UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2007
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or
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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
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Commission File Number:
001-33210
Transforma Acquisition Group
Inc.
(Exact name of registrant as
specified in its charter)
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Delaware
(State or Other Jurisdiction
of
Incorporation or Organization)
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20-5389307
(I.R.S. Employer
Identification No.)
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350 Park Avenue, 10th Floor
New York, NY
(Address of Principal
Executive Offices)
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10022
(Zip
Code)
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Registrants telephone number, including area code:
(646) 521-7805
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Units
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American Stock Exchange
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Common Stock, par value $0.0001 per share
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American Stock Exchange
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Warrants
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American Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
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No
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
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No
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Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes
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No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a smaller reporting company. See definitions of large
accelerated filer, accelerated filer and
smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer
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Accelerated
filer
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Non-accelerated
filer
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Smaller reporting
company
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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
Act). Yes
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No
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As of June 30, 2007, the last business day of the
registrants most recently completed second fiscal quarter,
the aggregate market value of the registrants units,
common stock and warrants held by non-affiliates of the
registrant was $108,786,684.
Number of shares of common stock outstanding as of
February 22, 2008: 15,624,997.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of registrants definitive proxy statement for
registrants 2007 Annual Meeting of Stockholders, to be
filed with the Commission pursuant to Regulation 14A, are
incorporated by reference into Part III of this report
where indicated.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This report includes forward-looking statements within the
meaning of Section 27A of the Securities
Act of 1933, as amended (the Securities
Act), and Section 21E of the Securities Exchange Act
of 1934, as amended (the Exchange Act). We have
based these forward-looking statements on our current
expectations, estimates and projections about future events.
These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may
cause our actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you
can identify forward-looking statements by terminology such as
may, should, could,
would, expect, plan,
anticipate, believe,
estimate, continue, or the negative of
such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not
limited to, those described in this report, including in
Item 1A. Risk Factors, and our other Securities
and Exchange Commission (SEC) filings, and the
following:
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our ability to continue as a going concern;
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our ability to consummate an attractive business combination due
to our limited resources and the significant competition for
business combination opportunities;
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our selection of a prospective acquisition target or asset;
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our status as a development stage company;
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our failure to receive necessary regulatory consents, or to
receive them in a timely manner, in connection with our initial
business combination;
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our dissolution or liquidation prior to a business combination,
and our ability to dissolve and liquidate in a timely manner;
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the reduction of the proceeds held in the trust account due to
third party claims;
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our issuance of our capital stock or incurrence of debt to
complete a business combination;
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our dependence on our key personnel;
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the tax consequences of an acquisition or disposition by us;
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conflicts of interest of our officers and directors;
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potential future affiliations of our officers and directors with
competing businesses;
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our ability to obtain additional financing if necessary;
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the control by our founders of a substantial interest in us;
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our common stock becoming subject to the SECs penny stock
rules;
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the adverse effect the outstanding warrants and options may have
on the market price of our common shares;
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the existence of registration rights with respect to the
securities owned by our founders;
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our being deemed an investment company;
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the lack of adequate resources to cover our operating expenses;
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the lack of a market for our securities;
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regulatory risks and operational risks of an acquisition target,
including those involved in operating outside the United States;
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loss of our intellectual property rights;
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foreign currency fluctuation;
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limited operating histories of businesses we may acquire in the
technology, media or telecommunications industries;
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cyclicality of the technology, media and telecommunications
industries; and
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our failure to keep pace with changes in our target industries.
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These risks and others described under Item 1A. Risk
Factors are not exhaustive.
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PART I
Introduction
Transforma Acquisition Group Inc. is a blank check company that
was organized as a corporation under the laws of the State of
Delaware on July 19, 2006. We were formed for the purpose
of acquiring one or more assets or control of one or more
operating businesses in the technology, media or
telecommunications industries through a merger, capital stock
exchange, asset acquisition, stock purchase or other similar
business transaction, which we refer to as a business
combination. Except for interest income generated on the
trust account in which the majority of the proceeds of our
initial public offering is held, we have not generated 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. Since our initial public offering
in December 2006, we have been actively engaged in sourcing a
suitable business combination candidate. We have met with
prospective acquisition targets, service professionals and other
intermediaries to discuss our company, the background of our
management and our business combination preferences. However, as
of the date of filing of this report we have not consummated any
business combination. Unless the context otherwise requires,
references in this report to the Company,
we, us, and our refer to
Transforma Acquisition Group Inc.
Our initial public offering closed on December 26, 2006
with our issuance of 12,500,000 units (which consist of one
share of our common stock, par value $0.0001 per share, and one
warrant to purchase one share of our common stock) for an
offering price of $100,000,000.
We will focus our investment activities on the technology, media
and telecommunications industries. Using the collective skill
and experience of our executive officers and directors, we will
seek to consummate our initial business combination with an
acquisition target:
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that we believe has an undervalued business strategy or
possesses underutilized assets;
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at a price we believe to be below its potential value; and
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that presents opportunities for:
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short-term enhancements in stockholder value through operational
improvements; and
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long-term enhancements in stockholder value through the
implementation of a transformative growth strategy, which may
include the acquisition of synergistic assets or businesses.
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We expect that any transformative growth strategy will take
advantage of emerging macroeconomic business, cultural, market,
and technological trends, including:
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changes in demographics and consumer behavior;
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the by-passing of traditional marketplace processes; and
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changes in the technology, media
and/or
telecommunications industries.
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Technology,
Media and Telecommunications Industries
We believe that our focus on the technology, media and
telecommunications industries will provide us with a large
universe of investment opportunities based on:
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the size of the technology, media and telecommunications
industries;
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the variety of participants in the sector; and
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the technological advancements, the changes in the regulatory
environment, and the macroeconomic, business, cultural and
technological trends and market trends that continuously impact
the growth dynamic of, and spawn new businesses in, the
technology, media and telecommunications industries.
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Effecting
a Business Combination
General
We were formed to acquire one or more assets or control of one
or more operating businesses in the technology, media or
telecommunications industries through a merger, capital stock
exchange, stock purchase, asset acquisition or other similar
business combination. We are not presently engaged in any
substantive commercial business. We intend to utilize cash
derived from the proceeds of our initial public offering, our
capital stock, debt or a combination of these in effecting a
business combination. Although a substantial portion of the net
proceeds of our initial public offering are expected to be
applied generally toward effecting a business combination, the
proceeds are not otherwise designated for any more specific
purposes. Accordingly, investors are investing without first
having an opportunity to evaluate the specific merits or risks
of any one or more business combinations.
Subject to the requirement that our business combination must be
with one or more acquisition targets having a fair market value
that is at least 80% of our net assets (excluding the amount
held in the trust account representing a portion of the
underwriters deferred discount) at the time of such
acquisition, there are no limitations on the type of investments
we can make or the percentage of our total assets that may be
invested in any one investment. Accordingly, other than the
requirement that our business combination must be with an
acquisition target having a fair market value that is at least
80% of our net assets (excluding the amount held in the trust
account representing a portion of the underwriters
deferred discount) at the time of such acquisition, our
investment policies may be changed from time to time at the
discretion of our board of directors, without a vote of our
stockholders. Additionally, no limits have been set on the
concentration of investments in any location or type of market.
We intend to focus our acquisitions efforts primarily in the
technology, media and telecommunications industries. We believe
that our management team and board of directors have the
industry knowledge and relationships to source and execute
acquisitions that will create above average stockholder returns.
We
have not consummated any business combination
We have met with prospective acquisition targets, service
professionals and other intermediaries to discuss our company,
the background of our management and our business combination
preferences. However, to date, we have not consummated any
business combination.
Except for the requirement that an acquisition target have a
fair market value of at least 80% of our net assets (excluding
the amount held in the trust account representing the
underwriters deferred discount) at the time of the
transaction, we have virtually unrestricted flexibility in
identifying and selecting prospective acquisition targets.
Accordingly, there is no basis for investors to evaluate the
possible merits or risks of any acquisition target with which we
may ultimately complete a business combination. To the extent we
effect a business combination with 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 businesses. Although our management will
endeavor to evaluate the risks inherent in a particular
acquisition target, we cannot assure you that we will properly
ascertain or assess all significant risk factors.
Sources
of acquisition targets
Acquisition target candidates have been, and we anticipate will
continue to be, brought to our attention by various unaffiliated
sources, including private equity funds, venture capital funds,
law firms, companies, investment bankers and advisory firms that
specialize in the technology, media or telecommunications
industries. In addition, our officers, directors and founders,
as well as their affiliates, have brought to our attention
acquisition target candidates of which they have become aware
through their business contacts as a result of formal and
informal inquiries and discussions. In no event will any of our
existing officers, directors or founders or any entity with
which they are affiliated, be paid any finders fee,
consulting fee or other compensation prior to, or for any
services they render in order to effectuate, the consummation of
a business combination (other than reimbursement for any
out-of-pocket expenses incurred by them in connection with
activities on our behalf, such as identifying potential
acquisition targets, performing business due diligence on
suitable acquisition targets and business combinations, as
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well as traveling to and from the offices, plants or similar
locations of prospective acquisition targets to examine their
operations).
Selection
of an acquisition target and structuring of a business
combination
Subject to the requirement that our business combination must be
with an acquisition target having a fair market value that is at
least 80% of our net assets (excluding the amount held in the
trust account representing a portion of the underwriters
deferred discount) at the time of such acquisition, our
management will have virtually unrestricted flexibility in
identifying and selecting prospective acquisition targets. In
evaluating a prospective acquisition target, our management will
consider, among other factors, the following:
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An existing under-capitalized business that has the potential to
further grow products and services in multiple geographies;
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A partial product or service offering that may need to be
enhanced by one or more acquisitions to complete the product or
service offering;
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An asset embedded in an underperforming business which asset
could be made more valuable through improved management,
technology, or enhanced operational efficiency; and/or
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An existing business requiring a non-traditional business model
in order to adapt to the changing technological and regulatory
environment and unlock stockholder value.
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These criteria are not intended to be exhaustive. Any evaluation
relating to the merits of a particular business combination will
be based, to the extent relevant, on the above factors as well
as other considerations deemed relevant by our management in
effecting a business combination consistent with our business
objective. In 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 acquisition
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 may identify
and evaluate potential acquisition targets that will utilize
these same investment strategies. 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 stockholders, 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 an
acquisition target and to structure and consummate our initial
business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the
identification and evaluation of a prospective acquisition
target with which a business combination is not ultimately
completed will result in a loss to us and reduce the amount of
capital available to otherwise complete a business combination.
None of the officers or directors will receive any compensation
from us prior to the consummation of our initial business
combination, except for out-of-pocket expenses incurred by them
on our behalf.
Fair
market value of acquisition target
The initial acquisition target that we acquire must have a fair
market value equal to at least 80% of our net assets (including
the funds held in the trust account other than the portion
representing our underwriters deferred discount) at the
time of such acquisition, subject to the conversion rights
described below, although we may acquire a target whose fair
market value significantly exceeds 80% of our net assets. To
accomplish this, we may seek to raise additional funds through a
secured financing or a private offering of debt or equity
securities if such funds are required to consummate such a
business combination, although we have not entered into any such
fund raising arrangement and do not currently anticipate
effecting such a financing other than in connection with the
consummation of our initial business combination. The fair
market value of the acquisition target will be determined by our
board of directors based upon standards generally accepted by
the financial community, such
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as actual and potential sales, earnings and cash flow and book
value. If our board is not able to independently calculate the
fair market value of the acquisition target, we will obtain an
opinion from an unaffiliated, independent third party appraiser,
which may or may not be an investment banking firm that is a
member of the National Association of Securities Dealers, Inc.
(NASD) with respect to the satisfaction of such
criteria. Because any opinion, if obtained, would merely state
that fair market value meets the 80% of net assets threshold, it
is not anticipated that copies of such opinion would be
distributed to our stockholders, although copies will be
provided to stockholders who request it. We will not be required
to obtain an opinion from a third party as to the fair market
value if our board of directors independently determines that
the acquisition target complies with the 80% threshold.
Nevertheless, we reserve the right to obtain an opinion from an
unaffiliated, independent third party appraiser if we deem it
appropriate, for example, in the event of an actual or perceived
conflict of interest.
Possible
lack of business diversification
Our initial business combination must be with an acquisition
target which satisfies the minimum valuation standard at the
time of such acquisition, as discussed above. Consequently, it
is possible that we may only have the ability to effect a single
business combination. 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 combinations 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 combination
with only a single entity, our lack of diversification may:
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subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate
subsequent to a business combination, and
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result in our dependency upon the 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 properties or assets and those properties or assets are
owned by different sellers, we may need for each of those
sellers to agree that our purchase of its properties 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 consummate our initial business combination.
With multiple acquisitions, we could also face additional risks,
including additional burdens and costs with respect to possible
multiple negotiations and due diligence investigations (if there
are multiple sellers) and the additional risks associated with
the subsequent assimilation of the properties or assets into a
single operating business.
Limited
ability to evaluate the acquisition targets
management
Although we intend to closely scrutinize the management of a
prospective acquisition target when evaluating the desirability
of effecting a business combination, we cannot assure you that
our assessment of the acquisition targets management will
prove to be correct. Following a business combination, we may
seek to recruit additional managers to supplement the incumbent
management of the acquisition target. We cannot assure you that
we will have the ability to recruit additional managers, or that
any such additional managers we do recruit will have the
requisite skills, knowledge or experience necessary to enhance
the incumbent management.
Opportunity
for stockholder approval of business combination
Prior to the consummation of our initial business combination,
we will submit the transaction to our stockholders for approval,
even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under Delaware law. In
connection with seeking stockholder approval of a business
combination, we will furnish our stockholders with proxy
solicitation materials prepared in accordance with the
Securities Exchange Act of 1934, as amended, which,
among other matters, will include a description of the
operations of the acquisition target and historical financial
statements of the business.
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In connection with the vote required for any business
combination, our founders have agreed to vote all of their
shares of common stock owned by them prior to our initial public
offering (but not shares acquired in our initial public offering
or the secondary market) in accordance with the majority of the
shares of common stock voted by the public stockholders. We will
proceed with our initial business combination only if a majority
of the shares of common stock voted by the public stockholders
are voted in favor of our initial business combination and
public stockholders owning less than 40% of the shares sold in
our initial public offering both vote against our initial
business combination and exercise their conversion rights.
Upon the consummation of our initial business combination,
unless required by Delaware law, the federal securities laws,
and the rules and regulations promulgated thereunder, or the
rules and regulations of an exchange upon which our securities
are listed, we do not presently intend to seek stockholder
approval for any subsequent acquisitions.
Conversion
rights
At the time we seek stockholder approval of any business
combination, we will offer each public stockholder the right to
have his or her shares of common stock converted to cash if the
stockholder votes against our initial business combination and
our initial business combination is approved and completed. Our
founders will not have such conversion rights with respect to
any shares of common stock owned by them. The actual per share
conversion price will be equal to the amount in the trust
account, which include $3,000,000 from the private placement of
warrants, the amount held in the trust account representing a
portion of the underwriters deferred discount, and the
interest earned on the trust account, net of taxes payable,
remaining in the trust account (other than one-half of the
interest earned on the trust account, net of taxes payable, up
to an aggregate amount of $2,000,000, which will be released to
us upon our demand, as follows: (i) an aggregate amount of
up to $1,250,000, within 12 months after the completion of
our initial public offering, and (ii) an aggregate amount
of up to $750,000 plus any remaining portion of the $1,250,000
not previously released to us during the initial
12-month
period, during the period that is between 12 months and
24 months after the completion of our initial public
offering) (calculated as of two business days prior to the
consummation of the proposed business combination), divided by
the number of shares sold in our initial public offering.
Without taking into any account any interest earned on the trust
account, the initial per share conversion price would be $7.88
or $0.12 less than the per unit offering price of $8.00. An
eligible stockholder may request conversion at any time after
the mailing to our stockholders of the proxy statement and prior
to the vote taken with respect to a proposed business
combination at a meeting held for that purpose, but the request
will not be granted unless the stockholder votes against our
initial business combination, our initial business combination
is approved and completed, and the stockholder continues to own
his shares through completion of our initial business
combination. Any request for conversion, once made, may be
withdrawn at any time up to the date of the meeting. It is
anticipated that the funds to be distributed to stockholders
entitled to convert their shares who elect conversion will be
distributed promptly after completion of a business combination.
Public stockholders who convert their stock into their share of
the trust account still have the right to exercise any warrants
that they still hold. We will not complete our initial business
combination if public stockholders owning 40% or more of the
shares sold in our initial public offering both exercise their
conversion rights and vote against our initial business
combination.
Dissolution
and liquidation if no business combination
If we do not complete our initial business combination by
June 26, 2008 (i.e., 18 months after the completion of
our initial public offering) or by December 26, 2008 (i.e.,
24 months after the completion of our initial public
offering) if a letter of intent, agreement in principle or
definitive agreement has been executed by June 26, 2008 and
our initial business combination has not yet been consummated,
our amended and restated certificate of incorporation
(a) provides that our corporate powers will automatically
thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation,
and we will not be able to engage in any other business
activities and (b) requires that our board of directors no
later than 15 days after the expiration of such time period
adopt a resolution finding our dissolution advisable and provide
notice as soon as possible thereafter of a special meeting of
stockholders to vote on our dissolution. Pursuant to Delaware
law, our dissolution also requires the affirmative vote of
stockholders owning a majority of our then outstanding common
stock. In order to solicit such stockholder approval,
(i) our board of directors will cause to be prepared a
preliminary proxy statement setting
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forth the board of directors recommendation that we
dissolve; (ii) we would expect that on the date that the
board of directors adopts such recommendation, we would file the
preliminary proxy statement with the Securities and Exchange
Commission; (iii) if the Securities and Exchange Commission
does not review the preliminary proxy statement, then
10 days following the passing of such deadline, we will
mail the proxy statements to our stockholders, and 30 days
following the passing of such deadline we will convene a meeting
of our stockholders at which they will either approve or reject
our dissolution; and (iv) if the Securities and Exchange
Commission does review the preliminary proxy statement, we
currently estimate that we will receive their comments
30 days following the passing of such deadline. We will
mail the proxy statements to our stockholders following the
conclusion of the comment and review process (the length of
which we cannot predict with any certainty), and we will convene
a meeting of our stockholders at which they will either approve
or reject our dissolution. In the event that we do not initially
obtain approval for our dissolution by stockholders owning a
majority of our outstanding common stock, we will continue to
take all reasonable actions to obtain such approval, which may
include adjourning the meeting from time to time to allow us to
obtain the required vote and retaining a proxy solicitation firm
to assist us in obtaining such vote. However, we cannot assure
you that our stockholders will approve our dissolution in a
timely manner or at all. If we are not able to obtain approval
from a majority of our stockholders, we cannot dissolve and
liquidate and we will not be able to distribute funds from our
trust account to holders of our common stock sold in our initial
public offering and these funds will not be available for any
other corporate purpose.
We anticipate that our liquidation will occur pursuant to
Section 281(b) of the Delaware General Corporation Law and,
in this event, our board of directors will be required under
Section 281(b) to adopt a plan of distribution pursuant to
which the corporation shall pay or make reasonable provision to
pay all existing claims and obligations of the corporation, all
contingent, conditional or unmatured contractual claims, claims
subject of a pending suit, and claims that are likely to arise
or become known within 10 years after our dissolution. Our
board of directors intends to adopt a plan of distribution and
to distribute the funds held in the trust account and any of our
remaining assets to holders of our common stock sold in our
initial public offering as promptly as practicable following our
dissolution. Until adoption of our plan of distribution and
distribution of the funds held in the trust account, the funds
will remain in the trust account and held by the trustee in
permitted investments.
Assuming our dissolution is approved by our directors and
stockholders in accordance with Delaware law, holders of our
common stock sold in our initial public offering will be
entitled to receive their proportionate share of the trust
account (inclusive of the proceeds from the private placement,
the remaining balance of any interest net of any income taxes
due on such interest and the underwriters deferred
discount). In addition, such holders will be entitled to receive
a pro rata portion of our remaining assets not held in the trust
account, less amounts we pay, or reserve to pay, for all of our
liabilities and obligations. These liabilities and obligations
include our corporate expenses arising during our remaining
existence and the costs associated with our dissolution and
liquidation. Our corporate expenses are expected to be primarily
associated with preparation for and conduct of our special
meeting of stockholders and our continuing public reporting
obligations, including legal services, proxy soliciting firms,
services of our independent public accounting firm as well as
legal fees we may incur in the event of disputes with any
claimants or creditors. To the extent that funds reserved to pay
liabilities or obligations are not subsequently used for such
purpose, the funds will be available for distribution to our
holders of common stock sold in our initial public offering or
for ongoing corporate expenses including costs of our
liquidation during our remaining existence.
Our founders have waived their rights to participate in any
distribution with respect to shares of common stock owned by
them immediately prior to our initial public offering (but not
shares acquired in our initial public offering or in the
secondary market). If we dissolve and liquidate before the
consummation of a business combination, there will be no
distribution from the trust account with respect to our
outstanding warrants which will expire worthless.
If we were to expend all of the net proceeds of our initial
public offering, other than the proceeds deposited in the trust
account, and without taking into account the remaining one-half
interest, if any, earned on the trust account, the initial per
share liquidation price would be $7.88, or $0.12 less than the
per unit offering price of $8.00. The proceeds deposited in the
trust account could, however, become subject to the claims of
our creditors, if any, which could have higher priority than the
claims of our public stockholders. We cannot assure you that the
actual per share liquidation price will not be less than $7.88,
plus interest, net of taxes, due to claims of creditors.
Although we will seek to have all vendors, prospective
acquisition targets or other entities we engage execute
agreements with us
9
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. 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 provider of required
services willing to provide the waiver. In any event, 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 partys engagement would be significantly
more beneficial to us than any alternative. 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.
Our founders have agreed, subject to certain exceptions, that
they will be personally liable, on a joint and several basis, to
cover claims made by such third parties, but only if, and to the
extent, the claims reduce the amounts in the trust account
available for payment to our stockholders in the event of a
liquidation and the claims are made by a vendor or service
provider for services rendered, or products sold, to us or by a
prospective acquisition target. However, our founders will not
have any personal liability as to any claimed amounts owed to a
third party who executed a waiver (including a prospective
acquisition target) or the underwriters. We cannot assure you,
however, that our founders would be able to satisfy such
obligations. Additionally, the underwriters of our initial
public offering have agreed to forfeit any rights or claims
against the proceeds held in the trust account which includes a
portion of their discount.
Under the Delaware General Corporation Law, stockholders may be
held liable for claims by third parties against a corporation to
the extent of distributions received by them in a dissolution.
If the corporation complies with certain procedures set forth in
Section 280 of the Delaware General Corporation Law
intended to ensure that it makes reasonable provision for all
claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distribution is limited to
the lesser of such stockholders, any liability of stockholders
with respect to a liquidating distribution is limited to the
lesser of such stockholders pro rata share of the claim or
the amount distributed to the stockholder, and any liability of
the stockholder would be barred from claims brought after the
third anniversary of the dissolution. However, as stated above,
it is our intention to make liquidating distributions to our
stockholders as soon as reasonably possible after dissolution
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 in a dissolution and any liability of our stockholders may
extend beyond the third anniversary of such dissolution. Because
we do not intend to comply with Section 280,
Section 281(b) of the Delaware General Corporation Law
would require us to adopt a plan of dissolution that will
provide for our payment, based on facts known to us at such
time, of (i) all existing claims, (ii) all pending
claims and (iii) all claims that may 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
acquisition targets to acquire, we believe the only likely
claims that could arise would be from our vendors (such as
accountants, lawyers, investment bankers, etc.) or potential
acquisition targets. As described above, we will seek to have
all vendors and prospective acquisition targets 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, we believe 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 is remote.
Moreover, because we will seek to obtain the waiver letters
described above, we believe the funds held in the trust account
should be excluded from the claims of any creditors in
connection with any bankruptcy proceeding.
Our public stockholders will be entitled to receive funds from
the trust account only in the event of our dissolution and
liquidation or if they seek to convert their respective shares
into cash upon a business combination which the stockholder
voted against and which is completed by us. In no other
circumstances will a stockholder have any right or interest of
any kind to or in the trust account. Voting against our initial
business combination alone
10
will not result in conversion of a stockholders shares
into a pro rata share of the trust account. The stockholder must
have also exercised his or her conversion rights described above.
Competition
Identifying, executing and realizing attractive returns on
business combinations is highly competitive and involves a high
degree of uncertainty. We expect to encounter intense
competition for potential acquisition targets from other
entities having a business objective similar to ours, including
venture capital funds, leveraged buyout funds, operating
businesses, and other entities and individuals, both foreign and
domestic. Many of these competitors are well established and
have extensive experience in identifying and effecting business
combinations directly or through affiliates. Many of these
competitors possess greater technical, human and other resources
than we do, and our financial resources will be relatively
limited when contrasted with those of many of these competitors.
Additional investment funds and blank check companies with
investment objectives similar to ours may be formed in the
future by other unrelated parties and these funds and companies
may have substantially more capital and may be able to have
access to and utilize additional financing on more attractive
terms. While we believe that there are numerous potential
acquisition targets with which we could combine using the net
proceeds of our initial public offering, together with
additional financing, if available, our ability to compete in
combining with certain sizeable acquisition targets will be
limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing a
business combination with certain acquisition targets. In
addition:
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the requirement that we obtain stockholder approval of a
business combination may delay or prevent the consummation of a
transaction within the
18-month
or
24-month
time periods;
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the requirement that we prepare a proxy statement and notice of
special meeting of stockholders in accordance with the
requirements of Delaware law and the federal securities laws,
which proxy statement will be required to be submitted to and
reviewed by the Securities and Exchange Commission, in
connection with such business combination may delay or prevent
the completion of a transaction;
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our outstanding warrants, the purchase option granted to one of
the underwriters of our initial public offering, CRT Capital
Group LLC, and the warrants we expect to issue in the private
placement, and the dilution they potentially represent, may not
be viewed favorably by certain acquisition targets;
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the conversion of common stock held by our public stockholders
into cash may reduce the resources available to us to fund an
initial business combination; and
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the requirement to acquire assets or an operating business that
have a fair market value at least 80% of our net assets
(excluding the amount held in the trust account representing a
portion of the underwriters deferred discount) at the time
of our initial business combination could require us to acquire
several assets or closely related operating businesses at the
same time, all of which sales would be contingent on the
closings of the other sales, which could make it more difficult
to consummate our initial business combination.
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Facilities
We do not own any real estate or other physical properties. We
maintain our principal executive offices at 350 Park Avenue,
10th Floor, New York, NY 10022. The cost for this space is
included in the monthly fee of $7,500 that S&B Investment
Management Group, LLC charges us for general and administrative
services, including office space, utilities and administrative
support. We believe, based on fees for similar services in the
New York, NY area, that the fee charged by S&B Investment
Management Group, LLC is at least as favorable as we could
obtain from an unaffiliated person. We consider our current
office space, combined with the other office space otherwise
available to our executive officers, adequate for our current
operations.
Employees
We have three executive officers. None of our officers, upon
whom we are dependant prior to effecting a business combination,
have entered into an employment agreement with us and none are
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 an acquisition target has
11
been selected for our initial business combination and the stage
of our initial business combination process we are in.
Accordingly, once management locates a suitable acquisition
target to acquire they will spend more time investigating such
acquisition target and negotiating and processing our initial
business combination (and consequently more time devoted to our
affairs) than they would prior to locating a suitable
acquisition target.
Available
Information
We file with or submit to the SEC annual, quarterly and current
periodic reports, proxy statements and other information meeting
the informational requirements of the Exchange Act. While we do
not have a website with available filings, we will provide, at
no additional charge, copies of these reports, proxy and
information statements and other information upon request to our
address at 350 Park Avenue, 10th Floor, New York, NY 10022,
Attention: Jon Lambert, or by telephone to
(646) 521-7805.
You may also inspect and copy these reports, proxy statements
and other information, and related exhibits and schedules, at
the Public Reference Room of the SEC at 100 F Street,
NE, Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains an Internet site that contains
reports, proxy and information statements and other information
filed electronically by us with the SEC, which are available on
the SECs Internet site at
http://www.sec.gov.
Investing in our securities involves a high degree of risk.
You should carefully consider the following risk factors before
making a decision to invest in our securities. The risks and
uncertainties described below are not the only ones facing us.
Subject to our initial objective of acquiring an operating
business or other assets in the technology, media or
telecommunications industries, we have not yet selected an
acquisition target with which to complete a business
combination. As a result, we are unable to ascertain the merits
or risks of the business or other assets that we may ultimately
operate. Additional risks and uncertainties that we are unaware
of, or that we currently deem immaterial, also may become
important factors that affect us. 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.
Risks
Related to the Company and our Business
The
report of the independent registered public accounting firm that
audited our financial statements includes a going
concern explanatory paragraph due to the possibility that
we may not consummate a business combination within the required
time frame, which will require us to dissolve and
liquidate.
The audit report in our financial statements for the year ended
December 31, 2007, includes an explanatory paragraph that
states that due to the possibility that a business combination
may not be consummated within the required timeframe, there is
substantial doubt about our ability to continue as a
going concern. We must complete a business combination with a
fair market value of at least 80% of our net assets (excluding
the amount held in the trust account representing a portion of
the underwriters deferred discount) at the time of
acquisition by June 26, 2008 (i.e., 18 months after
the completion of our initial public offering) or by
December 26, 2008 (i.e., 24 months after the
completion of our initial public offering) if a letter of
intent, agreement in principle or definitive agreement has been
executed by June 26, 2008).
We may
not be able to consummate a business combination within the
required time frame, in which case we will be required to
dissolve and liquidate our assets, and if we are forced to
dissolve and liquidate before a business combination and
distribute amounts remaining in the trust account, our public
stockholders may receive less than $8.00 per share and our
warrants will expire worthless.
If we are unable to complete a business combination within the
prescribed time frame and are forced to dissolve and liquidate
our assets, the per share liquidation distribution may be less
than $8.00 because of the expenses paid in our initial public
offering, our general and administrative expenses, the
anticipated costs associated with seeking a business combination
and any claims of our creditors. Furthermore, if we dissolve and
liquidate
12
before the completion of a business combination, there will be
no distribution from the trust account with respect to our
outstanding warrants which will expire worthless.
Because
of our limited resources and the significant competition for
business combination opportunities, we may not be able to
consummate an attractive business combination.
Identifying, executing and realizing attractive returns on
business combinations is highly competitive and involves a high
degree of uncertainty. We expect to encounter intense
competition for potential acquisition targets from other
entities having a business objective similar to ours, including
venture capital funds, leveraged buyout funds, operating
businesses, and other entities and individuals, both foreign and
domestic. Many of these competitors are well established and
have extensive experience in identifying and effecting business
combinations directly or through affiliates. Many of these
competitors possess greater technical, human and other resources
than we do, and our financial resources will be relatively
limited when contrasted with those of many of these competitors.
Additional investment funds and blank check companies with
similar investment objectives as ours may be formed in the
future by other unrelated parties and these funds and companies
may have substantially more capital and may be able to have
access to and utilize additional financing on more attractive
terms. While we believe that there are numerous potential
acquisition targets with which we could combine using the net
proceeds of our initial public offering, together with
additional financing, if available, our ability to compete in
combining with certain sizeable acquisition targets will be
limited by our available financial resources. This inherent
competitive limitation gives others an advantage in pursuing a
business combination with certain acquisition targets. In
addition:
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the requirement that we obtain stockholder approval of a
business combination may delay or prevent the consummation of a
transaction within the
18-month
or
24-month
time periods;
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the requirement that we prepare a proxy statement and notice of
special meeting of stockholders in accordance with the
requirements of Delaware law and the federal securities laws,
which proxy statement will be required to be submitted to and
reviewed by the Securities and Exchange Commission, in
connection with such business combination may delay or prevent
the completion of a transaction;
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our outstanding warrants, the purchase option we granted to CRT
Capital Group LLC and the warrants we issued in the private
placement, and the dilution they potentially represent, may not
be viewed favorably by certain acquisition targets;
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the conversion of common stock held by our public stockholders
into cash may reduce the resources available to us to fund an
initial business combination; and
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the requirement to acquire assets or an operating business that
have a fair market value at least 80% of our net assets
(excluding the amount held in the trust account representing a
portion of the underwriters deferred discount) at the time
of our initial business combination (i) could require us to
acquire several assets or closely related operating businesses
at the same time, all of which sales would be contingent on the
closings of the other sales, which could make it more difficult
to consummate our initial business combination, and
(ii) together with our ability to proceed with a business
combination if public stockholders owning up to 40% of the
shares sold in our initial public offering vote against our
business combination and exercise their conversion rights, may
require us to raise additional funds through the private sale of
securities or incur indebtedness in order to enable us to effect
such a business combination.
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If we
do not consummate a business combination and are forced to
dissolve, payments from the trust account to our public
stockholders may be delayed.
We currently believe that any plan of dissolution and
distribution subsequent to the expiration of the 18 and
24-month
deadlines would proceed in approximately the following manner:
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our board of directors will, consistent with its obligations
described in our amended and restated certificate of
incorporation to dissolve, prior to the passing of such
deadline, convene and adopt a specific plan of dissolution and
distribution, which it will then vote to recommend to our
stockholders; at such time it will also cause to be prepared a
preliminary proxy statement setting out the plan of dissolution
and distribution as well as the boards recommendation of
the plan;
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promptly after the passing of such deadline, we would file our
preliminary proxy statement with the Securities and Exchange
Commission;
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if the Securities and Exchange Commission does not review the
preliminary proxy statement, then, within 10 days following
the passing of such deadline, we will mail the proxy statements
to our stockholders, and within 30 days following the
passing of such deadline we will convene a meeting of our
stockholders, at which they will either approve or reject our
plan of dissolution and distribution; and
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if the Securities and Exchange Commission does review the
preliminary proxy statement, we currently estimate that we will
receive such comments within approximately 30 days
following the passing of such deadline. We will mail the proxy
statements to our stockholders following the conclusion of the
comment and review process (the length of which we cannot
predict with any certainty, and which may be substantial) and we
will convene a meeting of our stockholders at which they will
either approve or reject our plan of dissolution and
distribution.
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In the event we seek stockholder approval for a plan of
dissolution and distribution and do not obtain such approval, we
will nonetheless continue to pursue stockholder approval for our
dissolution. Pursuant to the terms of our amended and restated
certificate of incorporation, our powers following the
expiration of the permitted time periods for consummating a
business combination automatically will be limited to acts and
activities relating to dissolving and winding up our affairs,
including liquidation. The funds held in our trust account
(other than one-half of the interest earned on the trust
account, net of taxes payable, up to an aggregate amount of
$2,000,000, which will be released to us upon our demand, as
follows: (i) an aggregate amount of up to $1,250,000,
within 12 months after the completion of our initial public
offering, and (ii) an aggregate amount of up to $750,000
plus any remaining portion of the $1,250,000 not previously
released to us during the initial
12-month
period, during the period that is between 12 months and
24 months after the completion of our initial public
offering) may not be distributed except following our
dissolution and, unless and until approval is obtained from our
stockholders, the funds held in our trust account will not be
released.
These procedures, or a vote to reject any plan of dissolution
and distribution by our stockholders, may result in substantial
delays in the liquidation of our trust account to our public
stockholders as part of our plan of dissolution and distribution.
Upon
distribution of the trust account following our dissolution and
liquidation, our stockholders may be held liable for claims of
third parties against us to the extent of distributions received
by them.
Under the Delaware General Corporation Law, stockholders may be
held liable for claims by third parties against a corporation to
the extent of distributions received by them in a dissolution.
If a corporation complies with certain statutory procedures set
forth in Section 280 of the Delaware General Corporation
Law intended to ensure that the corporation makes reasonable
provision for all claims against it, any liability of
stockholders with respect to a liquidating distribution is
limited to the lesser of such stockholders pro rata share
of the claim or the amount distributed to the stockholder, and
any liability of the stockholder would be barred from claims
brought after the third anniversary of the dissolution. The
procedures in Section 280 include a
60-day
notice period during which any third-party claims may be brought
against us, a
90-day
period during which we may reject any claims brought, and an
additional
150-day
waiting period before any liquidating distributions may be made
to stockholders. If we do not follow the procedures in
Section 280 of the Delaware General Corporation Law, our
stockholders could potentially be liable for any claims to the
extent of distributions received by them in a dissolution and
any liability of our holders of common stock may extend beyond
the third anniversary of such dissolution. We do not intend to
comply with Section 280 of the Delaware General Corporation
Law.
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. Because we do not have an operating
history, you have no basis upon which to evaluate our ability to
achieve our business objective, which is to consummate a
business combination in the technology, media or
telecommunications industries. We
14
have no present revenue and we will not generate any revenues
until, at the earliest, after the consummation of a business
combination.
If the
net proceeds from our initial public offering not placed in the
trust account and our share of the interest earned on the trust
account are insufficient to allow us to operate for
24 months from our initial public offering, we may not be
able to complete a business combination.
We currently believe that the funds available to us from the net
proceeds of our initial public offering not placed in the trust
account (together with up to an aggregate amount of $2,000,000
from one-half of the interest earned on the trust account, net
of taxes payable, which will be released to us upon our demand,
as follows: (i) an aggregate amount of up to $1,250,000,
within 12 months after the completion of our initial public
offering, and (ii) an aggregate amount of up to $750,000
plus any remaining portion of the $1,250,000 not previously
released to us during the initial
12-month
period, during the period that is between 12 months and
24 months after the completion of our initial public
offering) will be sufficient to allow us to operate for at
24 months from our initial public offering, assuming that a
business combination is not consummated during that time.
However, we cannot assure you that our estimates will be
accurate. We could use a portion of these funds to pay due
diligence costs in connection with a potential business
combination or to pay fees to consultants to assist us with our
search for an acquisition target. We could also use a portion of
these funds as a down payment or to fund a no-shop
provision (a provision in letters of intent designed to keep
acquisition targets from shopping around for
transactions with others on terms more favorable to such
acquisition targets) with respect to a particular proposed
business combination, although we do not have any current
intention to do so. If we entered into such a letter of intent
where we paid for the right to receive exclusivity from an
acquisition target and were subsequently required to forfeit
such funds (whether as a result of our breach or otherwise), we
might not have sufficient funds to continue searching for, or
conduct due diligence with respect to any other potential
acquisition targets. Moreover, we may be required to expend a
significant portion of the available proceeds in pursuit of a
business combination which is not ultimately consummated. If we
do not have sufficient proceeds available to cover our expenses,
we may be required to obtain additional financing from our
executive officers, our directors, our founders or third
parties. We may not be able to obtain additional financing and
none of our executive officers, directors or founders are
obligated to provide any additional financing. If we do not have
sufficient proceeds and are unable to obtain additional
financing, we may be required to dissolve and liquidate prior to
consummating a business combination.
A
significant portion of our working capital could be expended in
pursuing business combinations that are not
consummated.
It is anticipated that the investigation of each specific
acquisition target and the negotiation, drafting and execution
of relevant agreements, disclosure documents, and other
instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and
others. In addition, we may opt to make down payments or pay
exclusivity or similar fees in connection with structuring and
negotiating a business combination. If a decision is made not to
complete a specific business combination, the costs incurred up
to that point in connection with the abandoned transaction,
potentially including down payments or exclusivity or similar
fees, will not be recoverable. Furthermore, even if an agreement
is reached relating to a specific acquisition target, we may
fail to consummate the transaction for any number of reasons
including those beyond our control, such as if our public
stockholders holding 40% or more of our common stock vote
against the transaction and exercise their conversion rights
even though a majority of our public stockholders approve the
transaction. Any such event will result in a loss to us of the
related costs incurred, which could materially and adversely
affect our subsequent attempts to locate and combine with
another business.
You
will not be entitled to protections normally afforded to
investors of blank check companies.
Because the net proceeds of our initial public offering are
intended to be used to complete a business combination with an
unidentified acquisition target, we may be deemed to be a
blank check company under the United States
securities laws. However, since we have net tangible assets in
excess of $5,000,000 and filed a Current Report on
Form 8-K
with the SEC promptly following completion of our initial public
offering including an audited balance sheet demonstrating this
fact, we are exempt from rules promulgated by the SEC to protect
investors of
15
blank check companies, such as Rule 419. Accordingly,
investors will not be afforded the benefits or protections of
those rules. Because we are not subject to these rules,
including Rule 419, our units were immediately tradable and
we have a longer period of time to complete a business
combination in certain circumstances than we would if we were
subject to such rule.
If
third parties bring claims against us, the proceeds held in the
trust account could be reduced and the per share liquidation
price received by stockholders may be less than the $7.88 per
share held in trust.
Placing of funds in the trust account may not protect those
funds from third party claims against us. Upon our dissolution,
we will be required, pursuant to Delaware General Corporate Law
Section 281, to pay or make reasonable provision to pay all
of our claims and obligations, including contingent or
conditional claims, which we intend to pay, to the extent
sufficient to do so, from our funds not held in the trust
account. Although we will seek to have all vendors, prospective
acquisition targets or other entities with which we execute
agreements waive 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 such waivers will be enforceable or they would
otherwise be prevented from bringing claims against 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 in which 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 any event, our
management would perform an analysis of the alternatives
available to it and would enter into an agreement with a third
party that did not execute a waiver only if management believed
that such third partys engagement would be significantly
more beneficial to us than any alternative. 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
not seek recourse against the trust account for any reason. In
addition, creditors may seek to interfere with the distribution
process under state or federal creditor and bankruptcy laws,
which could delay the actual distribution of such funds or
reduce the amount ultimately available for distribution to our
public stockholders. If we are required to file a bankruptcy
case or an involuntary bankruptcy case is filed against us that
is not dismissed, the funds held in the trust account will 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. Accordingly,
the proceeds held in the trust account could be subject to
claims which could take priority over those of our public
stockholders. We cannot assure you that the per share
distribution will not be less than $7.88, plus the remaining
one-half net interest accrued, due to such claims, or that there
will not be delays in distributing funds in addition to those
imposed by our duties to comply with Delaware General
Corporation Law procedures and federal securities laws and
regulations. Our founders have agreed, subject to certain
exceptions, that they will be personally liable, on a joint and
several basis, to cover claims made by such third parties, but
only if, and to the extent, the claims reduce the amounts in the
trust account available for payment to our stockholders in the
event of a liquidation and the claims are made by a vendor or
service provider for services rendered, or products sold, to us
or by a prospective acquisition target. Based on representations
made to us by our founders, we currently believe that they are
capable of funding a shortfall in our trust account to satisfy
their foreseeable indemnification obligations. However, we have
not asked them to reserve for such an eventuality. We cannot
assure you that our founders will be able to satisfy those
obligations or that the proceeds in the trust account will not
be reduced by such claims. Further, our founders will not have
any personal liability as to any claimed amounts owed to a third
party who executed a waiver (including a prospective acquisition
target) or the underwriters of our initial public offering.
16
Under
Delaware law, the requirements and restrictions relating to our
initial public offering contained in our amended and restated
certificate of incorporation may be amended, which could reduce
or eliminate the protection afforded to our stockholders by such
requirements and restrictions.
Our amended and restated certificate of incorporation contains
certain requirements and restrictions relating to our initial
public offering that will apply to us until the consummation of
a business combination. Specifically, our amended and restated
certificate of incorporation provides among other things, that:
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upon completion of our initial public offering, $98,500,000 of
the proceeds from the offering, including the underwriters
deferred discount and the proceeds of the private placement,
were to be deposited into the trust account, which proceeds may
not be disbursed from the trust account until the earlier of
(1) our initial business combination or (2) our
liquidation, or as otherwise permitted in our amended and
restated certificate of incorporation;
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prior to consummating our initial business combination, we must
submit such business combination to our stockholders for
approval;
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we may consummate our initial business combination if approved
by a majority of the shares of our common stock voted by our
public stockholders and public stockholders owning not more than
40% of the shares sold in our initial public offering both vote
against our initial business combination and exercise their
conversion rights;
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if our initial business combination is approved and consummated,
public stockholders who voted against our initial business
combination and who exercised their own conversion rights will
receive their pro rata share of the trust account (other than up
to an aggregate amount of $2,000,000 from one-half of the
interest earned on the trust account, net of taxes payable,
which will be released to us upon our demand, as follows:
(i) an aggregate amount of up to $1,250,000, within
12 months after the completion of our initial public
offering, and (ii) an aggregate amount of up to $750,000
plus any remaining portion of the $1,250,000 not previously
released to us during the initial
12-month
period, during the period that is between 12 months and
24 months after the completion of our initial public
offering);
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if a business combination is not consummated or a letter of
intent, an agreement in principle, or a definitive agreement is
not signed within the time periods specified in this prospectus,
then we will be dissolved and distribute to all of our public
stockholders their pro rata share of the trust account; and
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we may not consummate any other merger, capital stock exchange,
stock purchase, asset acquisition or other similar business
combination other than a business combination that meets the
conditions specified in this prospectus, including the
requirement that our initial business combination be with one or
more operating businesses whose fair market value, collectively,
is at least equal to 80% of our net assets (excluding the amount
held in the trust account representing a portion of the
underwriters deferred discount) at the time of such
business combination.
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Our amended and restated certificate of incorporation requires
that we obtain the unanimous consent of stockholders to amend
the above provisions. However, the validity of unanimous consent
provisions under Delaware law has not been settled. A court
could conclude that the unanimous consent requirement
constitutes a practical prohibition on amendment in violation of
the stockholders implicit rights to amend our amended and
restated certificate of incorporation. In that case, some or all
of the above provisions could be amended without unanimous
consent and any such amendment could reduce or eliminate the
protection afforded to our stockholders. However, we view the
foregoing provisions as obligations to our stockholders and we
will not take any action to waive or amend any of these
provisions, such that such waiver or amendment would take effect
prior to the consummation of our initial business combination.
Because
we have not yet selected any acquisition target with which to
complete a business combination, we are unable to currently
ascertain the merits or risks of the business
operations.
Because we have not yet selected a prospective acquisition
target with which to complete a business combination, investors
currently have no basis to evaluate the possible merits or risks
of the acquisition target.
17
Although our management will evaluate the risks inherent in a
particular acquisition target, we cannot assure you that they
will properly ascertain or assess all of the significant risk
factors. We also cannot assure you that an investment in our
securities will ultimately prove to be more favorable to
investors than a direct investment, if such opportunity were
available, in an acquisition target. Except for the limitation
that an acquisition target have a fair market value of at least
80% of our net assets (excluding the amount held in the trust
account representing a portion of the underwriters
deferred discount) at the time of the acquisition, we will have
virtually unrestricted flexibility in identifying and selecting
a prospective acquisition target in the technology, media or
telecommunications industries.
There
may be tax consequences associated with our acquisition, holding
and disposition of target companies and assets.
We may incur significant taxes in connection with effecting
acquisitions, holding, receiving payments from, and operating
target companies and assets, and disposing of target companies
and assets.
We may
issue shares of our capital stock to complete a business
combination, which would reduce the equity interest of our
stockholders and likely cause a change in control of our
ownership.
Our amended and restated certificate of incorporation authorizes
the issuance of up to 32,500,000 shares of common stock,
par value $0.0001 per share, and 5,000 shares of preferred
stock, par value $0.0001 per share. There are 625,003 authorized
but unissued shares of our common stock available for issuance
(after appropriate reservation for the issuance of shares upon
full exercise of our outstanding warrants and the purchase
option granted to CRT Capital Group LLC) and the
5,000 shares of preferred stock available for issuance.
Although we have no commitment to do so, we are likely to issue
a substantial number of additional shares of our common or
preferred stock, or a combination of common and preferred stock,
to complete a business combination. The issuance of additional
shares of our common stock or any number of shares of our
preferred stock:
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may significantly reduce the equity interest of investors;
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may subordinate the rights of holders of common stock if
preferred stock is issued with rights senior to those afforded
to our common stock;
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will likely cause a change in control if a substantial number of
our shares of common stock are issued, which may affect, among
other things, our ability to use our net operating loss carry
forwards, if any, and could result in the resignation or removal
of our present officers and directors; and
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may adversely affect prevailing market prices for our common
stock.
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We may
issue debt securities, which could limit our ability to operate
our business and return value to our stockholders.
If we issue debt securities, it could result in:
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default and foreclosure on our assets if our operating revenues
after a business combination are 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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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, working capital, capital
expenditures, acquisitions and other general corporate purposes;
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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;
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limitations on our ability to borrow additional amounts for
working capital, capital expenditures, acquisitions, debt
service requirements, execution of our strategy and other
purposes; and
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other disadvantages compared to our competitors, such as venture
capital funds, who have less debt.
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Our
ability to successfully consummate a business combination and to
be successful thereafter will be dependent upon the efforts of
our management.
Our ability to successfully consummate a business combination
will be dependent upon the efforts of our key personnel. The
future role of our key personnel following a business
combination, however, cannot presently be fully ascertained.
None of our key personnel have entered into either employment or
consulting agreements with us. Therefore, our key personnel will
only remain with the combined company upon the consummation of a
business combination if they choose to do so and are able to
negotiate and agree to mutually acceptable employment or
consultancy terms, which terms would be determined at such time
by the respective parties and disclosed to stockholders at the
time we seek approval for the initial business combination.
Furthermore, we will not be able to grant shares of common stock
or options to our key personnel prior to the earlier of the
consummation of our initial business combination or the total
release of funds in the trust account, which may affect our
hiring and retention efforts. Additionally, we may also employ
other personnel following a business combination, including the
management associated with the acquisition candidate. While we
intend to closely scrutinize any such individuals, we cannot
assure you that our assessment of them will prove to be correct.
The
loss of any of our executive officers could adversely affect our
ability to operate.
Our operations prior to our initial business combination are
dependent upon our executive officers. Our current executive
officers intend to stay with us until the consummation of a
business combination or our dissolution and liquidation. Our
executive officers will only remain with the combined company
after the consummation of a business combination if they choose
to do so and they are able to negotiate mutually agreeable
employment terms as a part of any such combination, which terms
would be disclosed to our stockholders in any proxy statement
relating to such transaction. If our executive officers choose
to remain with us after our initial business combination, they
will negotiate the terms of our initial business combination as
well as the terms of their employment arrangements and may have
a conflict of interest in negotiating the terms of our initial
business combination while, at the same time, negotiating terms
of their employment arrangements. The unexpected loss of the
services of one or more of our executive officers could have a
detrimental effect on us after a business combination.
Our
executive officers and directors will allocate some portion of
their time to other businesses, thereby causing conflicts of
interest in their determination as to how much time to devote to
our affairs. This conflict of interest could have a negative
impact on our ability to consummate a business
combination.
Our executive officers and directors are not required to commit
their full time to our affairs, which could create a conflict of
interest when allocating their time between our operations and
their other commitments. None of our officers or directors are
obligated to devote any specific number of hours to our affairs.
If an officer or director is required to devote more substantial
amounts of time to his or her other businesses and affairs, it
could limit his or her ability to devote time to our affairs and
could have a negative impact on our ability to consummate a
business combination. We cannot assure you that these conflicts
will be resolved in our favor.
19
Our
executive officers and directors currently are, and 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.
Some of our executive officers and directors are affiliated with
entities in the technology, media and telecommunications
industries.
None of our officers or directors are currently a principal of,
or affiliated or associated with, a blank check company.
However, all of our officers and directors currently are, and
may in the future become, affiliated with additional entities,
including other blank check companies. Additionally,
our officers and directors may become aware of business
opportunities that may be appropriate for presentation to us and
the other entities to which they owe fiduciary duties.
Accordingly, our executive officers and directors may have
conflicts of interest in determining to which entity a
particular business opportunity should be presented. We cannot
assure you that any of these conflicts will be resolved in our
favor.
If we
seek to effect a business combination with an entity that is
directly or indirectly affiliated with one or more of our
executive officers and directors, conflicts of interest could
arise.
Our executive officers and directors either currently have or
may in the future have affiliations with companies in the
technology, media and telecommunications industries. If we were
to seek a business combination with an acquisition target with
which one or more of our executive officers or directors may be
affiliated, conflicts of interest could arise in connection with
negotiating the terms of and completing our initial business
combination. Conflicts that may arise may not be resolved in our
favor. In the event we pursue a business combination with an
entity with which one or more of our executive officers and
directors is affiliated, we would obtain an opinion from an
independent investment banking firm regarding the fairness to
our stockholders, from a financial point of view, of the
business combination. Our executive officers and directors are
not currently aware of any specific opportunities to consummate
a business combination with any entities with which they are
affiliated, whether by virtue of the sale of assets, spin-off,
divestiture or otherwise, and there have been no preliminary
discussions or indications of interest with any such entity or
entities. Although we will not be specifically focusing on or
targeting any transaction with any entities affiliated with any
of our executive officers and directors, and we are unaware of
any such actual or potential transaction as of the date of this
prospectus, we would consider such a transaction after the
offering if any such opportunity were presented to us. It is
possible that we could consider an opportunity with entities
affiliated with any of our officers and directors without first
seeking to consummate a business combination with an entity that
is not affiliated with any of our executive officers and
directors.
Any
attempt to consummate more than one transaction as our initial
business combination will make it more difficult to consummate
our initial business combination.
In the event that we are unable to identify a single operating
company with which to engage in a business combination, we may
seek to combine contemporaneously with multiple operating
companies whose collective fair market value is at least 80% of
our net assets (excluding the amount held in the trust account
representing a portion of the underwriters deferred
discount) at the time of those combinations. Business
combinations involve a number of special risks, including
diversion of managements attention, legal, financial,
accounting and due diligence expenses, and general risks that
transactions will not be consummated. To the extent we try to
consummate more than one transaction at the same time, all of
these risks will be exacerbated, especially in light of the
small number of our executive officers and directors and our
limited financial and other resources. Completing our initial
business combination through more than one transaction likely
will result in increased costs as we would be required to
conduct a due diligence investigation of more than one business
and negotiate the terms of our initial business combination with
multiple entities. In addition, due to the difficulties involved
in consummating multiple business combinations concurrently, our
attempt to complete our initial business combination in this
manner would increase the chance that we would be unable to
successfully complete our initial business combination in a
timely manner. Further, if our initial business combination
entails simultaneous transactions with different entities, each
entity will need to agree that its transaction is contingent
upon the simultaneous closing of the other transactions, which
may make it more difficult for us, or delay our ability, to
complete the initial business combination. As a result, if we
20
attempt to consummate our initial business combination in the
form of multiple transactions, there is an increased risk that
we will not be in a position to consummate some or all of those
transactions, which could result in our failure to satisfy the
requirements for an initial business combination and force us to
liquidate.
We may
combine with an acquisition target with a history of poor
operating performance and there is no guarantee that we will be
able to improve the operating performance of that acquisition
target.
Due to the competition for business combination opportunities,
we may combine with an acquisition target with a history of poor
operating performance if we believe that acquisition target has
attractive attributes that can take advantage of trends in the
technology, media and telecommunications industries. However,
combining with an acquisition target with a history of poor
operating performance can be extremely risky and we may not be
able to improve its operating performance. If we cannot improve
the operating performance of such acquisition target following
our business combination, then our business, financial condition
and results of operations will be adversely affected. Factors
that could result in our not being able to improve operating
performance include, among other things:
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inability to predict changes in technological innovation;
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competition from superior or lower priced services and products;
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lack of financial resources;
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inability to attract and retain key executives and employees;
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claims for infringement of third-party intellectual property
rights
and/or
the
availability of third-party licenses; and
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changes in, or costs imposed by, government regulation.
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We may
be unable to obtain additional financing, if required, to
complete a business combination or to fund the operations and
growth of an acquisition target, which could compel us to
restructure or abandon a particular business
combination.
In connection with the capital requirements that will be
required for any particular business combination, if the net
proceeds of our initial public offering prove to be
insufficient, because of the size of our initial business
combination or because we become obligated to convert into cash
a significant number of shares from converting stockholders, we
may be required to seek additional financing through the
issuance of equity or debt securities or other financing
arrangements. We cannot assure you that such financing will be
available on acceptable terms, if at all. To the extent that
additional financing proves to be unavailable when needed to
consummate a particular business combination, we may be
compelled to restructure or abandon that particular business
combination and seek alternative acquisition targets. In
addition, if we complete a business combination, we may require
additional financing to fund the operations or growth of
acquisition target. The failure to secure additional financing
could have a material adverse effect on the continued
development or growth of our combined business or businesses.
None of our executive officers, directors or stockholders is
required to provide any financing to us in connection with or
after the consummation of a business combination.
The
3,124,997 shares of common stock owned by our founders will
not participate in liquidation distributions, and a conflict of
interest may arise in determining whether a particular
acquisition target is appropriate for a business
combination.
Our founders own, in the aggregate, 3,124,997 shares (after
forfeiture of 468,750 shares that was acknowledged on
January 25, 2007) of our common stock and the
3,000,000 warrants purchased in the private placement, but have
waived their right to receive distributions (other than with
respect to any shares acquired in our initial public offering or
in the secondary market) following our dissolution and
liquidation prior to a business combination. These shares will
be worthless if we do not consummate a business combination. The
personal and financial interests of our officers and directors
may influence their motivation in identifying and selecting an
acquisition business and completing a business combination in a
timely manner. Consequently, our officers and
21
directors discretion in identifying and selecting a
suitable acquisition target may result in a conflict of interest
when determining whether the terms, conditions and timing of a
particular business combination are appropriate and in our
public stockholders best interest.
If our
common stock becomes subject to the SECs penny stock
rules, broker-dealers may experience difficulty in completing
customer transactions and trading activity in our securities may
be adversely affected.
If at any time we have net tangible assets of $5,000,000 or less
and our common stock has a market price per share of less than
$5.00, transactions in our common stock will be subject to the
penny stock rules promulgated under the Securities
Exchange Act of 1934, as amended. Under these rules,
broker-dealers who recommend such securities to persons other
than institutional accredited investors must:
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make a special written suitability determination for the
purchaser;
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receive the purchasers written agreement to the
transaction prior to sale;
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provide the purchaser with risk disclosure documents which
identify certain risks associated with investing in penny
stocks and which describe the market for these penny
stocks as well as a purchasers legal
remedies; and
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obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the
required risk disclosure document before a transaction in a
penny stock can be completed.
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If our common stock becomes subject to these rules,
broker-dealers may find it difficult to effectuate customer
transactions and trading activity in our securities may be
adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult
to sell our securities.
Initially,
we may only be able to complete one business combination, which
may cause us to be solely dependent on a single business and a
limited number of products or services.
Of the net proceeds from our initial public offering, the
private placement and the underwriters deferred discount,
$98,500,000 is held in the trust account and may be used by us
to complete a business combination. Our business combination
must be with a business having a fair market value of at least
80% of our net assets (excluding the amount held in the trust
account representing a portion of the underwriters
deferred discount) at the time of such acquisition. We have no
limitation on our ability to raise additional funds through the
private sale of securities or the incurrence of indebtedness
that would enable us to effect a business combination with an
operating business having a fair market value in excess of 80%
of our net assets (excluding the amount held in the trust
account representing a portion of the underwriters
deferred discount) at the time of such an acquisition. However,
we have not entered into any such fundraising arrangement and
have no current intention of doing so. Consequently, initially
it is probable that we will have the ability to complete only a
single business combination. We may not be able to acquire more
than one acquisition target because of various factors,
including insufficient financing or the difficulties involved in
consummating the contemporaneous acquisition of more than one
operating company. Therefore, it is probable that we will have
the ability to complete a business combination with only a
single operating business, which may have only a limited number
of products or services. The resulting lack of diversification
may:
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result in our dependency upon the performance of a single or
small number of operating businesses;
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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; and
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subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate
subsequent to a business combination.
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In this case, we will not be able to diversify our operations or
benefit from the possible spreading of risks or offsetting of
losses, unlike other entities that may have the resources to
complete several business combinations in different industries
or different areas of a single industry so as to diversify risks
and offset losses. Further, the
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prospects for our success may be entirely dependent upon the
future performance of the initial acquisition target(s) we
acquire.
The
ability of our stockholders to exercise their conversion rights
may not allow us to consummate the most desirable business
combination or optimize our capital structure.
When we seek stockholder approval of our initial business
combination, we will offer each public stockholder (other than
our founders) the right to have his, her or its shares of common
stock converted to cash if the stockholder votes against our
initial business combination and our initial business
combination is approved and consummated. Such holder must both
vote against such business combination and then exercise his,
her or its conversion rights to receive a pro rata share of the
trust account. Accordingly, if our business combination requires
us to use substantially all of our cash to pay the purchase
price, because we will not know how many stockholders may
exercise such conversion rights, we may either need to reserve
part of the trust account for possible payment upon such
conversion, or we may need to arrange third party financing to
help fund our business combination in case a larger percentage
of stockholders exercise their conversion rights than we expect.
Therefore, we may not be able to consummate a business
combination that requires us to use all of the funds held in the
trust account as part of the purchase price, or we may end up
having to incur an amount of leverage that is not optimal for
our business combination. This may limit our ability to
effectuate the most attractive business combination available to
us.
Our
founders, including all of our officers and directors, control a
substantial interest in us and thus may influence certain
actions requiring a stockholder vote.
Our founders, including all of our officers and directors, own
20% of our issued and outstanding shares of common stock (not
including any units or shares of common stock purchased by our
founders in either our initial public offering or in the
secondary market). Our board of directors will be divided into
three classes, each of which generally will serve for a term of
three years, with only one class of directors being elected in
each year. There may not be an annual meeting of stockholders to
elect new directors prior to the consummation of a business
combination, in which case all of the current directors will
continue in office at least until the consummation of our
initial business combination. If there is an annual meeting, as
a consequence of this staggered board of directors,
only a minority of the board of directors would be considered
for election. As a result, our officers and directors may exert
considerable influence on actions requiring a stockholder vote,
including the election of officers and directors, amendments to
our amended and restated certificate of incorporation, the
approval of benefit plans, mergers, and similar transactions
(other than approval of our initial business combination).
Moreover, except to the extent stockholder proposals are
properly and timely submitted, our directors will determine
which matters, including prospective business combinations, to
submit to a stockholder vote. As a result, they will exert
substantial control over actions requiring a stockholder vote
both before and following a business combination.
In connection with the stockholder vote required for our initial
business combination, all of our founders, including all of our
officers and directors, have agreed to vote all of the shares of
common stock owned by them immediately prior to our initial
public offering (but not shares acquired in our initial public
offering or in the secondary market) in accordance with the
majority of the shares of common stock voted by the public
stockholders.
The
exercise by our founders of their registration rights, and/or by
CRT Capital Group LLC of its purchase option and registration
rights, may have an adverse effect on the market price of our
common stock and the existence of the registration rights and
CRT Capital Group LLCs purchase option may make it more
difficult to effect a business combination.
Our founders are entitled to make a demand that we file a
registration statement to register their shares of common stock
and the shares of common stock underlying the warrants sold in
the private placement at any time commencing 90 days prior
to the expiration of the transfer restrictions on such
securities. If our founders exercise their registration rights
with respect to all of their shares of common stock, including
those underlying the warrants issued in the private placement,
then there will be an additional 6,124,997 shares of common
stock eligible for trading in the public market. In addition, we
sold to CRT Capital Group LLC an option to purchase up to a
total of 375,000 units identical to those units offered in
our initial public offering, and have further agreed to grant to
CRT Capital Group LLC certain piggy-back
registration rights with respect to the units issuable upon
exercise of its
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purchase option. If this purchase option is exercised, and all
of the underlying warrants are also exercised, and CRT Capital
Group LLC exercises its registration rights, there will be an
additional 750,000 shares of our common stock eligible for
trading in the public market. The presence of these additional
shares of common stock trading in the public market may have an
adverse effect on the market price of our common stock. In
addition, the existence of the registration rights and the
purchase option may make it more difficult to effectuate a
business combination or increase the cost of acquiring the
acquisition target, as the stockholders of the acquisition
target may be discouraged from entering into a business
combination with us or will request a higher price for their
securities because of the potential effect the exercise of the
registration rights and the purchase option may have on the
trading market for our common stock.
A
market for our securities may not develop, which would adversely
affect the liquidity and price of our securities.
The price of our securities may vary significantly due to our
reports of operating losses, one or more potential business
combinations, the filing of periodic reports with the SEC, and
general market or economic conditions. Furthermore, an active
trading market for our securities may not be sustained. You may
be unable to sell your securities unless a market can be
established and sustained.
If we
are deemed to be an investment company, we may be required to
institute burdensome compliance requirements and our activities
may be restricted, which may make it difficult for us to
consummate a business combination, or we may be required to
incur additional expenses if we are unable to dissolve after the
expiration of the allotted time periods.
If we are deemed to be an investment company under the
Investment Company Act of 1940, as amended, we may be subject to
certain restrictions that may make it more difficult for us to
consummate a business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may have imposed upon us certain burdensome
requirements, including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy, compliance policies
and procedures and disclosure requirements and other rules and
regulations.
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To this end, the proceeds held in the trust account may be
invested by the trust agent only in United States
government securities within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as
amended, 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, as
amended. By restricting the investment of the proceeds to these
instruments, we intend to comply with certain exemptions under
the Investment Company Act of 1940, as amended.
In addition, if we do not complete a business combination by
June 26, 2008 (i.e., 18 months after the completion of
our initial public offering) or by December 26, 2008 (i.e.,
24 months after the completion of our initial public
offering) if a letter of intent, agreement in principle or
definitive agreement has been executed by June 26, 2008 and
our initial business combination has not yet been consummated),
our amended and restated certificate of incorporation
(1) provides that our corporate powers will automatically
thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation,
and (2) requires that, no later than 15 days after the
expiration of the allotted time periods, our board of directors
adopt a resolution finding our dissolution advisable and that it
provide notice as soon as possible thereafter of a special
meeting of stockholders to vote on our dissolution. If our
stockholders do not approve our dissolution in a timely manner
or at all, we will not be able to liquidate and distribute the
trust account to holders of our common stock sold in our initial
public offering for an extended period of time or indefinitely,
and, consequently, we may be deemed to be an investment company.
24
If we are deemed to be an investment company at any time, we
will be required to comply with additional regulatory
requirements under the Investment Company Act of 1940, as
amended, which would require additional expenses for which we
have not budgeted.
We may
or may not obtain an opinion from an unaffiliated third party as
to the fair market value of the acquisition target or that the
price we are paying for the business is fair to our
stockholders.
We are not required to obtain an opinion from an unaffiliated
third party that either the acquisition target we select has a
fair market value equal to at least 80% of our net assets
(excluding the amount held in the trust account representing a
portion of the underwriters discount) or that the price we
are paying is fair to stockholders. If no opinion is obtained,
our stockholders will be relying on the judgment or our board of
directors. However, we will not enter into an initial business
combination with any of our founders, officers or directors, or
any of their affiliates, without first obtaining an opinion from
an independent investment banking firm regarding the fairness to
our stockholders, from a financial point of view, of the
business combination.
The
American Stock Exchange may require us to file an additional
listing application on the consummation of a business
combination, and/or the American Stock Exchange may delist our
securities from trading on its exchange, which could limit
investors ability to effect transactions in our securities
and subject us to additional trading restrictions.
Our securities are listed on the American Stock Exchange, a
national securities exchange. We cannot assure you that our
securities will continue to be listed on the American Stock
Exchange in the future. In addition, in connection with a
business combination, it is likely that the American Stock
Exchange may require us to file a new listing application and
meet its initial listing requirements, as opposed to its more
lenient continued listing requirements. We cannot assure you
that we will be able to meet those initial listing requirements
at that time.
If the American Stock Exchange delists our securities from
trading on its exchange in the future, we could face significant
material adverse consequences, including:
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a limited availability of market quotations for our securities;
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a determination that our common stock is a penny
stock, which would require brokers trading in our common
stock to adhere to more stringent rules and possibly resulting
in a reduced level of trading activity in the secondary trading
market for our common stock;
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a more limited amount of news and analyst coverage for us;
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a decreased ability to issue additional securities or obtain
additional financing in the future; and
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a decreased ability of our security holders to sell their
securities in certain states.
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An
effective registration statement may not be in place when an
investor desires to exercise warrants, thus precluding such
investor from being able to exercise his warrants and causing
such warrants to be worthless.
No warrant held by public stockholders or issuable upon exercise
of the purchase option granted to CRT Capital Group LLC will be
exercisable and we will not be obligated to issue shares of
common stock with respect to any such warrant unless, at the
time a holder seeks to exercise such warrant, a prospectus
relating to the common stock issuable upon exercise of the
warrant is current and the common stock has been registered or
qualified or deemed to be exempt under the securities laws of
the state of residence of the holder of the warrant. Under the
terms of the warrant agreement, we have agreed to use our best
efforts to meet these conditions and to maintain a current
prospectus relating to the common stock issuable upon exercise
of the warrants until the expiration of the warrants. However,
we cannot assure you that we will be able to do so, and if we do
not maintain a current prospectus related to the common stock
issuable upon exercise of the warrants, holders will be unable
to exercise their warrants and we will not be required to settle
any such warrant exercise. If the prospectus relating to the
common stock issuable upon the exercise of the warrants is not
current or if the common stock is not qualified or exempt from
qualification in the jurisdictions in which the holders of the
warrants reside, the warrants held by public stockholders or
issuable upon
25
exercise of the purchase option granted to CRT Capital Group LLC
may have no value, the market for such warrants may be limited
and such warrants may expire worthless. Even if the prospectus
relating to the common stock issuable upon exercise of the
warrants is not current, the warrants issued to our initial
stockholders may be exercisable for unregistered shares of
common stock.
We may
choose to redeem our outstanding warrants at a time that is
disadvantageous to our warrant holders.
We may redeem the warrants issued as a part of our units
(including warrants issued and outstanding as a result of the
exercise of the purchase option that we have agreed to sell to
CRT Capital Group LLC and the warrants to be sold in the private
placement) at any time after the warrants become exercisable in
whole and not in part, at a price of $0.01 per warrant, upon a
minimum of 30 days prior written notice of
redemption, if, and only if, the last sales price of our common
stock on the American Stock Exchange, or other principal market
on which our common stock may be traded, equals or exceeds
$11.50 per share for any 20 trading days within a 30 trading day
period ending three business days before we send the notice of
redemption, and a registration statement under the Securities
Act relating to shares of common stock issuable upon exercise of
the warrants is effective and expected to remain effective to
and including the redemption date and a prospectus relating to
the shares of common stock issuable upon exercise of the
warrants is available for use to and including the redemption
date. Redemption of the warrants could force the warrant holders
(1) to exercise the warrants and pay the exercise price
therefor at a time when it may be disadvantageous for the
holders to do so, (2) to sell the warrants at the then
current market price when they might otherwise wish to hold the
warrants, or (3) 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.
Because our executive officers and directors own warrants that
may be exercised on a cashless basis, a conflict of
interest may arise in the event we elect to redeem the warrants
at a time when it may be disadvantageous for other warrant
holders to exercise their warrants. So long as the conditions
permitting management to elect to redeem the warrants are met,
if management believes that a number of holders will not
exercise their outstanding warrants upon redemption, management
may elect to redeem the warrants in order to permit such
executive officers and directors to own a greater percentage of
our voting common stock, on a fully-diluted basis, because the
warrants owned by our executive officers and directors are not
required to be exercised for cash.
Provisions
in our charter documents 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. These provisions include a staggered board of
directors and the ability of the board of directors to designate
the terms of and issue new series of preferred stock. Our board
of directors is divided into three classes, each of which will
generally serve for a term of three years with only one class of
directors being elected in each year. As a result, at any annual
meeting only a minority of the board of directors will be
considered for election. Since our staggered board
would prevent our stockholders from replacing a majority of our
board of directors at any annual meeting, it may entrench
management and discourage unsolicited stockholder proposals that
may be in the best interests of stockholders.
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.
Risks
Related to Doing Business Outside the United States
Since
we may acquire an acquisition target that is located outside the
United States, we may encounter risks specific to one or more
countries in which we ultimately operate.
We may acquire a business or businesses with some relationship
to countries outside of the United States. If we acquire a
company that has operations outside the United States, we will
be exposed to risks that could negatively
26
impact our future results of operations following a business
combination. The additional risks we may be exposed to in these
cases include but are not limited to:
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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tax issues, such as tax law changes and variations in tax laws
as compared to the United States;
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cultural and language differences;
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foreign exchange controls;
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the possibility of our assets being nationalized;
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crime, strikes, riots, civil disturbances, terrorist attacks and
wars; and
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deterioration of political relations with the United States.
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Foreign
currency fluctuations could adversely affect our business and
financial results.
An acquisition target with which we combine may do business and
generate sales within other countries. Foreign currency
fluctuations may affect the costs that we incur in such
international operations. It is also possible that some or all
of our operating expenses may be incurred in
non-U.S. dollar
currencies. The appreciation of
non-U.S. dollar
currencies in those countries where we have operations against
the U.S. dollar would increase our costs and could harm our
results of operations and financial condition.
Because
we must furnish our stockholders with acquisition target
financial statements prepared in accordance with and reconciled
to U.S. generally accepted accounting principles, we will not be
able to complete a business combination with some prospective
acquisition targets unless their financial statements are first
reconciled to U.S. generally accepted accounting
principles.
The federal securities laws require that a business combination
meeting certain financial significance tests include historical
and/or
pro
forma financial statement disclosure in periodic reports and
proxy materials submitted to stockholders. Because our initial
business combination must be with an acquisition target that has
a fair market value equal to at least 80% of our net assets at
the time of such business acquisition (all of our assets,
including the funds held in the trust account other than the
deferred underwriting discount, less our liabilities), we will
be required to provide historical
and/or
pro
forma financial information to our stockholders when seeking
approval of a business combination with one or more acquisition
targets. These financial statements must be prepared in
accordance with, or be reconciled to, U.S. generally
accepted accounting principles and the historical financial
statements must be audited in accordance with the standards of
the Public Company Accounting Oversight Board (United States),
or PCAOB. If a proposed acquisition target, including one
located outside of the United States, does not have financial
statements that have been prepared in accordance with, or that
can be reconciled to, U.S. generally accepted accounting
principles and audited in accordance with the standards of the
PCAOB, we will not be able to acquire that proposed acquisition
target. These financial statement requirements may limit the
pool of potential acquisition targets with which we may combine.
Risks
Associated with the Technology, Media and Telecommunications
Industries
Our
investments in technology, media and telecommunications
companies may be extremely risky due, in part, to market
conditions, and we could lose all or part of our
investments.
An investment in technology, media and telecommunications
companies may be extremely risky relative to an investment in
companies operating in other industries.
Technology, media and telecommunications companies typically
have limited operating histories, narrower product lines and
smaller market shares than larger businesses, which tend to
render them more vulnerable to competitors actions and
market conditions, as well as general economic downturns. In
addition, technology, media and telecommunications companies
generally have less predictable operating results, may from time
to time be
27
parties to litigation, may be engaged in rapidly changing
businesses with products subject to a substantial risk of
obsolescence, and may require substantial additional capital to
support their operations, finance expansion or maintain their
competitive position.
In recent years, a number of Internet companies have filed for
bankruptcy or liquidated, and many large companies whose
purchases affect the demand for products and services in the
technology, media and telecommunications industries have
experienced financial difficulties, which may result in
decreased demand for such products and services in the future.
Our investments in the technology, media and telecommunications
industries may be extremely risky and we could lose all or part
of our investments.
The
information available regarding technology, media and
telecommunications companies is limited which could result in
poor investment decisions on our part and we could lose all or
part of our investments.
Many technology, media and telecommunications companies are
privately owned and there is generally little publicly available
information about these businesses; therefore, we may not learn
all of the material information we need to know regarding these
businesses. As a result, we may make investment decisions based
on incomplete information or we may be unaware of material
problems in a business in which we invest, which make our
investments extremely risky.
If we
make an investment in a technology, media and telecommunications
company that is dependent on current management, the loss of
such management may materially affect results of
operations.
Technology, media and telecommunications companies are often
dependent on the management talents and efforts of a small group
of persons; therefore, the death, disability, resignation or
termination of one or more of these persons could have a
material adverse impact on the operations of any technology,
media and telecommunications companies we may acquire.
The
technology, media and telecommunications industries are highly
cyclical, which may materially affect our future performance and
ability to sell our products or services and, in turn, hurt our
profitability.
Customers of technology, media and telecommunications products
and services tend to defer purchases during periods of economic
weakness, opting instead to continue to use what they already
own. Conversely, during periods of economic strength,
technology, media and telecommunications sales frequently exceed
expectations. As a consequence, revenues and earnings for
technology, media and telecommunications companies may fluctuate
more than those of less economically sensitive companies. Due to
the cyclical nature of the technology, media and
telecommunications industries, inventories may not always be
properly balanced, resulting in lost sales when there are
shortages or write-offs when there are excess inventories. This
may materially adversely affect the business, financial
condition, and results of operations of any acquisition targets
that we may acquire. Moreover, many of the customers of
technology, media and telecommunications products and services
also may be subject to similar cycles and less able to pay for
such products and services during periods of economic weakness.
If we
are unable to keep pace with the changes in the technology,
media and telecommunications industries, the products of any
acquisition target that we acquire could become obsolete and it
could materially hurt our results of operations.
The technology, media and telecommunications industries are
generally characterized by intense, rapid changes, often
resulting in product obsolescence or short product life cycles.
Our ability to compete after the consummation of a business
combination will be dependent upon our ability to keep pace with
changes in the industry. If we are ultimately unable to adapt
our operations as needed, our business, financial condition and
results of operations following a business combination will be
materially adversely affected.
28
We may
be unable to protect or enforce the intellectual property rights
of any acquisition targets that we acquire.
After consummating a business combination, the procurement and
protection of trademarks, copyrights, patents, domain names,
trade dress, and trade secrets will likely be critical to our
success. We will likely rely on a combination of copyright,
trademark, trade secret laws and contractual restrictions to
protect any proprietary technologies and rights that we may
acquire. Despite our efforts to protect those proprietary
technologies and rights, we may not be able to prevent
misappropriation of those proprietary rights or deter
independent development of technologies that compete with the
business we acquire. Our competitors may claim that we are
infringing on their intellectual property rights and seek
damages, the payment of royalties, licensing fees
and/or
an
injunction against the sale of our products or services.
Litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets, or
to determine the validity and scope of the proprietary rights of
others. It is also possible that third parties may claim we have
infringed their patent, trademark, copyright or other
proprietary rights. Claims or litigation, with or without merit,
could result in substantial costs and diversions of resources,
either of which could have a material adverse effect on our
competitive position and business. Depending on the acquisition
target(s) that we acquire, it is likely that we will have to
protect copyrights, trademarks, patents, and domain names in an
increasing number of jurisdictions, a process that is expensive
and may not be successful in every location. With respect to
certain proprietary rights, such as trademarks and copyrighted
materials, of the acquisition target(s) that we will acquire, we
expect that the acquisition target(s) will have entered into
license agreements in the past and will continue to enter into
such agreements in the future. These licensees may take actions
that materially diminish the value of such acquisition target or
targets proprietary rights or cause material harm to such
acquisition target or targets reputation.
The
technology, media and telecommunications industries are highly
competitive and we may not be able to compete effectively which
could materially adversely affect our revenues and profitability
upon consummation of a business combination.
The technology, media and telecommunications industries are
rapidly evolving and intensely competitive. We expect
competition to intensify in the future. Many of the competitors
we will face upon consummation of a business combination will
have significantly greater financial, technical, manufacturing,
marketing and other resources than we do. Competing with these
companies after a business combination will require investment
by us in engineering, research and development and marketing. We
may not have the resources to make these investments and may not
be successful in making these investments. In addition, the
management of our competitors may have greater operating
resources and experience in their respective industries. Some of
these competitors may also offer a wider range of services than
we can and may have greater name recognition and a larger client
base. For example, cable network operators and communications
operators are increasingly offering similar products in an
effort to become an
all-in-one
provider of voice, high speed internet access and video services
to customers. These competitors may be able to respond more
quickly and effectively to new or changing opportunities,
technologies and client requirements. They may also be able to
undertake more extensive promotional activities, offer more
attractive terms to clients, and adopt more aggressive pricing
policies. If we are unable to compete effectively following a
business combination, our business, financial condition, results
of operations and prospects could be materially adversely
affected.
We may
be subject to significant regulatory requirements in connection
with our efforts to consummate a business combination with a
company in the media and telecommunications industries, which
may result in our failure to consummate our initial business
combination within the required time frame and may force us to
liquidate.
Acquisitions of media and telecommunications companies are often
subject to significant regulatory requirements and consents, and
we will not be able to consummate a business combination with
certain types of media and telecommunications companies without
complying with applicable laws and regulations and obtaining
required governmental or client consents. We may not receive any
such required approvals or we may not receive them in a timely
manner, including as a result of factors or matters beyond our
control. Satisfying any requirements of regulatory agencies may
delay the date of our consummation of our initial business
combination beyond the
29
required time frame (i.e., June 26, 2008 or
December 26, 2008 if a letter of intent, agreement in
principle or a definitive agreement has been executed by
June 26, 2008 and the initial business combination relating
thereto has not yet been consummated). If we fail to consummate
our initial business combination within the required time frame
we may be forced to dissolve and liquidate.
We may
not be able to comply with government regulations that may be
adopted with respect to the media and telecommunications
industries.
The media and telecommunications industries have historically
been subject to substantial government regulation. The Federal
Communications Commission, or FCC, is continuing implementation
of the Communications Act of 1996, which, when fully
implemented, may significantly impact the media and
telecommunications industries and change federal, state and
local laws and regulations regarding the provision of cable,
internet and telephony services. After we complete a business
combination, these regulations may materially affect the types
of products or services we may offer, the rates we are permitted
to charge and our method of operation. We cannot assure you that
regulations currently in effect or adopted in the future will
not have a material adverse affect on our ability to acquire a
particular target or the operations of a business acquired by us.
Government
regulation of the media and telecommunications industries and
the uncertainty over government regulation of the Internet could
harm our operating results and future prospects.
Certain segments of the media and telecommunications industries
historically have been subject to substantial government
regulation, both in the United States and overseas. If we
consummate a business combination with an acquisition target in
these industries, changes in regulatory requirements in the
United States or other countries could affect the sales of our
products, limit the growth of the markets we serve, or require
costly alterations of current or future products. Future changes
in tariffs by regulatory agencies or application of tariff
requirements to currently untariffed services could affect the
sales of our products for certain classes of customers.
On the other hand, few laws or regulations currently apply
directly to access of or commerce on the Internet. New
regulations governing the Internet and Internet commerce, if
adopted, could have an adverse effect on our business, operating
results, and financial condition following a business
combination. New regulations governing the Internet and Internet
commerce could include matters such as changes in encryption
requirements, sales taxes on Internet product sales, and access
charges for Internet service
and/or
content
and/or
commerce providers.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
We do not own any real estate or other physical properties. We
maintain our principal executive offices at 350 Park Avenue,
10
th
Floor,
New York, NY 10022. The cost for this space is included in the
monthly fee of $7,500 that S&B Investment Management Group,
LLC charges us for general and administrative services,
including office space, utilities and administrative support. We
believe, based on fees for similar services in the New York, NY
area, that the fee charged by S&B Investment Management
Group, LLC is at least as favorable as we could obtain from an
unaffiliated person. We consider our current office space,
combined with the other office space otherwise available to our
executive officers, adequate for our current operations.
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ITEM 3.
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LEGAL
PROCEEDINGS
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None.
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ITEM 4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
30
PART II
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ITEM 5.
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MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
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Market
Information
Our units, which consist of one share of our common stock, par
value $0.0001 per share, and one warrant to purchase one share
of our common stock, trade on the American Stock Exchange under
the symbol TAQ.U. Our warrants and common stock have
traded separately on the American Stock Exchange under the
symbols TAQ.WS and TAQ, respectively,
since January 5, 2007. Each warrant entitles the holder to
purchase from us one share of our common stock at an exercise
price of $5.50 commencing on the later of our consummation of an
initial business combination or December 19, 2007. Our
warrants will expire at 5:00 p.m., New York City time, on
December 19, 2010, or earlier upon redemption.
The following table sets forth, for the calendar quarter
indicated, the high and low sales prices per unit as reported on
the AMEX. The quotations listed below reflect interdealer
prices, without retail markup, markdown or commission and may
not necessarily represent actual transactions. On
January 5, 2007, each Unit became eligible to be split such
that the common stock and warrants that made up each Unit could
be separately tradable.
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Units
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Quarter Ended
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High
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Low
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December 31, 2006(1)
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$
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8.02
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$
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7.86
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(1)
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Represents the high and low sales prices from the first day our
units began trading on December 20, 2006 through
December 31, 2006.
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The following table sets forth, for the dates indicated, the
high and low sales prices per unit, warrant and share of common
stock, respectively, as reported on the AMEX. The quotations
listed below reflect interdealer prices, without retail markup,
markdown or commission and may not necessarily represent actual
transactions.
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Units
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Warrants
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Common Stock
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Quarter Ended
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High
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Low
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High
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Low
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High
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Low
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March 31, 2007(2)
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$
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9.00
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$
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7.95
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$
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1.15
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$
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0.80
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$
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7.80
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$
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7.30
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June 30, 2007
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$
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8.90
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$
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8.40
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$
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1.50
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$
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1.05
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$
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7.75
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$
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7.45
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September 30, 2007
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$
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8.82
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$
|
8.31
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$
|
1.27
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|
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$
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0.85
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|
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$
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7.70
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$
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7.50
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December 31, 2007
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$
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8.60
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$
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8.20
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$
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1.11
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$
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0.65
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$
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7.65
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$
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7.51
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(2)
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Represents the high and low sales prices only on and following
January 5, 2007, the date that our warrants and common
stock first became separately tradable.
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Holders
As of December 31, 2007, we had one (1) holder of
record of our units, ten (10) holders of record of our
common stock, and ten (10) holders of record of our
warrants.
Dividends
We have not paid any dividends on our common stock to date and
do not intend to pay dividends prior to the completion of a
business combination. The payment of dividends in the future
will be contingent upon our revenues and earnings, if any,
capital requirements and general financial condition subsequent
to completion of a business combination. The payment of any
dividends subsequent to a business combination will be within
the discretion of our then board of directors. It is the present
intention of our board of directors to retain all earnings, if
any, for use in our business operations and, accordingly, our
board does not anticipate declaring any dividends in the
foreseeable future. If, after we consummate a business
combination, we become a holding company with a risk-bearing
operating company subsidiary, the ability of that subsidiary to
pay dividends to our stockholders, either directly or through
us, may be limited by statute or regulation.
31
Securities
Authorized for Issuance Under Equity Compensation
Plans
We do not currently have an equity compensation plan and we do
not intend to have an equity compensation plan prior to the
completion of a business combination.
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
The following tables should be read in conjunction with our
financial statements and the notes thereto appearing elsewhere
in this Annual Report on
Form 10-K.
The selected financial data has been derived from our financial
statements, which have been audited by BDO Seidman, LLP, an
independent registered public accounting firm.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
From Inception
|
|
|
|
Year Ended
|
|
|
(7/19/2006) to
|
|
|
(7/19/2006) to
|
|
|
|
12/31/2007
|
|
|
12/31/2006
|
|
|
12/31/2007
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Interest income
|
|
|
5,098,883
|
|
|
|
110,425
|
|
|
|
5,209,308
|
|
General and administrative expenses
|
|
|
1,079,417
|
|
|
|
76,725
|
|
|
|
1,156,142
|
|
Provision for income taxes
|
|
|
1,366,618
|
|
|
|
5,055
|
|
|
|
1,371,673
|
|
Net income
|
|
|
2,652,848
|
|
|
|
28,645
|
|
|
|
2,681,493
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
|
(669,423
|
)
|
|
|
(18,767
|
)
|
|
|
(688,190
|
)
|
Net income attributable to common stockholders
|
|
|
1,983,425
|
|
|
|
9,878
|
|
|
|
1,993,303
|
|
Earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding, basic and diluted:
|
|
|
10,624,998
|
|
|
|
4,181,096
|
|
|
|
|
|
Net income per share, basic and diluted:
|
|
$
|
0.19
|
|
|
$
|
0.00
|
|
|
|
|
|
Number of shares outstanding subject to possible conversion
|
|
|
4,999,999
|
|
|
|
4,999,999
|
|
|
|
|
|
Net income per share subject to possible conversion, basic and
diluted:
|
|
$
|
0.13
|
|
|
$
|
0.00
|
|
|
|
|
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
3,213,524
|
|
|
$
|
85,451
|
|
|
$
|
3,298,975
|
|
Cash contributed to Trust Account
|
|
|
(2,689,429
|
)
|
|
|
(98,610,424
|
)
|
|
|
(101,299,853
|
)
|
Net proceeds from public offering allocable to
stockholders equity
|
|
|
|
|
|
|
53,044,897
|
|
|
|
53,044,897
|
|
Portion of net proceeds from public offering allocable to common
stock subject to possible conversion
|
|
|
|
|
|
|
39,399,992
|
|
|
|
39,399,992
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
Selected Balance Sheet Data
:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
917,710
|
|
|
$
|
665,016
|
|
Investments held in Trust Account
|
|
|
101,299,853
|
|
|
|
98,610,424
|
|
Total assets
|
|
|
102,539,826
|
|
|
|
99,280,680
|
|
Common stock subject to possible conversion
|
|
|
40,088,182
|
|
|
|
39,418,759
|
|
Total stockholders equity
|
|
|
57,855,529
|
|
|
|
55,922,104
|
|
32
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
This Annual Report on
Form 10-K
includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. We have based these forward-looking statements on our
current expectations and projections about future events. These
forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our
actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by
such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as
may, should, could,
would, expect, plan,
anticipate, believe,
estimate, continue, or the negative of
such terms or other similar expressions. Factors that might
cause or contribute to such a discrepancy include, but are not
limited to, those described in our other Securities and Exchange
Commission filings.
We were formed on July 19, 2006 for the purpose of
acquiring one or more assets or control of one or more operating
businesses in the technology, media or telecommunications
industries through a merger, capital stock exchange, asset
acquisition, stock purchase or other similar business
combination. Our initial business combination must be with an
acquisition target or targets whose collective fair market value
is at least equal to 80% of our net assets (excluding the amount
held in the trust account representing a portion of the
underwriters discount) at the time of the acquisition.
On December 26, 2006, we consummated our initial public
offering (Offering) of 12,500,000 Units. Each Unit
consists of one share of our common stock, par value $0.0001 per
share, and one warrant entitling the holder to purchase one
share of common stock at a price of $5.50. The public offering
price of each Unit was $8.00, and we generated gross proceeds of
$100,000,000 in the Offering. Of the gross proceeds: (i) we
deposited $98,500,000 into a trust account at Smith Barney, a
division of Citigroup Global Markets Inc., maintained by
Continental Stock Transfer & Trust Company, as
trustee, which amount included $3,720,000 of contingent
underwriting discount and $3,000,000 that we received from the
sale of warrants to our founders in a private placement on
December 26, 2006; (ii) the underwriters received
$3,280,000 as underwriting discount (excluding the contingent
underwriting discount); (iii) we retained $640,000 that
will not be held in the trust account; and (iv) we used
$580,000 for offering expenses.
On December 26, 2006, we consummated the sale to CRT
Capital Group LLC, one of our underwriters, for $100, of an
option to purchase up to a total of 375,000 Units at a price
equal to $10.00 per unit (i.e., 125% of the price of the units
sold in our initial public offering). The Units issuable upon
exercise of this option are otherwise identical to those sold in
the Offering except that (i) CRT Capital Group LLC is
entitled to certain piggy-back registration rights
with respect to the Units issuable upon exercise of its purchase
option, and (ii) the exercise price of the warrants issued
in respect of the Units issuable upon exercise of the purchase
option will not be subject to reduction in the event that we
determine to reduce the exercise price of our other warrants.
This option is exercisable commencing on the later of the
consummation of a business combination and December 19,
2007, and expiring on December 19, 2010. The purchase
option was registered under the Securities Act on a registration
statement on
Form S-1
(File
No. 333-137263)
that was declared effective on December 19, 2006.
The proceeds deposited in the trust account will not be released
from the trust account until the earlier of the consummation of
a business combination or the expiration of the time period
during which we may consummate a business combination. The
proceeds held in the trust account (other than the contingent
underwriting discount) may be used as consideration to pay the
sellers of an acquisition target with which we complete a
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 (other than
the contingent underwriting discount) will be used to finance
the operations of the acquisition target. We may also use the
proceeds held in the trust account (other than the contingent
underwriting discount) to pay a finders fee to any
unaffiliated party that provides information regarding
prospective targets to us.
We believe that the working capital available to us, in addition
to the funds available to us outside of the trust account, will
be sufficient to allow us to operate for 24 months from the
date of our initial public offering in December 2006, assuming
that a business combination is not consummated during that time.
Over this time, we
33
have estimated that up to $2,640,000 of working capital and
reserves will be allocated as follows: $1,500,000 of expenses
for legal, accounting and other expenses attendant to the due
diligence investigations, structuring and negotiating of a
business combination; up to $180,000 for the administrative fee
payable to S&B Investment Management Group, LLC ($7,500 per
month for 24 months), an affiliated third party; $100,000
of expenses in legal and accounting fees relating to our SEC
reporting obligations; and $860,000 for general working capital
that can be used for fairness opinions in connection with our
acquisition plans, director and officer liability insurance
premiums, and other miscellaneous expenses and reserves. As of
December 31, 2007 we have used $806,372 for such working
capital expenditures.
As of December 31, 2007 we have capitalized $248,973 of
legal and consulting costs related to proposed acquisitions.
Results
of Operations
For the year ended December 31, 2007, we had net income of
$2,652,848 which consisted of interest income on the trust
account investment of $5,072,653 and interest on cash of
$26,230, offset by general and administrative expenses of
$1,079,417, which includes professional fees of $524,106,
Delaware franchise tax of $98,283, insurance expense of
$143,086, travel and entertainment expenses of $159,687,
administrative fees of $90,000, filing fees of $24,671 and other
operating expenses of $39,584. The Company has a provision for
Federal income taxes of $1,366,618.
From inception (July 19, 2006) to December 31,
2006, we had net income of $28,645 which consisted of interest
income on the trust account investment of $110,425 and interest
on cash of $0, offset by general and administrative expenses of
$76,725, which includes professional fees of $15,375, Delaware
franchise tax of $48,725, insurance expense of $5,120, travel
and entertainment expenses of $0, administrative fees of $3,145,
filing fees of $0, and other operating expenses of $4,360. The
Company has a provision for Federal income taxes of $5,055.
From inception (July 19, 2006) to December 31,
2007, we had net income of $2,681,493 which consisted of
interest income on the trust account investment of $5,183,078
and interest on cash of $26,230, offset by general and
administrative expenses of $1,156,142, which includes
professional fees of $539,481, Delaware franchise tax of
$147,008, insurance expense of $148,206, travel and
entertainment expenses of $159,687, filing fees of $24,671,
administrative fees of $93,145 and other operating expenses of
$43,944. The Company has a provision for Federal income taxes of
$1,371,673.
Critical
Accounting Policies
Our significant accounting policies are described in Note 3
to our audited financial statements included elsewhere in this
report. We believe the following critical accounting polices
involved the most significant judgments and estimates used in
the preparation of our financial statements.
Cash and
Cash Equivalents
Cash and cash equivalents are deposits with financial
institutions as well as short-term money market instruments with
maturities of three months or less when purchased. The
Companys restricted cash and cash equivalents held in the
trust account at December 31, 2007 is invested in a money
market fund. The Company recognized interest income of $26,230
from inception (July 19, 2006) to December 31,
2007 on its cash and cash equivalents.
Investments
The Companys restricted investment held in the trust
account at December 31, 2007 is invested in a money market
fund. The Company recognized interest income of $5,183,078 from
inception (July 19, 2006) to December 31, 2007 on
such money market, which aggregated with the interest income
earned on cash and cash equivalents is $5,209,308, which is
included in interest income on the accompanying statements of
operations.
34
Concentration
of Credit Risk
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of
cash and cash equivalents. The Company may maintain deposits in
federally insured financial institutions in excess of federally
insured limits. However, management believes the Company is not
exposed to significant credit risk due to the financial position
of the depository institutions in which those deposits are held.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
To date, our efforts have been limited to organizational
activities and activities relating to our initial public
offering and the identification of an acquisition target. We
have neither engaged in any operations nor generated any
revenues other than interest income. As the proceeds from our
initial public offering held in the trust account have been
invested in short term investments, our only market risk
exposure relates to fluctuations in interest.
As of December 31, 2007, $101,299,853 of the net proceeds
of our initial public offering (including interest) was held in
the trust account for the purposes of consummating a business
combination. The proceeds held in the trust account have been
invested in a money market fund at Smith Barney, a division of
Citigroup Global Markets, Inc., which invests primarily in high
quality short term debt securities of financial institutions.
Continental Stock Transfer & Trust Company also
acts as trustee. As of December 31, 2007, the effective
annualized interest rate payable on our investment was 4.85%.
We have not engaged in any hedging activities since our
inception on July 19, 2006. We do not expect to engage in
any hedging activities with respect to the market risk to which
we are exposed.
35
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Transforma Acquisition Group Inc.
New York, New York
We have audited the accompanying balance sheets of Transforma
Acquisition Group Inc., a development stage company (the
Company), as of December 31, 2007 and 2006 and
the related statements of operations, stockholders equity,
and cash flows for the year ended December 31, 2007, for
the period from July 19, 2006 (date of inception) through
December 31, 2006 and for the period from July 19,
2006 (date of inception) through December 31, 2007. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit 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 presentation of the financial statements.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Company at December 31, 2007 and 2006, and the
results of its operations and its cash flows for the year ended
December 31, 2007, the period from July 19, 2006 (date
of inception) through December 31, 2006 and the period from
July 19, 2006 (date of inception) through December 31,
2007 in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the financial statements, the
Company is required to consummate a business combination within
18 months of the Companys initial public offering (by
June 26, 2008) or 24 months of the Companys
initial public offering (by December 26, 2008) if
certain extension criteria are met. The possibility of such
business combination not being consummated raises substantial
doubt about the Companys ability to continue as a going
concern, and the financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2007, based on
criteria established in
Internal Control
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) and our report
dated March 5, 2008 expressed an unqualified opinion
thereon.
New York, New York
March 5, 2008
36
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
ASSETS
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
917,710
|
|
|
$
|
665,016
|
|
Investments held in Trust Account (Note 1)
|
|
|
101,299,853
|
|
|
|
98,610,424
|
|
Prepaid expenses
|
|
|
73,290
|
|
|
|
5,240
|
|
Deferred acquisition costs
|
|
|
248,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
102,539,826
|
|
|
$
|
99,280,680
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Deferred underwriting fee (Note 5)
|
|
$
|
3,720,000
|
|
|
$
|
3,720,000
|
|
Accrued registration costs
|
|
|
50,000
|
|
|
|
157,771
|
|
Accrued acquisition costs
|
|
|
135,343
|
|
|
|
|
|
Accrued expenses
|
|
|
403,349
|
|
|
|
56,991
|
|
Income taxes payable
|
|
|
287,423
|
|
|
|
5,055
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
4,596,115
|
|
|
|
3,939,817
|
|
|
|
|
|
|
|
|
|
|
COMMON STOCK SUBJECT TO POSSIBLE CONVERSION
(4,999,999 shares at conversion value) (Note 1)
|
|
|
40,088,182
|
|
|
|
39,418,759
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
(Note 5)
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY
(Notes 2, 6 and 7):
|
|
|
|
|
|
|
|
|
Preferred stock, par value $.0001 per share, 5,000 shares
authorized, 0 shares issued
|
|
|
|
|
|
|
|
|
Common stock, par value $.0001 per share, 32,500,000 shares
authorized, 10,624,998 shares issued and outstanding
(excluding 4,999,999 shares subject to possible conversion)
at December 31, 2007 and 100,000,000 shares
authorized, 11,093,748 shares issued and outstanding
(excluding 4,999,999 shares subject to possible conversion)
at December 31, 2006
|
|
|
1,062
|
|
|
|
1,109
|
|
Additional paid-in capital
|
|
|
55,172,974
|
|
|
|
55,892,350
|
|
Earnings accumulated in the development stage
|
|
|
2,681,493
|
|
|
|
28,645
|
|
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS EQUITY
|
|
|
57,855,529
|
|
|
|
55,922,104
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
$
|
102,539,826
|
|
|
$
|
99,280,680
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements
37
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
From Inception
|
|
|
|
For the Year Ended
|
|
|
(July 19, 2006) to
|
|
|
(July 19, 2006) to
|
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
December 31, 2007
|
|
|
Interest income
|
|
$
|
5,098,883
|
|
|
$
|
110,425
|
|
|
$
|
5,209,308
|
|
General and administrative expenses (Notes 4 and 5)
|
|
|
1,079,417
|
|
|
|
76,725
|
|
|
|
1,156,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
4,019,466
|
|
|
|
33,700
|
|
|
|
4,053,166
|
|
Provision for income taxes (Note 4)
|
|
|
1,366,618
|
|
|
|
5,055
|
|
|
|
1,371,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
$
|
2,652,848
|
|
|
$
|
28,645
|
|
|
$
|
2,681,493
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
|
(669,423
|
)
|
|
|
(18,767
|
)
|
|
|
(688,190
|
)
|
Net income attributable to common stockholders
|
|
$
|
1,983,425
|
|
|
$
|
9,878
|
|
|
$
|
1,993,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
, basic and
diluted
|
|
|
10,624,998
|
|
|
|
4,181,096
|
|
|
|
|
|
Net income per share
, basic and diluted
|
|
$
|
0.19
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares outstanding subject to possible
conversion
, basic and diluted
|
|
|
4,999,999
|
|
|
|
4,999,999
|
|
|
|
|
|
Net income per share subject to possible conversion
,
basic and diluted
|
|
$
|
0.13
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements
38
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
STATEMENTS OF STOCKHOLDERS EQUITY
FROM INCEPTION (JULY 19, 2006) TO DECEMBER 31,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
Common stock
|
|
|
Paid-in
|
|
|
Treasury
|
|
|
Accumulated in the
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stock
|
|
|
Development Stage
|
|
|
Total
|
|
|
Balance, July 19, 2006 (inception)
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Issuance of common stock to initial stockholders
|
|
|
3,593,747
|
|
|
|
359
|
|
|
|
24,641
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
Proceeds from sale of underwriters unit purchase option
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
Proceeds from issuance of warrants
|
|
|
|
|
|
|
|
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
|
3,000,000
|
|
Sale of 12,500,000 units through public offering net of
underwriters discount and public offering expenses and net
of $39,399,992 of proceeds from stockholders allocable to
4,999,999 shares of common stock subject to possible
conversion
|
|
|
7,500,001
|
|
|
|
750
|
|
|
|
52,886,376
|
|
|
|
|
|
|
|
|
|
|
|
52,887,126
|
|
Net income for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,645
|
|
|
|
28,645
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
|
|
|
|
|
|
|
|
|
(18,767
|
)
|
|
|
|
|
|
|
|
|
|
|
(18,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2006
|
|
|
11,093,748
|
|
|
$
|
1,109
|
|
|
$
|
55,892,350
|
|
|
|
|
|
|
$
|
28,645
|
|
|
$
|
55,922,104
|
|
Forfeiture of common stock issued to initial stockholders
(Note 6)
|
|
|
|
|
|
|
|
|
|
|
3,501,562
|
|
|
|
(3,501,562
|
)
|
|
|
|
|
|
|
|
|
Cancellation of common stock received from initial stockholders
|
|
|
(468,750
|
)
|
|
|
(47
|
)
|
|
|
(3,501,515
|
)
|
|
|
3,501,562
|
|
|
|
|
|
|
|
|
|
Public offering expenses accrued related to the sale of
12,500,000 units through public offering
|
|
|
|
|
|
|
|
|
|
|
(50,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(50,000
|
)
|
Net income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,652,848
|
|
|
|
2,652,848
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
|
|
|
|
|
|
|
|
|
(669,423
|
)
|
|
|
|
|
|
|
|
|
|
|
(669,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2007
|
|
|
10,624,998
|
|
|
$
|
1,062
|
|
|
$
|
55,172,974
|
|
|
|
|
|
|
$
|
2,681,493
|
|
|
$
|
57,855,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements
39
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
From Inception
|
|
|
|
For the Year Ended
|
|
|
(July 19, 2006) to
|
|
|
(July 19, 2006) to
|
|
|
|
December 31, 2007
|
|
|
December 31, 2006
|
|
|
December 31, 2007
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period
|
|
$
|
2,652,848
|
|
|
$
|
28,645
|
|
|
$
|
2,681,493
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(68,050
|
)
|
|
|
(5,240
|
)
|
|
|
(73,290
|
)
|
Accrued expenses
|
|
|
346,358
|
|
|
|
56,991
|
|
|
|
403,349
|
|
Income taxes payable
|
|
|
282,368
|
|
|
|
5,055
|
|
|
|
287,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
3,213,524
|
|
|
|
85,451
|
|
|
|
3,298,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments held in Trust Account
|
|
|
(2,689,429
|
)
|
|
|
(98,610,424
|
)
|
|
|
(101,299,853
|
)
|
Deferred acquisition costs paid
|
|
|
(113,630
|
)
|
|
|
|
|
|
|
(113,630
|
)
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(2,803,059
|
)
|
|
|
(98,610,424
|
)
|
|
|
(101,413,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuances of common stock to initial stockholders
|
|
|
|
|
|
|
25,000
|
|
|
|
25,000
|
|
Proceeds from notes payable to initial stockholders
|
|
|
|
|
|
|
200,000
|
|
|
|
200,000
|
|
Payments of notes payable to initial stockholders
|
|
|
|
|
|
|
(200,000
|
)
|
|
|
(200,000
|
)
|
Proceeds from issuance of warrants
|
|
|
|
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Proceeds from sale of underwriters unit purchase option
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
Portion of net proceeds from sale of units through public
offering allocable to shares of common stock subject to possible
conversion
|
|
|
|
|
|
|
39,399,992
|
|
|
|
39,399,992
|
|
Net proceeds from sale of units through public offering
allocable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
53,044,897
|
|
|
|
53,044,897
|
|
Deferred underwriting fees
|
|
|
|
|
|
|
3,720,000
|
|
|
|
3,720,000
|
|
Registration costs paid
|
|
|
(157,771
|
)
|
|
|
|
|
|
|
(157,771
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
|
|
|
(157,771
|
)
|
|
|
99,189,989
|
|
|
|
99,032,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
252,694
|
|
|
|
665,016
|
|
|
|
917,710
|
|
CASH AND CASH EQUIVALENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
665,016
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
917,710
|
|
|
$
|
665,016
|
|
|
$
|
917,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
1,084,250
|
|
|
$
|
|
|
|
$
|
1,084,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITY:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued registration costs
|
|
$
|
50,000
|
|
|
$
|
157,771
|
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued acquisition costs
|
|
$
|
135,343
|
|
|
$
|
|
|
|
$
|
135,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
$
|
669,423
|
|
|
$
|
18,767
|
|
|
$
|
688,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of underwriters unit purchase option included
in public offering costs
|
|
$
|
|
|
|
$
|
1,218,750
|
|
|
$
|
1,218,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements
40
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
|
|
NOTE 1
|
DISCUSSION
OF THE COMPANYS ACTIVITIES
|
Organization and activities
Transforma
Acquisition Group Inc. (Company) was incorporated in
Delaware on July 19, 2006 for the purpose of acquiring one
or more assets or control of one or more operating businesses in
the technology, media or telecommunications industries
(Target Business) through a merger, capital stock
exchange, stock purchase, asset acquisition or other similar
business combination (Business Combination). The
Company has selected December 31 as its fiscal year end.
The Company is considered to be a development stage company and
as such the financial statements presented herein are presented
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 7.
The registration statement for the Companys initial public
offering (Offering) was declared effective on
December 19, 2006. The Company consummated the Offering on
December 26, 2006 for net proceeds of approximately
$96 million (including approximately $3.7 million
payable to the Companys underwriters upon the successful
closing of a Business Combination). The Companys
management intends to apply substantially all of the net
proceeds of the Offering toward consummating a Business
Combination. The initial Target Business must have a fair market
value equal to at least 80% of our net assets (excluding the
amount held in the trust account representing a portion of the
underwriters deferred discount) (Note 5) at the
time of such acquisition. However, there is no assurance that
the Company will be able to successfully effect a Business
Combination.
Management has agreed that $98.5 million or $7.88 per Unit
sold in the Offering will be held in a trust account
(Trust Account) and invested in permitted
United States government securities, of which $0.2976 per Unit
will be paid to the underwriter upon the consummation of a
Business Combination. The placing of funds in the
Trust Account may not protect those funds from third party
claims against the Company. Although the Company will seek to
have all vendors, prospective acquisition targets or other
entities it engages, execute agreements with the Company waiving
any right, title, interest or claim of any kind in or to any
monies held in the Trust Account, there is no guarantee
that they will execute such agreements. Fifty percent of after
tax interest up to an aggregate amount of $2,000,000 in interest
earned on the monies held in the Trust Account may be used
to pay for due diligence of prospective Target Businesses, legal
and accounting fees relating to Securities and Exchange
Commission (SEC) reporting obligations and working
capital to cover miscellaneous expenses, director and officer
insurance and reserves (Note 5).
The Company, after signing a definitive agreement for a Business
Combination, is obliged to submit such transaction for approval
by a majority (more than 50%) of the public stockholders of the
Company. Stockholders that vote against such proposed Business
Combination and exercise their conversion rights are, under
certain conditions described below, entitled to convert their
shares into a pro-rata distribution from the Trust Account
(the Conversion Right). The actual per-share
conversion price will be equal to the amount in the
Trust Account (inclusive of any interest thereon) as of two
business days prior to the proposed Business Combination,
divided by the number of shares sold in the Offering, or
approximately $7.95 per share based on the value of the
Trust Account as of December 31, 2007. As a result of
the Conversion Right, $39,399,992, plus accretion of $688,190,
aggregating 40,088,182 has been classified in common stock,
subject to possible conversion on the accompanying balance
sheets as of December 31, 2007. The Companys
stockholders prior to the Offering (Initial
Stockholders), have agreed to vote their 3,124,997
founding shares of common stock in accordance with the manner in
which the majority of the shares of common stock offered in the
Offering are voted by the Companys public stockholders
(Public Stockholders) with respect to a Business
Combination. In the event that a majority of the outstanding
shares of common stock voted by the Companys Public
Stockholders vote for the approval of the Business Combination
and holders owning 40% or more of the outstanding common stock
do not vote against the Business Combination and do not exercise
their Conversion Rights, the Business Combination may then be
consummated.
If the Company does not execute a letter of intent, agreement in
principle or definitive agreement for a Business Combination
prior to 18 months from the date of the Offering
(June 26, 2008), the Companys board will
41
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
convene, adopt and recommend to their stockholders a plan of
dissolution and distribution and file a proxy statement with the
SEC seeking stockholder approval for such plan. If, however, a
letter of intent, agreement in principle or definitive agreement
for a Business Combination has been executed prior to
18 months from the date of the Offering, the Company will
abandon their plan of dissolution and distribution and seek the
consummation of that Business Combination. If a proxy statement
seeking the approval of the Companys stockholders for that
Business Combination has not been filed prior to 24 months
from the date of the Offering (December 26, 2008), the
Companys board will convene, adopt and recommend to their
stockholders a plan of dissolution and distribution and file a
proxy statement with the SEC seeking stockholder approval for
such plan. In the event there is no Business Combination within
the 18 and
24-month
deadlines (Target Business Combination Period), the
Company will dissolve and distribute to its Public Stockholders,
in proportion to their respective equity interests, the amount
held in the Trust Account, and any remaining net assets,
after the distribution of the Trust Account. In the event
of liquidation, 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 share in the Offering.
With respect to a Business Combination which is approved and
consummated, any Public Stockholder who voted against the
Business Combination may contemporaneously with or prior to such
vote exercise their Conversion Right and their common shares
would be cancelled and returned to the status of authorized but
unissued shares. The per share conversion price will equal the
amount in the Trust Account, calculated as of two business
days prior to the consummation of the proposed Business
Combination, divided by the number of shares of common stock
held by Public Stockholders at the consummation of the Offering.
Accordingly, Public Stockholders holding less than 40% of the
aggregate number of shares owned by all Public Stockholders may
seek conversion of their shares in the event of a Business
Combination. Such Public Stockholders are entitled to receive
their per share interest in the Trust Account computed
without regard to the founding shares (but not shares acquired
in the Offering or in the secondary market) held by Initial
Stockholders.
In the Offering, the Company sold to the public 12,500,000 Units
(collectively the Units and each a Unit)
at a price of $8.00 per Unit. Proceeds from the Offering totaled
approximately $96 million, which was net of approximately
$3.9 million in underwriting fees and other expenses paid
at closing. Each Unit consists of one share of the
Companys common stock and one warrant to purchase a share
of the Companys common stock for $5.50 per share.
The Company also sold to one of the underwriters, CRT Capital
Group LLC, a unit purchase option to purchase up to a total of
375,000 additional Units (Note 7).
The Company had granted to the underwriters a
45-day
option to purchase up to 1,875,000 Units solely to cover
over-allotments, if any. As discussed in Note 6, the
45-day
option expired in January 2007, and the option was never
exercised.
|
|
NOTE 3
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
CASH AND CASH EQUIVALENTS
Cash and cash
equivalents are deposits with financial institutions as well as
short-term money market instruments with maturities of three
months or less when purchased.
DEFERRED ACQUISITION COSTS
Costs related to
proposed acquisitions are capitalized and in the event the
acquisition does not occur, the costs are expensed.
TRUST ACCOUNT
The Companys
restricted cash and cash equivalents held in the
Trust Account at December 31, 2007 is invested in a
money market fund. The Company recognized interest income of
$5,183,078 from inception (July 19, 2006) to
December 31, 2007 on such money market fund in addition to
$26,230 recognized
42
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
for the same period on its cash and cash equivalents,
aggregating $5,209,308, which is included in interest income on
the accompanying statements of operations.
CONCENTRATION OF CREDIT RISK
Financial
instruments that potentially subject the Company to a
significant concentration of credit risk consist primarily of
cash and cash equivalents. The Company may maintain deposits in
federally insured financial institutions in excess of federally
insured limits. However, management believes the Company is not
exposed to significant credit risk due to the financial position
of the depository institutions in which those deposits are held.
NET INCOME PER SHARE
Basic earnings per share
is computed by dividing income available to common stockholders
by the weighted average common shares outstanding for the
period. Calculation of the weighted average common shares
outstanding during the period is based on 3,124,997 initial
shares outstanding throughout the period from July 19, 2006
(inception) to December 31, 2007, 468,750 initial shares
cancelled by the Company on January 25, 2007 (retroactively
restated to August 2006 for this calculation) and 7,500,001
common shares outstanding after the completion of the Offering
on December 26, 2006. Basic net income per share subject to
possible conversion is calculated by dividing accretion of
Trust Account relating to common stock subject to possible
conversion by 4,999,999 common shares subject to possible
conversion. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in
the earnings of the entity. Since the effect of outstanding
warrants to purchase common stock and outstanding Unit Purchase
Option are antidilutive, they have been excluded from the
Companys computation of net income per share.
USE OF ESTIMATES
The preparation of financial
statements in accordance with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect certain reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
INCOME TAXES
Deferred income tax assets and
liabilities are computed for differences between the financial
statement and tax basis of assets and liabilities that will
result in future taxable or deductible amounts and are based on
enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred
income tax assets to the amount expected to be realized.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2006,
the FASB issued Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 establishes
new evaluation and measurement processes for all income tax
positions taken. FIN 48 also requires expanded disclosures
of income tax matters. Management does not believe the adoption
of this standard for the year ending December 31, 2007,
will have a material effect on the Companys financial
statements.
In September 2006, the FASB issued Statement No. 157, Fair
Value Measurements (SFAS No. 157).
SFAS No. 157 provides guidance for using fair value to
measure assets and liabilities. This statement clarifies the
principle that fair value should be based on the assumptions
that market participants would use when pricing the asset or
liability. SFAS No. 157 establishes a fair value
hierarchy, giving the highest priority to quoted prices in
active markets and the lowest priority to unobservable data.
SFAS No. 157 applies whenever other standards require
assets or liabilities to be measured at fair value. This
statement is effective in fiscal years beginning after
November 15, 2007. The Company believes that the adoption
of SFAS No. 157 will not have a significant effect on
the Companys financial statements.
In February 2007, FASB issued Statement No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities
(SFAS No. 159). SFAS No. 159
provides a Fair Value Option under which a company
may irrevocably elect fair value as the initial and subsequent
measurement attribute for certain financial assets and
43
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
liabilities. SFAS No. 159 will be available on a
contract-by-contract
basis with changes in fair value recognized in earnings as those
changes occur. SFAS No. 159 is effective for fiscal
years after November 15, 2007. SFAS No. 159 also
allows early adoption provided that the entity also adopts the
requirements of SFAS No. 157. The Company does not
believe the adoption of SFAS No. 159 will have a
material impact, if any, on its financial statements.
In December 2007, the FASB issued SFAS No. 141R,
Business Combination (SFAS 141R).
SFAS 141R replaces SFAS 141 and established principles
and requirements for how an acquirer recognizes and measures in
its financial statements the identifiable assets acquired,
liabilities assumed and any non-controlling interest in the
acquirer and the goodwill acquired. SFAS 141R also
establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business
combination. This standard is effective for fiscal years
beginning after December 15, 2008.
The Company does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted
would have a material effect on the accompanying financial
statements.
Provision for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the
|
|
From Inception
|
|
From Inception
|
|
|
Year Ended
|
|
(July 19, 2006) to
|
|
(July 19, 2006) to
|
|
|
December 31, 2007
|
|
December 31, 2006
|
|
December 31, 2007
|
|
Current - Federal
|
|
$
|
1,366,618
|
|
|
$
|
5,055
|
|
|
$
|
1,371,673
|
|
The Companys effective tax rate approximates the federal
statutory rate. No provision for state and local income taxes
has been made since the Company was formed as a vehicle to
effect a Business Combination and, as a result does not conduct
operations and is not engaged in a trade or business in any
state. The Company is incorporated in Delaware and accordingly
is subject to franchise taxes. Delaware franchise tax expense of
$98,283, $48,725 and $147,008 for the year ended
December 31, 2007, the period from inception (July 19,
2006) to December 31, 2006, and for the period from
inception (July 19, 2006) to December 31, 2007,
respectively, are included as part of general and administrative
expenses in the accompanying statements of operations.
Administrative
Fees
The Company is permitted to utilize fifty percent of after tax
interest up to an aggregate amount of $2,000,000 of the interest
earned upon monies in the Trust Account (of which
(i) an aggregate amount of up to $1,250,000 may be released
to the Company upon its demand within 12 months after the
completion of the Offering, and (ii) an aggregate amount of
up to $750,000 plus any remaining portion of the $1,250,000 not
previously released to the Company during the initial
12-month
period may be released to the Company upon its demand during the
period that is between 12 months and 24 months after
the completion of the Offering) in addition to approximately
$627,000 which was transferred to the Company upon consummation
of the Offering for working capital purposes. The working
capital will be used to pay for director and officer liability
insurance premiums and general and administrative services,
including office space, utilities and secretarial support, with
the balance being held in reserve for other expenses, such as
due diligence, legal, accounting, and other fees and expenses
for structuring and negotiating business combinations, and
deposits, down payments
and/or
funding of no shop provisions in connection with
business combinations as well as for reimbursement of any
out-of-pocket expenses incurred by the Initial Stockholders in
connection with activities undertaken on the Companys
behalf.
The Company has agreed to pay an affiliate of two directors
$7,500 per month commencing on effectiveness of the Offering for
office, secretarial and administrative services. Secretarial and
administrative service of $90,000, $3,145 and $93,145 for the
year ended December 31, 2006, the period from inception
(July 19, 2006) to
44
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
December 30, 2007, and for the period from inception
(July 19, 2006) to December 31, 2007,
respectively, are included as part of general and administrative
expenses in the accompanying statements of operations.
Underwriting
Agreement
In connection with the Offering, the Company entered into an
underwriting agreement (the Underwriting Agreement)
with the underwriters in the Offering.
Pursuant to the Underwriting Agreement, the Company was
obligated to the underwriters for certain fees and expenses
related to the Offering, including underwriting discounts of
$7,000,000. The Company paid $3,280,000 of the underwriting
discount upon closing of the Offering. The Company and the
underwriters have agreed that payment of the balance of the
underwriting discount of $3,720,000 will be deferred until
consummation of the Business Combination. Accordingly, a
deferred underwriting fee comprised of the deferred portion of
the underwriting discount is included on the accompanying
balance sheets.
During September 2006, the Company amended and restated its
Certificate of Incorporation to authorize the issuance of an
additional 90,000,000 shares of common stock for an
aggregate authorization of 100,000,000 shares of common
stock.
On December 14, 2006, the Company effected a 2 for 3
reverse stock split of its outstanding shares of common stock.
All of the references in the accompanying financial statements
to the number of shares have been retroactively restated to
reflect the reverse stock split.
During May 2007, the Company amended and restated its
Certificate of Incorporation to authorize the reduction of
67,500,000 shares of common stock for an aggregate
remaining authorization of 32,500,000 shares of common
stock.
Preferred
Stock
The Company is authorized to issue 5,000 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.
Common
Stock
In August 2006, the Companys Initial Stockholders
purchased 3,593,747 post reverse stock split shares of the
Companys common stock for an aggregate $25,000.
On January 25, 2007, the Initial Stockholders returned an
aggregate of 468,750 shares of the Companys common
stock to the Company for cancellation. At the date of return and
cancellation, management determined the fair value to be $7.47
per share based on the common stock closing price on
January 25, 2007. Accordingly, on January 25, 2007,
the Company recorded the $3,501,562 value of the shares
contributed to treasury stock and a $3,501,562 corresponding
credit to additional paid-in capital. Upon receipt, such shares
were then immediately cancelled by the Company, which resulted
in the retirement of the treasury stock and a corresponding
charge to additional paid-in capital and common stock.
Pursuant to letter agreements with the Company and the
underwriters in the Offering and the private placement offering,
the Initial Stockholders have waived their right to receive
distributions with respect to their founding shares (but not
shares purchased in the Offering or in the secondary market) in
the event of the Companys liquidation.
45
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 7
|
WARRANTS
AND OPTIONS TO PURCHASE COMMON STOCK
|
Public
Warrants
Each warrant sold in the Offering (a Public Warrant)
is exercisable for one share of common stock. Except as set
forth below, the Public Warrants entitle the holder to purchase
shares at $5.50 per share, subject to adjustment in the event of
stock dividends and splits, reclassifications, combinations and
similar events for a period commencing on the later of:
(a) completion of the Business Combination and
(b) December 19, 2007, and ending on December 19,
2010. The Company has the ability to redeem the Public Warrants,
in whole or in part, at a price of $.01 per Public Warrant, at
any time after the Public Warrants become exercisable, upon a
minimum of 30 days prior written notice of
redemption, if, and only if, the last sale price of the
Companys common stock equals or exceeds $11.50 per share
for any 20 trading days within a 30 trading day period ending
three business days before the Company sent the notice of
redemption.
Private
Warrants
On December 26, 2006, in conjunction with the Offering the
Company sold to certain of the Initial Stockholders 3,000,000
warrants (Private Warrants), for an aggregate
purchase price of $3,000,000. All of the proceeds received from
these purchases were placed in the Trust Account. The
Private Warrants are identical to the Public Warrants, including
entitling the holder to purchase shares at $5.50 per share,
except that they may be exercised on a cashless basis so long as
they are held by the original purchasers, members of their
immediate families or their controlled entities, and may not be
sold or transferred, except in limited circumstances, until
after the consummation of a Business Combination. If the Company
dissolves before the consummation of a Business Combination,
there will be no distribution from the Trust Account with
respect to such Private Warrants, which will expire worthless.
As the proceeds from the exercise of the Public Warrants and
Private Warrants will not be received until after the completion
of a Business Combination, the expected proceeds from exercise
will not have any effect on the Companys financial
condition or results of operations prior to a Business
Combination.
Purchase
Option
Upon closing of the Offering, the Company sold and issued to CRT
Capital Group LLC an option to purchase up to 375,000 Units at
an exercise price of $10.00 per Unit (Unit Purchase
Option or UPO). The Units underlying the UPO
will be exercisable in whole or in part, solely at CRT Capital
Group LLCs discretion, commencing on the consummation of a
Business Combination and expiring on the four-year anniversary
of the Offering. The Company accounted for the fair value of the
UPO, as an expense of the public offering resulting in a charge
directly to stockholders equity with an equivalent
increase in additional paid-in capital. The fair value of the
375,000 Units underlying the UPO was approximately
$1.2 million ($3.25 per Unit) at the date of sale and
issuance, which was determined using a Black-Scholes
option-pricing model. The fair value of the UPO was calculated
using the following assumptions: (1) expected volatility of
55.172%, (2) risk-free interest rate of 4.77% and
(3) contractual life of 4 years. The expected
volatility of approximately 55% was estimated by management
based on an evaluation of the historical daily volatilities of
similar public entities which had completed a transaction with
an operating company. The UPO may only be exercised for cash.
Each of the Units included in the UPO are identical to the Units
to be sold in the Offering, except that (i) the exercise
price of the Units will be $10.00 per Unit, (ii) CRT
Capital Group LLC will be entitled to receive certain
piggy-back registration rights with respect to the
Units issuable upon exercise of the UPO, and (iii) the
exercise price of the warrants issued in respect of the Units
issuable upon exercise of the UPO will not be subject to
reduction in the event that we determine to reduce the exercise
price of our other Warrants.
46
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
Registration
Rights Warrants and UPO
In accordance with the Warrant Agreement related to the Public
Warrants and the Registration Rights Agreement associated with
the Private Warrants, the Public Warrants and Private Warrants
are collectively referred to as the Warrants. The
Company will only be required to use its best efforts to
register the Warrants and the shares of common stock issuable
upon exercise of the Warrants and, once the registration
statement is effective, to use its best efforts to maintain the
effectiveness of such registration statement. The Company will
not be obligated to deliver securities, and there are no
contractual penalties for failure to deliver securities, if a
registration statement is not effective at the time of exercise.
Additionally, in the event that a registration statement is not
effective at the time of exercise, the holder of such Warrants
shall not be entitled to exercise. In no event (whether in the
case of a registration statement not being effective or
otherwise) will the Company be required to net cash settle a
Public Warrant exercise. Consequently, the Warrants may expire
unexercised and unredeemed. The holders of Warrants do not have
the rights or privileges of holders of the Companys common
stock or any voting rights until such holders exercise their
respective Warrants and receive shares of the Companys
common stock.
The Company is not required to register the Units underlying the
UPO; however if the Company does file certain kinds of
registration statements at any time during the seven year period
following December 19, 2006 the holders of securities
underlying the UPO shall have the right to join in such
registration statement, subject to certain limitations. The
Company has no obligation to net cash settle the exercise of the
UPO or the Units underlying the UPO. The holder of the UPO is
not entitled to exercise the UPO or the Units underlying the UPO
unless a registration statement covering the securities
underlying the UPO is effective or an exemption from
registration is available. If the holder is unable to exercise
the UPO or underlying Units, the UPO or underlying units, as
applicable, will expire worthless.
|
|
NOTE 8
|
SUMMARIZED
QUARTERLY FINANCIAL INFORMATION (unaudited)
|
Summarized quarterly financial information for the year ended
December 31, 2007 and the period from inception
(July 19, 2006) to December 31, 2006 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
2007
|
|
|
Interest income
|
|
$
|
1,242,193
|
|
|
$
|
1,282,652
|
|
|
$
|
1,293,457
|
|
|
$
|
1,280,581
|
|
General and administrative expenses
|
|
|
224,628
|
|
|
|
280,162
|
|
|
|
206,249
|
|
|
|
368,378
|
|
Provision for income taxes
|
|
|
345,972
|
|
|
|
340,8473
|
|
|
|
69,650
|
|
|
|
310,149
|
|
Net income
|
|
|
671,593
|
|
|
|
661,643
|
|
|
|
717,558
|
|
|
|
602,054
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
|
(163,678
|
)
|
|
|
(168,494
|
)
|
|
|
(169,640
|
)
|
|
|
(167,611
|
)
|
Net income attributable to common stockholders
|
|
|
507,915
|
|
|
|
493,149
|
|
|
|
547,918
|
|
|
|
434,443
|
|
Weighted average number of shares outstanding, basic and diluted
|
|
|
10,749,998
|
|
|
|
10,624,998
|
|
|
|
10,624,998
|
|
|
|
10,624,998
|
|
Net income per share, basic and diluted
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
Number of shares outstanding subject to possible conversion
|
|
|
4,999,999
|
|
|
|
4,999,999
|
|
|
|
4,999,999
|
|
|
|
4,999,999
|
|
Net income per share subject to possible conversion, basic and
diluted
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
47
TRANSFORMA
ACQUISITION GROUP INC.
(a corporation in the development stage)
NOTES TO FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
From Inception
|
|
|
|
|
|
|
(July 19, 2006) to
|
|
|
Quarter Ended
|
|
|
|
September 30, 2006
|
|
|
December 31 2006
|
|
|
Interest income
|
|
$
|
|
|
|
$
|
110,425
|
|
General and administrative expenses
|
|
|
6,000
|
|
|
|
70,725
|
|
Provision for income taxes
|
|
|
|
|
|
|
5,055
|
|
Net income (loss)
|
|
|
(6,000
|
)
|
|
|
34,645
|
|
Accretion of Trust Account relating to common stock subject
to possible conversion
|
|
|
|
|
|
|
(18,767
|
)
|
Net income (loss) attributable to common stockholders
|
|
|
(6,000
|
)
|
|
|
15,878
|
|
Weighted average number of shares outstanding, basic and diluted
|
|
|
1,651,181
|
|
|
|
4,181,096
|
|
Net income per share, basic and diluted
|
|
$
|
|
|
|
$
|
|
|
Number of shares outstanding subject to possible conversion
|
|
|
|
|
|
|
4,999,999
|
|
Net income per share subject to possible conversion, basic and
diluted
|
|
$
|
|
|
|
$
|
0.00
|
|
48
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Controls
and Procedures
We maintain disclosure controls and procedures designed to
ensure that information required to be disclosed in our periodic
filings with the SEC under the Exchange Act, including this
report, is recorded, processed, summarized and reported on a
timely basis. These disclosure controls and procedures include
controls and procedures designed to ensure that information
required to be disclosed under the Exchange Act is accumulated
and communicated to our management on a timely basis to allow
decisions regarding required disclosure. Management, including
our principal executive officer and principal financial officer,
has evaluated the effectiveness of the design and operation of
our disclosure controls and procedures (as defined under
Rules 13a-15(e)
and 15(d)-15(e) of the Exchange Act) as of December 31,
2007. Based upon that evaluation, management has concluded that
our disclosure controls and procedures were effective as of the
end of the period covered by this report. During our fiscal
quarter ended December 31, 2007, there was no change in our
internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Managements
Annual Report on Internal Control over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. As defined
in
Rule 13a-15(f)
under the Exchange Act, internal control over financial
reporting is a process designed by, or under the supervision of,
our principal executive officer and principal financial officer
and effected by our board of directors, management and other
personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles.
Under the supervision and with the participation of our
management, including our principal executive officer and
principal financial officer, we carried out an evaluation of the
effectiveness of our internal control over financial reporting
as of December 31, 2007 based on the criteria in
Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based upon this
evaluation, our management concluded that our internal control
over financial reporting was effective as of December 31,
2007.
BDO Seidman, LLP, the independent registered public accounting
firm that audited our financial statements included in this
report, has issued an attestation report regarding its
assessment of our internal control over financial reporting as
of December 31, 2007, which appears on the next page.
49
Report of
Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Transforma Acquisition Group Inc.
New York, New York
We have audited the internal control over financial reporting,
as of December 31, 2007, of Transforma Acquisition Group
Inc., a development stage company (the Company),
based on criteria established in
Internal Control
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
The Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion
on the companys internal control over financial reporting
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 effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our
opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
balance sheets of the Company as of December 31, 2007 and
2006 and the related statements of operations,
stockholders equity, and cash flows for the year ended
December 31, 2007, for the period from July 19, 2006
(date of inception) through December 31, 2006 and for the
period from July 19, 2006 (date of inception) through
December 31, 2007 and our report dated March 5, 2008
expressed an unqualified opinion thereon.
New York, New York
March 5, 2008
50
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III
Items 10,
11, 12, 13, and 14
Information required by Part III (Items 10, 11, 12,
13, and 14) of this
Form 10-K
is incorporated by reference from our definitive Proxy Statement
for our 2008 Annual Meeting of Stockholders, which will be filed
with the Securities and Exchange Commission, pursuant to
Regulation 14A, not later than 120 days after the end
of the 2007 fiscal year, all of which information is hereby
incorporated by reference in, and made part of, this
Form 10-K.
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
(a)(1)
Financial Statements
See financial statements set forth in Item 8 hereof.
(a)(2)
Financial Statement Schedules
No financial statement schedules are filed herewith because
(i) such schedules are not required or (ii) the
information required has been presented in the aforementioned
financial statements.
(a)(3)
Exhibits
Exhibits marked with an asterisk (*) are incorporated by
reference to documents previously filed by us with the SEC, as
exhibits to our registration statement on
Form S-1
(File
No. 333-137263).
For the exhibits marked with a (), exhibit 3.1 is
incorporated by reference from Exhibit 3.1 to our Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2007 (File
No. 001-33210),
and exhibit 3.2 is incorporated by reference from
Exhibit 3.1 to our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007 (File
No. 001-33210).
All other documents listed are filed with this report.
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
3
|
.1
|
|
Third Amended and Restated Certificate of Incorporation of the
Registrant
|
|
3
|
.2
|
|
Second Amended and Restated By-laws of the Registrant
|
|
*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
|
|
*4
|
.5
|
|
Form of Unit Purchase Option to be granted to CRT Capital Group
LLC
|
|
*10
|
.1
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Larry J. Lenhart
|
|
*10
|
.2
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Daniel L. Burstein
|
|
*10
|
.3
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Samuel L. Schwerin
|
|
*10
|
.4
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Jon Lambert
|
|
*10
|
.5
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Ashanti Capital Partners, LLC
|
|
*10
|
.6
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Gordon E. Eubanks, Jr.
|
|
*10
|
.7
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Dale Kutnick
|
51
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
*10
|
.8
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and S&B Investment Management Group, LLC
|
|
*10
|
.9
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Edward Fenster
|
|
*10
|
.10
|
|
Form of Investment Management Trust Agreement between the
Registrant and Continental Stock Transfer &
Trust Company
|
|
*10
|
.11
|
|
Administrative Services Letter Agreement, dated
September 1, 2006 between the Registrant and S&B
Investment Management Group, LLC
|
|
*10
|
.12
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $40,000.00 issued by the Registrant to Larry J. Lenhart
|
|
*10
|
.13
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $35,000.00 issued by the Registrant to Daniel L.
Burstein
|
|
*10
|
.14
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $35,000.00 issued by the Registrant to Samuel L.
Schwerin
|
|
*10
|
.15
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $5,000.00 issued by the Registrant to Jon Lambert
|
|
*10
|
.16
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $28,000.00 issued by the Registrant to Ashanti Capital
Partners, LLC
|
|
*10
|
.17
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $28,000.00 issued by the Registrant to Gordon E.
Eubanks, Jr.
|
|
*10
|
.18
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $17,500.00 issued by the Registrant to Dale Kutnick
|
|
*10
|
.19
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $7,500.00 issued by the Registrant to S&B
Investment Management Group, LLC
|
|
*10
|
.20
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $4,000.00 issued by the Registrant to Edward Fenster
|
|
*10
|
.21
|
|
Form of Registration Rights Agreement between the Registrant and
the Companys initial stockholders
|
|
*10
|
.22
|
|
Third Amended and Restated Private Placement Agreement between
the Registrant and the Companys initial stockholders
|
|
*10
|
.23
|
|
Form of Letter Agreement between each Insider, the Registrant
and the Underwriters
|
|
*10
|
.24
|
|
Forfeiture Letter dated January 25, 2007 between the
Registrant and the Registrants founders
|
|
*14
|
.1
|
|
Code of Ethics
|
|
24
|
.1
|
|
Power of Attorney (included on the signature pages)
|
|
31
|
.1
|
|
Certificate Pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934 of the Principal
Executive Officer
|
|
31
|
.2
|
|
Certificate Pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934 of the Principal
Financial Officer
|
|
32
|
.1
|
|
Certificate Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
32
|
.2
|
|
Certificate Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
*99
|
.1
|
|
Audit Committee Charter
|
|
*99
|
.2
|
|
Nominating Committee Charter
|
52
SIGNATURES
Pursuant to the requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRANSFORMA ACQUISITION GROUP INC.
Name:
Larry J. Lenhart
|
|
|
|
Title:
|
President and Chief Executive Officer
|
Dated: March 11, 2008
POWER OF
ATTORNEY AND SIGNATURES
Each of the undersigned officers and directors of Transforma
Acquisition Group Inc. hereby severally constitute and appoint
Larry J. Lenhart, our true and lawful attorney, with full power
to him, to sign for us in our names in the capacities indicated
below, all amendments to this Annual Report on
Form 10-K,
and generally to do all things in our names and on our behalf in
such capacities to enable Transforma Acquisition Group Inc. to
comply with the provisions of the Securities Exchange Act of
1934, as amended, and all requirements of the Securities and
Exchange Commission.
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on
this
11
th
day of March, 2008.
|
|
|
|
|
Name
|
|
Position
|
|
|
|
|
/s/ Larry
J. Lenhart
Larry
J. Lenhart
|
|
President, Chief Executive Officer and Director
(principal executive officer)
|
|
|
|
/s/ Jon
Lambert
Jon
Lambert
|
|
Treasurer and Secretary
(principal financial officer and principal accounting officer)
|
|
|
|
/s/ Gordon
E. Eubanks, Jr.
Gordon
E. Eubanks, Jr.
|
|
Chairman of the Board
|
|
|
|
/s/ Daniel
L. Burstein
Daniel
L. Burstein
|
|
Director
|
|
|
|
/s/ Samuel
L. Schwerin
Samuel
L. Schwerin
|
|
Director
|
|
|
|
/s/ John
Sculley
John
Sculley
|
|
Director
|
|
|
|
Dale
Kutnick
|
|
Director
|
53
EXHIBIT INDEX
Exhibits marked with an asterisk (*) are incorporated by
reference to documents previously filed by us with the SEC, as
exhibits to our registration statement on
Form S-1
(File
No. 333-137263).
For the exhibits marked with a (), exhibit 3.1 is
incorporated by reference from Exhibit 3.1 to our Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2007 (File
No. 001-33210),
and exhibit 3.2 is incorporated by reference from
Exhibit 3.1 to our Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2007 (File
No. 001-33210).
All other documents listed are filed with this report.
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
3
|
.1
|
|
Third Amended and Restated Certificate of Incorporation of the
Registrant
|
|
3
|
.2
|
|
Second Amended and Restated By-laws of the Registrant
|
|
*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
|
|
*4
|
.5
|
|
Form of Unit Purchase Option to be granted to CRT Capital Group
LLC
|
|
*10
|
.1
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Larry J. Lenhart
|
|
*10
|
.2
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Daniel L. Burstein
|
|
*10
|
.3
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Samuel L. Schwerin
|
|
*10
|
.4
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Jon Lambert
|
|
*10
|
.5
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Ashanti Capital Partners, LLC
|
|
*10
|
.6
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Gordon E. Eubanks, Jr.
|
|
*10
|
.7
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Dale Kutnick
|
|
*10
|
.8
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and S&B Investment Management Group, LLC
|
|
*10
|
.9
|
|
Subscription Agreement, dated August 31, 2006 between the
Registrant and Edward Fenster
|
|
*10
|
.10
|
|
Form of Investment Management Trust Agreement between the
Registrant and Continental Stock Transfer &
Trust Company
|
|
*10
|
.11
|
|
Administrative Services Letter Agreement, dated
September 1, 2006 between the Registrant and S&B
Investment Management Group, LLC
|
|
*10
|
.12
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $40,000.00 issued by the Registrant to Larry J. Lenhart
|
|
*10
|
.13
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $35,000.00 issued by the Registrant to Daniel L.
Burstein
|
|
*10
|
.14
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $35,000.00 issued by the Registrant to Samuel L.
Schwerin
|
|
*10
|
.15
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $5,000.00 issued by the Registrant to Jon Lambert
|
|
*10
|
.16
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $28,000.00 issued by the Registrant to Ashanti Capital
Partners, LLC
|
|
*10
|
.17
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $28,000.00 issued by the Registrant to Gordon E.
Eubanks, Jr.
|
|
*10
|
.18
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $17,500.00 issued by the Registrant to Dale Kutnick
|
|
*10
|
.19
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $7,500.00 issued by the Registrant to S&B
Investment Management Group, LLC
|
|
*10
|
.20
|
|
Promissory Note, dated August 31, 2006, in the principal
amount of $4,000.00 issued by the Registrant to Edward Fenster
|
|
*10
|
.21
|
|
Form of Registration Rights Agreement between the Registrant and
the Companys initial stockholders
|
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
*10
|
.22
|
|
Third Amended and Restated Private Placement Agreement between
the Registrant and the Companys initial stockholders
|
|
*10
|
.23
|
|
Form of Letter Agreement between each Insider, the Registrant
and the Underwriters
|
|
*10
|
.24
|
|
Forfeiture Letter dated January 25, 2007 between the
Registrant and the Registrants founders
|
|
*14
|
.1
|
|
Code of Ethics
|
|
24
|
.1
|
|
Power of Attorney (included on the signature pages)
|
|
31
|
.1
|
|
Certificate Pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934 of the Principal
Executive Officer
|
|
31
|
.2
|
|
Certificate Pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934 of the Principal
Financial Officer
|
|
32
|
.1
|
|
Certificate Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
32
|
.2
|
|
Certificate Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
|
|
*99
|
.1
|
|
Audit Committee Charter
|
|
*99
|
.2
|
|
Nominating Committee Charter
|
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