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 o No
x
Indicate
by check mark if the
registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange
Act. Yes o No
x
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file
such
reports), and (2) had been subject to such filing requirements for the past
90 days. Yes x No o
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 registrant’s 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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
Accelerated
filer o
Non-accelerated
filer x
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange
Act). Yes x No o
State
the aggregate market value of the voting and non-voting common equity held
by
non-affiliates computed by reference to the price at which the common equity
was
last sold, or the average bid and asked price of such common equity, as of
the
last business day of the registrant’s most recently completed second fiscal
quarter. [Not Applicable as Registrant was not a public company on
June 30, 2006.]
As
of March 23, 2007, there were outstanding 9,062,500 shares of the registrant’s
common stock issued and outstanding.
PART
I
Item
1.
Business.
Introduction
We
are a
blank check company organized under the laws of the State of Delaware on March15, 2006 for the purpose of effecting a merger, capital stock exchange, asset
acquisition or other similar transaction with one or more businesses that have
operations primarily in India. While our efforts in identifying a prospective
target business have not been limited to a particular industry, we have focused
primarily on privately owned businesses within the financial services,
healthcare, infrastructure and consumer, retail and hospitality sectors.
However, we remain willing to review any business opportunity presented to
us in
any industry sector.
Our
entire activity from inception through December 31, 2006 has been to prepare
for
our initial public offering and to effect a business combination. We have not
generated any revenues.
Our
principal executive office is located at 330 East 38th Street,
New York,
New York10016 and our telephone number at that address is
(212) 681-6783.
Identification
of Industry Sectors
We
are
focusing our efforts on identifying privately owned businesses within the
financial services, healthcare, infrastructure, and consumer, retail and
hospitality sectors for our potential target business combination. We believe
privately owned businesses within these sectors represent particularly
attractive acquisition targets with favorable valuations and significant growth
potential.
Financial
Services
The
Tribune India reported that during 2004, local banks such as ICICI, HDFC, Bank
Ltd, Unit Trust of India, and Industrial Development Bank extended approximately
$2.5 billion in loans, registering a 62% growth over the prior year in the
$21.5
billion retail business market that had previously been dominated by public
sector banks. Home loans escalated approximately 58% during that one year
period. Further, consumers in India are substantially underleveraged relative
to
other Asian countries, such as Thailand, Korea and Taiwan, and with respect
to
other countries such as the United States. We believe that vigorous business
transformations, combined with a large and increasingly consumption-driven
population, is fueling a strong growth in the financial services industry,
thereby presenting attractive acquisition opportunities for businesses, such
as
consumer finance and on-line trading, that are positioned to take advantage
of
anticipated demand and growth in the financial services industry.
Healthcare
India’s
continually rising literacy rate, together with increasing income levels and
media focus, has heightened public awareness of health care issues. A joint
study conducted by McKinsey & Co. and the Confederation of Indian
Industry shows estimated healthcare spending that is expected to double over
the
next ten years, with the majority of such increase expected to be in private
healthcare. Noting that with costs of quality healthcare in India averaged
80%
to 90% less than western societies, this study projected that the total Indian
healthcare market could rise from $22.2 billion in 2005 to $69 billion by 2012.
Additionally, an IBEF study shows that healthcare tourism is increasing by
an
average of 30% each year, such that today, one out of ten patients in Indian
hospitals is from outside
of
India.
This study concluded that India has the potential to attract over one million
health tourists a year, contributing approximately $5 billion to the Indian
economy. The Indian government is also contributing to the growing healthcare
industry by providing incentives to create and upgrade infrastructure, as well
as reduce operational costs. We believe that businesses that provide
state-of-the-art services or products to the healthcare and/or pharmaceutical
industries are particularly attractive acquisition targets.
Consumer,
Retail and Hospitality
A.T.
Kearney Inc. estimated India’s total retail market in 2004 at $202.6 billion,
with an anticipated compounded growth rate of 30% over the next five years.
Retail business activities are expected to grow at a rate of 25% per year by
2010. Supporting sectors such as real estate are similarly growing. Global
real
estate consulting group, Knight Frank LLP, ranked India fifth in the list of
30
emerging retail markets and has predicted an impressive 20% growth rate for
the
retail real estate segment by 2010. Business travel and domestic and foreign
tourism are also dramatically increasing and, by 2014, are expected to generate
approximately $90.4 billion of total demand and nearly 28 million jobs,
according to published research performed by the World Travel and Tourism
Council. We believe that businesses in the travel and business services, for
example, are an attractive acquisition target because of their position to
take
advantage of the increases in commercial and personal travel related to business
expansions and rising disposable incomes.
Infrastructure
The
Indian government has announced plans to spend at least $17 billion to upgrade
roads, airports and ports by 2010 and at least two dozen significant
international civil engineering, construction and infrastructure consultancy
firms have set up operations in India within the past several years. We believe
there are significant growth opportunities for companies that develop and build
infrastructure, including providing logistics, transportation and financial
services to support development, because of the rapidly growing Indian economy
and increasing demand by the large, growing Indian work force for ongoing
infrastructure improvements.
Effecting
a Business Combination
General
We
are
not presently engaged in, and we will not engage in, any substantive commercial
business for an indefinite period of time. We intend to utilize the
amount of cash held in trust, derived from the proceeds of the initial public
offering, and the proceeds derived from the sale of private placement warrants
sold prior to the date of the initial public offering, as well as our existing
cash, our capital stock, debt or a combination of these in effecting a business
combination. A business combination may involve the acquisition of, or merger
with, a company which does not need substantial additional capital but which
desires to establish a public trading market for its shares, while avoiding
what
it may deem to be adverse consequences of undertaking a public offering itself.
These include time delays, significant expense, loss of voting control and
compliance with various federal and state securities laws. In the alternative,
a
business combination may involve a company which may be financially unstable
or
in its early stages of development or growth.
We
have not identified a target business
Although
our focus in identifying a prospective target business is on private businesses
within the financial services, healthcare, infrastructure/industrial growth,
and
consumer, retail and hospitality
-2-
sectors,
our efforts in identifying a prospective target business will not be limited
to
a particular industry and we may ultimately acquire a business in any industry
we deem appropriate. Subject to the limitations that a target business have
a
fair market value of at least 80% of our net assets at the time of the
acquisition as described below in more detail, we will have virtually
unrestricted flexibility in identifying and selecting a prospective acquisition
candidate. We have not established any specific attributes or criteria
(financial or otherwise) for prospective target businesses. To the extent we
effect a business combination with a financially unstable company or an entity
in its early stage of development or growth, including entities without
established records of sales or earnings, we may be affected by numerous risks
inherent in the business and operations of financially unstable and early stage
or potential emerging growth companies. In addition, to the extent that we
effect a business combination with an entity in an industry characterized by
a
high level of risk, we may be affected by the currently unascertainable risks
of
that industry. An extremely high level of risk frequently characterizes many
industries which experience rapid growth. In addition, although our management
will endeavor to evaluate the risks inherent in a particular industry or target
business, we cannot assure you that we will properly ascertain or assess all
significant risk factors.
Sources
of target businesses
We
anticipate that target business candidates will be brought to our attention
as a
consequence of meetings initiated by our officers, directors or special advisors
with securities broker-dealers, investment bankers, venture capitalists, bankers
or other members of the financial community. We also anticipate we will receive
unsolicited proposals from persons or entities who may become aware of our
interest in acquiring a target business through public awareness of our
acquisition intentions. Our officers and directors and their affiliates may
also
bring to our attention target business candidates. While we do not presently
anticipate engaging the services of professional firms that specialize in
business acquisitions on any formal basis, we may engage these firms in the
future, in which event we may pay a finder’s fee or other compensation. In no
event, however, will any of our existing officers and directors or any entity
with which they are affiliated be paid any finder’s fee, consulting fee or other
compensation prior to or in connection with the consummation of a business
combination.
Size
of potential target business
We
intend
to identify a prospective target business, within our target industry sectors,
that is of a reasonable size and has good growth potential. Based on our
experience in these target industry sectors, as well as our knowledge of the
Indian market, we believe the likely target business is one where the
founder/entrepreneur is looking for liquidity, has exhausted his or her skills
to continue to grow the business and is in need of growth capital for expansion,
or is a business owned by a larger company that desires to spin off development
of one of its smaller, possibly “non core” units, or a target business that
shares several of these traits. We plan to position our company to effect a
business combination within a range of $55 million to $250 million because
we
believe:
•
there
are a substantial number of business combination opportunities in
this
target value range which are large enough and possess the necessary
growth
potential to be a public company;
and
•
there
is less competition in this transaction size from larger private
equity
investors and strategic investors who we believe seek opportunities
in
excess of $250 million.
Accordingly,
while we anticipate consummating a transaction with a value within a range
of
$55 million to $250 million, we reserve the right to pursue transactions that
are significantly in excess
-3-
of
this
range. 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 at the time of such an
acquisition. Since we have no specific business combination under consideration,
we have not entered into any such fund raising arrangement and have no current
intention of doing so.
Selection
of a target business and structuring of a business combination
Subject
to the requirement that our initial business combination must be with a target
business with a fair market value that is equal to at least 80% of our net
assets at the time of such acquisition, our management has virtually
unrestricted flexibility in identifying and selecting a prospective target
business. We have not established any specific attributes or criteria (financial
or otherwise) for prospective target businesses. We expect that our management
will diligently review all of the proposals we receive with respect to a
prospective target business. In evaluating a prospective target business, our
management will consider, among other factors, the following:
•
financial
condition and results of operation;
•
growth
potential;
•
experience
and skill of management and availability of additional
personnel;
•
earnings
before interest, taxes, depreciation and amortization
charges;
stability
and continuity in customer
relationships;
•
backlog
of orders for services;
•
capital
requirements;
•
competitive
position;
•
barriers
to entry in the relevant industry
sector;
•
stage
of development of the products, processes or
services;
•
degree
of current or potential market acceptance of the products, processes
or
services;
•
proprietary
features and degree of intellectual property or other protection
of the
products, processes or services;
•
regulatory
environment of the relevant industry sector;
and
•
costs
associated with effecting the business
combination.
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
-4-
consistent
with our business objective. In evaluating a prospective target business, we
will conduct an extensive due diligence review which will encompass, among
other
things, meetings with incumbent management and inspection of facilities, as
well
as review of financial and other information which will be made available to
us.
We
will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to us, the target business and both companies’ stockholders. We
cannot assure you, however, that the Internal Revenue Service or appropriate
state tax authority will agree with our tax treatment of the business
combination.
The
time
and costs required to select and evaluate a target business and to structure
and
complete the business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the identification
and
evaluation of a prospective target business with which a business combination
is
not ultimately completed will result in a loss to us and reduce the amount
of
capital available to otherwise complete a business combination. None of our
officers, directors or special advisors will receive any compensation 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 target business
The
initial target business that we acquire must have a fair market value equal
to
at least 80% of our net assets at the time of such acquisition. The fair market
value of such business will be determined by our board of directors based upon
standards generally accepted by the financial community, such as actual and
potential sales, earnings and cash flow and book value. If our board is not
able
to independently determine that the target business has a sufficient fair market
value, we will obtain an opinion from an unaffiliated, independent investment
banking firm that is a member of the National Association of Securities Dealers,
Inc. with respect to the satisfaction of such criteria. Since 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
an investment banking firm as to the fair market value absent the inability
of
our board of directors to independently determine that the target business
does
have sufficient fair market value. Nevertheless we reserve the right to obtain
an opinion from an unaffiliated, independent investment banking firm if we
deem
it appropriate, for example, in the event of an actual or perceived conflict
of
interest.
Probable
lack of business diversification
As
of
December 31, 2006, we had $57,004,924 of principal and interest held in the
trust account, which we may use to complete a business combination. Our initial
business combination must be with a business that has its operations primarily
in India whose fair market value is equal to at least 80% of our net assets
a
the time of such acquisition. In order to do so, 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 at the time of such an acquisition. Since we have no specific
business combination under consideration, we have not entered into any such
fund
raising arrangement and have no current intention of doing so. As a result,
we
are likely 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:
•
will
result in our dependency upon the performance of a single operating
business;
-5-
•
will
result in our dependency upon the development or market acceptance
of a
single or limited number of products, processes or services;
and
•
may
subject us to numerous economic, competitive and regulatory developments,
any or all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to a business
combination.
We
may
not be able to diversify our operations or benefit from the possible spreading
of risks or offsetting of losses, unlike other entities which may have the
resources to complete several business combinations in different industries
or
different areas of a single industry so as to diversify risks and offset losses.
Further, the prospects for our success may be entirely dependent upon the future
performance of the initial target business we acquire.
Limited
ability to evaluate the target business’ management
Although
we intend to closely scrutinize the management of a prospective target business
when evaluating the desirability of effecting a business combination, we cannot
assure you that our assessment of the target business’ management will prove to
be correct. In addition, we cannot assure you that the future management will
have the necessary skills, qualifications or abilities to manage a public
company intending to embark on a program of business development. Furthermore,
the future role of our directors, if any, in the target business cannot
presently be stated with any certainty. While it is possible that one or more
of
our directors will remain associated in some capacity with us following a
business combination, it is unlikely that any of them will devote their full
efforts to our affairs subsequent to a business combination. Moreover, we cannot
assure you that our directors will have significant experience or knowledge
relating to the operations of the particular target business.
Following
a business combination, we may seek to recruit additional managers to supplement
the incumbent management of the target business. We cannot assure you that
we
will have the ability to recruit additional managers, or that any such
additional managers will have the skills, knowledge or experience necessary
to
enhance the incumbent management.
Opportunity
for stockholder approval of business combination
Prior
to
the completion of a business combination, we will submit the transaction to
our
stockholders for approval, even if the nature of the acquisition would not
ordinarily require stockholder approval under applicable state 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 Exchange Act, which, among other matters, will include
a
description of the operations of the target business and audited historical
financial statements of the business. These materials will also be provided
to
the holders of our common stock although their vote will not be
solicited.
In
connection with any vote required for our initial business combination, all
of
our existing stockholders have agreed to vote the shares of common stock owned
and acquired by them immediately prior to the initial public offering in
accordance with the majority of the shares of common stock voted by the public
stockholders other than our existing stockholders, including purchasers in
our
private placement offering. As a result, our existing stockholders, including
purchasers in our private placement offering, will not have any conversion
rights attributable to their shares owned and acquired immediately prior to
the
initial public offering in the event that a business combination transaction
is
approved by a majority of our public stockholders. We will proceed with the
initial business combination only if both a majority of the shares of common
stock voted by the
-6-
public
stockholders are voted in favor of the business combination and public
stockholders owning less than 20% of the shares sold in the initial public
offering exercise their conversion rights.
Conversion
rights
At
the
time we seek stockholder approval of any business combination, we will offer
each stockholder, other than our existing stockholders, the right to have such
shares of common stock converted to cash if the stockholder votes against the
business combination and the business combination is approved and completed.
Our
existing stockholders will not have this right because they have agreed to
vote
their shares of common stock owned and acquired by them immediately prior to
the
initial public offering in accordance with the majority of the shares of common
stock voted by the public stockholders, other than our existing stockholders,
including purchasers in our private placement offering. The actual per-share
conversion price will be equal to the amount in the trust account, exclusive
of
any interest and the amount representing the deferred portion of the
underwriters’ fees and the deferred balance of the representative’s
non-accountable expense allowance, as of two business days prior to the
consummation of the proposed business combination, divided by 7,250,000 shares
sold in the initial public offering. Without taking into account interest,
if
any, earned on the trust account, the initial per-share conversion price would
be approximately $7.82, or $0.18 less than the per-unit offering price of $8.00.
There may be a disincentive for public stockholders to exercise their conversion
rights due to the fact that the amount available to such stockholders is likely
to be less than the purchase price paid for the unit in the initial public
offering. Voting against the business combination alone will not result in
an
election to exercise a stockholder’s conversion rights. A stockholder must also
affirmatively exercise such conversion rights at or prior to the time the
business combination is voted upon by the stockholders. 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 the business combination and the
business combination is approved and completed.
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 within 30 days after completion of a business combination. Any
stockholder who converts his, her or its stock into his, her or its share of
the
trust account still has the right to exercise the warrants that he, she or
it
received as part of the units. We will not complete any business combination
if
stockholders, owning 20% or more of the shares sold in the initial public
offering, both vote against the business combination and exercise their
conversion rights.
Liquidation
if no business combination
If
a
letter of intent, agreement in principle or definitive agreement for a business
combination has not been executed prior to November 20, 2007, which is two
months before the initial deadline for a business combination, our board will,
prior to such date, convene, adopt and recommend to our stockholders a plan
of
dissolution and distribution and on such date 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 January 20, 2008, we will abandon our plan of dissolution
and distribution and seek the consummation of that business combination. If
a
proxy statement seeking the approval of our stockholders for that business
combination has not been filed prior to May 20, 2008, our board will, prior
to
such date, convene, adopt and recommend to our stockholders a plan of
dissolution and distribution, and on such date file a proxy statement with
the
SEC seeking stockholder approval for such plan, as described below.
-7-
Upon
dissolution, we will distribute to all of our public stockholders, in proportion
to their respective equity interests, an aggregate sum equal to the amount
in
the trust account (including the amount representing the $725,000 deferred
portion of the underwriters’ fees and the $832,500 deferred balance of the
representative’s non-accountable expense allowance, plus any interest), net of
taxes payable. We anticipate notifying the trustee of the trust account to
begin
liquidating such assets promptly after such date. Our existing stockholders,
including purchasers in our private placement offering, have waived their rights
to participate in any liquidation distribution, but only with respect to those
shares of common stock owned by them prior to the initial public offering;
they
will participate in any liquidation distribution with respect to any shares
of
common stock acquired in connection with or following the initial public
offering. There will be no distribution from the trust account with respect
to
our existing stockholders’ warrants which will expire worthless. We will pay the
costs of liquidation from our working capital of up to $2,025,000 held outside
of the trust account. If such funds are insufficient, our chief executive
officer and chief financial officer have agreed pursuant to letter agreements
with the underwriters to pay any additional funds necessary to complete such
liquidation and to indemnify us from any third party claims against us that
would reduce the amount of funds held in trust.
The
proceeds deposited in the trust account could become subject to the claims
of
our creditors which could have higher priority than the claims of our public
stockholders. Accordingly, the actual per-share liquidation price could be
less
than $7.82, plus interest, due to claims of creditors. Although we will seek
to
have all vendors, prospective target businesses or other entities we engage
execute agreements with us waiving any right, title, interest or claim of any
kind in or to any monies held in the trust account for the benefit of our public
stockholders, there is no guarantee that they will execute such agreements
or
even if they execute such agreements that they would be prevented from bringing
claims against the trust account, including but not limited to, fraudulent
inducement, breach of fiduciary responsibility or other similar claims, as
well
as claims challenging the enforceability of the waiver, in each case in order
to
gain an advantage with a claim against our assets, including the funds held
in
the trust account. If any third party refused to execute an agreement waiving
such claims to the monies held in the trust account, we would perform an
analysis of the alternatives available to us if we chose not to engage such
third party and evaluate if such engagement would be in the best interest of
our
stockholders if such third party refused to waive such claims. Examples of
possible instances where we may engage a third party that refused to execute
a
waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior
to
those of other consultants that would agree to execute awaiver 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 party’s 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 chief
executive officer and chief financial officer have personally agreed, pursuant
to letter agreement with us and the representative, that if we liquidate prior
to the consummation of a business combination, they will be personally liable
to
pay debts and obligations to target businesses or vendors or other entities
that
are owed money by us for services rendered or contracted for or products sold
to
us in excess of the net proceeds of amount held in the trust account. We cannot
assure you, however, that our chief executive officer and chief financial
officer will be able to satisfy those obligations.
Our
public stockholders will be entitled to receive funds from the trust account
only in the event of the expiration of our existence and our liquidation or
if
they seek to convert their respective shares into cash upon a business
combination which the stockholder voted against and which is
-8-
completed
by us. In no other circumstances will a stockholder have any right or interest
of any kind to or in the trust account.
Under
the
Delaware General Corporation Law, stockholders may be held liable for claims
by
third parties against a corporation to the extent of distributions received
by
them in a dissolution. If the corporation complies with certain procedures
set
forth in Section 280 of the Delaware General Corporation Law intended to
ensure that it makes reasonable provision for all claims against it, including
a
60-day notice period during which any third-party claims can be brought against
the corporation, a 90-day period during which the corporation may reject any
claims brought, and an additional 150-day waiting period before any liquidating
distributions are made to stockholders, any liability of stockholders with
respect to a liquidating distribution is limited to the lesser of such
stockholder’s pro rata share of the claim or the amount distributed to the
stockholder, and any liability of the stockholder would be barred after the
third anniversary of the dissolution. Because we will not be complying with
Section 280, we will seek stockholder approval to comply with
Section 281(b) of the Delaware General Corporation Law, requiring us to
adopt a plan that will provide for our payment, based on facts known to us
at
such time, of (i) all existing claims, (ii) all pending claims and
(iii) all claims that may be potentially brought against us within the
subsequent 10 years. However, because we are a blank check company, rather
than
an operating company, and our operations will be limited to searching for
prospective target businesses to acquire, the only likely claims to arise would
be from our vendors and service providers (such as accountants, lawyers,
investment bankers, etc.) and potential target businesses. As described above,
we are obligated to have all vendors, service providers and prospective target
businesses execute agreements with us waiving any right, title, interest or
claim of any kind they may have in or to any monies held in the trust account.
As a result, the claims that could be made against us will be significantly
limited and the likelihood that any claim would result in any liability
extending to the trust is remote.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, the proceeds held in the trust account could
be subject to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders. To the extent any bankruptcy claims deplete the trust
account, we cannot assure you we will be able to return to our public
stockholders at least $7.82 per share.
If
a
letter of intent, agreement in principle or definitive agreement for a business
combination has not been executed prior to November 20, 2007, which is two
months before the initial deadline for a business combination, our board will,
prior to such date, convene, adopt and recommend to our stockholders a plan
of
dissolution and distribution and on such date 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 January 20, 2008, we will abandon our plan of dissolution
and distribution and seek the consummation of that business combination. If
a
proxy statement seeking the approval of our stockholders for that business
combination has not been filed prior to May 20, 2008, our board will, prior
to
such date, convene, adopt and recommend to our stockholders a plan of
dissolution and distribution and on such date file a proxy statement with the
SEC seeking stockholder approval for such plan. We currently believe that any
plan of dissolution and liquidation subsequent to the expiration of the January
and May deadlines would proceed in approximately the following
manner:
•
our
board will, prior to such date, convene, adopt and recommend to our
stockholders a plan of dissolution and distribution, and on such
date file
a proxy statement with the SEC seeking stockholder approval for such
plan;
-9-
•
upon
such deadline, we would file our preliminary proxy statement with
the
SEC;
•
if
the SEC does not review the preliminary proxy statement, then, 10
days
following the passing of such deadline, we will deliver 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 plan of dissolution and liquidation;
and
•
if
the SEC does review the preliminary proxy statement, we currently
estimate
that we will receive its comments 30 days following the passing of
such
deadline. We will deliver 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
liquidation.
In
the
event we seek stockholder approval for a plan of dissolution and liquidation
and
do not obtain such approval, we will nonetheless continue to pursue stockholder
approval for our dissolution. If no proxy statement seeking the approval of
our
stockholders for a business combination has been filed by May 20, 2008, our
board will, prior to such date, convene, adopt and recommend to our stockholders
a plan of dissolution and distribution, and on such date file a proxy statement
with the Securities and Exchange Commission seeking stockholder approval for
such plan. The funds held in our trust account may not be distributed except
upon our dissolution and, unless and until such approval is obtained from our
stockholders, the funds held in our trust account will not be released.
Consequently, holders of a majority of our outstanding stock must approve our
dissolution in order to receive the funds held in our trust account and the
funds will not be available for any other corporate purpose.
Certificate
of Incorporation
Our
certificate of incorporation sets forth certain requirements and restrictions
that shall apply to us until the consummation of a business combination.
Specifically, our certificate of incorporation provides, among other things,
that:
•
prior
to the consummation of a business combination, we will submit such
business combination to our stockholders for
approval;
•
we
may consummate the business combination only if approved by a majority
of
our stockholders and public stockholders owning less than 20% of
the
shares sold in the initial public offering exercise their conversion
rights;
•
if
a business combination is approved and consummated, public stockholders
who voted against the business combination and exercised their conversion
rights will receive their pro rata share of the trust account;
and
•
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 the certificate of incorporation, then
we will
be dissolved and distribute to all of our public stockholders their
pro
rata share of the trust account and any remaining net
assets.
Under
Delaware law, the foregoing requirements and restrictions may be amended if
our
Board of Directors adopts a resolution declaring the advisability of an
amendment which is then
-10-
approved
by a majority of our stockholders of our outstanding shares. Such an amendment
could reduce or eliminate the protection that such requirements and restrictions
afford to our stockholders. However, pursuant to our Articles of Incorporation,
neither we nor the Board of Directors will propose or seek stockholder approval
of any amendment of these provisions.
Audited
Financial Statements of Target Business
We
will
not acquire a target business if audited financial statements in conformity
with
United States generally accepted accounting principles cannot be obtained for
the target business. Additionally, our management will provide our stockholders
with audited financial statements, prepared in accordance with generally
accepted accounting principles, of the prospective target business as part
of
the proxy solicitation materials sent to stockholders to assist them in
assessing a business combination. We cannot assure you that any particular
target business identified by us as a potential acquisition candidate will
have
financial statements prepared in accordance with United States generally
accepted accounting principles or that the potential target business will be
able to prepare its financial statements in accordance with United States
generally accepted accounting principles. To the extent that this requirement
cannot be met, we may not be able to acquire the proposed target business.
While
this may limit the pool of potential acquisition candidates, we do not believe
that this limitation will be material.
Competition
In
identifying, evaluating and selecting a target business, we may encounter
intense competition from other entities having a business objective similar
to
ours. Based on publicly available information, from August 2003 through December
2006, approximately 78 similarly structured blank check companies have completed
initial public offerings, including three with a specific focus on Indian target
businesses, and numerous others have filed registration statements. Many of
these entities are well established and have extensive experience identifying
and effecting business combinations directly or through affiliates. Many of
these competitors possess greater technical, human and other resources than
us
and our financial resources are relatively limited when contrasted with those
of
many of these competitors. While we believe there are numerous potential target
businesses that we could acquire with the net proceeds of our initial public
offering and the sale of warrants in our private placement offering, our ability
to compete in acquiring certain sizable target businesses will be limited by
our
available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of a target business.
Further:
•
our
obligation to seek stockholder approval of a business combination
may
delay the completion of a
transaction;
•
our
obligation to convert into cash shares of common stock held by our
stockholders if such holders both vote against the business combination
and also seek conversion of their shares may reduce the resources
available to us for a business combination;
and
•
our
outstanding warrants and option, and the future dilution they potentially
represent, may not be viewed favorably by certain target
businesses.
Any
of
these factors may place us at a competitive disadvantage in successfully
negotiating and consummating a business combination. Our management believes,
however, that our status as a public entity and potential access to the United
States public equity markets may give us a competitive advantage over
privately-held entities having a similar business objective as us in acquiring
a
target business with significant growth potential on favorable
terms.
-11-
If
we
succeed in effecting a business combination, there will be, in all likelihood,
intense competition from competitors of the target business. In particular,
certain industries which experience rapid growth frequently attract an
increasingly larger number of competitors, including competitors with
increasingly greater financial, marketing, technical and other resources than
the initial competitors in the industry. The degree of competition
characterizing the industry of any prospective target business cannot presently
be ascertained. We cannot assure you that, subsequent to a business combination,
we will have the resources to compete effectively, especially to the extent
that
the target business is in a high growth industry.
Employees
We
currently have two full-time officers, F. Jacob Cherian, our President and
Chief Executive Officer and Suhel Kanuga, our Executive Vice President, Chief
Financial Officer, Treasurer and Secretary, who have relocated to India since
the consummation of the initial public offering, taking up full-time residency
in Mumbai, to oversee the sourcing, identification and selection of a target
business, the negotiation of business combination terms and the conduct of
due
diligence until the consummation of a business combination or our liquidation.
We have no other employees.
Item 1A.
Risk
Factors.
An
investment in our securities involves a high degree of risk. You should consider
carefully all of the risks described below, together with the other information
contained in this annual report.
Risks
Associated with Our Business
We
are a development stage company with no operating history and very limited
resources.
Since
we
do not have an operating history, you will have no basis upon which to evaluate
our ability to achieve our business objective, which is to acquire an operating
business. We have no present revenue and will not generate any revenues (other
than interest income on the proceeds from the proceeds held in trust) until,
at
the earliest, after the consummation of a business combination.
Since
we have not yet selected a target business with which to complete a business
combination, we are unable to currently ascertain the merits or risks of the
industry or business in which we may ultimately
operate.
Although
we have focused our efforts on businesses with primary operations in India,
we
are not limited to any particular industry or type of business. Accordingly,
there is no current basis for you to evaluate the possible merits or risks
of
the particular industry in which we may ultimately operate or the target
business that we may ultimately acquire. To the extent we complete a business
combination with a financially unstable company or an entity in its development
stage, we may be affected by numerous risks inherent in the business operations
of those entities. Although our management will endeavor to evaluate the risks
inherent in a particular industry or target business operating in India, we
cannot assure you that we will properly ascertain or assess all of the
significant risk factors. We also cannot assure you that an investment in our
securities will not ultimately
-12-
prove
to
be less favorable to investors than a direct investment, if an opportunity
were
available, in a target business.
We
may not be able to consummate a business combination within the required time
frame, in which case, we would be forced to
liquidate.
We
must
complete a business combination with a fair market value of at least 80% of
our
net assets (excluding the deferred underwriters’ discount and representative’s
non-accountable expense allowance held in the trust account for) at the time
of
acquisition by January 20, 2008 (or by May 20, 2008 if a letter of intent,
agreement in principle or a definitive agreement has been executed by January20, 2008 and the business combination relating thereto has not yet been
consummated). We may not be able to find suitable target businesses within
the
required time frame. In addition, our negotiating position and our ability
to
conduct adequate due diligence on any potential target may be reduced as we
approach the deadline for the consummation of a business combination. If a
letter of intent, agreement in principle or definitive agreement for a business
combination has not been executed prior to November 20, 2007, which is two
months before the initial deadline for a business combination, our board will,
prior to January 20, 2008, convene, adopt and recommend to our stockholders
a
plan of dissolution and distribution and on such date 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 January 20, 2008, we will abandon our
plan of dissolution and distribution and seek the consummation of that business
combination. If a proxy statement seeking the approval of our stockholders
for
that business combination has not been filed prior to May 20, 2008, our board
will, prior to such date, convene, adopt and recommend to our stockholders
a
plan of dissolution and distribution, and on such date file a proxy statement
with the SEC seeking stockholder approval for such plan.
If
we do not consummate a business combination and dissolve, payments from the
trust account to our public stockholders may be
delayed.
If
a
letter of intent, agreement in principle or definitive agreement for a business
combination has not been executed prior to November 20, 2007, which is two
months before the initial deadline for a business combination, our board will,
prior to January 20, 2008, convene, adopt and recommend to our stockholders
a
plan of dissolution and distribution and on such date 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 January 20, 2008, we will abandon our
plan of dissolution and distribution and seek the consummation of that business
combination. If a proxy statement seeking the approval of our stockholders
for
that business combination has not been filed prior to May 20, 2008, our board
will, prior to such date, convene, adopt and recommend to our stockholders
a
plan of dissolution and distribution and on such date file a proxy statement
with the SEC seeking stockholder approval for such plan. We currently believe
that any plan of dissolution and liquidation subsequent to the expiration of
the
January and May, 2008 deadlines would proceed in approximately the following
manner:
•
our
board will, prior to such date, convene, adopt and recommend to our
stockholders a plan of dissolution and distribution, and on such
date file
a proxy statement with the SEC seeking stockholder approval for such
plan;
•
upon
such deadline, we would file our preliminary proxy statement with
the
SEC;
•
if
the SEC does not review the preliminary proxy statement, then, 10
days
following the passing of such deadline, we will mail the proxy statements
to our stockholders, and 30
-13-
days
following the passing of such deadline we will convene a meeting
of our
stockholders, at which time they will either approve or reject
our plan of
dissolution and liquidation; and
•
if
the SEC does review the preliminary proxy statement, we currently
estimate
that we will receive its comments 30 days following the passing of
such
deadline. We will mail the proxy statements to our stockholders following
the conclusion of the comment and review process (the length of which
we
cannot predict with any certainty, and which may be substantial)
and we
will convene a meeting of our stockholders at which they will either
approve or reject our plan of dissolution and
liquidation.
In
the
event we seek stockholder approval for a plan of dissolution and liquidation
and
do not obtain such approval, we will nonetheless continue to pursue stockholder
approval for our dissolution. The funds held in our trust account may not be
distributed except upon our dissolution and, unless and until such approval
is
obtained from our stockholders, the funds held in our trust account will not
be
released. Consequently, holders of a majority of our outstanding stock must
approve our dissolution in order to receive the funds held in our trust account
and the funds will not be available for any other corporate
purpose.
These
procedures, or a vote to reject any plan of dissolution and liquidation 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
liquidation.
We
do not
believe that our anticipated principal activities will subject us to the
Investment Company Act of 1940. To this end, the proceeds held in trust may
only
be invested by the trustee in Treasury Bills issued by the United States with
maturity dates of 180 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of
1940. By restricting the investment of the proceeds to these instruments, we
intend to avoid being deemed an investment company within the meaning of the
Investment Company Act of 1940. Our securities are not intended for persons
who
are seeking a return on investments in government securities. The trust account
and the purchase of government securities for the trust account is intended
as a
holding place for funds pending the earlier to occur of either: (i) the
consummation of a business combination, or (ii) our liquidation and
distribution of the funds held in this trust account to our public stockholders
as part of our plan of dissolution and liquidation. Notwithstanding our belief
that we are not required to comply with the requirements of such act, in the
event that the stockholders do not approve a plan of dissolution and liquidation
and the funds remain in the trust account for an indeterminable amount of time,
we may be considered to be an investment company and thus required to comply
with such act. If we were deemed to be subject to the act, compliance with
these
additional regulatory burdens would require additional expense that we have
not
allotted for.
If
we are forced to liquidate before a business combination, our public
stockholders will receive less than $8.00 per share upon distribution of the
funds held in the trust account and our warrants will expire
worthless.
If
we are
unable to complete a business combination and are forced to liquidate our
assets, the per-share liquidation will be less than $8.00 because of the
expenses related to the initial public offering, our general and administrative
expenses and the anticipated costs of seeking a business combination.
Furthermore, the warrants will expire worthless if we liquidate before the
completion of a business combination.
-14-
You
will not be entitled to protections normally afforded to investors in blank
check companies.
Since
the
net proceeds of the initial public offering and the private placement warrants
are intended to be used to complete a business combination with a target
business that has not been identified, we may be deemed to be a blank check
company under the United States securities laws. However, since (i) our
securities are listed on the American Stock Exchange (ii) we have net
tangible assets in excess of $5,000,000 and (iii) have filed a Current
Report on Form 8-K with the SEC upon the consummation of the initial public
offering including an audited balance sheet demonstrating this fact, we are
exempt from rules promulgated by the SEC to protect investors of blank check
companies such as Rule 419. Accordingly, investors will not be afforded the
benefits or protections of those rules. Because we are not subject to
Rule 419, our units are tradeable and we will have a longer period of time
to complete a business combination in certain circumstances than we would if
we
were subject to such rules.
Under
Delaware law, the requirements and restrictions contained in our certificate
of
incorporation may be amended, which could reduce or eliminate the protection
afforded to our stockholders by such requirements and
restrictions.
Our
certificate of incorporation contains certain requirements and restrictions
that
will apply to us until the consummation of a business combination. Specifically,
our certificate of incorporation provides, among other things,
that:
•
prior
to the consummation of a business combination, we will submit such
business combination to our stockholders for
approval;
•
we
may consummate the business combination only if approved by a majority
of
our stockholders and public stockholders owning less than 20% of
the
shares sold in the initial public offering exercise their conversion
rights;
•
if
a business combination is approved and consummated, public stockholders
who voted against the business combination and exercised their conversion
rights will receive their pro rata share of the trust account;
and
•
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 the certificate of incorporation, then
we will
be dissolved and distribute to all of our public stockholders their
pro
rata share of the trust account and any remaining net
assets.
Under
Delaware law, the foregoing requirements and restrictions may be amended if
our
Board of Directors adopts a resolution declaring the advisability of an
amendment which is then approved by a majority of our stockholders of our
outstanding shares. Such an amendment could reduce or eliminate the protection
that such requirements and restrictions afford to our stockholders. However,
pursuant to our Articles of Incorporation, neither we nor the Board of Directors
will propose or seek stockholder approval of any amendment of these
provisions.
Because
there are numerous companies with a business plan similar to ours seeking to
effectuate a business combination, it may be more difficult for us to do
so.
Based
on
publicly available information, from August 2003 through December 2006,
approximately 78 similarly structured blank check companies have completed
initial public offerings,
-15-
including
three with a specific focus on Indian target businesses, and numerous others
have filed registration statements. Of these companies, only 23 companies have
consummated a business combination, while 21 other companies have announced
that
they have entered into definitive agreements or letters of intent with respect
to potential business combinations, but have not yet consummated such business
combinations. Accordingly, there are approximately 34 blank check companies
with
more than $2.5 billion in trust, and an additional 45 blank check companies
that
have filed registration statements with potentially $3.7 billion to be placed
in
trust. While some of these companies have specific industries in
which they must identify a potential target business, a number of these
companies may consummate a business combination in any industry and/or
geographic location they choose. As a result, we may be subject to competition
from these and other companies seeking to consummate a business combination
within any of our target sectors, which, in turn, will result in an increased
demand for privately-held companies in these industries. Because of this
competition, we cannot assure you that we will be able to effectuate a business
combination within the required time period. Further, because only 44 of such
companies have either consummated a business combination or entered into a
definitive agreement for a business combination, it may indicate that there
are
fewer attractive target businesses available to such entities or that many
privately-held target businesses are not inclined to enter into these types
of
transactions with publicly-held blank check companies like ours. We cannot
assure you that we will be able to successfully compete for an attractive
business combination. Additionally, because of this competition, we cannot
assure you that we will be able to effectuate a business combination within
the
prescribed time period. If we are unable to consummate a business combination
within the prescribed time period, we will be forced to liquidate.
We
expect
to encounter intense competition 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, competing for acquisitions. Many of these entities are well
established and have extensive experience in identifying and effecting business
combinations directly or through affiliates. Many of these competitors possess
greater technical, human and other resources than we do and our financial
resources will be relatively limited when contrasted with those of many of
these
competitors. While we believe that there are numerous potential target
businesses that we could acquire with the amount currently held in trust,
together with additional financing if available, our ability to compete in
acquiring certain sizable target businesses will be limited by our available
financial resources. This inherent competitive limitation gives others an
advantage in pursuing the acquisition of certain target businesses.
Further:
•
our
obligation to seek stockholder approval of a business combination
may
delay the consummation of a
transaction;
•
our
obligation to convert our shares of common stock into cash in certain
instances may reduce the resources available for a business combination;
and
•
our
outstanding warrants and the future dilution they potentially represent
may not be viewed favorably by certain target
businesses.
Any
of
these factors may place us at a competitive disadvantage in successfully
negotiating a business combination.
-16-
We
will be partially dependent upon interest earned on the trust account to fund
our search for a target company and consummation of a business
combination.
We
are
dependent upon sufficient interest being earned on the proceeds held in the
trust account to provide us with the working capital we need to search for
a
target company and consummate a business combination. While we are permitted
to
utilize up to a maximum of $1,975,000, for such purpose, if interest rates
were
to decline substantially, we may not have sufficient funds available to complete
a business combination. If we do not have sufficient proceeds available to
fund
our expenses, we may be forced to obtain additional financing, either from
our
directors and officers or from third parties. We may not be able to obtain
additional financing, and our existing stockholders are not obligated to provide
any additional financing. If we do not have sufficient proceeds and cannot
find
additional financing, we may be forced to liquidate prior to consummating a
business combination.
A
significant portion of working capital could be expended in pursuing
acquisitions that are not consummated.
It
is
anticipated that the investigation of each specific target business and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require substantial 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, would not be recoverable. Furthermore, even
if
an agreement is reached relating to a specific target business, we may fail
to
consummate the transaction for any number of reasons, including those beyond
our
control such as that more than approximately 19.99% of our public stockholders
vote against the transaction 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 adversely affect subsequent attempts to
locate and acquire or merge with another business.
If
third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share liquidation price received by stockholders will be
less than $7.82 per share.
Our
placing of funds in trust may not protect those funds from third party claims
against us. Although we will seek to have all vendors and service providers
we
engage and prospective target businesses we negotiate with, execute agreements
with us waiving any right, title, interest or claim of any kind in or to any
monies held in the trust account for the benefit of our public stockholders,
there is no guarantee that they will execute such agreements. Nor is there
any
guarantee that, even if such entities execute such agreements with us, they
will
not seek recourse against the trust account. Accordingly, the proceeds held
in
trust could be subject to claims which could take priority over those of our
public stockholders. If we liquidate before the completion of a business
combination and distribute the proceeds held in trust to our public
stockholders, F. Jacob Cherian and Suhel Kanuga have severally agreed,
pursuant to written agreements with us and the representative of the
underwriters, that they will be personally liable to ensure that the proceeds
in
the trust account are not reduced by vendors, service providers or prospective
target businesses that are owed money by us for services rendered or contracted
for or products sold to us. However, we cannot assure you that they will be
able
to satisfy those obligations nor can we assure you that the per-share
distribution from the trust account will not be less than $7.82, plus interest,
due to such claims.
-17-
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case
is
filed against us that is not dismissed, the funds held in our trust account
will
be subject to applicable bankruptcy law, and may be included in our bankruptcy
estate and subject to claims of third parties with priority over the claims
of
our public stockholders. To the extent bankruptcy claims deplete the trust
account, we cannot assure you we will be able to return to our public
stockholders at least $7.82 per share.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them.
If
a
letter of intent, agreement in principle or definitive agreement for a business
combination has not been executed prior to November 20, 2007, which is two
months before the initial deadline for a business combination, our board will,
prior to January 20, 2008, convene, adopt and recommend to our stockholders
a
plan of dissolution and distribution and on such date 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 January 20, 2008, we will abandon our
plan of dissolution and distribution and seek the consummation of that business
combination. If a proxy statement seeking the approval of our stockholders
for
that business combination has not been filed prior to May 20, 2008, our board
will, prior to such date, convene, adopt and recommend to our stockholders
a
plan of dissolution and distribution, and on such date file a proxy statement
with the SEC seeking stockholder approval for such plan. Under Sections 280
through 282 of the Delaware General Corporation Law, stockholders may be held
liable for claims by third parties against a corporation to the extent of
distributions received by them in a dissolution. If the corporation complies
with certain procedures intended to ensure that it makes reasonable provision
for all claims against it, including a 60-day notice period during which any
third-party claims can be brought against the corporation, a 90-day period
during which the corporation may reject any claims brought, and an additional
150-day waiting period before any liquidating distributions are made to
stockholders, any liability of stockholders with respect to a liquidating
distribution is limited to the lesser of such stockholder’s pro rata share of
the claim or the amount distributed to the stockholder, and any liability of
the
stockholder would be barred after the third anniversary of the dissolution.
However, 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. Accordingly, we cannot assure you
that third parties will not seek to recover from our stockholders amounts owed
to them by us.
Failure
to maintain a current prospectus relating to the common stock underlying our
warrants may deprive our warrants of any value and the market for our warrants
may be limited.
No
warrants will be exercisable unless at the time of exercise a prospectus
relating to common stock issuable upon exercise of the warrants 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 our warrants.
Under the terms of a warrant agreement between American Stock
Transfer & Trust Company, as warrant agent, and us, we have agreed to
meet these conditions and to use our best efforts to maintain a current
prospectus relating to 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. The warrants may be deprived of any value and the market for
the
warrants may be limited 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.
-18-
The
ability of our stockholders to exercise their conversion rights may not allow us
to effectuate the most desirable business
combination.
At
the
time we seek stockholder approval of any business combination, we will offer
each public stockholder the right to have such stockholder’s shares of common
stock converted to cash if the stockholder so elects and votes against the
business combination and the business combination is approved and completed.
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 expected. Therefore, we may not be able to consummate a business
combination that requires us to use all of the funds held in the trust account
as part of the purchase price, or we may end up having a leverage ratio that
is
not optimal for our business combination. This may limit our ability to
effectuate the most attractive business combination available to
us.
Our
outstanding warrants may have an adverse effect on the market price of common
stock and make it more difficult to effect a business
combination.
In
connection with the initial public offering, as part of the units, we issued
warrants to purchase 7,250,000 shares of common stock. Additionally, prior
to
the initial public offering, we privately sold 2,250,000 warrants, at a price
of
$1.00 per warrant, for an aggregate of $2,250,000 to our existing stockholders,
including to our officers, certain of our directors, other persons who owned
shares of our common stock prior to such sale, and, in some instances, to their
respective affiliates. All of the proceeds we received from the private
placement offering were placed in the trust account upon the consummation of
the
initial public offering. The privately placed warrants are identical to the
warrants offered in the initial public offering except that they are subject
to
lock up agreements restricting their sale until after the completion of a
business combination, and they may be exercised on a cashless basis. In
addition, the purchasers of the private placement warrants have waived their
right to receive distributions upon our liquidation prior to a business
combination with respect to the shares of common stock underlying the privately
placed warrants.
To
the
extent we issue shares of common stock to effect a business combination, the
potential for the issuance of substantial numbers of additional shares upon
exercise of these warrants could make us a less attractive acquisition vehicle
in the eyes of a target business as such securities, when exercised, will
increase the number of issued and outstanding shares of our common stock and
reduce the value of the shares issued to complete the business combination.
Accordingly, our warrants may make it more difficult to effectuate a business
combination or increase the cost of a target business. Additionally, the sale,
or even the possibility of sale, of the shares underlying the warrants could
have an adverse effect on the market price for our securities or on our ability
to obtain future public financing. If and to the extent these warrants are
exercised, you may experience dilution to your holdings.
We
may issue additional shares of our capital stock, including through convertible
debt securities, to complete a business combination, which would reduce the
equity interest of our stockholders and likely cause a change in control of
our
ownership.
Our
amended and restated certificate of incorporation authorizes the issuance of
up
to 45,000,000 shares of common stock, par value $0.0001 per share and 5,000
shares of preferred stock, par value $0.0001 per share. Without giving effect
to
the exercise of outstanding warrants, the exercise of the UPO and the exercise
of warrants issuable upon the exercise of the UPO (for an
-19-
aggregate
of 10,500,000 shares of common stock), there are currently 35,937,500 authorized
but unissued shares of our common stock and all of the 5,000 shares of preferred
stock available for issuance as of March 23, 2007. Although we have
no commitments to issue any securities, we may issue a substantial number of
additional shares of our common stock, or preferred stock, or a combination
of
both, including through convertible debt securities, to complete a business
combination. The issuance of additional shares of our common stock or any number
of shares of preferred stock, including upon conversion of any debt
securities:
•
may
significantly reduce the equity interest of our
stockholders;
•
may
subordinate the rights of holders of common stock if preferred stock
is
issued with rights senior to those afforded to our common
stockholders;
•
will
likely cause a change in control if a substantial number of our shares
of
common stock is issued, which may affect, among other things, our
ability
to use our net operating loss carry forwards, if any, and may also
result
in the resignation or removal of one or more of our present officers
and
directors; and
•
may
adversely affect prevailing market prices for our common stock, warrants
or units.
We
may issue notes or other debt securities, or otherwise incur substantial debt,
to complete a business combination, which may adversely affect our leverage
and
financial condition.
Although
we have no current commitments to incur any debt, we may choose to incur a
substantial amount of debt to finance a business combination. The incurrence
of
debt could result in:
•
default
and foreclosure on our assets if our operating revenues after a business
combination were insufficient to pay our debt
obligations;
•
acceleration
of our obligations to repay the indebtedness even if we have made
all
principal and interest payments when due if the debt security contains
covenants that required the maintenance of certain financial ratios
or
reserves and any such covenant is breached without a waiver or
renegotiation of such covenants;
•
our
immediate payment of all principal and accrued interest, if any,
if the
debt security is payable on demand;
•
our
inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to obtain additional
financing while such security is
outstanding;
•
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;
•
limitations
on our flexibility in planning for and reacting to changes in our
business
and in the industry in which we
operate;
•
increased
vulnerability to adverse changes in general economic, industry and
competitive conditions and adverse changes in government regulation;
and
-20-
•
other
disadvantages compared to our competitors who have less
debt.
Any
of
the above listed factors could materially and adversely affect our business
and
results of operations. Furthermore, if our debt bears interest at floating
rates, our interest expense could increase if interest rates rise. If we do
not
have sufficient earnings to service any debt incurred, we could need to
refinance all or part of that debt, sell assets, borrow more money or sell
securities, none of which we can guarantee we will be able to do on commercially
reasonable terms, or at all.
Our
current officers and directors may resign upon consummation of a business
combination.
Upon
consummation of a business combination, the role of our founding officers in
the
target business cannot presently be fully ascertained. While it is possible
that
one or more of our founding officers will remain in senior management following
a business combination, we may employ other personnel following the business
combination. If we acquired a target business in an all cash transaction, it
would be more likely that our founding officers and certain of our directors
would remain with us if they chose to do so. If a business combination were
structured as a merger whereby the stockholders of the target company were
to
control the combined company, following a business combination, it may be less
likely that our founding officers would remain with the combined company unless
it was negotiated as part of the transaction via the acquisition agreement,
an
employment agreement or other arrangement. If our founding officers negotiate
to
be retained post business combination as a condition to any potential business
combination, such negotiations may result in a conflict of interest. The ability
of such individuals to remain with us after the consummation of a business
combination will not be the determining factor in our decision as to whether
or
not we will proceed with any potential business combination. In making the
determination as to whether current management should remain with us following
the business combination, we will analyze the experience and skill set of the
target business’ management and negotiate as part of the business combination
that certain of our founding officers and directors remain if it is believed
that it is in the best interests of the combined company post business
combination. Although we intend to closely scrutinize any additional individuals
we engage after a business combination, we cannot assure you that our assessment
of these individuals will prove to be correct.
Our
officers, directors and special advisors are and may in the future become
affiliated with entities engaged in business activities similar to those
intended to be conducted by us and, accordingly, may have conflicts of interest
in determining to which entity a particular business opportunity should be
presented.
Our
officers, directors and special advisors are, or may in the future become,
affiliated with entities, including other blank check companies, engaged in
business activities similar to those intended to be conducted by us.
Additionally, our directors and special advisors may become aware of business
opportunities that may be appropriate for presentation to us as well as the
other entities with which they are or may be affiliated. Our directors and
special advisors involved in businesses similar to what we may intend to conduct
following a business combination may have fiduciary or contractual obligations
to present opportunities to those entities first. We cannot assure you that
any
such conflicts will be resolved in our favor.
-21-
Because
all of our existing stockholders, including our officers and directors, own
shares of our securities that will not participate in liquidation distributions,
our officers and directors may have a conflict of interest in determining
whether a particular target business is appropriate for a business
combination.
Our
existing stockholders, including our officers and directors, own, in the
aggregate, 1,812,500 shares of our common stock and 2,250,000 private placement
warrants. The existing stockholders have waived their right to receive
distributions (other than with respect to units they purchased in the initial
public offering or common stock they purchase in the aftermarket) upon our
liquidation prior to a business combination. The shares and warrants owned
by
our existing stockholders 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 a target business
and completing a business combination. Consequently, our officers’ and
directors’ discretion in identifying and selecting a suitable target business
may result in a conflict of interest when determining whether the terms,
conditions and timing of a particular business combination are appropriate
and
in our public stockholders’ best interest.
It
is probable that we will 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.
The
amount held in trust provides us with $57,004,924 as of December 31, 2006
(subject to reduction resulting from stockholders electing to convert their
shares into cash), which we may use to complete a business combination. While
we
may seek to effect a business combination with more than one target business,
our initial business acquisition must be with one or more operating businesses
whose fair market value, collectively, is at least equal to 80% of our net
assets (excluding any deferred fees held in the trust account for the benefit
of
the underwriters) 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 at the time of such an acquisition. Since we have no specific
business combination under consideration, we have not entered into any such
fund
raising arrangement and have no current intention of doing so. At the time
of
our initial business combination, we may not be able to acquire more than one
target business 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:
•
result
in our dependency upon the performance of a single or small number
of
operating businesses;
•
result
in our dependency upon the development or market acceptance of a
single or
limited number of products, processes or services;
and
•
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.
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
-22-
diversify
risks and offset losses. Further, the prospects for our success may be entirely
dependent upon the future performance of the initial target business or
businesses we acquire.
Our
loss of the services of F. Jacob Cherian and Suhel Kanuga would make it
more difficult to find a suitable company for a business combination which
makes
it more likely that we will be forced to distribute the proceeds of our trust
account to our stockholders.
Our
ability to successfully effect a business combination will be largely dependent
upon the efforts of F. Jacob Cherian, our President and Chief Executive
Officer and Suhel Kanuga, our Executive Vice President, Chief Financial Officer,
Treasurer and Secretary. We have not entered into an employment agreement with
either Mr. Cherian or Mr. Kanuga, nor have we obtained any “key man”
life insurance on either of their lives. The loss of Mr. Cherian’s and/or
Mr. Kanuga’s services could have a material adverse effect on our ability
to successfully achieve our business objectives, including seeking a suitable
target business to effect a business combination.
If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to complete a business
combination.
We
may be
deemed to be an investment company, as defined under Sections 3(a)(1)(A)
and (C) of the Investment Company Act of 1940, if, prior to the consummation
of
a business combination, we are viewed as engaging in the business of investing
in securities or we own investment securities having a value exceeding 40%
of
our total assets. If we are deemed to be an investment company under the
Investment Company Act of 1940, we may be subject to certain restrictions that
may make it difficult for us to complete a business combination,
including:
•
restrictions
on the nature of our investments;
and
•
restrictions
on our issuance of securities.
In
addition, we may have imposed upon us burdensome requirements,
including:
•
registration
as an investment company;
•
adoption
of a specific form of corporate structure;
and
•
reporting,
record keeping, voting, proxy and disclosure requirements and other
rules
and regulations.
We
do not
believe that our anticipated activities will subject us to the Investment
Company Act of 1940 as the amount held in trust may only be invested by the
trust agent in “government securities” with specific maturity dates. By
restricting the investment of the trust account to these instruments, we intend
to meet the requirements for the exemption provided in Rule 3a-1
promulgated under the Investment Company Act of 1940. If we were deemed to
be
subject to the act, compliance with these additional regulatory burdens would
require additional expense that we have not allotted for.
-23-
Our
existing stockholders control a substantial interest in us and thus may
influence certain actions requiring stockholder vote.
Our
existing stockholders collectively own 15.2% of our issued and outstanding
shares of common stock and warrants. Any exercise of these warrants would
increase their ownership percentage. These holdings could allow the existing
stockholders to influence the outcome of matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions after completion of our initial business combination.
We
may be obligated to return the funds raised in our private placement if that
transaction was not conducted in compliance with the registration requirements
of Section 5 of the Act.
The
23
purchasers in our private placement included six persons other than our
officers, directors, initial stockholders and their respective affiliates.
Although such six persons were accredited investors within the meaning of
Rule 501 of Regulation D promulgated under the Act, a court may take the
position that such private placement was not conducted in accordance with any
exemption from the registration requirements of Section 5 of the Act. If
our private placement was not conducted in compliance with the registration
requirements of Section 5 of the Act, the 23 purchasers in our private
placement may have the right to rescind their warrant purchases as a remedy
to
our failure to register these securities. These rescission rights, if any,
may
require us to refund up to an aggregate of $2,250,000, plus interest, to such
persons, thereby reducing the amount in the trust account available to us to
consummate a business combination, or, in the event we do not complete a
business combination within the period prescribed by our certificate of
incorporation, the amount available to our public stockholders upon our
liquidation. Although such persons have waived their respective rescission
rights, if any, such waivers may not be enforceable in light of public policy
considerations underlying federal and state securities laws.
The
American Stock Exchange may delist our securities from trading on its exchange
in the future, which could limit our investors’ ability to effect transactions
in our securities and subject us to additional trading
restrictions.
Our
securities are currently listed on the American Stock Exchange. However, 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 our initial
business combination, if any, 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:
•
a
limited availability of market quotations for our
securities;
•
a
determination that our common stock is a “penny stock” that will require
brokers trading in our common stock to adhere to more stringent rules,
possibly resulting in a reduced level of trading activity in the
secondary
trading market for our common
stock;
•
a
limited amount of news and analyst coverage for our company;
and
•
a
decreased ability to issue additional securities or obtain additional
financing in the future.
-24-
If
our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
may experience difficulty in completing customer transactions and trading
activity in our securities may be adversely affected.
Our
common stock may be subject to the penny stock rules promulgated under the
Securities Exchange Act of 1934, or Exchange Act, unless our net tangible assets
are greater than $5,000,000 or our common stock has a market price per share
greater than $5.00. Under these rules, broker-dealers who recommend such
securities to persons other than institutional accredited investors
must:
•
make
a special written suitability determination for the
purchaser;
•
receive
the purchaser’s written agreement to a transaction prior to
sale;
•
provide
the purchaser with risk disclosure documents that identify certain
risks
associated with investing in “penny stocks” and that describe the market
for these “penny stocks,” as well as a purchaser’s legal remedies;
and
•
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 “penny stock” can be
completed.
If
our
common stock becomes subject to these rules, broker-dealers may find it
difficult to effect 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.
Risks
Associated with Companies with Primary Operations in India
Political,
economic, social and other factors in India may adversely affect our ability
to
achieve our business objective.
Since
mid-1991, the Indian government has committed itself to implementing an economic
structural reform program with the objective of liberalizing India’s exchange
and trade policies, reducing the fiscal deficit, controlling inflation,
promoting a sound monetary policy, reforming the financial sector, and placing
greater reliance on market mechanisms to direct economic activity. A significant
component of the program is the promotion of foreign investment in key areas
of
the economy and the further development of, and the relaxation of restrictions
in, the private sector. These policies have been coupled with the express
intention to redirect the government’s central planning function away from the
allocation of resources and toward the issuance of specific guidelines. While
the government’s policies have resulted in improved economic performance, there
can be no assurance that the economic recovery will be sustained. Moreover,
there can be no assurance that these economic reforms will persist, and that
any
newly elected government will continue the program of economic liberalization
of
previous governments. Any change may adversely affect Indian laws and policies
with respect to foreign investment and currency exchange. Such changes in
economic policies could negatively affect the general business and economic
conditions in India, which could in turn affect us and our ability to achieve
our business objective.
Religious
and border disputes persist in India and remain pressing problems. For example,
India has from time to time experienced civil unrest and hostilities with
neighboring countries such as Pakistan. The longstanding dispute with Pakistan
over the border Indian state of Jammu and Kashmir, a majority of whose
population is Muslim, remains unresolved. If the Indian government is unable
to
-25-
control
the violence and disruption associated with these tensions, the results could
destabilize the economy and, consequently, adversely affect us and our ability
to achieve our business objective.
Since
early 2003, there have also been military hostilities and civil unrest in
Afghanistan, Iraq and other Asian countries. These events could adversely
influence the Indian economy and, as a result, negatively affect us and our
ability to achieve our business objective.
Foreign
currency fluctuations could adversely affect our ability to achieve our business
objective.
Because
our business objective is to acquire one or more operating businesses with
primary operations in India, changes in the U.S. dollar—Indian rupee exchange
rate may affect our ability to achieve such objective. The exchange rate between
the Indian rupee and the U.S. dollar has changed substantially in the last
two
decades and may fluctuate substantially in the future. If the U.S. dollar
declines in value against the Indian rupee, any business combination will be
more expensive and therefore more difficult to complete. Furthermore, we may
incur costs in connection with conversions between U.S. dollars and Indian
rupees, which may make it more difficult to consummate a business
combination.
Exchange
controls that exist in India may limit our ability to utilize our cash flow
effectively following a business combination.
Following
a business combination, we will be subject to India’s rules and regulations on
currency conversion. In India, the Foreign Exchange Regulation Act, or FERA,
regulates the conversion of the Indian rupee into foreign currencies. FERA
provisions previously imposed restrictions on locally incorporated companies
with foreign equity holdings in excess of 40% known as FERA companies. Following
a business combination, we will likely be a FERA company as a result of our
ownership structure. However, comprehensive amendments have been made to FERA
to
add strength to the liberalizations announced in their recent economic policies.
Such companies are now permitted to operate in India without any special
restrictions, effectively placing them on par with wholly Indian owned
companies. In addition, foreign exchange controls have been substantially
relaxed. Notwithstanding, the Indian foreign exchange market is not yet fully
developed and we cannot assure you that the Indian authorities will not revert
back to regulating FERA companies and impose new restrictions on the
convertibility of the Rupee. Any future restrictions on currency exchanges
may
limit our ability to use our cash flow for the distribution of dividends to
our
stockholders or to fund operations we may have outside of India.
Certain
sectors of the Indian economy are subject to government regulations that limit
foreign ownership, which may adversely affect our ability to achieve our
business objective which is to acquire one or more operating businesses with
primary operations in India.
The
Indian government prohibits investments in certain sectors and limits the
ownership in certain other sectors. We intend to avoid sectors in which foreign
investment is disallowed. This could limit the possible number of acquisitions
that are available for investment. The Indian government also regulates
investments in certain other sectors (e.g., banking) by periodically reviewing
and adjusting the permissible amount of foreign ownership. The management team
will evaluate the risk associated with investments in sectors in which ownership
is restricted. However, there can be no guarantee that management will be
correct in its assessment of political and policy risk associated with
investments in general and in particular in sectors that are regulated by the
Indian government. Any changes in policy could have an adverse impact on our
ability to achieve our
-26-
business
objective which is to acquire one or more operating businesses with primary
operations in India.
If
the
relevant Indian authorities find us or the target business with which we
ultimately complete a business combination to be in violation of any existing
or
future Indian laws or regulations, they would have broad discretion in dealing
with such a violation, including, without limitation:
•
levying
fines;
•
revoking
our business and other licenses;
and
•
requiring
that we restructure our ownership or
operations.
Returns
on investment in Indian companies may be decreased by withholding and other
taxes.
Our
investments in India will incur tax risk unique to investment in India and
in
developing economies in general. Income that might otherwise not be subject
to
withholding of local income tax under normal international conventions may
be
subject to withholding of Indian income tax. Under treaties with India and
under
local Indian income tax law, income is generally sourced in India and subject
to
Indian tax if paid from India. This is true whether or not the services or
the
earning of the income would normally be considered as from sources outside
India
in other contexts. Additionally, proof of payment of withholding taxes may
be
required as part of the remittance procedure. Any withholding taxes paid by
us
on income from our investments in India may or may not be creditable on our
income tax returns.
We
intend
to avail ourselves of income tax treaties with India to seek to minimize any
Indian withholding tax or local tax otherwise imposed. However, there is no
assurance that the Indian tax authorities will recognize application of such
treaties to achieve a minimization of Indian tax. We may also elect to create
foreign subsidiaries to effect the business combinations to attempt to limit
the
potential tax consequences of a business combination.
If
political relations between the U.S. and India weaken, it could make a target
business’ operations less attractive.
The
relationship between the United States and India may deteriorate over time.
Changes in political conditions in India and changes in the state of Indian—U.S.
relations are difficult to predict and could adversely affect our future
operations or cause potential target businesses to become less attractive.
This
could lead to a decline in our profitability. Any weakening of relations with
India could have a material adverse effect on our operations after a successful
completion of a business combination.
India
has different corporate disclosure, governance and regulatory requirements
than
those in the United States which may make it more difficult or complex to
consummate a business combination.
Companies
in India are subject to accounting, auditing, regulatory and financial standards
and requirements that differ, in some cases significantly, from those applicable
to public companies in the United States, which may make it more difficult
or
complex to consummate a business combination. In particular, the assets and
profits appearing on the financial statements of an Indian company may
-27-
not
reflect its financial position or results of operations in the way they would
be
reflected had such financial statements been prepared in accordance with U.S.
Generally Accepted Accounting Principles, or GAAP. There is substantially less
publicly available information about Indian companies than there is about United
States companies. Moreover, companies in India are not subject to the same
degree of regulation as are United States companies with respect to such matters
as insider trading rules, tender offer regulation, stockholder proxy
requirements and the timely disclosure of information.
Legal
principles relating to corporate affairs and the validity of corporate
procedures, directors’ fiduciary duties and liabilities and stockholders’ rights
for Indian corporations may differ from those that may apply in the U.S., which
may make the consummation of a business combination with an Indian company
more
difficult. We therefore may have more difficulty in achieving our business
objective.
The
requirement that Indian companies provide accounting statements that are in
compliance with GAAP may limit the potential number of acquisition
targets.
To
meet
the requirements of the United States federal securities laws, in order to
seek
stockholder approval of a business combination, a proposed target business
will
be required to have certain financial statements which are prepared in
accordance with, or which can be reconciled to GAAP and audited in accordance
with U.S. Generally Accepted Auditing Standards, or GAAS. GAAP and GAAS
compliance may limit the potential number of acquisition targets.
Because
the Indian judiciary will determine the scope and enforcement under Indian
law
of almost all of our target business’ material agreements, we may be unable to
enforce our rights inside and outside of India.
Indian
law will govern almost all of our target business’ material agreements, some of
which may be with Indian governmental agencies. We cannot assure you that the
target business or businesses will be able to enforce any of their material
agreements or that remedies will be available outside of India. The inability
to
enforce or obtain a remedy under any of our future agreements may have a
material adverse impact on our future operations.
Investors
may have difficulty enforcing judgments against our management or our target
business.
After
the
consummation of a business combination, it is likely that substantially all
or a
significant portion of our assets will be located outside of the United States
and some of our officers and directors may reside outside of the United States.
As a result, it may not be possible for investors in the United States to
enforce their legal rights, to effect service of process upon our directors
or
officers or to enforce judgments of United States courts predicated upon civil
liabilities and criminal penalties of our directors and officers under federal
securities laws. Moreover, we have been advised that India does not have a
treaty providing for the reciprocal recognition and enforcement of judgments
of
courts with the United States.
Item
2.
Properties.
We
maintain our executive offices at 330 East 38th Street, Suite 46C, New York,
NewYork10016. This space is provided to us at no cost by Suhel Kanuga, our
Executive Vice President, Chief Financial Officer, Treasurer and Secretary.
We
also have an executive office in Mumbai, India
-28-
located
at 5 Tulsiani Chambers, Nariman Point, Mumbai - 400 021, India, for which we
pay
$5,250 per month.
Item
3.
Legal
Proceedings.
We
are
not party to any litigation, and we are not aware of any threatened litigation
that would have a material adverse effect on us or our business.
Item
4.
Submission
of Matters to a Vote of Security
Holders.
No
matters were submitted to a vote of securityholders during the fourth quarter
of
the fiscal period ended December 31, 2006.
PART
II
Item
5.
Market
For Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity
Securities.
Our
units
commenced trading on July 20, 2006. Each unit consists of one
share of common stock and one warrant. Each warrant entitles the
holder to purchase one share of common stock at $6.00 per share.
On
September 21, 2006, there was a voluntary separation of our units into
shares of common stock and warrants. The units, common stock and
warrants each trade separately on the American Stock Exchange under the symbols
“MQC.U,”“MQC” and “MQC.WS,” respectively. The following table sets
forth, for the periods indicated, the high and low sales prices of the units,
common stock, and warrants as reported by the American Stock
Exchange:
Trading
of our common stock and warrants commenced on September 21,2006.
As
of
March 23, 2007, we had one unitholder, 34 stockholders, and 28
warrantholders, respectively, all of record. The last sale price as reported
by
the American Stock Exchange on March 23, 2007, was $8.20 for our units,
$7.59 for our shares and $0.78 for our warrants, respectively. The Company
has
never paid a cash dividend on its common stock and does not anticipate the
payment of cash dividends in the foreseeable future.
Use
of Proceeds from the Public Offering
On
July25, 2006, we completed our initial public offering of 7,250,000 units at a
price
of $8.00 per unit. We received proceeds of $52,855,000 from our initial public
offering, which was net of $3,587,500 in underwriting fees and other expenses
paid in cash at the closing and deferred underwriting fees and the
representative’s non-accountable expense allowance of $1,557,500. The deferred
portion of the underwriting fees and representative’s non-accountable expense
allowance is included in additional paid-in capital and will only be paid upon
our consummation of a business
-29-
combination.
Each unit consists of one share of our common stock and one warrant to purchase
one share of common stock. Additionally, on June 30, 2006, we sold 2,250,000
warrants, at a price of $1.00 per warrant, for an aggregate purchase price
of
$2,250,000 to our officers, certain of our directors, other persons who owned
shares of our common stock prior to such sale, and, in some instances, to their
respective affiliates. The aggregate net proceeds of $56,662,500 from our
initial public offering and our private placement offering have been placed
in a
trust account. Up to an aggregate of $1,975,000 of the interest
accrued on the amounts held in the trust account (net of taxes payable) is
available to us to fund a portion of our working capital
requirements. Ladenburg Thalmann & Co. Inc. acted as
representative for the underwriters in connection with our initial public
offering.
Our
founders advanced an aggregate of $148,000 to us, which was used to pay a
portion of the expenses of the initial public offering including SEC
registration fee, NASD filing fee, the non-refundable portion of the American
Stock Exchange listing fee, and a portion of the non-accountable expense
allowance, legal and audit fees and expenses. The loans were repaid out of
the
proceeds of the initial offering that was not placed in the trust.
Performance
Graph
Total
Return Analysis
9/21/2006
9/30/2006
10/31/2006
11/30/2006
12/31/2006
Millennium
India Acquisition Company Inc.
$
100.00
$
100.42
$
100.86
$
103.00
$
104.71
Peer
Group (1)
$
100.00
$
100.28
$
99.14
$
101.21
$
103.12
AMEX
Composite Index
$
100.00
$
99.41
$
102.92
$
107.70
$
107.20
-30-
________________
(1)
The
peer group was selected using
similar blind pool companies whose (i) registration statements are
effective; (ii) have not consummated a business combination; and
(iii)
have targeted India/Asia as its geographic region to consummate a
business
combination. All trading data begins on September 21,2006.
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 J.H. Cohn LLP, independent
registered public accounting firm, as indicated in their report on page
F-1 herein.
Value
of common stock which may be converted to cash (approximately
$7.82
per share without taking into account interest earned on the
trust
account)
$
11,326,834
Value
of private placement warrants, subject to possible
rescission
$
2,250,000
Stockholders’
equity
$
42,033,056
-31-
Item
7.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
The
following discussion should be read in conjunction with our financial statements
and footnotes thereto contained in this report.
We
were
formed on March 15, 2006 to serve as a vehicle to effect a merger, capital
stock exchange, asset acquisition or other similar business combination with
a
currently unidentified operating business.
On
July 25, 2006, we completed our initial public offering of 7,250,000 units
at a price of $8.00 per unit. We received proceeds of $52,855,000 from our
initial public offering, which was net of $3,587,500 in underwriting fees and
other expenses paid in cash at the closing and deferred underwriting fees and
the representative’s non-accountable expense allowance of $1,557,500. The
deferred portion of the underwriting fees and representative’s non-accountable
expense allowance will be included in additional paid-in capital and will only
be paid upon our consummation of a business combination. Each unit consists
of
one share of our common stock and one warrant. Additionally, on June 30,2006, we sold 2,250,000 warrants, at a price of $1.00 per warrant, for an
aggregate purchase price of $2,250,000 to our officers, certain of our
directors, other persons who owned shares of our common stock prior to such
sale, and, in some instances, to their respective affiliates. The aggregate
net
proceeds of $56,662,500 from our initial public offering and our private
placement offering have been placed in a trust account.
For
a
description of the proceeds generated in our initial public offering and a
discussion of the use of such proceeds, we refer you to Note 1 of the financial
statements included in this Annual Report on Form 10-K.
Upon
the
closing of our initial public offering, we sold and issued an option, for $100,
to the representative of the underwriters, to purchase up to 500,000 units,
at
an exercise price of $10.80 per unit. For a description of the representative’s
purchase option, we refer you to Note 7 of the financial statements
included in this Annual Report on Form 10-K.
We
believe that we have sufficient available funds to complete our efforts to
effect a business combination with an operating business.
Results
of Operations
For
the
period from inception (March 15, 2006) to December 31, 2006, we had a net loss
of $2,338,870 which consisted of interest income on the Trust Fund investment
of
$1,270,296 and interest on cash and cash equivalents of $11,665, offset by
a
charge related to the sale of common stock of $2,700,549, general and
administrative expenses of $726,282, which includes travel and entertainment
expenses of $285,080, professional fees of $170,263, $97,478 related to
relocation expenses, $84,667 related to rent and office expenses, $44,770
related to Delaware Franchise tax, and $44,024 related to other operating
expenses. The Company has a provision for income taxes of $194,000.
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.
-32-
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.
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.
Market
risk is a broad term for the risk of economic loss due to adverse changes in
the
fair value of a financial instrument. These changes may be the result of various
factors, including interest rates, foreign exchange rates, commodity prices
and/or equity prices. Our exposure to market risk is limited to interest income
sensitivity with respect to the funds placed in the trust account. However,
the
funds held in our trust account have been invested only in U.S. “government
securities,” defined as any Treasury Bill issued by the United States having a
maturity of one hundred and eighty days or less or in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company Act of
1940, so we are not deemed to be an investment company under the Investment
Company Act. Thus, we are subject to market risk primarily through the effect
of
changes in interest rates on government securities. The effect of other changes,
such as foreign exchange rates, commodity prices and/or equity prices, does
not
pose significant market risk to us.
Item
8.
Financial
Statements and Supplementary
Data.
Reference
is made to pages F-1 through F-13 comprising a portion of this annual
report on Form 10-K.
Item
9.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None.
Item 9A.
Controls
and Procedures.
Our
Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of
our
disclosure controls and procedures (as defined in Rules 13a-15(e) under the
Exchange Act) as of the end of the period covered by this
report. Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of December 31, 2006.
There
has
not been any change in our internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act) during the quarter ended December31, 2006 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Item 9B.
Other
Information.
Not
applicable.
-33-
PART
III
Item
10.
Directors
and Executive Officers and Corporate
Governance
Directors
and Executive Officers
Our
current directors and executive officers are as follows:
Name
Age
Position
F.
Jacob Cherian
42
President,
Chief Executive Officer & Director
Suhel
Kanuga
32
Executive
Vice President, Chief Financial Officer, Treasurer, Secretary &
Director
Kishore
Mirchandani
57
Chairman
& Director
Lawrence
Burstein
64
Director
Gul
Asrani
68
Director
C.P.
Krishnan Nair
85
Director
Sarat
Sethi
37
Director
F. Jacob
Cherian has served as our President and Chief Executive Officer
and has been a member of our board of directors since our inception. Since
April
2004, Mr. Cherian has served as a Partner in the financial services
division of Computer Sciences Corporation, or CSC, a Fortune 500 firm with
$15.0
billion in annual revenue and approximately 80,000 employees. With over 16
years
of experience, Mr. Cherian has successfully demonstrated his abilities,
with increasingly responsible positions as a financial services executive,
leading or co-leading numerous global multimillion dollar business transactions
in business restructuring, turnaround, growth, cost reduction and off-shoring
strategies. Working with high level senior executives of these multibillion
dollar multinational firms, Mr. Cherian has effectively evaluated
undervalued assets and business divisions, significantly increased revenues
to
clients and optimized business performance through business transformation,
restructuring, innovation of growth strategies, cost reduction and corporate
governance. His representative clients include: Goldman Sachs & Co; J.P.
Morgan Chase; Munich Re; Credit Suisse Group; Merrill Lynch; ABN AMRO; Society
Generale; Deutsche Bank; Asea Brown Boveri (ABB), Wellington Financial
Management, and Alliance Capital Management. Mr. Cherian also has
significant experience in designing and implementing off-shoring strategies
and
evaluating undervalued assets. Mr. Cherian has extensive international
experience and has relocated to, and had multi-year residences in both Europe
for 3 years and in India for 10 years. Mr. Cherian’s prior work experience
includes positions as a Director in New York with KPMG LLP / KPMG Consulting
from October 1998 to March 2004, and JP Morgan & Co from September 1995 to
September 1998 in its Fixed Income Credit Portfolio & Derivatives Division.
For the last ten years, Mr. Cherian has been an Adjunct Professor of
International Finance at St. John’s University, Tobin College of Business, New
York. He is frequently featured in leading publications and industry conferences
for his views and insights on emerging trends and growth strategies, cost
reduction initiatives, managing risks and business transformation for
multinational corporations. Mr. Cherian holds a Bachelor of Arts degree in
Accounting & Information Systems from Queens College of CUNY and an MBA in
International Finance from St. John’s University.
-34-
Suhel
Kanuga has served as our Executive Vice President, Chief Financial
Officer, Treasurer and Secretary and has been a member of our board of directors
since our inception. Since August 2004, Mr. Kanuga has been a Principal of
CSC, a Fortune 500 global services company with annual revenues exceeding $15
billion. In his role in CSC’s financial services division based in New York, and
in prior positions, Mr. Kanuga has been responsible for identifying and
building business value, restructuring and transforming businesses by
successfully implementing strategic growth initiatives, cost reduction and
risk
management. Mr. Kanuga has significant international management experience,
having led transactions with businesses across the U.S., Europe and Asia to
restructure and focus on more profitable business segments. He has expertise
in,
and advises senior corporate executives on complex business topics, including
derivatives, capital allocation, asset-liability management, international
expansion, merger integration, financial regulation, corporate governance,
and
business restructuring. His clients have included global organizations such
as
Credit Suisse, Bank of Montreal, ABN AMRO, the New York Stock Exchange, and
Merrill Lynch. Prior to joining CSC, he held management positions at KPMG in
New
York from January 1999 to August 2004 and prior to that, U.S. West.
Mr. Kanuga has authored a number of articles published in leading financial
services publications across the world. He holds degrees in Mathematics and
Economics from Lawrence University.
Kishore
Mirchandani, our Chairman since our inception, is, and since
January 2001 has been the Founder, President of Outsource Partners International
Inc. (OPI), a global specialty firm that focuses on providing high value
finance, accounting and tax outsourcing services to businesses organizations
across the world, and the Chief Executive Officer of its Indian affiliate,
Business Process Outsourcing Ltd. Mr. Mirchandani’s primary
responsibilities at OPI are its sales and marketing efforts in the United States
and management of its shared service center in India, which currently employs
approximately 1,200 persons. Since 2003, Mr. Mirchandani has also served as
a board member of Medusind Ltd., an Indian outsourcer of healthcare services,
which currently employs approximately 1,000 employees. Prior to joining OPI,
he
was the founding partner of MLZ Partners LLP, a public accounting firm in New
York City which was subsequently sold to Russell Bedford Stephano Mirchandani
LLP in May 2002. He was also a partner with a regional accounting firm in New
Jersey from 1996 to 1998. From 1977 to 1986, Mr. Mirchandani was chief
operating and financial officer of St. Michel Sportswear Ltd., a large
multinational distribution company in New York and was directly involved in
the
growth of the company from $5 million in revenues in 1978 to $50 million in
revenues in 1986. Mr. Mirchandani is also an industry expert in outsourcing
and offshoring, and is a frequent speaker at various seminars conducted in
the
United States, the United Kingdom and India on accounting, taxation and
outsourcing issues for global enterprises. Mr. Mirchandani graduated from
the City University, London, UK with a Bachelor of Science degree in Industrial
Chemistry and also qualified as a Chartered Accountant in 1976 through his
training at Deloitte & Touche, London, UK, for a period of 3 years. He is
also a Fellow of the Institute of Chartered Accountants of England & Wales
and has been licensed as a CPA in New York since 1983.
Lawrence
Burstein has served as a member of our board of directors since
our inception. Mr. Burstein is the president and a principal stockholder of
Unity Venture Capital Associates Ltd., a private investment company that he
founded in March 1996. For approximately ten years prior to 1996,
Mr. Burstein was the president, a director and a principal stockholder of
Trinity Capital Corporation, a private investment company. Trinity ceased
operations prior to the formation of Unity Venture in 1996. Mr. Burstein is
also Chairman of American Telecom Services, Inc., an American Stock
Exchange-listed offeror of broadband (voice-over-internet protocol, or VOIP)
and
prepaid long distance communications services that are bundled with its digital,
cordless multi-handset phones; a director of THQ, Inc., a Nasdaq National
Market-listed developer and publisher of interactive entertainment software
for
the major hardware platforms in the home video industry; CAS Medical Systems,
Inc., an OTC Bulletin Board-listed company which manufactures and markets blood
-35-
pressure
monitors and other disposable products principally for the neonatal market;
I.D.
Systems, Inc., a Nasdaq Capital Market-listed company, which designs, develops
and produces a wireless monitoring and tracking system which uses radio
frequency technology; and Traffix, Inc., a Nasdaq National Market-listed
marketing company that develops and operates internet-based marketing programs
as well as direct marketing programs. Mr. Burstein received a B.A. from the
University of Wisconsin and an L.L.B. from Columbia Law School.
Gul
Asrani has served as a member of our board of directors since our
inception. Mr. Asrani is the Chairman of Kaymo Industries Group, a
manufacturer and distributor of industrial products such as fasteners and
fastener tools. Kaymo, which pioneered the manufacture of fasteners in India
in
1959, is headquartered in Mumbai, with offices in major business centers
including Delhi, Chennai, Bangalore, Ahmedabad, Pune and Coimbatore, among
others. Mr. Asrani was instrumental in leading Kaymo Industries to become
one of India’s fastest growing companies in its sector, negotiating multiple
acquisitions and forging alliances with major foreign companies in the US,
Europe and in Asia. Under Mr. Asrani’s leadership, Kaymo has diversified
into new lines of business including the importation of luxury goods from Europe
and furniture from the Far East. Mr. Asrani, who became Kaymo’s Managing
Director and Chairman in 1996, is well respected by business and government
leaders, and has served as a board member of several associations, including
being the President of the Lion’s Club, and is actively involved in
non-government organizations including AGNI (Action for Good Governance and
Networking in India). He has experience in liaising with the Indian Government
at the highest levels, and has extensive experience in manufacturing, finance,
marketing and taxation matters in India along with extensive knowledge of the
Indian industrial marketplace. Mr. Asrani holds degrees in industrial
sociology, economics and law.
C.P.
Krishnan Nair has served as a member of our board of directors
since our inception. Captain Nair, formerly a highly decorated senior officer
in
the Indian Navy, is the founder and chairman of the Leela Hotel Group, one
of
the largest conglomerates in the Indian hospitality industry, which owns and
operates 5-star hotels in Mumbai and Bangalore as well as 5-star beach resorts
in Goa and Kovalem. A resort property, in development with Kempinski Hotels,
Europe’s oldest luxury hotel group, is scheduled to be opened in Kumarakom in
2007. He has also pioneered Leela Group’s foray into new areas such as
infrastructure development, particularly by leading the development of a
state-of-the-art airport in Kerala which will have the ability to handle any
kind of aircraft (including the world’s largest aircraft, the new Airbus A-380).
Captain Nair has been the recipient of the Indian Prime Minister’s National
Tourism Award for six years. Prior to founding the Leela Group, Captain Nair
was
a successful businessman in the garment industry and owned a garment export
house. Captain Nair has significant experience in dealing with the Indian
government at its most senior levels.
Sarat
Sethi has served as a member of our board of directors since our
inception. Mr. Sethi is a Portfolio Manager/Equity Analyst with, and a
principal of, Douglas C. Lane & Associates, Inc. Mr. Sethi graduated
magna cum laude from Lehigh University in 1992 where he was a Martindale
Scholar, earning a Bachelors of Science in Business and Economics. After working
as a certified public accountant at Coopers & Lybrand, Sarat graduated from
Harvard Business School in 1997 with a Masters in Business Administration.
Prior
to joining Douglas C. Lane & Associates in January 1999, Mr. Sethi
worked for JP Morgan in its Mergers & Acquisition/Corporate Finance area and
was involved in numerous domestic and cross-border transactions. Mr. Sethi
became a principal of the firm in 2001. He serves on Lehigh University’s Board
of Trustees, as a director of Lehigh University’s Alumni Association and is a
member of Lehigh University Business School’s Board of Advisors. He is a
Chartered Financial Analyst and a member of the New York Society of Security
Analysts. Mr. Sethi has been a guest on Forbes on Fox and BBC, and appears
regularly on CNBC and Bloomberg TV and Radio as a market strategist and equity
analyst.
-36-
Special
Advisors
Daulat
Dipshan, age 56, is the President of Harilela Hotels Ltd., which
is owned by the Harilela Group, a Hong Kong-based investment and development
company with holdings in hotels, restaurants and banks worldwide, and has been
is this position for over 20 years. Mr. Dipshan oversees the Harilela
Group’s operations in North America with specific responsibility for
acquisitions, construction, management and operations pertaining to the Group’s
hotel and real estate holdings. Mr. Dipshan was previously employed for
approximately 9 years by Hyatt Hotels International, and among his other
responsibilities managed the prestigious United Nations Plaza Hotel in New
York
City. Mr. Dipshan also serves as a part-time financial advisor to Morgan
Stanley with respect to hotel investment and development. He also serves as
Chairman of the ZMaya-Sheila Cyberspace Schools, where he takes an active role
in the education of underprivileged children in third world countries through
internet broadcasting. Mr. Dipshan holds a degree in business
administration from the European University of the University of
Maryland.
Indru
“Andrew” Kirpalani, age 59, has been the Founder, Chief Executive
Officer and President of Andrew Sportsclub, Inc., or ASC, since January 1984.
Mr. Kirpalani’s experience spans over 25 years working with various
organizations at different senior levels. From 1977 to 1984, Mr. Kirpalani
was the vice president of sales at St. Michel Sportswear, Ltd. and was
instrumental in increasing the company’s sales from its inception to revenues of
over $50 million. Mr. Kirpalani’s industry experience led him to start
international apparel and textile specialty firms that focused on providing
high
value-branded goods to specialty and major department stores. Through his
international sourcing experience, Mr. Kirpalani has grown ASC’s revenues
in excess of $100 million per year. Currently, Mr. Kirpalani is involved in
ASC’s sales and marketing efforts in the U.S., as well as managing its various
sourcing strategies in India and the Far East. He has also been an investor
in
several ventures, both locally and in India, one of which includes Outsource
Partners International, Ltd. Mr. Kirpalani sits on the Board of LeelaSoft
Ltd, a company focused on building information technology enabling services
infrastructure in South India. Mr. Kirpalani majored in Business
Administration at the University of Malaysia, Kuala Lumpur, Malaysia. He is
a
frequent speaker at various international conferences and seminars on apparel
manufacturing and branding.
Chandru
Jagwani, age 63, has been the Founder, Chief Executive Officer and
President of Diversified Impex Corp. since January 1986. The Diversified Impex
Corporation is involved in international trade finance and has clients in
various industries. At Diversified Impex, Mr. Jagwani has been involved in
the export of U.S. auto and off highway equipment parts to India, Latin America
and the Middle East, including export with Gould/Clevite, Caterpillar, Cummins,
Detroit Diesel, and International Harvester. Mr. Jagwani also has extensive
international experience in exporting auto parts, steel and engineering products
from India, Taiwan and Singapore. Mr. Jagwani graduated with a degree in
Electrical Engineering from Jodhpur University in India and subsequently
received his MBA from the University of Bridgeport, Connecticut, in
1970.
Venu
Krishnan, age 50, is the Deputy Managing Director of the Leela
Group of Companies, India. Mr. Krishnan joined Leela Group in 1987 as a
Commercial Director and was recently promoted to Deputy Managing Director in
March 2006. The Leela Group is a diversified group with interests in
hospitality, apparel and textile, real estate and infrastructure development
for
information technology and information technology enabling services companies.
As part of his responsibilities, Mr. Krishnan has been involved in the
listing of the Leela Hotel venture on the Mumbai Sensex. His responsibilities
include the group’s business strategy, finance, information technology
development, special projects and human resources. Prior to joining the Leela
Group, Mr. Krishnan worked as a management trainee at The Wallace Flour
Mills Co Ltd, a flour milling group, and was promoted to general
-37-
manager
in 1987. Mr. Krishnan graduated from Mumbai University with a bachelors
degree in Commerce in 1976.
Dr. Vijay
C. Panjabi, age 69, is the President of the India Medical
Association, Mumbai Chapter, and is one of the leading and most well respected
medical general practitioners in India, having an established practice in Bombay
for over 40 years. His line of work brings him in day-to-day contact with
leading healthcare professionals and representatives of pharmaceutical
companies. Dr. Panjabi served as the president of the Indian Medical
Association-Mumbai Chapter. Dr. Panjabi is the Editor of the MAHIMA
publication of the Indian Medical Association, circulated to over 20,000
physicians. He is also the vice president of the general practitioners
association. He is the author of numerous scientific papers. Dr. Panjabi is
also actively involved in the upliftment of rural areas and takes pride in
giving back to society. He holds several degrees, including the M.B.B.S.,
D.M.B., F.C.G.P. and D.G.P.
Ramesh
Hariani, age 57, is the managing director of G.R. Engineering
Works Ltd., which is a part of the G.R. Group of Companies, and has been in
this
position since 1996. Mr. Hariani is also responsible for overseeing the
operations of the G.R. Group of Companies. G.R. Engineering Works Ltd. was
established 40 years ago in Mumbai, India to supply equipment to grass root
refineries, petro-chemical plants and fertilizer plants. The equipment is
manufactured in accordance with American and other international codes with
the
highest quality manufacturing process. The company also manufactures
self-propelled barges for transportation of iron ore at Goa on the western
coast
of India, and manages an information technology industrial park at Bangalore.
Mr. Hariani is a Mechanical Engineering Graduate from City University,
London, U.K. with a Post Graduate Diploma in Business Management from Bradford
University, U.K.
We
expect
our officers, directors and special advisors will play a key role in identifying
and evaluating prospective acquisition candidates, selecting the target
business, and structuring, negotiating and consummating its acquisition. We
believe that the skills and expertise of these individuals, their collective
access to acquisition opportunities and ideas, their contacts, and their
transactional expertise should enable us to successfully identify and effect
a
business combination with a target business in India.
Compliance
with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a)
of the Exchange Act requires our directors and executive officers and persons
who own beneficially more than 10% of our common stock to file reports of
ownership and changes in ownership of such common stock with the SEC, and to
file copies of such reports with us. Based solely upon a review of the copies
of
such reports filed with us, we believe that during 2006, each of F. Jacob
Cherian, Suhel Kanuga, Kishore Mirchandani, Lawrence Burstein, C.P. Krishnan
Nair, Gul Asrani and Sarat Sethi did not file his initial statement of
beneficial ownership on Form 3 on a timely basis.
Director
Independence
The
American Stock Exchange requires that a majority of our board must be composed
of “independent directors,” which is defined generally as a person other than an
officer or employee of the company or its subsidiaries or any other individual
having a relationship, which, in the opinion of the company’s board of directors
would interfere with the director’s exercise of independent judgment in carrying
out the responsibilities of a director.
-38-
Our
board
of directors has determined that Larry Burstein, Captain Nair, Gul Asrani and
Sarat Sethi, who collectively constitute a majority of our board, meet the
general independence criteria set forth in the American Stock Exchange’s listing
standards. Our independent directors will have regularly scheduled meetings
at
which only independent directors are present.
Any
affiliated transactions will be on terms no less favorable to us than could
be
obtained from independent parties. Any affiliated transactions must be approved
by a majority of our independent and disinterested directors.
Audit
Committee
We
have
established an audit committee of the board of directors, which will consist
of
Sarat Sethi, as chairman, C.P. Krishnan Nair and Gul Asrani, each of whom is
an
independent director for audit committee purposes under the American Stock
Exchange’s listing standards. The audit committee’s duties, which are specified
in our Audit Committee Charter, include, but are not limited to:
•
appointing,
determining the compensation of, and retaining and overseeing the
work of,
the independent auditors (including resolving disagreements between
management and the independent auditors regarding financial
reporting).
•
actively
engaging in dialogue with the independent auditors with respect to
any
disclosed relationships or services that may impact their objectivity
and
independence and taking, or recommending that the Board take, appropriate
action to oversee the independence of the independent
auditors.
•
annually
reviewing the experience and qualifications of the key members of
the
independent auditors and the independent auditors’ quality control
procedures.
•
reviewing
and pre-approving all audit services and all permissible non-audit
services.
•
establishing
procedures for the receipt, retention and treatment of complaints
we
receive regarding accounting, internal accounting controls, or auditing
matters, and the confidential, anonymous submission by employees
of
concerns regarding questionable accounting or auditing
matters.
•
discussing
with the auditors the overall scope and plans for their audits including
the adequacy of staffing and
compensation.
•
discussing
with management and the auditors the adequacy and effectiveness of
the
accounting and financial controls, including our system to monitor
and
manage business risk, and legal and ethical compliance
programs.
•
reviewing
and discussing with management and the independent auditors (a) any
material financial or non-financial arrangements of ours that do
not
appear on our financial statements, and (b) any transaction with
parties related to us.
•
reviewing
the interim financial statements with management and the independent
auditors prior to the filing of our Quarterly Reports on Form 10-Q
and discussing the results of the quarterly review and any other
matters
required to be communicated to the Committee by the independent auditors
under generally accepted auditing
standards.
-39-
•
reviewing
with management and the independent auditors the financial statements
to
be included in our Annual Report on Form 10-K (or the annual report
to stockholders if distributed prior to the filing of the Form 10-K),
including their judgment about the quality, not just acceptability,
of
accounting principles, the reasonableness of significant judgments,
and
the clarity of the disclosures in the financial
statements.
Financial
Experts on Audit Committee
The
audit
committee will at all times be composed exclusively of “independent directors”
who are “financially literate” as defined under the American Stock Exchange
listing standards. The American Stock Exchange listing standards define
“financially literate” as being able to read and understand fundamental
financial statements, including a company’s balance sheet, income statement and
cash flow statement.
In
addition, we must certify to the American Stock Exchange that the committee
has,
and will continue to have, at least one member who has past employment
experience in finance or accounting, requisite professional certification in
accounting, or other comparable experience or background that results in the
individual’s financial sophistication. Our board of directors has determined
that Sarat Sethi satisfies the American Stock Exchange’s definition of financial
sophistication and also qualifies as an “audit committee financial expert,” as
defined under rules and regulations of the SEC.
Nominating
Committee
We
have
established a nominating committee of the board of directors, which will consist
of Sarat Sethi, as chairman, C.P. Krishnan Nair and Gul Asrani, each of whom
is
an independent director under the American Stock Exchange’s listing standards.
The nominating committee is responsible for overseeing the selection of persons
to be nominated to serve on our board of directors. The nominating committee
considers persons identified by its members, management, shareholders,
investment bankers and others.
Guidelines
for Selecting Director Nominees
The
guidelines for selecting nominees, which are specified in the Nominating
Committee Charter, generally provide that persons to be nominated should be
actively engaged in business endeavors, have an understanding of financial
statements, corporate budgeting and capital structure, be familiar with the
requirements of a publicly traded company, be familiar with industries relevant
to our business endeavors, be willing to devote significant time to the
oversight duties of the board of directors of a public company, and be able
to
promote a diversity of views based on the person’s education, experience and
professional employment. The nominating committee evaluates each individual
in
the context of the board as a whole, with the objective of recommending a group
of persons that can best implement our business plan, perpetuate our business
and represent shareholder interests. The nominating committee may require
certain skills or attributes, such as financial or accounting experience, to
meet specific board needs that arise from time to time. The nominating committee
does not distinguish among nominees recommended by shareholders and other
persons.
Code
of Ethics
We
have
adopted a code of ethics that applies to all of our executive officers,
directors and employees. The code of ethics codifies the business and ethical
principles that govern all aspects of our business.
-40-
Conflicts
of Interest
Potential
investors should also be aware of the following potential conflicts of
interest:
•
In
the course of their other business activities, our officers and directors
may become aware of investment and business opportunities which may
be
appropriate for presentation to us as well as the other entities
with
which they are affiliated. They may have conflicts of interest in
determining to which entity a particular business opportunity should
be
presented.
•
Our
officers and directors are now and may in the future become affiliated
with entities, including other blank check companies, engaged in
business
activities similar to those intended to be conducted by
us.
•
Our
officers and directors own warrants that are subject to lock-up agreements
restricting their sale until a business combination is successfully
completed. Accordingly, our board may have a conflict of interest
in
determining whether a particular target business is appropriate to
effect
a business combination.
•
The
personal and financial interests of our directors and officers may
influence their motivation in identifying and selecting a target
business,
and completing a business combination in a timely
manner.
In
general, officers and directors of a corporation incorporated under the laws
of
the State of Delaware are required to present business opportunities to a
corporation if:
•
the
corporation could financially undertake the
opportunity;
•
the
opportunity is within the corporation’s line of business;
and
•
it
would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the
corporation.
Accordingly,
as a result of multiple business affiliations, our officers and directors may
have similar legal obligations relating to presenting business opportunities
meeting the above-listed criteria to multiple entities. In addition, conflicts
of interest may arise when our board evaluates a particular business opportunity
with respect to the above-listed criteria. We cannot assure you that any of
the
above mentioned conflicts will be resolved in our favor.
In
order
to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, each of our officers and directors has agreed, until
the
earlier of a business combination or the distribution of the trust account
to
the stockholders, or such time as he ceases to be an officer or director, to
present to us for our consideration, prior to presentation to any other entity,
any suitable business opportunity which may reasonably be required to be
presented to us, subject to the pre-existing fiduciary and contractual
obligations discussed above.
Item
11.
Executive
Compensation.
None
of
our officers, directors or special advisors will receive any compensation prior
to the consummation of our initial business combination, except for
out-of-pocket expenses incurred in connection with activities on our behalf
such
as identifying potential target businesses and performing
-41-
due
diligence on suitable business combinations. There is no limit on the amount
of
these out-of-pocket expenses and there will be no review of the reasonableness
of the expenses by anyone other than our board of directors, which includes
persons who may seek reimbursement, or a court of competent jurisdiction if
such
reimbursement is challenged. Because of the foregoing, we will generally not
have the benefit of independent directors examining the propriety incurred
on
our behalf and subject to reimbursement.
Item
12.
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table sets forth information regarding the beneficial ownership of
our
common stock as of December 31, 2006 by:
•
each
person known by us to be the beneficial owner of more than 5% of
our
outstanding shares of common stock;
•
each
of our officers and directors; and
•
all
our officers and directors as a
group.
Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all shares of common stock
beneficially owned by them.
*
Represents less than 1% of the outstanding shares.
-42-
(1)
Unless
otherwise indicated, the address for all officers and directors is
c/o
Millennium India Acquisition Company Inc., 330 East 38th Street,
Suite
46C, New York, New York10016.
(2)
Includes
10,000 shares of common stock owned by Unity Venture Capital Associates
Ltd., a private investment company, of which Mr. Burstein is
President and a principal
stockholder.
(3)
Excludes
an aggregate of 77,863 shares of common stock, held by Daulat Dipshan,
Dr. Vijay C. Panjabi, Dr. Kurian P. Abraham, Indru Kirplani,
Chandru Jagwani, Venu Krishnan and Ramesh Hariani, our special
advisors.
(4)
Based
on information contained in an amended Schedule 13G jointly filed by
Millenco, L.L.C., Millennium Management, L.L.C. and Israel A. Englander
on
February 7, 2007. The address of Millenco, L.L.C. is c/o Millennium
Management, L.L.C., 666 Fifth Avenue, New York, NY10103. Millennium Management, L.L.C. is the general partner of
Millenco, L.P. Israel A. Englander is the Managing Member of
Millennium Management, L.L.C.
(5)
Based
on information contained in an amended Schedule 13G jointly filed by
Weiss Asset Management, LLC, Weiss Capital, LLC and Andrew M. Weiss
on
February 14, 2007. The address for all three filers is 29
Commonwealth Avenue, 10th Floor, Boston, MA02116.
(6)
Based
on information contained in a Schedule 13G jointly filed by Sapling,
LLC, Fir Tree Recovery Master Fund, L.P. and Fir Tree, Inc. on March9,2007. Fir Tree, Inc. is the investment manager for Fir Tree
Recovery Master Fund and Sapling, LLC. The address of Fir Tree, Inc.
is
505 Fifth Avenue, 23rd Floor, New York, NY10017.
Our
existing stockholders, collectively, beneficially own approximately 15.2% of
the
issued and outstanding shares of our common stock. None of our existing
stockholders purchased our securities in the initial public offering nor has
done so to date. Because of this ownership block held by our existing
stockholders, such individuals may be able to effectively exercise control
over
all matters requiring approval by our stockholders, including the election
of
directors and approval of significant corporate transactions other than approval
of a business combination.
All
of
the shares of our common stock outstanding immediately prior to the initial
public offering are being held in escrow with American Stock Transfer &
Trust Company as escrow agent, until the earliest of:
•
our
liquidation; and
•
six
months after the consummation of a liquidation, merger, stock exchange
or
other similar transaction which results in all of our stockholders
having
the right to exchange their shares of common stock for cash, securities
or
other property subsequent to our consummating our initial business
combination with a target business.
During
the escrow period, the holders of the shares will not be able to sell or
transfer its shares of common stock (except to a child and/or spouse, or trust
established for its benefit), but will retain all other rights as our
stockholders, including, without limitation the right to vote their shares
of
common stock, subject to their agreement to vote all of their shares of common
stock owned by them immediately prior to the initial public offering in
accordance with the majority of the shares of common stock voted by the public
stockholders other than our existing stockholders and the right to receive
cash
dividends, if declared. If dividends are declared and payable in shares of
common stock, such dividends will also be placed in escrow. If we are unable
to
effect a business combination and liquidate, none of our existing stockholders
will receive any portion of the liquidation proceeds with respect to common
stock owned by them immediately prior to the initial public
offering.
-43-
In
addition, in connection with the vote required for our initial business
combination, all of our existing stockholders have agreed, pursuant to letter
agreements with the Representative, to vote the shares of common stock owned
and
acquired by them prior to the initial public offering, in accordance with the
majority of the shares of common stock voted by the public stockholders other
than our existing stockholders, including purchasers in our private placement
offering.
Item
13.
Certain
Relationships and Related Transactions, and Director
Independence.
Prior
to
our initial public offering on July 20, 2006, we issued 1,812,500 shares of
common stock for $25,000 in cash, or a purchase price of approximately $0.01
per
share. These shares were issued to the individuals set forth below, as
follows:
Executive
VP, Chief Financial Officer, Treasurer, Secretary &
Director
Lawrence
Burstein
171,345
Director
Gul
Asrani
18,008
Director
C.P.
Krishnan Nair
18,008
Director
Sarat
Sethi
18,008
Director
Daulat
Dipshan
9,005
Advisor
Dr. Vijay
C. Panjabi
9,005
Advisor
Dr. Kurian
P. Abraham
9,005
Advisor
(1)
Does
not reflect the resale of approximately 112,703 shares by each of
our
founders and 21,330 shares by Mr. Burstein for an aggregate of
359,439 shares, as described below.
Messrs.
Mirchandani, Cherian, Kanuga and Burstein sold an aggregate of 50,850 shares
to
Venu Krishnan, Indru Kirplani, Chandru Jagwani and Ramesh Hariani prior to
the
date of the initial public offering.
Each
of
the individuals set forth above has agreed, pursuant to a letter agreement
between them and Ladenburg Thalmann & Co., not to sell any of the
foregoing securities until the completion of a business combination. In
addition, these holders of our common stock outstanding prior to the initial
public offering, have agreed to waive their respective right to participate
in
any liquidation distribution with respect to shares of common stock acquired
by
them prior to the initial public offering.
-44-
Prior
to
the date of the initial public offering, we privately sold 2,250,000 warrants,
at a price of $1.00 per warrant, for an aggregate of $2,250,000 to our existing
stockholders, including to our officers, certain of our directors, other persons
who owned shares of our common stock prior to such sale, and, in some instances,
to their respective affiliates. Certain of our officers, directors, special
advisors and their respective affiliates purchased an aggregate of 1,950,000
warrants at a price of $1.00 per warrant in the private placement. The 23
purchasers in our private placement included six persons other than our
officers, directors, initial stockholders and their respective affiliates.
Although such six persons were accredited investors within the meaning of
Rule 501 of Regulation D promulgated under the Act, a court may take the
position that such private placement was not conducted in accordance with any
exemption from the registration requirements of Section 5 of the
Act.
All
of
the proceeds we received from the sale of these private placement warrants,
together with the monies received from our sale of units in the initial public
offering, were placed in the trust account upon the consummation of the initial
public offering and are intended to be used to consummate a business
combination. The privately placed warrants are identical to the warrants offered
in the initial public offering except that they are subject to lock up
agreements restricting their sale until after the completion of a business
combination, and they may be exercised on a cashless basis. In addition, the
purchasers of the private placement warrants have waived their right to receive
distributions upon our liquidation prior to a business combination with respect
to the shares of common stock underlying the privately placed
warrants.
In
connection with our sale of warrants, our founders and Mr. Burstein resold
359,439 shares of common stock, at a price of $0.01 per share, to affiliated
and
non-affiliated purchasers in the private placement. The resale of 359,439 shares
of common stock by Messrs. Mirchandani, Cherian, Kanuga and Burstein occurred
concurrently with the sale of the private placement warrants on the basis of
10,000 shares of common stock for each 50,000 warrants purchased by those
persons other than Messrs. Mirchandani, Cherian, Kanuga and Burstein. The
purpose of this transaction was to encourage investors to participate in our
private placement offering. The 359,439 shares of common stock were resold
by
Messrs. Mirchandani, Cherian, Kanuga and Burstein pursuant to the so-called
Section 4(1 1/2) exemption from registration under the Securities Act. Such
selling stockholders may be deemed to be underwriters under the Securities
Act.
A court may take the position that the resale of 60,000 shares of such shares
of
common stock to persons other than our officers, directors and initial
stockholders may not have been conducted in accordance with the registration
requirements of Section 5 of the Securities Act affording the purchasers of
such shares the right to rescind such shares as a remedy to the failure to
register these securities. These rescission rights, if any, may require the
selling stockholders to refund up to an aggregate of $600, plus interest, to
such persons. These privately purchased shares are held in escrow with the
other
existing stockholders’ shares and subject to the same restrictions. Any resale
of these privately purchased shares must be registered under the Securities
Act
and any such resale cannot occur until six months after the consummation of
a
business combination.
We
consider Messrs. Mirchandani, Cherian and Kanuga to be our “promoters” as such
term is defined within the rules promulgated by the SEC under the Securities
Act.
Our
founders advanced an aggregate of $148,000 to us, which was used to pay a
portion of the expenses of the initial public offering including SEC
registration fee, NASD filing fee, the non-refundable portion of the American
Stock Exchange listing fee, and a portion of the non-accountable expense
allowance, legal and audit fees and expenses. The loans were repaid out of
the
proceeds of the initial offering that was not placed in the trust.
-45-
All
ongoing and future transactions between us and any of our officers and directors
or their respective affiliates, including loans by our officers and directors,
will be on terms believed by us to be no less favorable than are available
from
unaffiliated third parties. Such transactions or loans, including any
forgiveness of loans, will require prior approval in each instance by a majority
of our uninterested “independent” directors (to the extent we have any) or the
members of our board who do not have an interest in the transaction, in either
case who had access, at our expense, to our attorneys or independent legal
counsel.
Item
14.
Principal
Accounting Fees and
Services.
The
following table sets forth the aggregate fees billed to the Company by J.H.
Cohn
LLP for fiscal year 2006:
Fiscal
Year 2006
Audit
fees
$
97,000
Audit-related
fees
—
Tax
fees
—
All
other fees
—
Total
$
97,000
Audit
fees relate to services rendered to us for (i) audits of our annual
financial statements, (ii) reviews of our quarterly financial statements,
and (iii) the issuance of comfort letters and consents and other matters
related to SEC filings.
The
Audit
Committee has adopted a policy that requires advance approval of all audit,
audit-related, tax services, and other services performed by our independent
auditor. The policy provides for pre-approval by the Audit Committee of
specifically defined audit and non-audit services. Unless the specific service
has been previously pre-approved with respect to that year, the Audit Committee
must approve the permitted service before the independent auditor is engaged
to
perform it.
PART
IV
Item
15.
Exhibits
and Financial Statement
Schedules
(a)
Financial
Statements.
Our
financial statements as set forth in the Index to Financial Statements attached
hereto commencing on page F-1 are hereby incorporated by
reference.
(b)
Exhibits.
The
following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein:
Certificate
of Amendment to Registrant’s Amended and Restated Certificate of
Incorporation (1)
4.1
Specimen
Unit Certificate (1)
4.2
Specimen
Common Stock Certificate (1)
4.3
Specimen
Warrant Certificate (1)
4.4
Form
of Unit Purchase Option granted to the Representative of the Underwriters
(1)
4.5
Form
of Warrant Agreement between American Stock Transfer & Trust
Company and the Registrant(1)
10.1
Form
of Investment Management Trust Agreement between The Bank of New
York and
the Registrant(1)
10.2
Form
of Stock Escrow Agreement between the Registrant, American Stock
Transfer & Trust Company and the Existing Stockholders (1)
10.3
Form
of Letter Agreement among the Registrant, Ladenburg Thalmann &
Co. Inc. and each of Kishore Mirchandani, Lawrence Burstein, C.P.
Krishnan
Nair, Gul Asrani, and Sarat Sethi (1)
10.4
Form
of Promissory Note issued by the Registrant to each of F. Jacob
Cherian, Suhel Kanuga and Kishore Mirchandani (1)
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors and Stockholders
Millennium
India Acquisition Company Inc.
We
have
audited the accompanying balance sheet of Millennium India Acquisition Company
Inc. as of December 31, 2006, and the related statements of operations,
stockholders’ equity and cash flows for the period from inception (March 15,2006) to December 31, 2006. These financial statements are the responsibility
of
the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Millennium India Acquisition
Company Inc. as of December 31, 2006, and its results of operations and cash
flows for the period from inception (March 15, 2006) to December 31, 2006,
in
conformity with accounting principles generally accepted in the United States
of
America.
Rescission
of issuance of common stock to initial stockholders
—
—
2,700,549
(2,704,549
)
—
(4,000
)
Cancellation
of Common Stock to initial stockholders
(371,504
)
(37
)
(2,704,512
)
2,704,549
—
—
Issuance
of 0.211865 to 1 common stock dividend
371,504
37
(37
)
—
—
—
Contribution
of 312,500 shares of Common Stock by initial stockholders
—
—
2,275,000
(2,275,000
)
—
—
Cancellation
of Common Stock from initial stockholders
(312,500
)
(31
)
(2,274,969
)
2,275,000
—
—
Proceeds
from sale of the Unit Purchase Option
—
—
100
—
—
100
Sale
of 7,250,000 units through public offering net
of underwriter’s discount
and offering expenses and net of proceeds of $11,326,834
allocable to
1,449,275 shares of common stock, subject to possible
conversion
Organization
and activities—Millennium India Acquisition Company Inc. (the
“Company”) was incorporated in Delaware on March 15, 2006 for the purpose
of effecting a merger, capital stock exchange, asset acquisition or other
similar transaction with a currently unidentified operating business or
businesses that have operations primarily in India (a “Target
Business”).
The
registration statement for the Company’s initial public offering (“Offering”)
was declared effective on July 19, 2006. On July 25, 2006, the Company
consummated the Offering of 7,250,000 Units (the “Units” or a “Unit”) for gross
proceeds of approximately $58 million, or $8.00 per Unit. All of the net
proceeds of the Offering are intended to be applied toward consummating a
merger, capital stock exchange, asset acquisition or other similar business
combination with a Target Business (a “Business Combination”). Pending such a
Business Combination, substantially all of the proceeds from the Offering will
be held in trust. The Company’s management will have broad authority with
respect to the application of the interest earned on the monies held in the
trust from the net proceeds of the Offering (see Note 4). There is no
assurance that the Company will be able to successfully effect a Business
Combination.
Management
has agreed that approximately $7.82 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, $0.21 per Unit will be paid to the underwriters
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 target
businesses or other entities it engages, execute agreements with the Company
waiving any right, title, interest or claim of any kind in or to any monies
held
in the Trust Account, there is no guarantee that they will execute such
agreements. Up to $1,975,000 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.
Prior
to
the consummation of a Business Combination, the Company is obliged to submit
such proposed Business Combination for approval by a majority of the
stockholders of the Company. Stockholders that vote against such proposed
Business Combination 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 Fund (inclusive of any interest thereon, and net of income
taxes) as of two business days prior to the proposed Business Combination,
divided by the number of Units sold in the Offering, or approximately $7.82
per
share on July 25, 2006. The Company’s stockholders prior to the Offering
(“Initial Stockholders”), have agreed to vote their 1,812,500 founding shares of
common stock in accordance with the vote of the majority in interest of all
other stockholders of the Company (“Public Stockholders”) with respect to any
Business Combination. In the event that holders of a majority of the outstanding
shares of common stock vote for the approval of the proposed Business
Combination and that holders owning 20% or more of the outstanding common stock
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 16 months from the
date
of the Offering, the Company’s board of directors will, prior to such date,
convene, adopt and recommend to their
F-6
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
stockholders
a plan of dissolution and distribution and on such date 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 Company’s stockholders for that Business Combination has not
been filed prior to 22 months from the date of the Offering, the Company’s board
of directors will, prior to such date, convene, adopt and recommend to their
stockholders a plan of dissolution and distribution and on such date 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
(the
“Target Business Combination Period”), the Company will dissolve and distribute
to its Public Stockholders, in proportion to their respective equity interests,
the amount held in the Trust Account, and any remaining net assets, after the
distribution of the Trust Account. In the event of liquidation, it is likely
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. Pursuant to letter agreements
with the Company and the representative of the underwriters (the
“Representative”) in the Offering, the Initial Stockholders have waived their
right to receive distributions with respect to their existing shares in the
event of the Company’s liquidation.
With
respect to a Business Combination which is approved and consummated, any Public
Stockholder who voted against the Business Combination may 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 19.99% 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 shares held by Initial Stockholders.
NOTE
2 —OFFERING
In
the
Offering, effective July 19, 2006 (closed on July 25, 2006), the
Company sold to the public 7,250,000 Units (the “Units”) at a price of $8.00 per
Unit. Proceeds from the Offering, totaled approximately $52.9 million, which
was
net of approximately $3.5 million in underwriting and other Offering expenses
paid in cash at the closing and approximately $1.6 million in deferred
underwriting fees (see Note 4). Each Unit consists of one share of the
Company’s common stock and one warrant (a “Public Warrant”) (see
Note 7).
The
Company also sold to the Representative, for an aggregate of $100, an option
(the “Unit Purchase Option” or “UPO”) to purchase up to a total of 500,000
additional Units (see Note 7).
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.
F-7
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
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
Loss Per Share—Basic earnings (loss) per share is computed by dividing
income (loss) by the weighted average common shares outstanding for the period.
Diluted earnings per share are computed similar to basic earnings per share
except that the weighted average shares outstanding are increased to include
additional shares from the assumed exercise of warrants, if dilutive. The number
of additional shares is calculated by assuming that the outstanding warrants
were exercised and that the proceeds from such exercises were used to acquire
shares of common stock at the average market price during the reporting
period.
The
Company experienced a loss for the period from inception (March 15, 2006) to
December 31, 2006. Accordingly, the effect of the assumed exercise of all
9,500,000 outstanding warrants to purchase common stock and the outstanding
UPO
to purchase 500,000 units would be anti-dilutive and has been excluded from
the
calculation of diluted loss per share.
Fair
Value of Financial Instruments—The fair values of the Company’s assets
and liabilities that qualify as financial instruments under the Statement of
Financial Accounting Standard (“SFAS”) No. 107 “Disclosure About Fair
Value of Financial Instruments” approximate their carrying amounts
presented in the balance sheet at December 31, 2006.
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—The Company accounts for income taxes in accordance with SFAS No.
109 “Accounting for 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 Financial Accounting
Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109.” FIN 48 clarifies the accounting for uncertainty
in income taxes recognized in a company’s financial statements and prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken
in
an income tax return. FIN 48 also provides guidance in
derecognition, classification, interest and penalties, accounting in interim
periods, disclosures and transition. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company does not
believe the adoption of FIN 48 will have a material impact, if any, on its
financial statements.
F-8
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
In
September 2006, the FASB issued Statement No. 157 “Fair Value
Measurements”
(“SFAS No. 157”). This
Statement provides guidance for using fair value to measure assets and
liabilities. The standard also responds to investors’ requests
for
expanded information about the extent to which companies measure assets and
liabilities at fair value, the information used to measure fair value, and
the
effect of fair value measurements on earnings. SFAS No. 157 is effective for
financial statements issued in fiscal years beginning after November 15, 2007
and to interim periods within those fiscal years. The Company does not believe
the adoption of SFAS No. 157 will have a material impact, if any, on its
financial statements.
In
February 2007, the 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
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.
NOTE
4 —COMMITMENTS
Administrative
Fees
The
Company is permitted to utilize up to $2,025,000, which includes $50,000
transferred to the Company at closing on July 25, 2006 and $1,975,000 of
the interest earned upon monies in the Trust Account 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 relocation of their full-time officers
to
India, 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
Company’s officers, directors or special advisors in connection with activities
undertaken on the Company’s behalf.
Pursuant
to the Underwriting Agreement, the Company is obligated to the underwriters
for
certain fees and expenses related to the Offering, including an underwriting
discount of $3,480,000. The Company and the Representative have agreed that
payment of $725,000, of the underwriting discount will be deferred until
consummation of the Business Combination. The Company also agreed to pay the
Representative a non-accountable expense allowance of $870,000, or 1.50% of
the
gross proceeds of the Offering.
The
Company and the Representative have agreed that payment of $832,500 of the
non-accountable expense allowance will be deferred until consummation of the
Business Combination.
F-9
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
In
addition, in accordance with the terms of the Underwriting Agreement, the
Company has engaged the Representative, on a non-exclusive basis, to act as
its
agent for the solicitation of the exercise of the Company’s Public Warrants. In
consideration for solicitation services, the Company will pay the underwriters
a
commission equal to 6% of the exercise price for each Warrant exercised more
than one year after the date of the Offering if the exercise is solicited by
the
underwriters.
The
Company’s effective tax rate approximates the federal statutory
rate.
The
provision for income taxes differs from the amount computed by applying the
U.S.
statutory income tax rates for federal to loss before provision for income
taxes
for the reasons set forth below for the year ended December 31,2006.
Statutory
federal income tax rate
(34)%
Non-deductible
expenses and other
43%
Effective
tax rate
9%
The
Company’s effective tax rate differs from the federal statutory rate as a result
of non-deductible expenses and other deductions comprising primarily of a charge
related to the sale of the Company’s common stock included on the accompanying
statement of operations that will never be deductible from the Company’s
computation of taxable income.
Included
in general and administrative expenses for the period from inception (March15,2006) to December 31, 2006 are $44,770 of expenses related to Delaware
franchise tax.
NOTE
6 —CAPITAL
STOCK
During
May 2006, the Company amended and restated its Certificate of Incorporation
to
authorize the issuance of an additional 10,000,000 shares of common stock for
an
aggregate authorization of 45,000,000 shares of common stock.
On
June 5, 2006, the Company declared a stock dividend of 0.048951 shares for
1 share of common stock to stockholders of record on June 5, 2006. On
June 16, 2006, the Company declared a reverse stock split of 0.708333
shares for 1 share of common stock to be effective on June 16, 2006 to
stockholders of record on June 16, 2006. On July 6, 2006, the Company
declared a stock dividend of 0.211865 shares for 1 share of common stock to
stockholders of record on July 6, 2006. The accompanying unaudited condensed
financial statements and share amounts have been retroactively adjusted to
include the impact of the stock dividends and reverse stock split.
F-10
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
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
March
2006, the Company’s Initial Stockholders purchased 1,753,496 post stock dividend
and reverse stock split shares of the Company’s common stock for an aggregate
$25,000.
During
May 2006, certain of the Initial Stockholders purchased 371,504 post stock
dividend and reverse stock split shares of the Company’s common stock for an
aggregate $4,000. At the date of sale in May 2006, management determined the
fair value of the Company’s common stock to be $7.28 per share. This
determination of value was based on management’s evaluation of the value of
common stock of similar companies, which had recently completed an initial
public offering whose common stock had begun separate trading from the warrants.
As a result, the Company recorded a charge of $2,700,549 to the statement of
operations for the difference between the fair market value of the common stock
sold of $2,704,549 and the $4,000 price paid by the Initial Stockholders in
May
2006.
On
July 5, 2006, certain of the May 2006 Initial Stockholders’ purchase of
371,504 post stock dividend and reverse stock split shares was rescinded in
its
entirety by mutual agreement of the Company and the Initial Stockholders. At
the
date of rescission, management re-evaluated the current fair value of the
Company’s common stock and determined the fair value to be $7.28 per share as no
events had occurred since the date of sale which would provide another
indication of value and the Company’s circumstances were substantially the same
as in May 2006. Accordingly, on July 5, 2006the Company recorded the
$2,704,549 value of the shares rescinded and reacquired to treasury stock and
a
$2,700,549 credit to additional paid-in capital based on the difference between
fair market value of the common stock rescinded and the $4,000 price paid by
the
Company for such shares. 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.
On
July 20, 2006, certain Initial Stockholders returned an aggregate of
312,500 shares of the Company’s common stock to the Company for cancellation. At
the date of return and cancellation, management re-evaluated the current fair
value of the Company’s common stock and determined the fair value to be $7.28
per share as no events had occurred which would provide another indication
of
value and the Company’s circumstances were substantially the same as on
July 5, 2006 when the Company performed its last valuation. Accordingly, on
July 20, 2006, the Company recorded the $2,275,000 value of the shares
contributed to treasury stock and a $2,275,000 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.
F-11
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
NOTE
7 —WARRANTS
AND OPTION TO PURCHASE COMMON STOCK
Public
Warrants
Each
Public Warrant sold in the Offering will be exercisable for one share of common
stock. Except as set forth below, the Public Warrants will entitle the holder
to
purchase shares at $6.00 per share, subject to adjustment in the event of stock
dividends and splits, reclassifications, combinations and similar events for
a
period commencing on the later of: (a) completion of a Business Combination
and (b) July 19, 2007, and ending July 19, 2010. The Company has
the ability to redeem the Public Warrants with the prior consent of the
Representative, in whole or in part, at a price of $.01 per Public Warrant
at
any time after the Public Warrants become exercisable, upon a minimum of 30
days’ prior written notice of redemption, and if, and only if, the last sale
price of the Company’s 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
June 30, 2006, the Company sold to certain of the Initial Stockholders and
other accredited investors 2,250,000 warrants (“Private Warrants”), for an
aggregate purchase price of $2,250,000. All of the proceeds received from these
purchases were placed in the Trust Account at the closing of the Offering.
The
Private Warrants are identical to the Public Warrants in the Offering except
that they may be exercised on a cashless basis and the Private Warrants cannot
be sold or transferred until after the consummation of a Business Combination.
Additionally, such individuals will waive their right to receive distributions
in the event of the Company’s liquidation prior to a Business Combination with
respect to the shares of common stock underlying such Private Warrants. Based
on
certain circumstances in this transaction, the Private Warrant holders may
have
the right to rescind their purchases, which would require the Company to refund
up to an aggregate of the purchase price paid for the Private Warrants. Due
to
the uncertainty related to the rescission rights regarding the Private Warrants,
the Company has recorded the proceeds received from the purchase of Private
Warrants in the private placement as temporary equity, outside of stockholders’
equity.
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 the exercise will not have any effect on the Company’s financial
condition or results of operations prior to a Business Combination.
Unit
Purchase Option
Upon
closing of the Offering, the Company sold and issued the UPO for $100 to the
Representative to purchase up to 500,000 Units at an exercise price of $10.80
per Unit. The Units underlying the UPO will be exercisable in whole or in part,
solely at the Representative’s discretion, commencing on the consummation of a
Business Combination and expiring on the five-year anniversary of the Offering.
The Company accounted for the fair value of the UPO, inclusive of the receipt
of
the $100 cash payment, 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 500,000 Units underlying
the
UPO was approximately $1,535,000 ($3.07 per Unit) at the date of sale and
issuance, which was determined by the Company using a Black-Scholes
option-pricing model. The fair value of the UPO has been estimated using the
following assumptions: (1) expected volatility
F-12
Millennium
India Acquisition Company
Inc.
Notes
to Financial
Statements
of
46.702%, (2) risk-free interest rate of 5.10% and (3) contractual life
of 5 years. The expected volatility of approximately 46% was estimated by
management based on an evaluation of the historical volatilities of similar
public entities which had completed a transaction with an operating company.
The
UPO may be exercised for cash or on a “cashless” basis, at the holder’s option,
such that the holder may use the appreciated value of the UPO (the difference
between the exercise price of the UPO and the market price of the securities
underlying the Units) to exercise the UPO without the payment of any cash.
Each
of the Units included in the UPO are identical to the Units to be sold in the
Offering, except that the exercise price of the Units will be $10.80 per
Unit.
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 (collectively
the Public Warrants and Private Warrants are the “Warrants”), the Company is
only required to use its best efforts to register the Warrants and the shares
of
common stock issuable upon exercise of the Warrants and once effective to use
its best efforts to maintain the effectiveness of such registration statement.
The Company is not obligated to deliver securities, and there are no contractual
penalties for failure to deliver securities, if a registration statement is
not
effective at the time of exercise. 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. However, with regards to the
Private Warrants, the Company may satisfy its obligation by delivering
unregistered shares of common stock. 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 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 Company’s common stock or any voting
rights until such holders exercise their respective warrants and receive shares
of the Company’s common stock.
The
Company is only required to use its best efforts to register the UPO and the
securities underlying such UPO, and once effective to use its best efforts
to
maintain the effectiveness of such registration statement. The Company has
no
obligation to net cash settle the exercise of the UPO or the warrants underlying
the UPO. The holder of the UPO is not entitled to exercise the UPO or the
warrants 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 warrants,
the UPO or the underlying securities, as applicable, will expire
worthless.
F-13
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized
In
accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
