Filed On 9/6/07 4:32pm ET · SEC File 333-145901 · Accession Number 1193805-7-2365
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
9/06/07 China Energy & Resources Ltd S-1 17:309 E-Data Systems Inc/FA
Document/Exhibit Description Pages Size
1: S-1 Registration Statement (General Form) 116 559K
2: EX-1.1 Form of Underwriting Agreement 59 211K
3: EX-3.1.1 Certificate of Incorporation 8 29K
4: EX-3.1.2 Certificate of Amendment 2 8K
5: EX-3.1.3 Certificate of Amendment 2 8K
6: EX-3.2 By-Laws 11 44K
7: EX-4.4 Form of Warrant Agreement 14 51K
8: EX-4.5 Form of Unit Purchase Option Agreement 17 61K
9: EX-10.1 Form of Letter Agreement 4 23K
10: EX-10.2 Form of Letter Agreement 4 22K
11: EX-10.3 Form of Letter Agreement 1 7K
12: EX-10.4 Form of Subscription Agreement 26 94K
13: EX-10.5 Form of Investment Management Trust Agreement 16 50K
14: EX-10.6 Form of Securities Escrow Agreement 9 27K
15: EX-10.7 Form of Administrative Services Agreement 1 8K
16: EX-10.8 Form of Registration Rights Agreement 17 70K
17: EX-23.1 Consent of Rothstein Kass HTML 5K
As filed with the Securities and Exchange Commission on September 6, 2007
Registration No. 333-_______
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
______________
CHINA RESOURCES LTD.
(Exact name of registrant as specified in its charter)
______________
[Enlarge/Download Table]
Delaware 6770 26-0422971
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
Shen Zhen China Jia Yue Trading Co., Ltd
Room 921, Block A, Golden Central Tower, Jintian Road,
Futian District, Shenzhen, P.R. China.
86- 755-23993668 (telephone)
86- 755-23993698 (facsimile)
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Frederick E. Smithline, Esq.
China Resources Ltd.
c/o Eaton & Van Winkle LLP
Three Park Avenue, 16th floor
New York, NY 10016
(212) 779-9910 (telephone)
(212) 779-9928 (facsimile)
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Vincent McGill, Esq. Douglas S. Ellenoff, Esq.
Eaton & Van Winkle LLP Stuart Neuhauser, Esq.
Three Park Avenue Kathleen Cerveny, Esq.
New York, New York 10016 Ellenoff Grossman & Schole LLP
(212) 779-9910 370 Lexington Avenue
(212) 779-9928--facsimile New York, New York 10017
(212) 370-1300
(212) 370-7889--facsimile
______________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
CALCULATION OF REGISTRATION FEE
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==============================================================================================================
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Each Class of Security Being Amount Being Price Per Offering Registration
Registered Registered Security(1) Price(1) Fee
-------------------------------------------- ------------ ----------- ------------- -----------
Units, each consisting of one share of 4,600,000 $ 10.00 $ 46,000,000 $ 1,412.20
common stock, $0.0001 par value, and one
warrant(2)
Shares of common stock included in the 4,600,000 -- -- -- (3)
units(2)
Warrants included in the units(2) 4,600,000 -- -- -- (3)
Shares of common stock underlying the 4,600,000 $ 7.50 $ 34,500,000 $ 1,059.15
warrants included in the units(2)
Representatives' unit purchase option 1 $ 100.00 $ 100 $ 0
Units underlying the representative's unit 280,000 $ 11.00 $ 3,080,000 $ 94.56
purchase option ("Representative's Units")(4)
Shares of common stock included as part 280,000 -- -- -- (3)
of the Representative's Units(4)
Warrants included as part of the 280,000 -- -- -- (3)
Representative's Units(4)
Shares of common stock underlying the 280,000 $ 7.50 $ 2,100,000 $ 64.47
warrants included in the Representative's
Units(4)
Total(4) $ 85,680,100 $ 2,630.38
==============================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 600,000 units, consisting of 600,000 shares of common stock and
600,000 warrants, which may be issued upon exercise of a 45-day option granted
to the underwriters to cover over-allotments, if any.
(3) No fee is required pursuant to Rule 457(g).
(4) Pursuant to Rule 416, there also are being registered such indeterminable
additional securities as may be issued to prevent dilution as a result of stock
splits, stock dividends or similar transactions.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Preliminary Prospectus dated September __, 2007
(Subject to Completion)
PROSPECTUS
$40,000,000
China Resources Ltd.
4,000,000 Units
China Resources Ltd. is a newly organized Business Combination
Company(TM), or BCC(TM), formed for the purpose of acquiring, through a merger,
capital stock exchange, asset acquisition, stock purchase or similar business
combination, an unidentified operating business that has its principal
operations in the People's Republic of China, or PRC. While our efforts in
identifying a prospective target business will not be limited to a particular
industry segment, we intend to focus our initial efforts on acquiring an
operating business in the natural resources sector, particularly minerals, whose
activities include mining, extracting, smelting, processing and/or fabricating.
We do not have any specific merger, capital stock exchange, asset acquisition,
stock purchase or other similar business combination under consideration and
have not contacted any prospective target business or had any discussion, formal
or otherwise, with respect to such a transaction.
This is an initial public offering of our securities. We are offering
4,000,000 units. Each unit has an offering price of $10.00 and consists of:
o one share of our common stock; and
o one warrant.
Each warrant entitles the holder to purchase one share of our common stock at a
price of $7.50. Each warrant will become exercisable on the later of our
completion of a business combination and [ ], 2008, and will expire on
[ ], 2011, or earlier upon redemption.
Prior to the date of this prospectus, certain of our directors and
officers, or entities that they control, will purchase from us in a private
placement a total of 2,600,000 warrants to purchase an aggregate of 2,600,000
shares of our common stock for a total purchase price of $2,600,000 , or $1.00
per warrant. The private warrants are identical to the warrants included in the
units in this offering. If we fail to consummate a business combination, the
private warrants will expire worthless. These warrants are subject to transfer
restrictions which expire on the earlier of: (i) a business combination or (ii)
our dissolution and liquidation.
There is no public market for our units, common stock or warrants. We anticipate
that the units will be quoted on the OTC Bulletin Board under the symbol [
_____U] on or promptly after the date of this prospectus. Once the securities
comprising the units begin separate trading, the units will continue to trade
under the symbol [____U] and the common stock and warrants will be quoted on the
OTC Bulletin Board under the symbols [____] and [____W ], respectively. Each of
the common stock and warrants may trade separately beginning on the 10th
business day following the earlier to occur of: (i) the expiration of the
underwriters' over-allotment option or (ii) its exercise in full. We cannot
assure you that our securities will continue to be quoted on the OTC Bulletin
Board in the future.
Our business and an investment in our securities involve significant risks.
These risks are described under the caption "Risk Factors" beginning on page 15
of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of if this prospectus. Any representation to the contrary
is a criminal offense.
Per Unit Total
---------- -------------
Public offering price $ 10.00 $ 40,000,000
Underwriting discount(1)(2) $ 0.60 $ 2,400,000
Net proceeds, before expenses, to us $ 9.40 $ 37,600,000
----------
(1) Includes underwriting compensation in the amount of 4.0% of the gross
proceeds, or $0.40 per unit, a total of $1,600,000 ($1,840,000 if the
underwriters' over-allotment option is exercised in full), plus deferred
underwriting compensation payable to Maxim Group LLC, the representative
of the underwriters, in the amount of an additional 2.0% of the gross
proceeds, or $0.20 per unit, a total of $800,000 ($920,000 if the
underwriters' over-allotment option is exercised in full) payable only
upon completion of the initial business combination, as described in this
prospectus. Does not include a non-accountable expense allowance in the
amount of 1.0% of the gross proceeds, or $0.10 per unit ($400,000 in
total), payable to Maxim Group LLC, or the unit purchase option granted to
Maxim Group LLC. For information concerning underwriting compensation, see
"Underwriting."
(2) No discounts or commissions are payable with respect to the warrants
purchased in the private placement.
Of the proceeds we will receive from this offering and the sale of the
private warrants, approximately $9.80 per unit, or $39,200,000 ($9.75 per unit,
or $44,840,000 if the underwriters' over-allotment option is exercised in full)
in the aggregate, will be deposited into a trust account at Merrill Lynch,
Pierce, Fenner & Smith Incorporated, maintained by American Stock Transfer &
Trust Company, acting as trustee. An additional $800,000 ($920,000 if the
underwriters' over-allotment option is exercised in full), or $0.20 per unit,
representing the deferred underwriting discount payable to Maxim Group LLC if we
complete a business combination, will be deposited in the trust account and will
be available for distribution to public stockholders upon our liquidation if we
do not complete a business combination. If the over-allotment option is
exercised, the first $240,000 in interest earned on the amount held in the trust
account (net of taxes payable) will be used to bring the amount held in trust
for the benefit of the public stockholders to an aggregate of $46,000,000
($10.00 per share).
The underwriters also may purchase up to an additional 600,000 units from
us at the public offering price, less the underwriting discount, within 45 days
from the date of this prospectus to cover over-allotments. We have also agreed
to sell for $100 to Maxim Group LLC, the representative of the underwriters in
this offering, as additional compensation, an option to purchase up to 280,000
units at $11.00 per unit. The units we will issue upon exercise of this option
are identical to those offered by this prospectus. The option and the securities
we will issue upon its exercise have been registered under the registration
statement of which this prospectus forms a part.
The underwriters expect to deliver the units against payment in New York,
New York on , 2007.
Maxim Group LLC
, 2007
1
Table of Contents
Page
----
Prospectus Summary 1
Summary Financial Data 13
Risk Factors 15
Use of Proceeds 41
Capitalization 44
Dilution 45
Management's Discussion and Analysis of Financial Condition and
Results of Operations 48
Proposed Business 51
Our Executive Officers and Directors 71
Security Ownership 75
Certain Relationships and Related Transactions 77
Description of Securities 79
Dividend Policy 84
Underwriting 85
Legal Matters 93
Experts 93
Where You Can Find Additional Information 93
Index to Financial Statements F-1
If you are not an institutional investor, you may purchase securities in
this offering only if you reside within the states in which we have applied to
have the securities registered. We have registered the securities in: Colorado,
Delaware, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Indiana,
Louisiana, New York, Rhode Island and Wyoming.
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. We are not making an offer of these securities
in any state where the offer is not permitted. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information contained in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
This prospectus contains forward-looking statements that are based upon
our or our management's expectations and beliefs concerning future developments
and their potential effect upon us. You should not place undue reliance on these
forward-looking statements which may involve a number of risks, uncertainties
(some of which are beyond our control) or other assumptions that may cause
actual results or performance to be materially different from those expressed or
implied by these forward-looking statements. These risks and uncertainties
include, but are not limited to, those factors described under the heading "Risk
Factors." Should one or more of these risks or uncertainties materialize, or
should any of our assumptions prove incorrect, actual results may vary in
material respects from those projected in these forward-looking statements.
Except as may be required under applicable securities laws, we undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
"Business Combination Company"(TM) and "BCC"(TM) are service marks of
Maxim Group LLC.
2
Prospectus Summary
This summary provides an overview of certain information contained
elsewhere in this prospectus and does not contain all of the information you
should consider before investing in our units. You should carefully read the
prospectus and the registration statement of which this prospectus is a part in
their entirety before investing in our units, including the information
discussed under "Risk Factors" beginning on page 15 and our financial statements
and the notes thereto that appear elsewhere in this prospectus. Unless otherwise
stated, all of the information in this prospectus assumes that the underwriters
will not exercise their over-allotment option. As used in this prospectus,
unless the context otherwise indicates:
o the terms "we," "us" and "our company" refer to China Resources
Ltd.;
o references to our certificate of incorporation include our
certificate of incorporation as filed with the Office of the
Secretary of State of Delaware on June 8, 2007, and all amendments
thereto;
o the term "existing stockholders" refers to our directors and
executive officers who owned 1,000,000 shares of our common stock,
sometimes referred to in this prospectus as "founding shares,"
immediately prior to the date of this offering and the private
placement;
o references to the "PRC" or "China" include all territory claimed by
or under the control of the Central Government, except Hong Kong,
Macau, and Taiwan, also known as the People's Republic of China; the
term "Central Government" means the national government of the
People's Republic of China, or the PRC, and its various ministries,
agencies and commissions; the term "Provinces" include provinces,
autonomous regions, and municipalities directly under the Central
Government; the term "Local Governments" refers to governments in
the PRC, including governments at all administrative levels below
the Central Government, including provincial governments,
governments of municipalities directly under the Central Government,
municipal governments, county governments, and township governments;
and the term "PRC Government" means the Central Government and Local
Governments;
o the term "private placement" refers to the purchase by certain of
our directors and officers, or entities that they control, in a
private placement that will occur prior to the date of this
prospectus of an aggregate of 2,600,000 warrants at $1.00 per
warrant; and the term "private warrants" refers to the 2,600,000
warrants to be purchased in the private placement;
o the term "public stockholders" means the holders of our common stock
sold as part of the units in this offering or in the aftermarket,
including any existing stockholders, to the extent that they
purchase or acquire units in this offering or in the aftermarket;
o references to "Renminbi" or "RMB" are to Renminbi yuan, which is the
lawful currency of the PRC;
o the term "representative" refers to Maxim Group LLC; and
o the term "sponsor" refers to Mr. Fuzu Zeng, our CEO, President,
Chairman of the Board and principal stockholder.
Our Strategy and Target Business
We are a blank check company known as a Business Combination Company(TM)
or BCC(TM). We were formed under the laws of the State of Delaware on June 8,
2007 for the purpose of acquiring, through a merger, capital stock exchange,
asset acquisition, stock purchase or similar business combination, an
unidentified operating business that has its principal operations in the PRC.
While our efforts in identifying a prospective target business will not be
limited to a particular industry segment, we intend to focus our initial efforts
on acquiring an operating business in the natural resources sector, particularly
minerals, whose activities include mining, extracting, smelting, processing
and/or fabricating. Opportunities for market expansion have emerged for
businesses with operations in the PRC due to certain changes in the PRC's
political, economic and social policies, as well as certain fundamental changes
affecting the PRC and its neighboring countries. We believe that China
represents both a favorable environment for making business combinations and an
attractive operating environment for a target business for several reasons,
including increased government focus within the PRC on privatizing assets,
improving foreign trade and encouraging business and economic activity leading
to the PRC having one of the highest gross domestic product growth rates among
major industrial countries in the world, as well as strong growth in many
sectors of its economy driven by emerging private enterprises.
3
Notwithstanding these facts, there are various risks of business
combinations in the PRC, including the risk that we may be unable to enforce our
rights in the PRC, that the government may revert back to former policies less
conducive to free trade and that relations between China and countries in other
regions of the world, including the United States, may deteriorate leading to
reduced trade.
While we may seek to effect business combinations with more than one
target business, our initial business combination must be with a target business
or businesses whose collective fair market value is at least equal to 80% of our
net assets (excluding deferred underwriting discounts and commissions payable to
the representative of $800,000, or $920,000 if the underwriters' over-allotment
option is exercised in full) at time of the business combination. As used in
this prospectus, a "target business" shall include one or more operating
businesses with principal operations in the PRC and a "business combination"
shall mean the acquisition by us of such a target business. We have not,
directly or indirectly, contacted any potential target businesses or their
representatives or had any discussions, formal or otherwise, with respect to
effecting any potential business combination with our company. Moreover, we have
not engaged or retained any agent or other representative to identify or locate
any suitable acquisition candidate for us. We have not yet taken any measure,
directly or indirectly, to locate a target business. Our management team is
aware of the restrictions that apply to the identification of, and negotiations
and agreements with, prospective target businesses and the disclosure required
when there is an agreement pertaining to an acquisition or an acquisition is
probable.
We may further seek to acquire a target business that has a fair market
value significantly in excess of 80% of our net assets. In order to do so, we
may seek to raise additional funds through a private offering of debt or equity
securities and/or any other method of financing, although we have not entered
into any such arrangement and do not plan to seek additional financing for that
purpose. However, if we did, such arrangement would only be completed
simultaneously with the completion of the business combination. 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. For more information,
see the section below entitled "Proposed Business - Fair market value of target
business."
Following completion of this offering and until we complete a business
combination, our officers and directors will not receive any compensation.
However, all of these individuals will be reimbursed for any out-of-pocket
expenses incurred in connection with activities on our behalf, such as
identifying potential target businesses and performing due diligence on suitable
business combinations. These individuals may be paid consulting, management or
other fees from target businesses as a result of the business combination, with
any and all amounts being fully disclosed to stockholders, to the extent then
known, in the proxy solicitation materials furnished to our stockholders.
Our offices are located at Shen Zhen China Jia Yue Trading Co., Ltd., Room
921, Block A, Golden Central Tower, Jintian Road, Futian District, Shenzhen,
P.R. China , and our telephone number is 86-755-23993668.
Private Placement
Prior to the date of this prospectus, certain of our directors and
officers, or entities that they control, will purchase from us in a private
placement an aggregate of 2,600,000 warrants for a total purchase price of
$2,600,000, or $1.00 per warrant. Each warrant may be exercised to purchase one
share of our common stock at $7.50 per share and commencing on the later of: (i)
the completion of a business combination with a target business or (ii) one year
from the date of this prospectus. The warrants will expire at 5:00 p.m., New
York City time, on [ ], 2011, four years following the date of this
prospectus, or earlier upon redemption.
4
Of the $2,600,000 gross proceeds from the sale of the 2,600,000 warrants
in the private placement, $2,500,000 will be deposited into the trust account
pending completion of a business combination, with the remaining $100,000
available to us outside the trust for working capital. The private warrants will
contain restrictions prohibiting their transfer until the earlier of the
consummation of a business combination or our dissolution and liquidation and
will be deposited and held in escrow until such time as the restrictions on
transfer expire.
The Offering
Securities offered: 4,000,000 units, at $10.00 per unit, each unit
consisting of:
o one share of common stock; and
o one warrant.
Trading commencement and The units will begin trading on or promptly after
separation of common stock the date of this prospectus. Each of the common
and warrants: stock and warrants may trade separately beginning
on the 10th business day following the earlier to
occur of: (i) the expiration of the underwriters'
over-allotment option or (ii) its exercise in full.
In no event will separate trading of the common
stock and warrants occur until we have filed a
Current Report on Form 8-K with the Securities and
Exchange Commission containing an audited balance
sheet reflecting our receipt of the gross proceeds
of this offering and issuing a press release
announcing when such separate trading will begin.
We will file a Current Report on Form 8-K,
including an audited balance sheet, upon the
completion of this offering, which is anticipated
to take place three business days following the
date of this prospectus. The audited balance sheet
will include proceeds we receive from the exercise
of the over-allotment option, if the over-allotment
option is exercised prior to the filing of the
Current Report on Form 8-K. If the over-allotment
option is exercised following the initial filing of
this Form 8-K, we will file an amendment to that
Form 8-K, or an additional Form 8-K, reporting
information relating to the exercise of the
over-allotment option. Although we will not
distribute copies of the Current Report on Form 8-K
to individual unit holders, the Current Report will
be available on the SEC's website after its filing.
For more information on where you can find a copy
of these and other of our filings, see the section
appearing elsewhere in the prospectus titled "Where
You Can Find Additional Information."
Common stock:
Number outstanding before 1,000,000
the date of this offering:
Number to be outstanding 5,000,000 (does not include 280,000 shares of our
after this offering: common stock included in the representative's unit
purchase option).
Public Warrants:
Number outstanding before None
this offering:
Number to be outstanding 4,000,000 (does not include 280,000 warrants
after this offering: included in the representative's unit purchase
option)
Exercisability: Each public warrant is exercisable for one share of
common stock.
Exercise price: $7.50 per share
5
Exercise period for the The warrants will become exercisable on the later
public warrants included in of:
the units sold in this
offering: o the completion of an initial business
combination with a target business; and
o [ ], 2008, one year following the date of
this prospectus;
provided that a current registration statement is
in effect and a current prospectus is available
with respect to the common stock we will issue upon
exercise of the public warrants. All warrants will
expire at 5:00 p.m., New York City time, on
[_________], 2011, four years following the date of
this prospectus, or earlier upon redemption.
Redemption: When the warrants are exercisable, we may redeem
the outstanding public warrants (including any
warrants issued upon exercise of the
representative's unit purchase option):
o in whole and not in part;
o at a price of $.01 per warrant;
o upon a minimum of 30 days' prior written
notice of redemption; and
o if, and only if, the last sale price of our
common stock equals or exceeds $14.25 per
share for any 20 trading days within a 30
trading day period ending three business
days before we send the notice of
redemption;
provided that a current registration statement is
in effect and a current prospectus is available
with respect to the common stock we will issue upon
exercise of the public warrants.
We have established the above conditions to provide
public warrant holders with a reasonable premium to
the initial warrant exercise price as well as a
reasonable cushion against a negative market
reaction, if any, to our redemption call. The
warrants which we will issue to the representative
upon the exercise of the representative's unit
purchase option are subject to the same redemption
conditions. If the foregoing conditions are
satisfied and we call the public warrants for
redemption, each warrant holder shall then be
entitled to exercise his or her warrant prior to
the date scheduled for redemption; however, we
cannot assure you that the price of the common
stock will exceed the $14.25 trigger price for
redemption or the warrant exercise price after the
redemption call is made.
Private warrants:
Number of private warrants None
outstanding before this
offering and the private
placement:
Number of private warrants 2,600,000
outstanding after this
offering and the private
placement:
Exercisability: Each private warrant is exercisable for one share
of common stock.
Exercise price: $7.50 per share
Exercise period: The 2,600,000 private warrants will become
exercisable on the later of:
the completion of a business combination; or
6
[ ], 2008 one year following the date of this
prospectus.
The private warrants will expire at 5:00 p.m., New
York City time, on [ ], 2011 four years
following the date of this prospectus.
Redemption: We may redeem the private warrants:
o in whole and not in part (and only in
conjunction with the redemption of the
public warrants);
o at a redemption price of $0.01 per warrant
at any time after the warrants become
exercisable;
o upon a minimum of 30 days' prior written
notice of redemption; and
o if, and only if, the closing price of our
common stock equals or exceeds $14.25 per
share for any 20 trading days within a
30-trading day period ending three business
days before we send the notice of
redemption;
provided that a current registration statement is
in effect and a current prospectus is available
with respect to the common stock we will issue upon
exercise of the public warrants.
If the foregoing conditions are satisfied and we
call the private warrants for redemption, each
warrant holder will be entitled to exercise his or
her warrant before the date scheduled for
redemption.
Proposed OTC Bulletin Board
symbols for our:
Units: [_____U]
Common stock: [_______]
Warrants: {______W]
Offering and private Except for $100,000 that we will retain for our
placement proceeds to be working capital requirements, all of the proceeds
held in the trust account: of this offering and the private placement will be
placed in a trust account at Merrill Lynch, Pierce,
Fenner & Smith Incorporated, maintained by American
Stock Transfer & Trust Company, as trustee,
pursuant to an agreement to be signed on the date
of this prospectus. An additional $800,000
($920,000 if the underwriters' over-allotment
option is exercised in full), representing the
deferred underwriting discount payable to Maxim
Group LLC, will be deposited in the trust account
and will be available for distribution to public
stockholders upon our liquidation if we do not
complete a business combination.
We believe that the inclusion in the trust account
of the proceeds from the private placement and the
deferred portion of the underwriting discounts and
commissions is a benefit to our stockholders
because additional proceeds will be available for
distribution to investors if we liquidate the trust
account as part of our dissolution and prior to our
completing an initial business combination.
7
Offering and private
placement proceeds to be
held in the trust account:
- continued Subject to federal bankruptcy and similar laws,
these proceeds will not be released until the
earlier of (i) the completion of a business
combination on the terms described in this
prospectus, or (ii) implementation of our plan of
dissolution and liquidation. Therefore, unless and
until a business combination is completed, the
proceeds held in the trust account will not be
available for our use for any purpose, including
the payment of any expenses related to this
offering or expenses which we may incur related to
the investigation and selection of a target
business or the negotiation of an agreement to
effect the business combination, except that there
can be released to us periodically from the
interest earned on the trust account, net of taxes
on such interest, upon request of our Board, up to
$1,000,000 to fund our working capital requirements
and to pay expenses associated with pursuing a
business combination; provided that if the
over-allotment option is exercised in full, to the
extent the funds in trust are less than $10.00 per
share, the first $240,000 in interest earned on the
amount held in the trust account (net of taxes
payable) will be used to cover such shortfall to
bring the amount held in trust for the benefit of
the public stockholders to an aggregate of
$46,000,000 ($10.00 per share). With this
exception, expenses incurred by us while seeking a
business combination may be paid prior to a
business combination only from the net proceeds of
this offering not held in the trust account
(initially, $100,000 after the payment of the
expenses related to this offering). Although we do
not know the rate of interest to be earned on the
trust account and are unable to predict an exact
amount of time it will take to complete a business
combination, we anticipate that the interest that
will accrue on the trust account, even at an
interest rate of 4% per annum (approximately
$3,120,000 over a period of 24 months if the
underwriters' over-allotment option is not
exercised), during the time it will take to
identify a target and complete an acquisition in
the aggregate amount available to us, will be
sufficient to fund our working capital requirements
and to pay expenses associated with pursuing a
business combination. The net proceeds attributable
to the deferred underwriting discounts and
commissions (and any accrued interest thereon, net
of taxes payable) will be paid to the
representative upon completion of a business
combination on the terms described in this
prospectus.
None of the warrants may be exercised until after
the completion of a business combination and, thus,
after the proceeds of the trust account have been
disbursed. Accordingly, after the completion of a
business combination, the proceeds from the
exercise of the warrants will be paid directly to
us and not placed in the trust account.
We may use a portion of the up to $1,000,000 in
interest earned (net of taxes) we may withdraw from
the trust account to make a deposit, down payment
or fund a "no-shop, standstill" provision with
respect to a particular proposed business
combination. If we were ultimately required to
forfeit those funds (whether as a result of our
breach of the agreement relating to such payment or
otherwise), we may not have a sufficient amount of
working capital available to pay expenses related
to finding a suitable business combination without
securing additional financing. If we were unable to
secure additional financing, we would most likely
fail to complete a business combination in the
allotted time and would be forced to liquidate.
Limited payments to There will be no fees or other cash payments paid
insiders: to our existing stockholders or our officers or
directors prior to or in connection with a business
combination, other than:
8
o payment of $7,500 per month from the closing of
this offering to the earlier of the consummation of
a business combination and our dissolution and
liquidation, to Shen Zhen China Jia Yue Trading
Co., Ltd., an affiliate of our sponsor, for office
space and related services;
o repayment of advances from our sponsor to fund
certain of the expenses associated with this
offering out of the proceeds of this offering; and
o reimbursement of out-of-pocket expenses incurred
by our officers and directors in connection with
certain activities on our behalf, such as
identifying and investigating possible business
targets and business combinations.
Conditions to consummating Our initial business combination must occur with
our initial business one or more target businesses whose collective fair
combination: market value is at least equal to 80% of our net
assets (excluding deferred underwriting discounts
and commissions payable to the representative of
$800,000, or $920,000 if the underwriters'
over-allotment option is exercised in full) at the
time of such business combination.
Stockholders must approve We will seek stockholder approval before we effect
business combination: our initial business combination, even if the
nature of the acquisition would not ordinarily
require stockholder approval under applicable law.
In connection with the vote required for our
initial business combination, our executive
officers and directors have agreed to vote their
respective founding shares in accordance with the
majority of the shares of common stock voted by the
public stockholders. They also have agreed to vote
all shares of common stock they acquire in this
offering or in the aftermarket in favor of a
business combination. As a result, our existing
stockholders will not have any conversion rights
attributable to their shares in the event that a
business combination is approved by a majority of
our public stockholders.
We will proceed with the initial business
combination only if the following conditions are
met: (i) a majority of the shares of common stock
voted by the public stockholders are voted in favor
of the business combination, and (ii) public
stockholders owning less than 35% of the shares
sold in this offering vote against the business
combination and exercise their conversion rights,
as described below. Voting against the business
combination alone will not result in conversion of
a stockholder's shares for a pro rata share of the
trust account. To receive a per share cash payment
of $10.00, which includes $0.20 attributable to
underwriting compensation, a stockholder who voted
against the proposed business combination also must
have exercised his or her conversion rights,
described below. Even if stockholders holding less
than 35% of the shares of common stock included in
the units sold in this offering exercise their
conversion rights, we may be unable to complete a
business combination if, after payment for shares
converted, the fair market value of the business to
be acquired is less than 80% of our net assets
(excluding deferred underwriting discounts and
commissions) at the time of the business
combination, which amount is required as a
condition to the completion of our initial business
combination. In that event, we may be forced to
find additional financing to complete such a
business combination, complete a different business
combination or dissolve and liquidate.
Conversion rights for Public stockholders who properly exercise their
stockholders voting to conversion rights and who vote against a business
reject a business combination which is approved will be entitled to
combination: convert their stock into a per share cash payment
of $10.00 (which includes $0.20 attributable to the
9
deferred underwriting compensation) if the business
combination is completed. Our existing stockholders
will not be able to convert their founding shares
into a cash payment under these circumstances. For
more information, see the section entitled
"Proposed Business--Effecting a Business
Combination--Conversion rights."
Public stockholders who properly convert their
common stock will be paid the per share conversion
price of $10.00 promptly following the completion
of our initial business combination. Since this
amount may be lower than the market price of the
common stock on the date of conversion, there may
be a disincentive on the part of public
stockholders to exercise their conversion rights.
For more information, see "Proposed
Business--Effecting a Business
Combination--Opportunity for stockholder approval
of business combination."
Dissolution and liquidation We have agreed with the trustee to promptly adopt
if no business combination: a plan of dissolution and liquidation and initiate
procedures for our dissolution and liquidation and
the distribution of our assets, including the funds
held in the trust account, if we do not effect a
business combination within 18 months after
completion of this offering (or within 24 months
after the completion of this offering if a letter
of intent, agreement in principle or definitive
agreement has been executed within 18 months after
completion of this offering and the business
combination related thereto has not been completed
within that 18-month period). We cannot provide
investors with assurances of a specific time frame
for the dissolution and liquidation.
Pursuant to our certificate of incorporation, upon
the expiration of such time periods, our purpose
and powers will be limited to acts and activities
relating to dissolving, liquidating and winding up.
As required under Delaware law, we will seek
stockholder approval for any voluntary plan of
dissolution and liquidation. Upon our receipt of
the required approval by our stockholders of our
plan of dissolution and liquidation, we will
liquidate our assets, including the trust account,
and after (i) paying or making reasonable provision
to pay all claims and obligations known to us; (ii)
making such provision as will be reasonably likely
to be sufficient to provide compensation for any
claim against us which is the subject of a pending
action, suit or proceeding to which we are a party;
and (iii) making such provision as will be
reasonably likely to be sufficient to provide
compensation for claims that have not been made
known to us or that have not arisen but that, based
on facts known to us, are likely to arise or to
become known to us within ten years after the date
of dissolution, distribute our remaining assets
solely to our public stockholders.
Our existing stockholders will not have the right
to participate in any liquidating distributions
occurring upon our failure to complete a business
combination with respect to their founding shares,
and have agreed to vote all of their shares in
favor of any such plan of dissolution and
liquidation. In addition, if we liquidate, the
representative has agreed to waive its right to the
$800,000 ($920,000 if the underwriters'
over-allotment option is exercised in full) of
contingent compensation deposited in the trust
account for its benefit.
10
Dissolution and liquidation We estimate that, in the event we liquidate the
if no business combination: trust account, a public stockholder will receive
- continued approximately $10.00 per share, without taking into
account interest earned, net of taxes on the trust
account, out of the funds in the trust account. We
expect that all costs associated with implementing
our plan of dissolution and liquidation, as well as
payments to any creditors, will be funded by the
proceeds of this offering deposited in the trust
account, together with interest earned (net of
taxes) released to us of up to $1,000,000 for
working capital, but if the funds in the trust
account (including interest earned) are not
sufficient for those purposes or to cover our
liabilities and obligations, the amount distributed
to our public stockholders would be less than
$10.00 per share. In the event the over-allotment
option is exercised in full, to the extent the
funds in trust are less than $10.00 per share, the
first $240,000 in interest earned on the amount
held in the trust account (net of taxes payable)
will be used to cover such shortfall to bring the
amount held in trust for the benefit of the public
stockholders to an aggregate of $46,000,000 ($10.00
per share). We estimate that our total costs and
expenses for implementing and completing our
stockholder-approved plan of dissolution and
liquidation will be in the range of $50,000 to
$75,000. This amount includes all costs and
expenses relating to filing of our dissolution in
the State of Delaware, the winding up of our
company and the costs of a proxy statement and
meeting relating to the approval by our
stockholders of our plan of dissolution and
liquidation. We believe that there should be
sufficient funds available from the interest
released to us of up to $1,000,000 for working
capital to fund the $50,000 to $75,000 of expenses,
although we cannot assure you that there will be
sufficient funds for those purposes. Our sponsor
has agreed to indemnify us for these expenses to
the extent there are insufficient funds available
from the proceeds not held in the trust account and
interest released to us from the trust account.
In addition, if we seek approval from our
stockholders to complete a business combination in
the period within 90 days prior to the expiration
of 24 months after the completion of this offering
(assuming that the period in which we need to
complete a business combination has been extended,
as provided in our certificate of incorporation),
the proxy statement related to such business
combination will also seek stockholder approval for
our board's recommended plan of dissolution and
liquidation, in the event our stockholders do not
approve such business combination. If no proxy
statement seeking the approval of our stockholders
for a business combination has been filed 30 days
prior to the date that is 24 months after the
completion of this offering, our board of directors
will, prior to such date, convene, adopt and
recommend to our stockholders a plan of dissolution
and liquidation and, on such date, file a proxy
statement with the Securities and Exchange
Commission, or SEC, seeking stockholder approval
for such plan.
For more information regarding the dissolution and
liquidation procedures and the factors that may
impair our ability to distribute our assets,
including stockholder approval requirements, or
cause distributions to be less than $10.00 per
share, please see the sections entitled "Risk
Factors--Risks associated with our business--If
third parties bring claims against us, the proceeds
held in the trust account could be reduced and the
per share liquidation price received by
stockholders will be less than $10.00 per share,"
"Risk Factors--Risks associated with our
business--Under Delaware law, our dissolution
requires certain approvals by holders of our
outstanding stock, without which we will not be
able to dissolve and liquidate and distribute our
assets to our public stockholders," "Risk
Factors--Risks associated with our business--Our
stockholders may be held liable for claims by third
parties against us to the extent of distributions
received by them," and "Proposed
Business--Effecting a business
combination--Dissolution and liquidation if no
business combination."
11
Escrow of founding shares On the date of this prospectus, all of our existing
and private warrants: stockholders will place their founding shares into
an escrow account maintained by American Stock
Transfer & Trust Company, acting as escrow agent.
These shares will be released from escrow on the
earlier of (i) [____________], 2010, three years
following the date of this prospectus and (ii) one
year following the completion of a business
combination with a target business.
The foregoing restriction is subject to certain
limited exceptions. Individuals holding founding
shares may transfer such securities to an entity
controlled by such individual or to family members
and trusts for estate planning purposes or, upon
death, to an estate or beneficiaries. Entities
holding founding shares may transfer such
securities to persons or entities controlling,
controlled by, or under common control with such
entity. Even if transferred under these
circumstances, the founding shares will remain in
the escrow account. The shares may be released from
escrow prior to the above date only if, following
the initial business combination, we complete a
transaction in which all of the stockholders of the
combined entity have the right to exchange their
shares of common stock for cash, securities or
other property. If we are forced to liquidate, the
founding shares will be cancelled.
The private warrants will be placed in the same
escrow account as the founding shares until we have
completed a business combination and each of the
holders of the private warrants has agreed not to
sell or transfer the private warrants until after
we have completed a business combination, subject
to the same exceptions described above with respect
to the founding shares.
Determination of offering We based the size of this offering on our belief
amount: as to the capital required to facilitate our
combination with one or more viable target
businesses with sufficient scale to operate as a
stand-alone public entity. We also considered the
financial resources of competitors, including other
blank check companies with no limitation on the
industries in which they may acquire businesses and
the amounts such blank check companies were seeking
to raise or have raised in recent public offerings.
We believe that raising the amount described in
this offering will offer us a variety of potential
target businesses. In addition, we also considered
the past experiences of our officers and directors
in operating businesses, and the size of those
businesses. We believe that possessing an equity
base equivalent to the net proceeds of this
offering will provide us the capital to combine
with viable target businesses in the sector within
which we intend to focus our efforts initially.
The determination of the offering price of our
units and the valuation accorded to our company is
more arbitrary than the pricing of securities for
or valuation of operating companies in or related
to the sector within which we intend to focus our
efforts initially.
Risks
In making your decision on whether to invest in our securities, you should
take into account not only the backgrounds of the members of our management
team, but also the special risks we face as a blank check company. In addition,
you should consider the following risks:
12
o this offering is not being conducted in compliance with Rule 419
promulgated under the Securities Act, and, therefore, you will not
be entitled to protections normally afforded to investors in Rule
419 blank check offerings;
o investors' funds will be held in trust for up to 24 months in the
event we are unable to consummate a business combination;
o if third parties bring claims against us, the proceeds held in trust
could be reduced and the per share liquidation price may be less
than $10.00 per share;
o stockholders may be held liable for claims by third parties against
us to the extent of distributions received by them;
o an effective registration statement may not be in place when you
desire to exercise your warrants, thereby potentially causing those
warrants to be practically worthless; and
o our initial security holders' initial equity investment is below
that which is required under the guidelines of the North American
Securities Administrators' Association, Inc.
You should carefully consider these and the other risks which are set forth in
detail in the section entitled "Risk Factors" beginning on page 15 of this
prospectus
Summary Financial Data
The following table summarizes the relevant financial data for our
business and should be read with our financial statements, which are included in
this prospectus. We have not had any operations to date, so only balance sheet
data is presented.
[Enlarge/Download Table]
June 30, 2007 (Unaudited)
--------------------------------
Actual As Adjusted(1)
----------- --------------
Balance Sheet Data:
Working capital (deficit) $ (79,040) $39,317,460
Total assets $ 121,460 $39,317,460
Advances from stockholder $ 104,000(2) $ --
Total liabilities $ 104,000 $ 800,000
Value of common stock which may be converted to cash(3) $ -- $11,759,990
Stockholders' equity $ 17,460 $26,757,470
----------
(1) The "as adjusted" information gives effect to the sale of the units in
this offering and the sale of the private warrants in the private
placement, including the application of the related gross proceeds and the
payment of the estimated remaining costs from such transactions, including
repayment of amounts advanced by our sponsor to fund certain expenses
associated with this offering, and the $800,000 ($920,000 if the
underwriters' over-allotment is exercised in full) being held in the trust
account representing the deferred underwriting compensation.
(2) Represents amounts advanced by a stockholder to fund certain expenses
associated with this offering that will be repaid out of the proceeds of
this offering.
(3) If a business combination is approved and completed, public stockholders
who voted against the business combination will be entitled to convert
their stock into cash at a per share price of $10.00, which includes the
$0.20 deferred underwriting compensation attributable to the share.
However, the ability of stockholders to receive $10.00 per share upon
liquidation is subject to any valid claims by our creditors which are not
covered by amounts held in the trust account or the indemnities provided
by our sponsor. See "Risk Factors - Risks associated with our business -
If third parties bring claims against us, the proceeds held in the trust
account could be reduced and the per share liquidation price received by
stockholders will be less than $10.00 per share and "Proposed Business -
Effecting a business combination - Dissolution and liquidation if no
business combination." In the event the over-allotment option is exercised
in full the first $240,000 in interest earned on the amount held in the
trust account (net of taxes payable) will be used to bring the amount held
in trust for the benefit of the public stockholders to an aggregate of
$46,000,000 ($10.00 per share).
13
Working capital deficit at June 30, 2007 excludes $96,500 of costs related
to this offering and the private placement, which were incurred on or prior to
June 30, 2007. These deferred offering costs have been recorded as a long-term
asset and are reclassified against stockholders' equity in the "as adjusted"
column.
Working capital (as adjusted) and total assets (as adjusted) amounts
include $39,200,000 ($44,840,000 if the underwriters' over-allotment option is
fully exercised) deposited in the trust account and $800,000 ($920,000 if the
underwriters' over-allotment is exercised in full) being held in the trust
account representing the deferred underwriting compensation, which will be
distributed on completion of our initial business combination to: (i) any public
stockholders who exercise their conversion rights; (ii) the representative, in
the amount of $800,000 ($920,000 if the underwriters' over-allotment option is
exercised in full), plus interest net of taxes payable, in payment of deferred
underwriting discounts and commissions; and (iii) us, in the amount remaining in
the trust account following the payment to any public stockholders who exercise
their conversion rights and payments to the underwriters of deferred discounts
and commissions. All those proceeds will be distributed from the trust account
only upon completion of a business combination within the time period described
in this prospectus. If a business combination is not so completed, we have
agreed to promptly adopt a plan of dissolution and liquidation and initiate
procedures for our dissolution and liquidation and the distribution of our
assets to our public stockholders, including the available funds held in the
trust account.
We will not proceed with a business combination if public stockholders
owning 35% or more of the shares sold in this offering vote against the business
combination and exercise their conversion rights. Accordingly, we may effect a
business combination if public stockholders owning up to 1,399,999 shares of
common stock (1,609,999 shares if the over-allotment option is exercised in
full), one share less than 35% of the shares sold in this offering, vote against
the business combination and exercise their conversion rights. If this occurs,
we will convert to cash up to 1,399,999 shares of common stock at a per share
conversion price of $10.00.
Of the $10.00 per share conversion price, $0.20 per share represents a
portion of the deferred underwriting compensation, which the representative has
agreed to forego on a pro-rated basis for each share that is converted.
Accordingly, the total deferred underwriting compensation payable to the
representative in the event of a business combination will be reduced by $0.20
for each share that is converted. The balance, plus interest net of taxes
payable, will be paid from proceeds held in the trust account which are payable
to us upon consummation of the business combination. In order to partially
offset the resulting dilution to non-redeeming stockholders, the existing
stockholders have agreed to surrender to us for cancellation up to 100,000
founding shares on a pro-rated basis (at an assumed value of $10.00 per share).
Conversion payments will be paid from proceeds held in the trust account
which are payable to us upon consummation of the business combination. Even if
stockholders holding less than 35% of the shares of common stock included in the
units sold in this offering exercise their conversion rights, we may be unable
to complete a business combination if, after payment for shares converted, our
net assets (excluding deferred underwriting discounts and commissions) at the
time of the business combination are less than 80% of the fair market value of
the business acquired, which amount is required as a condition to the completion
of our initial business combination. In that event, we may be forced to find
additional financing to complete such a business combination, complete a
different business combination or dissolve and liquidate.
14
Risk Factors
Investing in our securities involves a high degree of risk. You should
carefully consider the risks described below and all of the other information
set forth in this prospectus before deciding to invest in our units. If any of
the events or developments described below occurs, our business, financial
condition or results of operation could be negatively affected. In that case,
the trading price of our securities could decline, and you could lose all or
part of your investment. This prospectus also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of specific factors discussed in this prospectus, including the risks described
below.
Risks Associated with Our Business
We are a development stage company with no operating history and, accordingly,
you will not have any basis on which to evaluate our ability to achieve our
business objective.
We are a recently incorporated development stage company with no operating
results to date. Therefore, our ability to commence operations is dependent upon
obtaining financing through the public offering of our securities. 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 not conducted any discussions and we have no plans,
arrangements or understandings with any prospective acquisition candidates. We
will not generate any revenues until, at the earliest, after the completion of a
business combination. We cannot assure you as to when, or if, a business
combination will occur.
We may not be able to complete a business combination within the required time
frame, in which case, we will be forced to dissolve and liquidate.
We must complete a business combination with one or more operating
businesses with a collective fair market value equal to at least 80% of our net
assets (excluding deferred underwriting discounts and commissions of $800,000,
or $920,000 if the underwriters' over-allotment option is exercised in full) at
the time of the business combination within 18 months after the completion of
this offering (or within 24 months after the completion of this offering if a
letter of intent, agreement in principle or a definitive agreement has been
executed within 18 months after the completion of this offering and the business
combination relating thereto has not yet been completed within that 18-month
period). If we fail to complete a business combination within the required time
frame, we have agreed with the trustee to promptly initiate procedures to
dissolve and liquidate our assets. 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 completion of a business
combination. We do not have any specific merger, capital stock exchange, asset
acquisition, asset purchase or similar business combination transaction under
consideration and we have not had any contacts or discussions with any target
business regarding such a transaction.
The terms on which we may effect a business combination can be expected to
become less favorable as we approach our eighteen and twenty four month
deadlines.
Under our certificate of incorporation, we must adopt a plan of
dissolution and liquidation and initiate procedures for our dissolution and
liquidation and the distribution of our assets, including the funds held in the
trust account, if we do not effect a business combination within 18 months after
completion of this offering (or within 24 months after the completion of this
offering if a letter of intent, agreement in principle or definitive agreement
has been executed within 18 months after completion of this offering and the
business combination related thereto has not been completed within such 18-month
period). We have agreed with the trustee to promptly adopt a plan of dissolution
and liquidation and initiate procedures for our dissolution and liquidation and
the distribution of our assets, including the funds held in the trust account,
upon expiration of the time periods set forth above.
Any entity with which we negotiate, or attempt to negotiate, a business
combination, will, in all likelihood, be aware of these time limitations and can
be expected to negotiate accordingly. In such event, we may not be able to reach
an agreement with any proposed target prior to such period and any agreement
that is reached can be expected to be on terms less favorable to us than if we
did not have the time period restrictions set forth above. Additionally, as the
18 or 24 month time periods draw closer, we may not have the desired amount of
leverage in the event any new information comes to light after entering into
definitive agreements with any proposed target but prior to consummation of a
business transaction.
15
Under Delaware law, the requirements and restrictions relating to this offering
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 relating to this offering that will apply to us until the
completion of a business combination. Specifically, our certificate of
incorporation provides, among other things, that:
o upon completion of this offering, a certain amount of the net
proceeds from the offering shall be placed into the trust account,
together with the proceeds from the private placement, which
proceeds may not be disbursed from the trust account except in
connection with a business combination, upon our dissolution and
liquidation, or as otherwise permitted in our certificate of
incorporation;
o prior to consummating a business combination, we must submit such
business combination to our public stockholders for approval;
o we may complete the business combination if approved by the holders
of a majority of the shares of common stock issued in this offering
and public stockholders owning less than 35% of the shares sold in
this offering exercise their conversion rights;
o if a business combination is approved and completed, public
stockholders who voted against the business combination and who
properly exercise their conversion rights will receive a cash
payment per share of $10.00;
o if a business combination is not completed or a letter of intent, an
agreement in principle or a definitive agreement is not signed
within the time periods specified in this prospectus, then our
corporate purposes and powers will immediately thereupon be limited
to acts and activities relating to dissolving and winding up our
affairs, including liquidation of our assets (including funds in the
trust account), and we will not be able to engage in any other
business activities; and
o we may not complete any merger, capital stock exchange, asset
purchase, stock purchase or similar transaction other than a
business combination that meets the conditions specified in our
certificate of incorporation, including the requirement that the
business combination be with one or more operating businesses whose
fair market value, collectively, is at least equal to 80% of our net
assets (excluding the deferred underwriting discounts and
commissions) at the time of that business combination.
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 stockholders holding a majority of our
outstanding shares. Such an amendment could reduce or eliminate the protection
that such requirements and restrictions afford to our stockholders. However,
under our certificate of incorporation and the terms of the underwriting
agreement, neither we nor our board will propose or seek stockholder approval of
any amendment of these provisions without the approval of stockholders holding
95% of our outstanding shares.
You will not be entitled to protections normally afforded to investors of blank
check companies.
Since the net proceeds of this offering are intended to be used to
complete a business combination with a target business that has not been
identified, we may be deemed to be a "blank check" company under the U.S.
securities laws. However, since we will have net tangible assets in excess of
$5,000,000 upon the successful completion of this offering and will file a
Current Report on Form 8-K with the SEC upon completion of this offering,
including an audited balance sheet demonstrating net tangible assets in excess
of $5,000,000, we are exempt from rules promulgated by the SEC to protect
investors of blank check companies such as Rule 419. Accordingly, investors will
not be afforded the benefits or protections of those rules, such as entitlement
to all the interest earned on the funds deposited into the trust account.
Because we are not subject to Rule 419, our units will be immediately tradable
and we have a longer period of time to complete a business combination in
certain circumstances than would normally be permitted under Rule 419. For a
more detailed comparison of our offering to offerings under Rule 419, see the
section entitled "Proposed Business--Comparison to offerings of blank check
companies".
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Unlike most other blank check offerings, we allow up to 1,399,999 shares,
representing one share less than 35% of the shares sold to our public
stockholders, to exercise their conversion rights. The ability of a larger
number of our stockholders to exercise their conversion rights may not allow us
to consummate the most desirable business combination or optimize our capital
structure.
When we seek stockholder approval of a business combination, we will offer
each public stockholder (but not our existing stockholders with respect to any
shares they owned prior to the consummation of this offering) the right to have
his, her or its shares of common stock converted to cash if the stockholder
votes against the business combination and the business combination is approved
and consummated. Such holder must both vote against such business combination
and then exercise his, her or its conversion rights to receive a cash payment
per share of $10.00, which includes $0.20 attributable to deferred underwriting
compensation. Unlike most other blank check offerings which have a 20%
threshold, we will allow up to 1,399,999 shares, representing one share less
than 35% of the shares sold to our public stockholders, to exercise their
conversion rights. Accordingly, if our business combination requires us to use
substantially all of our cash to pay the purchase price, because we will not
know how many stockholders may exercise such conversion rights, we may either
need to reserve part of the trust account for possible payment upon such
conversion, or we may need to arrange third party financing to help fund our
business combination in case a larger percentage of stockholders exercise their
conversion rights than we expect. In the event that the acquisition involves the
issuance of our stock as consideration, we may be required to issue a higher
percentage of our stock to make up for a shortfall in funds. Raising additional
funds to cover any shortfall may involve dilutive equity financing or incurring
indebtedness at higher than desirable levels. This may limit our ability to
effectuate the most attractive business combination available to us.
Under Delaware law, our dissolution requires certain approvals by holders of our
outstanding stock, without which we will not be able to dissolve and liquidate
and distribute our assets to our public stockholders.
We have agreed with the trustee to promptly adopt a plan of voluntary
dissolution and liquidation and initiate procedures for our dissolution and
liquidation if we do not effect a business combination within 18 months after
completion of this offering (or within 24 months after the completion of this
offering if a letter of intent, agreement in principle or definitive agreement
has been executed within 18 months after completion of this offering and the
business combination related thereto has not been completed within that 18-month
period).
However, pursuant to Delaware law, such dissolution requires certain
affirmative votes of stockholders. Specifically, Delaware law requires either
(i) the affirmative vote by stockholders then holding a majority of our
outstanding common stock approving a resolution by the board of directors to
dissolve the company; or (ii) a written consent by all stockholders in which
case no prior action by directors is necessary. We contemplate that any such
dissolution would be sought by the board of directors' adopting a resolution to
dissolve, followed by a meeting of stockholders. Soliciting the vote of our
stockholders will require the preparation of preliminary and definitive proxy
statements, which are required to be filed with the SEC and could be subject to
its review. This process could take a substantial amount of time ranging from 40
days to several months.
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. Pursuant to the terms of our
certificate of incorporation, our powers following the expiration of the
permitted time periods for consummating a business combination will
automatically be limited to acts and activities relating to dissolving and
winding up our affairs, including liquidation. After the permitted time periods
for consummating a business combination have lapsed, the funds held in the trust
account may not be distributed except upon our dissolution and, unless and until
such approval is obtained from our stockholders, the funds held in the trust
account will not be