Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE
COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
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For
the
fiscal year ended December 31, 2007
or
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
ACT
OF 1934
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For
the
transition period from _______ to _______
Commission
File No.: 001-33354
ALPHA
SECURITY GROUP CORPORATION
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
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03-0561397
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(State
or Other Jurisdiction of
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(I.R.S.
Employer
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Incorporation
or Organization)
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Identification
No.)
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328
West 77th Street, New York, New York 10024
(Address
of Principal Executive Offices) (Zip Code)
Registrant’s
telephone number, including area code: 212-877-1588
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
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Name
of each exchange on which registered
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Common
Stock, $0.0001 par value
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The
American Stock Exchange
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Common
Stock Purchase Warrants
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The
American Stock Exchange
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Units
consisting of one share of Common Stock
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The
American Stock Exchange
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and
one Common Stock Purchase Warrant
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Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act. Yes 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 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 Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. Yes 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 the 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, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer o Accelerated
filer o Non-accelerated
filer o Smaller
reporting company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
State
the
aggregate market value of the voting and non-voting stock held by non-affiliates
of the Issuer: $56,460,000 (based upon the closing price of Issuer’s Common
Stock, $.0001 par value, as of April 11, 2008).
Indicate
the number of shares outstanding of each of the Registrant’s classes of common
stock, as of the latest practicable date: 7,580,000 at April 11,
2008.
Documents
incorporated by reference: None
TABLE
OF CONTENTS
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Page
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ITEM
1.
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BUSINESS
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1
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ITEM
1A.
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RISK
FACTORS
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12
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ITEM
1B.
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UNRESOLVED
STAFF COMMENTS
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30
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ITEM
2.
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PROPERTIES
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30
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ITEM
3.
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LEGAL
PROCEEDINGS
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30
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ITEM
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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30
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ITEM
5.
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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30
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ITEM
6.
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SELECTED
FINANCIAL DATA
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32
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ITEM
7.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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32
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ITEM
7A.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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34 |
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ITEM
8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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35
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ITEM
9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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35
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ITEM
9A.(T) |
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CONTROLS
AND PROCEDURES
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35
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ITEM
9B. |
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OTHER
INFORMATION
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36
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ITEM
10.
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DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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36
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ITEM
11.
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EXECUTIVE
COMPENSATION
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40
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ITEM
12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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41
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ITEM
13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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42
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ITEM
14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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44
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ITEM
15.
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EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
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46
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Introduction
We
were
formed on April 20, 2005 as a Delaware blank check company for the purpose
of
acquiring, through a merger, capital stock exchange, asset acquisition or other
similar business combination, one or more businesses in the U.S. homeland
security or defense industries or a combination thereof.
On
March
28, 2007, we consummated our initial public offering of 6,000,000 units. Each
unit consists of one share of common stock, $.0001 par value per share, and
one
redeemable common stock purchase warrant. Each warrant entitles the holder
to
purchase from us one share of our common stock at an exercise price of $7.50
commencing the later of (i) the completion of a business combination with a
target business or (ii) March 23, 2008, and expires March 23, 2011. Our common
stock and warrants started trading separately as of June 14, 2007. Prior to
the
consummation of our initial public offering, on March 21, 2007, we completed
a
private placement of 3,200,000 warrants to Steven M. Wasserman, Chief Executive
Officer, Chief Financial Officer, President and Co-Chairman of the board of
directors and Constantinos Tsakiris, a former director of the Company and
received gross proceeds of $3,200,000.
The
net
proceeds from the sale of our units and the private placement of warrants after
deducting certain offering expenses of approximately $5,371,569 were
approximately $57,828,431. Because payment of a portion of underwriting and
other costs was deferred, $60,002,831 was placed in the trust account
established in connection with our initial public offering. $1,825,000 in
interest earned on the funds in the trust account, are available to be used
by
us to provide for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative expenses.
We
are
focused on a business combination in the U.S. homeland security or defense
industries, or a combination thereof, which includes, among others, the
following sectors:
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nuclear
and radiological prevention;
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ground
transport security;
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port
and maritime security;
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physical
infrastructure protection;
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emergency
and disaster preparedness and
response;
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bioterrorism
prevention;
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counterterrorism
and law enforcement;
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domestic
and foreign intelligence;
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information
technology solutions, systems engineering and operation, management
and
support services to the U.S. Department of Defense and other U.S.
government agencies; and
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support
services related to defense for the various U.S. national
laboratories.
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Pursuant
to our amended and restated certificate of incorporation, the initial business
combination must be a transaction with one or more operating businesses in
which
the collective fair market value of the target business, at the time of the
business combination, is at least 80% of our net assets at the time of the
business combination. Our initial business combination may involve the
simultaneous acquisition or merger of more than one target
business.
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 cash derived
from the proceeds of our initial public offering and the private placement,
our
capital stock, debt or a combination of these in effecting a business
combination. Although substantially all of the net proceeds from our initial
public offering and the private placement are intended to be generally applied
toward effecting a business combination, the proceeds are not otherwise being
designated for any more specific purposes. We intend to seek a business
combination from among private businesses, corporate divestitures, and portfolio
companies of private equity funds. We believe that the background and track
record of our management team positions us to identify target acquisitions
and
to effect a business combination. In seeking a business combination we will
consider the following sources:
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Private
Companies.
Owners of privately-held companies seeking liquidity or financing
for
additional growth opportunities are often interested in a sale to
or a
merger with a well-capitalized public
company.
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Corporate
Divestitures.
Corporate divestitures continue to represent an opportunity to acquire
operating divisions or subsidiaries from companies that embark on
transformation plans and seek to divest non-core
assets.
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Portfolio
Companies of Private Equity Funds.
Private equity funds generally have finite lives and must seek exit
transactions for their portfolio companies in order to liquidate
and/or
distribute the fund assets to their limited partners following a
predetermined term (which may include
extensions).
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Our
business strategy
Our
management has substantially unrestricted flexibility in identifying and
selecting a prospective target business. While we have not established specific
attributes or criteria for prospective target businesses we believe the
following factors to be important in evaluating prospects. However, we may
decide to enter into a business combination with a target business or businesses
that do not meet some or all of these criteria and guidelines.
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Positive
and reliable cash flow.
We will generally seek to acquire established companies with a history
of
positive and reliable cash flow (earnings before interest, taxes,
depreciation and amortization). We generally intend to avoid business
start-ups and companies that we perceive as having significant technology
risk or speculative business profiles. We also intend to focus on
companies where there are opportunities for substantial growth, either
organically or through acquisitions, and where such growth allows
for
enhanced profit margins through economies of
scale.
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Experienced
management team.
We believe that experienced and seasoned management that has been
tested
and proven through one or more complete business cycles constitutes
an
important determinant for success. Accordingly, we will weigh the
quality
and caliber of management as well as its depth as an important criterion
in our evaluation of target business
opportunities.
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Competitive
position in industry.
We will seek to evaluate the strengths and weaknesses of target
businesses, particularly with respect to their competitive position
in the
marketplace. In seeking to determine the competitive advantages of
a
business, we will consider product quality, customer loyalty, market
share, brand strength, switching costs (both for customers and suppliers),
intellectual property protection and other intangible assets as well
as
the customary financial measures such as growth, profitability and
capitalization. We will favor businesses that are market share leaders
within their respective industries and those that are positioned
for
growth. In addition, in evaluating competitive advantages, we will
seek to
ascertain and confirm their
sustainability.
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Target
industry
Subject
to the limitations that the initial business combination must be a transaction
with one or more operating businesses and in which the collective fair market
value of the target business or businesses is at least 80% of our net assets
at
the time of the business combination, as described below in more detail, we
will
have virtually unrestricted flexibility in identifying and selecting a
prospective acquisition candidate having its primary operations in the U.S.
homeland security or defense industries or a combination thereof.
We
have
not established any other 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. Although our management will endeavor to evaluate the risks
inherent in a particular target business, we cannot assure you that we will
properly ascertain or assess all significant risk factors.
Effect
of government regulations
Our
target business will likely have to comply with and will be affected by laws
and
regulations relating to the formation, administration and performance of federal
government contracts, which affect how it does business with its customers
and
may impose added costs on its business. For example, our target business or
parties with which it does business will likely be subject to the Federal
Acquisition Regulations and all supplements (including those issued by the
Department of Homeland Security and the Department of Defense), which
comprehensively regulate the formation, administration and performance of
federal government contracts, and to the Truth-in-Negotiations Act, which
requires certification and disclosure of cost and pricing data in connection
with contract negotiations. In addition, our target business or parties with
which it does business will likely be subject to industrial security regulations
of Department of Defense and other federal agencies that are designed to
safeguard against foreigners access to classified information. Our target
business may also be liable for systems and services failures and security
breaks with respect to the solutions, services, products, or other applications
it sells to the government. If our target business was to come under foreign
ownership, control or influence, its federal government customers could
terminate or decide not to renew their contracts, and it could impair the
ability of our target business to obtain new contracts. The government may
reform its procurement practices or adopt new contracting rules and regulations,
including cost-accounting standards, that could be costly to satisfy or that
could impair the ability of our target business to obtain new
contracts.
Sources
of target businesses
We
anticipate that target business candidates will be brought to our attention
from
various unaffiliated sources, including investment bankers, attorneys,
accountants, venture capital funds, private equity funds, leveraged buyout
funds, management buyout funds and other members of the financial community,
who
may present solicited or unsolicited proposals. Our executive officer and
directors, as well as their affiliates, may also bring to our attention target
business candidates. In no event, however, will we pay any of our existing
executive officer or directors or any entity with which they are affiliated
any
finder’s fee or other compensation for services rendered to us prior to or in
connection with the consummation of a business combination.
Selection
of a target business and structuring of a business combination
In
evaluating a prospective target business, our management will consider, among
other factors, the following:
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financial
condition and results of operation;
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experience
and skill of management and availability of additional
personnel;
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barriers
to entry into other industries;
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stage
of development of the products, processes or
services;
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degree
of current or potential market acceptance of the products, processes
or
services;
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proprietary
features and degree of intellectual property or other protection
of the
products, processes or services;
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regulatory
environment of the industry; and
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costs
associated with effecting the business
combination.
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These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management, where applicable, and inspection of
facilities, as well as review of financial and other information which will
be
made available to us.
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. We will not
pay
any finders or consulting fees to our existing officer and directors, or any
of
their respective affiliates, for services rendered to or in connection with
a
business combination.
Fair
market value of business combination
The
initial target business or businesses that we acquire must have a collective
fair market value equal to at least 80% of our net assets at the time of such
acquisition (exclusive of the deferred underwriting compensation, including
interest thereon held in the trust account). In the event we acquire less than
100% of the stock of a target business, for purposes of determining whether
the
acquisition is equal to or greater than 80% of our net assets, we will multiply
our post-transaction ownership percentage times 100% of the fair market value
of
the target business as determined by our board of directors. There is no
limitation on our ability to raise funds privately or through loans that would
allow us to acquire a target business or businesses with a fair market value
in
an amount considerably greater than 80% of our net assets at the time of
acquisition. We have not had any preliminary discussions, or made any agreements
or arrangements, with respect to financing arrangements with any third party.
The fair market value of any such business or businesses 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 because generally accepted valuation
standards would not adequately reflect fair market value of the target business,
such as valuation of intangible assets, we will obtain an opinion from an
unaffiliated, independent investment banking firm which is a member of the
National Association of Securities Dealers, Inc. with respect to the
satisfaction of such criteria. However, we will not be required to obtain an
opinion from an investment banking firm as to the fair market value if our
board
of directors independently determines that the target business has sufficient
fair market value. We expect that any such opinion will be included in our
proxy
soliciting materials furnished to our stockholders in connection with a business
combination, and that such independent investment banking firm will be a
consenting expert.
Probable
lack
of business diversification
While
we
may seek to effect business combinations with more than one target business,
our
initial business combination must be with a target business which satisfies
the
minimum valuation standard at the time of such acquisition, as discussed above.
Consequently, it is possible that we will have the ability to effect only a
single business combination. Accordingly, the prospects for our ability to
execute any potential business plan may be entirely dependent upon the future
performance of a single business. Unlike other entities which may have the
resources to complete several business combinations of entities operating in
multiple industries or multiple areas of a single industry, it is probable
that
we will not have the resources to diversify our operations or benefit from
the
possible spreading of risks or offsetting of losses. By consummating a business
combination with only a single entity, our lack of diversification
may:
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subject
us to numerous economic, competitive and regulatory developments,
any or
all of which may have a substantial adverse impact upon the particular
industry in which we may operate subsequent to a business combination;
and
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result
in our dependency upon the development or market acceptance of a
single or
limited number of products, processes or
services.
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Additionally,
since it is possible that our business combination may entail the simultaneous
acquisitions of several assets or operating businesses at the same time and
may
be with different sellers, we will need to convince such sellers to agree that
the purchase of their assets or closely related businesses is contingent upon
the simultaneous closings of the other acquisitions.
Limited
ability to evaluate the target business’
management
Although
we intend to closely scrutinize the management of prospective target businesses
when evaluating the desirability of effecting a business combination, we cannot
assure you that our assessment of the target business’s 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 officers and directors, if any, in the target businesses
cannot presently be stated with any certainty. While it is possible that one
or
more of our officers and directors will remain associated with us in some
capacity 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 officers and directors will have
significant experience or knowledge relating to the operations of the particular
target business acquired.
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 additional
managers will have the requisite skills, knowledge or experience necessary
to
enhance the incumbent management.
Opportunity
for stockholder approval of a
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 is such as
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 Securities Exchange Act of 1934, as amended, which, among
other matters, will include a description of the operations of the target
business and certain required financial information regarding the
business.
In
connection with the vote required for any business combination, all of our
initial stockholders, including all of our officers and directors, have agreed
to vote their respective shares of common stock owned by them immediately prior
to the public offering in accordance with the majority of the shares of common
stock voted by the public stockholders. In addition, our initial stockholders
have agreed to vote any shares of common stock acquired in or following our
initial public offering in favor of the business combination submitted to our
stockholders for approval. Accordingly, they will not be able to exercise
redemption rights with respect to a potential business combination. We will
proceed with the business combination only if a majority of the shares of common
stock voted by the public stockholders are voted in favor of the business
combination and public stockholders owning less than 35% of the shares sold
in
the public offering exercise their redemption rights. Voting against the
business combination alone will not result in redemption of a stockholder’s
shares into a pro rata share of the trust account. Such stockholder must have
also exercised its redemption rights described below.
Redemption
rights
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 redeemed for cash if the stockholder votes against the business
combination and the business combination is approved and completed. The actual
per-share redemption price will be equal to $10.00 per share (plus a portion
of
the interest earned), but net of: (i) taxes payable on interest earned on the
trust account, State of Delaware franchise taxes, repayment of $250,000 of
an
additional officer loan made prior to closing of the public offering by Steven
M. Wasserman (such loan was to be repaid within 90 days of the closing of the
public offering, but has not been repaid through December 31, 2007) and (ii)
up
to $1,825,000 of interest income released to us to fund our working capital
and
dissolution and liquidation expenses if we fail to consummate a business
combination. Any determination of the portion of interest payable to public
stockholders redeeming their common stock shall be made on a pro-rata basis,
in
relation to all the public stockholders through the date of redemption. An
eligible stockholder may request redemption 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 redemption, once made, may be withdrawn at any time up to the date of the
meeting. Public stockholders will not be required to tender their shares in
connection with the exercise of their redemption rights. Public stockholders
who
exercise their redemption rights will receive their redemption amount upon
consummation of a business combination and we will cancel their shares at that
time. It is anticipated that the funds to be distributed to stockholders
entitled to redeem their shares who elect redemption will be distributed
promptly after completion of a business combination. Public stockholders who
redeem their stock into their share of the trust account still have the right
to
exercise the warrants that they received as part of the units. We will not
complete any business combination if public stockholders, owning 35% or more
of
the shares sold in the initial public offering, exercise their redemption
rights. Even if less than 35% of the stockholders exercise their redemption
rights, we may be unable to consummate a business combination if such redemption
leaves us with funds less than a fair market value equal to 80% of the amount
in
the trust account (exclusive of the deferred underwriting compensation,
including interest thereon, held in the trust account) at the time of such
acquisition, which amount is required as a condition to the consummation of
our
initial business combination, and we may be forced to find additional financing
to consummate such a business combination, consummate a different business
combination or liquidate. 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. The securities issued in the private
placement do not have redemption rights. Investors who choose to remain as
stockholders and do not exercise their redemption rights will be effectively
diluted as the number of public shares decreases (thereby decreasing the total
number of shares outstanding) and the number of shares held by our initial
stockholders remains the same.
In
the
event that more than 20% of the public stockholders exercise their redemption
rights, a proportional percentage of the shares of common stock held by our
initial stockholders will automatically, and without any further action required
by us or such stockholders, be forfeited and cancelled upon consummation of
the
business combination. The percentage of shares forfeited will be equal to the
percentage of redemptions above 20% and will be pro rata among the initial
stockholders based on the 1,580,000 shares owned by them. For example, if 20%
or
fewer of the public stockholders exercise their redemption rights, no shares
will be forfeited. If 34.99% of the public stockholders exercise their
redemption rights, 14.99% of the initial stockholder shares will be
forfeited.
Plan
of dissolution and liquidation if no business combination
Pursuant
to the terms of the trust agreement between us and American Stock Transfer
and
Trust Company, and only as part of any plan of dissolution and liquidation
if we
do not complete a business combination within 18 months after the consummation
of the public offering, or within 24 months if the extension criteria described
below have been satisfied, we will dissolve and promptly liquidate and
distribute only to our public stockholders, in proportion to their respective
equity interests, an aggregate sum equal to the amount in the trust account,
inclusive of any interest but net of: (i) taxes payable on interest income
earned on the trust account, State of Delaware franchise taxes, repayment of
$250,000 of an additional officer loan made prior to closing of the public
offering by Steven M. Wasserman (such loan was to be repaid within 90 days
of
the closing of the public offering, but has not been repaid through December
31,
2007) and (ii) up to $1,825,000 of interest income released to us to fund our
working capital and dissolution and liquidation expenses if we fail to
consummate a business combination.
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 amended and restated
certificate of incorporation, our board has agreed to dissolve after the
expiration of those time periods (assuming that there has been no business
combination consummated), and furthermore, our powers following the expiration
of the permitted time periods for consummating a business combination will
automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. 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. Immediately upon the approval by our stockholders of our
plan
of dissolution and liquidation, we will liquidate our trust account to our
public stockholders. Our initial stockholders have waived their rights to
participate in any liquidation of our trust account in connection with our
dissolution with respect to shares of common stock owned by them immediately
prior to the public offering and to vote their shares of common stock in favor
of any plan of dissolution and distribution which we will submit to a vote
of
our stockholders. Upon the liquidation of our trust account as part of our
dissolution, Maxim Group LLC has agreed to waive any right it may have to the
$1,800,000, plus interest thereon, of deferred underwriting discount currently
being held in the trust account. There will be no distribution from the trust
account with respect to our warrants, which will expire worthless. We will
pay
the costs of dissolution from our remaining interest earned on funds in the
trust account that has been released to us to fund our working
capital.
If
we are
unable to consummate a business combination and we expend all of the interest
income on the trust account released to us to fund our working capital, without
taking into account interest, if any, earned on the trust account, the initial
per-share liquidation price to holders of the 6,000,000 shares entitled to
participate in liquidation distributions to be equal to the $10.00 per unit
offering price. The proceeds deposited in the trust account could, however,
become subject to the claims of our creditors which could be prior to the claims
of our public stockholders. In such event, we cannot assure you that the actual
per-share liquidation price will not be less than $10.00, including interest
(net of taxes payable on income earned on the trust account, State of
Delaware franchise taxes and repayment of $250,000 of an additional officer
loan
made prior to closing of the public offering by Steven M. Wasserman (such loan
was to be repaid within 90 days of the closing of the public offering, but
has
not been repaid through December 31, 2007)), due to claims of creditors
(including costs and expenses incurred in connection with our plan of
dissolution and liquidation currently estimated at approximately $50,000 to
$75,000). Although we will seek to have all vendors, target businesses,
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 a waiver or in cases where management
is
unable to find a provider of required services willing to provide the waiver.
In
any event, our management would perform an analysis of the alternatives
available to it and would only enter into an agreement with a third party that
did not execute a waiver if management believed that such third 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.
Steven
M.
Wasserman, our Chief Executive Officer, Chief Financial Officer, President
and
Co-Chairman of our board of directors and Robert B. Blaha, our Chief Management
Officer, Executive Vice President and a director, have agreed pursuant to
agreements with us and Maxim Group LLC that they will indemnify and hold us
harmless against any and all loss, liability, claims, damages and expense to
which we may become subject as a result of any claim by any target business,
prospective target business or any vendor or other entity owed money by us
for
services rendered or products sold to us or the claims of any target business
or
prospective target business, but only to the extent necessary to ensure that
the
amount in the trust account is not reduced by such loss, liability, claim,
damage or expense, and provided that and to the extent that (with the approval
of our Chief Executive Officer and the vote or written consent of no less than
a
majority of our board of directors, including all our non-independent directors)
we have elected to forego obtaining valid and enforceable waivers from such
third parties. Based on information we have obtained from such individuals,
we
currently believe that such persons are of substantial means and capable of
funding a shortfall in our trust account even though we have not asked them
to
reserve for such an eventuality. We cannot assure you, however, that they would
be able to satisfy those obligations. Accordingly, we cannot assure you that
the
actual per-share liquidation value receivable by our public stockholders will
not be less than $10.00 per share, plus interest (net of taxes payable on
interest earned on the trust account, State of Delaware franchise taxes and
repayment of $250,000 of an additional officer loan made prior to closing of
the
public offering by Steven M. Wasserman (such loan was to be repaid within 90
days of the closing of the public offering, but has not been repaid through
December 31, 2007)), due to claims of creditors. In the event of approval of
a
plan of dissolution and liquidation, we would remain obligated to enforce the
above referenced indemnification agreements with our executive officers.
We
believe the likelihood of our executive officers, Mr. Wasserman and Mr. Blaha,
having to indemnify the trust account is limited because we will endeavor to
have all vendors, target businesses and prospective target businesses as well
as
other entities execute agreements with us waiving any right, title, interest
or
claim of any kind in or to monies held in the trust account. The indemnification
provisions are set forth in the insider letters, executed by Mr. Wasserman
and
Mr. Blaha. The insider letters provide that in the event we obtain a valid
and
enforceable waiver of any right, title, interest or claim of any kind in or
to
any monies held in the trust account for the benefit of our stockholders from
a
target business, prospective target business, vendor or other creditor, the
indemnification will not be available. In the event that the board recommends
and our stockholders approve a plan of dissolution and liquidation where it
is
subsequently determined that the reserve for claims and liabilities is
insufficient, stockholders who received a return of funds from the liquidation
of our trust account could be liable for such claims made by creditors. We
also
will have access to any funds released to us to fund working capital
requirements with which to pay any such potential claims (including costs and
expenses incurred in connection with our plan of dissolution and liquidation
currently estimated at approximately $50,000 to $75,000).
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case
is
filed against us which is not dismissed, the funds held in our trust account
will be subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties with priority
over
the claims of our stockholders. To the extent any bankruptcy claims deplete
the
trust account we cannot assure you we will be able to return to our public
stockholders the liquidation amounts due them.
We
will
dissolve and liquidate our trust account to our public stockholders if we do
not
complete a business combination within 18 months after the consummation of
the
public offering (or within 24 months after the consummation of the public
offering if certain extension criteria are satisfied). 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, we will seek stockholder approval to liquidate our trust account to
our
public stockholders as soon as reasonably possible as part of our plan of
dissolution and distribution 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.
Pursuant
to, among other documents, our amended and restated certificate of
incorporation, if we do not complete a business combination within 18 months
after the consummation of the public offering, or within 24 months after the
consummation of the public offering if the extension criteria described below
have been satisfied, our purpose and powers will be limited to dissolving,
liquidating and winding up. We view this obligation to dissolve and liquidate
as
an obligation to our stockholders and neither we nor our board of directors
will
take any action to amend or waive any provision of our certificate of
incorporation to allow us to survive for a longer period of time if it does
not
appear we will be able to consummate a business combination within the foregoing
time periods. Upon dissolution, we will distribute to all of our public
stockholders, in proportion to their respective equity interest, an aggregate
sum equal to the amount in the trust account, inclusive of any interest. Our
initial stockholders have waived their rights to participate in any liquidation
distribution with respect to their initial shares and have also agreed to vote
in favor of any plan of dissolution and liquidation which we will present to
our
stockholders for vote. There will be no distribution from the trust account
with
respect to our warrants which will expire worthless. We will pay the costs
of
dissolution and liquidation from our remaining interest earned on funds in
the
trust account that has been released to us to fund our working
capital.
If
we
enter into either a letter of intent, an agreement in principle or a definitive
agreement to complete a business combination prior to the expiration of 18
months after the consummation of the public offering, but are unable to complete
the business combination within the 18-month period, then we will have an
additional six months in which to complete the business combination contemplated
by the letter of intent, agreement in principle or definitive agreement. If
we
are unable to consummate a transaction within 24 months following the
consummation of the public offering our purpose and powers will be limited
to
dissolving, liquidating and winding up. Upon notice from us, the trustee of
the
trust account will liquidate the investments constituting the trust account
and
will turn over the proceeds to our transfer agent for distribution to our public
stockholders as part of our plan of dissolution and liquidation. Concurrently,
we shall pay, or reserve for payment, from funds not held in trust, our
liabilities and obligations, although we cannot assure you that there will
be
sufficient funds for such purpose.
Our
public stockholders shall be entitled to receive funds from the trust account
only in the event of our liquidation or if the stockholders seek to redeem
their
respective shares into cash upon a business combination which the stockholder
voted against and which is actually completed by us. In no other circumstances
shall a stockholder have any right or interest of any kind to or in the trust
account. Voting against the business combination alone will not result in
redemption of a stockholder’s shares into a pro rata share of the trust account.
Such stockholder must have also exercised the redemption rights described
above.
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. Although we will make liquidating
distributions to our stockholders as soon as reasonably possible as part of
our
plan of dissolution and liquidation, we do not intend to comply with those
procedures. As such, our stockholders could potentially be liable for any claims
to the extent of distributions received by them in a dissolution and any
liability of our stockholders may extend beyond the third anniversary of such
dissolution. Because we 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 of dissolution that will provide
for our payment, based on facts known to us at such time, of (i) all existing
claims, (ii) all pending claims and (iii) all claims that may be potentially
brought against us within the subsequent 10 years. Under Section 281(b), the
payment and provision for payment of these claims and expenses has priority
over
the distribution of funds to stockholders. However, because we are a blank
check
company, rather than an operating company, and our operations will be limited
to
searching for prospective target businesses to acquire, the only likely claims
to arise would be from our vendors (such as accountants, lawyers, investment
bankers, etc.), target businesses or potential target businesses. As described
above, we intend to have all vendors, target businesses and prospective target
businesses execute agreements with us waiving any right, title, interest or
claim of any kind in or to any monies held in the trust account. As a result
of
such waivers, the claims that could be made against us should be significantly
limited and the likelihood that any claim that would result in any liability
extending to the trust account should be minimal.
We
expect
that all costs associated with the implementation and completion of our plan
of
dissolution and liquidation will be funded by any funds not held in our trust
account, although we cannot assure you that there will be sufficient funds
for
such purpose.
We
currently believe that any plan of dissolution and liquidation subsequent to
the
expiration of the 18 and 24 month deadlines would proceed in the following
manner:
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our
board of directors will, consistent with its obligations described
in our
amended and restated certificate of incorporation to dissolve, prior
to
the passing of such deadline, convene and adopt a specific plan of
dissolution and liquidation, which it will then vote to recommend
to our
stockholders; at such time it will also cause to be prepared a preliminary
proxy statement setting out such plan of dissolution and liquidation
and
the board’s recommendation of such
plan;
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upon
such deadline, we would file the preliminary proxy statement with
the
Securities and Exchange Commission;
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if
the Securities and Exchange Commission does not review the preliminary
proxy statement, then 10 days following the passing of such deadline,
we
will mail the proxy statements to our stockholders, and 30 days following
the passing of such deadline we will convene a meeting of our stockholders
at which they will either approve or reject our plan of dissolution
and
liquidation; and
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if
the Securities and Exchange Commission does review the preliminary
proxy
statement, we currently estimate that we will receive their comments
30
days following the passing of such deadline. We will mail the proxy
statements to our stockholders following the conclusion of the comment
and
review process (the length of which we cannot predict with any certainty),
and we will convene a meeting of our stockholders at which they will
either approve or reject our plan of dissolution and
liquidation.
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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 amended and restated
certificate of incorporation, our powers following the expiration of the
permitted time periods for consummating a business combination will
automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. 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. In addition, if we seek approval from our stockholders to
consummate a business combination within 90 days of the expiration of 24 months
(assuming that the period in which we need to consummate a business combination
has been extended, as provided in our amended and restated certificate of
incorporation) from the date of the public offering, the proxy statement related
to such a 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 a 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 which is 24 months from the date of the public
offering, our board 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 seeking stockholder
approval for such plan. Immediately upon the approval by our stockholders of
our
plan of dissolution and liquidation, we will liquidate our trust account to
our
public stockholders.
Competition
for Target Businesses
In
identifying, evaluating and selecting a target business, we may encounter
intense competition from other entities having a business objective similar
to
ours. 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 will be relatively limited when contrasted
with those of many of these competitors. While we believe based upon the
knowledge and experience of our officers and directors that there are numerous
potential target businesses that we could acquire with a fair market value
equal
to at least 80% of our net assets at the time of the acquisition (exclusive
of
Maxim Group LLC’s deferred underwriting compensation, including interest
thereon, held in the trust account) with the net proceeds of the public
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:
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our
obligation to seek stockholder approval of a business combination
or
obtain the necessary financial information to be included in the
proxy
statement to be sent to stockholders in connection with such business
combination may delay or prevent the completion of a
transaction;
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our
obligation to redeem into cash shares of common stock held by our
public
stockholders in certain instances may reduce the resources available
to us
for a business combination;
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our
outstanding warrants and options, and the future dilution they potentially
represent, may not be viewed favorably by certain target businesses;
and
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the
requirement to acquire assets or an operating business that has a
fair
market value equal to at least 80% of our net assets at the time
of the
acquisition (exclusive of Maxim Group LLC’s deferred underwriting
compensation, including interest thereon, held in the trust account)
could
require us to acquire several assets or closely related operating
businesses at the same time, all of which sales would be contingent
on the
closings of the other sales, which could make it more difficult to
consummate the business
combination.
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Additionally,
we face competition from other blank-check companies which have formed recently,
a number of which may consummate a business combination in any industry they
choose. We may therefore be subject to competition from these companies, which
are seeking to consummate a business plan similar to ours and which will, as
a
result, increase demand for privately-held companies to combine with companies
structured similarly to ours. Further, the fact that based on publicly available
information only 47 of approximately 153 such companies since 2003 have
completed a business combination and 24 of such companies have entered into
a
definitive agreement for a business combination may be an indication that there
are only a limited number of attractive target businesses available to such
entities or that many privately-held target businesses may not be inclined
to
enter into business combinations with publicly held blank check companies like
us.
Any
of
these factors may place us at a competitive disadvantage in negotiating a
business combination.
If
we
effect a business combination, there will be, in all likelihood, intense
competition from competitors of the target business. We cannot assure you that,
subsequent to a business combination, we will have the resources or ability
to
compete effectively.
Employees
We
have
two officers, both of whom are also members of our board of directors. These
individuals are not obligated to contribute any specific number of hours per
week and intend to devote only as much time as they deem necessary to our
affairs. The amount of time they will devote in any time period will vary based
on the availability of suitable target businesses to investigate, although
we
expect such individuals to devote an average of approximately ten hours per
week
to our business. We do not intend to have any full time employees prior to
the
consummation of a business combination.
Risks
Associated with Our Business
We
are a development stage company with no operating history and, accordingly,
there is limited
basis on which to evaluate our ability to achieve our business
objective.
We
are a
recently formed development stage company with no operating results to date.
Since we do not have an operating history, there is limited basis upon which
to
evaluate our ability to achieve our business objective, which is to acquire
one
or more domestic or international operating businesses in the U.S. homeland
security or defense industries or a combination thereof. We will not generate
any operating revenues (other than interest income on the proceeds of the public
offering and the private placement) until, at the earliest, after the
consummation of a business combination. We cannot assure you that an initial
business combination will occur.
We
may not be able to consummate a business combination within the required
timeframe, 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 at the time of acquisition (exclusive of Maxim Group LLC’s deferred
underwriting compensation, including interest thereon, held in the trust
account) within 18 months after the consummation of the public offering (or
within 24 months after the consummation of the public offering if a letter
of
intent, agreement in principle or a definitive agreement has been executed
within 18 months after the consummation of the public offering and the business
combination relating thereto has not yet been consummated within such 18 month
period). If we fail to consummate a business combination within the required
time frame, we will be forced to 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 consummation
of a business combination. We
have
contacted a number of potential target businesses and are in the process of
holding discussions with certain of these potential target businesses with
respect to a possible business combination. We
currently expect to enter into a letter of intent with respect to a possible
business combination on or prior to September 28,
2008.
If
we are forced to liquidate before a business combination, our warrants will
expire worthless.
If
we are
unable to complete a business combination and are forced to liquidate the trust
account, there will be no distribution with respect to our outstanding warrants
and, accordingly, the warrants will expire worthless.
You
will not be entitled to protections normally afforded to investors of blank
check companies.
Since
the
net proceeds of our initial public 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 have net tangible assets in excess of $5,000,000 and filed
a
Current Report on Form 8-K with the Securities and Exchange Commission upon
consummation of our initial public offering, including an audited balance sheet
demonstrating this fact, we are exempt from rules promulgated by the Securities
and Exchange Commission to protect investors of blank check companies, such
as
Rule 419.
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 complete
a
business combination.
As
of
February 26, 2008, based upon publicly available information, we have identified
approximately 153 blank check companies that have gone public since 2003. Of
these companies, only 47 have completed a business combination, while 8 have
liquidated or will be liquidating. The remaining approximately 98 blank check
companies have more than $16.0 billion in trust and are seeking to complete
business acquisitions. Of these companies, only 24 have announced that they
have
entered into definitive agreements or letters of intent with respect to
potential business combinations but have not yet consummated business
combinations. In addition, there are 74 blank check companies seeking to raise
approximately $12.8 billion in trust that have filed registration statements
and
will be seeking to complete business combinations. Furthermore, the fact that
only 47 of such companies have completed business combinations and only 24
other
of such companies have entered into definitive agreements or letters of intent
for business combinations, and 8 have liquidated or will be liquidating, may
be
an indication that there are only a limited number of attractive targets
available to such entities or that many targets are not inclined to enter into
a
transaction with a blank check company, and therefore we also may not be able
to
consummate a business combination within the prescribed time period. If we
are
unable to consummate a business combination within the prescribed time period,
our purpose will be limited to dissolving, liquidating and winding
up.
Investors
in our securities are unable to currently ascertain the merits or risks of
the
target business’s operations.
We
seek
to acquire one or more domestic or international operating businesses in the
U.S. homeland security or defense industries or a combination thereof, however,
investors in our securities have no current basis to evaluate the possible
merits or risks of the target business’s operations. To the extent we complete a
business combination with a financially unstable company, an entity in its
development stage and/or an entity subject to unknown or unmanageable
liabilities, 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 target business, 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
prove
to be less favorable to investors in the public offering than a direct
investment, if an opportunity were available, in a target 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 from the
trust account as part of our plan of dissolution and liquidation will be less
than $10.00 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, target businesses,
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 whether such engagement would be in the best interest of our
stockholders if such third party refused to waive such claims.
Examples
of possible instances where we may engage a third party that refused to execute
a waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior
to
those of other consultants that would agree to execute a waiver or in cases
where management is unable to find a provider of required services willing
to
provide the waiver. In any event, our management would perform an analysis
of
the alternatives available to it and would only enter into an agreement with
a
third party that did not execute a waiver if management believed that such
third
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. Accordingly, the proceeds held in
trust could be subject to claims which could take priority over the claims
of
our public stockholders and the per-share liquidation price could be less than
the initial $10.00 per share held in the trust account, plus interest (net
of
any taxes due on such interest, which taxes, if any, shall be paid from the
trust account, franchise taxes payable to the State of Delaware, repayment
of
$250,000 of an additional officer loan made prior to closing of the public
offering by Steven M. Wasserman (such loan was to be repaid within 90 days
of
the closing of the public offering, but has not been repaid through December
31,
2007)), due to claims of such creditors. Steven M. Wasserman, our Chief
Executive Officer, President and Co-Chairman of the board of directors, and
Robert B. Blaha, our Chief Management Officer, Executive Vice President and
a
director, have agreed to indemnify and hold us harmless against liabilities,
claims, damages and expenses to which we may become subject as a result of
any
claim by any target business, prospective target business, vendor or other
entity owed money by us for services rendered or products sold to us or the
claims of any target business or prospective target business, to the extent
necessary to ensure that such claims do not reduce the amount in the trust
account. However, we cannot assure you that Messrs. Wasserman and Blaha will
be
able to satisfy those obligations.
Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case
is
filed against us which is not dismissed, the funds held in our trust account
will be subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties with priority
over
the claims of our stockholders. To the extent any bankruptcy claims deplete
the
trust account we cannot assure you we will be able to return to our public
stockholders the liquidation amounts due them.
Unlike
most other bank check offerings, we allow up to approximately 34.99% of our
public stockholders to exercise their redemption rights. This higher threshold
will make it easier for us to consummate a business combination with which
you
may not agree.
When
we
seek stockholder approval of a business combination, we will offer each public
stockholder (other than our initial stockholders) the right to redeem their
shares of common stock for cash if the stockholder votes against the business
combination and the business combination is approved and consummated. We will
consummate the initial business combination only if the following two 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 35% or more of the shares sold in the public offering do
not
vote against the business combination and exercise their redemption rights.
Many
other blank check companies have a redemption threshold of 20%, which makes
it
more difficult for such companies to consummate their initial business
combination. Because we permit a larger number of stockholders to exercise
their
redemption rights, it will be easier for us to consummate an initial business
combination with a target business which you may believe is not suitable for
us.
Unlike
most other blank check offerings, we allow up to approximately 34.99% of our
public stockholders to exercise their redemption rights. The ability of a larger
number of our stockholders to exercise their redemption rights may require
us to
arrange third party financing in order to consummate a business
combination.
When
we
seek stockholder approval of a business combination, we will offer each public
stockholder (other than our initial stockholders) the right to redeem their
shares of common stock for 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 their
redemption rights to receive $10.00 per share (plus a portion of the interest
income earned on the funds in the trust account), but net of: (i) taxes payable
on interest income earned, State of Delaware franchise taxes, repayment of
$250,000 of an additional officer loan made prior to closing of the public
offering by Steven M. Wasserman (such loan was to be repaid within 90 days
of
the closing of the public offering, but has not been repaid through December
31,
2007), and (ii) up to $1,825,000 of interest income earned on the trust account
released to us to fund our working capital and dissolution and liquidation
expenses if we fail to consummate a business combination. Unlike most other
blank check offerings which have a 20% threshold, we allow up to approximately
34.99% of our public stockholders to exercise their redemption rights and the
business combination to go forward, however, we must still acquire a target
business with a fair market value equal to at least 80% of the amounts held
in
trust for our benefit (determined prior to stockholder redemptions). Even if
less than 35% of the stockholders exercise their redemption rights, we may
be
unable to consummate a business combination if such redemption leaves us with
funds less than a fair market value at least equal to 80% of the amount in
the
trust account (exclusive of Maxim Group LLC’s deferred underwriting
compensation, including interest thereon, held in the trust account) at the
time
of such acquisition, which amount is required as a condition to the consummation
of our initial business combination, and we may be forced to find additional
financing to consummate such a business combination, consummate a different
business combination or liquidate. 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.
We
will dissolve and liquidate if we do not consummate a business combination
and
our stockholders may be held liable for claims by third parties against us
to
the extent of distributions received by them.
Pursuant
to, among other documents, our amended and restated certificate of
incorporation, if we do not complete a business combination within 18 months
after the consummation of the public offering, or within 24 months after the
consummation of the public offering if the extension criteria described below
have been satisfied, our purpose and powers will be limited to dissolving,
liquidating and winding up. We view this obligation to dissolve and liquidate
as
an obligation to our public stockholders and neither we nor our board of
directors will take any action to amend or waive any provision of our
certificate of incorporation to allow us to survive for a longer period of
time
if it does not appear we will be able to consummate a business combination
within the foregoing time periods. Upon dissolution, we will distribute to
all
of our public stockholders, in proportion to their respective equity interest,
an aggregate sum equal to the amount in the trust account, inclusive of any
interest. Our initial stockholders have waived their rights to participate
in
any liquidation distribution with respect to their initial shares and have
agreed to vote in favor of any plan of dissolution and liquidation that we
will
present to our stockholders for vote. There will be no distribution from the
trust account with respect to our warrants which will expire worthless. We
will
pay the costs of our dissolution and liquidation of the trust account from
our
remaining interest earned on funds in the trust account that has been released
to us to fund our working capital.
If
we
enter into either a letter of intent, an agreement in principle or a definitive
agreement to complete a business combination prior to the expiration of 18
months after the consummation of the public offering, but are unable to complete
the business combination within the 18-month period, then we will have an
additional six months in which to complete the business combination contemplated
by the letter of intent, agreement in principle or definitive agreement. If
we
are unable to consummate a transaction within 24 months following the
consummation of the public offering our purpose and powers will be limited
to
dissolving, liquidating and winding up. Upon notice from us, the trustee of
the
trust account will liquidate the investments constituting the trust account
and
will turn over the proceeds to our transfer agent for distribution to our public
stockholders as part of our plan of dissolution and liquidation. Concurrently,
we shall pay, or reserve for payment, from funds not held in trust, our
liabilities and obligations, although we cannot assure you that there will
be
sufficient funds for such purpose.
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 we comply with certain procedures set forth in Section
280 of the Delaware General Corporation Law intended to ensure that we make
reasonable provision for all claims against us, including a 60-day notice period
during which any third-party claims can be brought against us, a 90-day period
during which we may reject any claims brought, and an additional 150-day waiting
period before any liquidating distributions are made to stockholders, any
liability of stockholders with respect to a liquidating distribution is limited
to the lesser of such stockholder’s pro- rata share of the claim or the amount
distributed to the stockholder, and any liability of the stockholder would
be
barred after the third anniversary of the dissolution. However, as stated above,
we will make liquidating distributions to our public stockholders as soon as
reasonably possible as part of our plan of dissolution and liquidation and,
therefore, we do not intend to comply with those procedures. As such, our
stockholders could potentially be liable for any claims to the extent of
distributions received by them in a dissolution and any liability of our
stockholders may extend beyond the third anniversary of such dissolution.
Because we 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 of dissolution that will provide for our payment,
based on facts known to us at such time, of: (i) all existing claims, (ii)
all
pending claims and (iii) all claims that may be potentially brought against
us
within the subsequent 10 years. However, because we are a blank check company,
rather than an operating company, and our operations are limited to searching
for prospective target businesses to acquire, the only likely claims to arise
would be from our vendors (such as accountants, lawyers, investment bankers,
etc.), target businesses or potential target businesses. As described above,
we
intend to have all vendors, target businesses and prospective target businesses
execute agreements with us waiving any right, title, interest or claim of any
kind in or to any monies held in the trust account. As a result of seeking
those
waivers, the claims that could be made against us should be significantly
limited and the likelihood that any claim that would result in any liability
extending to the trust should be minimal. Our Chief Executive Officer, President
and Co-Chairman of our board of directors and our Chief Management Officer,
Executive Vice President and a director have agreed to indemnify and hold us
harmless against liabilities, claims, damages and expenses to which we may
become subject as a result of any claim by any target business, prospective
target business, vendor or other entity owed money by us for services rendered
or products sold to us or the claims of any target business or prospective
target business, to the extent necessary to protect the amounts held in the
trust account. In the event that our board recommends and our stockholders
approve a plan of dissolution and liquidation where it is subsequently
determined that the reserve for claims and liabilities is insufficient,
stockholders who received a return of funds from the liquidation of our trust
account could be liable for such amounts to creditors. In addition, in the
event
of approval of a plan of dissolution and liquidation, we would remain obligated
to enforce the above referenced indemnification agreements with our executive
officers.
Our
public stockholders will be entitled to receive funds from the trust account
only in the event of our dissolution and liquidation or if they seek to redeem
their respective shares into cash upon a business combination that the
stockholder voted against and which is completed by us. In no other
circumstances will a stockholder have any right or interest of any kind to
or in
the trust account.
If
we do not consummate a business combination and dissolve, payments from the
trust account to our public stockholders may be
delayed.
We
currently believe that any plan of dissolution and liquidation subsequent to
the
expiration of the 18 and 24 month deadlines would proceed in approximately
the
following manner:
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our
board of directors will, consistent with its obligations described
in our
amended and restated certificate of incorporation to dissolve, prior
to
the passing of such deadline, convene and adopt a specific plan of
dissolution and liquidation, which it will then vote to recommend
to our
stockholders; at such time it will also cause to be prepared a preliminary
proxy statement setting out such plan of dissolution and liquidation
as
well as the board’s recommendation of such
plan;
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upon
such deadline, we would file our preliminary proxy statement with
the
Securities and Exchange Commission;
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if
the Securities and Exchange Commission does not review the preliminary
proxy statement, then, 10 days following the passing of such deadline,
we
will mail the proxy statement 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
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if
the Securities and Exchange Commission 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 statement
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.
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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 amended and restated
certificate of incorporation, our powers following the expiration of the
permitted time periods for consummating a business combination will
automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. 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
may choose to redeem our outstanding public warrants at a time that is
disadvantageous to our warrant holders.
Subject
to there being a current prospectus under the Securities Act of 1933, as
amended, with respect to the shares of common stock issuable upon exercise
of
the warrants, we may redeem the public warrants issued as a part of our units
at
any time after the warrants become exercisable, in whole and not in part, at
a
price of $.01 per warrant, upon a minimum of 30 days prior written notice of
redemption, if and only if, the last sales price of our common stock 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. Redemption
of the public warrants could force the warrant holders: (i) to exercise the
warrants and pay the exercise price therefore at a time when it may be
disadvantageous for the holders to do so, (ii) to sell the warrants at the
then
current market price when they might otherwise wish to hold the warrants, or
(iii) to accept the nominal redemption price which, at the time the warrants
are
called for redemption, is likely to be substantially less than the market value
of the warrants.
Although
we are required to use our best efforts to have an effective registration
statement covering the issuance of the shares underlying the public warrants
at
the time that our warrant holders exercise their warrants, we cannot guarantee
that a registration statement will be effective, in which case our public
warrant holders may not be able to exercise our
warrants.
Holders
of our public warrants issued in the public offering as part of our units will
be able to exercise the warrants only if: (i) a current registration statement
under the Securities Act of 1933, as amended, relating to the shares of our
common stock underlying the warrants is then effective and current and a
prospectus is available for use by our public stockholders and (ii) such shares
are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of warrants reside.
Although we have undertaken in the warrant agreement, and therefore have a
contractual obligation, to use our best efforts to maintain a current
registration statement covering the shares underlying the public warrants
following completion of the public offering to the extent required by federal
securities laws, and we intend to make every effort to comply with such
undertaking, we cannot assure that we will be able to do so. If we are unable
to
maintain the effectiveness of such registration statement until the expiration
of the public warrants and therefore are unable to deliver registered shares,
the warrants may become worthless. In addition, we have agreed to use our
reasonable efforts to register the shares underlying the public warrants under
the blue sky laws of the states of residence of the exercising warrantholders,
to the extent an exemption is not available. The value of the public warrants
may be greatly reduced if a registration statement covering the shares issuable
upon the exercise of the warrants is not effective and current and a prospectus
is not available for use by the holders of the public warrants or if the
securities are not qualified, or exempt from qualification, in the states in
which the holders of warrants reside. Holders of the public warrants who reside
in jurisdictions in which the shares underlying the warrants are not qualified
and in which there is no exemption will be unable to exercise their warrants
and
would either have to sell their warrants in the open market or allow them to
expire unexercised. If the public warrants become worthless, the price paid
by
holders for their units will thereafter relate solely to the common stock
underlying the units. If and when the public warrants become redeemable by
us,
we may exercise our redemption right even if we are unable to qualify the
underlying securities for sale under all applicable state securities
laws.
Because
the warrants sold in the private placement were originally issued pursuant
to an
exemption from registration requirements under the federal securities laws,
the
holders of those warrants will be able to exercise their warrants even if,
at
the time of exercise, a prospectus relating to the common stock issuable upon
exercise of such warrants is not current. As a result, the holders of the
warrants purchased in the private placement will not have any restrictions
with
respect to the exercise of their warrants. As described above, the holders
of
the public warrants purchased in the public offering will not be able to
exercise them unless we have a current registration statement covering the
shares issuable upon their exercise.
In
no
event will the registered holders of a warrant be entitled to receive a net-cash
settlement, stock, or other consideration in lieu of physical settlement in
shares of our common stock.
We
may issue shares of our capital stock, including convertible 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 30,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. Currently, there are
13,010,000 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation for the issuance of shares upon full
exercise of our outstanding warrants and the purchase option issued to the
representative of the underwriters) and all of the 1,000,000 shares of preferred
stock available for issuance. Although we have no commitments as of the date
of
the public offering to issue our securities, we may issue a substantial number
of additional shares of our common stock or preferred stock, or a combination
of
common and preferred stock, to complete a business combination. The issuance
of
additional shares of our common stock or any number of shares of our preferred
stock:
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may
significantly reduce the equity interest of investors in the public
offering;
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will
likely cause a change in control if a substantial number of our shares
of
common stock are issued, which may affect, among other things, our
ability
to use our net operating loss carry forwards, if any, and most likely
also
result in the resignation or removal of our present officers and
directors; and
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may
adversely affect prevailing market prices for our common
stock.
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We
may issue notes or other debt securities, or otherwise incur substantial debt,
to complete a business combination, which may adversely affect our financial
condition.
Although
we have no commitments as of the date of the public offering to issue any notes
or other debt securities, or to otherwise incur outstanding debt, we may choose
to issue a substantial amount of notes or other debt securities, or opt to
incur
substantial debt, or a combination of both, to complete a business combination.
If we finance the purchase of assets or operations through the issuance of
debt
securities, it could result in:
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default
and foreclosure on our assets if our operating revenues after a business
combination were insufficient to pay our debt
obligations;
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acceleration
of our obligations to repay the indebtedness even if we have made
all
principal and interest payments when due, if the debt security contained
covenants that required the maintenance of certain financial ratios
or
reserves and any such covenant was breached without a waiver or
renegotiation of that covenant;
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our
immediate payment of all principal and accrued interest, if any,
to the
extent the debt security was payable on demand;
and
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our
inability to obtain additional financing, if necessary, if the debt
security contained covenants restricting our ability to obtain additional
financing while such security was
outstanding.
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Because
of our limited resources and the significant competition for business
combination opportunities, we may not be able to consummate an attractive
business combination.
In
addition to other similarly situated blank check companies, we expect to
encounter intense competition from other entities having a business objective
similar to ours, including private equity and venture capital funds, leveraged
buyout funds and operating businesses 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 net proceeds of the public
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 certain
target businesses. Further:
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our
obligation to seek stockholder approval of a business combination
may
delay the consummation of a
transaction;
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our
obligation to redeem up to 35% of the publicly-held shares of our
common
stock into cash for dissenting shareholders may reduce the resources
available for a business combination;
and
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our
outstanding warrants and the purchase option granted to the representative
of the underwriters, and the future dilution they potentially represent,
may not be viewed favorably by certain target
businesses.
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Any
of
these obligations may place us at a competitive disadvantage in successfully
negotiating and completing a business combination.
In
addition, because it is possible that our business combination may entail the
contemporaneous acquisition of several operating businesses and may be with
several different sellers, we will need to convince such sellers to agree that
the purchase of their businesses is contingent upon the simultaneous closings
of
the other acquisitions.
Our
ability to effect a business combination and to execute any potential business
plan afterwards will be largely dependent upon the efforts of our key personnel,
some of whom may join us following a business combination and may be unfamiliar
with the requirements of operating a public company.
Our
ability to effect a business combination will be totally dependent upon the
efforts of our key personnel. The future role of our key personnel following
a
business combination, however, cannot presently be fully ascertained.
Specifically, the members of our current management are not obligated to remain
with us subsequent to a business combination, and we cannot assure you that
the
resignation or retention of our current management will be included as a term
or
condition in any agreement with respect to a business combination. Although
our
management and other key personnel, particularly our Chief Executive Officer
and
President and our Chief Management Officer and Executive Vice President, may
remain associated with us following a business combination, we may employ other
personnel following the business combination. While we intend to closely
scrutinize any additional individuals we employ after a business combination,
we
cannot assure you that our assessment of those individuals will prove to be
correct. Moreover, our current management will only be able to remain with
the
combined company after the consummation of a business combination if they are
able to negotiate such as part of the business combination. If we acquired
a
target business in an all-cash transaction, it would be more likely that current
members of management 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
business were to control the combined company following a business combination,
it may be less likely that management 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. In making the
determination as to whether current management should remain with us following
the business combination, management will analyze the experience and skill
set
of the target business’s management and negotiate as part of the business
combination that certain members of current management remain if it is believed
that it is in the best interests of the combined company post-business
combination.
If
management were to negotiate to be retained by our company post-business
combination as a condition to any potential business combination, such
negotiations may result in a conflict of interest.
Our
current management will only be able to remain with the combined company after
the consummation of a business combination if they are able to negotiate
mutually agreeable employment terms as part of any such combination, which
terms
would be disclosed to stockholders in any proxy statement relating to such
transaction. The financial interest of our officers and directors could
influence their motivation in selecting a target business and thus, there may
be
a conflict of interest when determining whether a particular business
combination is in the stockholders’ best interest.
Our
officers and directors will allocate their time to other businesses, thereby
causing conflicts of interest in their determination as to how much time to
devote to our affairs. This could have a negative impact on our ability to
consummate a business combination.
Our
officers and directors are not required to, and will not, commit their full
time
to our affairs, which may result in a conflict of interest in allocating their
time between our operations and other businesses. This could have a negative
impact on our ability to consummate a business combination. We do not intend
to
have any full time employees prior to the consummation of a business
combination. Each of our executive officers are engaged in several other
business endeavors and are not obligated to contribute any specific number
of
hours per week to our affairs. For example, Steven M. Wasserman, our Chief
Executive Officer, Chief Financial Officer, President and Co-Chairman of our
board of directors, currently serves as managing partner of AMT Ventures LLC,
an
entity primarily engaged in public and private equity and debt investments
on a
principal basis as well as managing partner of AMT Capital Partners LLC, an
investment banking advisory firm. In addition, Robert B. Blaha, our Chief
Management Officer and Executive Vice President, currently serves as president
of Human Capital Resources, a management consulting company and vice chairman
of
Integrity Bank & Trust, a commercial bank. If our officers’ and directors’
other business affairs require them to devote substantial amounts of time to
such affairs in excess of their current commitment levels, it could limit their
ability to devote time to our affairs and could have a negative impact on our
ability to consummate a business combination. We cannot assure you that these
conflicts will be resolved in our favor.
Our
officers and directors are currently 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
which entity a particular business opportunity should be presented to.
Our
officers and directors are currently, 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. Additionally, our
officers and directors may become aware of business opportunities which may
be
appropriate for presentation to us as well as the other entities with which
they
are or may be affiliated. Further, certain of our officers and directors are
currently involved in other businesses that are similar to the business
activities that we intend to conduct following a business combination. Due
to
these existing or potential affiliations, they have prior fiduciary obligations
to present potential business opportunities to those entities prior to
presenting them to us which could cause additional conflicts of interest.
Accordingly, they may have conflicts of interest in determining to which entity
a particular business opportunity should be presented. We cannot assure you
that
these conflicts will be resolved in our favor.
If
we seek to effect a business combination with an entity that is directly or
indirectly affiliated with one or more of our existing stockholders, conflicts
of interest could arise.
Our
initial stockholders either currently have or may in the future have
affiliations with companies in the homeland security and/or defense industries.
If we were to seek a business combination with a target business with which
one
or more of our initial stockholders may be affiliated, conflicts of interest
could arise in connection with negotiating the terms of and completing the
business combination. Conflicts that may arise may not be resolved in our
favor.
Since
our officers and directors own shares of our common stock and warrants which
will not participate in the liquidation of the trust account distributions,
they
may have a conflict of interest in determining whether a particular target
business is appropriate for a business combination.
All
of
our officers and directors own shares of common stock in our company which
were
issued prior to the public offering, but have waived their right to receive
distributions with respect to those shares upon the liquidation of the trust
account if we are unable to complete a business combination. Additionally,
Steven M. Wasserman, our Chief Executive Officer, Chief Financial Officer,
President and Co-Chairman of our board of directors and Constantinos Tsakiris,
a
former director, purchased an aggregate of $3,200,000 of warrants directly
from
us in a private placement transaction consummated on March 21, 2007. These
warrants will not be exercisable until the later of: (i) the consummation of
a
business combination or (ii) one year from March 23, 2007. The shares and
warrants owned by our directors 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 in a timely manner. Consequently,
our officers’ and directors’ discretion in identifying and selecting a suitable
target business may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular business combination are
appropriate and in our stockholders’ best interest.
Our
initial stockholders will not receive reimbursement for any out-of-pocket
expenses incurred by them to the extent that such expenses exceed the amount
not
held in the trust account unless the business combination is consummated and
therefore they may have a conflict of interest.
Our
initial stockholders will not receive reimbursement for any out-of-pocket
expenses incurred by them to the extent that such expenses exceed the amount
not
held in the trust account unless the business combination is consummated and
there are sufficient funds available for reimbursement after such consummation.
The financial interest of such persons could influence their motivation in
selecting a target business and thus, there may be a conflict of interest when
determining whether a particular business combination is in the stockholders’
best interest.
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.
If
at any
time we have net tangible assets of $5,000,000 or less and our common stock
has
a market price per share of less than $5.00, transactions in our common stock
may be subject to the “penny stock” rules promulgated under the Securities
Exchange Act of 1934, as amended. Under these rules, broker-dealers who
recommend such securities to persons other than institutional accredited
investors must:
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make
a special written suitability determination for the
purchaser;
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receive
the purchaser’s written agreement to a transaction prior to
sale;
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provide
the purchaser with risk disclosure documents which identify certain
risks
associated with investing in “penny stocks” and which describe the market
for these “penny stocks” as well as a purchaser’s legal remedies;
and
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obtain
a signed and dated acknowledgment from the purchaser demonstrating
that
the purchaser has actually received the required risk disclosure
document
before a transaction in a “penny stock” can be
completed.
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If
our
common stock becomes subject to these rules, broker-dealers may find it
difficult to effectuate customer transactions and trading activity in our
securities may be adversely affected. As a result, the market price of our
securities might be depressed, and you might find it more difficult to sell
our
securities.
It
is probable that we will only be able to complete one business combination,
which will cause us to be solely dependent on a single
business.
The
net
proceeds from the public offering and the private placement provided us with
$57,828,431 which we may use to complete a business combination. Our initial
business combination must be with a business or businesses with a collective
fair market value of at least 80% of our net assets at the time of such
acquisition (exclusive of Maxim Group LLC’s deferred underwriting compensation,
including interest thereon, held in the trust account). We may further seek
to
acquire a target business that has a fair market value significantly in excess
of 80% of our net assets. Although as of the date of our initial public offering
prospectus we have not engaged or retained, had any discussions with, or entered
into any agreements with, any third party regarding any such potential financing
transactions, we could seek to fund such a business combination by raising
additional funds through the sale of our securities or through loan
arrangements. However, if we were to seek such additional funds, any such
arrangement would likely only be consummated simultaneously with our
consummation of a business combination. Consequently, it is probable that we
will have the ability to complete only a single business combination, although
this may entail the simultaneous acquisitions of several assets or closely
related operating businesses at the same time. Accordingly, the prospects for
our ability to effect our business strategy may be:
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solely
dependent upon the performance of a single business; or
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dependent
upon the development or market acceptance of a single or limited
number of
products, processes or services.
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In
this
case, we will not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities
which
may have the resources to complete several business combinations in different
industries or different segments of a single industry. Further, our prospects
for success are likely to be entirely dependent upon the future performance
of
the initial target business or businesses we acquire. Furthermore, it is
possible that our business combination may entail the simultaneous acquisition
of several assets or operating businesses at the same time and may be with
different sellers, in which case we will need to convince such sellers to agree
that the purchase of their assets or businesses is contingent upon the
simultaneous closings of the other acquisitions.
We
may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target
business, which could compel us to restructure the transaction or abandon a
particular business combination.
Although
we believe, based upon the knowledge and experience of our management and board
of directors in the homeland security and defense industries, that the net
proceeds of the public offering and the private placement and the interest
earned on the trust account will be sufficient to allow us to consummate a
business combination, in as much as we have not yet selected or approached
any
prospective target business, we cannot ascertain the capital requirements for
any particular transaction. Furthermore, our management and board of directors
have no experience with blank check companies or the search for and consummation
of a business combination through a blank check company. If the net proceeds
of
the public offering and the private placement and the interest earned on the
trust account prove to be insufficient, either because of the size of the
business combination or the depletion of the available net proceeds in searching
for a target business, or because we become obligated to redeem into cash a
significant number of shares from dissenting stockholders, we will be required
to seek additional financing. We cannot assure you that such financing would
be
available on acceptable terms, if at all. To the extent that additional
financing proves to be unavailable when needed to consummate a particular
business combination, we would be compelled to restructure the transaction
or
abandon that particular business combination and seek an alternative target
business candidate. In addition, it is possible that we could use a portion
of
the funds not in the trust account to make a deposit, down payment or fund
a
“no-shop” provision with respect to a proposed business combination. In the
event that we were ultimately required to forfeit such funds (whether as a
result of our breach of the agreement relating to such payment or otherwise),
without securing additional financing we may not have a sufficient amount of
working capital available outside of the trust account to conduct due diligence
and pay other expenses related to finding a suitable business combination.
If we
were unable to secure additional financing, we would most likely fail to
consummate a business combination in the allotted time and would dissolve and
liquidate the trust account as part of our plan of dissolution and liquidation,
resulting in a loss of a portion of your investment. In addition, if we
consummate a business combination, we may require additional financing to fund
the operations or growth of the target business. The failure to secure
additional financing could have a material adverse effect on the continued
development or growth of the target business. None of our officers, directors,
stockholders or special advisor is required to provide any financing to us
in
connection with or after a business combination.
We
will depend upon interest earned on the trust account to fund our search for
a
target company and otherwise fulfill our business
purposes.
Before
we
complete a business combination, we may withdraw up to $1,825,000 of the
interest income earned on the funds in the trust account, after provision for
taxes, including State of Delaware franchise taxes, and repayment of $250,000
of
an additional officer loan made prior to closing of the public offering by
Steven M. Wasserman (such loan was to be repaid within 90 days of the closing
of
the public offering, but has not been repaid through December 31, 2007), to
fund
our working capital needs and expenses, including expenses associated with
the
pursuit of a business combination and, if necessary, with our potential
dissolution and liquidation. We estimate that the 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 related to the filing of our articles of dissolution, the
winding-up of our company and the costs of a proxy statement and meeting related
to the approval by our stockholders of our plan of dissolution and liquidation.
We have agreed with the representative of the underwriters that we may withdraw
interest monthly (or weekly during the first month after the offering). We
will
depend upon sufficient interest being earned on the proceeds held in the trust
account to provide us with the working capital we will need to engage in these
activities. If interest rates were to decline substantially, we may not have
sufficient funds available to fulfill our business purpose. In such event,
we
would need to find other sources of funds, which may not be available on
favorable terms, if at all, or be forced to liquidate.
Our
initial stockholders, including our officers and directors, control a
substantial interest in us and thus may influence certain actions requiring
stockholder vote.
Our
initial stockholders (including all of our officers and directors) collectively
beneficially own 18.9% of our issued and outstanding shares of common stock,
which could permit them to effectively influence the outcome of all matters
requiring approval by our stockholders at such time, including the approval
of
our initial business combination, and, following such business combination,
the
election of directors and approval of significant corporate
transactions.
In
connection with the vote required for any business combination, all of our
initial stockholders, including all of our officers and directors, have agreed
to vote the shares of common stock owned by them immediately before the public
offering in accordance with the majority of the shares of common stock voted
by
the public stockholders. In addition, our initial stockholders have agreed
to
vote any shares of common stock acquired in or following the public offering
in
favor of the business combination submitted to our stockholders for approval.
Our
board
of directors is divided into two classes, each of which will generally serve
for
a term of two years with only one class of directors being elected in each
year.
It is unlikely that there will be an annual meeting of stockholders to elect
new
directors prior to the consummation of a business combination, in which case
all
of the current directors will continue in office at least until the consummation
of the business combination. If there is an annual meeting, as a consequence
of
our “staggered” board of directors, initially only one-half of the board of
directors will be considered for election and our initial stockholders, because
of their ownership position, will have considerable influence regarding the
outcome. Accordingly, our initial stockholders will likely continue to exert
control at least until the consummation of a business combination. In addition,
our initial stockholders and their affiliates and relatives are not prohibited
from purchasing units in the public offering or in the aftermarket. If they
do,
we cannot assure you that our initial stockholders will not have considerable
influence upon the vote in connection with a business combination.
Our
outstanding warrants may have an adverse effect on the market price of our
common stock and make it more difficult to effect a business
combination.
In
connection with the public offering, we issued warrants to purchase 6,000,000
shares of common stock and, in our private placement, issued warrants to
purchase an aggregate of 3,200,000 shares of our common stock to Steven M.
Wasserman, Chief Executive Officer, Chief Financial Officer, President and
Co-Chairman of the board of directors and Constantinos Tsakiris, a former
director. In addition, we have agreed to sell to the representative of the
underwriters an option to purchase up to a total of 105,000 units that, if
exercised, would result in the issuance of warrants to purchase an additional
105,000 shares of common stock. 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 (to the extent
the
warrants are exercised on a “cashless exercise” basis the number of shares to be
issued by us will be reduced) 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 the 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 will experience dilution to your holdings.
If
our initial stockholders and the holders of our private placement warrants
exercise their registration rights, it may have an adverse effect on the market
price of our common stock and the existence of these rights may make it more
difficult to effect a business combination.
Our
initial stockholders are entitled to require us to register the resale of their
shares of common stock at any time after the date on which their shares are
released from escrow, which, except in limited circumstances including approval
by our public stockholders, will not be before one year from the date of
consummation of a business combination. The holders of our private placement
warrants are entitled to require us to register the shares of our common stock
issuable upon exercise of the warrants at any time after the date on which
we
publicly announce entering into a letter of intent with respect to a business
combination, although such securities remain subject to a lock-up agreement
and
cannot be transferred or exercised, as the case may be, until the consummation
of a business combination. If our initial stockholders, including the holders
of
our private placement warrants, exercise their registration rights with respect
to all of their shares of common stock, then there will be an additional
4,780,000 shares of common stock eligible for trading in the public market.
The
presence of this additional number of shares of common stock eligible for
trading in the public market may have an adverse effect on the market price
of
our common stock. In addition, the existence of these rights may make it more
difficult to effectuate a business combination or increase the cost of the
target business, as the stockholders of the target business may be discouraged
from entering into a business combination with us or may request a higher price
for their securities as a result of these registration rights and the potential
future effect their exercise may have on the trading market for our common
stock.
The
American Stock Exchange may delist our securities, which could limit investors’
ability to make transactions in our securities and subject us to additional
trading restrictions.
Our
securities are listed on the American Stock Exchange. We cannot assure you
that
we will be able to maintain the listing. Additionally, in connection with our
business combination, it is likely that the American Stock Exchange may require
us to file a new initial listing application and meet its initial listing
requirements as opposed to its more lenient continued listing requirements.
If
we are unable to meet those stricter listing requirements, our securities would
not be listed on the American Stock Exchange and might not be listed on any
securities exchange.
If
we are
unable to maintain the listing of our securities on the American Stock Exchange,
we could face significant material adverse consequences including:
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decreased
trading liquidity and a limited availability of market quotations
for our
securities;
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a
determination that our common stock is a “penny stock,” with the
consequences described in “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”;
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a
limited amount of news and analyst coverage for our company; and
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a
decreased ability to issue additional securities or obtain additional
financing.
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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.
If
we are
deemed to be an investment company under the Investment Company Act of 1940,
as
amended, our activities may be restricted which, among other problems, may
make
it difficult for us to complete a business combination. Such restrictions
include:
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restrictions
on the nature of our investments; and
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restrictions
on the issuance of our securities.
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In
addition, we may have imposed upon us burdensome requirements,
including:
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registration
and regulation as an investment
company;
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adoption
of a specific form of corporate structure; and
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reporting,
record keeping, voting, proxy and disclosure requirements and other
rules
and regulations.
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We
do not
believe that our anticipated principal activities will subject us to the
Investment Company Act of 1940, as amended. The proceeds held in trust will
be
invested only in United States “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
promulgated under the Investment Company Act of 1940, as amended, so that we
are
not deemed to be an investment company under the Investment Company Act, as
amended. By restricting the investment of the proceeds 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, as amended. If we were
deemed to be subject to such act, compliance with these additional regulatory
burdens would require additional expense that we have not allotted for.
Our
directors, including those serving on our audit committee, may not be considered
“independent”
under the policies of the North American Securities Administrators Association,
Inc.
Under
the
policies of the North American Securities Administrators Association, Inc.,
an
international organization devoted to investor protection, because all of our
directors own shares of our common stock and may receive reimbursement for
out-of-pocket expenses incurred by them in connection with activities on our
behalf, such as identifying potential target businesses and performing due
diligence on suitable business combinations, state securities administrators
could take the position that such individuals are not “independent.” If this
were the case, they would take the position that we would not have the benefit
of independent directors examining the propriety of expenses incurred on our
behalf and subject to reimbursement. Additionally, there is no limit on the
amount of out-of-pocket expenses that could be incurred and there will be no
review of the reasonableness of the expenses by anyone other than members of
our
audit committee and board of directors, which would include persons who may
seek
reimbursement, or a court of competent jurisdiction if such reimbursement is
challenged. To the extent such out-of-pocket expenses exceed the available
proceeds not deposited in the trust account, such out-of-pocket expenses would
not be reimbursed by us unless we consummate a business combination. Although
we
believe that all actions taken by our directors on our behalf will be in our
best interests, whether or not they are deemed to be “independent,” we cannot
assure you that this will actually be the case. If actions are taken, or
expenses are incurred, that are actually not in our best interests, it could
have a material adverse effect on our business and operations and the price
of
our stock held by the public stockholders.
The
inability of the sellers of companies we may acquire to fulfill their
indemnification obligations to us under our acquisition agreements could
increase our liabilities and adversely affect our results of operations and
financial position.
We
intend
to make an effort to negotiate as a term in our acquisition agreements, that
the
respective sellers will agree to retain responsibility for and indemnify us
against damages resulting from certain third-party claims or other liabilities.
However, there may be instances in which we decide to enter into an acquisition
agreement without such seller indemnification obligations, such as in purchases
of assets out of bankruptcy. These third-party claims and other liabilities
include, without limitation, premium payments to funds created under applicable
Federal laws, costs associated with various litigation matters, and certain
environmental liabilities. The lack of seller indemnification obligations or
the
failure of any seller to satisfy its obligations with respect to claims and
retained liabilities covered by the acquisition agreements could have an adverse
effect on our results of operations and financial position because claimants
may
successfully assert that we are liable for those claims and/or retained
liabilities. In addition, we expect that certain obligations of the sellers
to
indemnify us will terminate upon expiration of the applicable indemnification
period and will not cover damages in excess of the applicable coverage limit.
The assertion of third-party claims after the expiration of the applicable
indemnification period or in excess of the applicable coverage limit, or the
failure of any seller to satisfy its indemnification obligations with respect
to
breaches of its representations and warranties, could have an adverse effect
on
our results of operations and financial position.
Risks
Associated
with the U.S. Homeland Security and Defense Industries
Risks
Associated with Government Contracts
We
may
acquire a target business that contracts directly with federal, state or local
governments with respect to homeland security or defense or a combination
thereof. Alternatively, our target business may act as a subcontractor, supplier
or partner with another party or parties that contract with the government.
Set
forth below are the risk factors associated with government contracts that
may
impact us.
Our
target business could be adversely affected by significant changes in the
contracting or fiscal policies of governments and governmental
entities.
The
revenues of our target business may be substantially derived from contracts
with
federal, state and local governments and government agencies and subcontracts
under federal government prime contracts and we believe that the growth of
our
target business may depend on our procurement of government contracts either
directly or through prime contractors. Accordingly, changes in government
contracting policies or government budgetary constraints could directly affect
the financial performance of our target business. Among the factors that could
adversely affect our target business are:
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changes
in fiscal policies or decreases in available government
funding;
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changes
in government programs or applicable
requirements;
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the
adoption of new laws or regulations or changes to existing laws and
regulations;
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changes
in political or social attitudes with respect to homeland security
or
defense issues; and
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potential
delays or changes in the government appropriations
process.
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These
and
other factors could cause governments and governmental agencies, or prime
contractors that may use our target business as a subcontractor, to reduce
their
purchases under existing contracts, to exercise their rights to terminate
contracts at-will or to abstain from exercising options to renew contracts,
any
of which could have a material adverse effect on the business, financial
condition and results of operations of our target business.
Government
contracts typically contain unfavorable provisions.
Government
contracts often include provisions that are not standard in private commercial
transactions. For example, government contracts may:
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include
provisions that allow the government agency to terminate the contract
without penalty under certain
circumstances;
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contain
onerous procurement procedures;
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be
subject to cancellation if government funding becomes unavailable;
and
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subject
the contracting party to suspension or ban from doing business with
the
government or a government agency, impose fines and penalties and
subject
the contracting party to criminal
prosecution.
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Accordingly,
the business, financial condition and results of operations of our target
business may be adversely affected by such provisions (or other provisions)
contained in government contracts.
Government
contracts are subject to audit and cost adjustments, which could reduce revenue
of our target, disrupt its business or otherwise adversely affect its results
of
operations.
Government
agencies routinely audit and investigate government contracts and government
contractors’ administrative processes and systems. These agencies review
performance on contracts, pricing practices, cost structure and compliance
with
applicable laws, regulations and standards. They also review the contracting
parties’ compliance with regulations and policies and the adequacy of internal
control systems and policies, including the purchasing, property, estimating,
compensation and management information systems of our target business. Any
costs found to be improperly allocated to a specific contract will not be
reimbursed and any such costs already reimbursed must be refunded. Moreover,
if
any of the administrative processes and systems are found not to comply with
requirements, our target business may be subjected to increased government
oversight and approval that could delay or otherwise adversely affect its
ability to compete for or perform contracts. Therefore, an unfavorable outcome
to a government audit could cause the actual results of our target business
to
differ materially from those anticipated. If an investigation uncovers improper
or illegal activities, our target business may be subject to civil and criminal
penalties and administrative sanctions, including termination of contracts,
forfeitures of profits, suspension of payments, fines and suspension or
debarment from doing business with the government. In addition, our target
business could suffer serious harm to its reputation if allegations of
impropriety were made against it. Each of these results could cause the actual
results of our target business to differ materially from those anticipated.
Our
target business may derive significant revenue from contracts awarded through
a
competitive bidding process.
Government
contracts are awarded through a competitive bidding process. A material portion
of our target’s business in the future may be awarded through competitive
bidding. The competitive bidding process presents a number of risks, including
the following:
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bids
are made on programs before the completion of their design, which
may
result in unforeseen difficulties and cost
overruns;
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substantial
cost and managerial time and effort to prepare bids is made on proposals
for contracts that may not be won;
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it
may be difficult to estimate accurately the resources and cost structure
that will be required to service any contract won; and
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expense
and delay may be encountered if competitors protest or challenge
awards of
contracts to our target business in competitive bidding, and any
such
protest or challenge could result in the resubmission of bids on
modified
specifications, or in the termination, reduction, or modification
of the
awarded contract.
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Budgetary
pressures and changes in the procurement process have caused many government
clients to increasingly purchase goods and services through indefinite
deliver/indefinite quantity, or ID/IQ, contracts, GSA schedule contracts and
other government-wide acquisition contracts. These contracts, some of which
are
awarded to multiple contractors, have increased competition and pricing
pressure, requiring that our target business make sustained post-award efforts
to realize revenue under each such contract. In addition, the net effect of
such
programs may reduce the number of bidding opportunities available to our target
business. Moreover, even if our target business was highly qualified to work
on
a particular new contract, it might not be awarded business because of the
government’s policy and practice of maintaining a diverse contracting base.
Our
target business will likely have to comply with complex procurement laws and
regulations.
Our
target business will likely have to comply with and will be affected by laws
and
regulations relating to the formation, administration and performance of federal
government contracts, which affect how it does business with its customers
and
may impose added costs on its business. For example, our target business or
parties with which it does business will likely be subject to the Federal
Acquisition Regulations and all supplements (including those issued by the
Department of Homeland Security and the Department of Defense), which
comprehensively regulate the formation, administration and performance of
federal government contracts, and to the Truth-in-Negotiations Act, which
requires certification and disclosure of cost and pricing data in connection
with contract negotiations. In addition, our target business or parties with
which it does business will likely be subject to industrial security regulations
of Department of Defense and other federal agencies that are designed to
safeguard against foreigners access to classified information. Our target
business may also be liable for systems and services failures and security
breaks with respect to the solutions, services, products, or other applications
it sells to the government. If our target business was to come under foreign
ownership, control or influence, its federal government customers could
terminate or decide not to renew their contracts, and it could impair the
ability of our target business to obtain new contracts. The government may
reform its procurement practices or adopt new contracting rules and regulations,
including cost-accounting standards, that could be costly to satisfy or that
could impair the ability of our target business to obtain new contracts.
Other
Risks Associated with the U.S. Homeland Security and Defense
Industries
If
our target business is unable to respond to the technological, legal, financial
or other changes in the security industry and changes in our
customers’
requirements and preferences, we will not be able to effectively compete with
our competitors.
If
our
target business is unable, for technological, legal, financial or other reasons,
to adapt in a timely manner to changing market conditions, customer needs or
regulatory requirements, it could lose customers. Changes in customer
requirements and preferences, the introduction of new products and services
embodying new technologies, and the emergence of new industry standards and
practices could render the existing products of the company we acquire obsolete.
The success of our target business will depend, in part, on its ability to:
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enhance
products and services;
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anticipate
changing customer requirements by designing, developing, and launching
new
products and services that address the increasingly sophisticated
and
varied needs of customers;
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respond
to technological advances and emerging industry standards and practices
on
a cost-effective and timely basis; and
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respond
to changing regulatory requirements in a cost effective and timely
manner.
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The
development of additional products and services involves significant
technological and business risks and requires substantial expenditures and
lead
time. If our target business fails to introduce products with new technologies
in a timely manner, or adapt its products to these new technologies, our target
business will not be able to effectively compete with our competitors. We cannot
assure you that, even if our target business is able to introduce new products
or adapt our products to new technologies, that its products would gain
acceptance among its customers.
We
may be unable to protect or enforce the intellectual property rights of any
target businesses that we acquire.
We
may
acquire a target business whose business is dependent upon its proprietary
technology and intellectual property. Accordingly, the protection of trademarks,
copyrights, patents, domain names, trade dress, and trade secrets may be
critical to the ability of our target business to compete with its competitors.
In such a case, our target business will likely rely on a combination of
copyright, trademark, trade secret laws and contractual restrictions to protect
any proprietary technology and rights that it may acquire. Despite the efforts
of our target business to protect its proprietary technology and rights, our
target business may not be able to prevent misappropriation of its proprietary
rights or deter independent development of technologies that compete with the
business we acquire. Our target business’s competitors may file patent
applications or obtain patents and proprietary rights that block or compete
with
its patents. Litigation may be necessary in the future to enforce our target
business’s intellectual property rights, to protect its trade secrets, or to
determine the validity and scope of the proprietary rights of others. It is
also
possible that third parties may claim our target business has infringed their
patent, trademark, copyright or other proprietary rights. Claims or litigation,
with or without merit, could result in substantial costs and diversions of
resources, either of which could have a material adverse effect on the
competitive position and business of our target business. Depending on the
target business or businesses that we acquire, we may have to protect
trademarks, patents, and domain names in an increasing number of jurisdictions,
a process that is expensive and may not be successful in every location. With
respect to certain proprietary rights, such as trademarks and copyrighted
materials, of the target business or businesses that we will acquire, the target
business or businesses may have entered into license agreements in the past
and
will continue to enter into such agreements in the future. These licensees
may
take actions that diminish the value of such target business or businesses’
proprietary rights or cause harm to such target business or businesses’
reputation.
Our
target business may face inherent product liability or other liability risks
which could result in large claims against us.
Our
target business may face the inherent risk of exposure to product liability
and
other liability claims resulting from the use of its products, especially to
the
extent such products will be depended upon in emergency, rescue and public
safety situations that may involve physical harm or even death to individuals,
as well as potential loss or damage to property. Despite quality control systems
and inspection, there remains an ever-present risk of an accident resulting
from
a faulty manufacture or maintenance of products, or an act of an agent outside
the control of the companies or their suppliers. A product liability claim,
or
other legal claims based on theories including personal injury or wrongful
death, made against our target business could adversely affect its operations
and financial condition. Although there may be insurance to cover the product
liability claims, the amount of coverage may not be sufficient. Furthermore,
we
cannot assure you that our target business, if engaged in the sale of so-called
“anti-terrorism technologies” could avail itself of the liability protections
intended to be afforded by the Support Anti-Terrorism by Fostering Effective
Technologies Act of 2002, or the SAFETY Act.
A
decline in the U.S. defense budget may adversely affect the operations of our
target.
We
may
acquire a target business with material sales under contracts with the U.S.
Department of Defense, including sales under subcontracts having the Department
of Defense as the ultimate purchaser. The U.S. defense budget declined from
time
to time in the late 1980s and the early 1990s, resulting in a slowing of new
program starts, program delays and program cancellations. These reductions
caused most defense-related government contractors to experience declining
revenues, increasing pressure on operating margins and, in some cases, net
losses. While spending authorizations for defense-related programs by the
government have increased in recent years, and in particular after the September
11, 2001 terrorist attacks, these spending levels may not be sustainable, and
future levels of expenditures and authorizations for those programs may
decrease, remain constant or shift to programs in areas where our target
business may provide limited or no products or services. A change in the U.S.
Presidential Administration or in the composition of Congress could also
materially affect levels of support for military expenditures. A significant
decline in military expenditures could harm the operating results of our target
business.
Our
target business may regularly employ subcontractors to assist in satisfying
its
contractual obligations. If these subcontractors fail to adequately perform
their contractual obligations, our target business’s prime contract performance
and its ability to obtain future business could be materially and adversely
impacted.
The
performance by our target business of government contracts may involve the
issuance of subcontracts to other companies upon which our target business
may
rely to perform all or a portion of the work it is obligated to deliver to
customers. There is a risk that our target business may have disputes with
subcontractors concerning a number of issues including the quality and
timeliness of work performed by the subcontractor. A failure by one or more
of
our target business’s subcontractors to satisfactorily deliver on a timely basis
the agreed-upon supplies and/or perform the agreed-upon services may materially
and adversely impact the ability of our target business to perform its
obligations as a prime contractor. In extreme cases, such subcontractor
performance deficiencies could result in the government terminating our target’s
contract for default. A default termination could expose our target business
to
liability for excess costs of reprocurement by the government and have a
material adverse effect on the ability of our target business to compete for
future contracts.
If
our target business cannot obtain the necessary security clearances, it may
not
be able to perform classified work for the government and the revenues of our
target business may suffer.
Certain
government contracts may require the facilities of our target business and
some
of its employees to maintain security clearances. If our target business loses
or is unable to obtain required security clearances, the customer can terminate
the contract or decide not to renew it upon its expiration. As a result, to
the
extent our target business cannot obtain the required security clearances for
its employees working on a particular contract, our target business may not
derive the revenue anticipated from the contract, which, if not replaced with
revenue from other contracts, could seriously harm its operating
results.
Security
breaches of sensitive government systems could result in the loss of customers
and negative publicity.
Our
target business may offer products and services involving managing and
protecting information involved in national security and other sensitive
government functions. A security breach involving our target business’s products
or services could cause serious harm to its business, could result in negative
publicity and could prevent our target business from having further access
to
such critically sensitive information or other similarly sensitive areas for
other governmental customers.
Item
1B.
|
Unresolved
Staff Comments
|
Not
Applicable.
We
maintain our executive offices at 328 West 77th Street, New York, New York,
10024. We have agreed to pay ASG Management, Inc., an affiliated third party
of
which Mr. Wasserman and Mr. Blaha are principals, $7,500 per month for office
space (located at our executive offices) and certain additional general and
administrative services.
We
consider our current office space adequate for our current operations. Upon
completion of a business combination or the implementation of our plan of
dissolution and distribution, we will no longer be required to pay this monthly
fee.
Item
3.
|
Legal
Proceedings
|
To
the
knowledge of our management, there is no litigation currently pending or
contemplated against us or any of our officers or directors in their capacity
as
such.
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
During
the fourth quarter of our fiscal year ended December 31, 2007, there were no
matters submitted to a vote of security holders.
PART
II
Item
5.
|
Market
for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity
Securities
|
Our
units, common stock and warrants have been traded on the American Stock
Exchange, or AMEX, under the symbol “HDS.U,” since March 23, 2007 and under the
symbols “HDS” and “HDS.WS,” since June 14, 2007, respectively. The following
table sets forth the high and low bid information for our securities from the
commencement of trading through December 31, 2007 as reported by AMEX.
|
|
Common
Stock
|
|
Warrants
|
|
Units
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
First
Quarter (1)(2)
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
10.00
|
|
|
9.82
|
|
Second
Quarter (3)
|
|
$
|
9.40
|
|
$
|
9.31
|
|
|
1.25
|
|
|
1.05
|
|
|
10.58
|
|
|
9.83
|
|
Third
Quarter
|
|
$
|
9.42
|
|
$
|
9.26
|
|
|
1.27
|
|
|
0.97
|
|
|
10.65
|
|
|
10.15
|
|
Fourth
Quarter
|
|
$
|
9.40
|
|
$
|
9.25
|
|
|
1.06
|
|
|
0.83
|
|
|
10.30
|
|
|
10.06
|
|
(1)
Includes information from March 23, 2007 to March 31, 2007, the date when our
units commenced trading on AMEX.
(2)
No
figures are included as our common stock and warrants commenced trading on
June
14, 2007.
(3)
Includes information from June 14, 2007, the date when our common stock and
warrants commenced trading on AMEX to June 30, 2007.
Number
of Holders of Common Stock
The
number of holders of record of our common stock on April 11, 2008 was 11, which
does not include individual participants in security position
listings.
Dividends
There
were no cash dividends or other cash distributions made by us during the fiscal
year ended December 31, 2007. The payment of dividends in the future will be
contingent upon our revenues and earnings, if any, capital requirements and
general financial condition subsequent to completion of a business combination.
The payment of any dividends subsequent to a business combination will be within
the discretion of our then board of directors. It is the present intention
of
our board of directors to retain all earnings, if any, for use in our business
operations and, accordingly, our board does not anticipate declaring any
dividends in the foreseeable future.
Recent
Sales of Unregistered Securities and Use of Proceeds
On
March
21, 2007, we sold an aggregate of 3,200,000 warrants in a private placement
to
Steven M. Wasserman (500,000 warrants), our Chief Executive Officer, Chief
Financial Officer, President and Co-Chairman of our board of directors and
Constantinos Tsakiris (2,700,000 warrants), a former member of our board of
directors. The warrants were sold at a purchase price of $1.00 per warrant.
On
March 28, 2007, we consummated our initial public offering of 6,000,000 units,
each unit consisting of one share of common stock and one warrant. Each warrant
entitles the holder to purchase from us one share of our common stock at an
exercise price of $7.50. The units were sold at an offering price of $10.00
per
unit, generating total gross proceeds of $60,000,000. Maxim Group LLC acted
as
lead underwriter. The securities sold in the offering were registered under
the
Securities Act of 1933 on a registration statement on Form S-1 (No. 333-127999).
The Securities and Exchange Commission declared the registration statement
effective on March 23, 2007.
We
incurred a total of $3,780,000 in underwriting discounts and commissions, and
$1,591,569 of expenses related to the public offering and private
placement.
After
deducting the underwriting discounts and commissions and the offering expenses
(excluding $1,800,000 in underwriting discounts, commissions for which the
payment was deferred), the total net proceeds to us from the public offering
and
the private placement was $57,828,431. All of such net proceeds, are being
held
in a trust account and invested until the earlier of (i) the consummation of
the
first business combination or (ii) the distribution of the trust account as
described in this annual report, subject to deductions from the trust account
for the following items: (i) taxes payable on interest income earned on the
trust account , State of Delaware franchise taxes, repayment of $250,000 of
an
additional officer loan made prior to closing of the public offering by Steven
M. Wasserman (such loan was to be repaid within 90 days of the closing of the
public offering, but has not been repaid through December 31, 2007) and (ii)
up
to $1,825,000 of interest earned on the trust account may be released to us
to
fund our working capital. The amount in the trust account includes $1,800,000
of
contingent underwriting compensation which will be paid to the underwriters
if a
business combination is consummated, but which will be forfeited if public
stockholders elect to have their shares redeemed for cash if a business
combination is not consummated. $187,802 of the proceeds of the public offering
were used to repay debt to Mr. Wasserman ($137,802.50) and Robert Blaha
($50,000), our Chief Management Officer, Executive Vice President and a
director, for loans used to cover expenses related to the public offering and
$3,481,569 was used to pay accrued offering costs and fees. All
the
funds held in the trust account have been invested in either treasury bills
or
money market accounts.
Repurchases
of Equity Securities
None.
Equity
Compensation Plan Information
None.
Item
6.
|
Selected
Financial Data
|
As
a
smaller reporting company, we are not required to include this information
in
our annual report on Form 10-K.
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
Forward
Looking Statements
This
Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to known and unknown
risks, uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. In some cases, you
can
identify forward-looking statements by terminology such as “may,” “should,”
“could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“continue,” or the negative of such terms or other similar expressions. Factors
that might cause or contribute to such a discrepancy include, but are not
limited to, those described in our other Securities and Exchange Commission
filings. The following discussion should be read in conjunction with our
Financial Statements and related Notes thereto included elsewhere in this
report.
Overview
We
were
formed on April 20, 2005, to serve as a vehicle to acquire one or more domestic
or international operating businesses in the U.S. homeland security or defense
industries or a combination thereof, through a merger, capital stock exchange,
asset acquisition or other similar business combination. Our initial business
combination must be with a target business or businesses whose fair market
value
is at least equal to 80% of our net assets at the time of such acquisition.
Since our offering, we have been actively searching for a suitable business
combination candidate. We currently have not entered into any definitive
agreement with any potential target businesses. We are not presently engaged
in,
and will not engage in, any substantive commercial business until we consummate
an initial transaction. We intend to utilize cash derived from the proceeds
of
our recently completed private placement and initial public offering, our
capital stock, debt or a combination of cash, capital stock and debt, in
effecting a business combination.
We
cannot
assure investors that we will find a suitable business combination in the
allotted time.
Results
of Operations for The Years Ended
December 31, 2007 and 2006
We
reported net income of $817,608 for the year ended December 31, 2007. Net income
consisted of interest income of $2,094,530 reduced by $504,258 of operating
expenses. Operating expenses consisted of consulting and professional fees
of
$139,689, insurance expense of $47,287, travel expense of $127,112, Delaware
franchise fees of $56,888 and other operating costs of $133,282.
The
trust
account earned interest of $2,094,530, for the year ended December 31, 2007,
none of which is attributable to common stock subject to possible
redemption.
Until
we
enter into a business combination, we will not generate operating revenues.
We
had no funds in trust as of December 31, 2006.
For
the
year December 31, 2006, we incurred operating expenses of $23,905, which
consisted of formation costs.
Liquidity
and Capital Resources
On
March
21, 2007, we sold to Steven M. Wasserman (500,000 warrants), our Chief Executive
Officer, Chief Financial Officer, President and Co-Chairman of the board of
directors, and Constantinos Tsakiris (2,700,000 warrants), a former director,
an
aggregate of 3,200,000 warrants in a private placement for $1.00 per warrant
or
aggregate consideration of $3,200,000. The warrants in the private placement
have identical terms to the warrants included in the units offered as part
of
the public offering. On March 28, 2007, we consummated our initial public
offering of 6,000,000 units at a purchase price of $10.00 per unit or gross
proceeds of $60,000,000. Each unit in the public offering consisted of one
share
of common stock and one redeemable common stock purchase warrant. Each warrant
entitles the holder to purchase from us one share of common stock at an exercise
price of $7.50 per share. Prior to the closing, Steven M. Wasserman loaned
us
$250,000 for expenses of the public offering, which loan has not yet been
repaid.
On
March
28, 2007, the closing date of our public offering, $60,002,831 was placed in
the
Trust Account at JP Morgan Chase New York, New York. This amount includes net
proceeds of the public offering of $54,628,431 and the private placement of
$3,200,000 plus interest of $2,831 thereon. The funds in the Trust Account
will
be invested until the earlier of (i) consummation of a business combination
or
(ii) the liquidation of the Trust Account as part of a plan of distribution
and
liquidation approved by our stockholders.
In
addition to the net proceeds from the sale of the units in the public offering
and the sale of warrants in our private placement, on the closing date of the
public offering the trust account included $1,800,000 of deferred underwriting
compensation to be paid to Maxim Group LLC with accrued interest if and only
if
a business combination is consummated, and $90,000 of deferred legal fees to
be
paid, without contingency, from interest income earned on the trust account
released to us.
While
funds are held in the trust account, they will only be invested in treasury
bills issued by the United States government having a maturity of 180 days
or
less or money market funds meeting the criteria under Rule 2a-7 under the 1940
Act. Interest earned will be applied in the following order of
priority:
|
·
|
payment
of taxes on trust account interest
income;
|
|
·
|
payment
of State of Delaware franchise
taxes;
|
|
·
|
repayment
of up to $250,000 of an additional officer loan made prior to the
closing
of the public offering by Steven M.
Wasserman;
|
|
·
|
our
working capital requirements before we complete a business combination
and, if necessary, funding the costs of our potential dissolution
and
liquidation;
|
|
·
|
solely
if we complete a business combination, interest on the amount of
deferred
underwriters’ compensation payable to the underwriters;
and
|
|
·
|
the
balance, if any, to us if we complete a business combination or to
our
public stockholders if we do not complete a business
combination.
|
We
believe that the interest income earned on trust account funds in the period
before we effect a business combination will be sufficient to fund the costs
and
expenses relating to our liquidation and dissolution if we do not consummate
a
business combination.
We
will
use substantially all of the net proceeds of the public offering and from the
private placement, and interest income earned on the funds in the trust account,
to acquire a target business, including identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating the business combination. Costs and expenses
incurred prior to the consummation of a business combination, including those
that relate to a business combination that is not consummated, will be paid
from
the interest earned on funds held in the trust account (to the extent such
interest is released to us). To the extent that our capital stock is used in
whole or in part as consideration to effect a business combination, the proceeds
held in the trust account as well as any other net proceeds not expended will
be
used to finance the operations of the target business.
We
believe that the funds available to us from interest income earned on the trust
account ($1,825,000) will be sufficient to allow us to operate for at least
24
months or March 2009, assuming that a business combination is not consummated
during that time. Over this time period, the following estimated expenditures
are anticipated: $400,000 of expenses for legal, accounting and other expenses
attendant to the structuring, negotiating and consummation of a business
combination, $500,000 of expenses for identification, evaluation and due
diligence investigation of a target business, $180,000 for administrative
services and support payable to an affiliated third party ($7,500 per month
for
24 months), $100,000 of expenses in legal and accounting fees relating to our
SEC reporting obligations, $150,000 for directors’ and officers’ liability
insurance and $495,000 for general working capital that will be used for
miscellaneous expenses and reserves, deferred legal fees of $90,000, costs
of
dissolution and liquidation and reserves, if any, which we currently estimate
to
be approximately $50,000 to $75,000, potential deposits, down payments or
funding of a “no-shop” provision in connection with a particular business
combination and key-man insurance.
We
do not
believe we will need to raise additional funds in order to meet the expenditures
required for operating our business prior to consummating a business
combination. However, we may need to raise additional funds through a private
offering of debt or equity securities if such funds are required to consummate
a
business combination.
In
addition to the above described allocation of interest accrued on the trust
account, at December 31, 2007, we had funds aggregating $8,726 held outside
of
the trust account.
Off
Balance-Sheet Arrangements
We
do not
have any off-balance sheet arrangements.
Contractual
Obligations
We
do not
have any long term debt, capital lease obligations, operating lease obligations,
purchase obligations or other long term liabilities.
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market
Risk
|
Market
risk is the sensitivity of income to changes in interest rates, foreign
exchanges, commodity prices, equity prices, and other market-driven rates or
prices. We are not presently engaged in and, if a suitable business target
is
not identified by us prior to the prescribed liquidation date of the trust
account, we may not engage in, any substantive commercial business. Accordingly,
we are not and, until such time as we consummate a business combination, we
will
not be, exposed to risks associated with foreign exchange rates, commodity
prices, equity prices or other market-driven rates or prices. The net proceeds
of our initial public offering held in the trust account have been invested
only
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act of 1940, as amended. Given our limited risk
in
our exposure to money market funds, we do not view the interest rate risk to
be
significant.
Item
8.
|
Financial
Statements and Supplementary
Data
|
The
response to this item is included in a separate section of this Annual Report.
See “Index to Consolidated Financial Statements” on Page F-1.
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
On
December 18, 2007, the Company was notified that certain of the partners of
Goldstein Golub Kessler LLP (“GGK”) became partners of McGladrey & Pullen,
LLP (“McGladrey & Pullen”) in a limited asset purchase agreement and that
GGK resigned as independent registered public accounting firm for the Company.
McGladrey & Pullen was appointed as the Company’s new independent registered
public accounting firm. The decision to engage McGladrey
& Pullen, LLP was approved by the audit committee of the
board of directors
on December 18, 2007.
The
audit
reports of GGK on the financial statements of the Company as of and for the
years ended December 31, 2006 and December 31, 2005 did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. GGK’s 2006 and 2005 audit
report relating to GGK’s audit of Company’s financial statements for the fiscal
years ended December 31, 2006 and December 31, 2005, included an emphasis
paragraph relating to an uncertainty as to the Company’s ability to continue as
a going concern.
During
the Company’s most two recent fiscal years ended December 31, 2006 and 2005 and
through December 18, 2007, the Company did not consult with McGladrey &
Pullen on (i) the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
may
be rendered on the Company’s financial statements, and McGladrey & Pullen
did not provide either a written report or oral advice to the Company that
was
an important factor considered by the Company in reaching a decision as to
any
accounting, auditing, or financial reporting issue; or (ii) the subject of
any
disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the
related instructions, or a reportable event within the meaning set forth in
Item
304(a)(1)(v) of Regulation S-K.
In
connection with the audits of the Company’s financial statements for the fiscal
years ended December 31, 2006 and 2005 and through December 18, 2007, there
were: (i) no disagreements between the Company and GGK on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction
of
GGK, would have caused GGK to make reference to the subject matter of the
disagreement in their reports on the Company’s financial statements for such
years, and (ii) no reportable events within the meaning set forth in Item
304(a)(1)(v) of Regulation S-K.
Item
9A(T).
|
Controls
and Procedures
|
An
evaluation of the effectiveness of our disclosure controls and procedures as
of
December 31, 2007 was made under the supervision and with the participation
of
our management, including our principal executive and principal financial
officer. Based on that evaluation, our chief executive officer and principal
financial officer concluded that our disclosure controls and procedures are
effective as of the end of the period covered by this report to ensure that
information required to be disclosed by us in reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized
and
reported within the time periods specified in Securities and Exchange Commission
rules and forms. During the most recently completed fiscal quarter, there has
been no significant change in our internal control over financial reporting
that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
Compliance
with Section 404 of the Sarbanes-Oxley Act of 2002
This
annual report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of our
registered public accounting firm due to a transition period established by
the
rules of the Securities and Exchange Commission for newly public
companies.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002 (the Act), beginning with
our
Annual Report on Form 10-K for the fiscal year ending December 31, 2008, we
will
be required to furnish a report by our management on our internal control over
financial reporting. This report will contain, among other matters, an
assessment of the effectiveness of our internal control over financial reporting
as of the end of our fiscal year, including a statement as to whether or not
our
internal control over financial reporting is effective. This assessment must
include disclosure of any material weaknesses in our internal control over
financial reporting identified by management. If we identify one or more
material weaknesses in our internal control over financial reporting, we will
be
unable to assert our internal control over financial reporting is effective.
This report will also contain a statement that our independent registered public
accountants have issued an attestation report on management’s assessment of such
internal controls and conclusion on the operating effectiveness of those
controls.
Management
acknowledges its responsibility for internal controls over financial reporting
and seeks to continually improve those controls. In order to achieve compliance
with Section 404 of the Act within the prescribed period, we are currently
performing the system and process documentation and evaluation needed to comply
with Section 404, which is both costly and challenging. We believe our process,
which began in 2007 and continues in 2008 for documenting, evaluating and
monitoring our internal control over financial reporting is consistent with
the
objectives of Section 404 of the Act.
Item
9B.
|
Other
Information
|
None.
PART
III
Item
10.
|
Directors,
Executive Officers and Corporate
Governance
|
Our
current directors and executive officer are as follows:
Name
|
|
Age
|
|
Position
|
Gary
E. Johnson
|
|
54
|
|
Co-Chairman
of the Board of Directors
|
Steven
M. Wasserman
|
|
46
|
|
Chief
Executive Officer, Chief Financial Officer, President, Secretary
and
Co-Chairman
of the Board of Directors
|
Robert
B. Blaha
|
|
52
|
|
Chief
Management Officer,
Executive
Vice President and Director
|
Carol
A. DiBattiste
|
|
55
|
|
Director
|
Ronald
R. Fogleman
|
|
65
|
|
Director
|
Robert
T. Herres
|
|
74
|
|
Director
|
Governor
Gary E. Johnson has
served as Co-Chairman of our board of directors since August 2005. In July
2005,
he was elected a director. Since June 2004, Governor Johnson has been the
president of HighBeta of New Mexico, a venture capital company specializing
in
investments in companies focused on alternative forms of energy. From October
1998 to the present, Governor Johnson has also served as president of GEJ
Enterprises, Inc., a construction consulting company. From January 1995 to
December 2002, Governor Johnson served as the Governor of the State of New
Mexico, and was the first governor in the history of New Mexico to be elected
for two consecutive four year terms. He was ranked among the nation’s seven top
governors in each of the Cato Institute’s fiscal report cards between 1996 and
2002. As Governor, Mr. Johnson signed into law tax credits to help Sandia
National Laboratories offer assistance to small businesses and a joint-powers
agreement between the State of New Mexico and Los Alamos National Laboratories
to improve Internet accessibility to rural areas. Prior to serving as Governor,
from April 1975 to October 1998 Mr. Johnson was the founder and president of
Big
J Enterprises, Inc., a full-service commercial and industrial construction
company located in New Mexico with clients such as Sandia National Laboratories,
Honeywell International Inc. (NYSE: HON) and Intel Corp. (Nasdaq: INTC). Mr.
Johnson sold Big J Enterprises Inc. in 1999, at the time of its sale one of
New
Mexico’s leading construction companies.
Steven
M. Wasserman has
served as our Chief Executive Officer, Chief Financial Officer and Secretary
since April 2005 and as our President and Co-Chairman of our board of directors
since August 2005. From April 2005 to August 2005, Mr. Wasserman also served
as
our Chairman. Mr. Wasserman also currently serves as the managing partner of
AMT
Ventures LLC, an entity primarily engaged in public and private equity and
debt
investments on a principal basis, a position he has held since April 2004.
In
addition, Mr. Wasserman is the managing partner of AMT Capital Partners LLC,
an
investment banking and advisory firm, a position he has held since June 1998.
During his tenure as the managing partner of AMT Capital Partners, LLC, clients
of AMT Capital Partners, LLC have included the following: Ktech Corporation,
a
provider of technical support services, scientific and engineering services
and
management expertise to a variety of government defense and industry clients;
Nanodetex Corporation, a leader in lab-on-chip (LOC) platform technologies
for
gas phase chemical analysis and explosive detection; Agent Science Technologies
Incorporated, a provider of neural information management software solutions
to
the defense industry; Link One, LLC, a technology transfer advisory group to
Los
Alamos National Laboratory; American Detection Technologies, Inc., a homeland
security company engaged in contraband detection services using canines; ETEK
International Corporation, a network security provider; and Securant
Technologies, Inc., an Internet security software company which was sold to
RSA
Security, Inc. in September 2001. From June 1997 to July 2001, Mr. Wasserman
was
the managing director of the Cardinal Fund, a risk arbitrage fund. From April
1995 to May 1998, Mr. Wasserman served as the President and Chief Executive
Officer of Pudgies Chicken Inc. In September 1996, Pudgies Chicken Inc. filed
a
voluntary petition under Chapter 11 of the United States Bankruptcy Code and
the
sale of all of the company’s assets was approved in May 1998.
Robert
B. Blaha
has
served as our Chief Management Officer, Executive Vice President and a director
since July 2005. Since June 1993, Mr. Blaha has served as the president of
Human
Capital Associates, a management consulting company. Since February 2003, Mr.
Blaha has also served as the vice chairman and member of the board of directors
of Integrity Bank & Trust, a commercial bank based in Colorado Springs,
Colorado. During his career, Mr. Blaha has held management positions with Asea
Brown Boveri (NYSE: ABB) as vice president of Human Resources and senior vice
president of administration from 1990 to 1993, Englehard Corporation (NYSE:
EC)
as a manager from 1986 to 1990, Monsanto Company (NYSE: MON), as a personnel
supervisor and superintendent from 1979 to 1986 and Ford Motor Company (NYSE:
F), as a labor relations representative from 1977 to 1979. Mr. Blaha has
authored numerous articles and three books, entitled “Beyond Survival,” “The
Archer Chronicles” and “The Lean Six Sigma Accelerator,” on issues relating to
high performance work systems, leadership and achieving organizational wide
commitment to change and efficiency.
Carol
A. DiBattiste
has
served as a director since July 2005. Ms. DiBattiste is currently the general
counsel and chief privacy officer with ChoicePoint Inc. (NYSE: CPS), a leading
provider of identification and credential verification services, a position
she
has held since September 2006. From April 2005 until September 2006, she was
the
chief credentialing, compliance and privacy officer for ChoicePoint Inc. From
July 2004 to April 2005, Ms. DiBattiste served as deputy administrator,
Transportation Security Administration (TSA), Department of Homeland Security,
and as the TSA’s chief of staff from March 2003 to July 2004, with
responsibility for overseeing all TSA functions and serving as liaison between
TSA and the Department of Homeland Security. From February 2001 to February
2003, Ms. DiBattiste was a partner at the law firm of Holland & Knight, LLP.
Additionally, Ms. DiBattiste served as under secretary in the United States
Air
Force from August 1999 to January 2001, the second highest position, responsible
for readiness, recruiting, training and equipping a force of 710,000 individuals
and a budget of over $70 billion. From December 1997 to August 1999, Ms.
DiBattiste was the deputy United States attorney, Southern District of Florida
and from July 1994 to December 1997, she was the director of the Executive
Office for United States Attorneys, Department of Justice. From August 1993
to
July 1994, she was the principal deputy general counsel for the Department
of
the Navy and from July 1991 to August 1993 she was an assistant United States
attorney for the Southern District of Florida. Ms. DiBattiste enlisted in the
United States Air Force in March 1971, received her commission in September
1976
and retired in the rank of Major after twenty years of service in 1991.
General
Ronald R. Fogleman
has
served as a director since July 2005. General Fogleman retired in 1997 after
34
years of distinguished service in the United States Air Force. General Fogleman
is currently the senior vice president of Projects International, an
international business advising company, a position that he has held since
May
2001. General Fogleman served as chairman and chief executive officer of Durango
Aerospace, Inc., an international aviation consulting firm, from January 1998
until December 2004. In addition, from January 1998 to the present, General
Fogleman has served as a consultant to various defense industry and related
companies, including Northrop Grumman Corporation (NYSE: NOC), East Inc., RSL
Electronics USA Inc., FMC Technologies, Inc. (NYSE: FTI), Bell Helicopter
Textron Inc. (a subsidiary of Textron Inc. (NYSE: TXT)), Twentieth Century
Alliance and Ahura Corporation. From October 1994 to September 1997, General
Fogleman served as a member of the Joint Chiefs of Staff, acting as military
advisor to the Secretary of Defense, the National Security Counsel and the
President of the United States. From October 1994 to September 1997, he also
served as the 15th Chief of Staff of the U.S. Air Force, as the senior uniformed
officer responsible for organizing, training and equipping of 750,000 active
duty, guard, reserve and civilian forces serving in the United States and
overseas. From August 1992 to October 1994, he served as commander-in-chief
of
the U.S. Transportation Command (CINCTRANS). He currently serves on the board
of
directors of the following public companies: AAR Corporation (NYSE: AIR), a
supplier of products and services to the aviation industry; Alliant Techsystems
Inc. (NYSE: ATK), a provider of conventional munitions, rocket motors and
advanced weapons and space systems; and World Airways, Inc., an air carrier
providing customized transportation services. On May 31, 2004, General Fogleman
became the non-executive Chairman of the Board of World Airways, Inc. (Nasdaq:
WLDA).
General
Robert T. Herres
has
served as a director since July 2005. General Herres retired from the United
States Air Force in February 1990 after 36 years of distinguished service.
General Herres is currently an advisor and consultant to a family trust and
a
director of Ellison Management Co., LLC, which provides asset management support
and services to the trust, a position he has held since November 2000. From
September 1993 until April 2000, General Herres served as chief executive
officer of United Services Automobile Association (USAA), a member-owned
diversified insurance and financial service organization serving current and
former members of the U.S. military and their families. From September 1993
until October 2002, he served as USAA’s chairman. From March 2001 until
September 2003, General Herres served as chairman of Luby’s, Inc. (NYSE: LUB),
an owner and operator of restaurants. From February 1987 until February 1990,
General Herres was vice chairman of the Joint Chiefs of Staff, acting as
military advisor to the Secretary of Defense, the National Security Council
and
the President of the United States. During the prior ten years of his career
in
the Air Force, General Herres held the following positions: commander-in-chief,
North American Aerospace Defense Command and U.S. space command and commander,
U.S. Air Force Space Command (July 1984 to September 1987), commander of the
Eighth Air Force (July 1981 to October 1982) and commander of the Air Force
Communications Command (June 1979 to July 1981). He also served as the director
for command, control and communications of the Department of Defense Joint
Staff
(from October 1982 to July 1984). General Herres has received numerous awards
and commendations, including the Distinguished Service Medal, Defense
Distinguished Service Medal, the Legion of Merit and the Bronze Star.
On
November 8, 2007, Mr. Constantinos Tsakiris, a former director of the Company
resigned from his position as a member of the board of directors of the
Company.
Director
Independence
Our
board
of directors has determined that Governor Gary E. Johnson, Carol A. DiBattiste,
General Ronald R. Fogelman and Robert T. Herres are “independent directors”
within the meaning of Rule 121(A) of the American Stock Exchange Company Guide
and Rule 10A-3 promulgated under the Securities Act of 1934, as
amended.
Number
and Term of Directors
Our
board
of directors is divided into two classes with only one class of directors being
elected in each year and each class serving a two-year term. The term of office
of the first class of directors, consisting of Mr. Wasserman, General Fogleman
and Governor Johnson, will expire at our first annual meeting of stockholders.
The term of office of the second class of directors, consisting of Mr. Blaha,
Ms. DiBattiste and General Herres, will expire at the second annual meeting
of
stockholders.
These
individuals will play a key role in identifying and evaluating prospective
acquisition candidates, selecting the target business, and structuring,
negotiating and consummating its acquisition. Other than Ms. DiBattiste and
General Fogleman, none of these individuals has been a principal of or
affiliated with a public company or blank check company that executed a business
plan similar to our business plan and none of these individuals is currently
affiliated with such an entity. However, we believe that the skills and
expertise of these individuals, their collective access to acquisition
opportunities and ideas, their contacts, and their transaction expertise should
enable them to identify and effect an acquisition although we cannot assure
you
that they will, in fact, be able to do so.
Special
Advisor
In
addition to our board of directors, we also have access to special advisors
who
have the background and experience to assist us in evaluating target businesses
and consummating a business combination. We have initially identified Mr.
Weinstein as our special advisor.
Michael
Weinstein has
been
our special advisor since July 2005. Mr. Weinstein will from time to time assist
us in evaluating target businesses and consummating a business combination.
He
has not and will not receive compensation for acting as our special advisor
other than reimbursement for out-of-pocket expenses incurred by him on our
behalf. Mr. Weinstein has over twenty years of experience in government
procurement, business development, technology investments and law. Since October
2006, Mr. Weinstein has been the President and Founder of Military Religious
Freedom Foundation, an organization supporting the upholding of religious
freedoms in the United States armed forces. From November 2004 until September
2006, Mr. Weinstein was the director of business development, department of
energy programs, for Perot Systems Corporation (NYSE: PER), a provider of
technology-based business solutions. From December 2003 until November 2004,
Mr.
Weinstein was a partner with New York Technology Partners, LLC, a technology
transfer startup company. From December 2002 to December 2003, Mr. Weinstein
served as chief executive officer for Information Architects Corp. (OTCPK:
IACH), an internet-based pre-employment screening company. From October 2000
to
December 2002, he was the managing partner of Focos Investments, Inc., an
“angel” investment firm. From June 2000 to August 2001, Mr. Weinstein acted as a
partner in Link 1 LLC, a technology transfer startup company. Previously, Mr.
Weinstein served as Assistant General Counsel in the Executive Office of the
President of the United States from May 1986 to May 1987. From April 1984 to
May
1986, he served as attorney advisor for telecommunications and information
systems, Office of Management and Budget, Executive Office of the President
of
the United States and first chief of telecommunications and information systems
procurement law for the United States Air Force from October 1982 to April
1984.
Board
Committees
Our
board
of directors has an audit committee and our board of directors has adopted
a
charter for the audit committee, as well as a code of conduct and ethics that
governs the conduct of our directors, officers and employees.
Our
audit
committee consists of General Herres, General Fogleman and Governor Johnson.
Each member of our audit committee is financially literate under the current
listing standards of the American Stock Exchange.
The
audit
committee will review the professional services and independence of our
independent registered public accounting firm and our accounts, procedures
and
internal controls. The audit committee will also select our independent
registered public accounting firm, review and approve the scope of the annual
audit, review and evaluate the independent public accounting firm, review our
annual audit and annual consolidated financial statements, review with
management the status of internal accounting controls, evaluate problem areas
having a potential financial impact on us that may be brought to the committee’s
attention by management, the independent registered public accounting firm
or
the board of directors, and evaluate all of our public financial reporting
documents. In addition, our audit committee will be required to pre-approve
all
related party transactions between us and any of our officers, directors and
5%
or more stockholders and their respective affiliates.
Nominees
for the Company’s board of directors will be selected by vote of a majority of
the Company’s independent directors. The compensation of our chief executive
officer and other officers will be determined by a majority of our independent
directors in accordance with Section 805 of the American Stock Exchange Company
Guide.
Our
audit
committee (with any interested directors abstaining) will pass upon the
reasonableness of any reimbursable expenses in excess of $10,000. Steven M.
Wasserman, our Chief Executive Officer and President, will determine the
reasonableness of reimbursement of lesser amounts.
Changes
in Director Nomination Process for Stockholders
None.
Code
of Ethics
We
have
adopted a code of ethics (the “Code”) applicable to our directors, officers and
employees in accordance with applicable federal securities laws and rules of
The
American Stock Exchange. The Code was filed as Exhibit 14.1 to our registration
statement on Form S-1/A filed with the Securities and Exchange Commission on
February 9, 2007 and has been incorporated by reference into this annual report.
A written copy of the Code will be provided upon request at no charge by writing
to our Secretary, Alpha Security Group Corporation, 328 West 77th Street, New
York, New York 10024.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act requires our directors, executive officer
and persons who own more than 10% of our common stock to file reports of
ownership and changes in ownership of our common stock with the Securities
and
Exchange Commission. Our directors, executive officer and persons who own more
than 10% of our common stock are required by Securities and Exchange Commission
regulations to furnish to us copies of all Section 16(a) forms they file. To
our
knowledge, based solely upon a review of Forms 3, 4 and 5 and amendments to
these forms furnished to the Company, all our directors, executive officer
and
persons who own more than 10% of our common stock have filed Forms 3, 4 and
5 on
a timely basis during the year ended December 31, 2007.
Item
11.
|
Executive
Compensation
|
No
executive officer, director or initial stockholder, nor any affiliate thereof,
has received any cash compensation for services rendered. No compensation of
any
kind, including finder’s and consulting fees, will be paid by us to any of our
initial stockholders, including our officers and directors, or any of their
respective affiliates, for services rendered prior to or in connection with
a
business combination. However, 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, and we have agreed to pay ASG Management, Inc.,
an affiliated entity of which Mr. Wasserman and Mr. Blaha are principals, $7,500
per month for office space and certain additional general and administrative
services. Such 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 the stockholders. There is no limit
on
the amount of these out-of-pocket expenses. Our board of directors has
designated Steven M. Wasserman, our Chief Executive Officer and President,
to
pass upon the reasonableness of the reimbursement of expenses incurred by any
member of our management or board of directors in an amount of $10,000 or less.
Reimbursement of expenses in excess of $10,000 will be passed upon by our audit
committee, with any interested director abstaining. Other than through this
review process, or by review by a court of competent jurisdiction if such
reimbursement is challenged, provided that no proceeds held in the trust account
will be used to reimburse out-of-pocket expenses prior to a business
combination, there will be no other review of the reasonableness of these
expenses. If all of our directors are not deemed “independent,” we will not have
the benefit of independent directors examining the propriety of expenses
incurred on our behalf and subject to reimbursement, or monitoring our
compliance with the terms of the public offering. In addition, since the role
of
our current management and directors subsequent to a business combination is
uncertain, we have no ability to determine what remuneration, if any, will
be
paid to our current management and directors prior to or after a business
combination by any target businesses.
Since
our
formation, we have not granted any stock options or stock appreciation rights
or
any awards under long-term incentive plans.
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The
following table sets forth, as of April 11, 2008, certain information regarding
beneficial ownership of our common stock by each person who is known by us
to
beneficially own more than 5% of our common stock. The table also identifies
the
stock ownership of each of our directors, our officer, and all directors and
our
officer as a group. Except as otherwise indicated, the stockholders listed
in
the table have sole voting and investment powers with respect to the shares
indicated.
Shares
of
common stock which an individual or group has a right to acquire within 60
days
pursuant to the exercise or conversion of options, warrants or other similar
convertible or derivative securities are deemed to be outstanding for the
purpose of computing the percentage ownership of such individual or group,
but
are not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.
Name
and Address of Beneficial Owner
|
|
Amount and Nature of Beneficial Ownership
|
|
Percentage of Outstanding Common Stock
|
|
Steven
M. Wasserman (1) (2)
|
|
|
830,000
|
|
|
10.9
|
%
|
Robert
B. Blaha (2)
|
|
|
400,000
|
|
|
5.3
|
%
|
Gary
E. Johnson (2)
|
|
|
50,000
|
|
|
*
|
|
Carol
A. DiBattiste (2)
|
|
|
50,000
|
|
|
*
|
|
Ronald
R. Fogleman (2)
|
|
|
50,000
|
|
|
*
|
|
Robert
T. Herres (2)
|
|
|
50,000
|
|
|
*
|
|
Michael
Weinstein (2)
|
|
|
50,000
|
|
|
*
|
|
Laura
Haffner (2)
|
|
|
50,000
|
|
|
*
|
|
Fir
Tree Value Master Fund, L.P., Fir Tree, Inc. and Fir Tree Capital
Opportunity Master Fund, L.P. (3)
|
|
|
750,000
|
|
|
9.9
|
%
|
Polar
Securities Inc., North Pole Capital Master Fund and (4)
|
|
|
497,900
|
|
|
6.6
|
%
|
Wolverine
Convertible Arbitrage Fund, Ltd. (5)
|
|
|
396,875
|
|
|
5.2
|
%
|
Azimuth
Opportunity, Ltd. (6)
|
|
|
392,000
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (six
individuals)
|
|
|
1,430,000
|
|
|
18.9
|
%
|
* Less
than
1%
(1) |
Includes
80,000 shares of common stock owned by Tukwila Group LLC, an entity
in
which Mr. Wasserman is the sole manager and equity holder and has
sole
voting and dispositive power with respect to such shares and reflects
the
redemption in September 2006 of 20,000 shares of our common stock
previously owned by Tukwila Group
LLC.
|
(2) |
The
business address for each of our directors and officer is c/o Alpha
Security Group Corporation, 328 West 77th Street, New York, New York
10024.
|
(3) |
Based
on information contained in a Schedule 13G/A filed by Fir Tree Value
Master Fund, L.P., Fir Tree, Inc. and Fir Tree Capital Opportunity
Master
Fund, L.P. on February 14, 2008. The business address of Fir Tree,
Inc. is
505 Fifth Avenue, 23rd Floor, New York, New York 10017. The business
address of both Fir Tree Value Master Fund, L.P. and Fir Tree Capital
Opportunity Master Fund, L.P. is c/o Admiral Administration Ltd.,
Admiral
Financial Center, 5th Floor, 90 Fort Street, Box 32021 SMB, Grand
Cayman,
Cayman Islands. Fir Tree Value Master Fund, L.P. is the beneficial
owner
of and may direct the vote and dispose of 603,800 shares of our common
stock. Fir Tree Capital Opportunity Master Fund, L.P. is the beneficial
owner of and may direct the vote and dispose of 146,200 shares of
our
common stock. Fir Tree, Inc. has been granted investment discretion
over
the shares of our common stock held by Fir Tree Value Master Fund,
L.P.
and Fir Tree Capital Opportunity Master Fund,
L.P.
|
(4) |
Based
on information contained in a Schedule 13G/A filed by Polar Securities
Inc. and North Pole Capital Master Fund on February 14, 2008. The
business
address of Polar Securities Inc. and North Pole Capital Master Fund
is 372
Bay Street, 21st Floor, Toronto, Ontario M5H 2W9, Canada. Polar Securities
Inc. serves as the investment manager to North Pole Capital Master
Fund
and a number of discretionary accounts to which it has voting and
dispositive power over our common stock. Of the aggregate 497,900
shares
of our common stock with respect to which it has voting and dispositive
authority, 325,900 are beneficially owned by North Pole Capital Master
Fund. Polar Securities Inc. and North Pole Capital Master Fund disclaim
beneficial ownership of our common
stock.
|
(5) |
Based
on information contained in a Schedule 13G filed by Wolverine Convertible
Arbitrage Fund, Ltd. on February 14, 2008. The business address of
Wolverine Convertible Arbitrage Fund, Ltd. is 175 W. Jackson, Suite
200,
Chicago, IL 60604.
|
(6) |
Based
on information contained in a Schedule 13G filed by Azimuth Opportunity,
Ltd. on August 2, 2007. The business address of Azimuth Opportunity,
Ltd.
is c/o Ogier Qwomar Complex, 4th Floor, P.O. Box 3170, Road Town,
Tortola
British Virgin Islands.
|
Item
13.
|
Certain
Relationships and Related Transactions,
and Director Independence
|
In
July
2005, we issued 1,600,000 shares of our common stock to the individuals and
entity set forth below for an aggregate amount of $25,000 in cash, at an average
purchase price of $0.0156 per share, as follows:
Name
|
|
Number of Shares
|
|
Relationship to Us
|
Steven
M. Wasserman
|
|
780,000
|
|
Chief
Executive Officer, Chief Financial Officer, President, Secretary
and
Co-Chairman of our Board of Directors
|
Robert
B. Blaha
|
|
420,000
|
|
Chief
Management Officer, Executive Vice President and
Director
|
Tukwila
Group LLC
|
|
100,000
|
|
Affiliate
of Steven M. Wasserman
|
Gary
E. Johnson
|
|
50,000
|
|
Co-Chairman
of our Board of Directors
|
Carol
A. DiBattiste
|
|
50,000
|
|
Director
|
Ronald
R. Fogleman
|
|
50,000
|
|
Director
|
Robert
T. Herres
|
|
50,000
|
|
Director
|
Michael
Weinstein
|
|
50,000
|
|
Special
Advisor
|
Laura
Haffner
|
|
50,000
|
|
Stockholder
|
The
holders of the majority of these shares will be entitled to require us, on
up to
two occasions, to register these shares. The holders of the majority of these
shares may elect to exercise these registration rights at any time after the
date on which these shares of common stock are released from escrow, which,
except in limited circumstances, is not before one year following our
consummation of a business combination. In addition, these stockholders have
certain “piggy-back” registration rights on registration statements filed
subsequent to the date on which these shares of common stock are released from
escrow. We will bear the expenses incurred in connection with the filing of
any
such registration statements.
On
March
21, 2007, Steven M. Wasserman, our Chief Executive Officer, Chief Financial
Officer, President and Co-Chairman of our board of directors and Constantinos
Tsakiris, a former member of our board of directors, purchased from us an
aggregate of 3,200,000 warrants at $1.00 per warrant or an aggregate of
$3,200,000 in a private placement (Mr. Wasserman purchased 500,000 warrants
and,
Mr. Tsakiris purchased 2,700,000 warrants). Messrs. Wasserman and Tsakiris
paid
the purchase price for the private placement warrants out of their own funds
and
did not receive directly or indirectly, any cash or other consideration from
any
party in order to make these purchases. Such funds were not borrowed from any
third party. Such warrants are identical to the warrants included in the units
sold in the public offering. Each warrant is exercisable into one share of
common stock at $7.50 and will become exercisable on the later of: (i) the
completion of a business combination with a target business or (ii) one year
from the date of our initial public offering prospectus. The warrants are
subject to a lock-up agreement and held in accounts established by Mr. Wasserman
and Mr. Tsakiris with Maxim Group LLC until such time as we consummate a
business combination. Mr. Wasserman and Mr. Tsakiris will not request, and
Maxim
Group LLC will not grant, any waiver of the lock-up agreement.
In
May
2005, Steven M. Wasserman, our Chief Executive Officer, Chief Financial Officer,
President and Co-Chairman of our board of directors, and Robert B. Blaha, our
Chief Management Officer and Executive Vice President and a director, loaned
us
an aggregate of $187,802 to pay a portion of the expenses of the public
offering, such as SEC registration fees, NASD registration fees and legal and
accounting fees and expenses. We repaid Mr. Wasserman ($137,802) and Robert
Blaha ($50,000) an aggregate of $187,802 out of the proceeds of the public
offering for their loans which we used to cover expenses related to the public
offering.
In
addition, on March 16, 2007, Mr. Wasserman loaned us (on an interest-free basis)
an additional $250,000 for expenses of the public offering. This loan was to
be
repaid within 90 days of the closing of the public offering, but has not been
repaid through December 31, 2007.
We
have
agreed to pay ASG Management, Inc., an affiliated third party of which Mr.
Wasserman and Mr. Blaha are principals, $7,500 per month for office space and
certain additional general and administrative services.
In
September 2006, we redeemed an aggregate of 20,000 shares of our common stock
owned by Tukwila Group LLC, an entity owned by Steven M. Wasserman, for an
aggregate consideration of $312.50 or $.01 per share.
On
January 31, 2007, Steven M. Wasserman (30,000 shares) and Robert B. Blaha
(20,000 shares) transferred an aggregate of 50,000 shares of our common stock
to
Constantinos Tsakiris for an aggregate consideration of $500 or $.01 per
share.
We
will
reimburse our officers and directors for any reasonable out-of-pocket business
expenses incurred by them in connection with certain activities on our behalf
such as identifying and investigating possible target businesses and business
combinations. Our audit committee (with any interested directors abstaining)
will pass upon the reasonableness of any reimbursable expenses in excess of
$10,000. Steven M. Wasserman, our Chief Executive Officer and President, will
pass upon the receivableness of reimbursement of lesser amounts. There is no
limit on the amount of accountable out-of-pocket expenses reimbursable by us,
which will be reviewed only by our board or a court of competent jurisdiction
if
such reimbursement is challenged.
Other
than the reimbursable out-of-pocket expenses payable to our officers and
directors and the $7,500 per month payment to ASG Management, Inc., the
principals of which are Mr. Wasserman and Mr. Blaha, no compensation or fees
of
any kind, including finders and consulting fees, will be paid by us to any
of
our initial stockholders, officers or directors who owned our common stock
prior
to the public offering, or to any of their respective affiliates for services
rendered to us prior to or with respect to the business
combination.
Our
initial stockholders will not receive reimbursement for any out-of-pocket
expenses incurred by them to the extent that such expenses exceed permitted
working capital distributions as described herein unless the business
combination is consummated and there are sufficient funds available for
reimbursement after such consummation. The financial interest of such persons
could influence their motivation in selecting a target business and thus, there
may be a conflict of interest when determining whether a particular business
combination is in the stockholders’ best interest.
After
the
consummation of a business combination, if any, to the extent our management
remains as officers of the resulting business, we anticipate that our officers
and directors may enter into employment agreements, the terms of which shall
be
negotiated at the time of the business combination. Further, after the
consummation of a business combination, if any, to the extent our directors
remain as directors of the resulting business, we anticipate that they will
receive compensation for their service as directors.
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 at the time of such transactions 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 of our audit committee. In addition, our audit committee will
gather pricing information, estimates or fairness opinions from unaffiliated
third parties with respect to similar transactions undertaken by us to ascertain
whether such transactions with affiliates are on terms that are no less
favorable to us than are otherwise available from such unaffiliated third
parties. If a transaction with an affiliated third party were found to be on
terms less favorable to us than with an unaffiliated third party, we would
not
engage in such transaction.
Director
Independence
Our
board
of directors has determined that Governor Gary E. Johnson, Carol A. DiBattiste,
General Ronald R. Fogelman and Robert T. Herres are “independent directors”
within the meaning of Rule 121(A) of the American Stock Exchange Company Guide
and Rule 10A-3 promulgated under the Securities Act of 1934, as
amended.
Item
14.
|
Principal
Accountant Fees and
Services
|
As
previously disclosed in our December 19, 2007 8-K filing, certain of the
partners of Goldstein Golub Kessler LLP (GGK) became partners of McGladrey
&
Pullen, LLP (M&P). As a result, GGK resigned as auditors of the Company
effective December 18, 2007 and M&P was appointed as our independent
registered public accounting firm for the year ended December 31, 2007. During
the year ended December 31, 2006, the firm of Goldstein Golub Kessler LLP
(“GGK”) was our principal accountant. GGK had a continuing relationship with RSM
McGladrey, Inc. (“RSM”), from which it leased auditing staff who were full time,
permanent employees of RSM and through which its partners provided non-audit
services. GGK had no full time employees and therefore, none of the audit
services performed were provided by permanent full-time employees of GGK. GGK
managed and supervised the audit and audit staff, and was exclusively
responsible for the opinion rendered in connection with its examination. M&P
and RSM McGladrey, Inc. (RSM), an affiliate of M&P and GGK, have billed and
anticipate billing the Company as follows for the years ended December 31,
2007
and 2006.
Fee
Category
|
|
2007
|
|
2006
|
|
Audit
fees – McGladrey & Pullen, LLP
|
|
$
|
30,000
|
|
|
-
|
|
Audit
Fees – Goldstein Golub Kessler LLP
|
|
$
|
48,000
|
|
$
|
37,764
|
|
Audit
Fees
Audit
fees consist of fees for professional services rendered for the audit of the
Company’s financial statements and review of the interim financial statements
included in our quarterly reports on Form 10-Q and services rendered in
connection with our registration statement on Form S-1.
Audit
Related Fees
We
did
not incur any audit-related fees with M&P or GGK for the years ended
December 31, 2007 and 2006.
Tax
Fees
We
did
not incur any tax fees with M&P or GGK for the years ended December 31, 2007
and 2006.
All
Other Fees
We
did
not incur any fees with M&P or GGK for other professional services rendered
for the years ended December 31, 2007 or 2006.
Pre-Approval
Of Services
In
accordance with the SEC’s auditor independence rules, the Audit Committee has
established the following policies and procedures by which it approves in
advance any audit or permissible non-audit services to be provided to us by
our
independent auditor.
Prior
to
the engagement of the independent auditors for any fiscal year’s audit,
management submits to the Audit Committee for approval lists of recurring audit,
audit-related, tax and other services expected to be provided by the independent
auditors during that fiscal year. The Audit Committee adopts pre-approval
schedules describing the recurring services that it has pre-approved, and is
informed on a timely basis, and in any event by the next scheduled meeting,
of
any such services rendered by the independent auditor and the related
fees.
The
fees
for any services listed in a pre-approval schedule are budgeted, and the Audit
Committee requires the independent auditor and management to report actual
fees
versus the budget periodically throughout the year. The Audit Committee will
require additional pre-approval if circumstances arise where it becomes
necessary to engage the independent auditor for additional services above the
amount of fees originally pre-approved. Any audit or non-audit service not
listed in a pre-approval schedule must be separately pre-approved by the Audit
Committee on a case-by-case basis.
Every
request to adopt or amend a pre-approval schedule or to provide services that
are not listed in a pre-approval schedule must include a statement by the
independent auditors as to whether, in their view, the request is consistent
with the SEC’s rules on auditor independence.
The
Audit
Committee will not grant approval for:
|
·
|
any
services prohibited by applicable law or by any rule or regulation
of the
SEC or other regulatory body applicable to
us;
|
|
·
|
provision
by the independent auditors to us of strategic consulting services
of the
type typically provided by management consulting firms;
or
|
|
·
|
the
retention of the independent auditors in connection with a transaction
initially recommended by the independent auditors, the tax treatment
of
which may not be clear under the Internal Revenue Code and related
regulations and which it is reasonable to conclude will be subject
to
audit procedures during an audit of our financial
statements.
|
Tax
services proposed to be provided by the auditor to any director, officer or
employee of the Company who is in an accounting role or financial reporting
oversight role must be approved by the Audit Committee on a case-by-case basis
where such services are to be paid for by us, and the Audit Committee will
be
informed of any services to be provided to such individuals that are not to
be
paid for by us.
In
determining whether to grant pre-approval of any non-audit services in the
“all
other” category, the Audit Committee will consider all relevant facts and
circumstances, including the following four basic guidelines:
|
·
|
whether
the service creates a mutual or conflicting interest between the
auditor
and us;
|
|
·
|
whether
the service places the auditor in the position of auditing his or
her own
work;
|
|
·
|
whether
the service results in the auditor acting as management or an employee
of
our company; and
|
|
·
|
whether
the service places the auditor in a position of being an advocate
for our
company.
|
Item
15.
|
Exhibits,
Financial Statement
Schedules
|
(a)(1)
Financial Statements
An
index
to Consolidated Financial Statements appears on page F-1.
(b)
Exhibits
The
following Exhibits are filed as part of this report:
Exhibit No.
|
|
Description
|
3.1
|
|
Fourth
Amended and Restated Certificate of Incorporation*
|
3.2
|
|
Amended
and Restated By-laws*
|
4.1
|
|
Specimen
Unit Certificate*
|
4.2
|
|
Specimen
Common Stock Certificate*
|
4.3
|
|
Specimen
Warrant Certificate*
|
4.4
|
|
Form
of Warrant Agreement between American Stock Transfer & Trust Company
and the Registrant*
|
10.1.1
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Steven M.
Wasserman*
|
10.1.2
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Robert B.
Blaha*
|
10.1.3
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Michael
Weinstein*
|
10.1.4
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Carol A.
DiBattiste*
|
10.1.5
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Robert T.
Herres*
|
10.1.6
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Gary E.
Johnson*
|
10.1.7
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Ronald R.
Fogleman*
|
10.1.8
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Laura
Haffner*
|
10.1.9
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and Constantinos
Tsakiris*
|
10.1.10
|
|
Letter
Agreement among the Registrant, Maxim Group LLC and the Tukwila Group
LLC*
|
10.2
|
|
Form
of Investment Management Trust Agreement between American Stock Transfer
& Trust Company and the Registrant*
|
10.3
|
|
Form
of Stock Escrow Agreement between the Registrant, American Stock
Transfer
& Trust Company and the Initial Stockholders*
|
10.4
|
|
Form
of Registration Rights Agreement among the Registrant and the Initial
Stockholders*
|
10.5
|
|
Office
Services Agreement by and between the Registrant and ASG Management,
Inc.*
|
10.6.1
|
|
Promissory
Note, dated May 18, 2005, as amended on January 16, 2007, issued
to Steven
M. Wasserman, in the amount of $137,802.50*
|
10.6.2
|
|
Promissory
Note, dated May 18, 2005, as amended on January 16, 2007, issued
to Robert
B. Blaha, in the amount of $50,000*
|
10.6.3
|
|
Amended
and Restated Letter Agreement between the Registrant and Steven M.
Wasserman with respect to loan of up to $250,000*
|
10.7
|
|
Form
of Unit Purchase Option Agreement between the Registrant and Maxim
Group
LLC*
|
10.8
|
|
Form
of Subscription Agreement by and among the Registrant, Steven M.
Wasserman
and Constantinos Tsakiris*
|
14.1
|
|
Code
of Ethics*
|
31.1
|
|
Certification
of the Principal Executive Officer and Principal Financial Officer
pursuant to Rule 13-14(a) of the Securities Exchange of
1934
|
32.1
|
|
Certificate
of the Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002
|
*
Incorporated by reference to our Registration Statement on Form S-1,
Registration No. 333-127999, filed with the Securities and Exchange Commission
on August 31, 2005, as amended.
SIGNATURES
In
accordance with the requirements of the Securities and Exchange Act of 1934,
the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
ALPHA
SECURITY GROUP CORPORATION
|
|
|
|
April
15, 2008
|
By:
|
/s/
Steven M. Wasserman
|
|
|
Name:
|
Steven
M. Wasserman
|
|
|
Title:
|
Chief
Executive Officer and Chief
Financial
Officer (Principal Executive
and
Financial Officer)
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
April
15, 2008
|
By:
|
/s/
Steven M. Wasserman
|
|
|
Name:
|
Steven
M. Wasserman
|
|
|
Title:
|
Chief
Executive Officer and Chief
Financial
Officer, President, Secretary
and
Co-Chairman of the Board of
Directors
(Principal Executive and
Financial
Officer)
|
April
15, 2008
|
By:
|
/s/
Gary E. Johnson
|
|
|
Name:
|
Gary
E. Johnson
|
|
|
Title:
|
Co-Chairman
of the Board of
Directors
|
April
15, 2008
|
By:
|
/s/
Robert B. Blaha
|
|
|
Name:
|
Robert
B. Blaha
|
|
|
Title:
|
Chief
Management Officer, Executive
Vice
President and Director
|
April
15, 2008
|
By:
|
/s/
Carol A. DiBattiste
|
|
|
Name:
|
Carol
A. DiBattiste
|
|
|
Title:
|
Directors
|
April
15, 2008
|
By:
|
/s/
Ronald R. Fogleman
|
|
|
Name:
|
Ronald
R. Fogleman
|
|
|
Title:
|
Directors
|
April
15, 2008
|
By:
|
/s/
Robert T. Herres
|
|
|
Name:
|
Robert
T. Herres
|
|
|
Title:
|
Directors
|
ALPHA
SECURITY GROUP CORPORATION
(a
corporation in the development stage)
FINANCIAL
STATEMENTS
and
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
DECEMBER
31, 2007 and 2006
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-3
|
|
|
|
Financial
Statements
|
|
|
|
|
|
Balance
Sheets
|
|
F-4
|
|
|
|
Statements
of Operations
|
|
F-5
|
|
|
|
Statement
of Stockholders’ Equity (Deficiency)
|
|
F-6
|
|
|
|
Statements
of Cash Flows
|
|
F-7
|
|
|
|
Notes
to Financial Statements
|
|
F-8
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
Alpha
Security Group Corporation
We
have
audited the balance sheet of Alpha Security Group Corporation (a corporation
in
the development stage) as of December 31, 2007, and the related statements
of
operations, stockholders’ equity, and cash flows for the year then ended and the
amounts included in the cumulative columns in the statements of operations
and
cash flows for the year ended December 31, 2007. 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 Alpha Security Group Corporation
as
of December 31, 2007, and the results of its operations and its cash flows
for
the year then ended and the amounts included in the cumulative columns in the
statements of operations and cash flows for the year ended December 31, 2007
in
conformity with U. S. generally accepted accounting principles.
/s/
MCGLADREY & PULLEN LLP
MCGLADREY
& PULLEN LLP
New
York,
New York
April
11,
2008
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
Alpha
Security Group Corporation
We
have
audited the accompanying balance sheet of Alpha Security Group Corporation
(a
corporation in the development stage) as of December 31, 2006, and the related
statements of operations, stockholders’ deficiency, and cash flows for the year
then ended and the amounts included in the cumulative columns for the period
from April 20, 2005 (inception) 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 audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the 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 audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Alpha Security Group Corporation
as
of December 31, 2006 and the results of its operations and its cash flows for
the year then ended and for the period included in the cumulative column from
April 20, 2005 (inception) to December 31, 2006 in conformity with United States
generally accepted accounting principles.
/s/
GOLDSTEIN GOLUB KESSLER LLP
GOLDSTEIN
GOLUB KESSLER LLP
New
York,
New York
April
2,
2007
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE
SHEETS
|
|
December 31, 2007
|
|
December 31, 2006
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
|
|
$
|
8,726
|
|
$
|
7,119
|
|
Investment
in trust account
|
|
|
60,578,630
|
|
|
—
|
|
Prepaid
expenses
|
|
|
17,342
|
|
|
—
|
|
Total
current assets
|
|
|
60,604,698
|
|
|
7,119
|
|
Deferred
tax asset
|
|
|
150,220
|
|
|
—
|
|
Property
& equipment, net of depreciation
|
|
|
6,099
|
|
|
—
|
|
Deferred
offering costs
|
|
|
—
|
|
|
495,712
|
|
Total
assets
|
|
$
|
60,761,017
|
|
$
|
502,831
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accrued
offering costs — principally professional fees
|
|
$
|
—
|
|
$
|
325,386
|
|
Accrued
expenses
|
|
|
75,235
|
|
|
—
|
|
Deferred
underwriting fees
|
|
|
1,800,000
|
|
|
—
|
|
Notes
payable — stockholders
|
|
|
250,000
|
|
|
187,802
|
|
Total
liabilities
|
|
|
2,125,235
|
|
|
513,188
|
|
|
|
|
|
|
|
|
|
Common
stock, subject to possible redemption, 2,099,400 shares, at redemption
value of $9.70 per share
|
|
|
20,364,180
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
Stockholders’
equity (deficiency)
|
|
|
|
|
|
|
|
Preferred
stock, $.0001 par value, authorized 1,000,000 shares, none
issued
|
|
|
|
|
|
|
|
Common
stock, $.0001 par value, authorized 30,000,000 shares; issued and
outstanding 7,580,000 shares, inclusive of 2,099,400 shares subject
to
possible redemption and 1,580,000 shares at December 30, 2007 and
December
31, 2006
|
|
|
758
|
|
|
158
|
|
Additional
paid in capital
|
|
|
37,488,281
|
|
|
24,530
|
|
Earnings
(deficit) accumulated during the development stage
|
|
|
782,563
|
|
|
(35,045
|
)
|
Total
stockholders’ equity (deficiency)
|
|
|
38,271,602
|
|
|
(10,357
|
)
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity (deficiency)
|
|
$
|
60,761,017
|
|
$
|
502,831
|
|
See
accompanying notes to financial statements.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS
OF OPERATIONS
|
|
|
|
For the period
from April 20,
|
|
|
|
Years ended
|
|
|
|
|
|
December 31,
2007
|
|
December 31,
2006
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
Formation
and operating costs
|
|
$
|
(504,258
|
)
|
$
|
(23,905
|
)
|
$
|
(539,303
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income
|
|
|
2,094,530
|
|
|
—
|
|
|
2,094,530
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) before provision for income taxes
|
|
|
1,590,272
|
|
|
(23,905
|
)
|
|
1,555,227
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
772,664
|
|
|
|
|
|
772,664
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
817,608
|
|
$
|
(23,905
|
)
|
$
|
782,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
6,166,301
|
|
|
1,594,167
|
|
|
3,288,032
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share
|
|
$
|
0.13
|
|
$
|
(0.01
|
)
|
$
|
0.24
|
|
See
accompanying notes to financial statements.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS
OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
|
|
For the period from April 20, 2005 (inception) to December 31, 2007
|
|
|
|
Common stock
|
|
Additional paid-in
|
|
Earnings (deficit)
accumulated during
the development
|
|
Stockholders’ equity
|
|
|
|
Shares
|
|
Amount
|
|
capital
|
|
stage
|
|
(deficiency)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued July 18, 2005 at $.0156
|
|
|
1,600,000
|
|
$
|
160
|
|
$
|
24,840
|
|
$
|
—
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss - 2005
|
|
|
|
|
|
|
|
|
|
|
|
(11,140
|
)
|
|
(11,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2005
|
|
|
1,600,000
|
|
$
|
160
|
|
$
|
24,840
|
|
$
|
(11,140
|
)
|
$
|
13,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss - 2006
|
|
|
|
|
|
|
|
|
|
|
|
(23,905
|
)
|
|
(23,905
|
)
|
Redemption
- September 15, 2006
|
|
|
(20,000
|
)
|
|
(2
|
)
|
|
(310
|
)
|
|
|
|
|
(312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2006
|
|
|
1,580,000
|
|
$
|
158
|
|
$
|
24,530
|
|
$
|
(35,045
|
)
|
$
|
(10,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
of private placement -March 21, 2007
|
|
|
|
|
|
|
|
|
3,200,000
|
|
|
|
|
|
3,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued March 28, 2007 at $10 per share
|
|
|
6,000,000
|
|
|
600
|
|
|
59,999,400
|
|
|
|
|
|
60,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
subject to possible redemption
|
|
|
|
|
|
|
|
|
(20,364,180
|
)
|
|
|
|
|
(20,364,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
of the Offering
|
|
|
|
|
|
|
|
|
(5,371,569
|
)
|
|
|
|
|
(5,371,569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income - 2007
|
|
|
|
|
|
|
|
|
|
|
|
817,608
|
|
|
817,608
|
|
Proceeds
of options sold
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2007
|
|
|
7,580,000
|
|
$
|
758
|
|
$
|
37,488,281
|
|
$
|
782,563
|
|
$
|
38,271,602
|
|
See
accompanying notes to financial statements
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS
OF CASH FLOWS
|
|
For the year ended
|
|
For the period
|
|
|
|
|
|
|
|
April 20, 2005
|
|
|
|
|
|
|
|
(Inception) to
|
|
|
|
December 31, 2007
|
|
December 31, 2006
|
|
December 31, 2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
817,608
|
|
$
|
(23,905
|
)
|
$
|
782,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
299
|
|
|
—
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in investment in Trust Account
|
|
|
(2,086,835
|
)
|
|
—
|
|
|
(2,086,835
|
)
|
Increase
in deferred tax asset
|
|
|
(150,220
|
)
|
|
—
|
|
|
(150,220
|
)
|
Increase
in prepaid expenses
|
|
|
(17,342
|
)
|
|
—
|
|
|
(17,342
|
)
|
Increase
in accrued expenses
|
|
|
74,001
|
|
|
—
|
|
|
75,235
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,362,489
|
)
|
|
(23,905
|
)
|
|
(1,396,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Payment
to trust account
|
|
|
(60,002,831
|
)
|
|
—
|
|
|
(60,002,831
|
)
|
Withdrawals
from trust account
|
|
|
1,511,036
|
|
|
—
|
|
|
1,511,036
|
|
Purchase
of equipment
|
|
|
(6,398
|
)
|
|
—
|
|
|
(6,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(58,498,193
|
)
|
|
—
|
|
|
(58,498,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Payment
of expenses of offering
|
|
|
(3,400,009
|
)
|
|
|
)
|
|
(3,571,569
|
)
|
Proceeds
from sale of common stock
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
Proceeds
from notes payable - stockholders
|
|
|
250,000
|
|
|
—
|
|
|
437,802
|
|
Proceeds
from initial public offering
|
|
|
60,000,000
|
|
|
—
|
|
|
60,000,000
|
|
Proceeds
from private placement
|
|
|
3,200,000
|
|
|
—
|
|
|
3,200,000
|
|
Proceeds
from sale of option
|
|
|
100
|
|
|
—
|
|
|
100
|
|
Repayment
of notes payable - stockholders
|
|
|
(187,802
|
)
|
|
—
|
|
|
|
)
|
Redemption
of stock
|
|
|
—
|
|
|
(312
|
)
|
|
(312
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
59,862,289
|
|
|
(55,378
|
)
|
|
59,903,219
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
1,607
|
|
|
(79,283
|
)
|
|
8,726
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- beginning of period
|
|
|
7,119
|
|
|
86,402
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- end of period
|
|
$
|
8,726
|
|
$
|
7,119
|
|
$
|
8,726
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
923,038
|
|
$
|
—
|
|
$
|
923,038
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual
of deferred offering fees
|
|
$
|
1,800,000
|
|
$
|
54,531
|
|
$
|
1,800,000
|
|
See
accompanying notes to financial statements.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2007
1.
Organization, Proposed Business Operations and Summary of Significant Accounting
Policies
Nature
of Operations
Alpha
Security Group Corporation (the “Company”) was incorporated in the State of
Delaware on April 20, 2005 as a blank check company formed to acquire, through
a
merger, capital stock exchange, asset acquisition or other similar business
combination, one or more businesses in the U.S. homeland security or defense
industries or a combination thereof.
At
December 31, 2007, the Company had not yet commenced any operations. All
activity through December 31, 2007 relates to the Company’s formation, a private
placement and the public offering described below. The Company has selected
December 31 as its fiscal year-end.
The
registration statement for the Company’s initial public offering (the “Public
Offering”) was declared effective on March 23, 2007. On March 21, 2007, the
Company completed a private placement (the “Private Placement”) and received net
proceeds of $3,200,000. The Company consummated the Public Offering on March
28,
2007 and received net proceeds of $60,000,000. The Company’s management has
broad discretion with respect to the specific application of the net proceeds
of
the Private Placement and the Public Offering (collectively the “Offerings”) (as
described in Note 2), although substantially all of the net proceeds of the
Offerings (exclusive of working capital) are intended to be generally applied
toward consummating a business combination with a target business. As used
herein, a “target business” shall include an operating business in the U.S.
homeland security or defense industries, or a combination thereof, and a
“business combination” shall mean the acquisition by the Company of such a
target business. There is no assurance that the Company will be able to effect
a
business combination successfully.
Of
the
proceeds of the Offerings, $60,002,831 was placed in a trust account (“Trust
Account”) at JP MorganChase, New York, New York, maintained by American Stock
Transfer & Trust Company, the Company’s transfer agent. This amount includes
the net proceeds of the Public Offering and the Private Placement (including
interest thereon), $1,800,000 of deferred underwriting compensation fees which
will be paid to Maxim Group LLC if, and only if, a business combination is
consummated, but which will be forfeited in part if public stockholders elect
to
have their shares redeemed for cash and in full if a business combination is
not
consummated and certain other deferred expenses.
The
funds
in the Trust Account will be invested until the earlier of (i) the consummation
of the Company’s first business combination or (ii) the liquidation of the Trust
Account as part of a plan of dissolution and liquidation approved by our
stockholders. Up to $1,825,000 of interest income on the Trust Account may
be
used to fund the Company’s working capital including payments for business,
legal and accounting, due diligence on prospective acquisitions and continuing
general and administrative expenses.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2007
1.
Organization, Proposed Business Operations and Summary of Significant Accounting
Policies (continued)
The
Company, after signing a definitive agreement for the acquisition of a target
business, will submit such transaction for stockholder approval. In the event
that public stockholders owning 35% or more of the outstanding stock excluding
for this purpose, those persons who were stockholders prior to the Offerings
vote against the business combination, the business combination will not be
consummated. All of the Company’s stockholders prior to the Offerings, including
all of the officers and directors of the Company (“Initial Stockholders”), have
agreed to vote their 1,580,000 founding shares of common stock in accordance
with the vote of the majority-in-interest of all other stockholders of the
Company with respect to any business combination. After consummation of the
Company’s first business combination, all of these voting safeguards will no
longer be applicable.
With
respect to the first business combination which is approved and consummated,
any
Public Stockholder who voted against the business combination may demand that
the Company redeem his or her shares. The per share redemption price will equal
$10 per share plus the pro-rata share of any accrued interest earned on the
Trust Account, net of: (i) taxes payable on interest income earned on the Trust
Account, State of Delaware franchise taxes, repayment of $250,000 of an
additional officer loan made prior to closing of the Public Offering by Steven
M. Wasserman (such loan was to be repaid within 90 days of the closing of the
Public Offering, but has not been repaid through December 31, 2007) and (ii)
up
to $1,825,000 of interest earned on the Trust Account released to the Company
to
fund its working capital. Accordingly, Public Stockholders holding 34.99% of
the
aggregate number of shares owned by all Public Stockholders may seek redemption
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. In the event that
more than 20% of the Public Stockholders exercise their redemption rights,
a
proportional percentage of the common stock held by the Company’s Initial
Stockholders will automatically, and without any further action required by
the
Company or such stockholders, be forfeited and cancelled upon consummation
of
the business combination. The percentage of shares forfeited will be equal
to
the percentage of redemptions above 20% and will be pro rata among the Initial
Stockholders on the 1,580,000 shares owned by them.
The
Company’s Amended and Restated Certificate of Incorporation provides for
mandatory liquidation of the Trust Account as part of a stockholder-approved
plan of dissolution and liquidation in the event that the Company does not
consummate a business combination within 18 months from the date of the
consummation of the Public Offering, or 24 months from the consummation of
the
Public Offering if a letter of intent, agreement in principle or definitive
agreement has been executed within 18 months after consummation of the Public
Offering and the business combination has not yet been consummated within such
18 month period. In the event of such liquidation, the amount in the Trust
Account will be distributed to the holders of the shares sold in the Public
Offering. The Company’s initial business combination must be for assets or with
a target business the fair market value of which is at least equal to 80% of
the
Company’s net assets at the time of such acquisition (exclusive of Maxim Group
LLC’s deferred underwriting compensation, including interest thereon, held in
the trust account). Steven M. Wasserman, Chief Executive Officer, Chief
Financial Officer, President and Co-Chairman of the board of directors and
Constantinos Tsakiris, a former director of the Company, purchased warrants
to
purchase an aggregate of 3,200,000 shares of common stock in the Private
Placement for an aggregate purchase price of $3,200,000 or $1.00 per warrant.
The Private Placement warrants are exercisable on the later of (i) the
completion of a business combination or (ii) March 23, 2008.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2007
1.
Organization, Proposed Business Operations and Summary of Significant Accounting
Policies (continued)
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with original maturities of
three months or less when purchased to be cash equivalents. Such cash and cash
equivalents, may exceed federally insured limits. The Company maintains its
accounts with financial institutions with high credit ratings.
Fair
Value of Financial Instruments
The
fair
value of the Company’s assets and liabilities that qualify as financial
instruments under SFAS No. 107 “Disclosures about Fair Value of Financial
Instruments,” approximate their carrying amounts presented in the balance sheet
at December 31, 2007.
The
Trust
Account investment are held in a U.S. Government money market account in
which cost approximates fair value.
Income
Taxes
On
January 1, 2007 the Company adopted FASB issue Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an Interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty
in tax positions recognized in a company’s financial statements in accordance
with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 requires that the
impact of a tax position be recognized in the financial statements if it is
more
likely than not that the tax position will be sustained on tax audit, based
on
the technical merits of the position. FIN 48 also provides guidance on
derecognition of tax positions that do not meet the “more likely than not”
standard, classification of tax assets and liabilities, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of FIN 48
had
no effect on our financial condition or results of operations since the company
has not identified any uncertain tax positions.
The
Company recognizes interest and penalties related to uncertain tax positions
in
income tax expense. All tax years remain open to examination by the major taxing
jurisdictions to which we are subject.
Recently
Issued Accounting Pronouncements
In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 141(R) “Business Combinations”.
This statement establishes principles and requirements for how the acquirer
of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest in
the
acquiree. The Statement also provides guidance for recognizing and measuring
the
goodwill acquired in the business combination and determines what information
to
disclose to enable users of the financial statements to evaluate the nature
and
financial effects of the business combination. The guidance will become
effective
for
acquisitions on or after the beginning of the first annual reporting period
beginning on or after December 15, 2008.
In
December
2007, the Financial Accounting Standards Board released Statement of Financial
Accounting Standards No. 160 “Non-Controlling Interests in Consolidated
Financial Statements” (“SFAS 160”) that is effective for periods beginning on or
after December 15, 2008. Upon adoption of SFAS 160, the Company will re-classify
any non-controlling interests as a component of equity.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2007
1.
Organization, Proposed Business Operations and Summary of Significant Accounting
Policies (continued)
Income
(Loss) per Common Share
Income
(Loss) per share is computed by dividing net income (loss) by the
weighted-average number of shares of common stock outstanding during the period.
Shares of common stock issuable upon the exercise of options and warrants at
December 31, 2007 (9,410,000 shares) are excluded from the computation since
such options and warrants are contingently exercisable.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of
income and expenses during the reporting period. Actual results could differ
from those estimates.
2.
Public Offering and Private Placement
On
March
28, 2007 the Company sold 6,000,000 units to the public at a price of $10.00
per
unit. Each unit consists of one share of the Company’s common stock, $.0001 par
value, and one Redeemable Common Stock Purchase Warrant (“Warrant”). Each
Warrant entitles the holder to purchase from the Company one share of common
stock at an exercise price of $7.50 commencing the later of (i) the completion
of a business combination with a target business or (ii) March 23, 2008, and
expires March 23, 2011. The Warrants will be redeemable by the Company at a
price of $0.01 per warrant upon 30 days notice after the Warrants become
exercisable, only in the event that the closing price of the common stock is
at
least $14.25 per share for any 20 trading days within a 30 trading day period
ending on the third day prior to the date on which notice of redemption is
given.
On
March
21, 2007, Steven M. Wasserman, Chief Executive Officer, Chief Financial Officer,
President and Co-Chairman of the board of directors and Constantinos Tsakiris,
a
former director, acquired warrants to purchase an aggregate of 3,200,000 shares
of common stock from the Company in a Private Placement. The total purchase
price for the warrants was $3,200,000 or $1.00 per warrant. The Warrants
included in the Private Placement have terms identical to the Warrants included
in the Offering.
Under
the
terms of the Company’s warrant agreement, no public warrants will be exercisable
unless at the time of exercise a registration statement relating to common
stock
issuable upon exercise of the warrants is effective and current, a prospectus
is
available for use by the public stockholders and those shares of common stock
have been registered or been deemed to be exempt from registration under the
securities laws of the state of residence of the holder of the warrants. The
holders of the Warrants issued in the Private Placement will be able to exercise
their Warrants even if, at the time of exercise, a prospectus relating to the
common stock issuable upon exercise of such Warrants is not
current.
In
addition, in no event will the registered holders of the Warrants issued in
the
Public Offering or the Private Placement be entitled to receive a net cash
settlement of stock or other consideration in lieu of physical settlement in
shares of the Company’s common stock. As such, the Company has determined that
the public warrants should be classified in stockholders’ equity in accordance
with the guidance of EITF 00-19 (“EITF 00-19”), Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2007
2.
Public Offering and Private Placement (continued)
The
Company will use its best efforts to cause a registration statement to become
effective on or prior to the commencement of the warrant exercise period and
to
maintain the effectiveness of such registration statement until the expiration
of the Warrants. If the Company is unable to maintain the effectiveness of
such
registration until the expiration of the Warrants and therefore is unable to
deliver registered shares, the Warrants may become worthless.
3.
Note Payable, Stockholder
The
Company issued an unsecured promissory note to Steven Wasserman, a related
party, totaling $250,000 on March 28, 2007. The Note does not bear interest
and
was to be repaid in full ninety days thereafter and such repayment has not
been
made. Due to the short-term nature of the promissory note, the fair value of
the
note approximates its carrying value.
4.
Commitments
The
Company has agreed to pay to an affiliated third party, $7,500 a month for
24
months for office space and general and administrative expenses.
Upon
completion of the Public Offering, the Company sold to the representative of
the
underwriters, for $100, an option to purchase up to a total of 105,000 units.
The units issuable upon exercise of this option are identical to those offered
in the Public Offering. This option is exercisable at $11.00 per unit commencing
after 180 days from March 23, 2007 and expiring March 23, 2012. The 105,000
units (the 105,000 shares of common stock and the 105,000 warrants underlying
such units, and the 105,000 shares of common stock underlying such warrants)
have been deemed compensation by the National Association of Securities Dealers
(“NASD”) and are therefore subject to a 180-day lock-up pursuant to Rule
2710(g)(1) of the NASD Conduct Rules. Additionally, the option may not be sold,
transferred, assigned, pledged or hypothecated for a 24-month period (including
the foregoing 180-day period) following March 23, 2007 (the effective date
of
the prospectus pertaining to the Public Offering). However, the option may
be
transferred to any underwriter and selected dealer participating in the Public
Offering and their bona fide officers or partners. This represents an amended
agreement between the Company and the representative of the underwriters,
revising their original agreement which provided for the issuance of an option
to purchase 420,000 units with a lock-up period of one-year. The option may
expire unexercised and the underlying warrants unredeemed if the Company fails
to maintain an effective registration statement covering the units (including
the common stock and warrants) issuable upon exercise of the option. There
are
no circumstances upon which the Company will be required to net cash settle
the
option.
The
Company has accounted for this purchase option as a cost of raising capital
and
has included the instrument as equity in its financial statements. Accordingly,
there is no net impact on the Company’s financial position or results of
operations, except for the recording of the $100 proceeds from the sale. The
Company has estimated, based upon a Black Scholes model, that the fair value
of
the purchase option on the date of sale was approximately $4.46 per unit (a
total value of $468,300), using an expected life of five years, volatility
of
47.60% and a risk-free rate of 4.75%. The volatility calculation is based on
the
average volatility of 12 companies in the U.S. homeland security and defense
industries during the period from March 14, 2002 to March 15, 2007. Because
the
Company did not have a trading history, the Company needed to estimate the
potential volatility of its unit price, which depended on a number of factors
which could not be ascertained at the time. The Company used these companies
because management believed that the volatility of these companies was a
reasonable benchmark to use in estimating the expected volatility for the
Company’s units. Although an expected life of five years was used in the
calculation,
if the Company does not consummate a business combination within the prescribed
time period and it liquidates, the option will become worthless.
ALPHA
SECURITY GROUP CORPORATION
(A
CORPORATION IN THE DEVELOPMENT STAGE)
NOTES
TO
FINANCIAL STATEMENTS
December
31, 2007
4.
Commitments (continued)
The
Company has engaged the representative of the underwriters, on a non-exclusive
basis, as its agent for the solicitation of the exercise of the warrants. To
the
extent not inconsistent with the guidelines of the NASD and the rules and
regulations of the Securities and Exchange Commission, the Company has agreed
to
pay the representative for bona fide services rendered a cash commission equal
to 5% of the exercise price for each warrant exercised more than one year after
the effective date of the prospectus if the exercise was solicited by the
representative. In addition to soliciting, either orally or in writing, the
exercise of the warrants, the representative’s services may also include
disseminating information, either orally or in writing, to warrant holders
about
the Company or the market for the Company’s securities, and assisting in the
processing of the exercise of the warrants. No compensation will be paid to
the
representative upon the exercise of the warrants if:
|
·
|
the
market price of the underlying shares of common stock is lower than
the
exercise price;
|
|
·
|
the
holder of the warrants has not confirmed in writing that the
representative solicited the
exercise;
|
|
·
|
the
warrants are held in a discretionary
account;
|
|
·
|
the
warrants are exercised in an unsolicited transaction;
or
|
|
·
|
the
arrangement to pay the commission is not disclosed in the prospectus
provided to warrant holders at the time of
exercise.
|
5.
Income Taxes
The
Company’s provision for (benefit from) income taxes is as follows:
|
|
Year ended
December 31, 2007
|
|
Current:
|
|
|
|
|
Federal
|
|
$
|
574,837
|
|
State
& local
|
|
|
348,047
|
|
|
|
|
|
|
Total
Current
|
|
|
922,884
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
Federal
|
|
|
(93,658
|
)
|
State
& local
|
|
|
(56,562
|
)
|
|
|
|
|
|
Total
Deferred
|
|
|
(150,220
|
)
|
|
|
|
|
|
Total
Provision
|
|
$
|
772,664
|
|
Significant
components of the Company’s deferred tax asset are as follows:
|
|
December 31, 2007
|
|
December 31, 2006
|
|
|
|
|
|
|
|
Expenses
deferred for income tax purposes
|
|
|
193,878
|
|
|
11,915
|
|
Valuation
allowance
|
|
|
(43,658
|
)
|
|
(11,915
|
)
|
Total
deferred tax asset
|
|
$
|
150,220
|
|
$
|
—
|
|
A
reconciliation of the Company’s income tax provision (benefit) at the federal
statutory rate to the actual income tax provision (benefit) is as
follows:
|
|
December 31, 2007
|
|
December 31, 2006
|
|
Federal
income tax rate
|
|
|
34.00
|
%
|
|
34.00
|
%
|
State
& local tax rates
|
|
|
10.90
|
|
|
|
|
Valuation
Allowance
|
|
|
3.70
|
%
|
|
(34.00
|
)%
|
|
|
|
|
|
|
|
|
Effective
Tax Rate
|
|
|
48.60
|
%
|
|
—
|
|
Deferred
income taxes represent the net tax effects of temporary differences between
the
carrying amounts of assets and liabilities for financial reporting purposes
and
amounts used for income tax purposes. The Company had a net deferred tax asset
of approximately $150,220 on December 31, 2007. A valuation allowance was
established for the realizability of certain tax benefits considering the
expected future taxable income of the Company.
6.
Preferred Stock
The
Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences, as may be determined
from
time to time by the board of directors.
7.
Stockholders’ Equity
On
September 8, 2006, the Company redeemed 20,000 shares of its common stock at
a
price of $0.0125 per share.
On
September 15, 2006, the Company effected a 0.80 for 1 reverse stock split.
All
share numbers herein reflect this adjustment.
On
January 16, 2007, the Company filed its Third Amended and Restated Certificate
of Incorporation with the State of Delaware, reducing its authorized
capitalization from 100,000,000 shares of common stock, par value $.0001 per
share, and 1,000,000 shares of preferred stock, par value $.0001 per share,
to
30,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. Such reduction has been
given retroactive effect in these financial statements.
On
February 7, 2007, the Company filed its Fourth Amended and Restated Certificate
of Incorporation with the State of Delaware, amending the restriction against
the Company proceeding with a business combination from disallowing such a
transaction if the holders of less than 30% of the number of shares sold in
the
Public Offering vote against a business combination and subsequently exercise
their dissolution rights, increasing such percentage to 35%.