Item 1.
BUSINESS
General
We
are a
blank check company organized under the laws of the State of Delaware on August
24, 2006. We were formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase or other similar business
combination with a technology or technology-related business that has operations
or facilities located in Israel, or that intends to establish operations or
facilities in Israel, such as research and development, manufacturing or
executive offices, following our initial business combination. To date, our
efforts have been limited to organizational activities. We have neither engaged
in any operations nor generated any revenues to date.
We
intend
to utilize cash derived from the proceeds of our completed initial public
offering, our capital stock, debt or a combination of cash, capital stock and
debt, in effecting a business combination.
Our
initial business combination must be with an operating business whose fair
market value is equal to at least 80% of our net assets (excluding deferred
underwriting fees) at the time of such acquisition. We may seek to raise
additional funds through the private sale of securities or the incurrence of
indebtedness that would enable us to effect a business combination with an
operating business having a fair market value of at least, or greater than,
80%
of our net assets at the time of such an acquisition. There is no limitation
on
our ability to raise such additional funds through the sale of securities or
the
incurrence of indebtedness. We have not entered into any financing arrangements
or had discussions, formal or otherwise, with any third parties with respect
to
such financing arrangements.
A
registration statement for our initial public offering was declared effective
on
June 18, 2007. On June 22, 2007, we closed our initial public offering of
21,562,500 units (including the underwriters’ over-allotment option of 2,812,500
units) with each unit consisting of one share of our common stock and one
warrant, each to purchase one share of our common stock at an exercise price
of
$6.00 per share. The units from the initial public offering (including the
underwriters’ over-allotment option) were sold at an offering price of $8.00 per
unit. On June 22, 2007, we also consummated the private sale of 3,625,000
warrants at a price of $1.00 per warrant to certain of our initial stockholders.
Our common stock and warrants started trading separately on July 11, 2007.
We
generated gross proceeds of $176,125,000 from the sale of the units in our
initial public offering and the private placements. After deducting the
underwriting discounts and commissions, non-accountable expense allowance and
the offering expenses, the total net proceeds to us from the offering (including
the underwriters’ over-allotment option) were $163,430,000, of which
$163,050,000 was deposited into the trust account at Lehman Brothers Inc.,
maintained by Continental Stock Transfer & Trust Company, acting as trustee,
and the remaining proceeds of $380,000 became available to be used by us to
provide for business, legal and accounting due diligence or prospective business
combinations and continuing general and administrative expenses. In addition,
$6,468,750, representing the deferred underwriting discounts and commissions,
were deposited into the trust account for a total of $169,518,750 deposited
into
the trust account. The amounts deposited into the trust account remain on
deposit in the trust account earning interest.
The
funds
held in the trust account, other than the deferred underwriting discounts and
commissions, may be used as consideration to pay the sellers of a target
business with which we ultimately complete a business combination. Up to
one-half of the interest earned on the trust account, net of taxes, may be
released to us to complete a business combination. Up to one-half of the
interest earned on the trust account, net of taxes, may be released to us to
fund our working capital requirements. Any amounts not paid as consideration
to
the sellers of the target business or to the underwriters as deferred
underwriting discounts and commissions may be used to finance the operations
of
the target business.
Our
offices are located at 14 A Achimeir Street, Ramat Gan 52587 Israel, and our
telephone number is 011-972-3-751-3707.
Focus
on Israel
Over
the
course of the past decade, Israel has emerged as a favorable environment for
technology and technology-related companies. Based on information publicly
available from the Israel Venture Capital (IRC) Research Center, the Israel
Venture Association (IVA) and the Government of Israel’s Ministry of Industry,
Trade and Labor, we believe that Israel represents an attractive environment
for
a target business for several reasons, including:
·
Israel’s
Central Bureau of Statistics reported that Israel’s Gross Domestic Product grew
by 4.9% in 2005 and by 5.9% in the first six months of 2006 (on an annualized
basis), ranking it as one of the fastest growing economies in the Western
world;
·
Israel’s
Central Bank reported that foreign investments in Israel have risen
consecutively in the last three years, reaching $9.7 billion in 2005, a 67%
rise
from 2004, and a record $11.9 billion in the first six months of
2006;
·
According
to the Israeli Ministry of Industry, Trade and Labor, Israeli companies are
offered favorable tax incentives and government funding plans;
·
According
to the Israeli Ministry of Industry, Trade and Labor, Israel offers the modern
infrastructure, protection and services required for businesses to compete
effectively including protection of trademarks and patents, a transparent
financial and legal system and sophisticated capital markets that allow
companies to simultaneously list their securities on Israeli and foreign
exchanges;
·
Fitch
and
other rating agencies have maintained Israel’s credit rating at “A-”, noting the
rapid growth of the Israeli economy, Israel’s low government deficit and a
decrease in the Israeli government’s debt level as positive factors in the
country’s risk profile;
·
According
to the Israeli Ministry of Foreign Affairs, Israeli universities and research
institutions have produced significant research and innovations and, due to
their outstanding reputation, have attracted prominent scientists, researchers,
and professors from outside of Israel;
·
According
to the Israeli Ministry of Finance, Israel has one of the highest per-capita
ratios of engineers in the world;
·
According
to the Consulate General of Israel, Israel has more startup companies, in
absolute terms, than any other country in the world other than the United
States;
·
Israeli-based
technology companies rank as the most listed non-U.S. based technology companies
on the Nasdaq Stock Market, according to the Nasdaq Stock Market, and also
rank
highly in the number of listed technology companies on many European stock
exchanges; and
·
In
2005,
the Israeli Government continued its policy of accelerated privatization and
has
pledged to maintain this policy in 2006.
To
amplify on these reasons, it is worth noting that Israel offers:
·
A
highly educated and trained work force
:
Israeli
companies have access to a large pool of software and hardware engineers, a
majority of whom were trained in Israel Defense Forces’ elite technology units
or in the former Soviet Union. In addition, due mainly to the highly talented
and technically educated workforce, many global technology companies have
established research and development facilities in Israel, including: Microsoft,
Intel, Hewlett Packard, IBM, Motorola, 3Com, Lucent, Cisco, Applied Materials,
AOL, National Semiconductors and others. These global technology companies
also
serve as a source of seasoned managers and entrepreneurs for emerging growth
companies.
·
Commercialization
and adaptation of defense technologies
:
Cutting-edge technologies are being developed in Israel for use by the Israeli
defense forces. Israeli technology companies have successfully converted and
adapted defense technologies to civilian applications. This is due in part
to
the highly trained engineers and technicians who enter the private sector after
having completed their military service and contribute to the advancement of
Israeli technology companies.
·
Government
incentives
:
In
order to boost investment in the technology sector, the Israeli government
initiated various incentives to both the investment community and to technology
companies. Various tax breaks and grants from the Office of the Chief Scientist
are provided to emerging growth companies. These initiatives led to tremendous
growth in the technology industry during the past decade.
Additionally,
according to the Israel Venture Capital Research Center, since 1999,
$11 billion in venture capital has been invested in Israel’s technology
industry, which funded more than 1,500 technology companies.
We
believe that this high degree of venture capital being invested in Israel,
when
compared to other countries, makes Israel a favorable environment for making
acquisitions, as there should be a greater number of prospective target
businesses searching for a way to provide their investors with a return on
their
investment, or a liquidity event. Typical liquidity events include an initial
public offering, a sale or merger, or the payment of a dividend.
We
will
not enter into a business combination unless the target company already has
operations or facilities located in Israel, or that intends to establish
operations or facilities in Israel, such as research and development,
manufacturing or executive offices, following our initial business
combination.
Effecting
a Business Combination
General
We
are
not presently engaged in, and we will not engage in, any substantive commercial
business until such time as a business combination is consummated, if ever.
We
intend to use cash derived from the proceeds of our initial offering and the
sale of the founder warrants simultaneously with the closing of our initial
offering, and issuances of our capital stock, debt or any combination thereof
to
effect a business combination. Although substantially all of the net proceeds
of
our initial offering (excluding the amount held in the trust account
representing the deferred portion of the underwriter’s fees) are intended to be
generally applied toward effecting a business combination as described in this
report, the proceeds are not otherwise designated for any more specific purpose.
A business combination may involve the acquisition of, or merger with, an
operating business that does not need substantial additional capital but desires
to establish a public trading market for its shares, while avoiding what it
may
deem to be adverse consequences of undertaking a public offering itself. These
consequences include time delays, significant expense, loss of voting control
and compliance with various federal and state securities laws. In the
alternative, a business combination may involve a company that may be
financially unstable or may possess weak management, but, in our belief,
possesses long-term growth potential. While we may seek to effect business
combinations with more than one target business, we will probably have the
ability, as a result of our limited resources, to effect only a single business
combination.
We
have not identified a target business
To
date,
we have not selected any target businesses for a business combination. Subject
to the requirements that a target business (a) have operations or facilities
located in Israel, or intends to establish operations or facilities in Israel,
such as research and development, manufacturing or executive offices, following
our initial business combination, (b) be in a technology or
technology-related industry and (c) have a fair market value of at least
80% of our net assets (excluding deferred underwriting fees) at the time of
the
acquisition, as described below in more detail, we will have virtually
unrestricted flexibility in identifying and selecting a prospective acquisition
candidate. We have not established any other specific attributes or criteria
(financial or otherwise) for prospective target businesses. We have not
conducted any research with respect to identifying potential acquisition
candidates for our company, or with respect to determining the likelihood or
probability of whether or not we will be able to locate and complete a business
combination. Accordingly, there is no basis for investors to evaluate the
possible merits or risks of the particular target business with which we may
ultimately complete a business combination. Although our management will
endeavor to evaluate the risks inherent in a particular target business, we
cannot make any assurances that we will properly ascertain or assess all
significant risk factors.
Sources
of target businesses
Target
business candidates have
and
will
continue to be brought to our attention from various unaffiliated sources,
including securities broker-dealers, investment bankers, venture capitalists,
bankers and other members of the financial community. Target businesses may
be
brought to our attention by such unaffiliated sources as a result of being
solicited by us through calls or mailings.
These
sources may also introduce us to target businesses in which they think we may
be
interested on an unsolicited basis since many of these sources will have read
this report and know what types of business we are targeting.. Our management
team has extensive experience in the technology and technology-related
industries, and has the experience and skills necessary to identify, acquire
and
assist the appropriate target business or businesses. Furthermore, through
their
considerable experience in technology and technology-related businesses, our
management team has acquired extensive contacts and sources from which to
generate acquisition opportunities. These contacts and sources include private
equity and venture capital funds, public and private companies, business
brokers, investment bankers, attorneys and accountants.
Our
initial stockholders, our officers and directors, and their affiliates may
also
bring to our attention target business candidates that they become aware of
through their business contacts as a result of formal or informal inquiries
or
discussions they may have, as well as attending trade shows or conventions.
While we do not presently anticipate engaging the services of professional
firms
that specialize in business acquisitions on any formal basis, we may engage
these firms in the future, in which event we may pay a finder’s fee or other
compensation to be determined in an arm’s length negotiation based on the terms
of the transaction. In no event, however, will our initial stockholders, our
officers and directors, or any entity with which they are affiliated, be paid
any finder’s fee, consulting fee or other compensation prior to, or for services
they render in order to effectuate, the consummation of a business combination;
provided, however, that we are permitted to pay a finders fee or other
compensation to Shrem, Fudim, Kelner & Co. Ltd. and/or to Shrem, Fudim,
Kelner - Technologies Ltd. should they provide us services prior to or in
connection with a business combination.
Selection
of a target business and structuring of a business combination
Subject
to the requirements that a target business (a) have operations or facilities
located in Israel, or intends to establish operations or facilities in Israel,
such as research and development, manufacturing or executive offices, following
our initial business combination, (b) be in a technology or
technology-related industry and (c) have a fair market value of at least
80% of our net assets (excluding deferred underwriting fees) at the time of
the
acquisition, as described below in more detail, our management will have
virtually unrestricted flexibility in identifying and selecting prospective
target business. We have not established any other specific attributes or
criteria (financial or otherwise) for prospective target
businesses.
In
evaluating a prospective target business, our management team will likely
consider one or more of the following factors:
·
financial
condition and results of operations (including whether a business could be
improved with new management and changes to operational and capital strategies);
·
both
long-term and short-term growth potential (including the degree to which
opportunities for growth exist through internal expansion, industry
consolidation, globalization or innovative business strategies);
·
experience
and skill of the target’s management and availability of additional personnel;
·
competitive
position (including strength of brands, if any, customer loyalty and product
quality reltive to its competitors);
·
regulatory
or technical barriers to entry, and their potential effect on the long-term
competitive environment of the target business;
·
stage
of
development of the products, processes or services including the degree of
current or potential market acceptance of the products, processes or
services;
·
capital
requirements (including required working capital and capital expenditures,
and
their effect on the company’s cash flows);
·
earnings
and operating margins;
·
nature
of
the customers and contracts;
·
stability
and continuity in customer relationships;
·
degree
of
current or potential market acceptance of the products, processes or services;
·
proprietary
features and degree of intellectual property or other protection of the
products, processes or services;
·
regulatory
environment of the relevant industry sector; and
·
costs
associated with effecting the business combination
These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination with an operating business will
be
based on the above factors as well as other considerations deemed relevant
by
our management team in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we intend
to
conduct an extensive due diligence review of the target business that will
encompass, among other things, meetings with incumbent management and inspection
of facilities, as well as review of financial and other information that will
be
made available to us. This due diligence review will be conducted either by
our
management or by unaffiliated third parties we may engage, although we have
no
current intention to engage such third parties. We will also seek to have all
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.
If
any prospective target business refuses to execute such agreement, it is
unlikely we would continue negotiations with such target business. However,
we
would weigh the risks of potential liability and amount of exposure to the
trust
fund against the attractiveness of the particular business opportunity in making
any such decision.
We
will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to us, the target business and their stockholders, as well as
our
own stockholders. We cannot make any assurances, however, that the Internal
Revenue Service or appropriate state tax authority will agree with our tax
treatment of the business combination.
The
time
and costs required to select and evaluate a target business and to structure
and
complete the business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the identification
and
evaluation of a prospective target business with which a business combination
is
not ultimately completed will result in a loss to us and reduce the amount
of
capital available to otherwise complete a business combination. We will not
pay
any finders or consulting fees to our existing stockholders, directors or
officers or special advisors, or any of their respective affiliates, for
services rendered in connection with a business combination; provided, however,
that we are permitted to pay a finders fee or other compensation to Shrem,
Fudim, Kelner & Co. Ltd. and/or to Shrem, Fudim, Kelner -
Technologies Ltd. should they provide us services prior to or in connection
with a business combination. However, our existing stockholders, directors
and
officers will receive reimbursement for any reasonable out-of-pocket expenses
incurred by them in connection with activities on our behalf.
Fair
market value of target business
The
initial target business that we acquire must have a fair market value equal
to
at least 80% of our net assets (excluding deferred underwriting fees) at the
time of such acquisition. The fair market value of such business will be
determined by our board of directors based upon standards generally accepted
by
the financial community, such as actual and potential sales, earnings and cash
flow and book value. If our board is not able to independently determine that
the target business has a sufficient fair market value or if a conflict of
interest exists with respect to such determination - which is likely to occur
only in those situations in which the target business is outside the scope
of
the expertise of our officers or in those situations in which the proposed
business combination was with an entity which is affiliated with any of our
initial stockholders - we will obtain an opinion from an unaffiliated,
independent financial services firm with respect to the satisfaction of such
criteria. Since any opinion, if obtained, would merely state that fair market
value meets the 80% of net assets threshold, it is not anticipated that copies
of such opinion would be distributed to our stockholders, although copies will
be provided to stockholders who request it. We will not be required to obtain
an
opinion from an investment banking firm as to the fair market value if our
board
of directors independently determines that the target business complies with
the
80% threshold.
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, initially, it is probable that we will have the ability to effect
only a single business combination. Accordingly, the prospects for our success
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:
·
will
result in our dependency upon the performance of a single operating business;
·
will
result in our dependency upon the development or market acceptance of a single
or limited number of products, processes or services; and
·
may
subject us to numerous economic, competitive and regulatory developments, any
or
all of which may have a substantial adverse impact upon the particular industry
in which we may operate subsequent to a business combination. We may not be
able
to diversify our operations or benefit from the possible spreading of risks
or
offsetting of losses, unlike other entities which may have the resources to
complete several business combinations in different industries or different
areas of a single industry so as to diversify risks and offset losses. Further,
the prospects for our success may be entirely dependent upon the future
performance of the initial target business we acquire.
·
Limited
ability to evaluate the target business’ management
Although
we intend to closely scrutinize the management of prospective target businesses
when evaluating the desirability of effecting a business combination, we cannot
make any assurances that our assessment of the target business’ management will
prove to be correct. In addition, we cannot make any assurances that the target
business’ management will have the necessary skills, qualifications or abilities
to manage a public company. Furthermore, although our directors and officers
intend to remain associated with us after the consummation of our initial
business combination, the future role, if any, of our directors and officers
in
the target business cannot presently be stated with any certainty since we
cannot predict the structure of the business combination or the operations
of
the target company we will pursue. Although we expect one or more members of
our
management to serve on our board of directors following a business combination,
subject to continued election by the stockholders, it is unlikely that any
of
our officers or directors will devote their full efforts to our affairs
subsequent to a business combination. We may request continued representation
of
our management on the board of directors in our negotiation with a target
company. We will consider a target company’s response to this request in
determining whether the acquisition is in the best interest of our shareholders.
Moreover, we cannot make any assurances that our directors and officers will
have significant experience or knowledge relating to the operations of the
particular target business acquired. For example, if we were to acquire a target
business with diverse operations or a division of a company that has a
specialized operation, we may have to hire additional management personnel
for
our post-business combination operations.
Following
a business combination, we may seek to recruit additional managers to supplement
the incumbent management of the target business. We cannot make any assurances
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 of the target business.:
Opportunity
for stockholder approval of business combination
Prior
to
the completion of a business combination, we will submit the transaction to
our
stockholders for approval, even if the structure of the business combination
is
such that it 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,
or
the Exchange Act, which, among other matters, will include a description of
the
operations of the target business and certain required financial information
regarding the target business.
In
connection with any vote required for our initial business combination, all
of
our existing stockholders, directors and officers, have agreed to vote the
shares of common stock then owned by them, including any shares of common stock
purchased in or following our initial offering, in accordance with the majority
of the shares of common stock voted by the public stockholders other than our
existing stockholders, directors and officers. As a result, our existing
stockholders, directors and officers will not have any conversion rights
attributable to their shares in the event that a business combination
transaction is approved by a majority of our public stockholders other than
our
existing stockholder, directors and officers. We will proceed with the initial
business combination only if both 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 20% of the shares sold in our initial
offering exercise their conversion rights.
Conversion
rights
At
the
time we seek stockholder approval of any business combination, we will offer
each public stockholder, other than our existing stockholders, directors and
officers, the right to have such stockholder’s shares of common stock converted
into cash if the stockholder votes against the business combination and the
business combination is approved and completed. Our existing stockholders,
directors and officers will not have this right with respect to the shares
owned
by them, because they have agreed to vote their shares of common stock in
accordance with the majority of the shares of common stock voted by the public
stockholders other than our existing stockholders, directors and officers.
The
actual per-share conversion price will be equal to the amount in the trust
account, including the amount held in the trust account representing the
deferred portion of the underwriter’s fee, but excluding one-half of the
interest earned on the trust account, net of taxes payable on such interest,
that will be released to us on a monthly basis to fund our working capital
requirements, as of two business days prior to the consummation of the business
combination, divided by the number of units sold in our initial offering.
Without taking into account any interest earned on the trust account, the
initial per-share conversion price would be approximately $7.64, or $0.36 less
than the per-unit offering price of $8.00. There may be a disincentive for
public stockholders to exercise their conversion rights due to the fact that
the
amount available to such stockholders is likely to be less than the purchase
price paid for the unit in the offering. Voting against the business combination
alone will not result in an election to exercise a stockholder’s conversion
rights. A stockholder must also affirmatively exercise such conversion rights
at
or prior to the time the business combination is voted upon by the stockholders.
An eligible stockholder may request conversion at any time after the mailing
to
our stockholders of the proxy statement at or prior to the vote taken with
respect to a proposed business combination at a meeting held for that purpose,
but the request will not be granted unless the stockholder votes against the
business combination and the business combination is approved and completed.
Any
request for conversion, once made, may be withdrawn at any time up to the date
of the meeting. It is anticipated that the funds to be distributed to eligible
stockholders who elect conversion will be distributed promptly after completion
of the business combination. Public stockholders who convert their stock into
their share of the trust account retain their warrants. We will not complete
any
proposed business combination for which our public stockholders owning 20%
or
more of the shares sold in our initial offering, other than our existing
stockholders, directors and officers, both vote against a business combination
and exercise their conversion rights.
We
will
not complete any business combination if public stockholders owning 25% or
more
of the shares sold in our initial public offering exercise their conversion
rights. Accordingly, it is our understanding and intention in every case to
structure and consummate a business combination in which approximately 24.99%
of
the public stockholders may exercise their conversion rights and the business
combination will still go forward.
Liquidation
if no business combination
Pursuant
to the terms of our amended and restated certificate of incorporation, if we
do
not complete a business combination by December 22, 2008 (18 months after June
22, 2007, the date we consummated our initial offering), or by June 22, 2009
if
the extension criteria described below have been satisfied, as part of any
plan
of dissolution and distribution in accordance with the applicable provisions
of
the Delaware General Corporation Law, we will dissolve and distribute to all
of
our public stockholders, in proportion to their respective equity interests,
an
aggregate sum equal to the amount in the trust account, including the amount
representing the deferred portion of the underwriter’s fees, but excluding
one-half of the interest earned on the trust account, net of taxes payable
on
such interest, that will be released to us on a monthly basis to fund our
working capital requirements, plus any remaining net assets. In the event we
seek stockholder approval for a plan of dissolution and distribution and do
not
obtain such approval, we will nonetheless continue to pursue stockholder
approval for our dissolution. Pursuant to the terms of our amended and restated
certificate of incorporation, our board has agreed to dissolve after the expiry
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
the trust account may not be distributed except upon our dissolution and, unless
and until such approval is obtained from our stockholders, the funds held in
the
trust account will not be released. Consequently, holders of a majority of
our
outstanding stock must approve our dissolution in order to receive the funds
held in the trust account and the funds will not be available for any other
corporate purpose. Upon the approval by our stockholders of our plan of
dissolution and distribution, we will liquidate the trust account to our public
stockholders. Our existing stockholders, directors and officers have agreed
to
waive their respective rights to participate in any liquidation distribution
occurring upon our failure to consummate a business combination, but only with
respect to those shares of common stock owned by them prior to our initial
offering; they will participate in any liquidation distribution with respect
to
any shares of common stock acquired in connection with or following our initial
offering. There will be no distribution from the trust account with respect
to
the warrants and all rights with respect to the warrants will effectively
terminate upon our liquidation.
Without
taking into account interest, if any, earned on the trust account, the initial
per-share liquidation value of the trust account would be approximately $7.64,
or $0.36 less than the per-unit offering price of $8.00. We also will have
access to any funds available outside the trust account and to one-half of
the
interest earned on the trust account, net of taxes payable on such interest,
that will be released to us on a monthly basis to fund our 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). However, we cannot
make any assurances that the actual per-share liquidation value of the trust
account will not be less than approximately $7.64, plus interest, due to claims
of creditors that exceed the funds available outside the trust account or
released to us to fund working capital requirements.
Placing
of funds in a trust account may not protect those funds from third party claims
against us. Although we will seek to have all vendors, prospective acquisition
targets and other entities with whom we engage in business enter into agreements
with us waiving any right in or to any monies held in the trust account for
the
benefit of our public stockholders, there is no guarantee that they will execute
such agreements, or even if they execute such agreements, that such waivers
will
be enforceable or they would otherwise be prevented from bringing claims against
the trust account.
If
any
third party refused to execute an agreement waiving such claims to the monies
held in the trust account, we would perform an analysis of the alternatives
available to us if we chose not to engage such third party and evaluate if
such
engagement would be in the best interest of our stockholders if such third
party
refused to waive such claims. Examples of possible instances in which we may
engage a third party that refused to execute a waiver include the engagement
of
a third party consultant whose particular expertise or skills are believed
by
management to be significantly superior to those of other consultants that
would
agree to execute a waiver or in cases where management is unable to find a
provider of required services willing to provide the waiver. In any event,
our
management would perform an analysis of the alternatives available to it and
would enter into an agreement with a third party that did not execute a waiver
only if management believed that such third 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 not seek recourse against
the
trust account for any reason. Furthermore, creditors may seek to interfere
with
the distribution process under state or federal creditor and bankruptcy laws,
which could delay the actual distribution of such funds or reduce the amount
ultimately available for distribution to our public stockholders. If we are
required to file a bankruptcy case or an involuntary bankruptcy case is filed
against us that is not dismissed, the funds held in the trust account will
be
subject to applicable bankruptcy law and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders.
Accordingly,
the proceeds held in trust could be subject to claims that could take priority
over the claims of our public stockholders and the per-share liquidation price
could be less than approximately $7.64, plus one-half of the interest earned
on
the trust account, net of taxes payable on such interest, for the relevant
period, due to claims of such creditors or other entities.
Our
founding stockholders, M.O.T.A. Holdings Ltd., FSGL Holdings Ltd and OLEV
Holdings Ltd, have agreed that, subject to the qualifications stated below,
they
will be liable to cover claims made by vendors for services rendered or
contracted for, or for products sold to us, but only if, and to the extent,
the
claims reduce the amounts in the trust account available for payment to our
stockholders in the event of a liquidation. This indemnification is limited
to
claims of vendors that do not execute a waiver of all right in or to the monies
held in the trust account. Claims by vendors or other entities that executed
such a waiver agreement would not be indemnified by our founding stockholders.
For the avoidance of doubt, our founding stockholders will not have any
liability as to any claimed amounts owed - directly or indirectly - including,
without limitation, liabilities to an acquisition target, any third party who
executed a waiver or the underwriter of our initial offering, except as set
forth above.
The
indemnification provision described above is set forth in the insider letter
agreements, dated September 29, 2006, which are filed as exhibits to the
registration statement that was declared effective on June 18,
2007.
If
we
enter into either a letter of intent, an agreement in principle or a definitive
agreement to complete a business combination prior to December 22, 2008 (18
months after June 22, 2007, the date we consummated our initial public
offering), but are unable to complete the business combination by December
22,
2008, 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 do so by June 22, 2009
(the 24-month period from June 22, 2007, the date we consummated our initial
public offering), we will then liquidate. Upon notice from us, the trustee
of
the trust account will commence liquidating 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
distribution. We will promptly instruct the trustee to commence liquidating
the
investments constituting the trust account after the expiration of the
applicable 18-month or 24-month period and upon the approval by our stockholders
of our plan of dissolution and distribution.
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, 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 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.) or potential target businesses. As described above, we are
obligated to have all vendors, service providers and prospective target
businesses execute agreements with us waiving any right, title, interest or
claim of any kind they may have in or to any monies held in the trust account.
As a result, the claims that could be made against us are significantly limited
and the likelihood that any claim would result in any liability extending to
the
trust is remote. Moreover, because we are obligated to obtain the waiver
agreements described above, the funds held in trust should be excluded from
the
claims of any creditors who executed such agreements in connection with any
bankruptcy proceeding.
We
expect
that all costs associated with the implementation and completion of our
dissolution and distribution, which currently estimate to be approximately
$50,000 to $75,000, will be funded by any funds not held in our trust account,
although we cannot make any assurances that there will be sufficient funds
for
such purpose. To the extent such funds are not available, M.O.T.A. Holdings
Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd have agreed to advance the
necessary funds. However, there can be no assurance that M.O.T.A. Holdings
Ltd.,
FSGL Holdings Ltd and OLEV Holdings Ltd will be able to meet their obligations
under this agreement.
We
currently believe that any plan of dissolution and distribution subsequent
to
the expiration of the 18 and 24 month deadlines would proceed in the following
manner:
·
our
board
of directors will, consistent with its obligations described in our amended
and
restated certificate of incorporation to dissolve, prior to the passing of
such
deadline, convene and adopt a specific plan of dissolution and distribution,
which it will then vote to recommend to our stockholders; at such time it will
also cause to be prepared a preliminary proxy statement setting out such plan
of
dissolution and distribution and the board’s recommendation of such plan;
·
upon
such
deadline, we would file the preliminary proxy statement with the Securities
and
Exchange Commission, or the SEC;
·
if
the
SEC does not review the preliminary proxy statement, then 10 days following
the
passing of such deadline, we will mail the proxy statements to our stockholders,
and 30 days following the passing of such deadline we will convene a meeting
of
our stockholders at which they will either approve or reject our plan of
dissolution and distribution; and
·
if
the
SEC 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 of reject our plan of dissolution and distribution.
In
the
event we seek stockholder approval for a plan of dissolution and distribution
and do not obtain such approval, we will nonetheless continue to pursue
stockholder approval for our dissolution. Pursuant to the terms of our amended
and restated certificate of incorporation, our powers following the expiration
of the permitted time periods for consummating a business combination will
automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. Other than in
the
event of a public stockholder seeking to convert its shares into cash upon
a
business combination that such stockholder voted against and that is actually
completed by us, 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.
In
addition, if we seek approval from our stockholders to consummate a business
combination within 90 days of June 22, 2009 (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), the proxy statement
related to such a business combination will also seek stockholder approval
for
our board’s recommended plan of distribution and dissolution, 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 June 22, 2009, our board will, prior to such date,
convene, adopt and recommend to our stockholders a plan of dissolution and
distribution, and on such date file a proxy statement with the SEC seeking
stockholder approval for such plan. Upon the approval by our stockholders of
our
plan of dissolution and distribution, we will liquidate our trust account to
our
public stockholders.
In
connection with the vote required for any business combination, our initial
stockholders have agreed to vote the shares of common stock then owned by them,
including any shares of common stock purchased in or following our initial
offering, in accordance with the vote of the public stockholders owning a
majority of the shares of our common stock sold in our initial offering. In
addition, they have agreed to waive their respective rights to participate
in
any liquidation distribution but only with respect to their initial shares
and
the shares of common stock underlying any founder warrants held by them at
the
time of such liquidation.
Competition
In
identifying, evaluating and pursuing a target business, we expect to encounter
intense competition from other entities having a business objective similar
to
ours, including other blank check companies, venture capital funds, leveraged
buyout funds, private equity firms, operating businesses and other entities
and
individuals, both foreign and domestic, competing for acquisitions. Many of
these entities and individuals 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. 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, the
following may not be viewed favorably by certain target businesses:
·
our
obligation to seek stockholder approval of a business combination may impede
or
delay the completion of a transaction;
·
our
obligation to convert shares of common stock into cash in certain instances
may
reduce the resources available to effect a business combination; and
·
our
outstanding warrants and the future dilution they potentially represent may
not
be viewed favorably by a target business.
Any
of
these factors may place us at a competitive disadvantage in consummating a
business combination. Our management believes, however, that our status as
a
public entity and potential access to the United States public equity markets
may give us a competitive advantage over privately-held entities having a
similar business objective as ours in acquiring a target business on favorable
terms.
If
we
succeed in effecting a business combination, there will, in all likelihood,
be
intense competition from competitors of the target business. The degree of
competition characterizing the industry of any prospective target business
cannot presently be ascertained. We cannot make any assurances that, subsequent
to a business combination, we will have the resources to compete
effectively.
Israeli
Government Programs
Israeli
companies are generally subject to income tax on their taxable income at the
rate of 31% for the year 2006, 29% for 2007, 27% for 2008, 26% for 2009 and
25%
for year 2010 and thereafter.
We
do not
intend to restrict our search for a business combination to companies that
could
benefit from favorable Israeli government programs. However, it is possible
that
we would effectuate a business combination with such a company. The Israeli
government currently provides tax and capital investment incentives to qualified
domestic companies. Additionally, the Israeli government currently provides
grant and loan programs relating to research and development, marketing and
export activities. In recent years, the Israeli government has reduced the
benefits available under these programs and Israel Government authorities have
indicated that the government may in the future further reduce or eliminate
the
benefits of those programs. We cannot make any assurances that such benefits
and
programs would continue to be available following a business combination, or
if
available, to what extent. If such benefits and programs were terminated or
further reduced, it could have an adverse effect on our results of operations
following a business combination or make a specific business combination less
attractive.
The
Companies Law
Under
the
Companies Law, Israeli companies are subject to certain restrictions with
respect to changes in control of the company:
Tender
Offer
.
The
Companies Law provides that an acquisition of shares of a public company must
be
made by means of a special tender offer if as a result of the acquisition the
purchaser would become a holder of 25% or more of the voting power of the
company. This rule does not apply if there is already another 25% shareholder
of
the company. Similarly, the Companies Law provides that an acquisition of shares
in a public company must be made by means of a special tender offer if as a
result of the acquisition the purchaser would become a holder of 45% or more
of
the voting power of the company, if there is no 45% or greater shareholder
of
the company. An acquisition from a 25% or 45% holder, which turns the purchaser
into a 25% or 45% holder respectively, does not require a tender offer. An
exception to the tender offer requirement may also apply when the additional
voting power is obtained by means of a private placement approved by the general
meeting of shareholders (which approval shall also refer to the purchaser
becoming a holder of 25% or 45%, as the case may be, of the voting power in
the
subject company). These special tender offer requirements do not apply to
companies whose shares are listed for trading outside of Israel if, under local
law or the rules of the stock exchange on which their shares are traded, there
is a limitation on the percentage of control which may be acquired or the
purchaser is required to make a tender offer to the public.
Furthermore,
under the Companies Law, a person may not acquire shares in a public company
if,
after the acquisition, he will hold more than 90% of the shares or more than
90%
of any class of shares of that company, unless a full tender offer is made
to
purchase all of the shares or all of the shares of the particular class. The
Companies Law also provides that as long as a shareholder in a public company
holds more than 90% of the company’s shares or of a class of shares, that
shareholder shall be precluded from purchasing any additional shares (an
exception exists where the shareholder held on February 1, 2000 over 90% of
the
shares or of any class of shares, in which case he may purchase additional
shares by means of a full tender offer, provided that such tender offer is
accepted by the holders of a majority of the shares or the class of shares,
as
the case may be, with respect to which the tender offer is made). If a full
tender offer is accepted such that less than 5% of the shares of the company
are
not tendered, all of the shares will be transferred to the ownership of the
purchaser. If 5% or more of the shares of the company are not tendered, the
purchaser may not purchase shares in a manner which will grant him more than
90%
of the shares of the company. If a full tender offer is successful, any
shareholder may petition the court to alter the consideration for the
acquisition.
Merger
.
The
Companies Law permits merger transactions if approved by each party’s board of
directors and, unless certain requirements described in the Companies Law are
met, by the holders of a majority of each party’s shares voted on the proposed
merger at a shareholders’ meeting called on at least 21 days’ prior notice.
Under the Companies Law, merger transactions may be approved by holders of
a
simple majority of our shares present, in person or by proxy, at a general
meeting and voting on the transaction (unless the company was incorporated
prior
to the Companies Law, and did not change its articles of association to allow
for a simple majority, in which case the approval of 75% of the voting power
present at the meeting, is necessary for approval). In determining whether
the
required majority has approved the merger, if shares of a company are held
by
the other party to the merger, or by any person holding at least 25% of the
outstanding voting shares or 25% of the means of appointing directors of the
other party to the merger, then a vote against the merger by holders of the
majority of the shares present and voting, excluding shares held by the other
party or by such person, or anyone acting on behalf of either of them, is
sufficient to reject the merger transaction. If the transaction would have
been
approved but for the exclusion of the votes of certain shareholders as provided
above, a court may still approve the merger upon the request of holders of
at
least 25% of the voting rights of a company, if the court holds that the merger
is fair and reasonable, taking into account the value of the parties to the
merger and the consideration offered to the shareholders. Upon the request
of a
creditor of either party to the proposed merger, the court may delay or prevent
the merger if it concludes that there exists a reasonable concern that, as
a
result of the merger, the surviving company will be unable to satisfy the
obligations of the party not surviving the merger. In addition, a merger may
not
be completed unless at least 30 days have passed from the receipt of approval
of
each merging company’s shareholders and 50 days have passed from the time that a
proposal for approval of the merger has been filed by each merging company
with
the Israeli Registrar of Companies.
Additional
Israeli laws may be applicable to us depending on the industry and operations
of
the target business.
Factors
Considered in Determining Offering Size and Amount to be Deposited in
Trust
The
factors that were considered in determining both the size of the offering and
the percentage of the proceeds to be deposited in the trust fund were
market-related and were not, in any way, related to specific companies in the
target region, none of which have been identified as of this time.
With
respect to the size of the offering, we, in consultation with the underwriter,
determined that the target businesses that we are likely to be focused on are
those with a market capitalization of between $150 million and $400 million.
As
it would be our goal to own all or some portion of the combined business
following a business combination, we determined that the optimal size of our
initial offering was $200 million, realizing that we can utilize cash on hand,
borrowed funds, or the issuance of additional securities in order to effect
a
business combination.
With
respect to the percentage of the proceeds to be deposited in the trust fund,
this was determined based on our sense, following discussions with the
underwriter, as to what investors are now requiring for these types of
transactions. The goal behind this process was to maximize the trust fund per
share so as to benefit the public stockholders. In order to be able to have
$7.64 per share deposited into the trust fund, certain of our initial
stockholders have committed to purchase founder warrants from us for an
aggregate purchase price of $2,000,000.
Enforceability
of Certain Civil Liabilities and Agent for Service of Process in the United
States
We
have
appointed Corporation Service Company as our agent to receive service of process
in any action against us in the United States. Each of our officers and
directors has consented to service of process in the State of New York and
has
appointed Corporation Service Company as his agent in the State of New York
upon
which service of process against him may be made.
Each
of
our directors and officers reside outside the United States. As described above,
each of our officers or directors has consented to service of process in the
State of New York and to the jurisdiction of the courts of the State of New
York
or of the United States of America for the Southern District of New York.
However, since most of our and such persons’ assets are outside the United
States, it may not be possible for investors to enforce against them judgments
of United States courts predicated upon civil liability provisions of the United
States federal or state securities laws, and the enforceability in Israel of
a
judgment obtained in the United States against us or our officers and directors
may be difficult. Moreover, there is substantial doubt as to the enforceability
in Israel against us or any of our directors and officers who are not residents
of the United States, in original actions in Israel of civil liabilities
predicated solely on the Securities Act of 1933, as amended (referred to herein
as the Securities Act), or the Exchange Act. This is due to the fact that
Israeli courts may refuse to hear a claim based on a violation of U.S.
securities laws because Israel is not the most appropriate forum to bring such
a
claim, and even if it would hear the claim it may determine that Israeli law
and
not U.S. law is applicable to the claim. If U.S. law is found to be applicable,
the content of applicable U.S. law must be proved as a fact which can be
time-consuming and costly.
Facilities
We
maintain our executive offices at 14 A Achimeir Street, Ramat Gan 52587 Israel.
The cost for this space is included in the $10,000 per month fee that LMS Nihul,
an affiliate of M.O.T.A. Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings
Ltd,
three of our initial stockholders, charges us for general and administrative
service pursuant to a letter agreement between us and LMS Nihul. This
arrangement is solely for our benefit and is not intended to provide LMS Nihul
or our officers or directors compensation in lieu of salary. We believe, based
on rents and fees for similar services in Israel, that the fee charged by LMS
Nihul is at least as favorable as we could have obtained from an unaffiliated
person. We consider our current office space adequate for our current
operations.
In
addition to the other information contained in this Annual Report on
Form 10-K, we have identified the following risks and uncertainties that
may have a material adverse effect on our business, financial condition, or
results of operation. Investors should carefully consider the risks described
below before making an investment decision. The trading price of our securities
could decline due to any of these risks, and investors may lose all or part
of
their investment.
Risks
Associated with Our Business
We
are a development stage company with no operating history and, accordingly,
you
will have no basis upon which to evaluate our ability to achieve our business
objective.
We
are a
recently incorporated development stage company with no operating results to
date. Therefore, our ability to begin operations is dependent upon obtaining
financing through the public offering of our securities. Since we do not have
an
operating history, there is no basis upon which to evaluate our ability to
achieve our business objective, which is to acquire a technology or
technology-related business that has operations or facilities located in Israel,
or that intends to establish operations or facilities in Israel, such as
research and development, manufacturing or executive offices, following our
initial business combination. We have not conducted any discussions and we
have
no plans, arrangements or understandings with any prospective acquisition
candidates. We will not generate any revenues until, at the earliest (if at
all), after the consummation of a business combination. We cannot make any
assurances as to when, or if, a business combination will occur.
We
may not be able to consummate a business combination within the required time
frame, in which case we will be forced to liquidate.
We
must
complete a business combination with a fair market value equal to at least
80%
of our net assets (excluding deferred underwriting fees) at the time of the
acquisition by December 22, 2008 (18 months after June 22, 2007, the date we
consummated our initial public offering (or by June 22, 2009, 24 months after
the date we consummated our initial public offering) if a letter of intent,
agreement in principle or a definitive agreement has been executed by December
22, 2008 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 a suitable target business within the
required time frame. In addition, our negotiating position and our ability
to
conduct adequate due diligence on any potential target may be reduced as we
approach the deadline for the consummation of a business
combination.
If
we are forced to dissolve and liquidate before a business combination, our
public stockholders are likely to receive less than $8.00 per share upon
distribution of the funds held in the trust account and our warrants will expire
with no value.
If
we are
unable to complete a business combination and are forced to dissolve and
liquidate our assets, the per-share liquidation amount is likely to be less
than
$8.00, assuming current rates of interest, because of the expenses related
to
our initial offering, our general and administrative expenses and the
anticipated costs of seeking a business combination. Furthermore, there will
be
no distribution with respect to our outstanding warrants which will expire
worthless if we liquidate before the completion of a business
combination.
If
the proceeds held outside the trust are insufficient to allow us to operate
until at least June 18, 2009, we may be unable to complete a business
combination.
We
believe that, prior to the consummation of a business combination, the sum
of
one-half of the interest earned on the trust account, net of taxes payable
on
such interest, up to a maximum of $2.0 million, and the $380,000 of proceeds
held outside of the trust account, will be sufficient to cover our operating
expenses until June 18, 2009 and to cover the expenses incurred in connection
with a business combination. These amounts are based on our management’s
estimate of the amount needed to fund our operations for the 24-month period
following June 18, 2007, the date our registration statement was declared
effective, to consummate a business combination and to fund our working capital
requirements. This estimate may prove inaccurate, especially if we expend a
significant portion of the available funds in pursuit of a business combination
that is not consummated. Additionally, although we have no present intention
to
do so, it is possible that we will in the future
find
it
necessary or desirable to use a portion of these funds to make a down payment
or
deposit or fund a lock-up or “no-shop” provision, with respect to a potential
business combination. If so, any such amount would be based on the terms of
the
specific transaction and the amount of available funds at the time. If we use
a
significant portion of our funds for such a purpose and we are required to
forfeit such funds (whether as a result of our breach of the agreement relating
to the original payment or otherwise), we could, if such payment was large
enough and we had already used some or all of the funds allocated to due
diligence and related expenses in connection with the aborted transaction,
be
left with insufficient funds to continue searching for, or to conduct due
diligence with respect to, other potential target businesses. In that event,
we
may be required to liquidate before the completion of a business combination.
If
we do not have sufficient proceeds available to fund our expenses, we may be
forced to obtain additional financing, either from our existing stockholders,
directors and officers or from third parties. We may not be able to obtain
additional financing, and our existing stockholders, directors and officers
are
not obligated to provide any additional financing to us. If we do not have
sufficient funds and are unable to obtain additional financing, we may be forced
to liquidate prior to consummating a business combination. If we are able to
obtain additional financing in order to fund due diligence and other expenses
associated with locating a target business, and if such additional financing
were in the form of a loan, such loan would be incurred by us. To the extent
that a business combination is not ultimately consummated and that the funds
held outside of the trust account are not sufficient to repay such loan,
M.O.T.A. Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd have agreed
to
advance the funds necessary to repay such loan. In the event that M.O.T.A
Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd are unable to repay
such
loan and to the extent that there are not funds available outside of the trust
account for such purpose, then Moshe Bar-Niv, Dr. Shuki Gleitman and Liora
Lev have agreed that they will be personally liable to repay such
loan.
You
will not be entitled to protections normally afforded to investors of blank
check companies.
Since
the
net proceeds of our initial offering are intended to be used to complete a
business combination with an operating business that has not been identified,
we
are deemed to be a “blank check” company under the United States securities
laws. However, since we have net tangible assets in excess of $5,000,000 upon
the successful consummation of our initial offering and subsequently filed
a
Current Report on Form 8-K with the SEC, including an audited balance sheet
demonstrating this fact, we believe that we are exempt from the rules
promulgated by the SEC to protect investors in blank check companies, such
as
Rule 419. Accordingly, investors will not be afforded the benefits or
protections of those rules.
Failure
to comply with the American Stock Exchange’s requirements regarding the
composition of our board of directors and audit committee could result in the
delisting of our common stock from the American Stock Exchange and adversely
affect the market for our common stock.
In
order
for our common stock to continue to be listed on the American Stock Exchange,
we
must comply with listing standards regarding the independence of our board
of
directors and members of our audit committee. In particular, the American Stock
Exchange’s rules require that a majority of our directors and all of the members
of our audit committee be “independent,” as defined under the American Stock
Exchange’s rules, by no later than the first anniversary following the
completion of our initial offering. We do not currently meet these
requirements.
If
we are
unable to change the composition of our board of directors and our board
committees to comply with these requirements, our common stock may be delisted
from the American Stock Exchange and the liquidity and trading price of common
stock may be adversely affected.
Because
there are numerous companies with a business plan similar to ours seeking to
effectuate a business combination, it may be more difficult for us to do
so.
Based
on
publicly available information as of June 18, 2007, the date our registration
statement was declared effective, since August 2003, approximately 101 similarly
structured blank check companies have completed initial public offerings in
the
United States. Of these companies, only 24 companies have consummated a
business combination, while 22 other companies have announced that they have
entered into definitive agreements or letters of intent with respect to
potential business combinations, but have not yet consummated such business
combination. Additionally, five of these companies have recently announced
that
they will dissolve and distribute their assets to stockholders. Accordingly,
there are approximately 50 blank check companies in the United States with
more
than $4.8 billion in trust that are seeking to carry out a business plan
similar
to our business plan. Furthermore, there are approximately 37 additional
offerings for blank check companies in the United States seeking to raise more
than $3.2 billion that are still in the registration process but have not
completed initial public offerings and there are likely to be more blank check
companies filing registration statements for initial public offerings prior
to
our completion of a business combination. While some of these companies have
specific industries in which they must identify a potential target business,
a
number of these companies may consummate a business combination in any industry
they choose. As a result, we may be subject to competition from these and other
companies seeking to consummate a business combination within the technology
or
technology-related industries, which, in turn, will result in an increased
demand for privately-held companies in these industries. Because of this
competition, we cannot make any assurances that we will be able to effectuate
a
business combination within the required time period. Further, because only
46
of such companies have either consummated a business combination or entered
into
definitive agreements or letters of intent with respect to potential business
combinations, it may indicate that there are fewer attractive target businesses
available to such entities or that many privately-held target businesses are
not
inclined to enter into these types of transactions with publicly-held blank
check companies like ours. We cannot make any assurances that we will be able
to
successfully compete for an attractive business combination. Additionally,
because of this competition, we cannot make any assurances that we will be
able
to effectuate a business combination within the prescribed time period. If
we
are unable to consummate a business combination within the prescribed time
period, we will be forced to liquidate.
Because
of our limited resources and the significant competition for business
combination opportunities, we may not be able to consummate an attractive
business combination.
We
expect
to encounter intense competition from entities other than blank check companies
having a business objective similar to ours, including 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. 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. Furthermore,
the obligation we have to seek stockholder approval of a business combination
may delay the consummation of a transaction. Additionally, our outstanding
warrants, and the future dilution they potentially represent, may not be viewed
favorably by certain target businesses. Any of these obligations may place
us at
a competitive disadvantage in successfully negotiating a business combination.
Because only 46 of the 101 blank check companies that have gone public in the
United States since August 2003 have either consummated a business combination
or entered into definitive agreements or letters of intent with respect to
potential business combinations, it may indicate that there are fewer attractive
target businesses available to such entities like our company or that many
privately held target businesses are not inclined to enter into these types
of
transactions with publicly held blank check companies like ours. If we are
unable to consummate a business combination with a target business within 18
months after the consummation of our initial offering (or within 24 months
after
the consummation of our initial offering if a letter of intent, agreement in
principle or definitive agreement has been executed within 18 months after
consummation of our initial offering and the business combination has not yet
been consummated within such 18 month period), we will be forced to
liquidate.
Under
Delaware law, the requirements and restrictions relating to our initial offering
contained in our amended and restated certificate of incorporation may be
amended, which could reduce or eliminate the protection afforded to our
stockholders by such requirements and restrictions.
Our
amended and restated certificate of incorporation contains certain requirements
and restrictions relating to our initial offering that will apply to us until
the consummation of a business combination. Specifically, our amended and
restated certificate of incorporation provides, among other things,
that:
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upon
consummation of our initial offering and the private placement of
the
founder warrants, the net proceeds of $147,750,000 were placed into
the
trust account, which proceeds may not be disbursed from the trust
account
except in connection with, or following, a business combination,
upon our
liquidation or as otherwise permitted in our amended and restated
certificate of incorporation;
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prior
to the consummation of a business combination, we will submit such
business combination to our stockholders for
approval;
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we
may consummate the business combination only if approved by a majority
of
our stockholders and public stockholders owning less than 40% of
the
shares sold in our initial offering exercise their conversion
rights;
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if
a business combination is approved and consummated, public stockholders
who voted against the business combination and exercised their conversion
rights will receive their pro rata share (based on the number of
units
sold in our initial offering) of the trust
account;
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if
a business combination is not consummated or a letter of intent,
an
agreement in principle or a definitive agreement is not signed within
the
time periods specified in this report, then we will be dissolved
and
distribute to all of our public stockholders their pro rata share
(based
on the number of units sold in our initial offering) of the trust
account
and any remaining net assets; and
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we
may not consummate any other merger, acquisition, stock purchase,
asset
purchase or similar transaction other than a business combination
that
meets the conditions specified in this report, including the requirement
that the business combination be with a technology or technology-related
business that has operations or facilities located in Israel, or
that
intends to establish operations or facilities in Israel, such as
research
and development, manufacturing or executive offices, following our
initial
business combination, and whose fair market value is equal to at
least 80%
of our net assets at the time of such business
combination.
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Under
Delaware law, the foregoing provisions may be amended if our board of directors
adopts a resolution declaring the advisability of an amendment and calls a
shareholders meeting, at which the holders of a majority of our outstanding
stock vote in favor of such amendment. Any such amendment could reduce or
eliminate the protection afforded to our stockholders by such requirements
and
restrictions. However, we view these provisions as obligations to our
stockholders, and neither we nor our board of directors will propose, or seek
stockholder approval of, any amendment of these provisions.
Our
amended and restated certificate of incorporation and by-laws contain certain
provisions that may make it more difficult, expensive or otherwise discourage,
a
tender offer or a change in control or takeover attempt by a third party, even
if such a transaction would be beneficial to our
stockholders.
The
existence of certain provisions in our amended and restated certificate of
incorporation and by-laws may have a negative impact on the price of our common
stock by discouraging a third party from purchasing our common stock. These
provisions could also have the effect of discouraging a third party from
pursuing a non-negotiated takeover of our company and preventing certain changes
of control. In addition to our staggered board, our by-laws require that,
subject to certain exceptions, any stockholder desiring to propose business
or
nominate a person to the board of directors at a stockholders meeting must
give
notice of any proposals or nominations within a specified time frame. Our
by-laws also limit the ability of stockholders to remove directors, call
stockholders meetings and act by written consent and provide that vacancies
of
the board of directors may only be filled by a majority of the remaining
directors.
If
third parties bring claims against us, the proceeds held in the trust account
could be reduced and the per share liquidation price received by stockholders
is
likely to be less than the approximately $7.88 per share held in
trust.
Placing
of funds in a trust account may not protect those funds from third party claims
against us. Although we will seek to have all vendors, prospective acquisition
targets and other entities with whom we engage in business enter into agreements
with us waiving any right in or to any monies held in the trust account for
the
benefit of our public stockholders, there is no guarantee that they will execute
such agreements, or even if they execute such agreements, that such waivers
will
be enforceable or they would otherwise be prevented from bringing claims against
the trust account.
If
any
third party refused to execute an agreement waiving such claims to the monies
held in the trust account, we would perform an analysis of the alternatives
available to us if we chose not to engage such third party and evaluate if
such
engagement would be in the best interest of our stockholders if such third
party
refused to waive such claims. Examples of possible instances in which we may
engage a third party that refused to execute a waiver include the engagement
of
a third party consultant whose particular expertise or skills are believed
by
management
to
be
significantly superior to those of other consultants that would agree to execute
a waiver or in cases where management is unable to find a provider of required
services willing to provide the waiver. In any event, our management would
perform an analysis of the alternatives available to it and would enter into
an
agreement with a third party that did not execute a waiver only if management
believed that such third 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 not seek recourse against
the
trust account for any reason. Furthermore, creditors may seek to interfere
with
the distribution process under state or federal creditor and bankruptcy laws,
which could delay the actual distribution of such funds or reduce the amount
ultimately available for distribution to our public stockholders. If we are
required to file a bankruptcy case or an involuntary bankruptcy case is filed
against us that is not dismissed, the funds held in the trust account will
be
subject to applicable bankruptcy law and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders.
The
ability of our public stockholders to receive the proceeds held in the trust
account is subject to any valid claims by our creditors which are not covered
by
amounts held in the trust account or the indemnification provided by certain
of
our initial stockholders (described below). Furthermore, no distributions may
be
made from the trust account until provisions for the payment of creditors have
first been made in accordance with the applicable provisions of Delaware law.
Accordingly, the proceeds held in trust could be subject to claims that could
take priority over the claims of our public stockholders and the per-share
liquidation price could be less than approximately $7.88, plus one-half of
the
interest earned on the trust account, net of taxes payable on such interest,
for
the relevant period, due to claims of such creditors or other
entities.
If
we are
unable to complete a business combination, and are forced to liquidate and
distribute the proceeds held in trust to our stockholders, certain of our
executive officers - specifically, Moshe Bar-Niv, Shuki Gleitman and Liora
Lev -
have agreed, subject to the qualifications and exceptions stated below, that
they will be personally liable, on a joint and several basis, to ensure that
the
proceeds in the trust fund are not reduced by claims made by (and only by)
a
vendor or service provider for services rendered, or products sold, to us,
or by
a prospective acquisition target (each, a “Guaranteed Creditor”). However,
neither Moshe Bar-Niv, Shuki Gleitman and Liora Lev will have any personal
liability as to (i) any claimed amounts owed to a Guaranteed Creditor who
executed a agreement waiving any right, title, claim or interest of any kind
in
and to all monies held in the trust, or (ii) as to any claims under our
indemnity of the underwriters of our initial offering against certain
liabilities, including liabilities under the Securities Act. They will not
be
personally liable to pay any of our debts and obligations except as described
above.
We
cannot
make any assurances that Messrs. Bar-Niv and Gleitman and Ms. Lev have
sufficient funds to satisfy these indemnification obligations or that the
proceeds in the trust account will not be reduced by such claims.
In
addition, even after our liquidation (including the distribution of the funds
held in the trust account), under the Delaware General Corporation Law,
stockholders may be held liable for claims by third parties against a
corporation to the extent of distributions received by them in a dissolution.
Accordingly, we cannot make any assurances that third parties will not seek
to
recover from our stockholders amounts owed to them by us. Our stockholders
may
be held liable for claims by third parties against us to the extent of
distributions received by them in a dissolution.
We
may have insufficient funds not held in our trust account to implement and
complete our dissolution and distribution.
We
expect
that all costs associated with the implementation and completion of our
dissolution and distribution, which we currently estimate to be approximately
$50,000 to $75,000, will be funded by any funds not held in our trust account,
although we cannot make any assurances that there will be sufficient funds
for
such purpose. In addition, our initial shareholders have not provided any
written indemnity or guarantee with respect to these costs other than with
respect to costs for vendors or service providers that have not signed a waiver.
In the event that insufficient funds exist to cover these costs, we would
commence appropriate litigation if doing so would be in the best interests
of
our stockholders, which is a decision that would be made by our board of
directors based on its fiduciary duties as set forth under Delaware
law.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them in a
dissolution.
If
we do
not complete a business combination by December 22, 2008, 18 months after the
date we consummated our initial public offering (or by June 22, 2009, 24 months
after the date we consummated our initial public offering if a letter of intent,
agreement in principle or definitive agreement is executed within 18 months
after the consummation of our initial public offering and the business
combination relating thereto is not consummated within such 18-month period),
we
will dissolve. 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. Although we will seek stockholder approval
to liquidate the trust account to our public stockholders as part of our plan
of
dissolution and distribution, we do not intend to comply with those procedures.
In the event that our board recommends and our stockholders approve a plan
of
dissolution and distribution where it is subsequently determined that the
reserve for claims and liabilities was insufficient, stockholders who received
a
return of funds could be liable for claims made by creditors. 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 make any assurances that third parties will not seek
to
recover from our stockholders amounts owed to them by us.
In
certain circumstances, our board of directors may be viewed as having breached
their fiduciary duties to our creditors, thereby exposing itself and our company
to claims of punitive damages.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly upon the expiration of the 18-month
or 24-month time periods, this may be viewed or interpreted as giving preference
to our public stockholders over any potential creditors with respect to access
to or distributions from our assets. Furthermore, our board of directors may
be
viewed as having breached their fiduciary duties to our creditors and/or may
have acted in bad faith, and thereby exposing itself and our company to claims
of punitive damages, by paying public stockholders from the trust account prior
to addressing the claims of creditors and/or complying with certain provisions
of the Delaware General Corporation Law with respect to our dissolution and
liquidation. We cannot make any assurances that claims will not be brought
against us for these reasons.
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 distribution subsequent
to
the expiration of the 18 and 24 month deadlines would proceed in approximately
the following manner:
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our
board of directors will, consistent with its obligations described
in our
amended and restated certificate of incorporation to dissolve, prior
to
the passing of such deadline, convene and adopt a specific plan of
dissolution and distribution, which it will then vote to recommend
to our
stockholders; at such time it will also cause to be prepared a preliminary
proxy statement setting out such plan of dissolution and distribution
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
SEC;
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if
the SEC does not review the preliminary proxy statement, then, 10
days
following the passing of such deadline, we will mail the proxy statements
to our stockholders, and 30 days following the passing of such deadline
we
will convene a meeting of our stockholders, at which they will either
approve or reject our plan of dissolution and distribution;
and
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if
the SEC 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 which may be substantial)
and we
will convene a meeting of our stockholders at which they will either
approve or reject our plan of dissolution and
distribution.
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In
the
event we seek stockholder approval for a plan of dissolution and distribution
and do not obtain such approval, we will nonetheless continue to pursue
stockholder approval for our dissolution. Pursuant to the terms of our amended
and restated certificate of incorporation, our powers following the expiration
of the permitted time periods for consummating a business combination 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 distribution by
our
stockholders, may result in substantial delays in the liquidation of our trust
account to our public stockholders as part of our plan of dissolution and
distribution.
Since
we have not selected any prospective target businesses with which to complete
a
business combination, there is no basis to evaluate the merits or risks of
any
particular target business’ operations.
Since
we
have not yet selected or approached any prospective target businesses with
respect to a business combination, there is no basis to evaluate the possible
merits or risks of any particular target business’ operations, financial
condition or prospects. To the extent we complete a business combination, we
may
be affected by numerous risks inherent in the business operations of the
acquired company or companies. Although our management will endeavor to evaluate
the risks inherent in a particular target business, we cannot make any
assurances that we will properly ascertain or assess all of the significant
risk
factors, or that we will have adequate time to complete due diligence. We also
cannot make any assurances that an investment in our units will not ultimately
prove to be less favorable to investors in our initial offering than a direct
investment, if an opportunity were available, in any particular target
business.
A
significant portion of working capital could be expended in pursuing
acquisitions that are not consummated.
It
is
anticipated that the investigation of each specific target business and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require substantial time and attention
and
substantial costs for accountants, attorneys and others. In addition, we may
opt
to make down payments or pay exclusivity or similar fees in connection with
structuring and negotiating a business combination. If a decision is made not
to
complete a specific business combination, the costs incurred up to that point
in
connection with the abandoned transaction, potentially including down payments
or exclusivity or similar fees, would not be recoverable. Furthermore, even
if
an agreement is reached relating to a specific target business, we may fail
to
consummate the transaction for any number of reasons, including those beyond
our
control such as that 40% or more of our public stockholders vote against the
transaction even though a majority of our public stockholders approve the
transaction. Any such event will result in a loss to us of the related costs
incurred, which could adversely affect subsequent attempts to locate and acquire
or merge with another business.
We
may issue additional shares of our capital stock, including through convertible
debt securities, to complete a business combination, which would reduce the
equity interest of our stockholders and may cause a change in control of our
ownership.
Our
amended and restated certificate of incorporation authorizes the issuance of
up
to 100,000,000 shares of common stock, par value $0.0001 per share, and
1,000,000 shares of preferred stock, par value $0.0001 per share. Immediately
after our initial offering and the sale of the founder warrants, there were
30,875,000 authorized but unissued shares of our common stock available for
issuance (after appropriate reservation of shares issuable upon full exercise
of
our outstanding warrants, including the founder warrants, and the purchase
option issued to CRT Capital Group LLC and I-Bankers Securities, Inc. and all
of
the 1,000,000 shares of preferred stock available for issuance. Although we
have
no commitments as of the date hereof to issue any additional securities, we
may
issue
a substantial number of additional shares of our common stock or preferred
stock, or a combination of both, including through convertible debt securities,
to complete a business combination. The issuance of additional shares of our
common stock or any number of shares of preferred stock, including upon
conversion of any debt securities:
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may
significantly reduce the equity interest of investors in our initial
offering;
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may
subordinate the rights of holders of common stock if preferred stock
is
issued with rights senior to those afforded to our common
stock;
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will
likely cause a change in control if a substantial number of our shares
of
common stock or voting preferred stock are issued, which may affect,
among
other things, our ability to use our net operating loss carryforwards,
if
any, and most likely also result in the resignation or removal of
our
present directors and officers; and
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may
adversely affect prevailing market prices for our common stock and
warrants.
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We
may issue notes or other debt securities, or obtain bank financing, to complete
a business combination, which may adversely affect our leverage and financial
condition.
Although
we have no commitments as of the date hereof to incur any debt, we may choose
to
issue notes or other debt securities, or obtain bank financing, to finance
a
business combination. The incurrence of debt may:
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lead
to default and foreclosure on our assets if our operating revenues
after a
business combination are insufficient to pay our debt
obligations;
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cause
an acceleration of our obligation to repay the debt, even if we make
all
principal and interest payments when due, if we breach the covenants
contained in the terms of any debt;
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require
us to execute documents that contain covenants such as ones that
require
the maintenance of certain financial ratios or reserves, without
a waiver
or renegotiation of such covenants;
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create
an obligation to immediately repay all principal and accrued interest,
if
any, upon demand to the extent any debt securities are payable on
demand;
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hinder
our ability to obtain additional financing, if necessary, to the
extent
any debt securities contain covenants restricting our ability to
obtain
additional financing while such security is outstanding, or to the
extent
our existing leverage discourages other potential
investors;
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limit
our flexibility in planning for and reacting to changes in our business
and in the industry in which we
operate;
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make
us more vulnerable to adverse changes in general economic, industry
and
competitive conditions and adverse changes in government
regulation;
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limit
our ability to borrow additional amounts for working capital, capital
expenditures, acquisitions, debt service requirements, execution
of our
strategy, or other purposes; and
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place
us at a disadvantage compared to our competitors who have less
debt.
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Unlike
most other blank check offerings, we allow up to approximately 39.99% of our
public stockholders to exercise their conversion rights. This higher threshold
will make it easier for us to consummate a business combination with which
our
stockholders may not agree, and our stockholders may not receive the full amount
of your original investment upon exercise of your conversion
rights.
When
we
seek stockholder approval of a business combination, we will offer each public
stockholder (other than our existing stockholders) the right to have his, her
or
its shares of common stock converted to cash if the stockholder votes against
the business combination and the business combination is approved and
consummated. 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 40% or more of the shares
sold in our initial offering do not vote against the business combination and
exercise their conversion rights. Most other blank check companies have a
conversion threshold of
20%,
which makes it more difficult for such companies to consummate their initial
business combination. Thus, because we permit a larger number of stockholders
to
exercise their conversion 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, and you may not receive the full amount of your original
investment upon exercise of your conversion rights.
Unlike
most other blank check offerings, we allow up to approximately 39.99% of our
public stockholders to exercise their conversion rights. The ability of a larger
number of our stockholders to exercise their conversion rights may not allow
us
to consummate the most desirable business combination or optimize our capital
structure.
When
we
seek stockholder approval of a business combination, we will offer each public
stockholder (other than our existing stockholders) the right to have his, her
or
its shares of common stock converted to cash if the stockholder votes against
the business combination and the business combination is approved and
consummated. Such holder must both vote against such business combination and
then exercise his, her or its conversion rights to receive a pro rata share
of
the trust account. Unlike most other blank check offerings which have a 20%
threshold, we allow up to approximately 39.99% of our public stockholders to
exercise their conversion rights. Accordingly, if our business combination
requires us to use substantially all of our cash to pay the purchase price,
because we will not know how many stockholders may exercise such conversion
rights, we may either need to reserve part of the trust account for possible
payment upon such conversion, or we may need to arrange third party financing
to
help fund our business combination in case a larger percentage of stockholders
exercise their conversion rights than we expect. In the event that the
acquisition involves the issuance of our stock as consideration, we may be
required to issue a higher percentage of our stock to make up for a shortfall
in
funds. Raising additional funds to cover any shortfall may involve dilutive
equity financing or incurring indebtedness at higher than desirable levels.
This
may limit our ability to effectuate the most attractive business combination
available to us.
Our
ability to successfully effect a business combination and to be successful
afterwards will be totally dependent upon the efforts of our key personnel,
some
of whom may join us following a business combination.
Our
ability to be successful following a business combination will depend upon
the
efforts of our key personnel. The future role of our key personnel following
a
business combination, however, cannot presently be ascertained. In making the
determination whether current management should remain with us following the
business combination, management will analyze the experience and skill set
of
the target business’ management and negotiate as part of the business
combination that certain members of current management remain if it is believed
that doing so is in the best interests of the combined company post-business
combination. While we intend to closely scrutinize any individuals we engage
after a business combination, we cannot make any assurances that our assessment
of these individuals will prove to be correct. Furthermore, these individuals
may be unfamiliar with the requirements of operating a public company which
could cause us to have to expend time and resources helping them become familiar
with such requirements. This could be expensive and time-consuming and could
lead to various regulatory issues which may adversely affect our
operations.
The
loss of key directors and officers could adversely affect our ability to
consummate a business combination.
Our
operations are dependent upon a relatively small group of key directors and
officers consisting of Moshe Bar-Niv, our Chairman and director; Liora Lev,
our
Chief Executive Officer and director; and Shuki Gleitman, our Chief Technology
Officer and director. We believe that our success depends on the continued
service of our key directors and officers. We cannot make any assurances that
such individuals will remain with us for the immediate or foreseeable future.
We
do not have employment contracts with any of our current officers. The
unexpected loss of the services of one or more of these key officers or
directors could adversely affect our ability to consummate a business
combination.
Our
directors and officers will allocate their time to other businesses, and,
according, may have conflicts of interest in determining 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
directors and officers 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. We do not intend to have
any
full-time employees prior to the consummation of a business combination. Each
of
our officers is engaged in several other business endeavors and is not obligated
to contribute any specific number of hours per week to our affairs. If our
officers’ and directors’ other business affairs require them to devote
substantial amounts
of
time
to such affairs, 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.
Our
directors and officers are and may in the future become affiliated with other
businesses in, or investing in, technology or technology-related industries
and,
accordingly, may have conflicts of interest in determining to which entity
a
particular business opportunity should be presented.
Following
the consummation of our initial offering and until we consummate a business
combination, we intend to engage in the business of identifying and acquiring
a
potential target business in a technology or technology-related industry. Our
directors and officers are, and may in the future, become affiliated with
entities, including other blank check companies, that are engaged in a similar
business. Further, certain of our directors and officers are currently involved
in other businesses in, or investing in, technology or technology-related
industries. Our directors and officers may become aware of business
opportunities that may be appropriate for presentation to us as well as the
other entities with which they are or may be affiliated. Due to these existing
and potential future affiliations with these and other entities, they may have
fiduciary obligations to present potential business opportunities to those
entities prior to presenting them to us, which could cause additional conflicts
of interest. We cannot make any assurances that these conflicts will be resolved
in our favor. At this time, none of our officers or directors are or have been
affiliated with another blank check company.
While
we currently have no plans to combine with an entity affiliated with one or
more
of our initial stockholders, we are not prohibited from doing so. As a result,
our officers and directors may have personal financial interests in approving
a
specific business combination.
We
currently have no plans to combine with an entity affiliated with one or more
of
our initial stockholders and our management is not aware of any potential
business combination opportunity with any such affiliated entities.
If,
however, it is later determined that this is in the best interest of our
stockholders, we may propose to acquire an affiliated company as a “business
combination.” In particular, there is nothing in our amended and restated
certificate of incorporation or any contractual arrangements to which we are
a
party which would prohibit us from doing so.
In
the
event that we were to propose a business combination with an entity affiliated
with one or more of our initial stockholders, purchasers of the shares being
offered in our initial offering would have two protections:
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In
connection with the vote required for any business combination, our
initial stockholders have agreed to vote their respective initial
shares
of common stock in accordance with the vote of the public stockholders
holding a majority of the shares of common stock sold in our initial
offering. Consequently, unless a majority of the shares held by
non-affiliates are voted in favor of any proposed acquisition, the
acquisition will not be
consummated.
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We
have agreed not to consummate a business combination with an entity
which
is affiliated with any of our initial stockholders unless we obtain
an
opinion from an independent investment banking firm stating that
the
business combination is fair to our stockholders from a financial
point of
view.
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Despite
the foregoing, potential conflicts of interest may still exist and, as a result,
the terms of the business combination may not be as advantageous to our public
stockholders as they would be absent any conflicts of interest.
Because
all of our directors and officers own shares of our securities that will not
participate in liquidation distributions, they may have a conflict of interest
in determining whether a particular target business is appropriate for a
business combination.
All
of
our directors and officers own stock in our company. Our directors and officers,
as well as our initial stockholders, have waived their right to receive
distributions upon our liquidation in the event we fail to complete a business
combination. Furthermore, certain of our initial stockholders (specifically,
M.O.T.A. Holdings Ltd.; FSGL Holdings Ltd; OLEV Holdings Ltd; Shrem, Fudim,
Kelner - Technologies Ltd.; Shrem, Fudim, Kelner & Co. Ltd.; and Elisha
Yanay) purchased an aggregate of 3,625,000 warrants in a private placement
simultaneously with the consummation of our initial offering. The shares of
common stock and warrants owned by such directors and officers and their
affiliates will be worthless if we do not consummate a business combination.
The
personal
and financial interests of our directors and officers may influence their
motivation in identifying and selecting a target business and completing a
business combination in a timely manner. Consequently, our directors’ and
officers’ 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
directors’ and officers’ interests in obtaining reimbursement for any reasonable
out-of-pocket expenses incurred by them may lead to a conflict of interest
in
determining whether a particular target business is appropriate for a business
combination and in the public stockholders’ best
interest.
Our
existing stockholders, directors and officers will not receive reimbursement
for
any out-of-pocket expenses incurred by them to the extent that such expenses
exceed the sum of one-half of the interest earned on the trust account, net
of
taxes payable on such interest, up to a maximum of $2.0 million, and the
$380,000 of proceeds held outside of the trust account, unless a business
combination is consummated. The amounts of available proceeds and the interest
earned on the trust account, net of taxes payable on such interest, available
to
us to fund our working capital requirements are based on our management’s
estimate of the amount needed to fund our operations until June 22, 2009 and
to
consummate a business combination. This estimate may prove to be inaccurate,
especially if a portion of the available proceeds and the interest on the trust
account available for working capital purposes is used to make a down payment
in
connection with a business combination or pay exclusivity or similar fees or
if
we expend a significant portion in pursuit of an acquisition that is not
consummated. The financial interest of our directors and officers 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 our public 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 Exchange Act.
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 that identify certain
risks
associated with investing in “penny stocks” and that describe the market
for these “penny stocks,” as well as a purchaser’s legal remedies;
and
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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 “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 effect customer transactions and trading activity in our securities
may be adversely affected. As a result, the market price of our securities
may
be depressed, and you may find it more difficult to sell our
securities.
Initially,
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 and a limited
number of products or services.
Our
initial business combination must be with an operating business with a fair
market value of at least 80% of our net assets at the time of such business
combination. Consequently, initially, it is probably that we will have the
ability to complete a business combination with only a single operating
business.
It
is
probable that the company we acquire in our initial business combination will
have only a limited number of services or products. The resulting lack of
diversification:
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will
result in our dependency upon the performance of a single or small
number
of operating businesses;
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may
result in our dependency upon the development or market acceptance
of a
single or limited number of products, processes or services;
and
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may
subject us to numerous economic, competitive and regulatory developments,
any or all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to a business
combination.
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In
this
case, we will not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities
that
may have the resources to complete several business combinations in different
industries or different areas of a single industry so as to diversify risks
and
offset losses. Further, the prospects for our success may be entirely dependent
upon the future performance of the initial target business we acquire, if
any.
The
ability of our stockholders to exercise their conversion rights may not allow
us
to effectuate the most desirable business combination or optimize our capital
structure.
When
we
seek stockholder approval of any business combination, we will offer each public
stockholder (but not our initial stockholders) the right to have his, her or
its
shares of common stock converted to cash if the stockholder votes against the
business combination and the business combination is approved and completed.
Such holder must both vote against such business combination and then exercise
his, her or its conversion rights to receive a pro rata portion of the trust
fund. Accordingly, if our business combination requires us to use substantially
all of our cash to pay the purchase price, because we will not know how many
stockholders may exercise such conversion rights, we may either need to reserve
part of the trust fund for possible payment upon such conversion, or we may
need
to arrange third party financing to help fund our business combination in case
a
larger percentage of stockholders exercise their conversion rights than we
expected. Therefore, we may not be able to consummate a business combination
that requires us to use all of the funds held in the trust account as part
of
the purchase price, or we may end up having a leverage ratio that is not optimal
for our business combination. This may limit our ability to effectuate the
most
attractive business combination available to us.
We
will be dependent upon interest earned on the trust account, net of taxes
payable on such interest, to fund our search for a target company and
consummation of a business combination.
Only
$380,000 of the net proceeds of our initial offering and the private placement
are available to us to fund our working capital requirements. We will be
dependent upon one-half of the interest earned on the trust account, net of
taxes payable on such interest, up to a maximum of $2.0 million, and the
$380,000 of proceeds held outside of the trust account, to provide us with
the
working capital we will need to search for a target company and consummate
a
business combination. If interest rates were to decline substantially, we may
not have sufficient funds available to provide us with the working capital
necessary to complete a business combination. In such event, we would need
to
raise additional equity capital or borrow funds from our existing stockholders,
including officers and directors, or others or be forced to
liquidate.
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 or abandon a particular business
combination.
Although
we believe that the net proceeds of our initial offering and the sale of the
founder warrants, and one-half of the interest earned on the trust account,
net
of taxes payable on such interest, 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 businesses, we cannot ascertain the capital requirements
for
any particular business combination. If the net proceeds of our initial offering
and the sale of the founder warrants, and one-half of the interest earned on
the
trust account, net of taxes payable on such interest, prove to be insufficient,
either because of the size of the business combination or the depletion of
available funds in search of a target business, or because we become obligated
to convert into cash a significant number of shares from dissenting stockholders
as a result of the exercise of conversion rights, we will be required to seek
additional financing through the issuance of equity or debt securities or other
financing arrangements. We cannot make any assurances 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 re-negotiate or abandon that
particular business combination and seek an alternative target business
candidate. 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 adversely affect the continued
development or growth of the target business. None of our officers,
directors
or stockholders is required to provide any financing to us in connection with
or
after the consummation of a business combination.
Our
existing stockholders, directors and officers control a substantial interest
in
us and thus may influence certain actions requiring stockholder
vote.
Upon
consummation of our initial offering, our existing stockholders, directors
and
officers collectively own 20% of our issued and outstanding shares of common
stock. In addition, certain of our initial stockholders (specifically, M.O.T.A.
Holdings Ltd.; FSGL Holdings Ltd; OLEV Holdings Ltd; Shrem, Fudim, Kelner -
Technologies Ltd.; Shrem, Fudim, Kelner & Co. Ltd.; and Elisha Yanay)
purchased 3,625,000 warrants from us in a private placement concurrently with
the consummation of our initial offering. Any exercise of these warrants by
our
directors and officers would increase their ownership percentage. These holdings
could allow the existing stockholders, directors and officers to influence
the
outcome of matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions after completion
of
our initial business combination.
Our
board
of directors will be divided into three classes, each of which will generally
serve for a term of three years with only one class of directors being elected
in each year. 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, only a
minority of the board of directors will be considered for election and our
existing stockholders, directors and officers, because of their ownership
position, will have considerable influence regarding the outcome. Accordingly,
our existing stockholders, directors and officers will continue to exert control
at least until the consummation of a business combination and may continue
to
exercise substantial control after a business combination due to their
significant ownership. In connection with the vote required for our initial
business combination, all of our existing stockholders, directors and officers,
have agreed to vote the shares of common stock then owned by them, including
any
shares of common stock purchased in or following our initial offering, in
accordance with the majority of the shares of common stock voted by the public
stockholders. However, the affiliates and relatives of our existing
stockholders, directors and officers are not prohibited from purchasing units
in
the aftermarket, and they will have full voting rights with respect to any
shares of common stock they may acquire in subsequent market transactions.
If
they do, we cannot make any assurances that our existing stockholders, directors
and officers, through their affiliates and relatives, 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 our initial offering, as part of the units, we issued warrants
to purchase 18,750,000 shares of common stock. We also sold a total of 3,625,000
warrants to M.O.T.A. Holdings Ltd.; FSGL Holdings Ltd; OLEV Holdings Ltd; Shrem,
Fudim, Kelner - Technologies Ltd.; Shrem, Fudim, Kelner & Co. Ltd.; and
Elisha Yanay, certain of our initial stockholders, in a private placement
concurrently with the consummation of our initial offering. To the extent we
issue shares of common stock to effect a business combination, the potential
for
the issuance of substantial numbers of additional shares upon exercise of these
warrants could make us a less attractive acquisition vehicle in the eyes of
a
target business as such securities, when exercised, will increase the number
of
issued and outstanding shares of our common stock and reduce the value of the
shares issued to complete the
business
combination. Accordingly, our warrants may make it more difficult to effectuate
a business combination or increase the acquisition cost of a target business.
Additionally, the sale, or even the possibility of sale, of the shares
underlying the warrants could have an adverse effect on the market price for
our
securities or on our ability to obtain future public financing. If and to the
extent these warrants are exercised, you may experience dilution to your
holdings.
If
our existing stockholders 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.
The
majority of our existing stockholders are entitled to make up to two demands
that we register the resale of their shares of common stock at any time after
their shares are released from escrow. In addition, each of (a) the holder
of the underwriters’ purchase option and (b) Shrem, Fudim, Kelner -
Technologies Ltd. and Shrem, Fudim, Kelner & Co. Ltd., acting together, will
be entitled to one demand and unlimited piggy-back registration rights. The
increase in the 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
effect a business combination or increase the acquisition cost of a target
business, as the stockholders of a particular target business may be discouraged
from entering into a business combination with us or will 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.
An
effective registration statement may not be in place when an investor desires
to
exercise warrants, thus precluding such investor from being able to exercise
his, her or its warrants and causing such warrants to be practically
worthless.
No
warrant held by public stockholders or issuable upon exercise of the
underwriters’ purchase option will be exercisable and we will not be obligated
to issue shares of common stock unless at the time a holder seeks to exercise
such warrant, a prospectus relating to the common stock issuable upon exercise
of the warrant is current and the common stock has been registered or qualified
or deemed to be exempt under the securities laws of the state of residence
of
the holder of the warrants. Under the terms of the warrant agreement, we have
agreed to use our best efforts to maintain a current prospectus relating to
the
common stock issuable upon exercise of the warrants until the expiration of
the
warrants and to take such action as is necessary to qualify the common stock
under the securities laws of the states in which the warrants are initially
offered. However, we cannot make any assurances that we will be able to do
so or
that each such holder will be resident in a state in which the warrants are
initially offered. If we do not maintain a current prospectus related to the
common stock issuable upon exercise of the warrants, holders will be unable
to
exercise their warrants and we will not be required to settle any such warrant
exercise. If the prospectus relating to the common stock issuable upon the
exercise of the warrants is not current or if the common stock is not qualified
or exempt from qualification in the jurisdictions in which the holders of the
warrants reside, the warrants held by public stockholders or issuable upon
exercise of the underwriters’ purchase option may have no value, the market for
such warrants may be limited and such warrants may expire worthless. Even if
the
prospectus relating to the common stock issuable upon exercise of the warrants
is not current, the founder warrants may be exercisable for unregistered shares
of common stock.
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.
In
order
not to be regulated as an investment company under the Investment Company Act
of
1940, or the Investment Company Act, unless we can qualify for an exclusion,
we
must ensure that we are engaged primarily in a business other than investing,
reinvesting or trading of securities and that our activities do not include
investing, reinvesting, owning, holding or trading “investment securities.” Our
business will be to identify and consummate a business combination and
thereafter to operate the acquired business or businesses. We invest the funds
in the trust account only in treasury bills issued by the United States having
a
maturity of 180 days or less or money market funds meeting the criteria under
Rule 2a-7 under the Investment Company Act until we use them to complete a
business combination. By limiting the investment of the funds to these
instruments, we believe that we are not
considered
an investment company under the Investment Company Act. The trust account and
the purchase of government securities for the trust account is intended as
a
holding place for funds pending the earlier to occur of either: (i) the
consummation of our primary business objective, which is a business combination,
or (ii) absent a business combination, our dissolution, liquidation and
distribution of our assets, including the proceeds held in the trust account,
as
part of our plan of dissolution and liquidation. If we fail to invest the
proceeds as described above or if we cease to be primarily engaged in our
business as set forth above (for instance, if our stockholders do not approve
a
plan of dissolution and liquidation and the funds remain in the trust account
for an indeterminable amount of time), we may be considered to be an investment
company and thus be required to comply with the Investment Company
Act.
If
we are
deemed to be an investment company under the Investment Company Act, our
activities may be restricted, including:
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restrictions
on the nature of our investments;
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restrictions
on the issuance of securities; and
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which
may make it difficult for us to complete a business
combination;
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each
of
which may make it difficult for us to consummate a business combination. We
would also become subject to burdensome regulatory requirements, including
reporting, record keeping, voting, proxy and disclosure requirements and the
costs of meeting these requirements would reduce the funds we have available
outside the trust account to consummate a business combination.
The
American Stock Exchange may decline to list or may in the future delist our
securities from quotation on its exchange 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, a national securities
exchange. We cannot make any assurances that our securities will continue to
be
listed on the American Stock Exchange in the future. 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. We cannot make any assurances that we will be able to meet those
initial listing requirements at that time. If the American Stock Exchange
delists our securities from trading on its exchange, we could face significant
material adverse consequences including:
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reduced
liquidity with respect to our
securities;
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a
determination that our common stock is a "penny stock" which will
require
brokers trading in our common stock to adhere to more stringent rules
and
possibly resulting in a reduced level of trading activity in the
secondary
trading market for our common stock;
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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 in the future.
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In
the
event that our securities are not listed on the American Stock Exchange, we
anticipate that our units, common stock and warrants will be quoted on the
OTC
Bulletin Board, but we cannot assure that our securities will be so quoted,
or,
if quoted, will continue to be quoted.
Because
any target business that we attempt to complete a business combination with
will
be required to provide our stockholders with financial statements prepared
in
accordance with and reconciled to United States generally accepted accounting
principles, prospective target businesses may be
limited.
In
accordance with requirements of United States federal securities laws, in order
to seek stockholder approval of a business combination, a proposed target
business will be required to have certain financial statements which are
prepared in accordance with, or which can be reconciled to, United States
generally accepted accounting principles and audited in accordance with United
States generally accepted auditing standards. Many foreign companies do not
have
financial statements prepared in accordance with United States generally
accepted accounting principles and
would
need to incur significant time and expense in order to obtain financial
statements prepared in accordance with those principles. To the extent that
a
prospective target business does not have financial statements which have been
prepared with, or which can be reconciled to, United States generally accepted
accounting principles, and audited in accordance with United States generally
accepted auditing standards, we will not be able to acquire such target
business. We will enter into a business combination only with a target business
that has such financial statements. These financial statement requirements
may
limit the pool of potential target businesses which we may acquire.
If
we determine to change domiciles in connection with a business combination,
the
new jurisdiction’s laws will likely govern all of our material agreements
relating to the operations of the target business and we may not be able to
enforce our legal rights.
In
connection with a business combination, we may determine to relocate the home
jurisdiction of our business from Delaware to a jurisdiction outside of the
United States, including Israel. If we determine to do this, the new
jurisdiction’s corporate law will control our corporate governance requirements
and will determine the rights of our shareholders. The new jurisdiction’s
corporate law may provide less protection to our shareholders than is afforded
by Delaware law. Any such reincorporation will also likely subject us to foreign
regulation, including foreign taxation. In addition, upon reincorporation,
we
may become a “foreign private issuer” for purposes of United States securities
laws, which means that we may be subject to less stringent reporting
requirements and that some provisions of the United States securities laws
(such
as the proxy rules and the short-swing trading rules) would not apply to us.
Furthermore, whether or not we reincorporate outside the United States, the
new
jurisdiction’s laws will likely govern all of our material agreements relating
to the operations of the target business. We cannot make any assurances that
the
system of laws and the enforcement of existing laws in such jurisdiction would
be as certain in implementation and interpretation as in the United States.
The
inability to enforce or obtain a remedy under any of our future agreements
in a
new jurisdiction could result in a significant loss of business, business
opportunities or capital.
Risks
Associated With the Industry
We
rely on the experience and skills of our management team to identify future
trends in the technology and technology-related industries, and to take
advantage of these trends, but there is no guarantee that they will be able
to
do so.
The
process of predicting technological trends, especially in sectors developing
as
fast as the technology and technology-related sectors, is complex and uncertain.
After our initial business combination, we may commit significant resources
to
developing new products before knowing whether our investments will result
in
products the market will accept. Furthermore, we may not execute successfully
on
our vision because of, among other things, errors in product planning or timing,
technical hurdles that we fail to overcome in a timely fashion or a lack of
appropriate resources. If we are unable to identify and take advantage of future
trends in the technology and technology-related sectors, our business, financial
condition and results of operations will be adversely affected.
Our
investments in one or more companies in the technology or technology-related
industries may be extremely risky and we could lose all or part of our
investments.
An
investment in companies in the technology or technology-related industries
may
be extremely risky relative to an investment in other businesses because, among
other things, the companies we are likely to focus on:
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typically
have limited operating histories, narrower product lines and smaller
market shares than larger businesses, which tend to render them more
vulnerable to competitors’ actions and market conditions, as well as
general economic downturns;
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tend
to be privately-owned and generally have little publicly available
information and, as a result, we may not learn all of the material
information we need to know regarding these
businesses;
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are
more likely to depend on the management talents and efforts of a
small
group of people; and, as a result, the death, disability, resignation
or
termination of one or more of these people could have an adverse
impact on
the operations of any company we may
acquire;
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generally
have less predictable operating
results;
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may
from time to time be parties to
litigation;
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may
be engaged in rapidly changing businesses with products subject to
a
substantial risk of obsolescence;
and
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may
require substantial additional capital to support their operations,
finance expansion or maintain their competitive
position.
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If
we are unable to keep pace with changes in technology or consumer tastes and
preferences, the products or services of any target business that we acquire
could become obsolete.
The
technology and technology-related industries are generally characterized by
intense, rapid technological changes, evolving industry standards and new
product and service introductions, often resulting in product obsolescence
or
short product life cycles. Further, these sectors are very sensitive to changes
in consumer tastes and preferences. Our ability to compete after the
consummation of a business combination will be dependent upon our ability to
develop and introduce products and services that keep pace with changes in
technology and consumer tastes and preferences. The success of new products
or
services depends on several factors, including proper new product or service
definition, low component costs, timely completion and introduction of the
new
product or service, differentiation of the new product or service from those
of
our competitors and market acceptance of the new product or service. There
can
be no assurance that we will successfully identify new product or service
opportunities, develop and bring new products and services to the market in
a
timely manner or achieve market acceptance of our products and services or
that
products, services and technologies developed by others will not render our
products, services and technologies obsolete or noncompetitive. Our business,
financial condition and results of operations following a business combination
will depend on our ability to develop and introduce new products and services
into existing and emerging markets and to reduce the costs of existing products
and services. If we are unable to keep pace with these changes, our business,
financial condition and results of operations will be adversely
affected.
Consolidation
in the technology and technology-related industries may affect our ability
to
consummate a business combination and may result in increased competition
following a business combination.
There
has
been a trend toward consolidation in the technology and technology-related
industries for several years. We expect this trend to continue as companies
attempt to strengthen or hold their market positions in an evolving market
and
as companies are acquired or are unable to continue operations. The trend
towards consolidation will increase demand for target businesses. Furthermore,
we believe that industry consolidation will result in stronger competitors.
Additionally, rapid industry consolidation will lead to fewer customers, with
the effect that loss of a major customer could have a material impact on results
not anticipated in a customer marketplace composed of many participants. This
could lead to more variability in operating results and could adversely affect
on our business, operating results and financial condition following a business
combination.
Companies
in technology and technology-related industries require highly-skilled personnel
and if we are unable to attract and retain key personnel following a business
combination, we will be unable to effectively conduct our
business.
The
market for technical, creative, marketing and other personnel essential to
the
development and marketing of technology and technology-related products and
services and to the management of technology and technology-related businesses
is extremely competitive. Further, companies that have been the target of an
acquisition are often a prime target for recruiting of executives and key
creative talent. If we cannot successfully recruit and retain the employees
we
need following consummation of our business combination, or replace key
employees after their departure, our ability to develop and manage our
businesses will be impaired.
We
may be unable to protect or enforce the intellectual property rights of any
target business that we acquire or the target business may become subject to
claims of intellectual property infringement.
After
completing a business combination, the procurement and protection of trademarks,
copyrights, patents, domain names, trade dress and trade secrets may be critical
to our success. We will likely rely on a combination of copyright, trademark,
trade secret laws and contractual restrictions to protect any proprietary
technology and rights that we may acquire. Despite our efforts to protect those
proprietary technology and rights, we may not be able to prevent
misappropriation of those proprietary rights or deter independent development
of
technologies that compete
with
the
business we acquire. Furthermore, key aspects of networking technology are
governed by industry-wide standards, which are usable by all market entrants.
Our competitors may file patent applications or obtain patents and proprietary
rights that block or compete with our patents. Litigation may be necessary
in
the future to enforce our intellectual property rights, to protect our trade
secrets, or to determine the validity and scope of the proprietary rights of
others. It is also possible that third parties may claim we have infringed
their
patent, trademark, copyright or other proprietary rights. Claims or litigation,
with or without merit, could result in substantial costs and diversions of
resources, either of which could have an adverse effect on our competitive
position and business. Further, depending on the target business or businesses
that we acquire, it is likely that we will 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 of the target business or businesses
that
we acquire, such as trademarks and copyrighted materials, we expect that the
target business or businesses will have licensed such rights to third parties
in
the past and we may continue to enter into such agreements in the future. These
licensees may, unknowingly to us or the target business or businesses, take
actions that diminish the value of the target business or businesses’
proprietary rights or cause harm to the target business or businesses’
reputation. Also, products of the target business or businesses may include
software or other intellectual property licensed from third parties. It may
be
necessary in the future to seek or renew licenses relating to various aspects
of
these products. There can be no assurance that the necessary licenses would
be
available on acceptable terms, if at all. The inability to obtain certain
licenses or other rights or to obtain such licenses or rights on favorable
terms, or the need to engage in litigation regarding these matters, could have
an adverse effect on our business, operating results and financial condition
following a business combination. Moreover, the inclusion in our products of
software or other intellectual property licensed from third parties on a
nonexclusive basis could limit our ability to protect our proprietary rights
in
our products.
The
technology and technology-related industries are highly cyclical, which may
affect our future performance and ability to sell our products or services,
and
in turn, hurt our profitability.
Technology
and technology-related products and services tend to be relatively expensive
and
buyers tend to defer purchases during periods of economic weakness, opting
instead to continue to use what they already own. Conversely, during periods
of
economic strength, sales of technology and technology-related products and
services frequently exceed expectations. As a consequence, revenues and earnings
for these companies may fluctuate more than those of less economically sensitive
companies. Further, companies in the consumer segments of these industries
are
sensitive to a number of factors that influence the levels of consumer spending,
including economic conditions such as the rate of unemployment, inflation,
recessionary environments, the levels of disposable income, debt, interest
rates
and consumer confidence. Due to the cyclical nature of the technology and
technology-related industries, inventories may not always be properly balanced,
resulting in lost sales when there are shortages or write-offs when there are
excess inventories. This may adversely affect the business, financial condition
and results of operations of any target businesses that we may
acquire.
Government
regulation of certain technology or technology-related industries and the
uncertainty over government regulation of the Internet could harm our operating
results and future prospects.
Certain
technology or technology-related industries, including the telecommunications
and media sectors, have historically been subject to substantial government
regulation, both in the United States and overseas. If we consummate a business
combination with a target business or businesses in these sectors, changes
in
telecommunications requirements in the United States or other countries could
affect the sales of our products, limit the growth of the markets we serve
or
require costly alterations of current or future products. Future changes in
tariffs by regulatory agencies or application of tariff requirements to
currently untariffed services could affect the sales of our products for certain
classes of customers.
On
the
other hand, few laws or regulations currently apply directly to access of or
commerce on the Internet. The growth of the technology and technology-related
industries is closely tied to the growth of Internet use and new regulations
governing the Internet and Internet commerce could have an adverse effect on
our
business, operating results and financial condition following a business
combination. New regulations governing the Internet and Internet commerce could
include matters such as changes in encryption requirements, sales taxes on
Internet product sales and access charges for Internet service
providers.
Risks
Related to Operations in Israel
Acquisitions
of companies with operations in Israel entail special considerations and risks.
If we are successful in acquiring a target business with operations in Israel,
we will be subject to, and possibly adversely affected by, the following
risks:
If
there are significant shifts in the political, economic or military conditions
in Israel, it could have a material adverse effect on our
profitability.
If
we
consummate a business combination with a target business in Israel, it will
be
directly influenced by the political, economic and military conditions affecting
Israel at that time. Since the establishment of the State of Israel in 1948,
a
number of armed conflicts have taken place between Israel and its Arab
neighbors. A state of hostility, varying in degree and intensity, has caused
security and economic problems in Israel. Since September 2000, there has been
a
marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, primarily but not
exclusively in the West Bank and Gaza Strip, and negotiations between the State
of Israel and Palestinian representatives have effectively ceased. The election
of representatives of the Hamas movement to a majority of seats in the
Palestinian Legislative Council in January 2006 created additional unrest and
uncertainty. In July and August of 2006, Israel was involved in a full-scale
armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and
political party, in southern Lebanon, which involved missile strikes against
civilian targets in northern Israel that resulted in economic losses. On August
14, 2006, a ceasefire was declared relating to that armed conflict. Continued
hostilities between Israel and its neighbors and any failure to settle the
conflict could have a material adverse effect on the target business and its
results of operations and financial condition. Further deterioration of the
situation might require more widespread military reserve service by some of
the
target business’s Israeli employees and might result in a significant downturn
in the economic or financial condition of Israel. Israel is also a party to
certain trade agreements with other countries, and material changes to these
agreements could have an adverse effect on our business. Furthermore, several
Arab countries still restrict business with Israeli companies. The operations
of
the target business in Israel could be adversely affected by restrictive laws
or
policies directed towards Israel and Israeli businesses.
In
addition, the target business’s insurance may not cover losses that may occur as
a result of events associated with the security situation in the Middle East.
Although the Israeli government currently covers the reinstatement value of
direct damages that are caused by terrorist attacks or acts of war, there is
no
assurance that such government coverage will be maintained. Any of these factors
could have a material adverse effect on the target business and on our results
of operations and financial condition following a business combination with
the
target business.
Our
operations could be disrupted as a result of the obligation of personnel to
perform military service.
Generally,
all nonexempt male adult citizens and permanent residents of Israel, including
one of our officers and directors, are obligated to perform military reserve
duty annually for extended periods of time through the age of 45 (or older
for
citizens with certain occupations), and are subject to being called to active
duty at any time under emergency circumstances. Executive officers or key
employees of a target business may also reside in Israel and be required to
perform similar annual military reserve duty. In response to increases in
terrorist activity and the recent armed conflict with Hezbollah, there have
been
periods of significant call-ups of military reservists. It is possible that
there will be additional call-ups in the future. Our and the target business’s
operations could be disrupted by the absence for a significant period of one
or
more of these directors, officers or key employees due to military service.
Any
such disruption could adversely affect our operations and
profitability.
Because
a substantial portion of many Israeli companies’ revenues is generated in
dollars and euros, while a significant portion of their expenses is incurred
in
Israeli currency, the revenues of a target business may be reduced due to
inflation in Israel and currency exchange rate
fluctuations.
A
substantial portion of many Israeli companies’ revenues is generated in dollars
and euros, while a significant portion of their expenses, principally salaries
and related personnel expenses, are paid in Israeli currency. As a result,
a
target business will likely be exposed to the risk that the rate of inflation
in
Israel will exceed the rate of devaluation of Israeli currency in relation
to
the dollar or the euro, or that the timing of this devaluation will lag behind
inflation in Israel. Because inflation has the effect of increasing the dollar
and euro costs of an Israeli company’s operations, it would therefore have an
adverse effect on our dollar-measured results of operations following a business
combination.
The
termination or reduction of tax and other incentives that the Israeli government
provides to qualified domestic companies may increase the costs involved in
operating a company in Israel.
The
Israeli government currently provides tax and capital investment incentives
to
qualified domestic companies. The availability of these tax benefits, however,
is subject to certain requirements, including, among other things, making
specified investments in fixed assets and equipment, financing a percentage
of
those investments with capital contributions by the entity receiving the tax
benefits, compliance with a marketing program submitted to the Investment Center
of Israel’s Ministry of Industry, Trade and Labor, filing of certain reports
with the Investment Center and compliance with Israeli intellectual property
laws. Additionally, the Israeli government currently provides grant and loan
programs relating to research and development, marketing and export activities.
In recent years, the Israeli government has reduced the benefits available
under
these programs and Israeli governmental authorities have indicated that the
government may in the future further reduce or eliminate the benefits of those
programs. We cannot make any assurances that such benefits and programs would
continue to be available to the target business following a business
combination, or if available, to what extent. If such benefits and programs
were
terminated or further reduced, it could have an adverse effect on our results
of
operations following a business combination or make a specific business
combination less attractive. Without limiting the foregoing, if the foregoing
tax benefits were terminated or reduced, the amount of taxes payable by the
target business would likely increase, which could adversely affect our results
of operations.
Any
Israeli government grants received by the target business for research and
development expenditures limit the ability of the target business to manufacture
products and transfer know-how outside of Israel. In addition, our acquisition
of the target business may be subject to the approval of certain Israeli
governmental entities.
The
target business we may acquire may be receiving, or may receive following the
business combination, grants from the government of Israel through the Office
of
the Chief Scientist of Israel’s Ministry of Industry, Trade and Labor for the
financing of a portion of its research and development expenditures in Israel.
Upon our acquisition of such entity, the Office of Chief Scientist will
determine whether the entity will be eligible to continue receiving grants
following the business combination. When know-how or products are developed
using Chief Scientist grants, the terms of these grants limit the transfer
of
the know-how out of Israel and the ability of the entity receiving such grants
to manufacture products based on this know-how outside of Israel without the
prior approval of the Office of the Chief Scientist. Any approval, if given,
may
be subject to additional obligations or limitations. If the target business
fails to comply with the conditions imposed by the Office of the Chief
Scientist, including the payment of royalties with respect to grants received,
it may be required to refund any payments previously received, together with
interest and penalties. The difficulties in obtaining the approval of the Office
of the Chief Scientist for the transfer of manufacturing rights out of Israel
could have a material adverse effect on strategic alliances or other
transactions that we may wish the target business to enter into in the future
that provide for such a transfer. In addition, our acquisition of a target
business that shall have received, prior to such acquisition, any tax benefits
from the Investment Center and/or research and development grants from the
Office of the Chief Scientist, may be subject to the approval of such entities,
which approval may be subject to, among other things, an undertaking to observe
the law governing the grant programs of the Office of the Chief
Scientist.
The
anti-takeover effects of Israeli laws may delay or deter a change of control
of
the target business.
Under
the
Israeli Companies Law—1999, referred to as the Companies Law, a merger is
generally required to be approved by the board of directors and, unless certain
requirements described under the Companies Law are met, the shareholders of
each
of the merging companies. If the share capital of the company that will not
be
the surviving company is divided into different classes of shares, the approval
of each class is also required. A court may disapprove or delay the consummation
of a merger if it determines that there is a reasonable concern that the
surviving company will be unable to satisfy the obligations of the company
not
surviving the merger. In addition, a merger may not be completed unless at
least
50 days shall have passed from the date that a proposal for approval of the
merger was filed by each merging company with the Israeli Registrar of Companies
and 30 days have elapsed since shareholder approval of both merging companies
was obtained.
The
Israeli Companies Law provides that an acquisition of shares in an Israeli
public company must be made by means of a special tender offer, if as a result
of the acquisition, the purchaser would become a holder of 25% or more of the
voting power at general meetings, and no other shareholder owns a 25% stake
in
the company. Similarly, the Companies Law provides that an acquisition of shares
in a public company must be made by means of a special tender offer if, as
a
result of the acquisition, the purchaser would become a holder of 45% or more
of
the voting power at general meetings, unless someone else already holds 45%
of
the voting power. An acquisition from
a
25% or
45% holder, which turns the purchaser into a 25% or 45% holder, respectively,
does not require a tender offer. An exception to the tender offer requirement
may also apply when the additional voting power is obtained by means of a
private placement approved by the general meeting of shareholders (which
approval shall also refer to the purchaser becoming a holder of 25% or 45%,
as
the case may be, of the voting power in the subject company). These rules also
do not apply if the acquisition is made by way of a merger.
The
Companies Law also provides specific rules and procedures for the acquisition
of
shares held by minority shareholders, if the majority shareholder shall hold
more than 90% of the outstanding shares. Such acquisition shall be made through
a tender offer to all of the company’s shareholders for the purchase of all of
the issued and outstanding shares of the company. If the dissenting and
non-responsive shareholders hold more than 5% of the issued and outstanding
share capital of the company, the acquirer may not acquire additional shares
of
the company from shareholders who accepted the tender offer if following such
acquisition the acquirer would then own over 90% of the company’s issued and
outstanding share capital.
These
laws may have the effect of delaying or deterring a change in control of an
Israeli company, and should we desire to acquire control of a target business
that is an Israeli company we may encounter difficulties achieving such
control.
We
may be deemed to be effectively managed and controlled from Israel, and thus
be
treated as an Israeli entity for tax purposes.
Although
we were formed under Delaware law and are a U.S. corporation, our directors
and
officers are all Israeli residents, and shall be managing our affairs from
Israel. Additionally, as we will be searching for a target business that has
operations or facilities located in Israel, or that intends to establish
operations or facilities in Israel, such as research and development,
manufacturing or executive offices, following our initial business combination,
most of our activities shall be in Israel. Therefore, we may be deemed to be
effectively managed and controlled from Israel, and thus be treated as an
Israeli entity for tax purposes, in which case we will be taxed according to
Israeli law.
Risks
Relating to Enforcement of Legal Process
Third
parties are likely to have difficulty in enforcing judgments obtained in the
United States against us, our officers or our
directors.
We,
as
well as each of our officers and directors, have appointed Corporation Service
Company as our agent to receive service of process in any action against us
in
the United States.
After
the
consummation of a business combination, it is possible that substantially all
of
our assets will be located outside of the United States. As a result, it may
not
be possible for investors in the United States to enforce their legal rights
against us or to enforce judgments of United States courts given that
substantially all of our assets may be located outside of the United States.
Each
of
our directors and officers resides outside the United States. Each of our
officers or directors has consented to service of process in the State of New
York and to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York.
However,
since most of our and such persons’ assets are outside the United States, any
judgment obtained in the United States against us or such persons may not be
collectible within the United States. Furthermore, there is substantial doubt
as
to the enforceability of civil liabilities under the Securities Act or the
Exchange Act in original actions instituted in Israel, and the enforceability
of
a judgment obtained in the United States against us or our officers and
directors may be difficult.