UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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For the fiscal year ended March 31, 2009
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Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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For the transition period from
to
Commission File Number 001-33855
GLOBAL BRANDS ACQUISITION CORP.
(Name of Issuer in Its Charter)
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Delaware
(State of Incorporation)
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26-0482599
(Issuer I.R.S. Employer I.D. Number)
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11 West 42nd Street, 21st Floor
New York, New York
(Address of principal executive offices)
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10036
(zip code)
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(212) 201-8118
(Issuers Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Units consisting of one share of
Common Stock, par value $.0001 per
share, and one Warrant
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NYSE Amex
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Common Stock, $.0001 par value per
share
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NYSE Amex
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Warrants to purchase shares of
Common Stock
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NYSE Amex
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes
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No
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. Yes
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No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes
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No
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Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to the best of the
registrants knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
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Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
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No
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Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See definition of accelerated filer and
large accelerated filer in Rule 12b-2 of the Exchange Act (Check one).
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
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No
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As of September 30, 2008 (the Registrants most recently completed second fiscal quarter), the
aggregate market value of the common stock held by non-affiliates of the registrant was
$264,500,000.
As of June 11, 2009, there were 35,937,500 shares of Common Stock, $.0001 par value per share,
outstanding.
Documents Incorporated by Reference: None.
GLOBAL BRANDS ACQUISITION CORP.
FORM 10-K
TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS.
Introduction
Global Brands Acquisition Corp. is a blank check company formed on July 3, 2007 to acquire one
or more operating businesses or assets through a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination, which we refer to as our initial
business combination. Our efforts in identifying a prospective target business are not limited to
a particular industry, although we are focusing our search on U.S. as well as foreign companies in
the branded consumer sector, including apparel, specialty retail, footwear and accessories. We are
also exploring opportunities in other consumer-focused and other sectors that are attractive to us.
On December 12, 2007, we closed our initial public offering (IPO) of 28,750,000 units,
including 3,750,000 units subject to the underwriters over-allotment option, 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 $7.00 per share. Simultaneously with the consummation of the
IPO, we consummated the private sale of 5,000,000 warrants (sponsors warrants) at a price of
$1.00 per sponsors warrant, generating total proceeds of $5,000,000, to JLJ Partners, LLC (JLJ
Partners), an entity controlled by Joel J. Horowitz, our chief executive officer, treasurer and
director, Lawrence S. Stroll, our chairman of the board, and John D. Idol, our president, secretary
and director. The units from the IPO (including the 3,750,000 units pursuant to the over-allotment
option) were sold at an offering price of $10.00 per unit, generating total gross proceeds of
$287,500,000. After deducting the underwriting discounts and commissions and the offering
expenses, the total net proceeds to us from the offering (including the proceeds from the 3,750,000
units pursuant to the over-allotment option and the private sale of sponsors warrants) were
$286,390,858, of which $286,125,000 was deposited into a trust fund and the remaining proceeds
became available to be used to provide for business, legal and accounting due diligence on
prospective business combinations and other continuing general and administrative expenses. We
also have an aggregate of up to $2,875,000 of interest earned on the proceeds in the trust fund
that is available to us to fund our working capital requirements (provided that there are
sufficient funds available to us to pay our tax obligations then due at that time), as well as any
amounts necessary to pay our tax obligations. Through March 31, 2009, we had used $265,858 of the
net proceeds that were not deposited into the trust fund to pay general and administrative
expenses, and we had drawn interest income in the amount of $880,000 and $1,729,095 for our working
capital and tax obligations, respectively. The net proceeds deposited into the trust fund remain on
deposit in the trust fund earning interest. As of March 31, 2009, the funds held in trust have
earned $2,419,123 in interest income that has not been drawn by us (for a total of $288,540,957
held in the trust fund), of which $1,995,000 is available to be drawn by us as describe above.
If we do not complete a business combination by December 6, 2009, we will be dissolved and
will distribute to all the public stockholders, in proportion to the number of public shares held
by them, an aggregate sum equal to the amount in the trust fund, inclusive of any interest then
held in the trust account, plus any remaining net assets. The founders have waived their rights to
participate in any liquidation distribution with respect to the founders common stock.
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There will be no distribution from the trust fund with respect to our warrants. Upon notice
from us, the trustee of the trust fund will commence liquidating the investments constituting the
trust fund and will turn over the proceeds to our transfer agent for distribution to our
stockholders. We anticipate that our instruction to the trustee would be given promptly after the
expiration of the applicable time periods.
We are not presently engaged in, and we will not engage in, any operations for an indefinite
period of time. We intend to utilize the cash proceeds of our IPO and our private placements, our
capital stock, debt or a combination of the foregoing as the consideration to be paid in an initial
business combination. We may engage in an initial business combination with a company that does not
require significant additional capital but is seeking a public trading market for its shares, and
which wants to merge with an already public company to avoid the uncertainties associated with
undertaking its own public offering. These uncertainties include time delays, compliance and
governance issues requiring internal restructuring to comply with securities laws and stock
exchange regulations, significant expense, a possible loss of voting control, and the risk that
market conditions will not be favorable for an initial public offering at the time the offering is
ready to be sold. In the alternative, we may seek to consummate a business combination with a
company that may be financially unstable or in its early stages of development or growth.
Business Strategy
Branded consumer companies focus on developing customer loyalty by selling products
identifiable by specific and well recognized trademarks across product categories. Although none of
our officers or directors is currently, or has been within the past five years, associated with
other specified purpose acquisition companies or other entities with business plans similar to
ours, each of our executives has experience in lifestyle branding, whereby a consumer brand is
leveraged by expanding, either directly or through third-party licensing and distributorship
arrangements, into (i) multiple product categories, including apparel, accessories (handbags, shoes
and jewelry), fragrance/beauty products and home products, (ii) various distribution channels,
including department stores, specialty and/or outlet retail and direct-to-consumer and (iii)
international markets. We intend to leverage this expertise to accelerate the growth of the
business we acquire. Our management teams experience also provides us with the flexibility to
review growth and turnaround situations for underleveraged or underperforming brands.
While we do not have set criteria for a target business, we have established general
guidelines:
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Established Companies
. We generally focus on companies with a history of
operating and financial results. We do not intend to acquire start-up companies.
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Strong Free Cash Flow Characteristics
. We seek to acquire companies that have a
history of, or the ability to generate, strong, stable free cash flow. This may
include companies with opportunities for cash flow growth through operational
expansion or turnaround.
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Strong Competitive Industry Position
. For each potential acquisition, we review
growth prospects, competitive dynamics, level of consolidation, need for capital
investment and barriers to entry. We focus on companies that have a leading
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market position or that we believe have an opportunity to develop such a position.
We analyze the strengths and weaknesses of target businesses relative to their
competitors, focusing on product quality, customer loyalty, cost impediments
associated with customers switching to competitors, trademark protection and brand
positioning. We seek to acquire businesses that demonstrate advantages when compared
to their competitors, which may help to protect their market position and
profitability and deliver strong free cash flow.
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Experienced Management Team
. We seek to acquire businesses that have strong,
experienced management teams. We may also seek to supplement target businesses
management teams with seasoned and experienced executives recruited through our
extensive professional network. We focus on management teams with a proven track
record of driving revenue growth, enhancing profitability and generating strong
free cash flow. We believe that the operating expertise of our founders will
complement, not replace, the targets management team. While it is possible that
one or more of our officers or directors will remain associated in some capacity
with us following a business combination, it is unlikely that any of them will
devote their full efforts to our affairs subsequent to a business combination.
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Diversified Customer and Supplier Base
. We seek to acquire businesses that have
a diversified customer and supplier base. Companies with a diversified customer and
supplier base are generally better able to endure economic downturns, industry
consolidation, changing business preferences and other factors that may negatively
influence their customers, suppliers and competitors.
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Competitive Advantages
We believe that we have the following competitive advantages over other entities with business
objectives similar to ours:
Management Expertise
We believe that our management teams experience in owning, operating and developing branded
fashion and apparel companies, including Tommy Hilfiger, Pepe Jeans, Polo Ralph Lauren Europe,
Donna Karan, Kasper/Anne Klein and, most recently, Michael Kors, will help us locate an attractive
target business.
Established Deal Sourcing Network
We believe that our management teams relationships throughout the fashion, apparel and retail
industries will serve as a valuable source of acquisition candidates both in the U.S. and
internationally.
Status as a Public Company
We believe our structure will make us an attractive business combination partner to potential
target businesses. As an existing public company, we offer a target business an alternative to the
traditional initial public offering through a merger or other initial business combination. The
owners of the target business would exchange their shares of stock in the target business for
shares of our stock. We believe target businesses will find this method a cheaper, quicker and more
certain process to becoming a public company than the typical initial public
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offering. Once public, we believe the target business would then have greater access to
capital and additional means of incentivizing management consistent with shareholders interests.
It can offer further benefits by augmenting a companys profile among potential new customers and
vendors and aid in attracting talented employees.
Financial Position
We offer a target business a variety of options such as providing the owners of a target
business with shares in a public company and a public means to sell such shares, providing capital
for the potential growth and expansion of the target business operations or strengthening its
balance sheet by reducing its debt ratio. Because we are able to consummate an initial business
combination using our cash, debt or equity securities, or a combination of the foregoing, we have
the flexibility to use the most efficient combination that will allow us to tailor the
consideration to be paid to the target business to fit its needs and desires.
Selection of a Target Business and Structuring of a Business Combination
We anticipate that target business candidates will be brought to our attention from various
unaffiliated sources, including investment bankers, venture capital funds, private equity funds,
leveraged buyout funds, management buyout funds 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
they think we may be interested in on an unsolicited basis, since many of these sources will have
read the prospectus for our IPO and know what types of businesses we are targeting. Our officers
and directors, as well as 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.
We may engage professional firms or other individuals that specialize in business acquisitions, in
which event we may pay a finders fee, consulting fee or other compensation to be determined in an
arms length negotiation based on the terms of the transaction. In no event, however, will any of
our founders or members of our management team or our or their respective affiliates, be paid any
finders fee, consulting fee or other similar compensation prior to, or for any services they
render in order to effectuate, the consummation of an initial business combination (regardless of
the type of transaction that it is).
Subject to the requirement that our initial business combination be with one or more target
businesses with a collective fair market value that is at least 80% of the balance in the trust
account (excluding deferred underwriting discounts and commissions) at the time of such initial
business combination, our management will have virtually unrestricted flexibility in identifying
and selecting a prospective target business. In evaluating a prospective target business, our
management may consider a variety of factors, including one or more of the following:
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expected returns on investment relative to the aggregate consideration expected
to be paid in an initial business combination;
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financial condition and results of operations;
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growth potential;
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brand recognition and potential;
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experience and skill of management and availability of additional personnel;
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capital requirements;
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stage of development of the business and its products or services;
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existing distribution arrangements and the potential for expansion;
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degree of current or potential market acceptance of the products or services;
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proprietary aspects of products and the extent of intellectual property or other
protection for products or formulas;
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impact of regulation on the business;
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regulatory environment of the industry;
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seasonal sales fluctuations and the ability to offset these fluctuations through
other business combinations, introduction of new products, or product line
extensions;
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costs associated with effecting the business combination; and
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industry leadership, sustainability of market share and attractiveness of market
sectors in which the target business participates.
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These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a
particular initial business combination may be based, to the extent relevant, on the above factors
as well as other considerations deemed relevant by our management to our business objective. In
evaluating a prospective target business, we expect to conduct an extensive due diligence review
which will encompass, among other things, meetings with incumbent management and employees,
document reviews, interviews of customers and suppliers, inspection of facilities, as well as
review of financial and other information which will be made available to us.
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 the balance in the trust account (excluding deferred underwriting discounts and commissions)
at the time of such acquisition. The fair market value of such business will be determined by our
board of directors based upon one or more standards generally accepted by the financial community
(such as actual and potential sales, earnings, cash flow and/or book value). If our board is not
able to independently determine that the target business has a sufficient fair market value, we
will obtain an opinion from an unaffiliated, independent investment banking firm that is a member
of the Financial Industry Regulatory Authority with respect to the satisfaction of such criteria.
We will not be required to obtain an opinion from an investment banking firm as to the fair market
value if our board of directors independently determines that the target business has sufficient
fair market value.
Opportunity for Stockholder Approval of Business Combination
Prior to the completion of an initial business combination, we will submit the transaction to
our stockholders for approval, even if the nature of the acquisition is such as would not
ordinarily require stockholder approval under applicable state law. In connection with any such
initial business combination, we will also submit to our stockholders for approval a proposal to
amend our amended and restated certificate of incorporation to provide for our corporate life to
continue perpetually following the consummation of such initial business combination. Any vote
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to extend our corporate life to continue perpetually following the consummation of an initial
business combination will be taken only if the initial business combination is approved. We will
only consummate an initial business combination if stockholders vote both in favor of such initial
business combination and our amendment to extend our corporate life. We will not take any action to
amend or waive this provision to allow us to survive for a longer period of time except in
connection with the consummation of our initial business combination.
In connection with seeking stockholder approval of an initial business combination, we will
furnish our stockholders with proxy solicitation materials prepared in accordance with the
Securities Exchange Act of 1934, as amended, which, among other matters, will include a description
of the operations of the target business and audited historical financial statements of the
business.
In connection with the vote required for any initial business combination, all of our
founders, including all of our officers and directors, have agreed to vote the shares of common
stock included in the units issued to them prior to our IPO (founders units, and the common
stock and warrants comprising the founders units, the founders common stock and founders
warrants, respectively) in accordance with the majority of the shares of common stock voted by the
holders of shares of common stock issued in our IPO (public shares, and the holders thereof,
public stockholders). Our founders have also agreed that they will vote the shares they purchased
in our IPO and any they purchase in the open market in favor of an initial business combination. We
will proceed with the initial business combination only if a majority of the shares of common stock
voted by the public stockholders are voted in favor of the initial business combination and public
stockholders owning less than 30% of the public shares both vote against the initial business
combination and exercise their conversion rights, as described in the following section.
Conversion Rights
At the time we seek stockholder approval of any initial business combination, we will offer
each public stockholder the right to have their shares of common stock converted to cash if the
stockholder votes against the initial business combination and the initial business combination is
approved and completed. Our founders will not have conversion rights with respect to any shares of
common stock owned by them, directly or indirectly, whether underlying the founders units or
purchased by them in our IPO or in the aftermarket. The actual per-share conversion price will be
equal to the amount in the trust fund, inclusive of any interest, as of two business days prior to
the consummation of the business combination, divided by the total number of public shares. As of
March 31, 2009, the per-share conversion price would have been approximately $10.04.
An eligible stockholder may request conversion at any time after the mailing to our
stockholders of the proxy statement and prior to the vote taken with respect to a proposed initial
business combination at a meeting held for that purpose (including at the meeting itself), but the
request will not be granted unless the stockholder votes against the initial business combination
and the initial business combination is approved and completed. Additionally, we may require public
stockholders, whether they are a record holder or hold their shares in street name, to either
tender their certificates to our transfer agent at any time through the vote on the initial
business combination or to deliver their shares to the transfer agent electronically using
Depository Trust Companys DWAC (Deposit/Withdrawal At Custodian) System, at the holders
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option. The proxy solicitation materials that we will furnish to stockholders in connection
with the vote for any proposed initial business combination will indicate whether we are requiring
stockholders to satisfy such certification and delivery requirements. Accordingly, a stockholder
would have from the time we send out our proxy statement through the vote on the initial business
combination to complete the tender or delivery of his shares to us if he wishes to seek to exercise
his conversion rights. We will only require stockholders to deliver their certificates prior to the
vote if we give stockholders at least two weeks between the mailing of the proxy solicitation
materials and the meeting date.
If a stockholder votes against the initial business combination but fails to properly exercise
his, her or its conversion rights, the stockholder will not have his, her or its shares of common
stock converted to his, her or its pro rata share of the trust account. Any request for conversion,
once made, may be withdrawn at any time up to the date of the meeting at which a vote is taken with
respect to a proposed initial business transaction. Furthermore, if a stockholder delivers his
certificate for conversion and subsequently decides prior to the meeting not to elect conversion,
he may simply request that the transfer agent return the certificate (physically or
electronically). It is anticipated that the funds to be distributed to stockholders entitled to
convert their shares who elect conversion will be distributed promptly after completion of our
initial business combination. Public stockholders who convert their stock into their pro rata share
of the trust account will still have the right to exercise any warrants they still hold.
We will not complete our proposed initial business combination if public stockholders owning
30% or more of the public shares exercise their conversion rights. If a vote on an initial business
combination is held and the initial business combination is not approved, we may continue to try to
consummate an initial business combination with a different target until December 6, 2009. If the
initial business combination is not approved or completed for any reason, then public stockholders
voting against our initial business combination who exercised their conversion rights would not be
entitled to convert their shares of common stock into a pro rata share of the aggregate amount then
on deposit in the trust account. In such case, if we have required public stockholders to tender
their certificates prior to the meeting, we will promptly return such certificates to the tendering
public stockholder. Public stockholders would be entitled to receive their pro rata share of the
aggregate amount on deposit in the trust account only in the event that the initial business
combination they voted against was duly approved and subsequently completed, or in connection with
our liquidation.
Liquidation If No Business Combination
If we do not complete a business combination by December 6, 2009, we will be dissolved and
will distribute to all the public stockholders, in proportion to the number of public shares held
by them, an aggregate sum equal to the amount in the trust fund, inclusive of any interest, plus
any remaining net assets. The founders have waived their rights to participate in any liquidation
distribution with respect to the founders common stock. There will be no distribution from the
trust fund with respect to our warrants.
Upon notice from us, the trustee of the trust fund will commence liquidating the investments
constituting the trust fund and will turn over the proceeds to our transfer agent for distribution
to our stockholders. We anticipate that our instruction to the trustee would be given promptly
after the expiration of the applicable time periods.
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If we were to expend all of the net proceeds of our IPO, other than the proceeds deposited in
the trust fund, the per-share liquidation price as of March 31, 2009 would have been approximately
$10.04. However, the proceeds deposited in the trust fund could become subject to the claims of
our creditors which could be prior to the claims of our public stockholders. Lawrence S. Stroll,
Joel J. Horowitz and John D. Idol have agreed that they will be personally liable to pay debts and
obligations to third parties or target businesses that are owed money by us for services rendered
or contracted for or products sold to us in excess of the net proceeds of our IPO not held in the
trust fund but only if, and to the extent, that the claims would otherwise reduce the amount in the
trust fund payable to our public stockholders in the event of a liquidation, and only if such a
third party or prospective target business does not execute a valid and enforceable waiver.
Competition
In identifying, evaluating and selecting a target business for an initial business
combination, we may encounter intense competition from other entities having a business objective
similar to ours including other blank check companies, private equity groups and leveraged buyout
funds, and operating businesses seeking strategic acquisitions. Many of these entities are well
established and have extensive experience identifying and effecting business combinations directly
or through affiliates. Moreover, many of these competitors possess greater financial, technical,
human and other resources than us. Our ability to acquire larger target businesses will be limited
by our available financial resources. This inherent limitation gives others an advantage in
pursuing the acquisition of a target business. Furthermore:
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our obligation to seek stockholder approval of our initial business combination
or obtain necessary financial information may delay the completion of a
transaction;
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our obligation to convert into cash up to 30% of our shares of common stock held
by our public stockholders who vote against the initial business combination and
exercise their conversion rights may reduce the resources available to us for an
initial business combination; and
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our outstanding warrants, and the future dilution they potentially represent,
may not be viewed favorably by certain target businesses.
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Any of these factors may place us at a competitive disadvantage in successfully negotiating an
initial business combination. Our management believes, however, that our status as a public entity
and potential access to the United States public equity markets may give us a competitive advantage
over privately-held entities having a similar business objective as us in acquiring a target
business on favorable terms.
If we succeed in effecting a business combination, there will be, in all likelihood, intense
competition from competitors of the target business. Numerous companies, most of which have
substantially greater financial resources available to them than we do, are already engaged in the
industry segments we are focusing on. We cannot assure you that, subsequent to a business
combination, we will have the resources or ability to compete effectively.
Employees
We do not have any full time employees and do not anticipate having any full time employees
prior to the consummation of a business combination. We currently have three
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executive officers. These individuals are not obligated to devote any specific number of hours
to our matters and intend to devote only as much time as they deem necessary to our affairs. The
amount of time they will devote in any time period will vary based on whether a target business has
been selected for the initial business combination and the stage of the initial business
combination process the company is in.
ITEM 1A. RISK FACTORS
Risks associated with our business
In addition to other information included in this report, the following factors should be
considered in evaluating our business and future prospects.
We are a recently formed development stage company with no operating history and no revenues, and
you have no basis on which to evaluate our ability to achieve our business objective.
We are a recently formed development stage company with no operating results. Because we lack
an operating history, you have no basis upon which to evaluate our ability to achieve our business
objective of completing an initial business combination with one or more target businesses. We will
not generate any revenues other than interest and dividends until, at the earliest, after the
consummation of a business combination.
We may not be able to consummate an initial business combination within the required time frame, in
which case, we would be forced to liquidate our assets.
Pursuant to our amended and restated certificate of incorporation, we have until December 6,
2009 to complete an initial business combination. If we fail to consummate an initial business
combination within the required time frame, our corporate existence will, in accordance with our
amended and restated certificate of incorporation, cease except for the purposes of winding up our
affairs and liquidating. We may not be able to find suitable target businesses within the required
time frame. In addition, our negotiating position and our ability to conduct adequate due diligence
on any potential target may be reduced as we approach the deadline for the consummation of an
initial business combination.
If we are forced to liquidate before an initial business combination and distribute the trust
account, our public stockholders may receive less than $10.04 per share and our warrants will
expire worthless.
As of March 31, 2009, the per-share liquidation price was approximately $10.04. If we are
unable to complete an initial business combination by December 6, 2009 and are forced to liquidate
our assets, the per-share liquidation distribution may be less than $10.00 because of the expenses
of our IPO, our general and administrative expenses, the anticipated costs of seeking an initial
business combination and potential claims of creditors, if any. As of March 31, 2009, the
per-share liquidation price was approximately $10.04. However, we cannot assure you that we will in
fact be able to distribute approximately $10.04 per share upon liquidation of the trust account, as
a result of claims of creditors which may take priority over the claims of our public stockholders.
Furthermore, there will be no distribution with respect to our outstanding warrants which will
expire worthless if we liquidate before the completion of an initial business combination.
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If we are unable to consummate an initial business combination, our public stockholders will be
forced to wait until December 6, 2009 before receiving liquidation distributions.
We have until December 6, 2009 to complete an initial business combination. We have no
obligation to return funds to public stockholders prior to such date unless we consummate an
initial business combination prior thereto and only then in cases where public stockholders have
sought conversion of their shares. Only after the expiration of this full time period will public
stockholders be entitled to liquidation distributions if we are unable to complete an initial
business combination. Accordingly, public stockholders funds may be unavailable to them until such
date.
Because there are numerous companies with a business plan similar to ours seeking to effectuate an
initial business combination, it may be more difficult for us to do so.
There are numerous similarly structured blank check companies which have completed initial
public offerings with business plans similar to ours and there are a number of additional offerings
for blank check companies that are still in the registration process but have not completed initial
public offerings. While some of those companies must complete an initial business combination in
specific industries, a number of them may consummate an initial business combination in any
industry they choose. Therefore, we are subject to competition from these and other companies
seeking to consummate a business plan similar to ours. Because of this competition, we cannot
assure you that we will be able to effectuate an initial business combination within the required
time period.
If funds available to us are insufficient to allow us to operate until December 6, 2009, we may be
unable to complete an initial business combination.
We believe that the funds available to us will be sufficient to allow us to operate at least
until December 6, 2009, assuming that an initial business combination is not consummated during
that time. However, we cannot assure you that our estimates will be accurate. We could use a
portion of the funds available to us to pay fees to consultants to assist us with our search for a
target business. We could also use a portion of the funds as a down payment or to fund a no-shop
provision (a provision in letters of intent designed to keep target businesses from shopping
around for transactions with other companies on terms more favorable to such target businesses)
with respect to a particular proposed business combination, although we do not have any current
intention to do so. If we entered into a letter of intent where we paid for the right to receive
exclusivity from a target business and were subsequently required to forfeit the funds (whether as
a result of our breach or otherwise), we might not have sufficient funds to continue searching for,
or conduct due diligence with respect to, a target business.
The current global credit crisis could make it more difficult for us to obtain additional
financing, if required, to complete an initial business combination or to fund the operations and
growth of the target business.
The current global credit crisis is making it difficult, if not impossible, for companies to
obtain financing for acquisitions and operational growth. There is no indication when this credit
crisis will abate. If we need to obtain financing to consummate our initial business combination or
to fund the operations of the target business we seek to acquire after our initial business
combination, we cannot assure you that such financing will be available on acceptable terms, if at
all. To the extent that additional financing proves to be unavailable when needed to
10
consummate a particular business combination, we would be compelled to either restructure the
transaction or abandon that particular business combination and seek an alternative target business
candidate. Alternatively, we may require such financing to fund the operations or growth of the
target business. The failure to secure additional financing could have a material adverse effect on
the continued development or growth of the target business.
If we do not conduct an adequate due diligence investigation of a target business with which we
combine, we may be required to subsequently take write-downs or write-offs, restructuring, and
impairment or other charges that could have a significant negative effect on our financial
condition, results of operations and our stock price, which could cause you to lose some or all of
your investment.
We must conduct a due diligence investigation of the target businesses we intend to acquire.
Intensive due diligence is time consuming and expensive due to the operations, accounting, finance
and legal professionals who must be involved in the due diligence process. Even if we conduct
extensive due diligence on a target business with which we combine, we cannot assure you that this
diligence will reveal all material issues that may affect a particular target business, or that
factors outside the control of the target business and outside of our control will not later arise.
If our diligence fails to identify issues specific to a target business, industry or the
environment in which the target business operates, we may be forced to later write-down or
write-off assets, restructure our operations, or incur impairment or other charges that could
result in our reporting losses. Even though these charges may be non-cash items and not have an
immediate impact on our liquidity, the fact that we report charges of this nature could contribute
to negative market perceptions about us or our common stock. In addition, charges of this nature
may cause us to violate net worth or other covenants to which we may be subject as a result of
assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination
debt financing.
A decline in interest rates could limit the amount available to fund our search for a target
business or businesses and complete an initial business combination since we will depend on
interest earned on the trust account to fund our search, to pay our tax obligations and to complete
our initial business combination.
We will depend on sufficient interest being earned on the proceeds held in the trust account
to provide us with additional working capital which we will need to identify one or more target
businesses and to complete our initial business combination, as well as the funds required to pay
any tax obligations that we may owe. While we are entitled to have released to us for such purposes
certain interest earned on the funds in the trust account, a substantial decline in interest rates
may result in our having insufficient funds available with which to structure, negotiate or close
an initial business combination. In such event, we would need to borrow funds from our founders to
operate or may be forced to liquidate. Our founders are under no obligation to advance funds in
such circumstances.
If third parties bring claims against us, the proceeds held in trust could be reduced and the
per-share liquidation price received by stockholders may be less than approximately $10.04 per
share.
Our placing of funds in the trust account may not protect those funds from third party claims
against us. Although we will seek to have all third parties (including any vendors or other
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entities we engage after our IPO) and any prospective target businesses we negotiate with,
execute agreements with us waiving any right, title, interest or claim of any kind in or to any
monies held in the trust account, there is no guarantee that they will execute such waiver
agreements. Furthermore, there is no guarantee that, even if an entity executes a waiver agreement
with us, it will not seek recourse against the trust account. Nor is there any guarantee that such
entities will agree to waive any claims they may have in the future as a result of, or arising out
of, any negotiations, contracts or agreements with us and will not seek recourse against the trust
account for any reason. There is also no guarantee that a court would uphold the validity of a
waiver agreement.
Accordingly, the proceeds held in trust could be subject to claims which could take priority
over those of our public stockholders and, as a result, the per-share liquidation price could be
less than approximately $10.04 due to claims of such creditors. If we liquidate before the
completion of an initial business combination and distribute the proceeds held in the trust account
to our public stockholders, Joel J. Horowitz, Lawrence S. Stroll and John D. Idol have agreed that
they will be personally liable to ensure that the proceeds in the trust account are not reduced by
the claims of prospective target businesses or claims of third parties or other entities that are
owed money by us for services rendered or contracted for or products sold to us, but only if such
third party or prospective target business or other entity does not execute a valid and enforceable
agreement 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. However, we cannot assure you that they will be able to
satisfy those obligations. Therefore, we cannot assure you that the per-share distribution from the
trust account, if we liquidate, will not be less than approximately $10.04, plus interest, due to
such claims.
Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is
filed against us which is not dismissed, the proceeds held in the trust account could be subject to
applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims
of third parties with priority over the claims of our stockholders. To the extent any bankruptcy
claims deplete the trust account, we cannot assure you we will be able to return to our public
stockholders at least approximately $10.04.
Our stockholders may be held liable for claims by third parties against us to the extent of
distributions received by them.
If we are unable to complete an initial business combination by December 6, 2009, our
corporate existence will cease except for the purposes of winding up our affairs and liquidating
pursuant to Section 278 of the Delaware General Corporation Law, in which case we will as promptly
as practicable thereafter adopt a plan of distribution in accordance with Section 281(b) of the
Delaware General Corporation Law. Section 278 provides that our existence will continue for at
least three years after its expiration for the purpose of prosecuting and defending suits, whether
civil, criminal or administrative, by or against us, and of enabling us gradually to settle and
close our business, to dispose of and convey our property, to discharge our liabilities and to
distribute to our stockholders any remaining assets, but not for the purpose of continuing the
business for which we were organized. Our existence will continue automatically even beyond the
three-year period for the purpose of completing the prosecution or defense of suits begun prior to
the expiration of the three-year period, until such time as any judgments, orders or decrees
resulting from such suits are fully executed. Section 281(b) will require us to pay or make
reasonable provision for all then-existing claims and obligations, including all contingent,
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conditional, or unmatured contractual claims known to us, and to make provisions as will be
reasonably likely to be sufficient to provide compensation for any then-pending claims and for
claims that have not been made known to us or that have not arisen but that, based on facts known
to us at the time, are likely to arise or to become known to us within 10 years after the date of
dissolution. Accordingly, we would be required to provide for any creditors known to us at that
time or those that we believe could be potentially brought against us within the subsequent 10
years prior to distributing the funds held in the trust to stockholders. However, because we are a
blank check company, rather than an operating company, and our operations will be limited to
searching for prospective target businesses to acquire, the only likely claims to arise would be
from our vendors that we engage after the consummation of our IPO (such as accountants, lawyers,
investment bankers, etc.) and potential target businesses. We intend to have all third parties
(including any vendors or other entities that we engage after the consummation of our IPO) and any
prospective target businesses execute valid and enforceable agreements with us waiving any right,
title, interest or claim of any kind in or to any monies held in the trust account. Accordingly, we
believe the claims that could be made against us should be limited, thereby lessening the
likelihood that any claim would result in any liability extending to the trust. However, we cannot
assure you that we will properly assess all claims that may be potentially brought against us. As a
result, our stockholders could potentially be liable for any claims to the extent of distributions
received by them (but no more) and any liability of our stockholders may extend well beyond the
third anniversary of the date of distribution. Accordingly, we cannot assure you that third parties
will not seek to recover from our stockholders amounts owed to them by us.
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 after December 6, 2009, 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 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. We cannot assure
you that claims will not be brought against us for these reasons.
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 expire worthless.
No warrant held by public stockholders will be exercisable and we will not be obligated to
issue shares of common stock unless, at the time a holder seeks to exercise a warrant, a
registration statement under the Securities Act is in effect covering the shares of common stock
issuable upon the exercise of the warrants and a current prospectus relating to the shares of
common stock is available. Under the terms of the warrant agreement, we have agreed to use our best
efforts to have a registration statement in effect covering the shares of common stock issuable
upon exercise of the warrants as of the date the warrants become exercisable and to maintain a
current prospectus relating to the shares of common stock issuable upon exercise of
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the warrants until the expiration of the warrants. However, we cannot assure you that we will
be able to do so. We will not be required to net cash settle the warrants if we do not maintain a
current prospectus. In such event, the warrants held by public stockholders may have no value, the
market for such warrants may be limited, such warrants may expire worthless and, as a result, an
investor may have paid the full unit price solely for the shares of common stock included in the
units.
An investor will only be able to exercise a warrant if the issuance of common stock upon the
exercise has been registered or qualified or is deemed exempt under the securities laws of the
state of residence of the holder of the warrants.
No warrants will be exercisable and we will not be obligated to issue shares of common stock
unless the shares of common stock issuable upon an exercise 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. At the time that the warrants become exercisable, we expect to continue to be listed on a
national securities exchange, which would provide an exemption from registration in every state.
Accordingly, we believe holders in every state will be able to exercise their warrants as long as
our prospectus relating to the shares of common stock issuable upon exercise of the warrants is
current. However, we cannot assure you of this fact. If the shares of common stock issuable upon
exercise of the warrants is not qualified or exempt from qualification in the jurisdictions in
which the holders of the warrants reside, the warrants may be deprived of any value, the market for
the warrants may be limited and they may expire worthless if they cannot be sold.
Since we have not yet selected a particular industry or target business with which to complete a
business combination, you will be unable to currently ascertain the merits or risks of the industry
or business in which we may ultimately operate.
Except for the limitation that a target business have a fair market value of at least 80% of
the balance in the trust account (excluding deferred underwriting discounts and commissions), we
will have virtually unrestricted flexibility in identifying and selecting a prospective acquisition
candidate. Although we are focusing our search for target businesses in the branded consumer
sector, we may consummate an initial business combination with a company in any industry and are
not limited to any particular type of business. Accordingly, there is no current basis for you to
evaluate the possible merits or risks of the particular industry in which we may ultimately operate
or the target business which we may ultimately acquire. If we complete an initial business
combination with an entity in an industry characterized by a high level of risk, we may be affected
by the currently unascertainable risks of that industry. Although our management will endeavor to
evaluate the risks inherent in a particular industry or target business, we cannot assure you that
we will properly ascertain or assess all of the significant risk factors. Even if we properly
assess those risks, some of them may be outside of our control or ability to affect. We also cannot
assure you that an investment in our units will ultimately prove to be more favorable to investors
than a direct investment, if such an opportunity were available, in a target business.
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We may issue shares of our capital stock or debt securities to complete an initial business
combination. Issuance of our capital stock would reduce the equity interest of our stockholders and
may cause a change in control of our ownership, while the issuance of debt securities may have a
significant impact on our ability to utilize our available cash.
Our amended and restated certificate of incorporation authorizes the issuance of up to
90,000,000 shares of common stock, par value $.0001 per share, and 1,000,000 shares of preferred
stock, par value $.0001 per share. There are currently 13,125,000 authorized but unissued shares of
common stock available for issuance (after appropriate reservation for the issuance of the shares
upon full exercise of our outstanding warrants) and all of the 1,000,000 shares of preferred stock
available for issuance. Although we have made no commitments as of the date of this Annual Report
on Form 10-K, we may issue a substantial number of additional shares of our common or preferred
stock, or a combination of common and preferred stock, to complete an initial business combination.
The issuance of additional shares of our common stock or any number of shares of our preferred
stock:
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may significantly reduce your equity interest in us;
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may subordinate the rights of holders of shares of common stock if we issue
preferred stock with rights senior to those afforded to our common stock;
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may cause a change in control if a substantial number of our shares of common
stock are issued, which may affect, among other things, our ability to use our net
operating loss carry forwards, if any, and could result in the resignation or
removal of our present officers and directors;
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may, in certain circumstances, have the effect of delaying or preventing a
change of control of us; and
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may adversely affect prevailing market prices for our common stock.
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Similarly, if we issue debt securities, it could result in:
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default and foreclosure on our assets if our operating revenues after an initial
business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all
principal and interest payments when due if we breach certain covenants that
require the maintenance of certain financial ratios or reserves without a waiver or
renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt
security is payable on demand; and
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our inability to obtain necessary additional financing if the debt security
contains covenants restricting our ability to obtain such financing while the debt
security is outstanding.
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The value of your investment in us may decline if any of these events occur.
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Resources could be wasted in researching acquisitions that are not consummated, which could
materially adversely affect subsequent attempts to locate and acquire or merge with another
business.
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 management time and attention and substantial costs for accountants, attorneys
and others. If a decision is made not to complete a specific business combination, the costs
incurred up to that point for the proposed transaction likely would not be recoverable.
Furthermore, even if an agreement is reached relating to a specific target business, we may fail to
consummate an initial business combination for any number of reasons including those beyond our
control, such as that public stockholders owning 30% or more of the public shares vote against the
initial business combination and opt to have us convert their shares for a pro rata share of the
trust account even if a majority of our stockholders approve the initial business combination. Any
such event will result in a loss to us of the related costs incurred which could materially
adversely affect subsequent attempts to locate and acquire or merge with another business.
Our ability to successfully effect an initial business combination and to be successful thereafter
will be totally dependent upon the efforts and time commitments of our management team and key
personnel, some of whom may join us following an initial business combination.
Our ability to successfully effect an initial business combination is dependent upon the
efforts of Joel J. Horowitz, our chief executive officer and treasurer, Lawrence S. Stroll, our
chairman of the board, and John D. Idol, our president and secretary. We believe that our success
depends on the continued service and time commitments of these individuals, at least until we have
consummated an initial business combination. We cannot assure you that these individuals will
remain with, or devote sufficient time to, us for the immediate or foreseeable future. In addition,
these individuals are engaged in several other business endeavors and none of them is required to
commit any specified amount of time to our affairs. If the other business endeavors of these
individuals require them to devote substantial amounts of time, it could limit their ability to
devote time to our affairs, including the time necessary to identify potential initial business
combinations and monitor the related due diligence, and could have a negative impact on our ability
to consummate an initial business combination. We cannot assure you that any conflicts of interest
that these individuals may have in allocating management time among various business activities,
including identifying potential business combinations and monitoring the related due diligence,
will be resolved in our favor. We do not have employment agreements with, or key-man insurance on
the life of, any of our officers. The unexpected loss of the services of one or more members of our
management team could have a detrimental effect on us.
The role of our management team and key personnel in the target business cannot presently be
ascertained. Although some of our management team may remain with the target business in senior
management or advisory positions following an initial business combination, it is likely that some
or all of the management of the target business will remain in place. While we intend to closely
scrutinize any individuals we engage after an initial business combination, we cannot assure you
that our assessment of these individuals will prove to be correct. 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
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requirements. This could be expensive and time-consuming and could lead to various regulatory
issues which may adversely affect our operations.
Our officers and directors may negotiate employment or consulting agreements with a target business
in connection with a particular business combination. These agreements may provide for them to
receive compensation following an initial business combination and as a result, may cause them to
have conflicts of interest in determining whether a particular business combination is the most
advantageous.
Joel J. Horowitz, our chief executive officer and treasurer, Lawrence S. Stroll, our chairman
of the board, and John D. Idol, our president and secretary, will be able to remain with the
company after the consummation of an initial business combination only if they are able to
negotiate employment or consulting agreements in connection with the initial business combination.
Such negotiations would take place simultaneously with the negotiation of the initial business
combination and could provide for such individuals to receive compensation in the form of cash
payments and/or our securities for services they would render to the company after the consummation
of the initial business combination. The personal and financial interests of such individuals may
influence their motivation in identifying and selecting a target business.
Our officers and directors may in the future become affiliated with entities engaged in business
activities similar to those intended to be conducted by us. Accordingly, they may have fiduciary or
other obligations to these other entities which could create conflicts of interest, including in
allocating their time and determining to which entity a particular business opportunity should be
presented.
Our officers and directors may in the future become affiliated with entities, including, among
others, blank check companies, public companies, hedge funds, private equity funds, venture
capital funds and other investment vehicles and capital pools, which may be engaged in business
activities similar to those intended to be conducted by us. Additionally, our officers and
directors may become aware of business opportunities which may be appropriate for presentation to
us and the other entities to which they owe fiduciary duties. Accordingly, they may have conflicts
of interest in determining to which entity time should be allocated or a particular business
opportunity should be presented. We cannot assure you that these conflicts will be resolved in our
favor. As a result, a potential target business may be presented to another entity prior to its
presentation to us, which could have a negative impact on our ability to successfully consummate an
initial business combination.
The founders have waived their right to participate in liquidation distributions with respect to
the founders common stock and, therefore, our officers and directors may have a conflict of
interest in determining whether a particular target business is appropriate for an initial business
combination.
The founders have waived their right to receive distributions with respect to the founders
common stock upon our liquidation if we are unable to consummate an initial business combination.
Accordingly, the founders common stock and founders warrants, as well as the sponsors warrants,
and the units purchased by our directors in our IPO or by our officers and directors in the
aftermarket will be worthless if we do not consummate an initial business combination. The personal
and financial interests of our directors and officers who own founders common stock, founders
warrants or sponsors warrants (or their affiliates) may influence their motivation in timely
identifying and selecting a target business and completing an
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initial business combination. 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.
Because our founders purchased the founders units at a nominal price, they may have a conflict of
interest in determining whether to approve a proposed business combination.
Because our founders purchased the founders units at a nominal price, they may be able to
make a profit on such units or underlying securities even though a business combination may not be
profitable for public stockholders. The personal and financial interests of our founders may
influence their motivation in timely identifying and selecting a target business and completing an
initial business combination. Consequently, they may have conflicts of interest when determining
whether the terms, conditions and timing of a particular business combination are appropriate and
in our stockholders best interests.
The NYSE Amex may 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 currently quoted on the NYSE Amex. In order to continue quotation of our
securities, we must meet certain continued listing standards of the exchange. Generally, we must
maintain a minimum amount in stockholders equity (usually between $2,000,000 and $4,000,000) and a
minimum number of public shareholders (usually 300 shareholders). Additionally, our securities
cannot have what is deemed to be a low selling price as determined by the NYSE Amex.
Additionally, in connection with our business combination, it is likely that the NYSE Amex will
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 assure you that we will be
able to meet those initial listing requirements at that time.
On February 10, 2009, we received notice from the NYSE Amex indicating that we were below the
continued listing standards of the exchange, specifically that we had not held an annual meeting of
stockholders in 2008, as set forth in Section 704 of the NYSE Amexs Company Guide. On May 11,
2009, the NYSE Amex notified us that they had accepted our plan to regain compliance with the NYSE
Amex rules. Pursuant to the plan, if it appears likely that we will not execute a definitive
agreement for a business combination prior to August 11, 2009, we will take all actions necessary
to hold an annual meeting of stockholders by August 11, 2009 solely to elect directors pursuant to
Section 704 of the Company Guide. However, if we have signed a definitive agreement for a business
combination prior to August 11, 2009 (or if it is apparent that it will be signed shortly
thereafter), we will hold an annual meeting of stockholders promptly after the Securities and
Exchange Commission completes its review of our proxy statement for such transaction and allows us
to hold the meeting. At such meeting, in addition to asking stockholders to approve the
transaction, stockholders will also be asked to elect directors pursuant to Section 704 of the
Company Guide. Accordingly, we will be able to continue our listing but will be subject to
continued periodic review by the NYSE Amexs staff. If we do not adhere to our plan, the exchange
could initiate delisting procedures against us.
If the NYSE Amex delists our securities from trading on its exchange, we could face
significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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a 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, possibly
resulting in a reduced level of trading activity in the secondary trading market
for our common stock;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional
financing in the future.
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We may only be able to complete one business combination with the proceeds of our IPO, which will
cause us to be solely dependent on a single business which may have a limited number of products or
services.
Our initial business combination must be with one or more target businesses having an
aggregate fair market value of at least 80% of the balance in the trust account (excluding deferred
underwriting discounts and commissions) at the time of such acquisition. However, we may not be
able to acquire more than one target business because of various factors, including the existence
of complex accounting issues and the requirement that we prepare and file pro forma financial
statements with the SEC that present operating results and the financial condition of several
target businesses as if they had been operated on a combined basis. By consummating an initial
business combination with only a single entity, our lack of diversification may subject us to
numerous economic, competitive and regulatory developments. Further, we would 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. Accordingly, the prospects for our
success may be:
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solely dependent upon the performance of a single business, or
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dependent upon the development or market acceptance of a single or limited
number of products, processes or services.
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This lack of diversification 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 ultimately operate subsequent to an initial business combination.
Alternatively, if we determine to simultaneously acquire several businesses and such
businesses are owned by different sellers, we will need for each of the sellers to agree that our
purchase of its business is contingent on the simultaneous closings of the other business
combinations, which may make it more difficult for us, and delay our ability, to complete the
business combination. With multiple business combinations, we could also face additional risks,
including additional burdens and costs with respect to possible multiple negotiations and due
diligence investigations (if there are multiple sellers) and the additional risks associated with
the subsequent assimilation of the operations and services or products of the acquired companies in
a single operating business. If we are unable to adequately address these risks, it could
negatively impact our profitability and results of operations.
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We may require stockholders who wish to convert their shares in connection with a proposed business
combination to comply with specific requirements for conversion that may make it more difficult for
them to exercise their conversion rights prior to the deadline for exercising their rights.
We may require public stockholders who wish to convert their shares in connection with a
proposed business combination to either tender their certificates to our transfer agent at any time
prior to the vote taken at the stockholder meeting relating to such initial business combination or
to deliver their shares to the transfer agent electronically using the Depository Trust Companys
DWAC (Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock certificate, a
stockholders broker and/or clearing broker, DTC and our transfer agent will need to act to
facilitate this request. It is our understanding that stockholders should generally allot at least
two weeks to obtain physical certificates from the transfer agent. However, because we do not have
any control over this process or over the brokers or DTC, it may take significantly longer than two
weeks to obtain a physical stock certificate. While we have been advised that it takes a short time
to deliver shares through the DWAC System, we cannot assure you of this fact. Accordingly, if it
takes longer than we anticipate for stockholders to deliver their shares, stockholders who wish to
convert may be unable to meet the deadline for exercising their conversion rights and thus may be
unable to convert their shares.
The ability of our stockholders to exercise their conversion rights may not allow us to effectuate
the most desirable initial 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 founders) 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 the business combination
and then exercise his, her or its conversion rights to receive a pro rata portion of the aggregate
amount then on deposit in the trust account. Accordingly, if our initial 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 conversion, or we may need to arrange third party
financing to help fund our initial business combination in case a larger percentage of public
stockholders exercise their conversion rights than we expect. We have not taken any steps to secure
third party financing. Therefore, we may not be able to consummate an initial 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 initial business combination.
This may limit our ability to effectuate the most attractive initial business combination available
to us.
We may proceed with an initial business combination even if public stockholders owning 8,624,999 of
the public shares exercise their conversion rights.
We may proceed with an initial business combination as long as public stockholders owning less
than 30% of the public shares both vote against the business combination and exercise their
conversion rights. Accordingly, public stockholders holding up to 8,624,999 public shares may both
vote against the business combination and exercise their conversion rights and we could still
consummate a proposed business combination. We have set the conversion percentage at 30% in order
to reduce the likelihood that a small group of investors holding a
20
block of our stock will be able to stop us from completing an initial business combination
that is otherwise approved by a large majority of our public stockholders. However, this may have
the effect of making it easier for us to have an initial business combination approved over a
stockholder dissent.
Even if our business combination does not require us to use substantially all of our cash to
pay the purchase price, as described above, if a significant number of stockholders exercise their
conversion rights, we will have less cash available to use in furthering our business plans
following an initial business combination and may need to arrange third party financing. We have
not taken any steps to secure third party financing for either situation. We cannot assure you that
we will be able to obtain such third party financing on terms favorable to us or at all.
Because of our limited resources and structure, we may not be able to consummate an attractive
initial 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 an initial 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 an
initial business combination. Additionally, because of our structure, there may be fewer attractive
target businesses available to acquire or privately held target businesses may not be inclined to
enter into a transaction with a publicly held blank check company like us.
We may be unable to obtain additional financing, if required, to complete an initial 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 we will have funds available to us that will be sufficient to allow us to
consummate an initial business combination, because we have not yet identified any prospective
target business, we cannot ascertain the capital requirements for any particular transaction. If
the net proceeds of our IPO prove to be insufficient, either because of the size of the initial
business combination, the depletion of the available net proceeds in search of a target business or
the obligation to convert into cash a significant number of shares from dissenting stockholders, we
will be required to seek additional financing. We cannot assure you that such financing will be
available on acceptable terms, if at all. To the extent that additional financing proves to be
unavailable when needed to consummate a particular business combination, we would be compelled to
either restructure the transaction or abandon that particular business combination and seek an
alternative target business candidate. Even if we do not need additional financing to consummate an
initial business combination, we may require such financing to fund
21
the operations or growth of the target business. The failure to secure additional financing
could have a material adverse effect on the continued development or growth of the target business.
None of our officers, directors or stockholders is required to provide any financing to us in
connection with or after an initial business combination.
Our managements ability to require holders of our warrants to exercise such warrants on a cashless
basis will cause holders to receive fewer shares of common stock upon their exercise of the
warrants than they would have received had they been able to exercise their warrants for cash.
If we call our warrants for redemption after the redemption criteria described in the
prospectus for our IPO have been satisfied, our management will have the option to require any
holder that wishes to exercise his warrants to do so on a cashless basis. In such event, each
holder would pay the exercise price by surrendering the warrants for that number of shares of
common stock equal to the quotient obtained by dividing (x) the product of the number of shares of
common stock underlying the warrants, multiplied by the difference between the exercise price of
the warrants and the fair market value and (y) the fair market value. The fair market value
shall mean the average reported last sales price of our common stock for the 10 trading days ending
on the third trading day prior to the date on which notice of redemption is sent to the holders of
the warrants. If our management chooses to require holders to exercise their warrants on a cashless
basis, the number of shares of common stock received by a holder upon exercise will be fewer than
it would have been had such holder exercised his warrants for cash. This will have the effect of
reducing the potential upside of the holders investment in our company.
Our outstanding warrants may have an adverse effect on the market price of our common stock and
make it more difficult to effect an initial business combination.
We issued warrants to purchase 28,750,000 shares of common stock as part of the units sold in
our IPO. We also have sold the founders warrants as part of the founders units to purchase
7,187,500 shares of common stock and sponsors warrants to purchase 5,000,000 shares of common
stock. Affiliates of our founders have also agreed to purchase 2,500,000 co-investment units,
which will include 2,500,000 co-investment warrants to purchase 2,500,000 shares of common stock.
To the extent we issue shares of common stock to effect an initial business combination, the
potential for the issuance of a substantial number of additional shares upon exercise of these
warrants could make us a less attractive acquisition vehicle in the eyes of a target business.
These warrants, 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 initial business
combination. Accordingly, our warrants may make it more difficult to effectuate an initial business
combination or increase the cost of acquiring the target business. Additionally, the sale, or even
the possibility of a 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 financing. If and to the
extent these warrants are exercised, you may experience a substantial dilution of your holdings.
22
If our founders or purchasers of the sponsors warrants or purchasers of the co-investment units
exercise their registration rights with respect to their securities, such exercise 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 an initial business combination.
The founders are entitled to demand that we register the resale of the founders common stock
and founders warrants at any time commencing 30 days after consummation of our initial business
combination. Additionally, purchasers of the sponsors warrants are entitled to demand that we
register the resale of the sponsors warrants and underlying shares of common stock, and the
purchasers of the co-investment units are entitled to demand that we register the resale of the
co-investment units and underlying securities, at any time commencing 30 days after we consummate
an initial business combination. We will bear the cost of registering these securities. If our
founders exercise their registration rights with respect to all of their securities, then there
will be an additional 9,687,500 shares of common stock and 14,687,500 warrants (as well as
14,687,500 shares of common stock underlying the warrants) eligible for trading in the public
market. The presence of these additional securities trading in the public market may have an
adverse effect on the market price of our common stock. In addition, the existence of these rights
may make it more difficult to effectuate an initial business combination or increase the cost of
acquiring the target business, as the stockholders of the target business may be discouraged from
entering into an initial business combination with us or will request a higher price for their
securities because of the potential negative effect the exercise of such rights may have on the
trading market for our common stock.
If we seek to effect a business combination with an entity that is directly or indirectly
affiliated with our officers, directors or founders, conflicts of interest could arise.
We are not restricted from entering into a business combination with an entity that is
directly or indirectly affiliated with our officers, directors or founders. Accordingly, members of
our management team either currently, or may in the future, have affiliations with companies that
we may seek to acquire. Despite our agreement to obtain (i) approval of such a transaction by a
majority of our disinterested directors and (ii) an opinion from an independent investment banking
firm that is a member of FINRA that a business combination with an affiliated entity is fair to our
stockholders from a financial point of view, potential conflicts of interest may still exist. For
instance, such individuals would be negotiating a potential business combination on both sides of
the transaction and therefore they may not negotiate a purchase price that is most favorable to us.
Furthermore, the personal and financial interests of such individuals may influence their
motivation in identifying and selecting a target business. As a result, the terms of the business
combination may not be as advantageous to our public stockholders as they would have been absent
any conflicts of interest.
If we effect an initial business combination with a company located outside of the United States,
we would be subject to a variety of additional risks that may negatively impact our operations.
23
We may effect an initial business combination with a company located outside of the United
States. If we did, we would be subject to any special considerations or risks associated with
companies operating in the target business home jurisdiction, including any of the following:
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rules and regulations or currency conversion or corporate withholding taxes on
individuals;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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longer payment cycles;
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tax issues, such as tax law changes and variations in tax laws as compared to
the United States;
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currency fluctuations and exchange controls;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
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deterioration of political relations with the United States.
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We cannot assure you that we would be able to adequately address these additional risks. If we
were unable to do so, our operations might suffer.
If we effect an initial business combination with a company located outside of the United States,
the laws applicable to such company will likely govern all of our material agreements and we may
not be able to enforce our legal rights.
If we effect an initial business combination with a company located outside of the United
States, the laws of the country in which such company operates will govern almost all of the
material agreements relating to its operations. We cannot assure you that the target business will
be able to enforce any of its material agreements or that remedies will be available in this new
jurisdiction. The system of laws and the enforcement of existing laws in such jurisdiction may not
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 could result in a significant loss of
business, business opportunities or capital. Additionally, if we acquire a company located outside
of the United States, it is likely that substantially all of our assets would be located outside of
the United States and some of our officers and directors might reside outside of the United States.
As a result, it may not be possible for investors in the United States to enforce their legal
rights, to effect service of process upon our directors or officers or to enforce judgments of
United States courts predicated upon civil liabilities and criminal penalties of our directors and
officers under Federal securities laws.
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
an initial business combination.
A company that, among other things, is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing, reinvesting, owning, trading or holding
certain types of securities would be deemed an investment company under the Investment Company Act
of 1940. Since we have invested the proceeds held in the trust account,
24
it is possible that we could be deemed an investment company. Notwithstanding the foregoing,
we do not believe that our anticipated principal activities will subject us to the Investment
Company Act of 1940. To this end, the proceeds held in trust may be invested by the trustee only in
United States government securities within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940 having a maturity of 180 days or less or in money market funds meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. By restricting the
investment of the proceeds to these instruments, we intend to meet the requirements for the
exemption provided in Rule 3a-1 promulgated under the Investment Company Act of 1940.
If we are nevertheless deemed to be an investment company under the Investment Company Act of
1940, we may be subject to certain restrictions that may make it more difficult for us to complete
an initial business combination, including:
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restrictions on the nature of our investments; and
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restrictions on the issuance of securities.
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In addition, we may have imposed upon us certain burdensome requirements,
including:
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registration as an investment company;
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adoption of a specific form of corporate structure; and
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reporting, record keeping, voting, proxy, compliance policies and procedures and
disclosure requirements and other rules and regulations.
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Compliance with these additional regulatory burdens would require additional expense for which
we have not allotted.
Because we must furnish our stockholders with target business financial statements, we may not be
able to complete an initial business combination with some prospective target businesses.
We will provide stockholders with audited financial statements of the prospective target
business as part of the proxy solicitation materials sent to stockholders to assist them in
assessing the target business. In all likelihood, these financial statements will need to be
prepared in accordance with United States generally accepted accounting principles. We cannot
assure you that any particular target business identified by us as a potential acquisition
candidate will have financial statements prepared in accordance with United States generally
accepted accounting principles or that the potential target business will be able to prepare its
financial statements in accordance with United States generally accepted accounting principles. To
the extent that this requirement cannot be met, we may not be able to acquire the proposed target
business. These financial statement requirements may limit the pool of potential target businesses
with which we may combine.
25
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
We currently maintain our executive offices at 11 West 42nd Street, 21st Floor, New York, New
York 10036. The cost for this office is included in the aggregate $10,000 per-month fee that JLJ
Partners commenced charging us for office space, utilities and administrative services on December
6, 2007. We believe, based on rents and fees for similar services in the New York metropolitan
areas, that the fee charged by JLJ Partners is at least as favorable as we could have obtained from
an unaffiliated person. We consider our current office space adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
26
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
Market Information
Our units, common stock and warrants are listed on the NYSE Amex under the symbols GQN.U, GQN
and GQN.WS, respectively. The following table sets forth the range of high and low sales prices
for the units, common stock and warrants for the periods indicated since the units commenced public
trading on December 12, 2007, and since the common stock and warrants commenced public trading
separately on December 18, 2007.
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Units
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Common Stock
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Warrants
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High
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Low
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High
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Low
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High
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Low
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Fiscal 2010:
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First Quarter*
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$
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9.90
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$
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9.50
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$
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9.70
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$
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9.52
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$
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0.10
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$
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0.03
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Fiscal 2009:
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Fourth Quarter
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$
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9.80
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$
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9.22
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$
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9.55
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$
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9.19
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$
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0.10
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$
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0.03
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Third Quarter
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$
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9.50
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$
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8.85
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$
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9.19
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$
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8.70
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$
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0.21
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$
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0.03
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Second Quarter
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$
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9.85
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$
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9.50
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$
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9.56
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$
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9.10
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$
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0.65
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$
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0.20
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First Quarter
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$
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9.90
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$
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9.50
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$
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9.34
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$
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9.13
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$
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0.68
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$
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0.47
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Fiscal 2008:
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Fourth Quarter
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$
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10.49
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$
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9.65
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$
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9.25
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$
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9.10
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$
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1.00
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$
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0.50
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Third Quarter
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$
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10.09
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$
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9.71
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$
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9.12
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$
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8.97
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$
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0.95
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$
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0.75
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Holders
As of June 11, 2009, there was one holder of record of our units, six holders of record of our
common stock and six holders of record of our warrants.
Dividends
We have not paid any cash dividends on our common stock to date and do not intend to pay cash
dividends prior to the completion of a business combination. The payment of cash dividends in the
future will be contingent upon our revenues and earnings, if any, capital requirements and general
financial condition subsequent to completion of a business combination. The payment of any
dividends subsequent to a business combination will be within the discretion of our then board of
directors. It is the present intention of our board of directors to retain all earnings, if any,
for use in our business operations and, accordingly, our board does not anticipate declaring any
dividends in the foreseeable future.
Stock Price Performance Graph
The following graph compares the cumulative total return for our common stock from December
18, 2007, the date our common stock first became separately tradable, through March 31, 2009 with
the comparable cumulative return of two indices, the S&P 500 Index and the Amex Composite Index
(formerly the Amex Market Value Index). The graph assumes $100
27
invested on December 18, 2007 in our common stock and $100 invested at that same time in each
of the two listed indices.
Recent Sales of Unregistered Securities and Use of Proceeds
In July 2007, we sold the following units, consisting of one share of common stock and one
warrant to purchase one share of common stock, without registration under the Securities Act of
1933, as amended:
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Stockholders
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Number of Units
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JLJ Partners, LLC
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7,093,750
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Arthur Bargonetti
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31,250
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John R. Muse
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31,250
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M. William Benedetto
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31,250
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Such units were issued in connection with our organization pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act as they were sold to sophisticated,
wealthy individuals or entities. The units issued to the individuals and entities above were sold
at a purchase price of approximately $0.003 per unit.
In October 2007, JLJ Partners transferred 31,250 units to Stephen F. Reitman upon his becoming
a director of ours at the same purchase price that it initially paid for such units.
Simultaneously with the consummation of the IPO, we consummated the private sale of 5,000,000
sponsors warrants to JLP Partners at a price of $1.00 per sponsors warrant, generating total
proceeds of $5,000,000. Such warrants were issued pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act as they were sold to an accredited investor. The
sponsors warrants are identical to the warrants underlying the units sold in our IPO except that
the warrants will not be transferable or salable by the purchasers (except (i) to an entitys
beneficiaries upon its liquidation, (ii) to relatives and trusts for estate planning purposes,
(iii) by virtue of the laws of descent and distribution upon death, (iv) pursuant to a qualified
domestic relations order or (v) to our officers, directors and persons affiliated with our
founders, provided, in each of (i)-(v), that the transferee agrees to be bound by the transfer
restrictions) until after we complete an initial business combination, and they will be exercisable
28
on a cashless basis and will not be redeemable by us, in each case, so long as such warrants
are held by the purchasers or their permitted transferees.
In addition, immediately prior to our consummation of an initial business combination, JLJ
Partners and Sportswear Holdings Limited, an affiliate of Mr. Stroll, will purchase an aggregate of
2,500,000 of our units at a price of $10.00 per unit for an aggregate purchase price of $25.0
million. Except as noted below, the co-investment units will be identical to the units sold in our
IPO. Each of the purchasers has agreed, except as provided below, not to sell or otherwise transfer
any of its co-investment units, co-investment common stock or co-investment warrants (including the
common stock to be issued upon exercise of the co-investment warrants) for a period of 180 days
from the date of the consummation of our business combination, except (i) to an entitys
beneficiaries upon its liquidation, (ii) to relatives and trusts for estate planning purposes,
(iii) by virtue of the laws of descent and distribution upon death, (iv) pursuant to a qualified
domestic relations order or (v) to our officers and directors and persons affiliated with our
founders provided, in each of (i)-(v), that transferees receiving such securities agrees to be
subject to the same transfer restrictions as the purchasers. These transfer restrictions will
terminate if, subsequent to our initial business combination, (i) the last sales price of our
common stock equals or exceeds $14.25 per share for any 20 trading days within any 30-trading day
period beginning 90 days after our initial business combination or (ii) we consummate a subsequent
liquidation, merger, stock exchange or other similar transaction which results in all of our
stockholders having the right to exchange their shares of common stock for cash, securities or
other property. Each of the purchasers of the co-investment units has provided us, and has agreed
to provide our audit committee, on a semi-annual basis, with evidence that it has sufficient net
liquid assets available to consummate the co-investment. In the event that a purchaser does not
consummate all or any portion of its co-investment when required to do so, the other purchaser will
have the ability, but not the obligation, to satisfy the defaulting purchasers co-investment
obligation. If the co-investment obligation is not satisfied in full, JLJ Partners has agreed to
sell and we have agreed to purchase its founders units for the same purchase price originally paid
for them.
Initial Public Offering
On December 12, 2007, we closed our IPO of 28,750,000 units (including 3,750,000 units subject
to the underwriters over-allotment option) 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 $7.00
per share. The units from the IPO (including the over-allotment option) were sold at an offering
price of $10.00 per unit, generating total gross proceeds of $287,500,000. Citigroup Global
Markets Inc. acted as the sole bookrunning manager and Ladenburg Thalmann & Co. Inc. and I-Bankers
Securities, Inc. acted as co-managers of the initial public offering. The securities sold in the
offering were registered under the Securities Act of 1933 on a registration statement on Form S-1
(No. 333-145684). The Securities and Exchange Commission declared the registration statement
effective on December 6, 2007.
We paid a total of $5,750,000 in underwriting discounts and commissions (not including
deferred underwriting discounts and commissions of $14,375,000, which have been placed in our trust
account and will be released to the underwriters only upon completion of our initial business
combination) and $563,111 for other costs and expenses related to the offering and the
over-allotment option. After deducting the underwriting discounts and commissions and the offering
expenses, the total net proceeds to us from the offering (including the over-allotment
29
option) and the private sale of sponsors warrants were $286,390,858, of which $286,125,000
was deposited into the trust account and the remaining proceeds became available to be used to
provide for business, legal and accounting due diligence on prospective business combinations and
continuing general and administrative expenses. We also have an aggregate of up to $2,875,000 of
interest earned on the proceeds in the trust fund that is available to us to fund our working
capital requirements, as well as any amounts necessary to pay our tax obligations. Through March
31, 2009, we had used $265,858 of the net proceeds that were not deposited into the trust fund to
pay general and administrative expenses, and we had drawn interest income in the amount of $880,000
and $1,729,095 for our working capital and tax obligations, respectively. The net proceeds
deposited into the trust fund remain on deposit in the trust fund earning interest. As of March 31,
2009, the funds held in trust have earned $2,419,123 in interest income that has not been drawn by
us (for a total of $288,540,957 held in the trust fund), of which $1,995,000 is available to be
drawn by us as describe above.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data set forth below is derived from our audited financial statements.
This selected financial data should be read in conjunction with the section under the caption
Managements Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K:
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|
|
|
|
|
For the period from
|
|
|
For the year ended
|
|
July 3, 2007 (inception)
|
Income Statement Data:
|
|
March 31, 2009
|
|
through March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
|
|
|
$
|
|
|
Loss from operations
|
|
|
(789,117
|
)
|
|
|
(241,809
|
)
|
Interest income
|
|
|
3,127,016
|
|
|
|
1,901,202
|
|
Net income
|
|
|
1,192,516
|
|
|
|
895,050
|
|
Basic net income per share
|
|
|
.03
|
|
|
|
.06
|
|
Diluted net income per share
|
|
|
.03
|
|
|
|
.05
|
|
Weighted average shares
outstanding excluding
shares subject to possible
conversion Basic
|
|
|
35,937,500
|
|
|
|
15,907,629
|
|
Weighted average shares
outstanding excluding
shares subject to possible
conversion Diluted
|
|
|
45,904,443
|
|
|
|
19,806,901
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data:
|
|
As at March 31, 2009
|
|
As at March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
273,890,639
|
|
|
$
|
272,698,123
|
|
Cash held in trust account
|
|
|
288,540,957
|
|
|
|
287,574,981
|
|
Total assets
|
|
|
288,685,647
|
|
|
|
287,984,820
|
|
Total liabilities
|
|
|
14,795,008
|
|
|
|
15,286,697
|
|
Value at initial public
offering of common stock
which may be redeemed for
cash ($9.95 per share)
|
|
|
85,837,490
|
|
|
|
85,837,490
|
|
Stockholders Equity
|
|
|
188,053,149
|
|
|
|
186,860,633
|
|
30
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our Financial Statements and
footnotes thereto contained in this report.
Forward Looking Statements
All statements other than statements of historical fact included in this Form 10-K including,
without limitation, statements under Managements Discussion and Analysis of Financial Condition
and Results of Operations regarding our financial position, business strategy and the plans and
objectives of management for future operations, are forward looking statements. When used in this
Form 10-K, words such as anticipate, believe, estimate, expect, intend and similar
expressions, as they relate to us or our management, identify forward looking statements. Such
forward looking statements are based on the beliefs of management, as well as assumptions made by,
and information currently available to, our management. Actual results could differ materially
from those contemplated by the forward looking statements as a result of certain factors detailed
in our filings with the Securities and Exchange Commission. All subsequent written or oral forward
looking statements attributable to us or persons acting on our behalf are qualified in their
entirety by this paragraph.
Overview
We were formed on July 3, 2007, to serve as a vehicle to effect a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar business combination
with one or more operating businesses or assets. Our efforts in identifying a prospective target
business will not be limited to a particular industry, although we initially intend to focus our
search on U.S. as well as foreign companies in the branded consumer sector, including apparel,
specialty retail, footwear and accessories. We will also explore opportunities in other
consumer-focused and other sectors that are attractive to us. We intend to utilize cash derived
from the proceeds of our recently completed public offering, our capital stock, debt or a
combination of cash, capital stock and debt, in effecting a business combination.
Results of Operations
For the year ended March 31, 2009, we had a net income of $1,192,516 consisting of $3,127,016
of interest income offset by $789,117 of general, selling and administrative expenses and
$1,145,383 of provision for income taxes.
For the period from July 3, 2007 (inception) to March 31, 2008, we had a net income of
$895,050 consisting of $1,901,202 of interest income offset by $241,809 of general, selling and
administrative expenses and $764,343 of provision for income taxes.
Financial Condition and Liquidity
We consummated our initial public offering of 28,750,000 units, including 3,750,000 units
subject to the underwriters over-allotment option, on December 12, 2007. Gross proceeds from our
initial public offering were $287,500,000. We paid a total of $5,750,000 in underwriting discounts
and commissions (not including deferred underwriting discounts and commissions of $14,375,000,
which have been placed in our trust account and will be released to the underwriters only upon
completion of our initial business combination) and $563,111 for other costs and expenses related
to the offering and the over-allotment option. After deducting
31
the underwriting discounts and commissions and the offering expenses, the total net proceeds,
including $5,000,000 from the private sale of sponsors warrants to JLJ Partners, LLC, from the
offering were $286,390,858, of which $286,125,000 was deposited into the trust account. We intend
to use substantially all of the net proceeds of this offering to effect a business combination. To
the extent that our capital stock is used in whole or in part as consideration to effect a business
combination, the proceeds held in the trust account as well as any other net proceeds not expended
will be used to finance the operations of the target business. We believe we will have sufficient
available funds outside of the trust fund to operate through December 6, 2009, assuming that a
business combination is not consummated during that time.
We do not believe we will need to raise additional funds following this offering in order to
meet the expenditures required for operating our business. However, we may need to raise additional
funds through a private offering of debt or equity securities if such funds are required to
consummate a business combination that is presented to us. We would only consummate such a
financing simultaneously with the consummation of a business combination.
Commencing on December 6, 2007 and ending upon the consummation of a business combination or
our liquidation, we began incurring a fee from JLJ Partners of $10,000 per month for providing us
with office space and certain general and administrative services. In addition, in July 2007, JLJ
Partners advanced an aggregate of $100,000 to us for payment on our behalf of offering expenses.
This loan was repaid in January 2008.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
This information appears following Item 15 of this Report and is included herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information
relating to us is made known to the officers who certify our financial reports and to other members
of senior management and the board of directors.
Based on his evaluation as of March 31, 2009, our principal executive and principal financial
and accounting officer has concluded that our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.
32
Managements Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Internal control over
financial reporting is a process used to provide reasonable assurance regarding the reliability of
our financial reporting and the preparation of our financial statements for external purposes in
accordance with generally accepted accounting principles in the United States. Internal control
over financial reporting includes policies and procedures that pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of our assets; provide reasonable assurance that transactions are recorded as necessary to permit
preparation of our financial statements in accordance with generally accepted accounting principles
in the United States, and that our receipts and expenditures are being made only in accordance with
the authorization of our board of directors and management; and provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on our financial statements.
An internal control system over financial reporting has inherent limitations and may not
prevent or detect misstatements. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and presentation.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design into the process
safeguards to reduce, though not eliminate, this risk.
Our management assessed the effectiveness of the Companys internal control over financial
reporting as of March 31, 2009. In making this assessment, our management used the criteria set
forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control
Integrated Framework
. Based on managements assessment and those criteria, our management
believes that the Company maintained effective internal control over financial reporting as of
March 31, 2009.
Ernst & Young LLP, the Companys independent registered public accounting firm has issued an
attestation report on the Companys internal control over financial reporting as included elsewhere
herein.
Changes in Internal Control Over Financial Reporting
For the fiscal quarter ended March 31, 2009, there has been no change in our internal control
over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within a company have been detected. Our
disclosure controls and procedures are designed to provide reasonable assurance of achieving its
objectives. Our principal executive and principal financial and accounting
33
officer concluded that our disclosure controls and procedures are effective at that reasonable
assurance level.
ITEM 9B. OTHER INFORMATION.
None.
34
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Our current directors and executive officers are as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Joel J. Horowitz
|
|
|
58
|
|
|
Chief Executive Officer, Treasurer and Director
|
Lawrence S. Stroll
|
|
|
49
|
|
|
Chairman of the Board
|
John D. Idol
|
|
|
50
|
|
|
President, Secretary and Director
|
Arthur Bargonetti
|
|
|
75
|
|
|
Director
|
John R. Muse
|
|
|
58
|
|
|
Director
|
M. William Benedetto
|
|
|
68
|
|
|
Director
|
Stephen F. Reitman
|
|
|
61
|
|
|
Director
|
Joel J. Horowitz
has served as our chief executive officer, treasurer and a member of our
board of directors since our inception. Mr. Horowitz was a member of Tommy Hilfiger Corporations
board of directors from 1992 through October 2005 and rejoined the board in May 2006 following that
companys acquisition by Apax Partners. Mr. Horowitz continues to serve on the board of Tommy
Hilfiger. From 1989 to 1994, Mr. Horowitz served as president and chief operating officer of Tommy
Hilfiger. From 1994 to August 2003, he was the president and chief executive officer of Tommy
Hilfiger. He then served as chairman of Tommy Hilfiger from August 2003 to October 2005. The Tommy
Hilfiger group designs, sources and markets mens and womens sportswear, jeanswear and
childrenswear under the Tommy Hilfiger and Karl Lagerfeld trademarks. In 1989, Mr. Horowitz, along
with Mr. Stroll, Silas Chou and Tommy Hilfiger, acquired the Tommy Hilfiger business from Murjani
International, Ltd., an apparel manufacturer. Mr. Horowitz joined Murjani International in 1982 as
senior vice president and was president of new product development from 1984 to 1986, during which
time he was instrumental in developing and launching the Tommy Hilfiger business. Mr. Horowitz also
served as president of Murjani International from 1986 to 1989.
Lawrence S. Stroll
has been our chairman of the board since our inception. Mr. Stroll has been
the co-chairman of the board of Michael Kors Corporation, one of the preeminent designers for
luxury sportswear, since January 2003. Mr. Stroll acquired a majority stake in Michael Kors
Corporation in January 2003 through Sportswear Holdings Limited, a firm he co-founded in 1989.
Sportswear Holdings Limited was formed to acquire the Tommy Hilfiger business with Mr. Hilfiger,
Joel Horowitz and Silas Chou. Sportswear Holdings is beneficially owned 50% by Mr. Stroll and his
affiliates and 50% by Mr. Chou and his affiliates. He served on the board of directors of Tommy
Hilfiger Corporation from 1992 to July 2002, and was its co-chairman from 1998 to July 2002. In
2000, Sportswear Holdings acquired the London-based Asprey and Garrard luxury businesses. Mr.
Stroll served as co-chairman of Asprey and Garrard until its subsequent sale in 2006. Sportswear
Holdings also acquired Pepe Jeans London Corporation in 1991, of which Mr. Stroll was group chief
executive officer from 1993 through 1998. Pepe Jeans, in addition to its own jeanswear businesses,
held the license in Europe for Tommy Hilfiger jeans and womens wear. Mr. Stroll also currently
serves as co-chairman of Hackett
35
Ltd., a classic British mens clothing and accessories lifestyle brand based in London. Mr.
Stroll began his career over 25 years ago when he acquired the Pierre Cardin childrens wear
license for Canada. Shortly thereafter, he acquired the license for Polo Ralph Lauren childrens
wear in Canada and launched Polo Ralph Lauren mens, womens and childrens apparel throughout
Europe under the company Poloco S.A., of which Mr. Stroll was the founder, owner and operator.
John D. Idol
has been our president, secretary and a member of our board of directors since
our inception. In January 2003, Mr. Idol joined Mr. Kors, Lawrence Stroll and Silas Chou in
acquiring the Michael Kors business. Mr. Idol has served as the chief executive officer of Michael
Kors Corporation since January 2003. From July 2001 until July 2003 when it was sold to the Jones
Apparel Group, Mr. Idol served as chief executive officer of Kasper A.S.L., Ltd., a womens branded
apparel company whose lines included the Anne Klein brands, to lead the company through its Chapter
11 restructuring. From July 1997 to July 2001, Mr. Idol served as chief executive officer of Donna
Karan International Inc., which designs, markets and distributes collections of womens and mens
apparel and sportswear, accessories and shoes under the Donna Karan New York and DKNY brand names.
In 2001, Mr. Idol and a special committee of Donna Karan International negotiated the sale of Donna
Karan International to Louis Vuitton Moet Hennessey. From 1984 to 1990, Mr. Idol served as vice
president, and from 1990 to 1994, Mr. Idol served as president, of the Ralph Lauren home
collection. From 1994 to 1997, he served as Ralph Laurens group president and chief operating
officerproduct licensing, home collection and mens collection. Mr. Idol began his career in 1980
at J.P. Stevens, a major U.S. textile manufacturer.
Arthur Bargonetti
has served as a member of our board of directors since our inception. Since
January 2008, Mr. Bargonetti has been chief operating officer for Elie Tahari, which designs,
markets and distributes womens and mens sportswear. From July 2005 to December 2007, Mr.
Bargonetti served as the Chief Operating Officer of the Signature Apparel Group, a company which
designs, markets and distributes several branded lines, including Rocawear Juniors and Levi
Loungewear. From 1998 to 2004, Mr. Bargonetti served as President of Operations for Tommy Hilfiger
USA, Inc. where he was responsible for the control, coordination and execution of all operational
activities including the integration of several acquired licensees. From 1994 to 1998, Mr.
Bargonetti served as Chief Operating Officer of Pepe Jeans USA, Inc. From 1983 to 1994, Mr.
Bargonetti served as the Executive Vice President and Chief Operating Officer of Bidermann
Industries Corporation, a branded apparel company whose lines included, among others, Calvin Klein
Sportswear, Ralph Lauren Womenswear, Yves St. Laurent Clothing, Arrow Shirts and Gold Toe Hosiery.
From 1974 to 1983, Mr. Bargonetti served as the Executive Vice President of Territory Financial
Corporation, a factoring company which specialized in apparel. Mr. Bargonetti started his career as
a credit executive with a General Electric distributor.
John R. Muse
has served as a member of our board of directors since our inception. Mr. Muse
co-founded HM Capital Partners LLC (formerly Hicks, Muse, Tate & Furst, Incorporated), a private
equity firm. Since 2005, Mr. Muse has served as chairman of the board of HM Capital Partners. Mr.
Muse has been involved in HM Capital Partners investment activities in the food and beverage,
energy and media sectors since its inception. In 1998, Mr. Muse moved to London to extend HM
Capital Partners investment activities into Europe. Mr. Muse serves on the board of directors of a
number of portfolio companies of HM Capital. He also serves as a director of
36
Dean Foods Company, a NYSE listed dairy company, as well as the Anderson School of Business at
UCLA.
M. William Benedetto
has served as a member of our board of directors since our inception. Mr.
Benedetto is a co-founder and chairman of The Benedetto Gartland Group, a boutique investment bank
founded in 1988 that specializes in raising equity capital for private equity firms and providing
other investment banking services. From 1983 to 1988, Mr. Benedetto served as executive vice
president, director and manager of Dean Witter Reynolds, Inc.s Investment Banking Division. As
senior officer in charge of that firms national corporate and public finance departments, he
oversaw all investment banking advisory services as well as investment products for the firms
retail and institutional distribution systems. From 1980 to 1983, Mr. Benedetto served as head of
corporate finance for Warburg, Paribas Becker. From 1978 to 1980, Mr. Benedetto served as head of
Blyth Eastman Dillons Chicago office. Mr. Benedetto was lead director of Donna Karan International
from 1996 to 2001 and chaired its audit and compensation committees. Mr. Benedetto is also a member
of the board of directors of Georgetown University, is chairman of its board of regents, is a
director of FidelisCare, a healthcare insurance company, and is a former chairman of the Securities
Industry Associations corporate finance committee. He is co-author of Initial Public Offerings: A
Strategic Planner for Raising Equity Capital (Probus Publishing, Chicago, IL).
Stephen F. Reitman
has served as a member of our board of directors since October 2007. Since
1984, Mr. Reitman has served as a director, executive vice president and chief operating officer of
Reitmans (Canada) Limited, Canadas largest speciality ladies wear retailer, which is publicly
traded on the Toronto Stock Exchange. From 1971 to 1984, Mr. Reitman held various management
positions with Reitmans. Mr. Reitman also currently serves on the board of directors of Celio
International S.A., a privately-held European apparel retailer. Mr. Reitman received an M.B.A. from
the Wharton School of the University of Pennsylvania in 1971.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and
persons who own more than ten percent of a registered class of our equity securities to file
reports of ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and ten percent stockholders are required by regulation to furnish us with
copies of all Section 16(a) forms they file. Based solely on copies of such forms received or
written representations from certain reporting persons that no Form 5s were required for those
persons, we believe that, during the fiscal year ended March 31, 2009, all filing requirements
applicable to our officers, directors and greater than ten percent beneficial owners were complied
with.
Code of Ethics
In December 2007, our board of directors adopted a code of ethics that applies to our
directors, officers and employees as well any subsidiaries we may have in the future. Requests for
copies of our code of ethics should be sent in writing to Global Brands Acquisition Corp., 11 West
42nd Street, 21st Floor, New York, New York 10036.
37
Corporate Governance
Nominating Committee
Effective December 2007, we established a nominating committee of the board of directors,
which consists of M. William Benedetto, as chairman, and Arthur Bargonetti, each of whom is an
independent director under the American Stock Exchanges listing standards. The nominating
committee is responsible for overseeing the selection of persons to be nominated to serve on our
board of directors. The nominating committee considers persons identified by its members,
management, stockholders and others.
The guidelines for selecting nominees, which are specified in the nominating committee
charter, generally provide that persons to be nominated:
|
|
|
should have demonstrated notable or significant achievements in business,
education or public service;
|
|
|
|
|
should possess the requisite intelligence, education and experience to make a
significant contribution to the board of directors and bring a range of skills,
diverse perspectives and backgrounds to its deliberations; and
|
|
|
|
|
should have the highest ethical standards, a strong sense of professionalism and
intense dedication to serving the interests of the stockholders.
|
The nominating committee will consider a number of qualifications relating to management and
leadership experience, background and integrity and professionalism in evaluating a persons
candidacy for membership on the board of directors. The nominating committee may require certain
skills or attributes, such as financial or accounting experience, to meet specific board needs that
arise from time to time. The nominating committee does not distinguish among nominees recommended
by stockholders and other persons.
There have been no material changes to the procedures by which security holders may recommend
nominees to our board of directors.
Audit Committee
Effective December 2007, we established an audit committee of the board of directors, which
consists of Arthur Bargonetti, as chairman, M. William Benedetto and John R. Muse, each of whom has
been determined to be independent as defined in Rule 10A-3 of the Exchange Act and the rules of
the American Stock Exchange. The audit committees duties, which are specified in our audit
committee charter, include, but are not limited to:
|
|
|
reviewing and discussing with management and the independent auditor the annual
audited financial statements, and recommending to the board whether the audited
financial statements should be included in our Form 10-K;
|
|
|
|
|
discussing with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of our
financial statements;
|
|
|
|
|
discussing with management major risk assessment and risk management policies;
|
|
|
|
|
monitoring the independence of the independent auditor;
|
38
|
|
|
verifying the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law;
|
|
|
|
|
inquiring and discussing with management our compliance with applicable laws and
regulations;
|
|
|
|
|
pre-approving all audit services and permitted non-audit services to be
performed by our independent auditor, including the fees and terms of the services
to be performed;
|
|
|
|
|
appointing or replacing the independent auditor;
|
|
|
|
|
determining the compensation and oversight of the work of the independent
auditor (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work;
|
|
|
|
|
establishing procedures for the receipt, retention and treatment of complaints
received by us regarding accounting, internal accounting controls or reports which
raise material issues regarding our financial statements or accounting policies;
|
|
|
|
|
monitoring compliance with the terms of our IPO and, if any noncompliance is
identified, taking all action necessary to rectify the noncompliance or otherwise
cause compliance with the terms of our IPO;
|
|
|
|
|
reviewing and approving all reimbursements and payments made to any of our
founders or members of our management team or our or their respective affiliates,
other than the payment of an aggregate of $10,000 per month to JLJ Partners for
office space, secretarial and administrative services. Any reimbursements and
payments made to members of our audit committee will be reviewed and approved by
our board of directors, with the interested director or directors abstaining from
such review and approval; and
|
|
|
|
|
reviewing and approving any related party transactions we may enter into. The
audit committee will consider all relevant factors when determining whether to
approve a related party transaction, including whether the related party
transaction is on terms no less favorable than terms generally available to an
unaffiliated third-party under the same or similar circumstances and the extent of
the related partys interest in the transaction.
|
Financial Experts on Audit Committee
The audit committee is, and will at all times be, composed exclusively of independent
directors who are financially literate as defined under the NYSE Amex listing standards. The
NYSE Amex listing standards define financially literate as being able to read and understand
fundamental financial statements, including a companys balance sheet, income statement and cash
flow statement.
In addition, we must certify to the NYSE Amex that the committee has, and will continue to
have, at least one member who has past employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or background
39
that results in the individuals financial sophistication. The board of directors has
determined that each of Arthur Bargonetti and M. William Benedetto satisfies the NYSE Amexs
definition of financial sophistication and also qualifies as an audit committee financial expert,
as defined under rules and regulations of the SEC.
ITEM 11. EXECUTIVE COMPENSATION.
No executive officer has received any cash compensation for services rendered to us.
Commencing on December 6, 2007 and through the acquisition of a target business or our liquidation,
JLJ Partners, an affiliate of Messrs. Horowitz, Stroll and Idol, is making available to us a small
amount of office space and certain office and secretarial services, as we may require from time to
time. We have agreed to pay JLJ Partners an aggregate of $10,000 per month for these services.
However, this arrangement is solely for our benefit and is not intended to provide Messrs.
Horowitz, Stroll or Idol compensation in lieu of a salary. Other than such payments, no
compensation of any kind, including finders, consulting or other similar fees, will be paid to any
of our founders, officers, directors or any of their respective affiliates prior to, or for any
services they render in order to effectuate, the consummation of a business combination. However,
such individuals will be reimbursed for any out-of-pocket expenses incurred in connection with
activities on our behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations.
Since our formation, we have not granted any stock options or stock appreciation rights or any
awards under long-term incentive plans.
Compensation Discussion and Analysis
Overall, following our initial business combination, we will seek to provide total
compensation packages that are competitive in terms of potential value to our executives, and which
are tailored to the unique characteristics and needs of our company within our industry in order to
create an executive compensation program that will adequately reward our executives for their roles
in creating value for our shareholders. We intend to be competitive with other similarly situated
companies in our industry following completion of our initial business combination. The
compensation decisions regarding our executives will be based on our need to attract individuals
with the skills necessary for us to achieve our business plan, to reward those individuals fairly
over time, and to retain those individuals who continue to perform at or above our expectations.
It is likely that our executives compensation will have three primary components salary,
cash incentive bonus and stock-based awards. We will view the three components of executive
compensation as related but distinct. We do not believe that significant compensation derived from
one component of compensation should negate or reduce compensation from other components. We
anticipate determining the appropriate level for each compensation component based in part, but not
exclusively, on our view of internal equity and consistency, individual performance and other
information deemed relevant and timely. We have not adopted any formal or informal policies or
guidelines for allocating compensation between long-term and currently paid out compensation,
between cash and non-cash compensation, or among different forms of compensation.
40
We may utilize the services of third parties from time to time in connection with the hiring
and compensation awarded to executive employees. This could include subscriptions to executive
compensation surveys and other databases.
Benchmarking of Cash and Equity Compensation
We believe it is important when making compensation-related decisions to be informed as to
current practices of similarly situated publicly held companies. We expect to stay apprised of the
cash and equity compensation practices of publicly held companies in the industry we operate in
following our initial business combination through the review of such companies public reports and
through other resources. It is expected that any companies chosen for inclusion in any benchmarking
group would have business characteristics comparable to our company, including revenues, financial
growth metrics, stage of development, employee headcount and market capitalization. While
benchmarking may not always be appropriate as a stand-alone tool for setting compensation due to
the aspects of our post-acquisition business and objectives that may be unique to us, we generally
believe that gathering this information will be an important part of our compensation-related
decision-making process.
Compensation Components
Base Salary
. Generally, we anticipate setting executive base salaries at levels comparable
with those of executives in similar positions and with similar responsibilities at comparable
companies. We will seek to maintain base salary amounts at or near the industry norms while
avoiding paying amounts in excess of what we believe is necessary to motivate executives to meet
corporate goals. It is anticipated base salaries will generally be reviewed annually, subject to
terms of employment agreements, and that we will seek to adjust base salary amounts to realign such
salaries with industry norms after taking into account individual responsibilities, performance and
experience.
Annual Bonuses
. We may design and utilize cash incentive bonuses for executives to focus them
on achieving key operational and financial objectives within a yearly time horizon. We will
structure cash incentive bonus compensation so that it is taxable to our employees at the time it
becomes available to them. At this time, it is not anticipated that any executive officers annual
cash compensation will exceed $1 million, and we have accordingly not made any plans to qualify for
any compensation deductions under Section 162(m) of the Internal Revenue Code.
Equity Awards
. We may also use stock options and other stock-based awards to reward long-term
performance. We believe that providing a meaningful portion of our executives total compensation
package in stock options and other stock-based awards will align the incentives of our executives
with the interests of our shareholders and with our long-term success.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
The following table sets forth information regarding the beneficial ownership of our common
stock as of June 11, 2009 by:
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|
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each person known by us to be the beneficial owner of more than 5% of our
outstanding shares of common stock;
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|
|
|
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each of our officers and directors; and
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|
|
|
all of our officers and directors as a group.
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41
Unless otherwise indicated, we believe that all persons named in the table have sole voting
and investment power with respect to all shares of common stock beneficially owned by them.
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|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
Amount of
|
|
Percentage of
|
|
|
Beneficial
|
|
Outstanding
|
Name and Address of Beneficial Owner(1)
|
|
Ownership
|
|
Common Stock
|
JLJ Partners, LLC(2)
|
|
|
7,062,500
|
(3)
|
|
|
19.7
|
%
|
QVT Financial LP
|
|
|
3,127,667
|
(4)
|
|
|
8.7
|
%
|
Millenco LLC
|
|
|
2,487,000
|
(5)
|
|
|
6.1
|
%
|
Aldebaran Investments LLC
|
|
|
2,185,618
|
(6)
|
|
|
6.1
|
%
|
Deutsche Bank AG
|
|
|
1,865,101
|
(7)
|
|
|
5.2
|
%
|
Andrew M. Weiss, Ph.D.
|
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|
1,838,800
|
(8)
|
|
|
5.1
|
%
|
Lawrence S. Stroll
|
|
|
0
|
(9)
|
|
|
*
|
|
Joel J. Horowitz
|
|
|
0
|
(9)
|
|
|
*
|
|
John D. Idol
|
|
|
0
|
(9)
|
|
|
*
|
|
Arthur Bargonetti
|
|
|
31,250
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(10)
|
|
|
*
|
|
John R. Muse
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|
|
281,250
|
(11)
|
|
|
*
|
|
M. William Benedetto
|
|
|
31,250
|
(10)
|
|
|
*
|
|
Stephen F. Reitman
|
|
|
31,250
|
(10)
|
|
|
*
|
|
All directors and executive officers
as a group (seven individuals)
|
|
|
7,437,500
|
(12)
|
|
|
20.7
|
%
|
|
|
|
*
|
|
Less than one percent.
|
|
(1)
|
|
Unless otherwise indicated, the business address of each of the individuals or entities is 11
West 42nd Street, 21st Floor, New York, New York 10036.
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(2)
|
|
Lawrence S. Stroll, Joel J. Horowitz and John D. Idol share voting and dispositive power over
the shares held by JLJ Partners.
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(3)
|
|
Does not include (i) 7,062,500 shares of common stock issuable upon exercise of founders
warrants and (ii) 5,000,000 shares of common stock issuable upon exercise of sponsors
warrants, all of which are not exercisable and will not become exercisable within 60 days.
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(4)
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|
Represents (i) 2,665,600 shares of common stock beneficially owned by QVT Fund LP (Fund),
(ii) 278,410 shares of common stock beneficially owned by Quintessence Fund L.P.
(Quintessence), and (iii) 183,657 shares of common stock held in a separate discretionary
account for a third party (Separate Account). QVT Financial LP (QVT Financial), as the
investment manager for the Fund, Quintessence and the Separate Account, may be deemed the
beneficial owner of all such shares. QVT Financial GP LLC (GP), as the general partner of
QVT Financial, may be deemed the beneficial owner of all such shares. QVT Associates GP LLC
(Associates), as the general partner of the Fund and Quintessence, may be deemed the
beneficial owner of the shares held by such entities. Each entity has shared power to vote
and dispose of the shares beneficially owned by it. This amount does not include warrants
that are not exercisable and will not become exercisable until we complete a business
combination. The business address for QVT Financial, GP and Associates is 1177 Avenue of the
Americas, 9th Floor, New York, New York 10036. The business address for the Fund is Walkers
SPV, Walkers House, Mary Street, George Town, Grand Cayman, KY1 9001 Cayman Islands. The
foregoing information was derived from a Schedule 13G filed with the Securities and Exchange
Commission on January 9, 2008, as amended on February 7, 2008 and January 30, 2009.
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(5)
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|
Represents 2,487,000 shares of common stock beneficially owned by Integrated Core Strategies
(US) LLC (ICS). Integrated Holding Group LP (IHG), as the managing member of ICS,
Millenium Management LLC (Millenium), as the the general partner of IHG, and Isreal A.
Englander, as the managing member of Millenium, may each be deemed the beneficial owner of
such shares. Each of ICS, IHG, Millenium and
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42
|
|
|
|
|
Mr. Englander has shared power to vote and dispose of the shares. This amount does not
include 4,937,954 shares of common stock issuable upon the exercise of warrants held by ICS.
The business address for Millenium is 666 Fifth Avenue, New York, New York 10103 and the
business address for Mr. Englander and ICS is c/o Millenium Management LLC at the same
address. The foregoing information was derived from a Schedule 13G filed with the
Securities and Exchange Commission on December 26, 2007, as amended on November 3, 2008.
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(6)
|
|
Represents shares of common stock held in a separate account for which Aldebaran Investments
LLC (Aldebaran) is the investment manager. Aldebaran has sole power to vote and dispose of
the shares. The business address of Aldebaran is 11 West 42
nd
Street,
21
st
Floor, New York, New York 10036. The foregoing information was derived from a
Schedule 13G filed with the Securities Exchange Commission on February 17, 2009.
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|
(7)
|
|
Represents (i) 1,700,801 shares of common stock beneficially owned by Deutsche Bank AG,
London Branch (London Branch) and (ii) 164,300 shares of common stock owned by Deutsche Bank
Securities, Inc. (DBS). Each of the London Branch and DBS have sole power to vote and
dispose of the shares. The London Branch and DBS are subsidiaries of Deutsche Bank AG
(Bank). This amount represents shares beneficially owned by the Corporate and Investment
Banking and the Corporate Investments business groups and not shares of common stock held by
any other business group of the Bank. The address of the Bank is Theodor-Heuss-Allee 70,
60468 Frankfurt am Main, Federal Republic of Germany. The foregoing information was derived
from a Schedule 13G filed with the Securities Exchange Commission on February 6, 2009.
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(8)
|
|
Represents (i) 1,169,036 shares of common stock beneficially owned by Weiss Asset Management,
LLC and (ii) 669,764 shares of common stock beneficially owned by Weiss Capital, LLC. Mr.
Weiss is managing member of both Weiss Asset Management, LLC and Weiss Capital, LLC. The
business address for each entity and for Mr. Weiss is 29 Commonwealth Avenue, 10th Floor,
Boston, Massachusetts 02116. The foregoing information was derived from a Schedule 13G filed
with the Securities and Exchange Commission on April 25, 2008.
|
|
(9)
|
|
Does not include the shares held by JLJ Partners, of which each individual is approximately a
1/3 beneficial owner, either directly or through entities of which they or their family
members are owners and beneficiaries.
|
|
(10)
|
|
Does not include 31,250 shares of common stock issuable upon exercise of founders warrants
which are not exercisable and will not become exercisable within 60 days.
|
|
(11)
|
|
Represents (i) 91,250 shares of common stock held by Mr. Muse, (ii) 150,000 shares of common
stock held by Muse Family Enterprises, Ltd., a family partnership benefiting Mr. Muses
children, (iii) 30,000 shares of common stock held by Muse Childrens GS Trust, a trust
established for the benefit of Mr. Muses children, and (iv) 10,000 shares of common stock
held by The Muse Educational Foundation of which Mr. Muse is President. Does not include (i)
91,250 shares of common stock issuable upon exercise of founders warrants and public warrants
held by Mr. Muse, (ii) 150,000 shares of common stock issuable upon exercise of public
warrants held by Muse Family Enterprises, Ltd., (iii) 30,000 shares of common stock issuable
upon exercise of public warrants held by Muse Childrens GS Trust and (iv) 10,000 shares of
common stock issuable upon exercise of public warrants held by The Muse Educational
Foundation, none of which are exercisable or will become exercisable within 60 days.
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(12)
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|
Does not include (i) 7,437,500 shares of common stock issuable upon exercise of founders
warrants, (ii) 250,000 shares of common stock issuable upon the exercise of public warrants
and (iii) 5,000,000 shares of common stock issuable upon exercise of sponsors warrants, all
of which are not exercisable and will not become exercisable within 60 days.
|
All of the founders units have been placed in escrow with Continental Stock Transfer & Trust
Company, as escrow agent. The founders shares will be released from escrow 180 days after the
consummation of our initial business combination and the founders warrants will be
43
released when they become exercisable. The founders common stock may be released from escrow
earlier than as described above if subsequent to our initial business combination:
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the last sales price of our common stock equals or exceeds $14.25 per share for
any 20 trading days within any 30-trading day period beginning 90 days after our
initial business combination; or
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|
we consummate a subsequent liquidation, merger, stock exchange or other similar
transaction which results in all of our securityholders having the right to
exchange their securities for cash, securities or other property, in which case,
the founders warrants will also be released from escrow but only to the extent
necessary to participate in such exchange.
|
During the escrow period, the holders of these securities will not be able to sell or transfer
their securities except (i) to an entitys beneficiaries upon its liquidation, (ii) to relatives
and trusts for estate planning purposes, (iii) by virtue of the laws of descent and distribution
upon death, (iv) pursuant to a qualified domestic relations order, (v) to our officers and
directors and persons affiliated with our founders or (vi) by private sales with respect to up to
one third of the founders units held by them made at or prior to the consummation of an initial
business combination at prices no greater than the price at which the units were originally
purchased (approximately $0.003 per unit), in each of (i)-(vi) provided the transferee agrees in
writing to be bound to the transfer restrictions and to the terms of the escrow agreement, to vote
in accordance with the majority of the shares of common stock voted by our public stockholders in
connection with our initial business combination and to waive any rights to participate in any
liquidation distribution if we fail to consummate an initial business combination and to resell the
founders units to us if the coinvestment is not made. The founders and their permitted transferees
will retain all other rights as our stockholders with respect to the founders common stock,
including, without limitation, the right to vote their shares of common stock and the right to
receive cash dividends, if declared, but excluding conversion rights. If dividends are declared and
payable in units, such dividends will also be placed in escrow and will be subject to the transfer
restrictions and the terms of the escrow agreement, and the underlying shares will be subject to
the requirement to vote in accordance with the majority of the shares of common stock voted by our
public stockholders in connection with our initial business combination and the waiver of any
rights to participate in any liquidation distribution if we fail to consummate an initial business
combination. If we are unable to effect an initial business combination and liquidate, none of our
founders (or any transferees) will receive any portion of the liquidation proceeds with respect to
the founders common stock.
In addition, in connection with the vote required for our initial business combination, the
founders have agreed (and any permitted transferees will agree) to vote the founders common stock
in accordance with the majority of the shares of common stock voted by the public stockholders. The
founders have also agreed to vote any shares acquired by them in or after our IPO in favor of our
initial business combination.
JLJ Partners, Joel J. Horowitz, Lawrence S. Stroll and John D. Idol are our promoters as
that term is defined under the federal securities laws.
44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
On July 3, 2007, we issued 7,187,500 units, representing 7,187,500 shares of our common stock
and 7,187,500 warrants included in the founders units to the entity and individuals set forth
below for an aggregate of $25,000 in cash, at a purchase price of approximately $0.003 per unit, as
follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
Name
|
|
Shares
|
|
Warrants
|
|
Relationship to Us
|
JLJ Partners, LLC
|
|
|
7,093,750
|
|
|
|
7,093,750
|
|
|
Stockholder
|
Arthur Bargonetti
|
|
|
31,250
|
|
|
|
31,250
|
|
|
Director
|
John R. Muse
|
|
|
31,250
|
|
|
|
31,250
|
|
|
Director
|
M. William Benedetto
|
|
|
31,250
|
|
|
|
31,250
|
|
|
Director
|
In October 2007, JLJ Partners transferred 31,250 units to Stephen F. Reitman upon his becoming
a director of ours at the same purchase price that it initially paid for such units.
The holders of the majority of the shares of founders common stock and founders warrants,
respectively, will be entitled to demand that we register these securities pursuant to an agreement
signed on the date of our IPO. The holders of the majority of the founders common stock and
founders warrants may elect to exercise these registration rights at any time commencing 30 days
after the consummation of our initial business combination. In addition, these stockholders have
certain piggyback registration rights with respect to registration statements filed subsequent to
the date on which these shares are released from escrow. We will bear the expenses incurred in
connection with the filing of any such registration statements.
JLJ Partners purchased the 5,000,000 sponsors warrants (for a total purchase price of
$5,000,000) from us. These purchases took place on a private placement basis simultaneously with
the consummation of our IPO. The sponsors warrants will be identical to the warrants underlying
the units offered in our IPO except that the warrants will not be transferable or salable by the
purchasers (except (i) to an entitys beneficiaries upon its liquidation, (ii) to relatives and
trusts for estate planning purposes, (iii) by virtue of the laws of descent and distribution upon
death, (iv) pursuant to a qualified domestic relations order or (v) to our officers, directors and
persons affiliated with our founders, provided, in each of (i)-(v), that the transferee agrees to
be bound by the transfer restrictions) until after we complete an initial business combination,
they will be exercisable on a cashless basis and will not be redeemable by us, in each case, so
long as such warrants are held by the purchasers or their permitted transferees. The holders of the
majority of these sponsors warrants (or underlying shares) will be entitled to demand that we
register these securities pursuant to the registration rights agreement referred to above. The
holders of the majority of these securities may elect to exercise these registration rights with
respect to such securities at any time commencing 30 days after we consummate our initial business
combination. In addition, these holders will have certain piggy-back registration rights with
respect to registration statements filed subsequent to such date. We will bear the expenses
incurred in connection with the filing of any such registration statements.
In addition, immediately prior to our consummation of an initial business combination, JLJ
Partners and Sportswear Holdings Limited, an affiliate of Mr. Stroll, will purchase an aggregate of
2,500,000 of our units at a price of $10.00 per unit for an aggregate purchase price of $25.0
million. Except as noted below, the co-investment units will be identical to the units
45
sold in our IPO. Pursuant to the registration rights agreement, the holders of the
co-investment units (and underlying securities) will be entitled to certain registration rights
commencing 30 days after the consummation of our business combination. Each of the purchasers has
agreed, except as provided below, not to sell or otherwise transfer any of its co-investment units,
co-investment common stock or co-investment warrants (including the common stock to be issued upon
exercise of the co-investment warrants) for a period of 180 days from the date of the consummation
of our business combination, except (i) to an entitys beneficiaries upon its liquidation, (ii) to
relatives and trusts for estate planning purposes, (iii) by virtue of the laws of descent and
distribution upon death, (iv) pursuant to a qualified domestic relations order or (v) to our
officers and directors and persons affiliated with our founders provided, in each of (i)-(v), that
transferees receiving such securities agrees to be subject to the same transfer restrictions as the
purchasers. These transfer restrictions will terminate if, subsequent to our initial business
combination, (i) the last sales price of our common stock equals or exceeds $14.25 per share for
any 20 trading days within any 30-trading day period beginning 90 days after our initial business
combination or (ii) we consummate a subsequent liquidation, merger, stock exchange or other similar
transaction which results in all of our stockholders having the right to exchange their shares of
common stock for cash, securities or other property. Each of the purchasers of the co-investment
units has provided us, and has agreed to provide our audit committee, on a semi-annual basis, with
evidence that it has sufficient net liquid assets available to consummate the co-investment. In the
event that a purchaser does not consummate all or any portion of its co-investment when required to
do so, the other purchaser will have the ability, but not the obligation, to satisfy the defaulting
purchasers co-investment obligation. If the co-investment obligation is not satisfied in full, JLJ
Partners has agreed to sell and we have agreed to purchase its founders units for the same
purchase price originally paid for them.
Commencing on December 6, 2007 and through the acquisition of a target business or our
liquidation, JLJ Partners, an affiliate of Messrs. Horowitz, Stroll and Idol, is making available
to us a small amount of office space and certain office and secretarial services, as we may require
from time to time. We have agreed to pay JLJ Partners an aggregate of $10,000 per month for these
services. Each of Messrs. Horowitz, Stroll and Idol is approximately a 1/3 beneficial owner, either
directly or through entities of which they or their family members are owners and beneficiaries, of
JLJ Partners. As a result, each will benefit from the transaction to the extent of his interest in
JLJ Partners. However, this arrangement is solely for our benefit and is not intended to provide
Messrs. Stroll, Horowitz or Idol compensation in lieu of a salary. We believe, based on rents and
fees for similar services in the New York metropolitan area, that the fee charged by JLJ Partners
is at least as favorable as we could have obtained from an unaffiliated person.
Prior to our IPO, JLJ Partners loaned to us an aggregate of $100,000 to cover expenses related
to the offering. The loan was repaid without interest following the consummation of our IPO.
We will reimburse our management team, founders and our or their respective affiliates for any
reasonable out-of-pocket business expenses incurred by them in connection with certain activities
on our behalf such as identifying and investigating possible target businesses and business
combinations. There is no limit on the amount of out-of-pocket expenses that could be incurred. Our
audit committee will review and approve all reimbursements and payments made to any founder or
member of our management team and our or their respective affiliates, and any
46
reimbursements and payments made to members of our audit committee will be reviewed and
approved by our board of directors, with the interested director or directors abstaining from such
review and approval.
Other than the $10,000 per-month administrative fee and reimbursable out-of-pocket expenses
payable to our management team, no compensation or fees of any kind, including finders fees,
consulting fees or other similar compensation, will be paid to any of our founders, officers or
directors or our or their respective affiliates, prior to or with respect to the initial business
combination (regardless of the type of transaction that is its).
All ongoing and future transactions between us and any of our founders or members of our
management team or our directors, or our or their respective affiliates, including loans by members
of our management team, will be on terms believed by us at that time, based upon other similar
arrangements known to us, to be no less favorable than are available from unaffiliated third
parties. Such transactions or loans, including any forgiveness of loans, will require prior
approval in each instance by our audit committee who had access, at our expense, to our attorneys
or independent legal counsel. It is our intention to obtain estimates from unaffiliated third
parties for similar goods or services to ascertain whether such transactions with affiliates are on
terms that are no less favorable to us than are otherwise available from such unaffiliated third
parties. If a transaction with an affiliated third party were found to be on terms less favorable
to us than with an unaffiliated third party, we would not engage in such transaction.
Related Party Policy
Our Code of Ethics requires us to avoid, wherever possible, all related party transactions
that could result in actual or potential conflicts of interest, except under guidelines approved by
the board of directors (or the audit committee). Related-party transactions are defined as
transactions in which (i) the aggregate amount involved will or may be expected to exceed $120,000
in any calendar year, (ii) we or any of our subsidiaries is a participant and (iii) any (a)
executive officer, director or nominee for election as a director, (b) greater than 5 percent
beneficial owner of our common stock, or (c) immediate family member, of the persons referred to in
clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as
a result of being a director or a less than 10 percent beneficial owner of another entity). A
conflict of interest situation can arise when a person takes actions or has interests that may make
it difficult to perform his or her work objectively and effectively. Conflicts of interest may also
arise if a person, or a member of his or her family, receives improper personal benefits as a
result of his or her position.
Our audit committee, pursuant to its written charter, is responsible for reviewing and
approving related-party transactions to the extent we enter into such transactions. The audit
committee will consider all relevant factors when determining whether to approve a related party
transaction, including whether the related party transaction is on terms no less favorable than
terms generally available to an unaffiliated third-party under the same or similar circumstances
and the extent of the related partys interest in the transaction. No director may participate in
the approval of any transaction in which he is a related party, but that director is required to
provide the audit committee with all material information concerning the transaction. Additionally,
we require each of our directors and executive officers to complete a directors and officers
questionnaire that elicits information about related party transactions. These procedures are
47
intended to determine whether any such related party transaction impairs the independence of a
director or presents a conflict of interest on the part of a director, or officer.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The firm of Ernst & Young acts as our independent registered public accounting firm. The
following is a summary of fees paid to Ernst & Young for services rendered.
Audit Fees
During the fiscal years ended March 31, 2009 and March 31, 2008, audit fees for our
independent registered public accounting firm were $70,000 and $65,000, respectively.
Audit-Related Fees
We did not receive audit-related services that are not reported as Audit Fees for the fiscal
years ended March 31, 2009 or March 31, 2008.
Tax Fees
During the fiscal year ended March 31, 2009, tax fees for our independent registered public
accounting firm were $5,000. During the fiscal year ended March 31, 2008, our independent
registered public accounting firm did not render any for tax services to us.
All Other Fees
During the fiscal year ended March 31, 2009, there was $38,000 of fees billed for services
provided by our independent registered public accounting firm other than those set forth above.
During the fiscal year ended March 31, 2008, there were no fees billed for services provided by our
independent registered public accounting firm other than those set forth above.
Audit Committee Approval
Since our audit committee was not formed until December 2007, the audit committee did not
pre-approve the foregoing services prior to such date, although any services rendered prior to the
formation of our audit committee were reviewed and ratified. Our audit committee pre-approved all
the foregoing services subsequent to such date. In accordance with Section 10A(i) of the
Securities Exchange Act of 1934, before we engage our independent accountant to render audit or
non-audit services on a going-forward basis, the engagement will be approved by our audit
committee.
PART
IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed as part of this report.
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
3.1
|
|
Form of Amended and Restated Certificate of Incorporation.(1)
|
|
|
|
3.2
|
|
By-laws.(2)
|
|
|
|
4.1
|
|
Specimen Unit Certificate.(1)
|
|
|
|
4.2
|
|
Specimen Common Stock Certificate.(1)
|
|
|
|
4.3
|
|
Specimen Warrant Certificate.(1)
|
48
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
4.4
|
|
Form of Warrant Agreement between Continental Stock Transfer & Trust Company
and the Registrant.(1)
|
|
|
|
10.1
|
|
Letter Agreement between the Registrant and Joel J. Horowitz.(1)
|
|
|
|
10.2
|
|
Letter Agreement between the Registrant and Lawrence S. Stroll.(1)
|
|
|
|
10.3
|
|
Letter Agreement between the Registrant and John D Idol.(1)
|
|
|
|
10.4
|
|
Letter Agreement between the Registrant and Arthur Bargonetti.(1)
|
|
|
|
10.5
|
|
Letter Agreement between the Registrant and John R. Muse.(1)
|
|
|
|
10.6
|
|
Letter Agreement between the Registrant and M. William Benedetto.(1)
|
|
|
|
10.7
|
|
Letter Agreement between the Registrant and Stephen F. Reitman.(1)
|
|
|
|
10.8
|
|
Form of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant.(1)
|
|
|
|
10.9
|
|
Form of Stock Escrow Agreement between the Registrant, Continental Stock
Transfer & Trust Company and the Initial Stockholders.(1)
|
|
|
|
10.10
|
|
Form of Administrative Services Agreement between the Registrant and JLJ
Partners, LLC.(1)
|
|
|
|
10.11
|
|
Form of Promissory Note issued to JLJ Partners, LLC.(1)
|
|
|
|
10.12
|
|
Form of Registration Rights Agreement among the Registrant and the Initial
Stockholders.(1)
|
|
|
|
10.13
|
|
Sponsors Warrant Subscription Agreement among the Registrant, Graubard Miller
and JLJ Partners, LLC.(1)
|
|
|
|
10.14
|
|
Co-Investment Subscription Agreement among the Registrant and JLJ Partners,
LLC.(1)
|
|
|
|
10.15
|
|
Co-Investment Subscription Agreement among the Registrant and Sportswear
Holdings Limited.(1)
|
|
|
|
10.16
|
|
Form of letter agreement of the interest owners of JLJ Partners, LLC.(1)
|
|
|
|
14
|
|
Code of Ethics.(1)
|
|
|
|
31
|
|
Certification of Principal Executive and Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32
|
|
Certification of Principal Executive and Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
99.1
|
|
Audit Committee Charter.(1)
|
|
|
|
99.2
|
|
Nominating Committee Charter.(1)
|
49
|
|
|
(1)
|
|
Incorporated by reference to the Registrants Registration Statement on Form
S-1 (SEC File No. 333-145684).
|
|
(2)
|
|
Incorporated by reference to the Registrants Current Report on Form 8-K, filed
on January 28, 2009.
|
50
SIGNATURES
Pursuant to the requirements of the Section 13 or 15 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on the 15th day of June 2009.
|
|
|
|
|
|
GLOBAL BRANDS ACQUISITION CORP.
|
|
|
By:
|
/s/ Joel J. Horowitz
|
|
|
|
Joel J. Horowitz
|
|
|
|
Chief Executive Officer and
Treasurer
(Principal Executive and Principal
Financial and Accounting Officer)
|
|
|
POWER OF ATTORNEY
The undersigned directors and officers of Global Brands Acquisition Corp. hereby constitute and
appoint Joel J. Horowitz, Lawrence S. Stroll and John D. Idol, and each of them, with full power to
act without the other and with full power of substitution and resubstitution, our true and lawful
attorneys-in-fact with full power to execute in our name and behalf in the capacities indicated
below, this annual report on Form 10-K and any and all amendments thereto and to file the same,
with all exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, and hereby ratify and confirm all that such attorneys-in-fact, or any of them,
or their substitutes shall lawfully do or cause to be done by virtue hereof.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Joel J. Horowitz
Joel J. Horowitz
|
|
Chief Executive Officer,
Treasurer and Director
(Principal Executive Officer and
Principal Financial and
Accounting Officer)
|
|
June 15, 2009
|
|
|
|
|
|
/s/ Lawrence S. Stroll
Lawrence S. Stroll
|
|
Chairman of the Board
|
|
June 15, 2009
|
|
|
|
|
|
/s/ John D. Idol
John D. Idol
|
|
President, Secretary and Director
|
|
June 15, 2009
|
|
|
|
|
|
/s/ Arthur Bargonetti
Arthur Bargonetti
|
|
Director
|
|
June 15, 2009
|
51
|
|
|
|
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ John R. Muse
John R. Muse
|
|
Director
|
|
June 15, 2009
|
|
|
|
|
|
/s/ M. William Benedetto
M. William Benedetto
|
|
Director
|
|
June 15, 2009
|
|
|
|
|
|
/s/ Stephen F. Reitman
Stephen F. Reitman
|
|
Director
|
|
June 15, 2009
|
52
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Table of Contents
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
|
|
Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
|
F-4
|
|
|
|
|
|
|
|
|
|
F-5
|
|
|
|
|
|
|
|
|
|
F-6
|
|
|
|
|
|
|
|
|
|
F-7
|
|
|
|
|
|
|
Notes to Financial Statements
|
|
|
F-8
|
|
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
of Global Brands Acquisition Corp.
We have audited the accompanying balance sheet of Global Brands Acquisition Corp. (a development
stage enterprise) as of March 31, 2008 and March 31, 2009, and the related statements of income,
shareholders equity, and cash flows for the period from July 3, 2007 (inception) through March 31,
2008, the year ended March 31, 2009 and the period from July 3, 2007 (inception) through March 31,
2009. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Global Brands Acquisition Corp. at March 31, 2008 and March 31,
2009, and the results of its operations and its cash flows for the period from July 3, 2007
(inception) through March 31, 2008, the year ended March 31, 2009 and the period from July 3, 2007
(inception) through March 31, 2009, in conformity with U.S. generally accepted accounting
principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Global Brands Acquisition Corp.s internal control over financial reporting
as of March 31, 2009, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June
15, 2009 expressed an unqualified opinion thereon.
/s/ Ernst & Young
New York, NY
June 15, 2009
F-2
The Board of Directors and Shareholders
of Global Brands Acquisition Corp.
We have audited Global Brands Acquisition Corp.s (a development stage enterprise) internal control
over financial reporting as of March 31, 2009, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Global Brands Acquisition Corp.s management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying
Managements Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of March 31, 2009, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheet of Global Brands Acquisition Corp. as of
March 28, 2009, and the related consolidated statements of operations, shareholders equity, and
cash flows for the fiscal year then ended and our report dated June 15, 2009 and expressed an
unqualified opinion thereon.
/s/ Ernst & Young
New York, New York
June 15, 2009
F-3
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009
|
|
|
March 31, 2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
136,690
|
|
|
$
|
219,001
|
|
Cash held in trust fund
|
|
|
288,540,957
|
|
|
|
287,574,981
|
|
Prepaid expense
|
|
|
8,000
|
|
|
|
97,300
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
288,685,647
|
|
|
|
287,891,282
|
|
Deferred tax asset
|
|
|
|
|
|
|
93,538
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
288,685,647
|
|
|
$
|
287,984,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accrued accounting fees payable
|
|
$
|
55,000
|
|
|
$
|
20,000
|
|
Income tax payable
|
|
|
360,361
|
|
|
|
857,881
|
|
Accrued filing fees payable
|
|
|
14,375,000
|
|
|
|
14,375,000
|
|
Accrued payable, stockholders
|
|
|
4,647
|
|
|
|
33,816
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
$
|
14,795,008
|
|
|
$
|
15,286,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, subject to possible conversion, 8,624,999
shares at conversion value at initial public offering
|
|
|
85,837,490
|
|
|
|
85,837,490
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock; $.0001 par value; 1,000,000 shares
authorized; none issued
|
|
|
|
|
|
|
|
|
Common stock; $.0001 par value; authorized 90,000,000
shares; 35,937,500 (less 8,624,999 shares subject
to possible conversion) shares issued and
outstanding
|
|
|
2,732
|
|
|
|
2,732
|
|
Additional paid-in capital
|
|
|
185,962,851
|
|
|
|
185,962,851
|
|
Earnings accumulated during the development stage
|
|
|
2,087,566
|
|
|
|
895,050
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
188,053,149
|
|
|
|
186,860,633
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
288,685,647
|
|
|
$
|
287,984,820
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-4
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Statements of Operations
For the Period July 3, 2007 (inception) to March 31, 2009,
the year ending March 31, 2009 and the
Period July 3, 2007 (inception) to March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the year
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
ending
|
|
|
(inception) to
|
|
|
|
March 31, 2009
|
|
|
March 31, 2009
|
|
|
March 31, 2008
|
|
|
Formation and operating costs
|
|
$
|
788,202
|
|
|
$
|
611,393
|
|
|
$
|
176,809
|
|
Professional and other fees
|
|
|
242,724
|
|
|
|
177,724
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(1,030,926
|
)
|
|
|
(789,117
|
)
|
|
|
(241,809
|
)
|
Interest income
|
|
|
5,028,218
|
|
|
|
3,127,016
|
|
|
|
1,901,202
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
3,997,292
|
|
|
|
2,337,899
|
|
|
|
1,659,393
|
|
|
Provision for income taxes
|
|
|
1,909,726
|
|
|
|
1,145,383
|
|
|
|
764,343
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,087,566
|
|
|
$
|
1,192,516
|
|
|
$
|
895,050
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,400,216
|
|
|
|
35,937,500
|
|
|
|
15,907,629
|
|
Diluted
|
|
|
35,701,006
|
|
|
|
45,904,443
|
|
|
|
19,806,901
|
|
Net income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
.07
|
|
|
$
|
.03
|
|
|
$
|
.06
|
|
Diluted
|
|
$
|
.06
|
|
|
$
|
.03
|
|
|
$
|
.05
|
|
The accompanying notes are an integral part of these financial statements.
F-5
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Statement of Stockholders Equity
For the Period July 3, 2007 (inception) to March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
accumulated
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
paid-in
|
|
|
during
|
|
|
stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
development stage
|
|
|
equity
|
|
|
Common shares issued at inception
|
|
|
7,187,500
|
|
|
$
|
719
|
|
|
$
|
24,281
|
|
|
$
|
|
|
|
$
|
25,000
|
|
|
|
|
Sale of 28,750,000 units, net of underwriters
discount and offering expenses (includes
8,624,999 shares subject to possible conversion)
|
|
|
28,750,000
|
|
|
|
2,875
|
|
|
|
266,775,198
|
|
|
|
|
|
|
|
266,778,073
|
|
Proceeds subject to possible conversion of
8,624,999 shares
|
|
|
|
|
|
|
(862
|
)
|
|
|
(85,836,628
|
)
|
|
|
|
|
|
|
(85,837,490
|
)
|
Proceeds from issuance of founders warrants
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
|
|
|
|
|
|
5,000,000
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
895,050
|
|
|
|
895,050
|
|
|
|
|
Balances, at March 31, 2008
|
|
|
35,937,500
|
|
|
|
2,732
|
|
|
|
185,962,851
|
|
|
|
895,050
|
|
|
|
186,860,633
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,192,516
|
|
|
|
1,192,516
|
|
|
|
|
Balances, at March 31, 2009
|
|
|
35,937,500
|
|
|
$
|
2,732
|
|
|
$
|
185,962,851
|
|
|
$
|
2,087,566
|
|
|
$
|
188,053,149
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-6
Global Brands Acquisition Corp.
(a Corporation in the Development Stage)
Statements of Cash Flows
For the Period July 3, 2007 (inception) to March 31, 2009,
the year ended March 31, 2009, and
the Period July 3, 2007 (inception) to March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the year
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
ended March 31,
|
|
|
(inception) to
|
|
|
|
March 31, 2009
|
|
|
2009
|
|
|
March 31, 2008
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,087,566
|
|
|
$
|
1,192,516
|
|
|
$
|
895,050
|
|
Adjustment to reconcile net income to net cash
provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
(8,000
|
)
|
|
|
89,300
|
|
|
|
(97,300
|
)
|
Deferred tax asset
|
|
|
|
|
|
|
93,538
|
|
|
|
(93,538
|
)
|
Accrued expenses
|
|
|
55,000
|
|
|
|
35,000
|
|
|
|
20,000
|
|
Accrued payable, stockholders
|
|
|
4,647
|
|
|
|
(29,169
|
)
|
|
|
33,816
|
|
Income tax payable
|
|
|
360,361
|
|
|
|
(497,520
|
)
|
|
|
857,881
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
2,499,574
|
|
|
|
883,665
|
|
|
|
1,615,909
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash held in trust fund
|
|
|
(288,540,957
|
)
|
|
|
(965,976
|
)
|
|
|
(287,574,981
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross proceeds from initial public offering
|
|
|
287,500,000
|
|
|
|
|
|
|
|
287,500,000
|
|
Proceeds from notes payable, stockholders
|
|
|
100,000
|
|
|
|
|
|
|
|
100,000
|
|
Payment of notes payable, stockholders
|
|
|
(100,000
|
)
|
|
|
|
|
|
|
(100,000
|
)
|
Proceeds from issuance of common stock
|
|
|
25,000
|
|
|
|
|
|
|
|
25,000
|
|
Proceeds from issuance of founders warrants
|
|
|
5,000,000
|
|
|
|
|
|
|
|
5,000,000
|
|
Payment of offering costs
|
|
|
(6,346,927
|
)
|
|
|
|
|
|
|
(6,346,927
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
286,178,073
|
|
|
|
|
|
|
|
286,178,073
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
136,690
|
|
|
|
(82,311
|
)
|
|
|
219,001
|
|
Cash, beginning of period
|
|
|
|
|
|
|
219,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
136,690
|
|
|
$
|
136,690
|
|
|
$
|
219,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary cash flow disclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
1,585,860
|
|
|
$
|
1,585,860
|
|
|
$
|
|
|
The accompanying notes are an integral part of these financial statements.
F-7
A. Description of Organization and Business Operations
Global Brands Acquisition Corp. (a corporation in the development stage) (the Company) was
incorporated in Delaware on July 3, 2007. The Company was formed to acquire an operating business
or asset or several operating businesses or assets (a Business Combination) through a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business
combination. All activity through March 31, 2009 relates to the formation of the Company and its
initial public offering described below in Note E. The Company has neither engaged in any
operations nor generated revenue to date and will not until completion of a business combination.
The Company is considered to be in the development stage as defined in Statement of Financial
Accounting Standards (SFAS) No. 7,
Accounting and Reporting By Development Stage Enterprises,
and
is subject to the risks associated with activities of development stage companies. The Company has
selected March 31
st
as its fiscal year end.
The registration statement for the Companys initial public offering of Units (as defined in Note E
below) (Offering) was declared effective December 6, 2007. The Company consummated the Offering on
December 12, 2007 and received net proceeds of $281.2 million (see Note E). An amount of $286.1
million of the net proceeds from the Offering, including $14.4 million of deferred underwriting
discounts and commissions and the $5.0 million of proceeds relating to the private placement of the
sponsors warrants (see Note F), was placed in a trust account (Trust Account) and invested in
JPMorgan 100% U.S. Treasury Securities Money Market Fund, a money market fund meeting certain
conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. The funds in the
Trust Account must be invested in United States government securities within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, or in
money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act of 1940 until the earlier of (i) the consummation of its initial Business Combination
or (ii) the liquidation of the Company as described below. The remaining proceeds may be used to
pay for business, legal and accounting due diligence on prospective target businesses and
continuing general and administrative expenses.
The Companys management has broad discretion with respect to the specific application of the net
proceeds of the Offering, although substantially all of the net proceeds of the Offering are
intended to be generally applied toward consummating a Business Combination. Furthermore, there is
no assurance that the Company will be able to successfully effect a Business Combination. The
Company, after signing a definitive agreement for the acquisition of a target business, will submit
such transaction for stockholder approval. In the event that stockholders owning 30% or more of the
shares of common stock sold in the Offering vote against the Business Combination and exercise
their conversion rights described below, the Business Combination will not be consummated. If the
Companys initial Business Combination is approved and completed, public stockholders voting
against the initial Business Combination will be entitled to convert their shares of common stock
into a pro rata share of the aggregate amount then on deposit in the Trust Account, before payment
of deferred underwriting discounts and commissions and including interest earned on their pro rata
portion of the trust account, net
F-8
of interest income on the Trust Account balance previously released to the Company to pay its tax obligations
and net of interest income of up to $2.9 million on the Trust Account balance previously released to the
Company to fund its working capital requirements.
However, voting against the Business Combination alone will not result in an election to exercise a
stockholders 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. All of
the Companys stockholders prior to the Offering (Initial Stockholders), including all of the
officers and directors of the Company have agreed to vote all of the shares of common stock held by
them prior to the Offering in accordance with the vote of the majority in interest of all other
stockholders of the Company. They have also agreed to vote any shares acquired by them in the
Offering or in the aftermarket in favor of the Business Combination.
In the event that the Company does not consummate a Business Combination by December 6, 2009, the
corporate existence of the Company will cease except for purposes of winding up and liquidating.
The amounts held in the Trust Account will be distributed to the Companys public stockholders,
excluding the Initial Stockholders to the extent of their stock holdings prior to the Offering.
In the event of such distribution, it is likely that the per share value of the residual assets
remaining available for distribution (including Trust Account assets) will be less than the initial
public offering price per Unit in the Offering (as no value is attributed to the warrants contained
in the Units sold in the Offering discussed in Note E).
B. Summary of Significant Accounting Policies
Development Stage Company
The Company complies with the reporting requirements of SFAS No. 7,
Accounting and Reporting by
Development Stage Enterprises.
Comprehensive Income
Comprehensive income is equal to net income.
Net Income per Common Share
Income per common share is based on the weighted average number of common shares outstanding. The
Company complies with SFAS No. 128,
Earnings Per Share,
which requires dual presentation of basic
and diluted earnings per share on the face of the statements of operations, which the Company has
adopted. Basic loss per share excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average common shares outstanding for the period. Diluted loss
per share reflects the potential dilution that could occur if convertible debentures, options and
warrants were to be exercised or
F-9
converted or otherwise resulted in the issuance of common stock
that then shared in the earnings of the entity.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist
of cash accounts in a financial institution, which at times, exceeds the Federal depository
insurance coverage of $250,000 until December 31, 2009 and $100,000 thereafter. The Company has not
experienced losses on these accounts and management believes the Company is not exposed to
significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the companys assets and liabilities, which qualify as financial instruments
under SFAS No. 157,
Fair Value Measurements,
approximates the carrying amounts represented in the
balance sheet.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when
purchased to be cash equivalents.
Cash Held in Trust Fund
Cash held in trust consists of investments in government securities having a maturity of 180 days
or less and are classified as current in the Companys balance sheet.
Deferred Offering Costs
Deferred offering costs of $14.4 million consist of underwriting fees that are payable upon the
Companys consummation of a Business Combination. This amount has been recorded as a reduction of
additional paid in capital.
Income Tax
The Company complies with SFAS 109,
Accounting for Income Taxes
which requires an asset and
liability approach to financial accounting and reporting for income taxes. Deferred income
F-10
tax assets and liabilities are computed for differences between the financial statement and tax bases
of assets and liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
Significant judgment is required in assessing the timing and amount of deductible and taxable
items, evaluating tax positions and in determining the income tax provision. In accordance with
FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of
FASB Statement No. 109, (FIN 48), the Company recognizes tax benefits only when it is more
likely than not that the tax position will be fully sustained upon review by taxing authorities.
If the recognition threshold is met, the Company measures the tax benefit at the largest amount
that is greater than 50 percent likely to be realized. When the outcome of these tax matters
changes, the change in estimate impacts the provision for income taxes in the period that such a
determination is made. The Company recognizes interest and penalties related to unrecognized tax
benefits in the Companys income tax provision.
Recently Issued Accounting Standards
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (SFAS) No. 157,
Fair Value Measurements
. SFAS No. 157 defines fair value,
provides a framework for measuring fair value under current standards in GAAP, and requires
additional disclosure about fair value measurements. In accordance with the Statement, the
definition of fair value retains the exchange price notion, and exchange price is defined as the
price in an orderly transaction between market participants to sell an asset or transfer a
liability. If there is a principal market for the asset or liability, the fair value measurement
should reflect that price, whether that price is directly observable or otherwise used in a
valuation technique. Depending on the asset or liability being valued, the inputs used to determine
fair value can range from observable inputs (i.e. prices based on market data independent from the
entity) and unobservable inputs (i.e. entitys own assumptions about the assumptions that market
participants would use). The adoption of FAS 157 by the Company on April 1, 2008 had no material
impact to its financial statements given the development stage nature of the Company. The Company
has no investment assets or liabilities that would be classified as Level II or Level III. The
Companys investment in a money market fund amounting to $288,540,957 as of March 31, 2009 which
invests exclusively in 100% U.S. Treasury Securities is considered a Level I asset.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities
. SFAS No. 159 permits entities to voluntarily choose to measure many
financial assets and financial liabilities at fair value. The election is made on an
instrument-by-instrument basis and is irrevocable. Unrealized gains and losses on items for which
the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company has elected not to adopt SFAS No. 159.
F-11
In December 2007, the FASB issued FAS No. 141R, Business Combinations (FAS 141R), which
replaces FAS No. 141. FAS 141R was issued to create greater consistency in the accounting and
financial reporting of business combinations, resulting in more complete, comparable and relevant
information for investors and other users of financial statements. FAS 141R establishes principles
and requirements for how an acquirer in a business combination
recognizes and measures in its financial statements the identifiable assets acquired, liabilities
assumed, and any noncontrolling interests in the acquiree, as well as the goodwill acquired.
Significant changes from current practice resulting from FAS 141R include the need for the acquirer
to record 100% of all assets and liabilities of the acquired business, including goodwill,
generally at their fair values for all business combinations (whether partial, full or step
acquisitions); the need to recognize contingent consideration at its fair value on the acquisition
date and, for certain arrangements, to recognize changes in fair value in earnings until
settlement; and the need to expense acquisition-related transaction and restructuring costs rather
than to treat them as part of the cost of the acquisition. FAS 141R also establishes disclosure
requirements to enable users to evaluate the nature and financial effects of the business
combination. FAS 141R is effective for the Company as of the beginning of Fiscal 2010 and will be
applied prospectively to business combinations that close on or after April 1, 2009.
In December 2007, the FASB issued FAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements an Amendment of ARB No. 51 (FAS 160). FAS 160 establishes accounting and reporting
standards for noncontrolling interests (previously referred to as minority interests) in a
subsidiary and for the deconsolidation of a subsidiary, to ensure consistency with the requirements
of FAS 141R. FAS 160 states that noncontrolling interests should be classified as a separate
component of equity, and establishes reporting requirements that provide sufficient disclosures
that clearly identify and distinguish between the interests of the parent and the interests of the
noncontrolling owners. FAS 160 is effective for the Company as of the beginning of Fiscal 2010 and
its application is not expected to have a material effect on the Companys consolidated financial
statements.
C. Common Stock, Subject to Possible Conversion
The Company is required to convert to cash up to 8,624,999 of the shares of common stock sold in
the Offering should those shareholders vote against an initial Business Combination and convert
their shares of common stock into a pro rata share of the aggregate amount then on deposit in the
Trust Account. An amount of $85.8 million has been classified as common stock, subject to possible
conversion representing the initial per-share conversion price.
D. Stockholders Equity
The Companys capital stock consists of common stock and preferred stock. The Company is authorized
to issue 90,000,000 shares of common stock, of which 35,937,500 (including 8,624,999 shares subject
to possible conversion) are outstanding as of March 31, 2009. The Company is authorized to issue
1,000,000 shares of preferred stock with such designations, voting and other rights and preferences
as may be determined from time to time by the board of directors.
F-12
E. Initial Public Offering
On December 12, 2007, the Company sold 28,750,000 units (Units) to the public at a price of $10.00
per Unit. Each Unit consists of one share of the Companys common stock, $0.0001 par value, and one
redeemable common stock purchase warrant (Warrant). Each Warrant entitles the
holder to purchase from the Company one share of common stock, subject to the restrictions
discussed below, at an exercise price of $7.00 commencing on the completion of a Business
Combination with a target business, and will expire December 5, 2012, unless earlier redeemed. The
Warrants will be redeemable, in whole and not in part, at a price of $0.01 per Warrant upon 30 days
prior written notice of redemption, only in the event that the last sales price of the common stock
is at least $14.25 per share for any 20 trading days within a 30 trading day period ending on the
third business day prior to the date on which notice of redemption is sent to the holders of
Warrants. The Warrants may not be redeemed unless an effective and current registration statement
covering the shares of common stock issuable upon exercise of the Warrants is available throughout
the redemption period.
The Company paid an underwriting discount of 2.0% of the public unit offering price to the
underwriters at the closing of the Initial Public Offering, with an additional 5.0% fee of the
gross offering proceeds payable upon the Companys consummation of a Business Combination. The
additional 5% fee, amounting to $14.4 million, has been placed in the Trust Account.
F. Related Party Transactions
The Initial Stockholders purchased an aggregate of 7,187,500 of the Companys founders units for
an aggregate price of $25,000 in a private placement. Each of the Initial Stockholders has agreed
to vote its founders common stock in the same manner as holders of a majority of the shares of the
Companys common stock voted by the public stockholders at the special or annual meeting called for
the purpose of approving the Companys initial Business Combination. As a result, none of the
founders will be able to exercise conversion rights with respect to the founders common stock. In
addition, the Initial Stockholders have agreed to waive their rights to participate in any
liquidation distribution with respect to the founders common stock if the Company fails to
consummate an initial Business Combination. All of the founders units have been placed in escrow,
and subject to limited exceptions, the founders common stock will be held in escrow until 180 days
after the consummation of the Companys initial Business Combination and the founders warrants
will remain in escrow until they become exercisable. The founders common stock will be released
from escrow earlier than as described above if, subsequent to an initial Business Combination, (i)
the last sales price of the Companys common stock equals or exceeds $14.25 per share for any 20
trading days within any 30-trading day period beginning 90 days after an initial Business
Combination or (ii) the Company consummates a subsequent liquidation, merger, stock exchange or
other similar transaction which results in all of its security holders having the right to exchange
their for cash, securities or other property; provided further that the founders warrants will be
released from escrow in connection with (ii) but only to the extent necessary to participate in
such exchange.
F-13
In addition, JLJ Partners, LLC (JLJ Partners) purchased an aggregate of 5,000,000 warrants from the
Company at a price of $1.00 per Warrant ($5.0 million in the aggregate) in a private placement that
occurred simultaneously with the consummation of the Offering. The $5.0 million was placed in the
Trust Account until a successful completion of an initial Business Combination. If the Company
does not complete an initial Business Combination, the $5.0 million will be part of the liquidating
distribution to the public stockholders, and the sponsors warrants will expire worthless. There
will not be any liquidating distributions with respect to the
warrants. The sponsors warrants will not be transferable or salable by JLJ Partners (subject to
limited exceptions) until after the Company completes an initial Business Combination, and will be
exercisable on a cashless basis and will be non-redeemable by the Company, in each case, so long
as they are held by JLJ Partners or its permitted transferees. In addition, commencing 30 days
after the consummation of an initial business combination, the sponsors warrants and the
underlying shares of common stock are entitled to registration rights under an agreement to be
signed on or before the date of the prospectus. With the exception of the terms noted above, the
sponsors warrants have terms and provisions that are identical to those of the warrants being sold
as part of the units in the initial public offering. The Company believes the purchase price of
these Warrants approximated the fair value of such Warrants on the date of issuance.
In addition, JLJ Partners and Sportswear Holdings Limited, an affiliate of the Companys chairman
of the board, have agreed to purchase 2,500,000 Units at a price of $10 per Unit (an aggregate
price of $25.0 million) from the Company in a private placement that may occur contingent upon the
Companys consummation of a Business Combination. These private placement units are identical to
the Units sold in the Offering, except that, subject to certain exceptions, these Units and
underlying securities will not be sold, assigned or transferred for a period of 180 days from the
date of the consummation of the Business Combination.
The Company presently occupies office space provided by JLJ Partners. JLJ Partners has agreed that,
until the consummation of a Business Combination, it will make such office space, as well as
certain office and secretarial services, available to the Company, as may be required by the
Company from time to time. The Company has agreed to pay JLJ Partners $10,000 per month for such
services.
G. Income Taxes
The Company is subject to U.S. Federal, state and local income taxes. The components of the
Companys income tax provision by taxing jurisdiction for the period ended March 31, 2009 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the year
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
ended March 31,
|
|
|
(inception) to
|
|
|
|
March 31, 2009
|
|
|
2009
|
|
|
March 31, 2008
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1,173,898
|
|
|
$
|
707,132
|
|
|
$
|
537,514
|
|
State & Local
|
|
|
735,828
|
|
|
|
438,251
|
|
|
|
320,367
|
|
|
|
|
|
|
|
|
|
|
|
Current provision for income taxes
|
|
$
|
1,909,726
|
|
|
$
|
1,145,383
|
|
|
$
|
857,881
|
|
|
|
|
|
|
|
|
|
|
|
F-14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the year
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
ended March 31,
|
|
|
(inception) to
|
|
|
|
March 31, 2009
|
|
|
2009
|
|
|
March 31, 2008
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(70,748
|
)
|
State & Local
|
|
|
|
|
|
|
|
|
|
|
(22,790
|
)
|
|
|
|
|
|
|
|
|
|
|
Current provision for income taxes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(93,538
|
)
|
|
|
|
|
|
|
|
|
|
|
Total provision for income taxes
|
|
$
|
1,909,726
|
|
|
$
|
1,145,383
|
|
|
$
|
764,343
|
|
|
|
|
|
|
|
|
|
|
|
The deferred tax asset at March 31, 2008 was temporary differences related to start up costs.
The Companys effective tax rate of 47.78%, 49% and 46.06% for the period from July 3, 2007
(inception) to March 31, 2009, the year ended March 31, 2009 and the period from July 3, 2007
(inception) to March 31, 2008, respectively differs from the federal statutory rate of 34.0%
mainly due to certain differences including state.
The following is a reconciliation of the difference between the actual provision for income taxes
and the provision computed by applying the federal statutory rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
For the period
|
|
|
|
July 3, 2007
|
|
|
For the year
|
|
|
July 3, 2007
|
|
|
|
(inception) to
|
|
|
ended March 31,
|
|
|
(inception) to
|
|
|
|
March 31, 2009
|
|
|
2009
|
|
|
March 31, 2008
|
|
U.S. Federal Statutory Rate
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
Increase (decrease) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State and Local Income Taxes, net
of Federal Benefits
|
|
|
12.15
|
%
|
|
|
11.29
|
%
|
|
|
12.74
|
%
|
Others
|
|
|
1.63
|
%
|
|
|
3.71
|
%
|
|
|
(0.68
|
%)
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
47.78
|
%
|
|
|
49.00
|
%
|
|
|
46.06
|
%
|
|
|
|
|
|
|
|
|
|
|
F-15