AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 2004
REGISTRATION NO. 333-113583
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TREMISIS ENERGY ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 6770 20-0700684
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
LAWRENCE S. COBEN, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TREMISIS ENERGY ACQUISITION CORPORATION
1775 BROADWAY, SUITE 604
NEW YORK, NEW YORK 10019
(212) 397-1464
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
David Alan Miller, Esq. Floyd I. Wittlin, Esq.
Graubard Miller Bingham McCutchen LLP
600 Third Avenue 399 Park Avenue
New York, New York 10016 New York, New York 10022
(212) 818-8800 (212) 705-7000
(212) 818-8881 - Facsimile (212) 752-5378 - Facsimile
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITY AMOUNT BEING MAXIMUM OFFERING AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PRICE PER SECURITY(1) OFFERING PRICE(1) FEE
Units, each consisting of one
share of Common Stock,
$.0001 par value, and two
Warrants (2) 6,325,000 Units $ 6.00 $37,950,000 $ 4,808.27
Shares of Common Stock
included as part of the Units(2) 6,325,000 Shares -- -- --(3)
Warrants included as part of the
Units(2) 12,650,000 Warrants -- -- --(3)
Shares of Common Stock
underlying the Warrants
included in the Units(4) 12,650,000 Shares $ 5.00 $63,250,000 $ 8,013.78
Representative's Unit Purchase
Option 1 $ 100 $ 100 --(3)
Units underlying the
Representative's Unit Purchase
Option ("Underwriter's
Units")(4) 275,000 Units $ 9.90 $2,722,500 $ 344.94
Shares of Common Stock
included as part of the
Underwriter's Units(4) 275,000 Shares -- -- --(3)
Warrants included as part of the
Representative's Units(4) 550,000 Warrants -- -- --(3)
Shares of Common Stock
underlying the Warrants
included in the
Representative's Units(4) 550,000 Shares $ 6.25 $ 3,437,500 $ 435.53
Total $107,360,100 $13,602.53(5)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 825,000 Units and 825,000 shares of Common Stock and 1,650,000
Warrants underlying such Units which may be issued on exercise of a
45-day option granted to the Underwriters to cover over-allotments, if
any.
(3) No fee pursuant to Rule 457(g).
(4) Pursuant to Rule 416, there are also being registered such indeterminable
additional securities as may be issued as a result of the anti-dilution
provisions contained in the Warrants.
(5) $9,842.06 of the fee has been previously paid.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, APRIL 27, 2004
PROSPECTUS
$33,000,000
TREMISIS ENERGY ACQUISITION CORPORATION
5,500,000 UNITS
Tremisis Energy Acquisition Corporation is a blank check company recently
formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition or other similar business combination with an operating business.
Our objective is to acquire an operating business in either the energy or
environmental industry and their related infrastructures.
This is an initial public offering of our securities. Each unit consists
of:
o one share of our common stock; and
o two warrants.
Each warrant entitles the holder to purchase one share of our common stock
at a price of $5.00. Each warrant will become exercisable on the later of our
completion of a business combination or , 2005 [ONE YEAR FROM THE DATE
OF THIS PROSPECTUS], and will expire on , 2008 [FOUR YEARS FROM THE
DATE OF THIS PROSPECTUS], or earlier upon redemption.
We have granted the underwriters a 45-day option to purchase up to 825,000
additional units solely to cover over-allotments, if any (over and above the
5,500,000 units referred to above). The over-allotment will be used only to
cover the net syndicate short position resulting from the initial distribution.
We have also agreed to sell to the representative of the underwriters, for
$100, an option to purchase up to a total of 275,000 units at a per-unit
offering price of $9.90. The units issuable upon exercise of this option are
identical to those offered by this prospectus except that the warrants included
in the option have an exercise price of $6.25 (125% of the exercise price of
the warrants included in the units sold in the offering). The purchase option
and its underlying securities have been registered under the registration
statement of which this prospectus forms a part.
There is presently no public market for our units, common stock or
warrants. We anticipate that the units will be quoted on the OTC Bulletin Board
under the symbol on or promptly after the date of this prospectus. Once the
securities comprising the units begin separate trading, the common stock and
warrants will be traded on the OTC Bulletin Board under the symbols and
, respectively.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION OF INFORMATION
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN OUR SECURITIES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
UNDERWRITING
PUBLIC DISCOUNT PROCEEDS, BEFORE
OFFERING PRICE AND COMMISSIONS(1) EXPENSES, TO US
---------------- -------------------- -----------------
Per unit ......... $ 6.00 $ 0.54 $ 5.46
Total ............ $33,000,000 $2,970,000 $30,030,000
(1) Includes a non-accountable expense allowance in the amount of 3% of the
gross proceeds, or $0.18 per unit ($990,000 in total) payable to
EarlyBirdCapital, Inc.
Of the net proceeds we receive from this offering, $28,490,000 ($5.18 per
unit) will be deposited into trust with Continental Stock Transfer & Trust
Company acting as trustee.
We are offering the units for sale on a firm-commitment basis.
EarlyBirdCapital, Inc., acting as representative of the underwriters, expects
to deliver our securities to investors in the offering on or about ,
2004.
EARLYBIRDCAPITAL, INC.
, 2004
TABLE OF CONTENTS
PAGE
----
Prospectus Summary ................................................................... 3
Summary Financial Data ............................................................... 8
Risk Factors ......................................................................... 9
Use of Proceeds ...................................................................... 17
Dilution ............................................................................. 19
Capitalization ....................................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of Operations 21
Proposed Business .................................................................... 23
Management ........................................................................... 32
Principal Stockholders ............................................................... 35
Certain Transactions ................................................................. 37
Description of Securities ............................................................ 38
Underwriting ......................................................................... 42
Legal Matters ........................................................................ 45
Experts .............................................................................. 45
Where You Can Find Additional Information ............................................ 46
Index to Financial Statements ........................................................ F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER IS NOT PERMITTED.
---------------------
2
PROSPECTUS SUMMARY
This summary highlights certain information appearing elsewhere in this
prospectus. For a more complete understanding of this offering, you should read
the entire prospectus carefully, including the risk factors and the financial
statements. Unless otherwise stated in this prospectus, references to "we," "us"
or "our company" refer to Tremisis Energy Acquisition Corporation. Unless we
tell you otherwise, the information in this prospectus assumes that the
underwriters will not exercise their over-allotment option. Additionally, unless
we tell you otherwise, the information in this prospectus has been adjusted to
give retroactive effect to a 1.1666666-to-one forward stock split effected on
March 10, 2004, a 1.1428571-to-one forward stock split on April 16, 2004 and a
1.375-to-one forward stock split on April 23, 2004.
We are a blank check company organized under the laws of the State of
Delaware on February 5, 2004. We were formed to effect a merger, capital stock
exchange, asset acquisition or other similar business combination with an
operating business in either the energy or the environmental industry and their
related infrastructures. To date, our efforts have been limited to
organizational activities.
ENERGY INDUSTRY AND ITS RELATED INFRASTRUCTURE
The energy industry and its related infrastructure generally includes the
production, generation, transmission and distribution of electricity, heat,
fuel and other consumable forms of energy and the infrastructure needed to
maintain and operate the facilities, services and installations used in the
foregoing areas.
Although we may consider a target business in any segment of the energy
industry, we currently intend to concentrate our search for an acquisition
candidate on companies in the following segments:
o Electricity generation, distribution and transmission;
o Natural gas production, distribution and transmission;
o Energy related services including conservation, metering, operations and
maintenance;
o Steam generation and distribution;
o Alternative and renewable energy technologies; and
o The infrastructure necessary to operate in the energy industry including
but not limited to areas such as the production, transportation or
distribution of towers, power lines, scaffolding products and other
equipment or supplies incidental to the energy industry.
ENVIRONMENTAL INDUSTRY AND ITS RELATED INFRASTRUCTURE
The environmental industry and its related infrastructure generally
includes the technologies and services that protect the natural and human
environment from destruction and pollution, and the infrastructure needed to
maintain and operate the facilities, services and installations used in the
foregoing areas. The environmental industry also seeks to ameliorate the
negative effects of industrial production and unhealthy practices and materials
on our population as a whole.
Although we may consider a target business in any segment of the
environmental industry, we currently intend to concentrate our search for an
acquisition candidate on companies in the following segments:
o Waste management and disposal, including wastewater treatment and
management and sewage control;
3
o Air treatment and ionization, pollution and emission control;
o Medical waste disposal;
o Radon and site cleanup services;
o Other energy/environmental related technologies; and
o The infrastructure necessary to operate in the environmental industry
including but not limited to areas such as the operation of water supply
facilities, waste and wastewater treatment facilities, pollution control
facilities and transportation facilities and the production,
transportation or distribution of the equipment and products incidental to
such operations.
Although we believe there are many positive trends that make acquisition
candidates in both the energy and environmental industries attractive, there
are various risks of acquiring a business in such industries, including
substantial government regulation. Depending on the industry segment we
ultimately operate in, we may be required to spend substantial amounts of time
and money in complying with such governmental regulations. For a more complete
discussion of the risks relating to operations in the energy and environmental
industries, see the section below entitled "Risk Factors."
While we may seek to effect business combinations with more than one
target business, our initial business combination must be with a target
business whose fair market value is at least equal to 80% of our net assets at
the time of such acquisition. Consequently, it is likely that we will have the
ability to effect only a single business combination.
Our offices are located at 1775 Broadway, Suite 604, New York, New York
10019 and our telephone number is (212) 397-1464.
4
THE OFFERING
Securities offered:........... 5,500,000 units, at $6.00 per unit, each unit
consisting of:
o one share of common stock; and
o two warrants.
The units will begin trading on or promptly
after the date of this prospectus. Each of the
common stock and warrants may trade separately
on the 90th day after the date of this
prospectus unless EarlyBirdCapital determines
that an earlier date is acceptable. In no
event will EarlyBirdCapital allow separate
trading of the common stock and warrants until
we file an audited balance sheet reflecting
our receipt of the gross proceeds of this
offering. We will file a Current Report on
Form 8-K, including an audited balance sheet,
upon the consummation of this offering, which
is anticipated to take place three business
days from the date of this prospectus. The
audited balance sheet will include proceeds we
receive from the exercise of the
over-allotment option if the over-allotment
option is exercised prior to the filing of the
Form 8-K.
Common stock:
Number outstanding before this
offering.................... 1,375,000 shares
Number to be outstanding after
this offering............... 6,875,000 shares
Warrants:
Number outstanding before this
offering.................... 0
Number to be outstanding after
this offering............... 11,000,000 warrants
Exercisability............... Each warrant is exercisable for one share of
common stock.
Exercise price............... $5.00
Exercise period.............. The warrants will become exercisable on the
later of:
o the completion of a business combination
with a target business, or
o [ ], 2005 [ONE YEAR FROM THE DATE OF
THIS PROSPECTUS].
The warrants will expire at 5:00 p.m., New
York City time, on [ ], 2008 [FOUR YEARS
FROM THE DATE OF THIS PROSPECTUS] or earlier
upon redemption.
5
Redemption.................... We may redeem the outstanding warrants:
o in whole and not in part,
o at a price of $.01 per warrant at any time
after the warrants become exercisable,
o upon a minimum of 30 days' prior written
notice of redemption, and
o if, and only if, the last sales price of
our common stock equals or exceeds $8.50 per
share for any 20 trading days within a 30
trading day period ending three business days
before we send the notice of redemption.
Proposed OTC Bulletin Board
symbols for our:
Units....................... [ ]
Common stock................ [ ]
Warrants.................... [ ]
Offering proceeds to be held
in trust:..................... $28,490,000 of the proceeds of this offering
($5.18 per unit) will be placed in a trust fund
at JPMorgan Chase NY Bank maintained by
Continental Stock Transfer & Trust Company,
pursuant to an agreement to be signed on the
date of this prospectus. These proceeds will
not be released until the earlier of the
completion of a business combination or our
liquidation. Therefore, unless and until a
business combination is consummated, the
proceeds held in the trust fund will not be
available for our use for any expenses related
to this offering or expenses which we may incur
related to the investigation and selection of a
target business and the negotiation of an
agreement to acquire a target business. These
expenses may be paid prior to a business
combination only from the net proceeds of this
offering not held in the trust fund (initially,
approximately $1,020,000).
None of the warrants may be exercised until
after the consummation of a business
combination and, thus, after the proceeds of
the trust fund have been disbursed, the
warrant exercise price will be paid directly
to us.
Stockholders must approve
business combination:........ We will seek stockholder approval before we
effect any business combination, even if the
nature of the acquisition would not ordinarily
require stockholder approval under applicable
state law. In connection with the vote required
for any business combination, all of our
existing stockholders, including all of our
officers and directors, have agreed to vote the
shares of common stock owned by them
immediately before this offering in accordance
with
6
the majority of the shares of common stock
voted by the public stockholders. We will
proceed with a business combination only if a
majority of the shares of common stock voted
by the public stockholders are voted in favor
of the business combination and public
stockholders owning less than 20% of the
shares sold in this offering exercise their
conversion rights described below.
Conversion rights for
stockholders voting to reject
a business combination:........ Public stockholders voting against a business
combination will be entitled to convert their
stock into a pro rata share of the trust fund,
including any interest earned on their portion
of the trust fund, if the business combination
is approved and completed.
Liquidation if no
business combination:.......... We will dissolve and promptly distribute only
to our public stockholders the amount in our
trust fund plus any remaining net assets if we
do not effect a business combination within 18
months after consummation of this offering (or
within 24 months from the consummation of this
offering if a letter of intent, agreement in
principle or definitive agreement has been
executed within 18 months after consummation of
this offering and the business combination has
not yet been consummated within such 18 month
period).
Escrow of management shares:... On the date of this prospectus, all of our
existing stockholders, including all of our
officers and directors, will place the shares
they owned before this offering into an escrow
account maintained by Continental Stock
Transfer & Trust Company, acting as escrow
agent. Subject to certain limited exceptions,
these shares will not be transferable during
the escrow period and will not be released from
escrow until [ ], 2007 [THREE YEARS FROM THE
DATE OF THIS PROSPECTUS].
RISKS
In making your decision on whether to invest in our securities, you should
take into account not only the backgrounds of our management team, but also the
special risks we face as a blank check company, as well as the fact that this
offering is not being conducted in compliance with Rule 419 promulgated under
the Securities Act of 1933, as amended, and, therefore, you will not be
entitled to protections normally afforded to investors in Rule 419 blank check
offerings. You should also note that our financial statements contain a
statement indicating that our ability to continue as a going concern is
dependent on us raising funds in this offering. You should carefully consider
these and the other risks set forth in the section entitled "Risk Factors"
beginning on page 9 of this prospectus.
7
SUMMARY FINANCIAL DATA
The following table summarizes the relevant financial data for our
business and should be read with our financial statements, which are included
in this prospectus. We have not had any significant operations to date, so only
balance sheet data is presented.
MARCH 10, 2004
----------------------------
ACTUAL AS ADJUSTED
------------- ------------
BALANCE SHEET DATA:
Working capital/(deficiency) ....................... $ (65,735) $29,535,000
Total assets ....................................... 95,000 29,535,000
Total liabilities .................................. 70,000 --
Value of common stock which may be converted to cash
($5.18 per share)................................. -- 5,695,151
Stockholders' equity ............................... 25,000 23,839,849
The "as adjusted" information gives effect to the sale of the units we are
offering and the application of the estimated net proceeds from their sale.
The working capital and total assets amounts include the $28,490,000 being
held in the trust fund, which will be available to us only upon the consummation
of a business combination within the time period described in this prospectus.
If a business combination is not so consummated, we will be dissolved and the
proceeds held in the trust fund will be distributed solely to our public
stockholders.
We will not proceed with a business combination if public stockholders
owning 20% or more of the shares sold in this offering vote against the
business combination and exercise their conversion rights. Accordingly, we may
effect a business combination if public stockholders owning up to approximately
19.99% of the shares sold in this offering exercise their conversion rights. If
this occurred, we would be required to convert to cash up to approximately
19.99% of the 5,500,000 shares sold in this offering, or 1,099,450 shares of
common stock, at an initial per-share conversion price of $5.18, without taking
into account interest earned on the trust fund. The actual per-share conversion
price will be equal to:
o the amount in the trust fund as of the record date for the determination
of stockholders entitled to vote on the business combination plus any
interest accrued through the record date,
o divided by the number of shares of common stock sold in the offering.
8
RISK FACTORS
An investment in our securities involves a high degree of risk. You should
consider carefully all of the material risks described below, together with the
other information contained in this prospectus before making a decision to
invest in our units.
RISKS ASSOCIATED WITH OUR BUSINESS
WE ARE A DEVELOPMENT STAGE COMPANY WITH NO OPERATING HISTORY AND VERY LIMITED
RESOURCES AND OUR FINANCIAL STATEMENTS CONTAIN A STATEMENT INDICATING THAT OUR
ABILITY TO CONTINUE AS A GOING CONCERN IS DEPENDENT ON US RAISING FUNDS IN THIS
OFFERING.
We are a recently incorporated development stage company with no operating
results to date. Since we do not have an operating history, you will have no
basis upon which to evaluate our ability to achieve our business objective,
which is to acquire an operating business in either of the energy or
environmental industries and their related infrastructures. We have not
conducted any discussions and we have no plans, arrangements or understandings
with any prospective acquisition candidates. We will not generate any revenues
(other than interest income on the proceeds of this offering) until, at the
earliest, after the consummation of a business combination. We currently have a
working capital deficit whereby our current liabilities exceed our current
assets (cash). The report of our independent certified public accountants on
our financial statements includes an explanatory paragraph, stating that our
ability to continue as a going concern, is dependent on the consummation of
this offering. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
IF WE ARE FORCED TO LIQUIDATE BEFORE A BUSINESS COMBINATION, OUR PUBLIC
STOCKHOLDERS WILL RECEIVE LESS THAN $6.00 PER SHARE UPON DISTRIBUTION OF THE
TRUST FUND AND OUR WARRANTS WILL EXPIRE WORTHLESS.
If we are unable to complete a business combination and are forced to
liquidate our assets, the per-share liquidation distribution will be less than
$6.00 because of the expenses of this offering, our general and administrative
expenses and the anticipated costs of seeking a business combination.
Furthermore, there will be no distribution with respect to our outstanding
warrants and, accordingly, the warrants will expire worthless if we liquidate
before the completion of a business combination. For a more complete discussion
of the effects on our stockholders if we are unable to complete a business
combination, see the section below entitled "Effecting a business
combination--Liquidation if no business combination."
YOU WILL NOT BE ENTITLED TO PROTECTIONS NORMALLY AFFORDED TO INVESTORS OF BLANK
CHECK COMPANIES.
Since the net proceeds of this offering are intended to be used to
complete a business combination with a target business that has not been
identified, we may be deemed to be a "blank check" company under the United
States securities laws. However, since we will have net tangible assets in
excess of $5,000,000 upon the successful consummation of this offering and our
units are being offered at an initial price of $6.00 per unit, we are exempt
from rules promulgated by the SEC to protect investors of blank check companies
such as Rule 419. Accordingly, investors will not be afforded the benefits or
protections of those rules. Because we are not subject to Rule 419, our units
will be immediately tradable and we have a longer period of time to complete a
business combination in certain circumstances. For a more detailed comparison
of our offering to offerings under Rule 419, see the section entitled
"Comparison to offerings of blank check companies" below.
IF THIRD PARTIES BRING CLAIMS AGAINST US, THE PROCEEDS HELD IN TRUST COULD BE
REDUCED AND THE PER-SHARE LIQUIDATION PRICE RECEIVED BY STOCKHOLDERS WILL BE
LESS THAN $5.18 PER SHARE.
Our placing of funds in trust may not protect those funds from third party
claims against us. The proceeds held in trust could be subject to claims which
could take priority over the claims of our public stockholders. We cannot
assure you that the per-share liquidation price will not be less than
9
$5.18, plus interest, due to claims of creditors. If we liquidate before the
completion of a business combination, Lawrence S. Coben, our chairman of the
board and chief executive officer, will be personally liable under certain
circumstances to ensure that the proceeds in the trust fund are not reduced by
the claims of various vendors or other entities that are owed money by us for
services rendered or products sold to us. However, we cannot assure you that
Mr. Coben will be able to satisfy those obligations.
SINCE WE HAVE NOT CURRENTLY SELECTED ANY TARGET BUSINESS WITH WHICH TO COMPLETE
A BUSINESS COMBINATION, WE ARE UNABLE TO CURRENTLY ASCERTAIN THE MERITS OR
RISKS OF THE BUSINESS' OPERATIONS.
Since we have not yet identified a prospective target business, investors
in this offering have no current basis to evaluate the possible merits or risks
of the target business' operations. To the extent we complete a business
combination with a financially unstable company or an entity in its development
stage, we may be affected by numerous risks inherent in the business operations
of those entities. Although our management will endeavor to evaluate the risks
inherent in a particular target business, we cannot assure you that we will
properly ascertain or assess all of the significant risk factors. We also
cannot assure you that an investment in our units will not ultimately prove to
be less favorable to investors in this offering than a direct investment, if an
opportunity were available, in a target business. For a more complete
discussion of our selection of a target business, see the section below
entitled "Effecting a business combination--We have not identified a target
business."
WE MAY ISSUE SHARES OF OUR CAPITAL STOCK OR DEBT SECURITIES TO COMPLETE A
BUSINESS COMBINATION, WHICH WOULD REDUCE THE EQUITY INTEREST OF OUR
STOCKHOLDERS AND LIKELY CAUSE A CHANGE IN CONTROL OF OUR OWNERSHIP.
Our certificate of incorporation authorizes the issuance of up to
30,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. Immediately after this
offering (assuming no exercise of the underwriters' over-allotment option),
there will be 11,300,000 authorized but unissued shares of our common stock
available for issuance (after appropriate reservation for the issuance of
shares upon full exercise of our outstanding warrants and the purchase option
granted to EarlyBirdCapital, the representative of the underwriters) and all of
the 1,000,000 shares of preferred stock available for issuance. Although we
have no commitments as of the date of this offering to issue our securities, we
will, in all likelihood, issue a substantial number of additional shares of our
common stock or preferred stock, or a combination of common and preferred
stock, to complete a business combination. The issuance of additional shares of
our common stock or any number of shares of our preferred stock:
o may significantly reduce the equity interest of investors in this
offering;
o will likely cause a change in control if a substantial number of our
shares of common stock are issued, which may affect, among other
things, our ability to use our net operating loss carry forwards, if
any, and most likely also result in the resignation or removal of our
present officers and directors; and
o may adversely affect prevailing market prices for our common stock.
Similarly, if we issued debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues after
a business combination were insufficient to pay our debt obligations;
o acceleration of our obligations to repay the indebtedness even if we
have made all principal and interest payments when due if the debt
security contained covenants that required the maintenance of certain
financial ratios or reserves and any such covenant were breached
without a waiver or renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any,
if the debt security was payable on demand; and
o our inability to obtain additional financing, if necessary, if the
debt security contained covenants restricting our ability to obtain
additional financing while such security was outstanding.
10
For a more complete discussion of the possible structure of a business
combination, see the section below entitled "Effecting a business
combination--Selection of a target business and structuring of a business
combination."
IT IS LIKELY THAT OUR CURRENT OFFICERS AND DIRECTORS WILL RESIGN UPON
CONSUMMATION OF A BUSINESS COMBINATION AND WE WILL HAVE ONLY LIMITED ABILITY TO
EVALUATE THE MANAGEMENT OF THE TARGET BUSINESS.
Our ability to successfully effect a business combination will be totally
dependent upon the efforts of our key personnel. The future role of our key
personnel in the target business, however, cannot presently be ascertained.
Although it is possible that some of our key personnel will remain associated
in various capacities with the target business following a business
combination, it is likely that the management of the target business at the
time of the business combination will remain in place. Although we intend to
closely scrutinize the management of a prospective target business in
connection with evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of management will prove
to be correct.
OUR OFFICERS AND DIRECTORS MAY ALLOCATE THEIR TIME TO OTHER BUSINESSES WHICH
COULD CAUSE A CONFLICT OF INTEREST AS TO WHICH BUSINESS THEY PRESENT A VIABLE
ACQUISITION OPPORTUNITY TO.
Our officers and directors are not required to commit their full time to
our affairs, which may result in a conflict of interest in allocating their
time between our operations and other businesses. Some of these persons may in
the future become affiliated with entities, including other "blank check"
companies, engaged in business activities similar to those intended to be
conducted by us. Our officers and directors may become aware of business
opportunities which may be appropriate for presentation to us as well as the
other entities with which they are or may be affiliated. Accordingly, they may
have conflicts of interest in determining to which entity a particular business
opportunity should be presented. For a complete discussion of the potential
conflicts of interest that you should be aware of, see the section below
entitled "Management--Conflicts of Interest." We cannot assure you that these
conflicts will be resolved in our favor.
ALL OF OUR OFFICERS AND DIRECTORS OWN SHARES OF OUR SECURITIES WHICH WILL NOT
PARTICIPATE IN LIQUIDATION DISTRIBUTIONS AND THEREFORE THEY MAY HAVE A CONFLICT
OF INTEREST IN DETERMINING WHETHER A PARTICULAR TARGET BUSINESS IS APPROPRIATE
FOR A BUSINESS COMBINATION.
All of our officers and directors own stock in our company, but have
waived their right to receive distributions upon liquidation. Additionally,
Lawrence S. Coben has agreed with the representative of the underwriters that
he and certain of his affiliates or designees will purchase warrants in the
open market following this offering. The shares and warrants owned by our
directors and officers will be worthless if we do not consummate a business
combination. The personal and financial interests of our directors and officers
may influence their motivation in identifying and selecting a target business
and completing a business combination timely. 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.
IF OUR COMMON STOCK BECOMES SUBJECT TO THE SEC'S PENNY STOCK RULES,
BROKER-DEALERS MAY EXPERIENCE DIFFICULTY IN COMPLETING CUSTOMER TRANSACTIONS
AND TRADING ACTIVITY IN OUR SECURITIES MAY BE ADVERSELY AFFECTED.
If at any time we have net tangible assets of $5,000,000 or less and our
common stock has a market price per share of less than $5.00, transactions in
our common stock may be subject to the "penny stock" rules promulgated under
the Securities Exchange Act of 1934. Under these rules, broker-dealers who
recommend such securities to persons other than institutional accredited
investors must:
o make a special written suitability determination for the purchaser;
11
o receive the purchaser's written agreement to a transaction prior to
sale;
o provide the purchaser with risk disclosure documents which identify
certain risks associated with investing in "penny stocks" and which
describe the market for these "penny stocks" as well as a purchaser's
legal remedies; and
o obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the required
risk disclosure document before a transaction in a "penny stock" can
be completed.
If our common stock becomes subject to these rules, broker-dealers may
find it difficult to effectuate customer transactions and trading activity in
our securities may be adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult to sell our
securities.
IT IS PROBABLE THAT WE WILL ONLY BE ABLE TO COMPLETE ONE BUSINESS COMBINATION,
WHICH WILL CAUSE US TO BE SOLELY DEPENDENT ON A SINGLE BUSINESS AND A LIMITED
NUMBER OF PRODUCTS OR SERVICES.
The net proceeds from this offering will provide us with only
approximately $29,480,000 which we may use to complete a business combination.
Our initial business combination must be with a business with a fair market
value of at least 80% of our net assets at the time of such acquisition.
Consequently, it is probable that we will have the ability to complete only a
single business combination. Accordingly, the prospects for our success may be:
o solely dependent upon the performance of a single business, or
o dependent upon the development or market acceptance of a single or
limited number of products, processes or services.
In this case, we will not be able to diversify our operations or benefit from
the possible spreading of risks or offsetting of losses, unlike other entities
which may have the resources to complete several business combinations in
different industries or different areas of a single industry.
BECAUSE OF OUR LIMITED RESOURCES AND THE SIGNIFICANT COMPETITION FOR BUSINESS
COMBINATION OPPORTUNITIES, WE MAY NOT BE ABLE TO CONSUMMATE AN ATTRACTIVE
BUSINESS COMBINATION.
We expect to encounter intense competition from other entities having a
business objective similar to ours, including venture capital funds, leveraged
buyout funds and operating businesses competing for acquisitions in the energy
or environmental industry and their related infrastructures. Many of these
entities are well established and have extensive experience in identifying and
effecting business combinations directly or through affiliates. Many of these
competitors possess greater technical, human and other resources than we do and
our financial resources will be relatively limited when contrasted with those
of many of these competitors. While we believe that there are numerous
potential target businesses that we could acquire with the net proceeds of this
offering, our ability to compete in acquiring certain sizable target businesses
will be limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of certain
target businesses. Further, the obligation we have to seek stockholder approval
of a business combination may delay the consummation of a transaction, and our
obligation to convert into cash the shares of common stock held by public
stockholders in certain instances may reduce the resources available for a
business combination. Additionally, our outstanding warrants, and the future
dilution they potentially represent, may not be viewed favorably by certain
target businesses. Any of these obligations may place us at a competitive
disadvantage in successfully negotiating a business combination.
WE MAY BE UNABLE TO OBTAIN ADDITIONAL FINANCING, IF REQUIRED, TO COMPLETE A
BUSINESS COMBINATION OR TO FUND THE OPERATIONS AND GROWTH OF THE TARGET
BUSINESS, WHICH COULD COMPEL US TO RESTRUCTURE THE TRANSACTION OR ABANDON A
PARTICULAR BUSINESS COMBINATION.
Although we believe that the net proceeds of this offering will be
sufficient to allow us to consummate a business combination, in as much as we
have not yet identified any prospective target
12
business, we cannot ascertain the capital requirements for any particular
transaction. If the net proceeds of this offering prove to be insufficient,
either because of the size of the business combination or the depletion of the
available net proceeds in search of a target business, or because we become
obligated 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 would be available on acceptable terms, if at
all. To the extent that additional financing proves to be unavailable when
needed to consummate a particular business combination, we would be compelled
to restructure the transaction or abandon that particular business combination
and seek an alternative target business candidate. In addition, if we
consummate a business combination, we may require additional financing to fund
the operations or growth of the target business. The failure to secure
additional financing could have a material adverse effect on the continued
development or growth of the target business. None of our officers, directors
or stockholders is required to provide any financing to us in connection with
or after a business combination.
OUR EXISTING STOCKHOLDERS, INCLUDING OUR OFFICERS AND DIRECTORS, CONTROL A
SUBSTANTIAL INTEREST IN US AND THUS MAY INFLUENCE CERTAIN ACTIONS REQUIRING
STOCKHOLDER VOTE.
Upon consummation of our offering, our existing stockholders (including
all of our officers and directors) will collectively own 20% of our issued and
outstanding shares of common stock (assuming they do not purchase units in this
offering). Isaac Kier, our secretary and treasurer and a member of our board of
directors, has indicated that he plans on purchasing units in the offering.
However, he is not obligated to do so and we do not have any agreement or
arrangement with him requiring him to purchase securities in the offering. None
of our other existing shareholders, officers and directors have indicated to us
that they intend to purchase our securities in the offering.
Our board of directors is divided into three classes, each of which will
generally serve for a term of two years with only one class of directors being
elected in each year. It is unlikely that there will be an annual meeting of
stockholders to elect new directors prior to the consummation of a business
combination, in which case all of the current directors will continue in office
at least until the consummation of the business combination. If there is an
annual meeting, as a consequence of our "staggered" board of directors, only a
minority of the board of directors will be considered for election and our
existing stockholders, because of their ownership position, will have
considerable influence regarding the outcome. Accordingly, our existing
stockholders will continue to exert control at least until the consummation of
a business combination. In addition, our existing stockholders and their
affiliates and relatives are not prohibited from purchasing units in this
offering or shares in the aftermarket. If they do, we cannot assure you that
our existing stockholders will not have considerable influence upon the vote in
connection with a business combination.
OUR EXISTING STOCKHOLDERS PAID AN AGGREGATE OF $25,000, OR AN AVERAGE OF
APPROXIMATELY $0.018 PER SHARE, FOR THEIR SHARES AND, ACCORDINGLY, YOU WILL
EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION FROM THE PURCHASE OF OUR COMMON
STOCK.
The difference between the public offering price per share of our common
stock and the pro forma net tangible book value per share of our common stock
after this offering constitutes the dilution to you and the other investors in
this offering. The fact that our existing stockholders acquired their shares of
common stock at a nominal price has significantly contributed to this dilution.
Assuming the offering is completed, you and the other new investors will incur
an immediate and substantial dilution of approximately 31% or $1.87 per share
(the difference between the pro forma net tangible book value per share of
$4.13, and the initial offering price of $6.00 per unit).
OUR OUTSTANDING WARRANTS MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF
COMMON STOCK AND MAKE IT MORE DIFFICULT TO EFFECT A BUSINESS COMBINATION.
In connection with this offering, as part of the units, we will be issuing
warrants to purchase 11,000,000 shares of common stock. We will also issue an
option to purchase 275,000 units to the representative of the underwriters
which, if exercised, will result in the issuance of an additional
13
550,000 warrants. To the extent we issue shares of common stock to effect a
business combination, the potential for the issuance of substantial numbers of
additional shares upon exercise of these warrants and options could make us a
less attractive acquisition vehicle in the eyes of a target business as such
securities, when exercised, will increase the number of issued and outstanding
shares of our common stock and reduce the value of the shares issued to
complete the business combination. Accordingly, our warrants and options may
make it more difficult to effectuate a business combination or increase the
cost of the target business. Additionally, the sale, or even the possibility of
sale, of the shares underlying the warrants and options could have an adverse
effect on the market price for our securities or on our ability to obtain
future public financing. If and to the extent these warrants and options are
exercised, you may experience dilution to your holdings.
IF OUR EXISTING STOCKHOLDERS EXERCISE THEIR REGISTRATION RIGHTS, IT MAY HAVE AN
ADVERSE EFFECT ON THE MARKET PRICE OUR COMMON STOCK AND THE EXISTENCE OF THESE
RIGHTS MAY MAKE IT MORE DIFFICULT TO EFFECT A BUSINESS COMBINATION.
Our existing stockholders are entitled to demand that we register the
resale of their shares of common stock at any time after the date on which their
shares are released from escrow. If our existing stockholders exercise their
registration rights with respect to all of their shares of common stock, then
there will be an additional 1,375,000 shares of common stock eligible for
trading in the public market. The presence of this additional number of shares
of common stock eligible for trading in the public market may have an adverse
effect on the market price of our common stock. In addition, the existence of
these rights may make it more difficult to effectuate a business combination or
increase the cost of the target business, as the stockholders of the target
business may be discouraged from entering into a business combination with us or
will request a higher price for their securities as a result of these
registration rights and the potential future effect their exercise may have on
the trading market for our common stock.
IF YOU ARE NOT AN INSTITUTIONAL INVESTOR, YOU MAY PURCHASE OUR SECURITIES IN
THIS OFFERING ONLY IF YOU RESIDE WITHIN CERTAIN STATES AND MAY ENGAGE IN RESALE
TRANSACTIONS ONLY IN THOSE STATES AND A LIMITED NUMBER OF OTHER JURISDICTIONS.
We have applied to register our securities, or have obtained or will seek
to obtain an exemption from registration, in Delaware, the District of
Columbia, Florida, Hawaii, Illinois, Maryland, New York and Rhode Island. If
you are not an "institutional investor," you must be a resident of these
jurisdictions to purchase our securities in the offering. The definition of an
"institutional investor" varies from state to state but generally includes
financial institutions, broker-dealers, banks, insurance companies and other
qualified entities. In order to prevent resale transactions in violation of
states' securities laws, you may engage in resale transactions only in these
states and in a limited number of other jurisdictions in which an applicable
exemption is available or a Blue Sky application has been filed and accepted.
This restriction on resale may limit your ability to resell the securities
purchased in this offering and may impact the price of our securities. For a
more complete discussion of the Blue Sky state securities laws and
registrations affecting this offering, please see the section entitled "State
Blue Sky Information" below.
WE INTEND TO HAVE OUR SECURITIES QUOTED ON THE OTC BULLETIN BOARD, WHICH WILL
LIMIT THE LIQUIDITY AND PRICE OF OUR SECURITIES MORE THAN IF OUR SECURITIES
WERE QUOTED OR LISTED ON THE NASDAQ STOCK MARKET OR A NATIONAL EXCHANGE.
Our securities will be traded in the over-the-counter market. It is
anticipated that they will be quoted on the OTC Bulletin Board, an
NASD-sponsored and operated inter-dealer automated quotation system for equity
securities not included in the Nasdaq Stock Market. Quotation of our securities
on the OTC Bulletin Board will limit the liquidity and price of our securities
more than if our securities were quoted or listed on The Nasdaq Stock Market or
a national exchange.
THE REPRESENTATIVE OF THE UNDERWRITERS IN THE OFFERING WILL NOT MAKE A MARKET
FOR OUR SECURITIES WHICH COULD ADVERSELY AFFECT THE LIQUIDITY AND PRICE OF OUR
SECURITIES.
EarlyBirdCapital, the representative of the underwriters in this offering,
does not make markets in securities and will not be making a market in our
securities. However, we believe certain
14
broker-dealers other than EarlyBirdCapital will be making a market in our
securities. EarlyBirdCapital not acting as a market maker for our securities
may adversely impact the liquidity of our securities.
IF WE ARE DEEMED TO BE AN INVESTMENT COMPANY, WE MAY BE REQUIRED TO INSTITUTE
BURDENSOME COMPLIANCE REQUIREMENTS AND OUR ACTIVITIES MAY BE RESTRICTED, WHICH
MAY MAKE IT DIFFICULT FOR US TO COMPLETE A BUSINESS COMBINATION.
If we are deemed to be an investment company under the Investment Company
Act of 1940, our activities may be restricted, including:
o restrictions on the nature of our investments; and
o restrictions on the issuance of securities,
which may make it difficult for us to complete a business combination.
In addition, we may have imposed upon us burdensome requirements,
including:
o registration as an investment company;
o adoption of a specific form of corporate structure; and
o reporting, record keeping, voting, proxy and disclosure requirements
and other rules and regulations.
We do not believe that our anticipated principal activities will subject us to
the Investment Company Act of 1940. To this end, the proceeds held in trust may
only be invested by the trust agent in "government securities" with specific
maturity dates. 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 were
deemed to be subject to the act, compliance with these additional regulatory
burdens would require additional expense that we have not allotted for.
BECAUSE WE MAY BE DEEMED TO HAVE NO "INDEPENDENT" DIRECTORS, ACTIONS TAKEN AND
EXPENSES INCURRED BY OUR OFFICERS AND DIRECTORS ON OUR BEHALF WILL GENERALLY
NOT BE SUBJECT TO "INDEPENDENT" REVIEW.
Each of our directors own shares of our securities and, although no
compensation will be paid to them for services rendered prior to or in
connection with a business combination, they may receive reimbursement for
out-of-pocket expenses incurred by them in connection with activities on our
behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations. There is no limit on the amount of
these out-of-pocket expenses and there will be no review of the reasonableness
of the expenses by anyone other than our board of directors, which includes
persons who may seek reimbursement, or a court of competent jurisdiction if
such reimbursement is challenged. Because none of our directors will be deemed
"independent," we will generally not have the benefit of independent directors
examining the propriety of expenses incurred on our behalf and subject to
reimbursement. Although we believe that all actions taken by our directors on
our behalf will be in our best interests, we cannot assure you that this will
actually be the case. If actions are taken, or expenses are incurred that are
actually not in our best interests, it could have a material adverse effect on
our business and operations.
IF WE COMPLETE A BUSINESS COMBINATION WITH A TARGET BUSINESS LOCATED OUTSIDE OF
THE UNITED STATES, WE WOULD BE SUBJECT TO THE RISKS INHERENT WITH DOING BUSINESS
IN THAT COUNTRY WHICH COULD ADVERSELY AFFECT OUR PROFITABILITY AND OPERATIONS.
Although we intend to focus our search on target businesses located
within the United States, we are not limited to this geographical region. Our
directors have strong ties to locations outside of the United States. For
instance, Lawrence S. Coben, our chairman of the board and chief executive
officer, has significant experience in South America. It is possible that
prospective target businesses could be introduced to us in this and other areas.
If we locate a suitable target business outside of the United States, we would
be subject to all the inherent risks of doing business in that foreign country.
For instance, many countries in South America have had economic difficulties and
political instability. If we were to complete a business combination with a
target business located in another country such as one in South America, our
operations and profitability could be negatively affected by that country's
response to these and other issues.
IF WE COMPLETE A BUSINESS COMBINATION WITH A TARGET BUSINESS LOCATED OUTSIDE OF
THE UNITED STATES AND OUR MANAGEMENT FOLLOWING A BUSINESS COMBINATION IS
UNFAMILIAR WITH UNITED STATES SECURITIES LAWS, THEY MAY HAVE TO EXPEND TIME AND
RESOURCES BECOMING FAMILIAR WITH SUCH LAWS WHICH COULD LEAD TO VARIOUS
REGULATORY ISSUES.
It is possible that we could complete a business combination with a
target business located outside of the United States. Following a business
combination, it is likely that our management will resign from their positions
as officers of the company and the management of the target business at the time
of the business combination will remain in place. We cannot assure you that
management of the target business will be familiar with United States securities
laws. If new management is unfamiliar with our laws, they may have to expend
time and resources becoming familiar with such laws. This could be expensive and
time-consuming and could lead to various regulatory issues which may adversely
affect our operations.
RISKS ASSOCIATED WITH THE ENERGY AND ENVIRONMENTAL INDUSTRIES
AND THEIR RELATED INFRASTRUCTURES
FLUCTUATIONS IN ENERGY PRICES MAY CAUSE A REDUCTION IN THE DEMAND OR
PROFITABILITY OF THE PRODUCTS OR SERVICES WE MAY ULTIMATELY PRODUCE OR OFFER.
Prices for energy sources such as oil and natural gas tend to fluctuate
widely based on a variety of political and economic factors. These price
fluctuations heavily influence both the energy and environmental industries and
their related infrastructures. Lower energy prices for existing products
15
tend to limit the demand for alternate forms of energy services and related
products and infrastructure. Factors that impact price fluctuations include the
actions of the members of the Organization of Petroleum Exporting Countries
(OPEC), the level of production by non-OPEC countries, worldwide demand for oil
and natural gas, political tensions involving OPEC and non-OPEC countries and
other varying factors. If we complete a business combination with a target
business that is involved with an energy source that is affected by these or
other factors, there may be a decrease in the demand for the products or
services we may ultimately produce or offer and our profitability could be
adversely affected.
CHANGES IN TECHNOLOGY MAY RENDER OUR PRODUCTS OR SERVICES OBSOLETE FOLLOWING A
BUSINESS COMBINATION.
Both the energy and environmental industries and their related
infrastructures are substantially affected by rapid and significant changes in
technology. These changes may render certain existing services and technologies
currently used obsolete. We cannot assure you that the technologies used by or
relied upon by a target business with which we effect a business combination
will not be subject to such obsolescence. While we may attempt to adapt and
apply the services provided by the target business to newer technologies, we
cannot assure you that we will have sufficient resources to fund these changes
or that these changes will ultimately prove successful.
FAILURE TO COMPLY WITH GOVERNMENTAL REGULATIONS COULD RESULT IN THE IMPOSITION
OF PENALTIES, FINES OR RESTRICTIONS ON OPERATIONS AND REMEDIAL LIABILITIES.
Both the energy and environmental industries are subject to extensive
federal, state and local laws and regulations related to our population's
health and safety and those associated with compliance and permitting
obligations (including those related to the use, storage, handling, discharge,
emission and disposal of municipal solid waste and other waste, pollutants or
hazardous substances or wastes, or discharges and air and other emissions) as
well as land use and development. Existing laws also impose obligations to
clean up contaminated properties or to pay for the cost of such remediation,
often upon parties that did not actually cause the contamination. Compliance
with these laws, regulations and obligations could require substantial capital
expenditures. Failure to comply could result in the imposition of penalties,
fines or restrictions on operations and remedial liabilities. These costs and
liabilities could adversely affect our operations following a business
combination. These laws, regulations and obligations could change with the
promulgation of new laws and regulations or a change in the interpretation of
existing laws and regulations, which could result in substantially similar
risks. We cannot assure you that we will be able to comply with existing or new
regulations.
IF WE ARE UNABLE TO ACQUIRE OR RENEW PERMITS AND APPROVALS REQUIRED FOR OUR
OPERATIONS FOLLOWING A BUSINESS COMBINATION, WE MAY BE FORCED TO SUSPEND OR
CEASE OUR OPERATIONS ALTOGETHER.
The construction and operation of energy projects require numerous permits
and approvals from governmental agencies. We cannot assure you that we will be
able to obtain all necessary permits and approvals following a business
combination. If we are unable to obtain or renew permits or approvals necessary
for the operation of our business following a business combination, our
operations would be adversely affected. In addition, obtaining all necessary
permits and approvals may necessitate substantial expenditures and may create a
significant risk of expensive delays or loss of value if a project is unable to
function as planned due to changing requirements or local opposition.
REGULATION WITHIN THE ENERGY INDUSTRY COULD REDUCE OUR PROFITABILITY FOLLOWING
A BUSINESS COMBINATION.
Essentially all of the energy sectors including electric generation,
transmission and distribution, natural gas transmission and distribution, and
oil transportation are subject to highly technical Federal and state regulatory
regimes. Rates, terms of service, facility sites, financing, dividend payments,
wages, divestitures, changes in control and business dealings with affiliates
are all subject to ongoing regulatory disclosure and approval on the merits.
The failure or refusal of any jurisdictional regulator to grant approval as to
any particular rate, service or transaction could prove harmful to us, as could
the occurrence of any dispute with a regulator.
16
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be as set forth in
the following table:
Without Over- Over-Allotment
Allotment Option Option Exercised
---------------- ----------------
Gross proceeds.................................................. $33,000,000.00 $37,950,000.00
- --------------
Offering expenses
- -----------------
Underwriting discount (6% of gross proceeds)................ 1,980,000.00 2,277,000.00
Underwriting non-accountable expense allowance
(3% of gross proceeds)................................. 990,000.00 1,138,500.00
Legal fees and expenses (including blue sky services
and expenses).......................................... 350,000.00 350,000.00
Miscellaneous expenses....................................... 90,161.46 90,161.46
Printing and engraving expenses.............................. 35,000.00 35,000.00
Accounting fees and expenses................................. 20,000.00 20,000.00
SEC registration fee......................................... 13,602.53 13,602.53
NASD registration fee........................................ 11,236.01 11,236.01
Net proceeds
- ------------
Held in trust................................................ 28,490,000.00 32,994,500.00
Not held in trust............................................ 1,020,000.00 1,020,000.00
----------------- -------------------
Total net proceeds..................................... $29,510,000.00 $34,014,500.00
================= ===================
Use of net proceeds not held in trust
- -------------------------------------
Legal, accounting and other expenses attendant to
the due diligence investigations, structuring and
negotiation of a business combination................ $180,000 (17.6%)
Payment of administrative fee to Coqui Capital Partners ($3,500
per month for two years)............................. 84,000 (8.2%)
Due diligence of prospective target businesses............ 50,000 (4.9%)
Legal and accounting fees relating to SEC reporting
obligations.......................................... 40,000 (3.9%)
Working capital to cover miscellaneous expenses,
D&O insurance and reserves........................... 666,000 (65.4%)
--------------------------------
Total............................................ $1,020,000 (100.0%)
================================
$28,490,000, or $32,994,500 if the underwriters' over-allotment option is
exercised in full, of net proceeds will be placed in a trust fund maintained by
Continental Stock Transfer & Trust Company, New York, New York, as trustee. The
proceeds will not be released from the trust fund until the earlier of the
completion of a business combination or our liquidation. The proceeds held in
the trust fund may be used as consideration to pay the sellers of a target
business with which we ultimately complete a business combination. Any amounts
not paid as consideration to the sellers of the target business may be used to
finance operations of the target business or to effect other acquisitions, as
determined by our board of directors at that time.
The payment to Coqui Capital Partners, L.P., an affiliate of Isaac Kier,
our secretary, treasurer and a member of our board of directors, of a monthly
fee of $3,500 is for general and administrative services including office
space, utilities and secretarial support. We believe, based on rents and fees
for similar services in the New York, New York metropolitan area, that the fee
charged by Coqui Capital Partners is at least as favorable as we could have
obtained from an unaffiliated person.
We intend to use the excess working capital (approximately $666,000) for
director and officer liability insurance premiums (approximately $115,000),
with the balance of $115,000 being held in reserve in the event due diligence,
legal, accounting and other expenses of structuring and negotiating
17
business combinations exceed our estimates, as well as for reimbursement of any
out-of-pocket expenses incurred by our existing stockholders in connection with
activities on our behalf as described below. We believe that the excess working
capital will be sufficient to cover the foregoing expenses and reimbursement
costs.
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
fund as well as any other net proceeds not expended will be used to finance the
operations of the target business.
Lawrence S. Coben, our chairman and chief executive officer, has advanced
to us a total of $77,500 ($70,000 on February 17, 2004 and $7,500 on April 23,
2004) which was used to pay a portion of the expenses of this offering
referenced in the line items above for SEC registration fee, NASD registration
fee and legal fees and expenses. The loans will be payable without interest on
the earlier of February 17, 2005 or the consummation of this offering. The loans
will be repaid out of the proceeds of this offering not being placed in trust.
The net proceeds of this offering not held in the trust fund and not
immediately required for the purposes set forth above will only be invested in
United States "government securities," defined as any Treasury Bill issued by
the United States having a maturity of one hundred and eighty days or less so
that we are not deemed to be an investment company under the Investment Company
Act. The interest income derived from investment of these net proceeds during
this period will be used to defray our general and administrative expenses, as
well as costs relating to compliance with securities laws and regulations,
including associated professional fees, until a business combination is
completed.
We believe that, upon consummation of this offering, we will have
sufficient available funds to operate for at least the next 24 months, assuming
that a business combination is not consummated during that time.
Commencing on the effective date of this prospectus through the
consummation of the acquisition of the target business, we will pay Coqui
Capital Partners the fee described above. Other than this $3,500 per month
administrative fee, no compensation of any kind (including finder's and
consulting fees) will be paid to any of our existing stockholders, or any of
their affiliates, for services rendered to us prior to or in connection with
the consummation of the business combination. However, our existing
stockholders will receive reimbursement for any out-of-pocket expenses incurred
by them in connection with activities on our behalf, such as identifying
potential target businesses and performing due diligence on suitable business
combinations. Since the role of present management after a business combination
is uncertain, we have no ability to determine what remuneration, if any, will
be paid to those persons after a business combination.
A public stockholder will be entitled to receive funds from the trust fund
(including interest earned on his, her or its portion of the trust fund) only
in the event of our liquidation or if that public stockholder were to seek to
convert such shares into cash in connection with a business combination which
the public stockholder voted against and which we actually consummate. In no
other circumstances will a public stockholder have any right or interest of any
kind to or in the trust fund.
18
DILUTION
The difference between the public offering price per share of common
stock, assuming no value is attributed to the warrants included in the units,
and the pro forma net tangible book value per share of our common stock after
this offering constitutes the dilution to investors in this offering. Net
tangible book value per share is determined by dividing our net tangible book
value, which is our total tangible assets less total liabilities (including the
value of common stock which may be converted into cash), by the number of
outstanding shares of our common stock.
At March 10, 2004, our net tangible book value was $(65,735), or
approximately $(0.05) per share of common stock. After giving effect to the sale
of 5,500,000 shares of common stock included in the units, and the deduction of
underwriting discounts and estimated expenses of this offering, our pro forma
net tangible book value (as decreased by the value of 1,099,450 shares of common
stock which may be converted into cash) at March 10, 2004 would have been
$23,839,849 or $4.13 per share, representing an immediate increase in net
tangible book value of $4.18 per share to the existing stockholders and an
immediate dilution of $1.87 per share or 31% to new investors not exercising
their conversion rights.
The following table illustrates the dilution to the new investors on a
per-share basis, assuming no value is attributed to the warrants included in
the units:
Public offering price ......................................... $ 6.00
Net tangible book value before this offering ................ (.05)
Increase attributable to new investors ...................... 4.18
-----
Pro forma net tangible book value after this offering ......... $ 4.13
-------
Dilution to new investors ..................................... $ 1.87
=======
Our pro forma net tangible book value after this offering has been reduced
by approximately $5,695,151 because if we effect a business combination, the
conversion rights to the public stockholders may result in the conversion into
cash of up to approximately 19.99% of the aggregate number of the shares sold
in this offering at a per-share conversion price equal to the amount in the
trust fund as of the record date for the determination of stockholders entitled
to vote on the business combination, inclusive of any interest, divided by the
number of shares sold in this offering.
The following table sets forth information with respect to our existing
stockholders and the new investors:
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------------- ----------------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------------ ------------ -------------- ------------ ----------
Existing stockholders ......... 1,375,000 20.0% $ 25,000 0.1% $ 0.02
New investors ................. 5,500,000 80.0% $33,000,000 99.9% $ 6.00
--------- ----- ----------- -----
6,875,000 100.0% $33,025,000 100.0%
========= ===== =========== =====
19
CAPITALIZATION
The following table sets forth our capitalization at March 10, 2004 and as
adjusted to give effect to the sale of our units and the application of the
estimated net proceeds derived from the sale of our units:
MARCH 10, 2004
--------------------------
AS
ACTUAL ADJUSTED
---------- -------------
Common stock, $.0001 par value, -0- and 1,099,450 shares which are subject
to possible conversion, shares at conversion value ...................... $ -- $ 5,695,151
======= ===========
Stockholders' equity:
Preferred stock, $.0001 par value, 1,000,000 shares authorized; none
issued or outstanding ................................................. $ -- $ --
======= ===========
Common stock, $.0001 par value, 30,000,000 shares authorized; 1,375,000
shares issued and outstanding; 5,775,550 shares issued and outstanding
(excluding 1,099,450 shares subject to possible conversion), as adjusted 137 578
Additional paid-in capital .............................................. 24,863 23,839,271
------- -----------
Total stockholders' equity: ........................................... $25,000 $23,839,849
======= ===========
Total capitalization .................................................. $25,000 $29,535,000
======= ===========
If we consummate a business combination, the conversion rights afforded to
our public stockholders may result in the conversion into cash of up to
approximately 19.99% of the aggregate number of shares sold in this offering at
a per-share conversion price equal to the amount in the trust fund as of the
record date for determination of stockholders entitled to vote on the business
combination, inclusive of any interest thereon, divided by the number of shares
sold in this offering.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We were formed on February 5, 2004, to serve as a vehicle to effect a
merger, capital stock exchange, asset acquisition or other similar business
combination with a company in either of the energy or environmental industries
and their related infrastructures. We intend to utilize cash derived from the
proceeds of this offering, our capital stock, debt or a combination of cash,
capital stock and debt, in effecting a business combination. The issuance of
additional shares of our capital stock:
o may significantly reduce the equity interest of our stockholders;
o will likely cause a change in control if a substantial number of our
shares of common stock are issued, which may affect, among other
things, our ability to use our net operating loss carry forwards, if
any, and most likely will also result in the resignation or removal of
our present officers and directors; and
o may adversely affect prevailing market prices for our common stock.
Similarly, if we issued debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues after
a business combination were insufficient to pay our debt obligations;
o acceleration of our obligations to repay the indebtedness even if we
have made all principal and interest payments when due if the debt
security contained covenants that required the maintenance of certain
financial ratios or reserves and any such covenant were breached
without a waiver or renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any,
if the debt security was payable on demand; and
o our inability to obtain additional financing, if necessary, if the
debt security contained covenants restricting our ability to obtain
additional financing while such security was outstanding.
We have neither engaged in any operations nor generated any revenues to
date. Our entire activity since inception has been to prepare for our proposed
fundraising through an offering of our equity securities.
We estimate that the net proceeds from the sale of the units, after
deducting offering expenses of approximately $1,510,000, including $990,000
evidencing the underwriters' non-accountable expense allowance of 3% of the
gross proceeds, and underwriting discounts of approximately $1,980,000, will be
approximately $29,510,000, or $34,014,500 if the underwriters' over-allotment
option is exercised in full. Of this amount, $28,490,000, or $32,994,500 if the
underwriters' over-allotment option is exercised in full, will be held in trust
and the remaining $1,020,000 in either event will not be held in trust. We will
use substantially all of the net proceeds of this offering to acquire a target
business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the 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 fund as well as any other net proceeds not expended
will be used to finance the operations of the target business. We believe that,
upon consummation of this offering, the funds available to us outside of the
trust fund will be sufficient to allow us to operate for at least the next 24
months, assuming that a business combination is not consummated during that
time. Over this time period, we anticipate approximately $180,000 of expenses
for legal, accounting and other expenses attendant to the due diligence
investigations, structuring and negotiating of a business combination, $84,000
for the administrative fee payable to Coqui Capital Partners ($3,500 per month
for two years), $50,000 of expenses for the due diligence and investigation of a
target business, $40,000 of expenses in legal and accounting fees relating to
our SEC reporting obligations and $666,000 for general working capital that will
be used for miscellaneous expenses and reserves, including approximately
$115,000 for director and officer liability insurance
21
premiums. 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
fund raising simultaneously with the consummation of a business combination.
We are obligated, commencing on the date of this prospectus, to pay to
Coqui Capital Partners, an affiliate of Isaac Kier, a monthly fee of $3,500 for
general and administrative services. In addition, in February and April 2004,
Lawrence S. Coben advanced an aggregate of $77,500 to us, on a non-interest
bearing basis, for payment of offering expenses on our behalf. The loans will be
payable without interest on the earlier of February 17, 2005 or the consummation
of this offering. The loans will be repaid out of the proceeds of this offering
not being placed in trust.
22
PROPOSED BUSINESS
INTRODUCTION
We are a recently organized Delaware blank check company formed to serve
as a vehicle for the acquisition of an operating business. Our objective is to
acquire an operating business in either the energy or the environmental
industries and their related infrastructures.
ENERGY INDUSTRY AND ITS RELATED INFRASTRUCTURE
The energy industry and its related infrastructure generally includes the
production, generation, transmission and distribution of electricity, heat,
fuel and other consumable forms of energy and the infrastructure needed to
maintain and operate the facilities, services and installations used in the
foregoing areas. The shortage of natural gas, rising oil prices and blackouts
that have occurred as a result of over-usage in current energy forms have
brought renewed focus on a variety of energy forms and the infrastructure
related to the transmission of such energy.
Although we may consider a target business in any segment of the energy
industry, we currently intend to concentrate our search for an acquisition
candidate on companies in the following segments:
o Electricity generation, distribution and transmission;
o Natural gas production, distribution and transmission;
o Energy related services including conservation, metering, operations
and maintenance;
o Steam generation and distribution;
o Alternative and renewable energy technologies; and
o The infrastructure necessary to operate in the energy industry
including but not limited to areas such as the production,
transportation or distribution of towers, power lines, scaffolding
products and other equipment or supplies incidental to the energy
industry.
ENVIRONMENTAL INDUSTRY AND ITS RELATED INFRASTRUCTURE
The environmental industry and its related infrastructure generally
includes the technologies and services that protect the natural and human
environment from destruction and pollution, and the infrastructure needed to
maintain and operate the facilities, services and installations used in the
foregoing areas. The environmental industry also seeks to ameliorate the
negative effects of industrial production and unhealthy practices and materials
on our population as a whole.
Landfill closures and the difficulty of positioning new facilities in
certain parts of the country have required that waste be transported long
distances for environmentally sound disposal. New landfills require additional
remediation measures to ensure that waste does not contaminate the surrounding
ground or nearby water supplies. New technologies and expenditures are
increasingly required with respect to air emissions and water cleanup, as
pollution from power and industrial plants merit increasing examination and
concern. Searches for new energy and water sources must meet stringent
environmental standards, while existing and alternative forms of energy that
are being used, developed and tested must adhere to an expanding body of
practices and procedures to ensure that our environment is protected.
Although we may consider a target business in any segment of the
environmental industry, we currently intend to concentrate our search for an
acquisition candidate on companies in the following segments:
o Waste management and disposal, including wastewater treatment and
management and sewage control;
o Air treatment and ionization, pollution and emission control;
23
o Medical waste disposal;
o Radon and site cleanup services;
o Other energy/environmental related technologies; and
o The infrastructure necessary to operate in the environmental industry
including but not limited to areas such as the operation of water
supply facilities, waste and wastewater treatment facilities,
pollution control facilities and transportation facilities and the
production, transportation or distribution of the equipment and
products incidental to such operations.
EFFECTING A BUSINESS COMBINATION
General
We are not presently engaged in, and we will not engage in, any
substantive commercial business for an indefinite period of time following this
offering. We intend to utilize cash derived from the proceeds of this offering,
our capital stock, debt or a combination of these in effecting a business
combination. Although substantially all of the net proceeds of this offering
are intended to be generally applied toward effecting a business combination as
described in this prospectus, the proceeds are not otherwise being designated
for any more specific purposes. Accordingly, prospective investors will invest
in us without an opportunity to evaluate the specific merits or risks of any
one or more business combinations. A business combination may involve the
acquisition of, or merger with, a company which does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself. These include time delays, significant
expense, loss of voting control and compliance with various Federal and state
securities laws. In the alternative, 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. While we may seek to effect business
combinations with more than one target business, we will probably have the
ability, as a result of our limited resources, to effect only a single business
combination.
We have not identified a target business
To date, we have not selected any target business on which to concentrate
our search for a business combination. Subject to the limitations that a target
business be within the energy or environmental industry and their related
infrastructures and has a fair market value of at least 80% of our net assets at
the time of the acquisition, as described below in more detail, we will have
virtually unrestricted flexibility in identifying and selecting a prospective
acquisition candidate. We intend to focus our search on target businesses within
the United States. However, as a result of our directors' previous contacts, it
is possible that they may locate a suitable target business outside of the
United States. For instance, Lawrence S. Coben, our chairman and chief executive
officer, has had significant experience in South America, including Bolivia.
Through these contacts, we may be introduced to suitable target businesses
located outside of the United States. If we complete a business combination with
a target business located outside of the United States, we will be subject to
the risks inherent in doing business in that country as well as the possibility
that our future management will not be familiar with United States securities
laws.
As a result of the foregoing, there is no basis for investors in this
offering to evaluate the possible merits or risks of the target business with
which we may ultimately complete a business combination. To the extent we effect
a business combination with a financially unstable company or an entity in its
early stage of development or growth, including entities without established
records of sales or earnings, we may be affected by numerous risks inherent in
the business and operations of financially unstable and early stage or potential
emerging growth companies. Although our management will endeavor to evaluate the
risks inherent in a particular target business, we cannot assure you that we
will properly ascertain or assess all significant risk factors.
Sources of target businesses
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, who may present
solicited or unsolicited proposals. Our officers and directors as well as their
affiliates may also bring to our attention target business candidates. While we
do not presently anticipate engaging the services of professional firms that
specialize in business acquisitions on any formal basis, we may engage these
firms in the future, in which event we may pay a finder's fee or other
compensation. In no event, however, will we pay any of our existing officers,
directors or stockholders or any entity with which they are affiliated any
finder's fee or other compensation for services rendered to us prior to or in
connection with the consummation of a business combination.
24
Selection of a target business and structuring of a business combination
Subject to the requirement that our initial business combination must be
with a target business with a fair market value that is at least 80% of our net
assets at the time of such acquisition, our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target
business. In evaluating a prospective target business, our management will
consider, among other factors, the following:
o financial condition and results of operation;
o growth potential;
o experience and skill of management and availability of additional
personnel;
o capital requirements;
o competitive position;
o stage of development of the products, processes or services;
o degree of current or potential market acceptance of the products,
processes or services;
o proprietary features and degree of intellectual property or other
protection of the products, processes or services;
o regulatory environment of the industry; and
o costs associated with effecting the business combination.
These criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will
conduct an extensive due diligence review which will encompass, among other
things, meetings with incumbent management and inspection of facilities, as
well as review of financial and other information which will be made available
to us.
The time and costs required to select and evaluate a target business and
to structure and complete the business combination cannot presently be
ascertained with any degree of certainty. Any costs incurred with respect to
the identification and evaluation of a prospective target business with which a
business combination is not ultimately completed will result in a loss to us
and reduce the amount of capital available to otherwise complete a business
combination. However, we will not pay any finders or consulting fees to our
existing stockholders, or any of their respective affiliates, for services
rendered to or in connection with a business combination.
Fair Market Value of Target Business
The initial target business that we acquire must have a fair market value
equal to at least 80% of our net assets at the time of such acquisition. The
fair market value of such business will be determined by our board of directors
based upon standards generally accepted by the financial community, such as
actual and potential sales, earnings and cash flow and book value. If our board
is not able to independently determine that the target business has a
sufficient fair market value, we will obtain an opinion from an unaffiliated,
independent investment banking firm which is a member of the National
Association of Securities Dealers, Inc. with respect to the satisfaction of
such criteria. Since any opinion, if obtained, would merely state that fair
market value meets the 80% of net assets threshold, it is not anticipated that
copies of such opinion would be distributed to our stockholders, although
copies will be provided to stockholders who request it. We will not be required
to obtain an opinion from an investment banking firm as to the fair market
value if our board of directors independently determines that the target
business has sufficient fair market value.
Probable lack of business diversification
While we may seek to effect business combinations with more than one
target business, our initial business combination must be with a target
business which satisfies the minimum valuation standard at
25
the time of such acquisition, as discussed above. Consequently, it is probable
that we will have the ability to effect only a single business combination.
Accordingly, the prospects for our success may be entirely dependent upon the
future performance of a single business. Unlike other entities which may have
the resources to complete several business combinations of entities operating
in multiple industries or multiple areas of a single industry, it is probable
that we will not have the resources to diversify our operations or benefit from
the possible spreading of risks or offsetting of losses. By consummating a
business combination with only a single entity, our lack of diversification
may:
o subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate subsequent
to a business combination, and
o result in our dependency upon the development or market acceptance of
a single or limited number of products, processes or services.
Limited ability to evaluate the target business' management
Although we intend to closely scrutinize the management of a prospective
target business when evaluating the desirability of effecting a business
combination, we cannot assure you that our assessment of the target business'
management will prove to be correct. In addition, we cannot assure you that the
future management will have the necessary skills, qualifications or abilities
to manage a public company. Furthermore, the future role of our officers and
directors, if any, in the target business cannot presently be stated with any
certainty. While it is possible that one or more of our directors will remain
associated in some capacity with us following a business combination, it is
unlikely that any of them will devote their full efforts to our affairs
subsequent to a business combination. Moreover, we cannot assure you that our
officers and directors will have significant experience or knowledge relating
to the operations of the particular target business.
Following a business combination, we may seek to recruit additional
managers to supplement the incumbent management of the target business. We
cannot assure you that we will have the ability to recruit additional managers,
or that additional managers will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
Opportunity for stockholder approval of business combination
Prior to the completion of a business combination, we will submit the
transaction to our stockholders for approval, even if the nature of the
acquisition is such as would not ordinarily require stockholder approval under
applicable state law. In connection with seeking stockholder approval of a
business combination, we will furnish our stockholders with proxy solicitation
materials prepared in accordance with the Securities Exchange Act of 1934,
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 business combination, all of
our existing stockholders, including all of our officers and directors, have
agreed to vote their respective shares of common stock owned by them
immediately prior to this offering in accordance with the majority of the
shares of common stock voted by the public stockholders. This voting
arrangement shall not apply to shares included in units purchased in this
offering or purchased following this offering in the open market by any of our
existing stockholders, officers and directors. We will proceed with the
business combination only if a majority of the shares of common stock voted by
the public stockholders are voted in favor of the business combination and
public stockholders owning less than 20% of the shares sold in this offering
exercise their conversion rights.
Conversion rights
At the time we seek stockholder approval of any business combination, we
will offer each public stockholder the right to have such stockholder's shares
of common stock converted to cash if the stockholder votes against the business
combination and the business combination is approved and completed. The actual
per-share conversion price will be equal to the amount in the trust fund,
26
inclusive of any interest, as of the record date for determination of
stockholders entitled to vote on the business combination, divided by the
number of shares sold in this offering. Without taking into any account
interest earned on the trust fund, the initial per-share conversion price would
be $5.18, or $0.82 less than the per-unit offering price of $6.00. An eligible
stockholder may request conversion at any time after the mailing to our
stockholders of the proxy statement and prior to the vote taken with respect to
a proposed business combination at a meeting held for that purpose, but the
request will not be granted unless the stockholder votes against the business
combination and the business combination is approved and completed. Any request
for conversion, once made, may be withdrawn at any time up to the date of the
meeting. It is anticipated that the funds to be distributed to stockholders
entitled to convert their shares who elect conversion will be distributed
promptly after completion of a business combination. Public stockholders who
convert their stock into their share of the trust fund still have the right to
exercise the warrants that they received as part of the units. We will not
complete any business combination if public stockholders, owning 20% or more of
the shares sold in this offering, exercise their conversion rights.
Liquidation if no business combination
If we do not complete a business combination within 18 months after the
consummation of this offering, or within 24 months if the extension criteria
described below have been satisfied, we will be dissolved and will distribute
to all of our public stockholders, in proportion to their respective equity
interests, an aggregate sum equal to the amount in the trust fund, inclusive of
any interest, plus any remaining net assets. Our existing stockholders have
waived their rights to participate in any liquidation distribution with respect
to shares of common stock owned by them immediately prior to this offering.
There will be no distribution from the trust fund with respect to our warrants.
If we were to expend all of the net proceeds of this offering, other than
the proceeds deposited in the trust fund, and without taking into account
interest, if any, earned on the trust fund, the initial per-share liquidation
price would be $5.18, or $0.82 less than the per-unit offering price of $6.00.
The proceeds deposited in the trust fund could, however, become subject to the
claims of our creditors which could be prior to the claims of our public
stockholders. We cannot assure you that the actual per-share liquidation price
will not be less than $5.18, plus interest, due to claims of creditors.
Lawrence S. Coben, our chairman of the board and chief executive officer, has
agreed pursuant to an agreement with us and EarlyBirdCapital that, if we
liquidate prior to the consummation of a business combination, he will be
personally liable to pay debts and obligations to vendors or other entities
that are owed money by us for services rendered or products sold to us in
excess of the net proceeds of this offering not held in the trust account. We
cannot assure you, however, that Mr. Coben would be able to satisfy those
obligations.
If we enter into either a letter of intent, an agreement in principle or a
definitive agreement to complete a business combination prior to the expiration
of 18 months after the consummation of this offering, but are unable to
complete the business combination within the 18-month period, then we will have
an additional six months in which to complete the business combination
contemplated by the letter of intent, agreement in principle or definitive
agreement. If we are unable to do so by the expiration of the 24-month period
from the consummation of this offering, we will then liquidate. 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 18-month or 24-month period.
Our public stockholders shall be entitled to receive funds from the trust
fund only in the event of our liquidation or if the stockholders seek to
convert their respective shares into cash upon a business combination which the
stockholder voted against and which is actually completed by us. In no other
circumstances shall a stockholder have any right or interest of any kind to or
in the trust fund.
COMPETITION
In identifying, evaluating and selecting a target business, we expect to
encounter intense competition from other entities having a business objective
similar to ours. Many of these entities are
27
well established and have extensive experience identifying and effecting
business combinations directly or through affiliates. Many of these competitors
possess greater technical, human and other resources than us and our financial
resources will be relatively limited when contrasted with those of many of
these competitors. While we believe there are numerous potential target
businesses that we could acquire with the net proceeds of this offering, our
ability to compete in acquiring certain sizable target businesses will be
limited by our available financial resources. This inherent competitive
limitation gives others an advantage in pursuing the acquisition of a target
business. Further:
o our obligation to seek stockholder approval of a business combination
may delay the completion of a transaction;
o our obligation to convert into cash shares of common stock held by our
public stockholders in certain instances may reduce the resources
available to us for a business combination; and
o our outstanding warrants and options, and the future dilution they
potentially represent, may not be viewed favorably by certain target
businesses.
Any of these obligations may place us at a competitive disadvantage in
successfully negotiating a business combination. Our management believes,
however, that our status as a public entity and potential access to the United
States public equity markets may give us a competitive advantage over
privately-held entities having a similar business objective as us in acquiring
a target business with significant growth potential on favorable terms.
If we succeed in effecting a business combination, there will be, in all
likelihood, intense competition from competitors of the target business in the
energy and environmental industries and their related infrastructures and
elsewhere. Such a business combination may also be subject to regulatory
approval. There is substantial competition in all aspects and segments of our
industry focus. Numerous companies, most of which have substantially greater
financial resources available to them than we do, are already engaged in the
industry segments we intend to focus on. We cannot assure you that, subsequent
to a business combination, we will have the resources or ability to compete
effectively.
FACILITIES
We maintain our executive offices at 1775 Broadway, Suite 604, New York,
New York. The cost for this space is included in the $3,500 per-month fee Coqui
Capital Partners charges us for general and administrative services pursuant to
a letter agreement between us and Coqui Capital Partners. We believe, based on
rents and fees for similar services in the New York, New York metropolitan
area, that the fee charged by Coqui Capital 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.
EMPLOYEES
Lawrence S. Coben, our chairman of the board and chief executive officer,
and Isaac Kier, our secretary and treasurer, are our only executive officers.
These employees are not obligated to contribute any specific number of hours
per week and intend to devote only as much time as they deem necessary to our
affairs. The amount of time they will devote in any time period will vary based
on the availability of suitable target businesses to investigate, although we
expect they will devote an average of approximately ten hours per week to our
business. We do not intend to have any full time employees prior to the
consummation of a business combination.
PERIODIC REPORTING AND AUDITED FINANCIAL STATEMENTS
We have registered our units, common stock and warrants under the
Securities Exchange Act of 1934, as amended, and have reporting obligations,
including the requirement that we file annual and quarterly reports with the
SEC. In accordance with the requirements of the Securities Exchange Act of
1934, our annual reports will contain financial statements audited and reported
on by our independent accountants.
28
We will not acquire a target business if audited financial statements
based on United States generally accepted accounting principles cannot be
obtained for the target business. Additionally, our management will provide
stockholders with audited financial statements, prepared in accordance with
generally accepted accounting principles, of the prospective target business as
part of the proxy solicitation materials sent to stockholders to assist them in
assessing the target business. Our management believes that the requirement of
having available audited financial statements for the target business will not
materially limit the pool of potential target businesses available for
acquisition.
COMPARISON TO OFFERINGS OF BLANK CHECK COMPANIES
The following table compares and contrasts the terms of our offering and
the terms of an offering of blank check companies under Rule 419 promulgated by
the SEC assuming that the gross proceeds, underwriting discounts and
underwriting expenses for the Rule 419 offering are the same as this offering
and that the underwriters will not exercise their over-allotment option. None
of the terms of a Rule 419 offering will apply to this offering.
TERMS OF OUR OFFERING TERMS UNDER A RULE 419 OFFERING
------------------------------------ ------------------------------------
ESCROW OF OFFERING PROCEEDS .......... $28,490,000 of the net offering $27,027,000 of the offering
proceeds will be deposited into a proceeds would be required to
trust fund maintained by be deposited into either an
Continental Stock Transfer & escrow account with an insured
Trust Company. depositary institution or in a
separate bank account
established by a broker-dealer in
which the broker-dealer acts as
trustee for persons having the
beneficial interests in the
account.
INVESTMENT OF NET PROCEEDS ........... The $28,490,000 of net offering Proceeds could be invested only
proceeds held in trust will only in specified securities such as a
be invested in U.S. "government money market fund meeting
securities," defined as any conditions of the Investment
Treasury Bill issued by the Company Act of 1940 or in
United States having a maturity securities that are direct
of one hundred and eighty days obligations of, or obligations
or less. guaranteed as to principal or
interest by, the United States.
LIMITATION ON FAIR VALUE OR NET
ASSETS OF TARGET BUSINESS ............ The initial target business that We would be restricted from
we acquire must have a fair acquiring a target business unless
market value equal to at least the fair value of such business or
80% of our net assets at the time net assets to be acquired
of such acquisition. represent at least 80% of the
maximum offering proceeds.
29
TERMS OF OUR OFFERING TERMS UNDER A RULE 419 OFFERING
------------------------------------ ----------------------------------
TRADING OF SECURITIES ISSUED ......... The units may commence trading No trading of the units or the
on or promptly after the date of underlying common stock and
this prospectus. The common warrants would be permitted
stock and warrants comprising until the completion of a
the units will begin to trade business combination. During
separately on the 90th day after this period, the securities would
the date of this prospectus unless be held in the escrow or trust
EarlyBirdCapital informs us of account.
its decision to allow earlier
separate trading, provided we
have filed with the SEC a
Current Report on Form 8-K,
which includes an audited
balance sheet reflecting our
receipt of the proceeds of this
offering, including any proceeds
we receive from the exercise of
the over-allotment option, if such
option is exercised prior to the
filing of the Form 8-K.
EXERCISE OF THE WARRANTS ............. The warrants cannot be The warrants could be exercised
exercised until the later of the prior to the completion of a
completion of a business business combination, but
combination or one year from securities received and cash paid
the date of this prospectus, and, in connection with the exercise
accordingly, will only be would be deposited in the
exercised after the trust fund has escrow or trust account.
been terminated and distributed.
30
TERMS OF OUR OFFERING TERMS UNDER A RULE 419 OFFERING
------------------------------------ ------------------------------------
ELECTION TO REMAIN AN INVESTOR ......... We will give our stockholders A prospectus containing
the opportunity to vote on the information required by the SEC
business combination. In would be sent to each investor.
connection with seeking Each investor would be given
stockholder approval, we will the opportunity to notify the
send each stockholder a proxy company, in writing, within a
statement containing information period of no less than 20
required by the SEC. A business days and no more than
stockholder following the 45 business days from the
procedures described in this effective date of the
prospectus is given the right to post-effective amendment, to
convert his or her shares into his decide whether he or she elects
or her pro rata share of the trust to remain a stockholder of the
fund. However, a stockholder company or require the return of
who does not follow these his or her investment. If the
procedures or a stockholder who company has not received the
does not take any action would notification by the end of the
not be entitled to the return of 45th business day, funds and
any funds. interest or dividends, if any, held
in the trust or escrow account
would automatically be returned
to the stockholder. Unless a
sufficient number of investors
elect to remain investors, all of
the deposited funds in the
escrow account must be returned
to all investors and none of the
securities will be issued.
BUSINESS COMBINATION DEADLINE .......... A business combination must If an acquisition has not been
occur within 18 months after the consummated within 18 months
consummation of this offering or after the effective date of the
within 24 months after the initial registration statement,
consummation of this offering if funds held in the trust or escrow
a letter of intent or definitive account would be returned to
agreement relating to a investors.
prospective business combination
was entered into prior to the end
of the 18-month period.
RELEASE OF FUNDS ....................... The proceeds held in the trust The proceeds held in the escrow
account will not be released until account would not be released
the earlier of the completion of a until the earlier of the
business combination or our completion of a business
liquidation upon failure to effect combination or the failure to
a business combination within effect a business combination
the allotted time. within the allotted time.
31
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our current directors and executive officers are as follows:
NAME AGE POSITION
- ------------------------------ ----- ---------------------------------------------
Lawrence S. Coben .......... 45 Chairman of the Board of Directors and Chief
Executive Officer
Isaac Kier ................. 51 Secretary, Treasurer and Director
David A. Preiser ........... 46 Director
Jon Schotz ................. 48 Director
LAWRENCE S. COBEN has been our chairman of the board and chief executive
officer since our inception. From January 2001 until December 2003, Mr. Coben
served as senior principal of Sunrise Capital Partners L.P., a private equity
firm established by Houlihan Lokey Howard & Zukin, an international investment
banking firm that invests capital in middle market companies. From January 1997
to December 2000, Mr. Coben was an independent consultant. From October 1994 to
December 1996, Mr. Coben was chief executive officer of Bolivian Power Company,
Ltd., a New York Stock Exchange-listed company that was one of Bolivia's
largest private electric generator and distributor until its sale to an
American-Swedish utility consortium. He was also a managing director of Liberty
Power Latin America, L.P., a private developer and owner of power facilities,
from January 1993 to December 1996. He has served as a director of Prisma
Energy, one of the successor Enron companies, since September 2003. Mr. Coben
has also been a director of NRG Energy, Inc. since December 2003, when he was
appointed in connection with its plan of reorganization following its emergence
from Chapter 11 bankruptcy. Mr. Coben is a member of the board of directors of
the Bolivian-American Chamber of Commerce and was the co-chairman of the
Lieberman 2004 National Energy Policy Committee which has devised a plan (the
Declaration of Energy Independence) to reduce American dependence on
politically unstable sources of energy. Mr. Coben is also an archaeologist
affiliated with the University of Pennsylvania and is completing a doctorate in
Anthropology. Mr. Coben received a B.A. in economics from Yale University, an
M.A. in Anthropology (Archaeology) from the University of Pennsylvania and a
J.D. from Harvard School of Law.
ISAAC KIER has been a member of our board of directors and our secretary
and treasurer since our inception. Since February 2000, Mr. Kier has served as
a general partner of Coqui Capital Patners L.P., a venture capital firm, which
invests primarily in early stage companies. Mr. Kier has been a director of
eDiets.com, Inc., a Nasdaq-listed leading provider of online diet and fitness
programs and related products and services, since November 1999. Since October
1997, he has been a principal and managing partner of First Americas Partners,
LLC, an investment partnership focusing on investments in North and South
America. From 1987 to 1997, he served as the managing partner of the Alabama 8
Market, a non-wireline cellular licensee. From 1982 until its sale in 1995, Mr.
Kier served as the chairman of the board and chief executive officer of Lida,
Inc., a Nasdaq-listed company engaged in textile production and printing. Mr.
Kier also serves on the board of directors of several private companies
including Hudson Health Sciences, Caribbean Storage, Inc. and Montebello Brand
Liquors, Inc. Mr. Kier received a B.A. in Economics from Cornell University and
a J.D. from George Washington University Law School.
DAVID A. PREISER has been a director of ours since our inception. Since
January 1991, Mr. Preiser has served as an officer of Houlihan Lokey and is
currently a senior managing director and a member of the board of directors of
Houlihan Lokey and has served as managing partner of Sunrise Capital Partners
since December 1998. Mr. Preiser has been a director of NVR, Inc., an American
Stock Exchange-listed home building and mortgage banking company, since
September 1993. Mr. Preiser is also a director of Jos. A Bank Clothiers, Inc.,
a Nasdaq-listed company, and Akrion, LLC. Mr. Preiser received a B.A. (magna
cum laude) in Economics from the University of Virginia and a J.D. (with
honors) from Columbia University.
32
JON SCHOTZ has been a director of ours since our inception. Mr. Schotz has
been a partner of Saybrook Capital, LLC, a private investment bank engaged in
capital management and financial advisory services, since he co-founded it in
February 1990 and has managed the Saybrook Tax-Exempt Opportunity Funds since
May 1999. Mr. Schotz also helps manage the investments of Saybrook's
proprietary capital as well as the investments of the Saybrook Fund. Prior to
co-founding Saybrook, Mr. Schotz was involved in opening the Los Angeles office
of Ehrlich Bober & Co., Inc., a public finance investment bank, in 1983. Mr.
Schotz is also a director of Saybrook Capital Corp. Mr. Schotz received a B.A.
and a Master of Public and Private Management degree from Yale University.
Our board of directors is divided into three classes with only one class
of directors being elected in each year and each class serving a three-year
term. The term of office of the first class of directors, consisting of Jon
Schotz, will expire at our first annual meeting of stockholders. The term of
office of the second class of directors, consisting of David A. Preiser, will
expire at the second annual meeting. The term of office of the third class of
directors, consisting of Lawrence S. Coben and Isaac Kier, will expire at the
third annual meeting.
These individuals will play a key role in identifying and evaluating
prospective acquisition candidates, selecting the target business, and
structuring, negotiating and consummating its acquisition. None of these
individuals has been a principal of a public company or blank check company
that executed a business plan similar to our business plan. However, we believe
that the skills and expertise of these individuals, their collective access to
acquisition opportunities and ideas, their contacts, and their transactional
expertise should enable them to successfully identify and effect an
acquisition.
EXECUTIVE COMPENSATION
No executive officer has received any cash compensation for services
rendered. Commencing on the effective date of this prospectus through the
acquisition of a target business, we will pay Coqui Capital Partners, an
affiliate of Isaac Kier, a fee of $3,500 per month for providing us with office
space and certain office and secretarial services. No other executive officer
or director has a relationship with or interest in Coqui Capital Partners.
Other than this $3,500 per-month fee, no compensation of any kind, including
finder's and consulting fees, will be paid to any of our existing stockholders,
including our directors, or any of their respective affiliates, for services
rendered prior to or in connection with a business combination. However, our
existing stockholders 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. There is no limit on the amount of these out-of-pocket expenses
and there will be no review of the reasonableness of the expenses by anyone
other than our board of directors, which includes persons who may seek
reimbursement, or a court of competent jurisdiction if such reimbursement is
challenged. Because none of our directors will be deemed "independent," we will
generally not have the benefit of independent directors examining the propriety
of expenses incurred on our behalf and subject to reimbursement.
CONFLICTS OF INTEREST
Potential investors should be aware of the following potential conflicts of
interest:
o None of our officers and directors are required to commit their full
time to our affairs and, accordingly, they may have conflicts of
interest in allocating management time among various business
activities.
o In the course of their other business activities, our officers and
directors may become aware of investment and business opportunities
which may be appropriate for presentation to us as well as the other
entities with which they are affiliated. They may have conflicts of
interest in determining to which entity a particular business
opportunity should be presented.
o Our officers and directors may in the future become affiliated with
entities, including other blank check companies, engaged in business
activities similar to those intended to be conducted by us.
33
o Since our directors own shares of our common stock which will be
released from escrow only if a business combination is successfully
completed, our board may have a conflict of interest in determining
whether a particular target business is appropriate to effect a
business combination. The personal and financial interests of our
directors and officers may influence their motivation in identifying
and selecting a target business, completing a business combination
timely and securing the release of their stock.
In general, officers and directors of a corporation incorporated under the
laws of the State of Delaware are required to present business opportunities to
a corporation if:
o the corporation could financially undertake the opportunity;
o the opportunity is within the corporation's line of business; and
o it would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the corporation.
Accordingly, as a result of multiple business affiliations, our officers
and directors may have similar legal obligations relating to presenting
business opportunities meeting the above-listed criteria to multiple entities.
In addition, conflicts of interest may arise when our board evaluates a
particular business opportunity with respect to the above-listed criteria. We
cannot assure you that any of the above mentioned conflicts will be resolved in
our favor.
In order to minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of our officers and directors has agreed,
until the earlier of a business combination, our liquidation or such time as he
ceases to be an officer or director, to present to us for our consideration,
prior to presentation to any other entity, any suitable business opportunity
which may reasonably be required to be presented to us subject to any
pre-existing fiduciary or contractual obligations he might have.
Each of Lawrence Coben, as a result of his board membership on Prisma
Energy and NRG Energy, Inc., David A. Preiser, as a result of his affiliation
with Houlihan Lokey Howard & Zukin, and Jon Schotz, as a result of his
affiliation with Saybrook Capital, have to a certain degree, pre-existing
fiduciary or contractual obligations as these entities continually examine
business opportunities in the industries we propose to operate in. To the
extent that Messrs. Coben, Preiser and Schotz identify business opportunities
that may be suitable for any of the aforementioned entities, they will honor
their pre-existing fiduciary obligations to such entities. Accordingly, they
may not present opportunities to us that otherwise may be attractive unless
each of the aforementioned entities has declined to accept such opportunities.
In connection with the vote required for any business combination, all of
our existing stockholders, including all of our officers and directors, have
agreed to vote their respective shares of common stock which were owned prior
to this offering in accordance with the vote of the public stockholders owning
a majority of the shares of our common stock sold in this offering. In
addition, they have agreed to waive their respective rights to participate in
any liquidation distribution but only with respect to those shares of common
stock acquired by them prior to this offering.
To further minimize potential conflicts of interest, we have agreed not to
consummate a business combination with an entity which is affiliated with any
of our existing stockholders unless we obtain an opinion from an independent
investment banking firm that the business combination is fair to our
stockholders from a financial point of view.
34
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of April 27, 2004, and as adjusted to reflect
the sale of our common stock included in the units offered by this prospectus,
by:
o each person known by us to be the beneficial owner of more than 5% of
our outstanding shares of common stock;
o each of our officers and directors; and
o all our officers and directors as a group.
Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power with respect to all shares of common
stock beneficially owned by them.
APPROXIMATE PERCENTAGE OF
OUTSTANDING COMMON STOCK
NAME AND ADDRESS AMOUNT AND NATURE OF -----------------------------------
OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP BEFORE OFFERING AFTER OFFERING
- ----------------------------------------- --------------------- ----------------- ---------------
Lawrence S. Coben ....................... 1,083,334 73.3% 14.7%
Isaac Kier .............................. 183,334 13.3% 2.7%
David A. Preiser(2) ..................... 91,666 6.7% 1.3%
Jon Schotz(3) ........................... 91,666 6.7% 1.3%
All directors and executive officers as a
group (4 individuals) .................. 1,375,000 100% 20.0%
- ----------
(1) Unless otherwise noted, the business address of each of the following is
1775 Broadway, Suite 604, New York, New York 10019.
(2) Mr. Preiser's business address is c/o Houlihan Lokey Howard & Zukin, 685
Third Avenue, New York, New York 10016.
(3) Mr. Schotz's business address is c/o Saybrook Capital, LLC, 401 Wilshire
Boulevard, Suite 850, Santa Monica, California 90401.
Immediately after this offering, our existing stockholders, which include
all of our officers and directors, collectively, will beneficially own 20% of
the then issued and outstanding shares of our common stock. Because of this
ownership block, these stockholders may be able to effectively exercise control
over all matters requiring approval by our stockholders, including the election
of directors and approval of significant corporate transactions other than
approval of a business combination.
All of the shares of our common stock outstanding prior to the date of
this prospectus will be placed in escrow with Continental Stock Transfer &
Trust Company, as escrow agent, until the earliest of:
o three years following the date of this prospectus;
o our liquidation; or
o the consummation of a liquidation, merger, stock exchange or other
similar transaction which results in all of our stockholders having the
right to exchange their shares of common stock for cash, securities or
other property subsequent to our consummating a business combination with
a target business.
During the escrow period, the holders of these shares will not be able to sell
or transfer their securities except to their spouses and children or trusts
established for their benefit, but will retain all other rights as our
stockholders, including, without limitation, the right to vote their shares of
common stock and the right to receive cash dividends, if declared. If dividends
are declared and payable in shares of common stock, such dividends will also be
placed in escrow. If we are unable to effect a business combination and
liquidate, none of our existing stockholders will receive any portion of the
liquidation proceeds with respect to common stock owned by them prior to the
date of this prospectus.
35
Lawrence S. Coben has agreed with EarlyBirdCapital that after this
offering is completed and within the first forty trading days after separate
trading of the warrants has commenced, he or certain of his affiliates or
designees will collectively purchase up to 1,000,000 warrants in the public
marketplace at prices not to exceed $0.65 per warrant. He has further agreed
that any warrants purchased by him or his affiliates or designees will not be
sold or transferred until after we have completed a business combination in the
energy and environmental industry and its related infrastructure. The warrants
may trade separately on the 90th day after the date of this prospectus unless
EarlyBirdCapital determines that an earlier date is acceptable. In no event
will EarlyBirdCapital allow separate trading of the common stock and warrants
until we file a Current Report on Form 8-K which includes an audited balance
sheet reflecting our receipt of the proceeds of this offering including any
proceeds we receive from the exercise of the over-allotment option if such
option is exercised prior to our filing of the Form 8-K. Purchases of warrants
demonstrate confidence in our ultimate ability to effect a business combination
because the warrants will expire worthless if we are unable to consummate a
business combination and are ultimately forced to liquidate.
Lawrence S. Coben and Isaac Kier may be deemed to be our "parents" and
"promoters," as these terms are defined under the Federal securities laws.
36
CERTAIN TRANSACTIONS
In February 2004, we issued 750,000 shares of our common stock to the
individuals set forth below for $25,000 in cash, at an average purchase price
of approximately $0.033 per share, as follows:
NAME NUMBER OF SHARES RELATIONSHIP TO US
- ---------------------------- ------------------ ----------------------------------
Lawrence S. Coben .......... 550,000 Chairman of the Board and Chief
Executive Officer
Isaac Kier ................. 100,000 Secretary, Treasurer and Director
David A. Preiser ........... 50,000 Director
Jon Schotz ................. 50,000 Director
On March 10, 2004, our board of directors authorized a 1.1666666-to-one forward
stock split of our common stock, effectively lowering the purchase price to
$0.029 per share. On April 16, 2004, our board of directors authorized a
1.1428571-to-one forward stock split of our common stock, effectively lowering
the purchase price to $0.025 per share. On April 23, 2004, our board of
directors authorized a 1.375-to-one forward stock split of our common stock,
effectively lowering the purchase price to $0.018 per share.
The holders of the majority of these shares will be entitled to make up to
two demands that we register these shares pursuant to an agreement to be signed
prior to or on the date of this prospectus. The holders of the majority of
these shares may elect to exercise these registration rights at any time after
the date on which these shares of common stock are released from escrow. In
addition, these stockholders have certain "piggy-back" registration rights on
registration statements filed subsequent to the date on which these shares of
common stock are released from escrow. We will bear the expenses incurred in
connection with the filing of any such registration statements.
Coqui Capital Partners, an affiliate of Isaac Kier, has agreed that,
commencing on the effective date of this prospectus through the acquisition of
a target business, it will make 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 Coqui Capital Partners $3,500 per month for these
services. Mr. Kier is one of three general partners of Coqui Capital Partners
and owns approximately a 17% interest in the limited partner of Coqui Capital
Partners and, as a result, will benefit from the transaction to the extent of
his interest in Coqui Capital Partners. We believe, based on rents and fees for
similar services in the New York, New York metropolitan area, that the fee
charged by Coqui Capital Partners is at least as favorable as we could have
obtained from an unaffiliated person. However, as our directors may not be
deemed "independent," we did not have the benefit of disinterested directors
approving this transaction.
Lawrence S. Coben has advanced $77,500 to us as of the date of this
prospectus to cover expenses related to this offering. The loans will be payable
without interest on the earlier of February 17, 2005 or the consummation of this
offering. We intend to repay these loans from the proceeds of this offering not
being placed in trust.
We will reimburse our officers and directors for any reasonable
out-of-pocket business expenses incurred by them in connection with certain
activities on our behalf such as identifying and investigating possible target
businesses and business combinations. There is no limit on the amount of
accountable out-of-pocket expenses reimbursable by us, which will be reviewed
only by our board or a court of competent jurisdiction if such reimbursement is
challenged.
Other than the $3,500 per-month administrative fee and reimbursable
out-of-pocket expenses payable to our officers and directors, no compensation
or fees of any kind, including finders and consulting fees, will be paid to any
of our existing stockholders, officers or directors who owned our common stock
prior to this offering, or to any of their respective affiliates for services
rendered to us prior to or with respect to the business combination.
All ongoing and future transactions between us and any of our officers and
directors or their respective affiliates, including loans by our officers and
directors, will be on terms believed by us to be no less favorable than are
available from unaffiliated third parties and such transactions or loans,
including any forgiveness of loans, will require prior approval in each
instance by a majority of our uninterested "independent" directors (to the
extent we have any) or the members of our board who do not have an interest in
the transaction, in either case who had access, at our expense, to our
attorneys or independent legal counsel.
37
DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue 30,000,000 shares of common stock, par value
$.0001, and 1,375,000 shares of preferred stock, par value $.0001. As of the
date of this prospectus, 1,375,000 shares of common stock are outstanding, held
by four recordholders. No shares of preferred stock are currently outstanding.
UNITS
Each unit consists of one share of common stock and two warrants. Each
warrant entitles the holder to purchase one share of common stock. The common
stock and warrants will begin to trade separately on the 90th day after the
date of this prospectus unless EarlyBirdCapital informs us of its decision to
allow earlier separate trading, provided that in no event may the common stock
and warrants be traded separately until we have filed with the SEC a Current
Report on Form 8-K which includes an audited balance sheet reflecting our
receipt of the gross proceeds of this offering. We will file a Current Report
on Form 8-K which includes this audited balance sheet upon the consummation of
this offering. The audited balance sheet will reflect proceeds we receive from
the exercise of the over-allotment option, if the over-allotment option is
exercised prior to the filing of the Form 8-K.
COMMON STOCK
Our stockholders are entitled to one vote for each share held of record on
all matters to be voted on by stockholders. In connection with the vote
required for any business combination, all of our existing stockholders,
including all of our officers and directors, have agreed to vote their
respective shares of common stock owned by them immediately prior to this
offering in accordance with the public stockholders. This voting arrangement
shall not apply to shares included in units purchased in this offering or
purchased following this offering in the open market by any of our existing
stockholders, officers and directors. Additionally, our existing stockholders,
officers and directors will vote all of their shares in any manner they
determine, in their sole discretion, with respect to any other items that come
before a vote of our stockholders.
We will proceed with the business combination only if a majority of the
shares of common stock voted by the public stockholders are voted in favor of
the business combination and public stockholders owning less than 20% of the
shares sold in this offering exercise their conversion rights discussed below.
Our board of directors is divided into three classes, each of which will
generally serve for a term of three years with only one class of directors
being elected in each year. There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than 50% of the
shares voted for the election of directors can elect all of the directors.
If we are forced to liquidate prior to a business combination, our public
stockholders are entitled to share ratably in the trust fund, inclusive of any
interest, and any net assets remaining available for distribution to them after
payment of liabilities. Our existing stockholders have agreed to waive their
rights to share in any distribution with respect to common stock owned by them
prior to the offering if we are forced to liquidate.
Our stockholders have no conversion, preemptive or other subscription
rights and there are no sinking fund or redemption provisions applicable to the
common stock, except that public stockholders have the right to have their
shares of common stock converted to cash equal to their pro rata share of the
trust fund if they vote against the business combination and the business
combination is approved and completed. Public stockholders who convert their
stock into their share of the trust fund still have the right to exercise the
warrants that they received as part of the units.
PREFERRED STOCK
Our certificate of incorporation authorizes the issuance of 1,000,000
shares of blank check preferred stock with such designation, rights and
preferences as may be determined from time to time
38
by our board of directors. No shares of preferred stock are being issued or
registered in this offering. Accordingly, our board of directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect
the voting power or other rights of the holders of common stock, although the
underwriting agreement prohibits us, prior to a business combination, from
issuing preferred stock which participates in any manner in the proceeds of the
trust fund, or which votes as a class with the common stock on a business
combination. We may issue some or all of the preferred stock to effect a
business combination. In addition, the preferred stock could be utilized as a
method of discouraging, delaying or preventing a change in control of us.
Although we do not currently intend to issue any shares of preferred stock, we
cannot assure you that we will not do so in the future.
WARRANTS
No warrants are currently outstanding. Each warrant entitles the
registered holder to purchase one share of our common stock at a price of $5.00
per share, subject to adjustment as discussed below, at any time commencing on
the later of:
o the completion of a business combination; or
o one year from the date of this prospectus.
The warrants will expire four years from the date of this prospectus at 5:00
p.m., New York City time.
We may call the warrants for redemption,
o in whole and not in part,
o at a price of $.01 per warrant at any time after the warrants become
exercisable,
o upon not less than 30 days' prior written notice of redemption to each
warrantholder, and
o if, and only if, the reported last sale price of the common stock
equals or exceeds $8.50 per share, for any 20 trading days within a 30
trading day period ending on the third business day prior to the
notice of redemption to warrantholders.
The warrants will be issued in registered form under a warrant agreement
between Continental Stock Transfer & Trust Company, as warrant agent, and us.
You should review a copy of the warrant agreement, which has been filed as an
exhibit to the registration statement of which this prospectus is a part, for a
complete description of the terms and conditions applicable to the warrants.
The exercise price and number of shares of common stock issuable on
exercise of the warrants may be adjusted in certain circumstances including in
the event of a stock dividend, or our recapitalization, reorganization, merger
or consolidation. However, the warrants will not be adjusted for issuances of
common stock at a price below their respective exercise prices.
The warrants may be exercised upon surrender of the warrant certificate on
or prior to the expiration date at the offices of the warrant agent, with the
exercise form on the reverse side of the warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price, by
certified check payable to us, for the number of warrants being exercised. The
warrantholders do not have the rights or privileges of holders of common stock
and any voting rights until they exercise their warrants and receive shares of
common stock. After the issuance of shares of common stock upon exercise of the
warrants, each holder will be entitled to one vote for each share held of
record on all matters to be voted on by stockholders.
No warrants will be exercisable unless at the time of exercise a
prospectus relating to common stock issuable upon exercise of the warrants is
current and the common stock has been registered or qualified or deemed to be
exempt under the securities laws of the state of residence of the holder of the
warrants. Under the terms of the warrant agreement, we have agreed to meet
these conditions and to maintain a current prospectus relating to common stock
issuable upon exercise of the warrants until the expiration of the warrants.
However, we cannot assure you that we will be able to do so. The warrants may
be deprived of any value and the market for the warrants may be limited if the
39
prospectus relating to the common stock issuable upon the exercise of the
warrants is not current or if the common stock is not qualified or exempt from
qualification in the jurisdictions in which the holders of the warrants reside.
No fractional shares will be issued upon exercise of the warrants.
However, we will pay to the warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable to the warrantholder, an amount in
cash based on the market value of the common stock on the last trading day
prior to the exercise date.
PURCHASE OPTION
We have agreed to sell to the representative of the underwriters an option
to purchase up to a total of 275,000 units at a per-unit price of $9.90. The
units issuable upon exercise of this option are identical to those offered by
this prospectus except that the warrants included in the option have an
exercise price of $6.25 (125% of the exercise price of the warrants included in
the units sold in the offering). For a more complete description of the
purchase option, see the section below entitled "Underwriting--Purchase
Option."
DIVIDENDS
We have not paid any dividends on our common stock to date and do not
intend to pay dividends prior to the completion of a business combination. The
payment of dividends in the future will be contingent upon our revenues and
earnings, if any, capital requirements and general financial condition
subsequent to completion of a business combination. The payment of any
dividends subsequent to a business combination will be within the discretion of
our then board of directors. It is the present intention of our board of
directors to retain all earnings, if any, for use in our business operations
and, accordingly, our board does not anticipate declaring any dividends in the
foreseeable future.
OUR TRANSFER AGENT AND WARRANT AGENT
The transfer agent for our securities and warrant agent for our warrants
is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New
York 10004.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately after this offering, we will have 6,875,000 shares of common
stock outstanding, or 7,700,000 shares if the underwriters' over-allotment
option is exercised in full. Of these shares, the 5,500,000 shares sold in this
offering, or 5,825,000 shares if the over-allotment option is exercised, will be
freely tradable without restriction or further registration under the Securities
Act, except for any shares purchased by one of our affiliates within the meaning
of Rule 144 under the Securities Act. All of the remaining 1,375,000 shares are
restricted securities under Rule 144, in that they were issued in private
transactions not involving a public offering. None of those will be eligible for
sale under Rule 144 prior to February 5, 2005. Notwithstanding this, all of
those shares have been placed in escrow and will not be transferable for a
period of three years from the date of this prospectus and will only be released
prior to that date subject to certain limited exceptions.
Rule 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares of our common stock for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of either of the following:
o 1% of the number of shares of common stock then outstanding, which
will equal 68,750 shares immediately after this offering (or 77,000 if
the underwriters' exercise their over-allotment option); and
o the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with
respect to the sale.
40
Sales under Rule 144 are also limited by manner of sale provisions and
notice requirements and to the availability of current public information about
us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at the time of or at any time during the three months preceding a
sale, and who has beneficially owned the restricted shares proposed to be sold
for at least two years, including the holding period of any prior owner other
than an affiliate, is entitled to sell their shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
SEC Position on Rule 144 Sales
The Securities and Exchange Commission has taken the position that
promoters or affiliates of a blank check company and their transferees, both
before and after a business combination, would act as an "underwriter" under
the Securities Act when reselling the securities of a blank check company.
Accordingly, the Securities and Exchange Commission believes that those
securities can be resold only through a registered offering and that Rule 144
would not be available for those resale transactions despite technical
compliance with the requirements of Rule 144.
Registration Rights
The holders of our 1,375,000 issued and outstanding shares of common stock
on the date of this prospectus will be entitled to registration rights pursuant
to an agreement to be signed prior to or on the effective date of this offering.
The holders of the majority of these shares are entitled to make up to two
demands that we register these shares. The holders of the majority of these
shares can elect to exercise these registration rights at any time after the
date on which these shares of common stock are released from escrow. In
addition, these stockholders have certain "piggy-back" registration rights on
registration statements filed subsequent to the date on which these shares of
common stock are released from escrow. We will bear the expenses incurred in
connection with the filing of any such registration statements.
41
UNDERWRITING
In accordance with the terms and conditions contained in the underwriting
agreement, we have agreed to sell to each of the underwriters named below, and
each of the underwriters, for which EarlyBirdCapital is acting as
representative, have severally, and not jointly, agreed to purchase on a firm
commitment basis the number of units offered in this offering set forth
opposite their respective names below:
UNDERWRITERS NUMBER OF UNITS
- --------------------------------- ----------------
EarlyBirdCapital, Inc. ..........
----------------
Total ..........................
================
A copy of the underwriting agreement has been filed as an exhibit to the
registration statement of which this prospectus forms a part.
STATE BLUE SKY INFORMATION
We will offer and sell the units to retail customers only in Delaware, the
District of Columbia, Florida, Hawaii, Illinois, Maryland, New York and Rhode
Island. In New York and Hawaii, we have relied on exemptions from the state
registration requirements for transactions between an issuer and an underwriter
involving a firm-commitment underwritten offering. In the other states, we have
applied to have the units registered for sale and will not sell the units in
these states until such registration is effective. We also believe that the
units, from and after the effective date, and the common stock and warrants
comprising the units, once they become separately transferable, will be
eligible for sale on a secondary market basis in each of the following states
based upon the registration of the units, common stock and warrants in those
states or the availability of an applicable exemption from the state's
registration requirements:
o immediately in Alabama, Colorado, Delaware, the District of Columbia,
Florida, Georgia, Illinois, Kentucky, Maryland, New York,
Pennsylvania, Rhode Island and Wisconsin;
o commencing 90 days from the date of this prospectus in Iowa, Maine,
Missouri, Nevada, New Mexico; and
o commencing 180 days from the date of this prospectus in Massachusetts.
Additionally, the units, from and after the effective date, and the common
stock and warrants comprising the units, once they become separately
transferable, will be eligible for sale on a secondary market basis in certain
states based on exemptions from such states' registration requirements as a
result of the National Securities Markets Improvement Act of 1996. The National
Securities Markets Improvement Act exempts from state registration requirements
certain secondary market trading transactions for issuers that file periodic
and annual reports under the Securities Exchange Act of 1934. However, under
the act, the states are able to continue to require notice filings and collect
fees with regard to these transactions. As of the date of this prospectus, we
have not determined in which states we will submit the required notice filing
and applicable fee to take advantage of this exemption.
We will amend this prospectus for the purpose of disclosing additional
states, if any, in which our securities will be eligible for resale in the
secondary trading market. If you are not an institutional investor, you may
purchase our securities in this offering or in any subsequent trading market
which may develop, only in the jurisdictions described above. Institutional
investors in every state except in Idaho and South Dakota may purchase the
units in this offering and in the secondary market pursuant to exemptions
provided to such entities under the Blue Sky laws of various states. The
definition of an
42
"institutional investor" varies from state to state but generally includes
financial institutions, broker-dealers, banks, insurance companies and other
qualified entities.
PRICING OF SECURITIES
We have been advised by the representative that the underwriters propose
to offer the units to the public at the initial offering price set forth on the
cover page of this prospectus. They may allow some dealers concessions not in
excess of $ per unit and the dealers may reallow a concession not in excess
of $ per unit to other dealers.
Prior to this offering there has been no public market for any of our
securities. The public offering price of the units and the terms of the
warrants were negotiated between us and the representative. Factors considered
in determining the prices and terms of the units, including the common stock
and warrants underlying the units, include:
o the history and prospects of companies whose principal business is the
acquisition of other companies;
o prior offerings of those companies;
o our prospects for acquiring an operating business at attractive
values;
o our capital structure;
o an assessment of our management and their experience in identifying
operating companies in the energy and environmental industry;
o general conditions of the securities markets at the time of the
offering; and
o other factors as were deemed relevant.
However, although these factors were considered, the determination of our
offering price is more arbitrary than the pricing of securities for an
operating company in a particular industry since the underwriters are unable to
compare our financial results and prospects with those of public companies
operating in the same industry.
OVER-ALLOTMENT OPTION
We have also granted to the underwriters an option, exercisable during the
45-day period commencing on the date of this prospectus, to purchase from us at
the offering price, less underwriting discounts and the non-accountable expense
allowance, up to an aggregate of 750,000 additional units for the sole purpose
of covering over-allotments, if any. The over- allotment option will only be
used to cover the net syndicate short position resulting from the initial
distribution. The underwriters may exercise that option if the underwriters
sell more units than the total number set forth in the table above. If any
units underlying the option are purchased, the underwriters will severally
purchase shares in approximately the same proportion as set forth in the table
above.
COMMISSIONS AND DISCOUNTS
The following table shows the public offering price, underwriting discount
to be paid by us to the underwriters and the proceeds, before expenses, to us.
This information assumes either no exercise or full exercise by the
underwriters of their over-allotment option.
PER UNIT WITHOUT OPTION WITH OPTION
---------- ---------------- --------------
Public offering price ...................... $ 6.00 $33,000,000 $37,950,000
Discount ................................... $ 0.36 $ 1,980,000 $ 2,277,000
Non Accountable Expense Allowance .......... $ 0.18 $ 990,000 $ 1,138,500
Proceeds before expenses(1) ................ $ 5.46 $30,030,000 $34,345,000
- ----------
(1) The offering expenses are estimated at $520,000.
43
PURCHASE OPTION
We have agreed to sell to the representative, for $100, an option to
purchase up to a total of 275,000 units. The units issuable upon exercise of
this option are identical to those offered by this prospectus except that the
warrants included in the option have an exercise price of $6.25 (125% of the
exercise price of the warrants included in the units sold in the offering).
This option is exercisable at $9.90 per unit commencing on the later of the
consummation of a business combination or one year from the date of this
prospectus and expiring five years from the date of this prospectus. The option
may not be sold, transferred, assigned, pledged or hypothecated for a one-year
period following the date of this prospectus. However, the option may be
transferred to any underwriter and selected dealer participating in the
offering and their bona fide officers or partners. Although the purchase option
and its underlying securities have been registered under the registration
statement of which this prospectus forms a part of, the option grants to
holders demand and "piggy back" rights for periods of five and seven years,
respectively, from the date of this prospectus with respect to the registration
under the Securities Act of the securities directly and indirectly issuable
upon exercise of the option. We will bear all fees and expenses attendant to
registering the securities, other than underwriting commissions which will be
paid for by the holders themselves. The exercise price and number of units
issuable upon exercise of the option may be adjusted in certain circumstances
including in the event of a stock dividend, or our recapitalization,
reorganization, merger or consolidation. However, the option will not be
adjusted for issuances of common stock at a price below its exercise price.
WARRANT SOLICITATION FEE
We have engaged EarlyBirdCapital, the representative of the underwriters,
on a non-exclusive basis, as our agent for the solicitation of the exercise of
the warrants. To the extent not inconsistent with the guidelines of the NASD
and the rules and regulations of the SEC, we have agreed to pay the
representative for bona fide services rendered a commission equal to 5% of the
exercise price for each warrant exercised more than one year after the date of
this prospectus if the exercise was solicited by the underwriters. In addition
to soliciting, either orally or in writing, the exercise of the warrants, the
representative's services may also include disseminating information, either
orally or in writing, to warrantholders about us or the market for our
securities, and assisting in the processing of the exercise of warrants. No
compensation will be paid to the representative upon the exercise of the
warrants if:
o the market price of the underlying shares of common stock is lower
than the exercise price;
o the holder of the warrants has not confirmed in writing that the
underwriters solicited the exercise;
o the warrants are held in a discretionary account;
o the warrants are exercised in an unsolicited transaction; or
o the arrangement to pay the commission is not disclosed in the
prospectus provided to warrantholders at the time of exercise.
REGULATORY RESTRICTIONS ON PURCHASE OF SECURITIES
Rules of the SEC may limit the ability of the underwriters to bid for or
purchase our securities before the distribution of the securities is completed.
However, the underwriters may engage in the following activities in accordance
with the rules:
o Stabilizing Transactions. The underwriters may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of our
securities, so long as stabilizing bids do not exceed a specified
maximum.
o Over-Allotments and Syndicate Coverage Transactions. The underwriters
may create a short position in our securities by selling more of our
securities than are set forth on the cover page of this prospectus. If
the underwriters create a short position during the offering, the
44
representative may engage in syndicate covering transactions by
purchasing our securities in the open market. The representative may
also elect to reduce any short position by exercising all or part of
the over-allotment option.
o Penalty Bids. The representative may reclaim a selling concession from
a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
Stabilization and syndicate covering transactions may cause the price of
the securities to be higher than they would be in the absence of these
transactions. The imposition of a penalty bid might also have an effect on the
prices of the securities if it discourages resales of the securities.
Neither we nor the underwriters makes any representation or prediction as
to the effect that the transactions described above may have on the prices of
the securities. These transactions may occur on the OTC Bulletin Board, in the
over-the-counter market or on any trading market. If any of these transactions
are commenced, they may be discontinued without notice at any time.
OTHER TERMS
We have granted the representative the right to have its designee present
at all meetings of our board of directors for a period of five years from the
date of this prospectus. The designee will be entitled to the same notices and
communications sent by us to our directors and to attend directors' meetings,
but will not have voting rights. The representative has not named a designee as
of the date of this prospectus.
Although they are not obligated to do so, any of the underwriters may
introduce us to potential target businesses or assist us in raising additional
capital, as needs may arise in the future, but there are no preliminary
agreements or understandings between any of the underwriters and any potential
targets. We are not under any contractual obligation to engage any of the
underwriters to provide any services for us after this offering, but if we do,
we may pay the underwriters a finder's fee that would be determined at that
time in an arm's length negotiation where the terms would be fair and
reasonable to each of the interested parties; provided that no agreement will
be entered into and no fee will be paid prior to the one year anniversary of
the date of this prospectus.
INDEMNIFICATION
We have agreed to indemnify the underwriters against some liabilities,
including civil liabilities under the Securities Act, or to contribute to
payments the underwriters may be required to make in this respect.
LEGAL MATTERS
The validity of the securities offered in this prospectus are being passed
upon for us by Graubard Miller, New York, New York. Bingham McCutchen LLP, New
York, New York, is acting as counsel for the underwriters in this offering.
EXPERTS
The financial statements included in this prospectus and in the
registration statement have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the period set forth in
their report (which contains an explanatory paragraph regarding our ability to
continue as a going concern) appearing elsewhere in this prospectus and in the
registration statement. The financial statements and the report of BDO Seidman,
LLP are included in reliance upon their report given upon the authority of BDO
Seidman, LLP as experts in auditing and accounting.
45
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1, which
includes exhibits, schedules and amendments, under the Securities Act, with
respect to this offering of our securities. Although this prospectus, which
forms a part of the registration statement, contains all material information
included in the registration statement, parts of the registration statement
have been omitted as permitted by rules and regulations of the SEC. We refer
you to the registration statement and its exhibits for further information
about us, our securities and this offering. The registration statement and its
exhibits, as well as our other reports filed with the SEC, can be inspected and
copied at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549-1004. The public may obtain information about the
operation of the public reference room by calling the SEC at 1-800-SEC-0330. In
addition, the SEC maintains a web site at http://www.sec.gov which contains the
Form S-1 and other reports, proxy and information statements and information
regarding issuers that file electronically with the SEC.
46
TREMISIS ENERGY ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants ......... F-2
Financial statements
Balance sheet ............................................. F-3
Statement of cash flows ................................... F-4
Notes to financial statements .............................. F-5 -- F-6
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Directors and Shareholders
Tremisis Energy Acquisition Corporation
New York, New York
We have audited the accompanying balance sheet of Tremisis Energy
Acquisition Corporation (a corporation in the development stage) as of March
10, 2004, and the related statement of cash flows for the period February 5,
2004 (inception) to March 10, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tremisis Energy Acquisition
Corporation as of March 10, 2004, and the related statement of cash flows for
the period February 5, 2004 (inception) to March 10, 2004 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming Tremisis
Energy Acquisition Corporation will continue as a going concern. The Company
has a working capital deficit whereby current liabilities exceed current assets
(cash), has no operations and as discussed in Note 2, is in the process of
raising capital through a Proposed Offering. This raises substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
BDO Seidman, LLP
New York, NY
March 10, 2004, except as to Note 8 as to which the date is April 23, 2004
F-2
TREMISIS ENERGY ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
MARCH 10, 2004
---------------
ASSETS
CURRENT ASSETS -- CASH ............................................ $ 4,265
DEFERRED REGISTRATION COSTS (NOTE 3) .............................. 90,735
--------
TOTAL ASSETS ...................................................... $95,000
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES -- NOTE PAYABLE, STOCKHOLDER (NOTE 4) ......... $70,000
COMMITMENT (NOTE 5)
STOCKHOLDERS' EQUITY (NOTES 1, 2, 6, 7 and 8)
Preferred stock, $.0001 par value
Authorized 1,000,000 shares; none issued
Common stock, $.0001 par value
Authorized 30,000,000 shares
Issued and outstanding 1,375,000 shares ........................ 137
Additional paid-in capital ....................................... 24,863
--------
TOTAL STOCKHOLDERS' EQUITY ........................................ 25,000
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................ $ 95,000
========
See accompanying notes to financial statements.
F-3
TREMISIS ENERGY ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FEBRUARY 5, 2004
(INCEPTION) TO
MARCH 10, 2004
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable, stockholder ................................ $ 70,000
Proceeds from issuance of common stock to initial stockholders ......... 25,000
Deferred registration costs ............................................ (90,735)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES, NET INCREASE IN CASH ......... 4,265
---------
CASH AT BEGINNING OF PERIOD ............................................. -0-
---------
CASH AT END OF PERIOD ................................................... $ 4,265
=========
See accompanying notes to financial statements.
F-4
TREMISIS ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS
Tremisis Energy Acquisition Corporation ("Company") was incorporated in
Delaware on February 5, 2004 as a blank check company, the objective of which is
to acquire an operating business in either the energy or the environmental
industry and their related infrastructures. The Company's initial stockholders
purchased 1,375,000 common shares, $.0001 par value, for $25,000 on February 5,
2004 (see Note 8 discussing a subsequent events). At March 10, 2004, the Company
had not yet commenced any operations and, accordingly, a statement of operations
has not been presented. All activity through March 10, 2004 relates to the
Company's formation. The Company has selected December 31, as its fiscal
year-end.
The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through a proposed public offering ("Proposed
Offering") which is discussed in Note 2. The Company's management has broad
discretion with respect to the specific application of the net proceeds of this
Proposed Offering, although substantially all of the net proceeds of this
Proposed Offering are intended to be generally applied toward consummating a
business combination with a operating business in the energy and environmental
industry and its related infrastructure ("Business Combination"). Furthermore,
there is no assurance that the Company will be able to successfully effect a
Business Combination. Upon the closing of the Proposed Offering, at least ninety
percent (90%) of the net proceeds, after payment of certain amounts to the
underwriter, will be held in a trust account ("Trust Fund") and invested in
government securities until the earlier of (i) the consummation of its first
Business Combination or (ii) liquidation of the Company. The remaining proceeds
may be used to pay for business, legal and accounting due diligence on
prospective acquisitions and continuing general and administrative expenses. 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 20% or more of the outstanding stock excluding, for
this purpose, those persons who were stockholders prior to the Proposed
Offering, vote against the Business Combination, the Business Combination will
not be consummated. All of the Company's stockholders prior to the Proposed
Offering, including all of the officers and directors of the Company ("Initial
Stockholders"), have agreed to vote their 1,375,000 founding shares of common
stock in accordance with the vote of the majority in interest of all other
stockholders of the Company ("Public Stockholders") with respect to any Business
Combination (see Note 8 discussing a subsequent events). After consummation of
the Company's first Business Combination, all of these voting safeguards will no
longer be applicable.
With respect to the first Business Combination which is approved and
consummated, any Public Stockholder who voted against the Business Combination
may demand that the Company redeem his shares. The per share redemption price
will equal the amount in the Trust Fund as of the record date for determination
of stockholders entitled to vote on the Business Combination divided by the
number of shares of common stock held by Public Stockholders at the
consummation of the Proposed Offering. Accordingly, Public Stockholders holding
approximately 19.99% of the aggregate number of shares owned by all Public
Stockholders may seek redemption of their shares in the event of a Business
Combination. Such Public Stockholders are entitled to receive their per share
interest in the Trust Fund computed without regard to the shares held by
Initial Stockholders.
The Company's Certificate of Incorporation provides for mandatory
liquidation of the Company, without stockholder approval, in the event that the
Company does not consummate a Business Combination within 18 months from the
date of the consummation of the Proposed Offering, or 24 months from the
consummation of the Proposed Offering if certain extension criteria have been
satisfied. In the event of liquidation, it is likely that the per share value
of the residual assets remaining available for distribution (including Trust
Fund assets) will be less than the initial public
F-5
TREMISIS ACQUISITION CORPORATION
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
offering price per share in the Proposed Offering (assuming no value is
attributed to the Warrants contained in the Units to be offered in the Proposed
Offering discussed in Note 2).
2. PROPOSED OFFERING
The Proposed Offering calls for the Company to offer for public sale up to
5,500,000 units ("Units"). Each Unit consists of one share of the Company's
common stock, $.0001 par value, and two Redeemable Common Stock Purchase
Warrants ("Warrants"). Each Warrant will entitle the holder to purchase from
the Company one share of common stock at an exercise price of $5.00 commencing
the later of the completion of a business combination with a target business or
one year from the effective date of the Proposed Offering and expiring four
years from the date of the prospectus. The Warrants will be redeemable at a
price of $.01 per Warrant upon 30 days notice after the Warrants become
exercisable, only in the event that the last sale price of the common stock is
at least $8.50 per share for any 20 trading days within a 30 trading day period
ending on the third day prior to date on which notice of redemption is given.
3. DEFERRED REGISTRATION COSTS
As of March 10, 2004, the Company has incurred deferred registration costs
of $90,735 relating to expenses incurred in connection to the Proposed
Offering. Upon consummation of this Proposed Offering, the deferred
registration costs will be charged to equity. Should the Proposed Offering
prove to be unsuccessful, these deferred costs as well as additional expenses
to be incurred, will be charged to operations.
4. NOTE PAYABLE, STOCKHOLDER
The Company issued a $70,000 unsecured promissory note to a stockholder on
February 17, 2004. The note is non-interest bearing and is payable on the
earlier of February 17, 2005 or the consummation of the Company's initial public
offering.
5. COMMITMENT
The Company presently occupies office space provided by an affiliate of an
Initial Stockholder. Such affiliate has agreed that, until the acquisition of a
target business by the Company, 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 this
affiliate $3,500 per month for such services commencing on the effective date
of the Proposed Offering.
6. COMMON STOCK
On March 10, 2004, the Company's Board of Directors authorized a
1.1666666-to-one forward stock split of its common stock (see Note 8 discussing
a subsequent events).
7. PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock
with such designations, voting and other rights and preferences as may be
determined from time to time by the Board of Directors.
8. SUBSEQUENT EVENTS
On April 16, 2004, the Company's Board of Directors authorized a
1.1428571-to-one forward stock split of its common stock. On April 23, 2004, the
Company's Board of Directors authorized a 1.375-to-one forward stock split of
its common stock and filed an amendment to its amended and restated certificate
of incorporation to increase the number of authorized shares of common stock
from 20,000,000 shares to 30,000,000 shares. All references in the accompanying
financial statements to the number of shares of stock have been retroactively
restated to reflect these transactions.
F-6
================================================================================
Until , 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
No dealer, salesperson or any other person is authorized to give any
information or make any representations in connection with this offering other
than those contained in this prospectus and, if given or made, the information
or representations must not be relied upon as having been authorized by us.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any security other than the securities offered by this prospectus,
or an offer to sell or a solicitation of an offer to buy any securities by
anyone in any jurisdiction in which the offer or solicitation is not authorized
or is unlawful.
-----------------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary ..................... 3
Summary Financial Data ................. 8
Risk Factors ........................... 9
Use of Proceeds ........................ 18
Dilution ............................... 20
Capitalization ......................... 21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .......................... 22
Proposed Business ...................... 24
Management ............................. 33
Principal Stockholders ................. 36
Certain Transactions ................... 38
Description of Securities .............. 39
Underwriting ........................... 43
Legal Matters .......................... 46
Experts ................................ 46
Where You Can Find Additional
Information ......................... 47
Index to Financial Statements .......... F-1
================================================================================
================================================================================
$33,000,000
TREMISIS ENERGY ACQUISITION CORPORATION
5,500,000 UNITS
---------------------------
PROSPECTUS
---------------------------
EARLYBIRDCAPITAL, INC.
, 2004
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by us in connection with the offering
described in this registration statement (other than the underwriting discount
and commissions and the Representative's non-accountable expense allowance)
will be as follows:
Initial Trustees' fee ..................................... $ 1,000.00(1)
SEC Registration Fee ...................................... 13,602.53
NASD filing fee ........................................... 11,236.01
Accounting fees and expenses .............................. 20,000.00
Printing and engraving expenses ........................... 35,000.00
Directors & Officers liability insurance premiums ......... 115,000.00(2)
Legal fees and expenses (including blue sky services and
expenses) ................................................ 350,000.00
Miscellaneous ............................................. 89,161.46
-----------------
Total .................................................. $ 635,000.00
=================
- ----------
(1) In addition to the initial acceptance fee that is charged by Continental
Stock Transfer & Trust Company, as trustee, the registrant will be
required to pay to Continental Stock Transfer & Trust Company annual fees
of $3,000 for acting as trustee, $4,800 for acting as transfer agent of
the registrant's common stock, $2,400 for acting as warrant agent for the
registrant's warrants and $1,800 for acting as escrow agent.
(2) This amount represents the approximate amount of Director and Officer
liability insurance premiums the registrant anticipates paying following
the consummation of its initial public offering and until it consummate a
business combination.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation provides that all directors, officers,
employees and agents of the registrant shall be entitled to be indemnified by
us to the fullest extent permitted by Section 145 of the Delaware General
Corporation Law.
Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth
below.
"Section 145. Indemnification of officers, directors, employees and
agents; insurance.
(a) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
(b) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the
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right of the corporation to procure a judgment in its favor by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with the defense
or settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present
or former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
II-2
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment of expenses incurred or paid by a director, officer or controlling
person in a successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to the court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
Paragraph B of Article Eighth of our certificate of incorporation
provides:
"The Corporation, to the full extent permitted by Section 145 of the GCL,
as amended from time to time, shall indemnify all persons whom it may indemnify
pursuant thereto. Expenses (including attorneys' fees) incurred by an officer
or director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding for which such officer or director may be entitled
to indemnification hereunder shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized hereby."
Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this
Registration Statement, we have agreed to indemnify the Underwriter and the
Underwriter has agreed to indemnify us against certain civil liabilities that
may be incurred in connection with this offering, including certain liabilities
under the Securities Act.
II-3
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) During the past three years, we sold the following shares of common
stock without registration under the Securities Act:
STOCKHOLDERS NUMBER OF SHARES
- ------------------------------------- -----------------
Lawrence S. Coben ................. 550,000
Isaac Kier ........................ 100,000
David A. Preiser .................. 50,000
Jon Schotz ........................ 50,000
Such shares were issued in February 2004 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. The shares issued to the individuals above were sold at an average
purchase price of approximately $0.033 per share. In March 2004, we authorized a
1.1666666-for-one stock split of our common stock, effectively lowering the
purchase price to approximately $0.029 per share. In April 2004, we authorized a
1.1428571-to-one stock split of our common stock and a 1.375-to-one stock split
of our common stock, effectively lowering the purchase price to approximately
$0.018 per share.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this Registration
Statement:
EXHIBIT NO. DESCRIPTION
- ------------ -----------
1.1 Form of Underwriting Agreement.
1.2 Form of Selected Dealers Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2* By-laws.
4.1* Specimen Unit Certificate.
4.2* Specimen Common Stock Certificate.
4.3* Specimen Warrant Certificate.
4.4 Form of Unit Purchase Option to be granted to Representative.
4.5 Form of Warrant Agreement between Continental Stock Transfer & Trust Company
and the Registrant.
5.1 Opinion of Graubard Miller.
10.1* Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Lawrence S.
Coben.
10.2* Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Isaac Kier.
10.3* Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and David A. Preiser.
10.4* Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Jon Schotz.
10.5 Form of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant.
10.6 Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer
& Trust Company and the Initial Stockholders.
II-4
EXHIBIT NO. DESCRIPTION
- ------------ -----------
10.7* Form of Letter Agreement between Coqui Capital Partners L.P. and Registrant
regarding administrative support.
10.8* Promissory Note, dated February 17, 2004, in the principal amount of $70,000 issued to
Lawrence S. Coben.
10.9* Form of Registration Rights Agreement among the Registrant and the Initial
Stockholders.
10.10* Warrant Purchase Agreement among Lawrence S. Coben and EarlyBirdCapital, Inc.
10.11* Letter amendment to letter agreements between the Registrant, EarlyBirdCapital, Inc.
and each of Lawrence S. Coben, Isaac Kier, David A. Preiser and Jon Schotz.
10.12 Promissory Note, dated April 23, 2004, in the principal amount of $7,500, issued to
Lawrence S. Cohen.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Graubard Miller (included in Exhibit 5.1).
24* Power of Attorney (included on signature page of this Registration Statement).
- ----------
* Previously filed
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
i. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
iii. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other
II-5
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 27th day of April, 2004.
TREMISIS ENERGY ACQUISITION
CORPORATION
By: /s/ Lawrence S. Coben
------------------------------
Lawrence S. Coben
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
NAME POSITION DATES
---- -------- -----
/s/ Lawrence S. Coben Chairman of the Board and Chief April 27, 2004
- ----------------------------- Executive Officer (Principal executive
Lawrence S. Coben and financial officer)
/s/ Isaac Kier Secretary, Treasurer and Director April 27, 2004
- -----------------------------
Isaac Kier
/s/ David A. Preiser* Director April 27, 2004
- -----------------------------
David A. Preiser
/s/ Jon Schotz* Director April 27, 2004
- -----------------------------
Jon Schotz
* By Lawrence S. Coben, Power of Attorney
II-7