ITEM
1.
Legal Proceedings.
Not
applicable.
Item
1A.
Risk
Factors
This
quarterly report on Form 10-Q for the quarter ended June 30, 2007 represents
our
first periodic report required to be filed by Sections 13 and 15(d) of the
Securities Exchange Act of 1934, as amended. Item 1A contains all of the risk
factors that would otherwise be reported in an annual report on Form
10-K.
Risks
Relating to the Company
We
are a development stage company with no operating history and, accordingly,
you
have no basis upon which to evaluate our ability to achieve our business
objective.
We
are a
recently incorporated development stage company with no operating results to
date. Since we do not have an operating history, you have no basis upon which
to
evaluate our ability to achieve our business objective, which is to acquire
a
technology or technology-related business that has operations or facilities
located in Israel, or that intends to establish operations or facilities in
Israel, such as research and development, manufacturing or executive offices,
following our initial business combination. We have not conducted any
discussions and we have no plans, arrangements or understandings with any
prospective acquisition candidates as of the date of this report. We will not
generate any revenues until, at the earliest (if at all), after the consummation
of a business combination. We cannot assure you as to when, or if, a business
combination will occur.
We
may not be able to consummate a business combination within the required time
frame, in which case we will be forced to liquidate.
We
must
complete a business combination with a fair market value equal to at least
80%
of our net assets (excluding deferred underwriting fees) at the time of the
acquisition by December 22, 2008 (or by June 22, 2009 if a letter of intent,
agreement in principle or a definitive agreement has been executed by December
22, 2008 and the business combination relating thereto has not yet been
consummated by such date). If we fail to consummate a business combination
within the required time frame, we will be forced to liquidate our assets.
We
may not be able to find a suitable target business within the required time
frame. In addition, our negotiating position and our ability to conduct adequate
due diligence on any potential target may be reduced as we approach the deadline
for the consummation of a business combination.
If
the proceeds held outside the trust are insufficient to allow us to operate
until at least June 22, 2009, we may be unable to complete a business
combination.
We
believe that, prior to the consummation of a business combination, the sum
of
one-half of the interest earned on the trust account, net of taxes payable
on
such interest, up to a maximum of $2.0 million, and the $380,000 of proceeds
initially held outside of the trust account, will be sufficient to cover our
operating expenses until June 22, 2009 and to cover the expenses incurred in
connection with a business combination. These amounts are based on our
management’s estimate of the amount needed to fund our operations until June 22,
2009, consummate a business combination and fund our working capital
requirements. This estimate may prove inaccurate, especially if we expend a
significant portion of the available funds in pursuit of a business combination
that is not consummated. Additionally, although we have no present intention
to
do so, it is possible that we will in the future find it necessary or desirable
to use a portion of these funds to make a down payment or deposit or fund a
lock-up or “no-shop” provision, with respect to a potential business
combination. If so, any such amount would be based on the terms of the specific
transaction and the amount of available funds at the time. If we use a
significant portion of our funds for such a purpose and we are required to
forfeit such funds (whether as a result of our breach of the agreement relating
to the original payment or otherwise), we could, if such payment was large
enough and we had already used some or all of the funds allocated to due
diligence and related expenses in connection with the aborted transaction,
be
left with insufficient funds to continue searching for, or to conduct due
diligence with respect to, other potential target businesses. In that event,
we
may be required to liquidate before the completion of a business combination.
If
we do not have sufficient proceeds available to fund our expenses, we may be
forced to seek additional financing, which we may not be able to obtain. If
we
do not have sufficient funds and are unable to obtain additional financing,
we
may be forced to liquidate prior to consummating a business combination. If
we
are able to obtain additional financing in order to fund due diligence and
other
expenses associated with locating a target business, and if such additional
financing were in the form of a loan, such loan would be incurred by us. To
the
extent that a business combination is not ultimately consummated and that the
funds held outside of the trust account are not sufficient to repay such loan,
M.O.T.A. Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd have agreed
to
advance the funds necessary to repay such loan. In the event that M.O.T.A
Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd are unable to repay
such
loan and to the extent that there are not funds available outside of the trust
account for such purpose, then Moshe Bar-Niv, Dr. Shuki Gleitman and Liora
Lev have agreed that they will be personally liable to repay such
loan.
Failure
to comply with the American Stock Exchange’s requirements regarding the
composition of our board of directors and audit committee could result in the
delisting of our common stock from the American Stock Exchange and adversely
affect the market for our common stock.
In
order
for our common stock to continue to be listed on the American Stock Exchange,
we
must comply with listing standards regarding the independence of our board
of
directors and members of our audit committee. In particular, the American Stock
Exchange’s rules require that a majority of our directors and all of the members
of our audit committee be “independent,” as defined under the American Stock
Exchange’s rules, by no later than June 22, 2008. We do not currently meet these
requirements.
If
we are
unable to change the composition of our board of directors and our board
committees to comply with these requirements on a timely basis, our common
stock
will be delisted from the American Stock Exchange and the liquidity and trading
price of common stock will be adversely affected.
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 companies having a business
objective similar to ours, including other blank check companies, venture
capital funds, leveraged buyout funds and operating businesses competing for
acquisitions. Many of these entities are well-established and have extensive
experience in identifying and effecting business combinations directly or
through affiliates. Many of these competitors possess greater technical, human
and other resources than we do and our financial resources will be relatively
limited when contrasted with those of many of these competitors. Our ability
to
compete in acquiring certain sizable target businesses will be limited by our
available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of certain target businesses. In
addition, we can only effect a business combination with a fair market value
equal to at least 80% of our net assets (excluding deferred underwriting fees)
at the time of the acquisition. Furthermore, the obligation we have to seek
stockholder approval of a business combination may delay the consummation of
a
transaction. Additionally, our outstanding warrants, and the future dilution
they potentially represent, may not be viewed favorably by certain target
businesses. Any of these obligations may place us at a competitive disadvantage
in successfully negotiating a business combination. If we are unable to
consummate a business combination with a target business by December 22, 2008
(or by June 22, 2009 if a letter of intent, agreement in principle or definitive
agreement has been executed by December 22, 2008 and the business combination
has not yet been consummated by such date), we will be forced to
liquidate.
Under
Delaware law, our amended and restated certificate of incorporation may be
amended, which could reduce or eliminate the protection afforded to our
stockholders by certain requirements and restrictions contained
therein.
Our
amended and restated certificate of incorporation contains certain requirements
and restrictions that will apply to us until the consummation of a business
combination. Specifically, our amended and restated certificate of incorporation
provides, among other things, that:
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the
net proceeds our initial public offering and the private placement
of the
founder warrants, which have been placed into a trust account, may
not be
disbursed from the trust account except in connection with, or following,
a business combination, upon our liquidation or as otherwise permitted
in
our amended and restated certificate of
incorporation;
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prior
to the consummation of a business combination, we will submit such
business combination to our stockholders for
approval;
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we
may consummate the business combination only if approved by a majority
of
our stockholders and public stockholders owning 40% or more of the
shares
sold in our initial public offering do not exercise their conversion
rights;
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if
a business combination is approved and consummated, public stockholders
who voted against the business combination and exercised their conversion
rights will receive their pro rata share (based on the number of
units
sold in our initial public offering) of the trust
account;
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if
a business combination is not consummated or a letter of intent,
an
agreement in principle or a definitive agreement is not signed within
the
specified time periods, then we will be dissolved and distribute
to all of
our public stockholders their pro rata share (based on the number
of units
sold in our initial public offering) of the trust account and any
remaining net assets; and
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we
may not consummate any other merger, acquisition, stock purchase,
asset
purchase or similar transaction other than a business combination
that
meets certain specified conditions, including the requirement that
the
business combination be with a technology or technology-related business
that has operations or facilities located in Israel, or that intends
to
establish operations or facilities in Israel, such as research and
development, manufacturing or executive offices, following our initial
business combination, and whose fair market value is equal to at
least 80%
of our net assets (excluding deferred underwriting fees) at the time
of
such business combination.
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Under
Delaware law, the foregoing provisions may be amended if our board of directors
adopts a resolution declaring the advisability of an amendment and calls a
stockholders meeting, at which the holders of a majority of our outstanding
stock vote in favor of such amendment. Any such amendment could reduce or
eliminate the protection afforded to our stockholders by such requirements
and
restrictions.
Our
amended and restated certificate of incorporation and by-laws contain certain
provisions that may make it more difficult, expensive or otherwise discourage,
a
tender offer or a change in control or takeover attempt by a third party, even
if such a transaction would be beneficial to our
stockholders.
The
existence of certain provisions in our amended and restated certificate of
incorporation and by-laws may have a negative impact on the price of our common
stock by discouraging a third party from purchasing our common stock. These
provisions could also have the effect of discouraging a third party from
pursuing a non-negotiated takeover of our company and preventing certain changes
of control. In addition to our staggered board, our by-laws require that,
subject to certain exceptions, any stockholder desiring to propose business
or
nominate a person to the board of directors at a stockholders meeting must
give
notice of any proposals or nominations within a specified time frame. Our
by-laws also limit the ability of stockholders to remove directors, call
stockholders meetings and act by written consent and provide that vacancies
of
the board of directors may only be filled by a majority of the remaining
directors.
If
third parties bring claims against us, the proceeds held in the trust account
could be reduced and the per share liquidation price received by stockholders
is
likely to be less than the approximately $7.88 per share held in
trust.
Placing
of funds in a trust account may not protect those funds from third party claims
against us. Although we will seek to have all vendors, prospective acquisition
targets and other entities with whom we engage in business enter into agreements
with us waiving any right in or to any monies held in the trust account for
the
benefit of our public stockholders, there is no guarantee that they will execute
such agreements, or even if they execute such agreements, that such waivers
will
be enforceable or they would otherwise be prevented from bringing claims against
the trust account.
If
any
third party refused to execute an agreement waiving such claims to the monies
held in the trust account, we would perform an analysis of the alternatives
available to us if we chose not to engage such third party and evaluate if
such
engagement would be in the best interest of our stockholders if such third
party
refused to waive such claims. Examples of possible instances in which we may
engage a third party that refused to execute a waiver include the engagement
of
a third party consultant whose particular expertise or skills are believed
by
management to be significantly superior to those of other consultants that
would
agree to execute a waiver or in cases where management is unable to find a
provider of required services willing to provide the waiver. In any event,
our
management would perform an analysis of the alternatives available to it and
would enter into an agreement with a third party that did not execute a waiver
only if management believed that such third party’s engagement would be
significantly more beneficial to us than any alternative.
In
addition, there is no guarantee that such entities will agree to waive any
claims they may have in the future as a result of, or arising out of, any
negotiations, contracts or agreements with us and not seek recourse against
the
trust account for any reason. Furthermore, creditors may seek to interfere
with
the distribution process under state or federal creditor and bankruptcy laws,
which could delay the actual distribution of such funds or reduce the amount
ultimately available for distribution to our public stockholders. If we are
required to file a bankruptcy case or an involuntary bankruptcy case is filed
against us that is not dismissed, the funds held in the trust account will
be
subject to applicable bankruptcy law and may be included in our bankruptcy
estate and subject to the claims of third parties with priority over the claims
of our stockholders.
The
ability of our public stockholders to receive the proceeds held in the trust
account is subject to any valid claims by our creditors which are not covered
by
the indemnification provided by certain of our initial stockholders (described
below). Furthermore, no distributions may be made from the trust account until
provisions for the payment of creditors have first been made in accordance
with
the applicable provisions of Delaware law. Accordingly, the proceeds held in
trust could be subject to claims that could take priority over the claims of
our
public stockholders and the per-share liquidation price could be less than
approximately $7.88, plus one-half of the interest earned on the trust account,
net of taxes payable on such interest, for the relevant period, due to claims
of
such creditors or other entities.
If
we are
unable to complete a business combination, and are forced to liquidate and
distribute the proceeds held in trust to our stockholders, certain of our
executive officers - specifically, Moshe Bar-Niv, Shuki Gleitman and Liora
Lev -
have agreed, subject to the qualifications and exceptions stated below, that
they will be personally liable, on a joint and several basis, to ensure that
the
proceeds in the trust fund are not reduced by claims made by (and only by)
a
vendor or service provider for services rendered, or products sold, to us,
or by
a prospective acquisition target (each, a “Guaranteed Creditor”). However,
neither Moshe Bar-Niv, Shuki Gleitman and Liora Lev will have any personal
liability as to (i) any claimed amounts owed to a Guaranteed Creditor who
executed a agreement waiving any right, title, claim or interest of any kind
in
and to all monies held in the trust, or (ii) as to any claims under our
indemnity of the underwriters of our initial public offering against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
They will not be personally liable to pay any of our debts and obligations
except as described above.
We
cannot
assure you that Messrs. Bar-Niv and Gleitman and Ms. Lev have sufficient funds
to satisfy these indemnification obligations or that the proceeds in the trust
account will not be reduced by such claims.
In
addition, even after our liquidation (including the distribution of the funds
held in the trust account), under Delaware law, stockholders may be held liable
for claims by third parties against a corporation to the extent of distributions
received by them in a dissolution. Accordingly, we cannot assure you that third
parties will not seek to recover from our stockholders amounts owed to them
by
us. Our stockholders may be held liable for claims by third parties against
us
to the extent of distributions received by them in a dissolution.
We
may have insufficient funds not held in our trust account to implement and
complete our dissolution and distribution.
We
expect
that all costs associated with the implementation and completion of our
dissolution and distribution, which we currently estimate to be approximately
$50,000 to $75,000, will be funded by any funds not held in our trust account,
although we cannot assure you that there will be sufficient funds for such
purpose. In addition, our initial shareholders have not provided any written
indemnity or guarantee with respect to these costs other than with respect
to
costs for vendors or service providers that have not signed a waiver. In the
event that insufficient funds exist to cover these costs, we would commence
appropriate litigation if doing so would be in the best interests of our
stockholders, which is a decision that would be made by our board of directors
based on its fiduciary duties as set forth under Delaware law.
Our
stockholders may be held liable for claims by third parties against us to the
extent of distributions received by them in a
dissolution.
If
we do
not complete a business combination by December 22, 2008 (or by June 22, 2009
if
a letter of intent, agreement in principle or definitive agreement has been
executed by December 22, 2008 and the business combination has not yet been
consummated by such date), we will dissolve. Under Sections 280 through 282
of
the Delaware General Corporation Law, stockholders may be held liable for claims
by third parties against a corporation to the extent of distributions received
by them in a dissolution. If the corporation complies with certain procedures
intended to ensure that it makes reasonable provision for all claims against
it,
including a 60-day notice period during which any third-party claims can be
brought against the corporation, a 90-day period during which the corporation
may reject any claims brought, and an additional 150-day waiting period before
any liquidating distributions are made to stockholders, any liability of
stockholders with respect to a liquidating distribution is limited to the lesser
of such stockholder’s pro rata share of the claim or the amount distributed to
the stockholder, and any liability of the stockholder would be barred after
the
third anniversary of the dissolution. Although we will seek stockholder approval
to liquidate the trust account to our public stockholders as part of our plan
of
dissolution and distribution, we do not intend to comply with those procedures.
In the event that our board recommends and our stockholders approve a plan
of
dissolution and distribution where it is subsequently determined that the
reserve for claims and liabilities was insufficient, stockholders who received
a
return of funds could be liable for claims made by creditors. As such, our
stockholders could potentially be liable for any claims to the extent of
distributions received by them in a dissolution and any liability of our
stockholders may extend beyond the third anniversary of such dissolution.
Accordingly, we cannot assure you that third parties will not seek to recover
from our stockholders amounts owed to them by us.
In
certain circumstances, our board of directors may be viewed as having breached
their fiduciary duties to our creditors, thereby exposing itself and our company
to claims of punitive damages.
If
we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by stockholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our stockholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public stockholders promptly, following December 22, 2008 or,
if
applicable, June 22, 2009, if we do not complete a business combination (subject
to delays as described below), this may be viewed or interpreted as giving
preference to our public stockholders over any potential creditors with respect
to access to or distributions from our assets. Furthermore, our board of
directors may be viewed as having breached their fiduciary duties to our
creditors and/or may have acted in bad faith, and thereby exposing itself and
our company to claims of punitive damages, by paying public stockholders from
the trust account prior to addressing the claims of creditors and/or complying
with certain provisions of Delaware law with respect to our dissolution and
liquidation. We cannot assure you that claims will not be brought against us
for
these reasons.
If
we do not consummate a business combination and dissolve, payments from the
trust account to our public stockholders may be
delayed.
We
currently believe that any plan of dissolution and distribution subsequent
to
December 22, 2008 or, if applicable, June 22, 2009, if we do not complete a
business combination would proceed in approximately the following
manner:
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our
board of directors will, consistent with its obligations described
in our
amended and restated certificate of incorporation to dissolve, prior
to
the passing of such deadline, convene and adopt a specific plan of
dissolution and distribution, which it will then vote to recommend
to our
stockholders; at such time it will also cause to be prepared a preliminary
proxy statement setting out such plan of dissolution and distribution
as
well as the board’s recommendation of such
plan;
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upon
such deadline, we would file our preliminary proxy statement with
the
Securities and Exchange Commission, or the
SEC;
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if
the SEC does not review the preliminary proxy statement, then, ten
days
following the passing of such deadline, we will mail the proxy statements
to our stockholders, and 30 days following the passing of such deadline
we
will convene a meeting of our stockholders, at which they will either
approve or reject our plan of dissolution and distribution;
and
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if
the SEC does review the preliminary proxy statement, we currently
estimate
that we will receive their comments 30 days following the passing
of such
deadline. We will mail the proxy statements to our stockholders following
the conclusion of the comment and review process (the length of which
we
cannot predict with any certainty, and which may be substantial)
and we
will convene a meeting of our stockholders at which they will either
approve or reject our plan of dissolution and
distribution.
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In
the
event we seek stockholder approval for a plan of dissolution and distribution
and do not obtain such approval, we will nonetheless continue to pursue
stockholder approval for our dissolution. Pursuant to the terms of our amended
and restated certificate of incorporation, our powers following the expiration
of the permitted time periods for consummating a business combination will
automatically thereafter be limited to acts and activities relating to
dissolving and winding up our affairs, including liquidation. The funds held
in
our trust account may not be distributed except upon our dissolution and, unless
and until such approval is obtained from our stockholders, the funds held in
our
trust account will not be released. Consequently, holders of a majority of
our
outstanding stock must approve our dissolution in order to receive the funds
held in our trust account and the funds will not be available for any other
corporate purpose.
These
procedures, or a vote to reject any plan of dissolution and distribution by
our
stockholders, may result in substantial delays in the liquidation of our trust
account to our public stockholders as part of our plan of dissolution and
distribution.
Since
we have not selected any prospective target businesses with which to complete
a
business combination as of the date of this report, you are unable to ascertain
the merits or risks of any particular target business’
operations.
Since
we
have not yet selected or approached any prospective target businesses with
respect to a business combination, there is no basis to evaluate the possible
merits or risks of any particular target business’ operations, financial
condition or prospects. To the extent we complete a business combination, we
may
be affected by numerous risks inherent in the business operations of the
acquired company or companies. Although our management will endeavor to evaluate
the risks inherent in a particular target business, we cannot assure you that
we
will properly ascertain or assess all of the significant risk factors, or that
we will have adequate time to complete due diligence.
A
significant portion of working capital could be expended in pursuing
acquisitions that are not consummated.
It
is
anticipated that the investigation of each specific target business and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents and other instruments will require substantial time and attention
and
substantial costs for accountants, attorneys and others. In addition, we may
opt
to make down payments or pay exclusivity or similar fees in connection with
structuring and negotiating a business combination. If a decision is made not
to
complete a specific business combination, the costs incurred up to that point
in
connection with the abandoned transaction, potentially including down payments
or exclusivity or similar fees, would not be recoverable. Furthermore, even
if
an agreement is reached relating to a specific target business, we may fail
to
consummate the transaction for any number of reasons, including those beyond
our
control such as that 40% or more of our public stockholders vote against the
transaction even though a majority of our stockholders approve the transaction.
Any such event will result in a loss to us of the related costs incurred, which
could adversely affect subsequent attempts to locate and acquire or merge with
another business.
We
may issue additional shares of our capital stock, including through convertible
debt securities, to complete a business combination, which would reduce the
equity interest of our stockholders and may cause a change in control of our
ownership.
Our
amended and restated certificate of incorporation authorizes the issuance of
up
to 100,000,000 shares of common stock, par value $0.0001 per share, and
1,000,000 shares of preferred stock, par value $0.0001 per share. As of June
30,
2007, there will be 45,609,375 authorized but unissued shares of our common
stock available for issuance (after appropriate reservation of shares issuable
upon full exercise of our outstanding warrants, including the founder warrants,
and the purchase option issued to CRT Capital Group LLC and I-Bankers
Securities, Inc. and all of the 1,000,000 shares of preferred stock available
for issuance). Although we have no commitments as of the date of this report
to
issue any additional securities, we may issue a substantial number of additional
shares of our common stock or preferred stock, or a combination of both,
including through convertible debt securities, to complete a business
combination. The issuance of additional shares of our common stock or any number
of shares of preferred stock, including upon conversion of any debt
securities:
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may
significantly reduce stockholders’ equity
interest;
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may
subordinate the rights of holders of common stock if preferred stock
is
issued with rights senior to those afforded to our common
stock;
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will
likely cause a change in control if a substantial number of our shares
of
common stock or voting preferred stock are issued, which may affect,
among
other things, our ability to use our net operating loss carryforwards,
if
any, and most likely also result in the resignation or removal of
our
present directors and officers; and
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may
adversely affect prevailing market prices for our common stock and
warrants.
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We
may issue notes or other debt securities, or obtain bank financing, to complete
a business combination, which may adversely affect our leverage and financial
condition.
Although
we have no commitments as of the date of this report to incur any debt, we
may
choose to issue notes or other debt securities, or obtain bank financing, to
finance a business combination. The incurrence of debt may:
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lead
to default and foreclosure on our assets if our operating revenues
after a
business combination are insufficient to pay our debt
obligations;
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cause
an acceleration of our obligation to repay the debt, even if we make
all
principal and interest payments when due, if we breach the covenants
contained in the terms of any debt;
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require
us to execute documents that contain covenants such as ones that
require
the maintenance of certain financial ratios or reserves, without
a waiver
or renegotiation of such covenants;
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create
an obligation to immediately repay all principal and accrued interest,
if
any, upon demand to the extent any debt securities are payable on
demand;
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hinder
our ability to obtain additional financing, if necessary, to the
extent
any debt securities contain covenants restricting our ability to
obtain
additional financing while such security is outstanding, or to the
extent
our existing leverage discourages other potential
investors;
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limit
our flexibility in planning for and reacting to changes in our business
and in the industry in which we
operate;
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make
us more vulnerable to adverse changes in general economic, industry
and
competitive conditions and adverse changes in government
regulation;
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limit
our ability to borrow additional amounts for working capital, capital
expenditures, acquisitions, debt service requirements, execution
of our
strategy, or other purposes; and
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place
us at a disadvantage compared to our competitors who have less
debt.
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Unlike
most other blank check companies, we allow up to approximately 39.99% of our
public stockholders to exercise their conversion rights. This higher threshold
will make it easier for us to consummate a business combination with which
you
may not agree, and you may not receive the full amount of your original
investment upon exercise of your conversion rights.
When
we
seek stockholder approval of a business combination, we will offer each public
stockholder (other than our initial stockholders) the right to have his, her
or
its shares of common stock converted to cash if the stockholder votes against
the business combination and the business combination is approved and
consummated. We will consummate the initial business combination only if
the following two conditions are met: (i) a majority of the shares of
common stock voted by the public stockholders are voted in favor of the business
combination and (ii) public stockholders owning 40% or more of the shares
outstanding do not vote against the business combination and exercise their
conversion rights. Most other blank check companies have a conversion threshold
of 20%, which makes it more difficult for such companies to consummate their
initial business combination. Thus, because we permit a larger number of
stockholders to exercise their conversion rights, it will be easier for us
to
consummate an initial business combination with a target business which you
may
believe is not suitable for us, and you may not receive the full amount of
your
original investment upon exercise of your conversion rights.
Unlike
most other blank check companies, we allow up to approximately 39.99% of our
public stockholders to exercise their conversion rights. The ability of a larger
number of our stockholders to exercise their conversion rights may not allow
us
to consummate the most desirable business combination or optimize our capital
structure.
When
we
seek stockholder approval of a business combination, we will offer each public
stockholder (other than our initial stockholders) the right to have his, her
or
its shares of common stock converted to cash if the stockholder votes against
the business combination and the business combination is approved and
consummated. Such holder must both vote against such business combination and
then exercise his, her or its conversion rights to receive a pro rata share
of
the trust account. Unlike most other blank check companies which have a 20%
threshold, we allow up to approximately 39.99% of our public stockholders to
exercise their conversion rights. Accordingly, if our business combination
requires us to use substantially all of our cash to pay the purchase price,
because we will not know how many stockholders may exercise such conversion
rights, we may either need to reserve part of the trust account for possible
payment upon such conversion, or we may need to arrange third-party financing
to
help fund our business combination in case a larger percentage of stockholders
exercise their conversion rights than we expect. In the event that the
acquisition involves the issuance of our stock as consideration, we may be
required to issue a higher percentage of our stock to make up for a shortfall
in
funds. Raising additional funds to cover any shortfall may involve dilutive
equity financing or incurring indebtedness at higher than desirable levels.
This
may limit our ability to effectuate the most attractive business combination
available to us.
Our
ability to successfully effect a business combination and to be successful
afterwards will be dependent upon the efforts of our key personnel, some of
whom
may join us following a business combination.
Our
ability to be successful following a business combination will depend upon
the
efforts of our key personnel. We cannot presently ascertain the future role
of
our key personnel following a business combination. In making the determination
whether current management should remain with us following the business
combination, management will analyze the experience and skill set of the target
business’ management and negotiate as part of the business combination that
certain members of current management remain if it is believed that doing so
is
in the best interests of the combined company post-business combination. While
we intend to closely scrutinize any individuals we engage after a business
combination, we cannot assure you that our assessment of these individuals
will
prove to be correct. Furthermore, these individuals may be unfamiliar with
the
requirements of operating a public company which could cause us to have to
expend time and resources familiarizing them with such requirements. This could
be expensive and time-consuming and could lead to various regulatory issues
which may adversely affect our operations.
The
loss of key directors and officers could adversely affect our ability to
consummate a business combination.
Our
operations are dependent upon a relatively small group of key directors and
officers consisting of Moshe Bar-Niv, our Chairman and director; Liora Lev,
our
Chief Executive Officer and director; and Shuki Gleitman, our Chief Technology
Officer and director. We believe that our success depends on the continued
service of our key directors and officers. We cannot assure you that such
individuals will remain with us for the immediate or foreseeable future. We
do
not have employment contracts with any of our current officers. The unexpected
loss of the services of one or more of these key officers or directors could
adversely affect our ability to consummate a business combination.
Our
directors and officers will allocate their time to other businesses, and,
accordingly, may have conflicts of interest in determining as to how much time
to devote to our affairs. This could have a negative impact on our ability
to
consummate a business combination.
Our
directors and officers are not required to, and will not, commit their full
time
to our affairs, which may result in a conflict of interest in allocating their
time between our operations and other businesses. We do not intend to have
any
full-time employees prior to the consummation of a business combination. Each
of
our officers is engaged in several other business endeavors and is not obligated
to contribute any specific number of hours per week to our affairs. If our
officers’ and directors’ other business affairs require them to devote
substantial amounts of time to such affairs, it could limit their ability to
devote time to our affairs and could have a negative impact on our ability
to
consummate a business combination.
Our
directors and officers are and may in the future become affiliated with other
businesses in, or invest in, technology or technology-related industries and,
accordingly, may have conflicts of interest in determining to which entity
a
particular business opportunity should be presented.
Until
we
consummate a business combination, we intend to engage in the business of
identifying and acquiring a potential target business in a technology or
technology-related industry. Our directors and officers are, and may in the
future, become affiliated with entities, including other blank check companies,
that are engaged in a similar business. Further, certain of our directors and
officers are currently involved in other businesses in, or investing in,
technology or technology-related industries. Our directors and officers may
become aware of business opportunities that may be appropriate for presentation
to us as well as the other entities with which they are or may be affiliated.
Due to these existing and potential future affiliations with these and other
entities, they may have fiduciary obligations to present potential business
opportunities to those entities prior to presenting them to us, which could
cause additional conflicts of interest. We cannot assure you that these
conflicts will be resolved in our favor. At this time, none of our officers
or
directors are or have been affiliated with another blank check
company.
While
we currently have no plans to combine with an entity affiliated with one or
more
of our initial stockholders, we are not prohibited from doing so.
We
currently have no plans to combine with an entity affiliated with one or more
of
our initial stockholders and our management is not aware of any potential
business combination opportunity with any such affiliated entities, as of the
date of this report.
If,
however, it is later determined that this is in the best interest of our
stockholders, we may propose to acquire an affiliated company as a “business
combination.” In particular, there is nothing in our amended and restated
certificate of incorporation or any contractual arrangements to which we are
a
party which would prohibit us from doing so.
In
the
event that we were to propose a business combination with an entity affiliated
with one or more of our initial stockholders, public stockholders would have
two
protections:
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in
connection with the vote required for any business combination, our
initial stockholders have agreed to vote their respective initial
shares
of common stock in accordance with the vote of the public stockholders
holding a majority of the shares of common stock outstanding.
Consequently, unless a majority of the shares held by non-affiliates
are
voted in favor of any proposed acquisition, the acquisition will
not be
consummated; and
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we
have agreed not to consummate a business combination with an entity
which
is affiliated with any of our initial stockholders unless we obtain
an
opinion from an independent investment banking firm stating that
the
business combination is fair to our stockholders from a financial
point of
view.
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Despite
the foregoing, potential conflicts of interest may still exist and, as a result,
the terms of the business combination may not be as advantageous to our public
stockholders as they would be absent any conflicts of interest.
Because
all of our directors and officers own shares of our securities that will not
participate in liquidation distributions, they may have a conflict of interest
in determining whether a particular target business is appropriate for a
business combination.
All
of
our directors and officers own stock in our company. Our directors and officers,
as well as our initial stockholders, have waived their right to receive
distributions upon our liquidation in the event we fail to complete a business
combination. Furthermore, certain of our initial stockholders (specifically,
M.O.T.A. Holdings Ltd.; FSGL Holdings Ltd; OLEV Holdings Ltd; Shrem, Fudim,
Kelner - Technologies Ltd.; Shrem, Fudim, Kelner & Co. Ltd.; and Elisha
Yanay) purchased an aggregate of 3,625,000 warrants in a private placement.
The
shares of common stock and warrants owned by such directors and officers and
their affiliates will be worthless if we do not consummate a business
combination. The personal and financial interests of our directors and officers
may influence their motivation in identifying and selecting a target business
and completing a business combination in a timely manner. Consequently, our
directors’ and officers’ discretion in identifying and selecting a suitable
target business may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular business combination are
appropriate and in our stockholders’ best interest.
Our
directors’ and officers’ interests in obtaining reimbursement for any reasonable
out-of-pocket expenses incurred by them may lead to a conflict of interest
in
determining whether a particular target business is appropriate for a business
combination and in the public stockholders’ best
interest.
Our
initial stockholders, directors and officers will not receive reimbursement
for
any out-of-pocket expenses incurred by them to the extent that such expenses
exceed the sum of one-half of the interest earned on the trust account, net
of
taxes payable on such interest, up to a maximum of $2.0 million, and the
$380,000 of proceeds initially held outside of the trust account, unless a
business combination is consummated. The amounts of available proceeds and
the
interest earned on the trust account, net of taxes payable on such interest,
available to us to fund our working capital requirements are based on our
management’s estimate of the amount needed to fund our operations until June 22,
2009 and consummate a business combination. This estimate may prove to be
inaccurate, especially if a portion of the available proceeds and the interest
on the trust account available for working capital purposes is used to make
a
down payment in connection with a business combination or pay exclusivity or
similar fees or if we expend a significant portion in pursuit of an acquisition
that is not consummated. The financial interest of our directors and officers
could influence their motivation in selecting a target business, and thus there
may be a conflict of interest when determining whether a particular business
combination is in our public stockholders’ best interest.
If
our common stock becomes subject to the SEC’s penny stock rules, broker-dealers
may experience difficulty in completing customer transactions and trading
activity in our securities may be adversely affected.
If
at any
time we have net tangible assets of $5,000,000 or less and our common stock
has
a market price per share of less than $5.00, transactions in our common stock
may be subject to the “penny stock” rules promulgated under the Securities
Exchange Act of 1934, as amended. Under these rules, broker-dealers who
recommend such securities to persons other than institutional accredited
investors must:
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make
a special written suitability determination for the
purchaser;
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receive
the purchaser’s written agreement to a transaction prior to
sale;
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provide
the purchaser with risk disclosure documents that identify certain
risks
associated with investing in “penny stocks” and that describe the market
for these “penny stocks,” as well as a purchaser’s legal remedies;
and
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obtain
a signed and dated acknowledgment from the purchaser demonstrating
that
the purchaser has actually received the required risk disclosure
document
before a transaction in “penny stock” can be
completed.
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If
our
common stock becomes subject to these rules, broker-dealers may find it
difficult to effect customer transactions and trading activity in our securities
may be adversely affected. As a result, the market price of our securities
may
be depressed, and you may find it more difficult to sell our
securities.
Initially,
it is probable that we will only be able to complete one business combination,
which will cause us to be solely dependent on a single business and a limited
number of products or services.
Our
initial business combination must be with an operating business with a fair
market value of at least 80% of our net assets (excluding deferred underwriting
fees)at the time of such business combination. Consequently, initially, it
is
probable that we will have the ability to complete a business combination with
only a single operating business.
It
is
probable that the company we acquire in our initial business combination will
have only a limited number of services or products. The resulting lack of
diversification:
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will
result in our dependency upon the performance of a single or small
number
of operating businesses;
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may
result in our dependency upon the development or market acceptance
of a
single or limited number of products, processes or services;
and
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may
subject us to numerous economic, competitive and regulatory developments,
any or all of which may have a substantial adverse impact upon the
particular industry in which we may operate subsequent to a business
combination.
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In
this
case, we will not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities
that
may have the resources to complete several business combinations in different
industries or different areas of a single industry so as to diversify risks
and
offset losses. Further, the prospects for our success may be entirely dependent
upon the future performance of the initial target business we acquire, if
any.
The
ability of our public stockholders to exercise their conversion rights may
not
allow us to effectuate the most desirable business combination or optimize
our
capital structure.
When
we
seek stockholder approval of any business combination, we will offer each public
stockholder (but not our initial stockholders) the right to have his, her or
its
shares of common stock converted to cash if the stockholder votes against the
business combination and the business combination is approved and completed.
Such holder must both vote against such business combination and then exercise
his, her or its conversion rights to receive a pro rata portion of the trust
fund. Accordingly, if our business combination requires us to use substantially
all of our cash to pay the purchase price, because we will not know how many
stockholders may exercise such conversion rights, we may either need to reserve
part of the trust fund for possible payment upon such conversion, or we may
need
to arrange third-party financing to help fund our business combination in case
a
larger percentage of stockholders exercise their conversion rights than we
expected. Therefore, we may not be able to consummate a business combination
that requires us to use all of the funds held in the trust account as part
of
the purchase price, or we may end up having a leverage ratio that is not optimal
for our business combination. This may limit our ability to effectuate the
most
attractive business combination available to us.
We
will be dependent upon interest earned on the trust account, net of taxes
payable on such interest, to fund our search for a target company and
consummation of a business combination.
As
of
June 30, 2007, $289,247 is available to us to fund our working capital
requirements. We are be dependent upon one-half of the interest earned on the
trust account, net of taxes payable on such interest, up to a maximum of $2.0
million, and the $380,000 of proceeds initally held outside of the trust
account, to provide us with the working capital we will need to search for
a
target company and consummate a business combination. If interest rates were
to
decline substantially, we may not have sufficient funds available to provide
us
with the working capital necessary to complete a business combination. In such
event, we would need to raise additional equity capital or borrow funds from
our
initial stockholders, including officers and directors, or others or be forced
to liquidate.
We
may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target
business, which could compel us to restructure or abandon a particular business
combination.
Although
we believe that the net proceeds of our initial public offering and the sale
of
the founder warrants, and one-half of the interest earned on the trust account,
net of taxes payable on such interest, will be sufficient to allow us to
consummate a business combination, in as much as we have not yet selected or
approached any prospective target businesses, we cannot ascertain the capital
requirements for any particular business combination. If the net proceeds of
our
initial public offering and the sale of the founder warrants, and one-half
of
the interest earned on the trust account, net of taxes payable on such interest,
prove to be insufficient, either because of the size of the business combination
or the depletion of available funds in search of a target business, or because
we become obligated to convert into cash a significant number of shares from
dissenting stockholders as a result of the exercise of conversion rights, we
will be required to seek additional financing through the issuance of equity
or
debt securities or other financing arrangements. We cannot 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 re-negotiate or
abandon that particular business combination and seek an alternative target
business candidate. In addition, if we consummate a business combination, we
may
require additional financing to fund the operations or growth of the target
business. The failure to secure adequate additional financing could adversely
affect the continued development or growth of the target business. None of
our
officers, directors or stockholders is required to provide any financing to
us
in connection with or after the consummation of a business
combination.
Our
initial stockholders, directors and officers control a substantial interest
in
us and thus may influence certain actions requiring stockholder
vote.
Our
initial stockholders, directors and officers collectively own 20% of our issued
and outstanding shares of common stock. In addition, certain of our initial
stockholders (specifically, M.O.T.A. Holdings Ltd.; FSGL Holdings Ltd; OLEV
Holdings Ltd; Shrem, Fudim, Kelner - Technologies Ltd.; Shrem, Fudim, Kelner
& Co. Ltd.; and Elisha Yanay) have purchased 3,625,000 warrants from us in a
private placement. Any exercise of these warrants by our initial stockholders
would increase their ownership percentage. These holdings could allow the
initial stockholders, directors and officers to influence the outcome of matters
requiring stockholder approval, including the election of directors and approval
of significant corporate transactions after completion of our initial business
combination.
Our
board
of directors will be divided into three classes, each of which will generally
serve for a term of three years with only one class of directors being elected
in each year. 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 initial stockholders, directors and officers, because
of
their ownership position, will have considerable influence regarding the
outcome. Accordingly, our initial stockholders, directors and officers will
continue to exert control at least until the consummation of a business
combination and may continue to exercise substantial control after a business
combination due to their significant ownership. In connection with the vote
required for our initial business combination, all of our initial stockholders,
directors and officers have agreed to vote the shares of common stock then
owned
by them, including any shares of common stock purchased in or following our
initial public offering, in accordance with the majority of the shares of common
stock voted by the public stockholders. However, the affiliates and
relatives of our initial stockholders, directors and officers were not
prohibited from purchasing units in our initial public offering and are not
prohibited from purchasing shares in the aftermarket, and they have full voting
rights with respect to any shares of common stock they acquired or may acquire,
either through our initial public offering or in subsequent market transactions.
If they do, we cannot assure you that our initial stockholders, directors and
officers, through their affiliates and relatives, will not have considerable
influence upon the vote in connection with a business combination.
Our
outstanding warrants may have an adverse effect on the market price of our
common stock and make it more difficult to effect a business
combination.
In
connection with our initial public offering, as part of the units, we have
issued warrants to purchase 18,750,000 shares of common stock. We have also
sold
a total of 3,625,000 warrants to M.O.T.A. Holdings Ltd.; FSGL Holdings Ltd;
OLEV
Holdings Ltd; Shrem, Fudim, Kelner - Technologies Ltd.; Shrem, Fudim, Kelner
& Co. Ltd.; and Elisha Yanay, certain of our initial stockholders, in a
private placement. To the extent we issue shares of common stock to effect
a
business combination, the potential for the issuance of substantial numbers
of
additional shares upon exercise of these warrants could make us a less
attractive acquisition vehicle in the eyes of a target business as such
securities, when exercised, will increase the number of issued and outstanding
shares of our common stock and reduce the value of the shares issued to complete
the business combination. Accordingly, our warrants may make it more difficult
to effectuate a business combination or increase the acquisition cost of a
target business. Additionally, the sale, or even the possibility of sale, of
the
shares underlying the warrants could have an adverse effect on the market price
for our securities or on our ability to obtain future public financing. If
and
to the extent these warrants are exercised, you may experience dilution to
your
holdings.
If
our initial stockholders exercise their registration rights, it may have an
adverse effect on the market price of our common stock and the existence of
these rights may make it more difficult to effect a business
combination.
The
majority of our initial stockholders are entitled to make up to two demands
that
we register the resale of their shares of common stock at any time after
their
shares are released from escrow. If the majority of our initial stockholders
exercise their registration rights, then there could be an additional 3,625,000
shares of common stock eligible for trading in the public market. In addition,
each of Shrem, Fudim, Kelner - Technologies Ltd. and Shrem, Fudim, Kelner
&
Co. Ltd., acting together, will be entitled to one demand and unlimited
piggy-back registration rights. The increase in the number of shares of common
stock eligible for trading in the public market may have an adverse effect
on
the market price of our common stock. In addition, the existence of these
rights
may make it more difficult to effect a business combination or increase the
acquisition cost of a target business, as the stockholders of a particular
target business may be discouraged from entering into a business combination
with us or will request a higher price for their securities as a result of
these
registration rights and the potential future effect their exercise may have
on
the trading market for our common stock.
If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to complete a business
combination.
In
order
not to be regulated as an investment company under the Investment Company Act
of
1940, as amended, or the Investment Company Act, unless we can qualify for
an
exclusion, we must ensure that we are engaged primarily in a business other
than
investing, reinvesting or trading of securities and that our activities do
not
include investing, reinvesting, owning, holding or trading “investment
securities.” Our business will be to identify and consummate a business
combination and thereafter to operate the acquired business or businesses.
We
will invest the funds in the trust account only in treasury bills issued by
the
United States having a maturity of 180 days or less or registered money market
funds meeting the criteria under Rule 2a-7 under the Investment Company Act
until we use them to complete a business combination. By limiting the investment
of the funds to these instruments, we believe that we will not be considered
an
investment company under the Investment Company Act. The trust account and
the
purchase of government securities for the trust account is intended as a holding
place for funds pending the earlier to occur of either: (i) the consummation
of
our primary business objective, which is a business combination or (ii) absent
a
business combination, our dissolution, liquidation and distribution of our
assets, including the proceeds held in the trust account, as part of our plan
of
dissolution and liquidation. If we fail to invest the proceeds as described
above or if we cease to be primarily engaged in our business as set forth above
(for instance, if our stockholders do not approve a plan of dissolution and
liquidation and the funds remain in the trust account for an indeterminable
amount of time), we may be considered to be an investment company and thus
be
required to comply with the Investment Company Act.
If
we are
deemed to be an investment company under the Investment Company Act, our
activities may be restricted, including:
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restrictions
on the nature of our investments;
and
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restrictions
on the issuance of securities;
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each
of
which may make it difficult for us to consummate a business combination. We
would also become subject to burdensome regulatory requirements, including
reporting, record-keeping, voting, proxy and disclosure requirements and the
costs of meeting these requirements would reduce the funds we have available
outside the trust account to consummate a business combination.
The
American Stock Exchange may decline to list or may in the future delist our
securities from quotation on its exchange which could limit investors' ability
to make transactions in our securities and subject us to additional trading
restrictions.
In
connection with our business combination, it is likely that the American Stock
Exchange may require us to file a new initial listing application and meet
its
initial listing requirements at that time as opposed to its more lenient
continued listing requirements. We cannot assure you that we will be able to
meet those initial listing requirements at that time. If the American Stock
Exchange delists our securities from trading on its exchange, we could face
significant material adverse consequences including:
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reduced
liquidity with respect to our
securities;
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a
determination that our common stock is a "penny stock" which will
require
brokers trading in our common stock to adhere to more stringent rules
and
possibly resulting in a reduced level of trading activity in the
secondary
trading market for our common stock;
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limited
amount of news and analyst coverage for our company; and
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a
decreased ability to issue additional securities or obtain additional
financing in the future.
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Because
any target business with which we attempt to complete a business combination
will be required to provide our stockholders with financial statements prepared
in accordance with and reconciled to U.S. generally accepted accounting
principles or U.S. GAAP, prospective target businesses may be
limited.
In
accordance with requirements of U.S. federal securities laws, in order to seek
stockholder approval of a business combination, a proposed target business
will
be required to have certain financial statements which are prepared in
accordance with, or which can be reconciled to, U.S. GAAP and audited in
accordance with U.S. GAAP. Many foreign companies do not have financial
statements prepared in accordance with U.S. GAAP and would need to incur
significant time and expense in order to obtain financial statements prepared
in
accordance with those principles. To the extent that a prospective target
business does not have financial statements which have been prepared with,
or
which can be reconciled to, U.S. generally accepted accounting principles,
and
audited in accordance with U.S. GAAP, we will not be able to acquire such target
business. We will enter into a business combination only with a target business
that has such financial statements. These financial statement requirements
may
limit the pool of potential target businesses which we may acquire.
If
we determine to change domiciles in connection with a business combination,
the
new jurisdiction’s laws will likely govern all of our material agreements
relating to the operations of the target business and we may not be able to
enforce our legal rights.
In
connection with a business combination, we may determine to relocate the home
jurisdiction of our business from Delaware to a jurisdiction outside of the
United States, including Israel. If we determine to do this, the new
jurisdiction’s corporate law will control our corporate governance requirements
and will determine the rights of our stockholders. The new jurisdiction’s
corporate law may provide less protection to our shareholders than is afforded
by Delaware law. Any such reincorporation will also likely subject us to foreign
regulation, including foreign taxation. In addition, upon reincorporation,
we
may become a “foreign private issuer” for purposes of U.S. securities laws,
which means that we may be subject to less stringent reporting requirements
and
that some provisions of the U.S. securities laws (such as the proxy rules and
the short-swing trading rules) would not apply to us. Furthermore, whether
or
not we reincorporate outside the United States, the new jurisdiction’s laws will
likely govern all of our material agreements relating to the operations of
the
target business. We cannot assure you that the system of laws and the
enforcement of existing laws in such jurisdiction would be as certain in
implementation and interpretation as in the United States or, in the case of
a
new U.S. jurisdiction, Delaware. The inability to enforce or obtain a remedy
under any of our future agreements in a new jurisdiction could result in a
significant loss of business, business opportunities or capital.
Risks
Associated with the Industry
We
rely on the experience and skills of our management team to identify future
trends in the technology and technology-related industries, and to take
advantage of these trends, but there is no guarantee that they will be able
to
do so.
The
process of predicting technological trends, especially in sectors developing
as
fast as the technology and technology-related sectors, is complex and uncertain.
After our initial business combination, we may commit significant resources
to
developing new products before knowing whether our investments will result
in
products the market will accept. Furthermore, we may not execute successfully
on
our vision because of, among other things, errors in product planning or timing,
technical hurdles that we fail to overcome in a timely fashion or a lack of
appropriate resources. If we are unable to identify and take advantage of future
trends in the technology and technology-related sectors, our business, financial
condition and results of operations will be adversely affected.
Our
investments in one or more companies in the technology or technology-related
industries may be extremely risky and we could lose all or part of our
investments.
An
investment in companies in the technology or technology-related industries
may
be extremely risky relative to an investment in other businesses because, among
other things, the companies we are likely to focus on:
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typically
have limited operating histories, narrower product lines and smaller
market shares than larger businesses, which tend to render them more
vulnerable to competitors’ actions and market conditions, as well as
general economic downturns;
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tend
to be privately-owned and generally have little publicly available
information and, as a result, we may not learn all of the material
information we need to know regarding these
businesses;
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are
more likely to depend on the management talents and efforts of a
small
group of people; and, as a result, the death, disability, resignation
or
termination of one or more of these people could have an adverse
impact on
the operations of any company we may
acquire;
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generally
have less predictable operating
results;
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may
from time to time be parties to
litigation;
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may
be engaged in rapidly changing businesses with products subject to
a
substantial risk of obsolescence;
and
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may
require substantial additional capital to support their operations,
finance expansion or maintain their competitive
position.
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If
we are unable to keep pace with changes in technology or consumer tastes and
preferences, the products or services of any target business that we acquire
could become obsolete.
The
technology and technology-related industries are generally characterized by
intense, rapid technological changes, evolving industry standards and new
product and service introductions, often resulting in product obsolescence
or
short product life cycles. Further, these sectors are very sensitive to changes
in consumer tastes and preferences. Our ability to compete after the
consummation of a business combination will be dependent upon our ability to
develop and introduce products and services that keep pace with changes in
technology and consumer tastes and preferences. The success of new products
or
services depends on several factors, including proper new product or service
definition, low component costs, timely completion and introduction of the
new
product or service, differentiation of the new product or service from those
of
our competitors and market acceptance of the new product or service. There
can
be no assurance that we will successfully identify new product or service
opportunities, develop and bring new products and services to the market in
a
timely manner or achieve market acceptance of our products and services or
that
products, services and technologies developed by others will not render our
products, services and technologies obsolete or noncompetitive. Our business,
financial condition and results of operations following a business combination
will depend on our ability to develop and introduce new products and services
into existing and emerging markets and to reduce the costs of existing products
and services. If we are unable to keep pace with these changes, our business,
financial condition and results of operations will be adversely
affected.
Consolidation
in the technology and technology-related industries may affect our ability
to
consummate a business combination and may result in increased competition
following a business combination.
There
has
been a trend toward consolidation in the technology and technology-related
industries for several years. We expect this trend to continue as companies
attempt to strengthen or hold their market positions in an evolving market
and
as companies are acquired or are unable to continue operations. The trend
towards consolidation will increase demand for target businesses. Furthermore,
we believe that industry consolidation will result in stronger competitors.
Additionally, rapid industry consolidation will lead to fewer customers, with
the effect that loss of a major customer could have a material impact on results
not anticipated in a customer marketplace composed of many participants. This
could lead to more variability in operating results and could adversely affect
on our business, operating results and financial condition following a business
combination.
Companies
in technology and technology-related industries require highly-skilled personnel
and if we are unable to attract and retain key personnel following a business
combination, we will be unable to effectively conduct our
business.
The
market for technical, creative, marketing and other personnel essential to
the
development and marketing of technology and technology-related products and
services and to the management of technology and technology-related businesses
is extremely competitive. Further, companies that have been the target of an
acquisition are often a prime target for recruiting of executives and key
creative talent. If we cannot successfully recruit and retain the employees
we
need following consummation of our business combination, or replace key
employees after their departure, our ability to develop and manage our
businesses will be impaired.
We
may be unable to protect or enforce the intellectual property rights of any
target business that we acquire or the target business may become subject to
claims of intellectual property infringement.
After
completing a business combination, the procurement and protection of trademarks,
copyrights, patents, domain names, trade dress and trade secrets may be critical
to our success. We will likely rely on a combination of copyright, trademark,
trade secret laws and contractual restrictions to protect any proprietary
technology and rights that we may acquire. Despite our efforts to protect those
proprietary technology and rights, we may not be able to prevent
misappropriation of those proprietary rights or deter independent development
of
technologies that compete with the business we acquire. Furthermore, key aspects
of networking technology are governed by industry-wide standards, which are
usable by all market entrants. Our competitors may file patent applications
or
obtain patents and proprietary rights that block or compete with our patents.
Litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, or to determine the validity and scope
of
the proprietary rights of others. It is also possible that third parties may
claim we have infringed their patent, trademark, copyright or other proprietary
rights. Claims or litigation, with or without merit, could result in substantial
costs and diversions of resources, either of which could have an adverse effect
on our competitive position and business. Further, depending on the target
business or businesses that we acquire, it is likely that we will have to
protect trademarks, patents, and domain names in an increasing number of
jurisdictions, a process that is expensive and may not be successful in every
location.
With
respect to certain proprietary rights of the target business or businesses
that
we acquire, such as trademarks and copyrighted materials, we expect that the
target business or businesses will have licensed such rights to third parties
in
the past and we may continue to enter into such agreements in the future. These
licensees may, unknowingly to us or the target business or businesses, take
actions that diminish the value of the target business or businesses’
proprietary rights or cause harm to the target business or businesses’
reputation. Also, products of the target business or businesses may include
software or other intellectual property licensed from third parties. It may
be
necessary in the future to seek or renew licenses relating to various aspects
of
these products. There can be no assurance that the necessary licenses would
be
available on acceptable terms, if at all. The inability to obtain certain
licenses or other rights or to obtain such licenses or rights on favorable
terms, or the need to engage in litigation regarding these matters, could have
an adverse effect on our business, operating results and financial condition
following a business combination. Moreover, the inclusion in our products of
software or other intellectual property licensed from third parties on a
nonexclusive basis could limit our ability to protect our proprietary rights
in
our products.
The
technology and technology-related industries are highly cyclical, which may
affect our future performance and ability to sell our products or services,
and
in turn, hurt our profitability.
Technology
and technology-related products and services tend to be relatively expensive
and
buyers tend to defer purchases during periods of economic weakness, opting
instead to continue to use what they already own. Conversely, during periods
of
economic strength, sales of technology and technology-related products and
services frequently exceed expectations. As a consequence, revenues and earnings
for these companies may fluctuate more than those of less economically sensitive
companies. Further, companies in the consumer segments of these industries
are
sensitive to a number of factors that influence the levels of consumer spending,
including economic conditions such as the rate of unemployment, inflation,
recessionary environments, the levels of disposable income, debt, interest
rates
and consumer confidence. Due to the cyclical nature of the technology and
technology-related industries, inventories may not always be properly balanced,
resulting in lost sales when there are shortages or write-offs when there are
excess inventories. This may adversely affect the business, financial condition
and results of operations of any target businesses that we may
acquire.
Government
regulation of certain technology or technology-related industries and the
uncertainty over government regulation of the Internet could harm our operating
results and future prospects.
Certain
technology or technology-related industries, including the telecommunications
and media sectors, have historically been subject to substantial government
regulation, both in the United States and overseas. If we consummate a business
combination with a target business or businesses in these sectors, changes
in
telecommunications requirements in the United States or other countries could
affect the sales of our products, limit the growth of the markets we serve
or
require costly alterations of current or future products. Future changes in
tariffs by regulatory agencies or application of tariff requirements to
currently untariffed services could affect the sales of our products for certain
classes of customers.
On
the
other hand, few laws or regulations currently apply directly to access of or
commerce on the Internet. The growth of the technology and technology-related
industries is closely tied to the growth of Internet use and new regulations
governing the Internet and Internet commerce could have an adverse effect on
our
business, operating results and financial condition following a business
combination. New regulations governing the Internet and Internet commerce could
include matters such as changes in encryption requirements, sales taxes on
Internet product sales and access charges for Internet service
providers.
Risks
Related to Operations in Israel
Acquisitions
of companies with operations in Israel entail special considerations and risks.
If we are successful in acquiring a target business with operations in Israel,
we will be subject to, and possibly adversely affected by, the following
risks:
If
there are significant shifts in the political, economic or military conditions
in Israel, it could have a material adverse effect on our
profitability.
If
we
consummate a business combination with a target business in Israel, it will
be
directly influenced by the political, economic and military conditions affecting
Israel at that time. Since the establishment of the State of Israel in 1948,
a
number of armed conflicts have taken place between Israel and its Arab
neighbors. A state of hostility, varying in degree and intensity, has caused
security and economic problems in Israel. Since September 2000, there has been
a
marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, primarily but not
exclusively in the West Bank and Gaza Strip, and negotiations between the State
of Israel and Palestinian representatives have effectively ceased. The election
of representatives of the Hamas movement to a majority of seats in the
Palestinian Legislative Council in January 2006 created additional unrest and
uncertainty. In July and August of 2006, Israel was involved in a full-scale
armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and
political party, in southern Lebanon, which involved missile strikes against
civilian targets in northern Israel that resulted in economic losses. On August
14, 2006, a ceasefire was declared relating to that armed conflict. Continued
hostilities between Israel and its neighbors and any failure to settle the
conflict could have a material adverse effect on the target business and its
results of operations and financial condition. Further deterioration of the
situation might require more widespread military reserve service by some of
the
target business’s Israeli employees and might result in a significant downturn
in the economic or financial condition of Israel. Israel is also a party to
certain trade agreements with other countries, and material changes to these
agreements could have an adverse effect on our business. Furthermore, several
Arab countries still restrict business with Israeli companies. The operations
of
the target business in Israel could be adversely affected by restrictive laws
or
policies directed towards Israel and Israeli businesses.
In
addition, the target business’s insurance may not cover losses that may occur as
a result of events associated with the security situation in the Middle East.
Although the Israeli government currently covers the reinstatement value of
direct damages that are caused by terrorist attacks or acts of war, there is
no
assurance that such government coverage will be maintained. Any of these factors
could have a material adverse effect on the target business and on our results
of operations and financial condition following a business combination with
the
target business.
Our
operations could be disrupted as a result of the obligation of personnel to
perform military service.
Generally,
all nonexempt male adult citizens and permanent residents of Israel, including
one of our officers and directors, are obligated to perform military reserve
duty annually for extended periods of time through the age of 45 (or older
for
citizens with certain occupations), and are subject to being called to active
duty at any time under emergency circumstances. Executive officers or key
employees of a target business may also reside in Israel and be required to
perform similar annual military reserve duty. In response to increases in
terrorist activity and the recent armed conflict with Hezbollah, there have
been
periods of significant call-ups of military reservists. It is possible that
there will be additional call-ups in the future. Our and the target business’s
operations could be disrupted by the absence for a significant period of one
or
more of these directors, officers or key employees due to military service.
Any
such disruption could adversely affect our operations and
profitability.
Because
a substantial portion of many Israeli companies’ revenues is generated in
dollars and euros, while a significant portion of their expenses is incurred
in
Israeli currency, the revenues of a target business may be reduced due to
inflation in Israel and currency exchange rate
fluctuations.
A
substantial portion of many Israeli companies’ revenues is generated in dollars
and euros, while a significant portion of their expenses, principally salaries
and related personnel expenses, are paid in Israeli currency. As a result,
a
target business will likely be exposed to the risk that the rate of inflation
in
Israel will exceed the rate of devaluation of Israeli currency in relation
to
the dollar or the euro, or that the timing of this devaluation will lag behind
inflation in Israel. Because inflation has the effect of increasing the dollar
and euro costs of an Israeli company’s operations, it would therefore have an
adverse effect on our dollar-measured results of operations following a business
combination.
The
termination or reduction of tax and other incentives that the Israeli government
provides to qualified domestic companies may increase the costs involved in
operating a company in Israel.
The
Israeli government currently provides tax and capital investment incentives
to
qualified domestic companies. The availability of these tax benefits, however,
is subject to certain requirements, including, among other things, making
specified investments in fixed assets and equipment, financing a percentage
of
those investments with capital contributions by the entity receiving the tax
benefits, compliance with a marketing program submitted to the Investment Center
of Israel’s Ministry of Industry, Trade and Labor, filing of certain reports
with the Investment Center and compliance with Israeli intellectual property
laws. Additionally, the Israeli government currently provides grant and loan
programs relating to research and development, marketing and export activities.
In recent years, the Israeli government has reduced the benefits available
under
these programs and Israeli governmental authorities have indicated that the
government may in the future further reduce or eliminate the benefits of those
programs. We cannot assure you that such benefits and programs would continue
to
be available to the target business following a business combination, or if
available, to what extent. If such benefits and programs were terminated or
further reduced, it could have an adverse effect on our results of operations
following a business combination or make a specific business combination less
attractive. Without limiting the foregoing, if the foregoing tax benefits were
terminated or reduced, the amount of taxes payable by the target business would
likely increase, which could adversely affect our results of
operations.
Any
Israeli government grants received by the target business for research and
development expenditures limit the ability of the target business to manufacture
products and transfer know-how outside of Israel. In addition, our acquisition
of the target business may be subject to the approval of certain Israeli
governmental entities.
The
target business we may acquire may be receiving, or may receive following the
business combination, grants from the government of Israel through the Office
of
the Chief Scientist of Israel’s Ministry of Industry, Trade and Labor for the
financing of a portion of its research and development expenditures in Israel.
Upon our acquisition of such entity, the Office of Chief Scientist will
determine whether the entity will be eligible to continue receiving grants
following the business combination. When know-how or products are developed
using Chief Scientist grants, the terms of these grants limit the transfer
of
the know-how out of Israel and the ability of the entity receiving such grants
to manufacture products based on this know-how outside of Israel without the
prior approval of the Office of the Chief Scientist. Any approval, if given,
may
be subject to additional obligations or limitations. If the target business
fails to comply with the conditions imposed by the Office of the Chief
Scientist, including the payment of royalties with respect to grants received,
it may be required to refund any payments previously received, together with
interest and penalties. The difficulties in obtaining the approval of the Office
of the Chief Scientist for the transfer of manufacturing rights out of Israel
could have a material adverse effect on strategic alliances or other
transactions that we may wish the target business to enter into in the future
that provide for such a transfer. In addition, our acquisition of a target
business that shall have received, prior to such acquisition, any tax benefits
from the Investment Center and/or research and development grants from the
Office of the Chief Scientist, may be subject to the approval of such entities,
which approval may be subject to, among other things, an undertaking to observe
the law governing the grant programs of the Office of the Chief
Scientist.
The
anti-takeover effects of Israeli laws may delay or deter a change of control
of
the target business.
Under
the
Israeli Companies Law—1999, referred to as the Companies Law, a merger is
generally required to be approved by the board of directors and, unless certain
requirements described under the Companies Law are met, the shareholders of
each
of the merging companies. If the share capital of the company that will not
be
the surviving company is divided into different classes of shares, the approval
of each class is also required. A court may disapprove or delay the consummation
of a merger if it determines that there is a reasonable concern that the
surviving company will be unable to satisfy the obligations of the company
not
surviving the merger. In addition, a merger may not be completed unless at
least
50 days shall have passed from the date that a proposal for approval of the
merger was filed by each merging company with the Israeli Registrar of Companies
and 30 days have elapsed since shareholder approval of both merging companies
was obtained.
The
Israeli Companies Law provides that an acquisition of shares in an Israeli
public company must be made by means of a special tender offer, if as a result
of the acquisition, the purchaser would become a holder of 25% or more of the
voting power at general meetings, and no other shareholder owns a 25% stake
in
the company. Similarly, the Companies Law provides that an acquisition of shares
in a public company must be made by means of a special tender offer if, as
a
result of the acquisition, the purchaser would become a holder of 45% or more
of
the voting power at general meetings, unless someone else already holds 45%
of
the voting power. An acquisition from a 25% or 45% holder, which turns the
purchaser into a 25% or 45% holder, respectively, does not require a tender
offer. An exception to the tender offer requirement may also apply when the
additional voting power is obtained by means of a private placement approved
by
the general meeting of shareholders (which approval shall also refer to the
purchaser becoming a holder of 25% or 45%, as the case may be, of the voting
power in the subject company). These rules also do not apply if the acquisition
is made by way of a merger.
The
Companies Law also provides specific rules and procedures for the acquisition
of
shares held by minority shareholders, if the majority shareholder shall hold
more than 90% of the outstanding shares. Such acquisition shall be made through
a tender offer to all of the company’s shareholders for the purchase of all of
the issued and outstanding shares of the company. If the dissenting and
non-responsive shareholders hold more than 5% of the issued and outstanding
share capital of the company, the acquirer may not acquire additional shares
of
the company from shareholders who accepted the tender offer if following such
acquisition the acquirer would then own over 90% of the company’s issued and
outstanding share capital.
These
laws may have the effect of delaying or deterring a change in control of an
Israeli company, and should we desire to acquire control of a target business
that is an Israeli company we may encounter difficulties achieving such
control.
We
may be deemed to be effectively managed and controlled from Israel, and thus
be
treated as an Israeli entity for tax purposes.
Although
we were formed under Delaware law and are a U.S. corporation, our directors
and
officers are all Israeli residents, and shall be managing our affairs from
Israel. Additionally, as we will be searching for a target business that has
operations or facilities located in Israel, or that intends to establish
operations or facilities in Israel, such as research and development,
manufacturing or executive offices, following our initial business combination,
most of our activities shall be in Israel. Therefore, we may be deemed to be
effectively managed and controlled from Israel, and thus be treated as an
Israeli entity for tax purposes, in which case we will be taxed according to
Israeli law.
Risks
Relating to Enforcement of Legal Process
Third
parties are likely to have difficulty in enforcing judgments obtained in the
United States against us, our officers or our
directors.
We,
as
well as each of our officers and directors, have appointed Corporation Service
Company as our agent to receive service of process in any action against us
in
the United States.
After
the
consummation of a business combination, it is possible that substantially all
of
our assets will be located outside of the United States. As a result, it may
not
be possible for investors in the United States to enforce their legal rights
against us or to enforce judgments of United States courts given that
substantially all of our assets may be located outside of the United States.
Each
of
our directors and officers resides outside the United States. Each of our
officers or directors has consented to service of process in the State of New
York and to the jurisdiction of the courts of the State of New York or of the
United States of America for the Southern District of New York.
However,
since most of our and such persons’ assets are outside the United States, any
judgment obtained in the United States against us or such persons may not be
collectible within the United States. Furthermore, there is substantial doubt
as
to the enforceability of civil liabilities under the Securities Act or the
Exchange Act in original actions instituted in Israel, and the enforceability
of
a judgment obtained in the United States against us or our officers and
directors may be difficult.