CONDENSED NOTES TO FINANCIAL
STATEMENTS
NOTE A BASIS OF PRESENTATION
The accompanying unaudited condensed financial
statements have been prepared by the Company (as defined below) and reflect all
adjustments, consisting only of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the financial
position as of September 30, 2007 and the financial results for the three and
nine months ended September 30, 2006 and 2007, and the period September 1, 2005
(inception) to September 30, 2007, in accordance with accounting principles
generally accepted in the United States of America for interim financial
statements and pursuant to Form 10-Q and Regulation S-X.
Certain
information and footnote disclosures normally included in the Companys annual
audited financial statements have been condensed or omitted pursuant to such
rules and regulations. The results of operations for the three and nine
months ended September 30, 2007 and for the period from September 1, 2005 (date
of inception) to September 30, 2007 are not necessarily indicative of the
results of operations to be expected for a full fiscal year. These
interim condensed financial statements should be read in conjunction with the
financial statements for the fiscal year ended December 31, 2006, which are
included in the Companys Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 26, 2007.
NOTE
BORGANIZATION AND BUSINESS OPERATIONS
Oracle
Healthcare Acquisition Corp. (the Company) was incorporated in Delaware on
September 1, 2005. The Company was formed to acquire an operating business in
the healthcare industry through a merger, capital stock exchange, asset
acquisition or other similar business combination. The Company has neither
engaged in any operations nor generated revenues to date, with the exception of
interest income. The Company is considered to be in the development stage as
defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting
and Reporting By Development stage Enterprises and is subject to the risks
associated with activities of development stage companies. The Company has
selected December 31st as its fiscal year-end.
The
registration statement for the Companys initial public offering (the Offering)
(as described in Note D) was declared effective on March 2, 2006. The Company
consummated the Offering on March 8, 2006 and received net proceeds of
approximately $113,500,000. The Companys management has broad discretion with
respect to the specific application of the net proceeds of the Offering,
although substantially all of the net proceeds of the Offering are intended to
be generally applied toward consummating a business combination with (or
acquisition of) an operating business in the healthcare industry (Business
Combination). Upon the closing of the Offering, approximately 94.5% of the
gross proceeds, after payment of certain expenses related to the Offering and
amounts paid to the underwriters, was placed in a trust account at Lehman
Brothers, Inc., maintained by Continental Stock Transfer & Trust Company
acting as trustee (the Trust Account). The proceeds held in the Trust Account
will be invested in U.S. government securities, defined as any Treasury Bill
issued by the United States government having a maturity of one hundred and
eighty days or less or any open ended investment company registered under the
Investment Company Act of 1940 that holds itself out as a money market fund and
bears the highest credit rating issued by a United States nationally recognized
rating agency, until the earlier of (i) the consummation of the Companys
initial Business Combination or (ii) the distribution of the Trust Account as
described below. On March 2, 2006, immediately prior to the Offering, two
stockholders purchased in a private placement 416,667 Warrants (as defined
below), for a combined total of 833,334 Warrants, at a price of $1.20 per
Warrant (an aggregate purchase price of approximately $1,000,000) directly from
the Company and not as part of the Offering. The proceeds from the sale of
these Warrants may be used to pay for business, legal and accounting due
diligence on prospective acquisitions and continuing general and administrative
expenses. The Company, after signing a definitive agreement for the acquisition
of a target business, will submit such transaction for stockholder approval. In
the event that 20% or more of the outstanding stock (excluding, for this
purpose, those shares of common stock issued prior to the Offering) vote
against the Business Combination and exercise their conversion rights described
below, the Business Combination will not be consummated. Public stockholders
voting against a Business Combination will be entitled to convert their stock
into a pro rata share of the trust account (including the additional 2% fee of
the gross proceeds payable to the underwriters upon the Companys consummation
of a Business Combination), including any interest earned (net of taxes
payable) on their pro rata share, if the Business Combination is approved and
consummated. However, voting against the Business Combination alone will not
result in an election to exercise a stockholders conversion rights. A
stockholder must also affirmatively exercise such conversion rights at or prior
to the time the Business Combination is voted upon by the stockholders. All of
the Companys
7
stockholders prior
to the Offering, including all of the officers and directors of the Company,
have agreed to vote all of the shares of common stock held by them, including
any shares of common stock purchased in or following the Offering, in
accordance with the vote of the majority of all other stockholders of the
Company, other than the existing stockholders, officers and directors, with
respect to any Business Combination.
In the event that the Company does not consummate a
Business Combination within 18 months from the date of the consummation of the
Offering, or 24 months from the consummation of the Offering if certain
extension criteria have been satisfied, the proceeds held in the Trust Account
will be distributed to the Companys public stockholders, excluding the
existing stockholders to the extent of their initial stock holdings. Since the
Offering was consummated on March 8, 2006, the above-mentioned 18-month period
was set to end on September 8, 2007 unless otherwise extended. In furtherance
of the Companys corporate purpose, on September 8, 2007, the Company entered
into a letter of intent with a potential target business, thereby extending the
deadline to consummate a business combination from September 8, 2007 to March
8, 2008. On October 17, 2007, the letter of intent with the potential target
business was terminated. Pursuant to the provisions of the Companys Amended
and Restated Certificate of Incorporation, the Company will liquidate as
promptly as practicable, unless negotiations in respect of this transaction are
recommenced, and a business combination is consummated. However, there can be
no assurance that the Company will be able to recommence negotiations with such
potential target business or, if negotiations are recommenced, consummate a
business combination in the time allotted.
NOTE
CSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1]
Common stock:
In February 2006, the Board of Directors of the
Company approved a six-for-five stock split to all shareholders of record on
February 16, 2006. All transactions and disclosures in the financial
statements, related to the Companys common stock, have been adjusted to
reflect the effects of the stock split.
[2]
Warrant liability:
The Company has outstanding Warrants pursuant to the
terms of a Warrant Agreement, dated March 2, 2006 (the Warrant Agreement),
which provides for the Company to register the shares underlying the Warrants
but is silent as to the penalty to be incurred in the absence of the Companys
ability to deliver registered shares to the Warrant holders upon Warrant
exercise. Under EITF No. 00-19 Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock (EITF No. 00-19),
registration of the common stock underlying the Companys Warrants is assumed
to be not within the Companys control. As a result, the Company must assume
that it could be required to settle the Warrants on a net-cash basis, thereby
necessitating the treatment of the potential settlement obligation as a
liability. Further, EITF No. 00-19 requires the Company to record the potential
settlement liability at each reporting date using the current estimated fair
value of the Warrants, with any changes being recorded through the Companys
statements of operations. The potential settlement obligation related to the
Warrants will continue to be reported as a liability until such time that the
Warrants are exercised, expire, or the Company is otherwise able to modify the
registration requirements in the Warrant Agreement to remove the provisions
which require this treatment. The fair value of the warrant liability is
determined using the trading value of the Warrants.
[3]
Income per common share:
The Company complies with SFAS No. 128, Earnings Per
Share. SFAS No. 128 requires dual presentation of basic and diluted income per
common share for all periods presented. Basic income per common share excludes
dilution and is computed by dividing income available to common stockholders by
the weighted average number of common shares outstanding for the period.
Diluted income per common share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then share in the income of the Company. The difference between the number of
shares used to compute basic income per common share and diluted income per
common share relates to additional shares to be issued upon the assumed
exercise of stock options and warrants, net of shares hypothetically
repurchased at the average market price with the proceeds of exercise.
8
[4]
Use of estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
[5]
Income tax:
The
Company complies with the Financial Accounting Standards Board (FASB) SFAS
109, Accounting for Income Taxes, which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
future taxable or deductible amounts, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
On
July 13, 2006, FASB released FASB Interpretation No. 48 Accounting for
Uncertainty in Income Taxes (FIN 48). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Companys tax returns to determine whether
the tax positions are more-likely-than-not of being sustained by the
applicable tax authority. Tax benefits of positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax expense in the
current year. Adoption of FIN 48 is required for fiscal years beginning after
December 15, 2006 and is to be applied to all open tax years as of the
effective date. The Company feels that there are no uncertain tax positions
being taken.
[6]
Recently issued accounting standards:
In
September 2006, the Statement of Financial Accounting Standard (the FASB)
issued SFAS No. 157, Fair Value Measurements.
This Statement defines fair value, established a framework for measuring
fair value in generally accepted accounting principles, expands disclosure
about fair value measurements, and applies under other pronouncements that
require or permit fair value measurements, SFAS 157 does not require any new
fair value measurements. However, the FASB anticipates that for some entities,
the application of SFAS No. 157 will change current practice. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, which for the Company would be its fiscal year beginning
January 1, 2008. The Company is currently evaluating the impact of SFAS No. 157
but does not expect that it will have a material impact on its condensed
interim financial statements.
In September
2006, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 108, Considering the Effects of the Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB
108 provides guidance on how prior year misstatements should be considered when
quantifying misstatements in the current year financial statements. SAB 108
requires registrants to quantify misstatements using both balance sheet and an
income statement approach and evaluate whether either approach results in
quantifying a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material. SAB 108 does not change the guidance in
SAB 99, Materiality, when evaluating the materiality of misstatements. SAB
108 is effective for fiscal years ending after November 15, 2006. Upon initial
application, SAB 108 permits a one-time cumulative effect adjustment to
beginning retained earnings. The Company is currently evaluating the potential
impact, if any, that the adoption of SAB 108 will have on its condensed interim
financial statements.
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities.
This statement permits entities to choose to measure many financial
instruments at fair value. Unrealized gains and losses on items for which
option has been elected are reported in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company is currently assessing
impact of SFAS 159 on its condensed interim financial statements.
In
November, 2007, the Securities and Exchange Commission's issued Staff
Accounting Bulletin (SAB) No. 109, "Written Loan Commitments Recorded at
Fair Value Through Earnings" ("SAB 109"). SAB 109 provides the
Staff's views on the accounting for written loan commitments recorded at fair
value under generally accepted accounting principles (GAAP). SAB 109 revises
the Staff's views on incorporating expected net future cash flows related to
loan servicing activities in the fair value measurement of a written loan
commitment. SAB 109 retains the Staff's views on incorporating expected net
future cash flows related to internally-developed intangible assets in the fair
value measurement of a written loan commitment. SAB 109 revises and rescinds
portions of SAB 105, "Application of Accounting Principles to Loan
Commitments", which provided the views of the Staff regarding derivative
loan commitments that are accounted for at fair value through earnings pursuant
to Statement of Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Company is currently
evaluation the potential impact, if any, that the adoption of SAB 109 will have
on its condensed interim financial statements.
[7]
Cash and cash equivalents:
The
Company considers all highly liquid investments purchased within an original
maturity of three months or less to be cash equivalents.
9
[8]
Concentration of credit risk:
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash accounts in a financial institution, which at times,
exceeds the Federal depository insurance coverage of $100,000. The Company has
not experienced losses on these accounts and management believes the Company is
not exposed to significant risks on such accounts.
[9]
Fair value of financial instruments:
The
fair value of the Companys assets and liabilities, which qualify as financial
instruments under SFAS No. 107, Disclosure About Fair Value of Financial
Instruments, approximates the carrying amounts represented in the balance
sheet.
NOTE
DTHE OFFERING
On
March 8, 2006, the Company sold 15,000,000 units (Units) at a price of $8.00
per Unit in the Offering. Each Unit consists of one share of the Companys
common stock, $0.0001 par value, and one redeemable common stock purchase
warrant (Warrant). Each Warrant entitles the holder to purchase from the
Company one share of common stock at an exercise price of $6.00 commencing on
the later of (a) March 2, 2007 or (b) the completion of a Business Combination
with a target business or the distribution of the Trust Account. The Warrants
expire on March 2, 2010. The Warrants are redeemable at a price of $0.01 per
Warrant upon 30 days notice after the Warrants become exercisable, only in the
event that the last sale price of the common stock is at least $11.50 per share
for any 20 trading days within a 30 trading day period ending on the third day
prior to the date on which notice of redemption is given.
NOTE E
INCOME TAXES
Income
tax expense for the three and nine months ended September 30, 2007 and the
period from September 1, 2005 (inception) to September 30, 2007 was
approximately $300,000, $1,700,000 and $3,300,000, respectively. The expense is
for current federal and state income taxes as well as deferred taxes.
The
effective tax rate of (3%) for the three months ended September 30, 2007 and
(10%) for the nine month period ended September 30, 2007, differs from the
federal statutory tax rate of approximately 35% as a result of the gain on the
warrant liability, which is a permanent difference, and the deferred tax asset.
Deferred
income taxes are provided for the differences between the bases of assets and
liabilities for financial reporting and income tax purposes. As of September
30, 2007, the Company has a deferred tax asset of approximately $365,000. As of
December 31, 2006, the deferred tax asset was approximately $206,000 and had a
full valuation allowance on it. Management has changed its position at
September 30, 2007 and feels that the deferred tax asset will be fully
utilized.
NOTE F
SUBSEQUENT EVENT
On October 22, 2007, the Company issued a press release and
filed a Form 8-K with the Securities and Exchange Commission announcing that it
had terminated the letter of intent with a company for a potential business
combination, which was entered into on September 8, 2007. Pursuant to the
provisions of the Companys Amended and Restated Certificate of Incorporation,
the Company will liquidate as promptly as practicable, unless negotiations in
respect of this transaction are recommenced, and a business combination is
consummated. However, there can be no assurance that the Company will be able
to recommence negotiations with such potential target business or, if
negotiations are recommenced, consummate a business combination in the time
allotted.
10
Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations.
This Quarterly Report on Form 10-Q includes
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. We have based these forward-looking
statements on our current expectations and projections about future events.
These forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions about us that may cause our actual results,
levels of activity, performance or achievements to be materially different from
any future results, levels of
activity, performance or achievements
expressed or implied by such forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as may, should, could, would, expect, plan, anticipate,
believe, estimate, continue, or the negative of such terms or
other similar expressions. Factors that might cause or contribute to such a
discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission filings. The following discussion should be
read in conjunction with our financial statements and related notes thereto
included elsewhere in this report.
We
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
We cannot assure you that any future results, performance or achievements will
be achieved. For a discussion of certain of these risks, uncertainties and
other factors, see Risk Factors and Cautionary Note Regarding
Forward-Looking Statements included in our Final Prospectus dated March 2,
2006.
Overview
We were formed on September 1, 2005, for the
purpose of acquiring an operating business in the healthcare industry through a
merger, capital stock exchange, asset acquisition or other similar business
combination. Our initial business combination must be with an operating
business whose fair market value is equal to at least 80% of our net assets at
the time of such acquisition.
On March 8, 2006, we consummated our initial
public offering of 15,000,000 units. Each unit consists of one share of our
common stock, $0.0001 par value, and one redeemable common stock purchase
warrant. Each warrant entitles the holder to purchase from us one share of
common stock at an exercise price of $6.00 commencing on the later of
(a) March 2, 2007 or (b) the completion of a business
combination with a
target
business or the distribution of the trust account. The warrants expire on
March 2, 2010. The warrants are redeemable by us at a price of $0.01 per
warrant upon 30 days notice after the warrants become exercisable, only in the
event that the last sale price of the common stock is at least $11.50 per share
for any 20 trading days within a 30 trading day period ending on the third day
prior to the date on which notice of redemption is given.
To
date, our efforts have been limited to organizational activities, completion of
our initial public offering and the evaluation of possible business
combinations. In furtherance of our corporate purpose, on September 8, 2007, we
entered into a letter of intent with a potential target business, thereby
extending the deadline to consummate a business combination from September 8,
2007 to March 8, 2008. On October 17, 2007, the letter of intent with the
potential target business was terminated. We intended to utilize cash derived
from the proceeds of our initial public offering, our capital stock, debt or a
combination of cash, capital stock and debt, to effect such business
combination. Pursuant to the provisions of our Amended and Restated Certificate
of Incorporation, we will liquidate as promptly as practicable, unless
negotiations in respect of this transaction are recommenced, and a business
combination is consummated. However, there can be no assurance that we will be
able to recommence negotiations with such potential target business or, if
negotiations are recommenced, consummate a business combination in the time
allotted. As described in greater detail below, if we are forced to liquidate,
the per-share liquidation may be less than the price at which public
stockholders purchased their shares because of the expenses related to our
initial public offering, our general and administrative expenses and the
anticipated costs of seeking a business combination.
For
the three and nine months ended September 30, 2007, we had net income of
$10,162,963 and $14,579
,043, respectively, derived primarily from a gain on
a change in the warrant liability and income related to the cash held in our
trust account. For the period from September 1, 2005 (date of inception)
through
September
30, 2007, we had net income of $21,496,858, derived
primarily from a gain on a change in the warrant liability and income related
to the cash held in our trust account.
11
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor
generated revenues to date (with the exception of interest income), nor is it
likely that we will do so. Since our inception, our only activities have been
organizational activities and those necessary to prepare for our Offering, and
thereafter, certain expenses related to pursuing a target business. We will not
generate any operating revenues until the completion of a business combination,
if any. We have generated non-operating income in the form of interest income
on cash and cash equivalents and our other short term investments.
We have met with target companies,
service professionals and other intermediaries to discuss our company, the
background of our management and our combination preferences. In the course of
these discussions, we have also spent time explaining the capital structure of
the initial public offering, the business combination approval process and the
timeline under which we may operate before the proceeds of our initial public offering
are returned to investors. In furtherance of our corporate purpose, on
September 8, 2007, we entered into a letter of intent with a potential target
business, thereby extending the deadline to consummate a business combination
from September 8, 2007 to March 8, 2008. On October 17, 2007, the letter of
intent with the potential target business was terminated. Pursuant to the
provisions of our Amended and Restated Certificate of Incorporation, we will
liquidate as promptly as practicable, unless negotiations in respect of this
transaction are recommenced,
and a business combination is consummated
. However, there can be no assurance that
we will be able to recommence negotiations with such potential target business
or, if
negotiations are recommended,
consummate a business combination in the time allotted.
Liquidity and Capital Resources
The net proceeds from our initial public offering,
after deducting certain offering expenses of approximately $500,000, and an
underwriting discount of $6,000,000, were approximately $113,500,000, all of
which was placed into a trust account. On March 2, 2006, immediately prior to
our initial public offering, two of our founding directors, Larry N. Feinberg
and Joel D. Liffmann, each purchased in a private placement 416,667 warrants,
for a combined total of 833,334 warrants, at a price of $1.20 per warrant (an
aggregate purchase price of approximately $1,000,000) directly from us. The
proceeds from the sale of these warrants are available to be used by us to
provide for business, legal and accounting due diligence on prospective
acquisitions and to pay for continuing general and administrative expenses. As
of September
30, 2007
, we had $53,696 of proceeds
available for such uses.
In the
event that we recommence negotiations with the potential target business with
whom we previously entered into a letter of intent, we would expect to use
substantially all of the net proceeds from our initial public offering to
acquire such target business, including structuring, negotiating and
consummating such business combination. To the extent that our capital stock is
used in whole or in part as consideration to effect such business combination,
the proceeds held in the trust account as well as any other net proceeds not
expended will be used to finance the operations of such target business. We
believe we will have sufficient available funds, or access to funds, outside of
the trust account to operate through March 8, 2008. Until we enter into a
business combination, if any, we expect to use our available resources for
general working capital as well as legal, accounting and due diligence expenses
for structuring and negotiating a business combination and legal and accounting
fees relating to our Securities and Exchange Commission reporting obligations.
In the event that we recommence negotiations with the
potential target business with whom we previously entered into a letter of
intent, of which there can be no assurance, we may need to raise additional
funds through a private offering of debt or equity securities if such funds are
required to consummate a business combination with such target business. Our
primary liquidity requirements through March 8, 2008 include approximately
$400,000 for expenses for the due diligence and investigation of a target
business which includes legal, accounting and other expenses associated with
structuring, negotiating and documenting an initial business combination;
$180,000 for administrative services and support payable to Oracle Investment
Management, an affiliate of
Mr. Feinberg, representing an aggregate of $7,500 per month for up to 24
months; $80,000 for legal and accounting fees relating to our SEC reporting
obligations; and approximately $340,000 for general working capital that will
be used for miscellaneous expenses and reserves, as well as for director and
officer liability insurance premiums.
In
connection with the initial public offering, we agreed to pay the underwriters
additional underwriting fees of $2,400,000, which the underwriters have agreed
to defer until the consummation of our initial business combination. We expect
that such fees will be paid out of the proceeds held in the trust account. In
the event that negotiations in respect of the potential business combination
discussed above are not recommenced, of which there can be no assurance, and we
are required to liquidate, we will distribute to our public stockholders the
principal and accumulated interest in the trust account,
12
including the
amount representing the deferred portion of the underwriters fee held in the
trust account following the consummation of our initial public offering.
As of
September 30, 2007, the proceeds in the trust account were invested in a money
market fund. The average credit rating in the portfolio of the money market
fund was Aaa/AAA, as rated by Moodys and S&P.
We
currently have no operating business. Since our initial public offering, we
have been actively engaged in sourcing a suitable business combination
candidate. We have met with target companies, service professionals and other
intermediaries to discuss our company, the background of our management and our
combination preferences. In the course of these discussions, we have also spent
time explaining the capital structure of the initial public offering, the
combination approval process and the timeline under which we are operating
before the proceeds of the offering are returned to investors. In furtherance
of our corporate purpose, on September 8, 2007, we entered into a letter of
intent with a potential target business, thereby extending the deadline to
consummate a business combination from September 8, 2007 to March 8, 2008. On
October 17, 2007, the letter of intent with the potential target business was
terminated. If we are unable to recommence negotiations with the target
business and consummate the business combination relating thereto by March 8,
2008, we will be forced to liquidate. However, there can be no assurance that
we will be able to recommence negotiations with such potential target business
or, if negotiations are recommenced, consummate a business combination in the
time allotted. If we are forced to liquidate, the per-share liquidation may be
less than the price at which public stockholders purchased their shares because
of the expenses related to our initial public offering, our general and
administrative expenses and the anticipated costs of seeking a business
combination. Additionally, if third parties make claims against us, the
offering proceeds held in the trust account could be subject to those claims,
resulting in a further reduction to the per-share liquidation price. Under
Delaware law, our stockholders who have received distributions from us may be
held liable for claims by third parties to the extent such claims have not been
paid by us. Furthermore, our warrants will expire worthless if we liquidate
before the completion of a business combination.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the sensitivity of income to changes
in interest rates, foreign exchanges, commodity prices, equity prices and other
market-driven rates or prices. We are not presently engaged in and, unless we
recommence negotiations with the potential target business with whom we
previously entered into a letter of intent and consummate a business
combination with such target business, we will not engage in any
substantive commercial business. Accordingly, we are not and, until such time
as we consummate a business combination, we will not be, exposed to risks
associated with foreign exchange rates, commodity prices, equity prices or
other market-driven rates or prices. The net proceeds of our initial public
offering held in the trust account will be invested in either U.S. government
securities or any open ended investment company registered under the
Investment Company Act of 1940 that holds itself out as a money market fund and
bears the highest credit rating issued by a United States nationally recognized
rating agency. Given our limited risk in our exposure to money market funds, we
do not view the interest rate risk to be significant.
Item 4. Controls
and Procedures.
Our management carried out an evaluation, with the
participation of our chief operating officer (principal executive officer) and
our chief financial officer (principal financial and accounting officer), of
the effectiveness of our disclosure controls and procedures as of September 30,
2007. Based upon that evaluation, our chief operating officer and chief
financial officer concluded that our disclosure controls and procedures were
effective to ensure that information required to be disclosed by us in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.
There has not been any change in our internal
control over financial reporting in connection with the evaluation required by
Rule 13a-15(d) under the Exchange Act that occurred during the
quarter ended September 30, 2007, that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II
- OTHER INFORMATION
Item 1. Legal
Proceedings.
There are no material legal proceedings pending
against us.
13
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
On March 8, 2006, we consummated our initial
public offering of 15,000,000 units. Each unit consists of one share of common
stock and one warrant. Each warrant entitles the holder to purchase from us one
share of our common stock at an exercise price of $6.00. The units were sold at
an offering price of $8.00 per unit, generating total gross proceeds of
$120,000,000. CRT Capital Group LLC acted as lead underwriter. The securities
sold in the offering were registered under the Securities Act of 1933 on a
registration statement on Form S-1 (No. 333-128748). The Securities
and Exchange Commission declared the registration statement effective on
March 2, 2006.
We paid a total of $6,000,000 in underwriting
discounts and commissions, and approximately $500,000 has been paid for costs
and expenses related to the offering. In connection with the initial public
offering, we agreed to pay the underwriters an additional underwriting fee of
$2,400,000 upon the consummation of our initial business combination. We expect
that such fees and expenses will be paid out of the proceeds in the trust
account.
In the event
that negotiations in respect of the potential business combination discussed
above are not recommenced and we are required to liquidate, we will distribute
to our public stockholders the principal and accumulated interest in the trust
account, including the amount representing the deferred portion of the
underwriters fee held in the trust account following the consummation of our
initial public offering.
After deducting the underwriting discounts and the
offering expenses, the total net proceeds to us from the offering were
approximately $114,000,000, of which $113,500,000 was deposited into a trust
fund (or $7.57 per unit sold in the offering) and the remaining proceeds are
available to be used to provide for business, legal and accounting due
diligence on prospective business combinations and continuing general and
administrative expenses.
On
March 2, 2006, immediately prior to our initial public offering, two of
our founding directors, Larry N. Feinberg and Joel D. Liffmann, each purchased
in a private placement 416,667 warrants, for a combined total of 833,334
warrants, at a price of $1.20 per warrant (an aggregate purchase price of
approximately $1,000,000) directly from us. Each warrant entitles the holder to
purchase from us one share of common stock at an exercise price of $6.00
commencing on the later of (a) March 2, 2007 or (b) the
completion of a business combination with a target business or the distribution
of the trust account. The warrants expire on March 2, 2010. The warrants
are redeemable by us at a price of $0.01 per warrant upon 30 days notice after
the warrants become exercisable, only in the event that the last sale price of
the common stock is at least $11.50 per share for any 20 trading days within a
30 trading day period ending on the third day prior to the date on which notice
of redemption is given.
For a
description of the use of proceeds generated in our initial public offering
and the sale of warrants to Larry N. Feinberg and Joel D.
Liffmann,
see Part I, Item 2 of this
Form 10-Q.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of
Security Holders.
Not applicable.
Item 5. Other Information
In
furtherance of our corporate purpose, on September 8, 2007, we entered into a
letter of intent with a potential target business, thereby extending the
deadline to consummate a business combination from September 8, 2007 to March
8, 2008. On October 17, 2007, the letter of intent with the potential target
business was terminated. We intended to utilize cash derived from the proceeds
of our initial public offering, our capital stock, debt or a combination of
cash, capital stock and debt, to effect such business combination. Pursuant to the
provisions of our Amended and Restated Certificate of Incorporation, we will
liquidate as promptly as practicable, unless negotiations in respect of this
transaction are recommenced, and a business combination is consummated. However,
there can be no assurance that we will be able to recommence negotiations with
such potential target business or, if negotiations are recommenced, consummate
a business combination in the time allotted. As described in greater detail
above, if we are forced to liquidate, the per-share liquidation may be less
than the price at which public stockholders purchased their shares because of
the expenses related to our initial public offering, our general and
administrative expenses and the anticipated costs of seeking a business combination.
14
Item 6. Exhibits
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31.1
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Section 302 Certification of Chief Operating Officer
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31.2
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Section 302 Certification of Chief Financial Officer
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32
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Section 906 Certification
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SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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ORACLE HEALTHCARE ACQUISITION CORP.
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Date: November 14, 2007
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By:
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/s/ Joel D. Liffmann
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Joel D. Liffmann
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President and Chief Operating Officer
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(Principal Executive Officer)
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By:
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/s/ Mark A. Radzik
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Mark A. Radzik
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Chief Financial Officer and Secretary (Principal
Financial and Accounting Officer)
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15
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