UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2005
or
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-32587
_____________________
HEALTHCARE ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
Delaware 20-2726770
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2116 Financial Center
666 Walnut
Des Moines, Iowa 50309 50309
(Address of principal executive offices) (Zip Code)
(515) 244-5746
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |X| No |_|
As of November 14, 2005, 11,650,000 shares of the registrant's common stock, par
value $0.0001 per share, were outstanding.
HEALTHCARE ACQUISITION CORP.
Table of Contents
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Balance Sheet 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk 13
Item 4. Controls and Procedures 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits 14
SIGNATURES 16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Healthcare Acquisition Corp.
We have reviewed the accompanying balance sheet of Healthcare Acquisition Corp.
as of September 30, 2005, and the related statements of operations,
stockholders' equity and cash flows for the three months ended September 30,
2005 and the period from April 25, 2005 (inception) to September 30, 2005. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with United States generally accepted accounting principles.
LWBJ, LLP
West Des Moines, Iowa
November 14, 2005
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)
BALANCE SHEET
September 30, 2005
ASSETS
Current assets
Cash and cash equivalents $ 1,471,369
Cash held in trust 68,175,645
Prepaid expense 75,000
-----------
Total current assets $69,722,014
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 13,617
Accrued expenses 105,996
Income tax payable 10,000
Deferred revenue 49,505
-----------
Total current liabilities 179,118
-----------
Common stock, subject to possible redemption
1,879,060 shares, at conversion value 13,578,807
-----------
Stockholders' equity
Preferred stock, $.0001 par value, authorized 1,000,000
shares; none issued Common stock, $.0001 par value,
authorized 100,000,000 shares; issued
and outstanding 11,650,000 shares 1,165
Paid-in capital in excess of par 55,818,948
Earnings accumulated during the development stage 143,976
-----------
Total stockholders' equity 55,964,089
-----------
Total liabilities and stockholders' equity $69,722,014
===========
See accompanying notes to financial statements.
2
HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)
STATEMENTS OF OPERATIONS
For the three months For the Period April
ended September 30, 25, 2005 (inception)
2005 to September 30, 2005
- --------------------------------------------------------------------------------
Revenues
Interest income $ 8,120 $ 8,120
Interest income from trust fund 189,914 189,914
Dividend income from trust fund 8,227 8,227
---------- ----------
Total revenues 206,261 206,261
Costs and expenses
Management fees 15,486 15,486
Insurance 15,000 15,000
Travel 13,902 13,902
General and administrative 5,397 5,397
Formation costs -- 2,500
---------- ----------
Total expenses 49,785 52,285
Income before taxes 156,476 153,976
Provision for income taxes 10,000 10,000
---------- ----------
Net income $ 146,476 $ 143,976
========== ==========
Weighted average shares outstanding 8,184,066 5,667,722
Net income per share basic and diluted 0.02 0.03
See accompanying notes to financial statements.
3
HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)
STATEMENTS OF STOCKHOLDERS' EQUITY
For period from April 25, 2005 (inception) to September 30, 2005
Equity
(Deficit)
Accumulated
Paid-in During the
Common Capital in Development Stockholders'
Stock Shares Par Amount Excess of Par Stage Equity
------------ ------------ ------------ ------------ ------------
Common shares issued to initial
stockholders at $.0111 per share 2,250,000 $ 150 $ 24,850 $ -- $ 25,000
Net loss -- -- -- (2,500) (2,500)
------------ ------------ ------------ ------------ ------------
Balances at June 30, 2005 2,250,000 150 24,850 (2,500) 22,500
Stock dividend - July 8, 2005 -- 50 (50) -- --
Stock dividend - July 22, 2005 -- 25 (25) -- --
Sale of 9,000,000 units, net of
underwriters' discount and offering
expenses (includes 1,799,100 shares
subject to possible conversion) 9,000,000 900 66,364,920 -- 66,365,820
Proceeds of exercise of underwriters'
over-allotment option for 400,000
units, net of commissions (includes
79,960 shares subject to possible
conversion) 400,000 40 3,007,960 3,008,000
Proceeds subject to possible
conversion of 1,879,060 shares -- -- (13,578,807) -- (13,578,807)
Proceeds from issuance of unit options -- -- 100 -- 100
Net income for period -- -- -- 146,476 146,476
------------ ------------ ------------ ------------ ------------
Balance at September 30, 2005 11,650,000 $ 1,165 $ 55,818,948 $ 143,976 $ 55,964,089
============ ============ ============ ============ ============
See accompanying notes to financial statements.
4
HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)
STATEMENTS OF CASH FLOWS
For the period
For the three April 25, 2005
months ended (inception) to
September 30, 2005 September 30,2005
Cash flows from operating activities
Net income $ 146,476 $ 143,976
Adjustments to reconcile net income
to net cash used in operating activities:
Interest earned on investment in trust fund (247,644) (247,644)
Increase in prepaid insurance (75,000) (75,000)
Increase in accounts payable 9,132 13,617
Increase in income tax payable 10,000 10,000
Increase in deferred revenue 49,504 49,504
------------ ------------
Net cash used in operating activities (107,532) (105,547)
------------ ------------
Cash flows from investing activities
Cash held in trust fund (67,928,000) (67,928,000)
------------ ------------
Cash flows from financing activities
Gross proceeds from initial public offering 75,200,000 75,200,000
Proceeds from issuance of unit option 100 100
Proceeds from notes payable, stockholders 75,000 250,000
Proceeds from issuance of common stock -- 25,000
Payments made on notes payable, stockholders (250,000) (250,000)
Payments made for costs of initial public offering (5,523,959) (5,720,184)
------------ ------------
Net cash provided by financing activities 69,501,141 69,504,916
------------ ------------
Net increase in cash 1,465,609 1,471,369
Cash, beginning of period 5,760 --
------------ ------------
Cash, end of period $ 1,471,369 $ 1,471,369
============ ============
Supplemental schedule of non-cash
financing activities
Accrued expenses related to initial public
offering $ 105,996 $ 105,996
See accompanying notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The financial statements at September 30, 2005 and for the periods ended
September 30, 2005 are unaudited. In the opinion of management, all adjustments
(consisting of normal accruals) have been made that are necessary to present
fairly the financial position of Healthcare Acquisition Corp. (the "Company") as
of September 30, 2005 and the results of its operations and its cash flow for
the three months ended September 30, 2005 and period from April 25, 2005
(inception) to September 30, 2005. Operating results for the interim period are
not necessarily indicative of the results to be expected for the full year.
2. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
The Company was incorporated in Delaware on April 25, 2005, as a blank check
company whose objective is to acquire, through a merger, capital stock exchange,
asset acquisition or other similar business combination, a currently
unidentified operating business.
Primarily all activity through September 30, 2005 relates to the Company's
formation and the public offering described below. The Company has selected
December 31 as its fiscal year-end. The registration statement for the Company's
initial public offering ("Offering") was declared effective July 28, 2005. The
Company consummated the Offering on August 3, 2005 (and 400,000 units subject to
the underwriters' over-allotment option on August 16, 2005) and received net
proceeds of approximately $69,450,000 (Note 3). The Company's management has
broad discretion with respect to the specific application of the net proceeds of
this Offering, although substantially all of the net proceeds of the Offering
are intended to be generally applied toward consummating a business combination
with an operating domestic or international company in the healthcare industry,
a "target business".
In evaluating a prospective target business, the Company will consider, among
other factors, the financial condition and results of operation; growth
potential; experience and skill of management; availability of additional
personnel; capital requirements; competitive position; barriers to entry into
other industries; stage of development of the products, processes or services;
degree of current or potential market acceptance of the products, processes or
services; proprietary features and degree of intellectual property or other
protection of the products, processes or services; regulatory environment of the
industry; and costs associated with effecting the business combination. These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors, as well as other considerations deemed relevant
by the Company in effecting a business combination consistent with its business
objective.
There are no assurances the Company will be able to successfully effect a
business combination. An amount of $67,928,000 or 90.3% of the gross proceeds of
this offering ($7.22 per unit) are being held in an interest-bearing trust
account at JP Morgan Chase NY Bank maintained by Continental Stock Transfer &
Trust Company ("Trust Fund") and invested in United States Treasury Bills or
short-term securities having a maturity of one hundred eighty (180) days or
less, until the earlier of (i) the consummation of the
6
2. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Nature of Operations (continued)
Company's first business combination or (ii) the liquidation of the Company. The
placing of funds in the Trust Fund may not protect those funds from third party
claims against the Company. Although the Company will seek to have all vendors,
prospective target businesses or other entities it engages, execute agreements
with the Company waiving any right, title, interest or claim of any kind in or
to any monies held in the Trust Fund, there is no guarantee that they will
execute such agreements. The Company's officers have severally agreed that they
will be personally liable to ensure that the proceeds in the Trust Fund are not
reduced by the claims of target businesses or vendors or other entities that are
owed money by the Company for services rendered or contracted for or products
sold to the Company. However, there can be no assurance that the officers will
be able to satisfy those obligations. The remaining proceeds, not held in trust,
may be used to pay for business, legal and accounting expenses, expenses which
may be incurred related to the investigation and selection of a target business,
and the negotiation of an agreement to acquire a target business, and for
continuing general and administrative expenses.
The Company's first business combination must be with a business or businesses
with a fair market value of at least 80% of the Company's net asset value at the
time of acquisition. The Company, after signing a definitive agreement for the
acquisition of a target business, will submit such transaction for stockholder
approval. In the event that stockholders owning 20% or more of the outstanding
stock excluding, for this purpose, those persons who were stockholders prior to
the Offering, vote against the business combination or request their conversion
right as described below, the business combination will not be consummated. All
of the Company's stockholders prior to the Offering, including all of the
officers and directors of the Company ("Initial Stockholders"), have agreed to
vote their 2,250,000 founding shares of common stock in accordance with the vote
of the majority in interest of all other stockholders of the Company ("Public
Stockholders") with respect to any business combination. After consummation of
the Company's first business combination, all of these voting safeguards will no
longer be applicable.
With respect to the first business combination, which is approved and
consummated, any Public Stockholder who voted against the business combination
may demand that the Company redeem his or her shares. The per share redemption
price will equal the amount in the Trust Fund as of the record date for
determination of stockholders entitled to vote on the business combination
divided by the number of shares of common stock held by Public Stockholders at
the consummation of the Offering. Accordingly, Public Stockholders holding
19.99% of the aggregate number of shares owned by all Public Stockholders may
seek redemption of their shares in the event of a business combination. Such
Public Stockholders are entitled to receive their per share interest in the
Trust Fund computed, without regard to the shares held by Initial Stockholders.
Accordingly, a portion of the net proceeds from the Offering (19.99% of the
amount held in the Trust Fund), or $13,578,807 after proceeds from the
underwriter over-allotment, has been classified as common stock subject to
possible conversion and 19.99% of the related interest earned on cash held in
the Trust Fund has been recorded as deferred revenue until the business
combination is consummated.
The Company's Amended and Restated Certificate of Incorporation provides for
mandatory liquidation of the Company, without stockholder approval, in the event
that the Company does not consummate a business combination within eighteen (18)
months from the date of the consummation of the Offering, or twenty-four (24)
months from the consummation of the Offering if certain extension criteria have
been
7
2. Nature of Operations and Summary of Significant Accounting Policies
(continued)
satisfied. In the event of liquidation, it is likely that the per share value of
the residual assets remaining available for distribution (including Trust Fund
assets) will be less than the initial public offering price per share in the
Offering (assuming no value is attributed to the Warrants contained in the Units
to be offered in the Offering discussed in Note 3.)
Net Income Per Common Share
Net income per share is computed by dividing net income by the weighted-average
number of shares of common stock outstanding during the period.
Derivative Financial Instrument
As described in Note 5, the Company has granted a Purchase Option to a
representative of its underwriters. Based on Emerging Issues Task Force 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settle in, a Company's Own Stock, the sale of the Purchase Option was reported
in permanent equity and accordingly, there is no impact on the Company's
financial position and results of operation, except for the $100 in proceeds
from sale. Subsequent changes in fair value will not be recognized as long as
the Purchase Option continues to be classified as an equity instrument.
The Company has determined, based on the Black-Scholes option pricing formula,
the fair value of the Purchase Option at date of issuance, was $3.79 per share
or approximately $852,750 total, using a risk- free interest rate of 4.0%,
expected life of five years and estimated volatility of 60.0%.
The volatility calculation of 60.0% is based on the 365-day average volatility
of a representative sample of eight (8) healthcare companies in the information
technology and services niches with market capitalizations between $200 million
and $910 million ("Representative Sample"). Because the Company did not have a
trading history, the Company needed to estimate the potential volatility of its
common stock price, which depends on a number of factors which could not be
ascertained at this time. The Company referred to the 365-day volatility of the
Representative Sample because its management believed that the volatility of
these representative companies was a reasonable benchmark to use in estimating
the expected volatility for the Company's common stock post-business
combination.
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 at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those
estimates.
Income Taxes
Deferred income taxes are provided for the differences between the basis of
assets and liabilities for financial reporting and income tax purposes. A
valuation allowance is established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
The effective tax rate differs from the statutory rate of 34% due to primarily
all interest income being generated from tax-exempt securities.
8
2. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Recent Accounting Pronouncements
The Company does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
accompanying financial statements.
3. Initial Public Offering
On July 28, 2005, the Company sold 9,000,000 units ("Units") in the Offering. On
August 16, 2005 an additional 400,000 Units were sold. Each Unit consists of one
share of the Company's common stock, $.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 the later of the completion of a business combination with a target
business or one (1) year from the effective date of the Offering and expiring
four (4) years from the effective date of the Offering. The Warrants will be
redeemable by the Company at a price of $.01 per Warrant, upon thirty (30) days
notice after the Warrants become exercisable, only in the event that the last
sales price of the common stock is at least $11.50 per share for any twenty (20)
trading days within a thirty (30) trading-day period ending on the third day
prior to date on which notice of redemption is given. The warrants began trading
separately from the Company's common stock on October 6, 2005. In connection
with the Offering, the Company paid the underwriter a discount of 6% of the
gross proceeds of the Offering and a non-accountable expense allowance of 1% of
the gross proceeds of the Offering.
4. Notes Payable, Stockholders
The Company issued unsecured promissory notes to three Initial Stockholders,
amounting to $250,000, who are also officers. The notes were non-interest
bearing and were paid from the proceeds of this Offering during the three months
ended September 30, 2005.
5. Unit Option
In connection with the Offering, the Company issued to the representative of the
underwriters for $100, an option to purchase up to a total of 225,000 units,
exercisable at $10 per unit ("Purchase Option"). In lieu of payment of the
exercise price in cash, the holder of the Purchase Option has the right (but not
the obligation) to convert any exercisable portion of the Purchase Option into
units using a cashless exercise based on the difference between current market
value of the units and its exercise price. The Warrants issued in conjunction
with these units are identical to those offered by the prospectus, except that
they have an exercise price of $7.50 (125% of the exercise price of the Warrants
included in the Units sold in the Offering). This option commences on the later
of the consummation of a business combination and one (1) year from the date of
the prospectus and expiring five (5) years from the date of the prospectus.
Additionally, the option may not be sold, transferred, assigned, pledged or
hypothecated for a one-year period (including the foregoing 180-day period)
following July 28, 2005. However, the option may be transferred to any
underwriter and selected dealer participating in the Offering and their bona
fide officers or partners. The purchase option grants to holders demand and
"piggy back" rights for periods of five (5) and seven (7) years, respectively,
from July 28, 2005 with respect to the registration under the Securities Act of
the securities directly and indirectly issuable upon exercise of the option. The
Company will bear all fees and expenses attendant to registering the securities,
other than underwriting commissions, which
9
5. Unit Option (continued)
will be paid for by the holders themselves. The exercise price and number of
units issuable upon exercise of the option may be adjusted in certain
circumstances, including in the event of a stock dividend, or our
recapitalization, reorganization, merger or consolidation. However, the option
will not be adjusted for issuances of common stock at a price below its exercise
price.
6. Commitments and Contingencies
The Company presently occupies office space in two locations, provided by two
affiliates of the Initial Stockholders. Such affiliates have agreed that, until
the Company consummates a business combination, they will make such office
space, as well as certain office and secretarial services, available to the
Company, as may be required by the Company from time to time. The Company has
agreed to pay such affiliates an aggregate of $7,500 per month for such services
commencing on the effective date of the Offering. Upon completion of a business
combination or liquidation, the Company will no longer be required to pay these
monthly fees.
An Initial Stockholder has agreed that after this Offering is completed and
within three months after separate trading of the Warrants has commenced, he or
certain designees will collectively purchase up to $1,000,000 of the Company's
Warrants in the public marketplace at prices not to exceed $1.20 per Warrant. He
has further agreed that any Warrants purchased by him or his affiliates or
designees, will not be sold or transferred until the completion of a business
combination. In addition, subject to any regulatory restrictions and subsequent
to the completion of the purchase of the $1,000,000 of Warrants described above
and within three months after separate trading of the Warrants has commenced,
the representative of the underwriters, or certain of its principals, affiliates
or designees has agreed to purchase up to $500,000 of the Company's Warrants in
the public marketplace at prices not to exceed $1.20 per Warrant.
The Company has engaged a third party to act as the representative of the
underwriters, on a non-exclusive basis, as its agent for the solicitation of the
exercise of the Warrants. To the extent not inconsistent with the guidelines of
the NASD and the rules and regulations of the Securities and Exchange
Commission, the Company has agreed to pay the representative for bona fide
services rendered, a commission equal to 4% of the exercise price for each
Warrant exercised more than one (1) year after July 28, 2005 if the exercise was
solicited by the underwriters. In addition to soliciting, either orally or in
writing, the exercise of the Warrants, the representative's services may also
include disseminating information, either orally or in writing, to Warrant
holders about the Company or the market for its securities, and assisting in the
processing of the exercise of the Warrants. No compensation will be paid to the
representative upon the exercise of the Warrants if:
o the market price of the underlying shares of common stock is lower
than the exercise price;
o the holder of the Warrants has not confirmed in writing that the
underwriters solicited the exercise;
o the Warrants are held in a discretionary account;
o the Warrants are exercised in an unsolicited transaction; or
o the arrangement to pay the commission is not disclosed in the
prospectus provided to Warrant holders at the time of exercise.
10
6. Commitments and Contingencies (continued)
The Initial Stockholders, who are holders of 2,250,000 issued and outstanding
shares of common stock, are entitled to registration rights pursuant to an
agreement signed on the effective date of the Offering. The holders of the
majority of these shares are entitled to request the Company, on up to two (2)
occasions, to register these shares. The holders of the majority of these shares
can elect to exercise these registration rights at any time after the date on
which these shares of common stock are released from escrow. In addition, these
stockholders have certain "piggy-back" registration rights on registration
statements filed subsequent to the date on which these shares of common stock
are released from escrow. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
7. Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred stock with such
designations, voting and other rights and preferences, as may be determined from
time to time by the Board of Directors.
8. Common Stock
On July 8, 2005, the Company's Board of Directors authorized a .333333 to 1
stock dividend. On July 22, 2005, the Company's Board of Directors authorized a
..125 to 1 stock dividend. All references in the accompanying financial
statements to the number of shares of stock have been retroactively restated to
reflect these transactions.
9. Subsequent Events
In October 2005, the Company entered into Amendment No. 1 (the "Amendment") to
the Investment Management Trust Agreement by and among the Company, Continental
Stock Transfer and Trust Company ("Continental") and Maxim Group LLC. Pursuant
to the terms of the Amendment, the Company is permitted to invest the funds held
in trust not only in treasury bills having a maturity of 180 days or less, but
also in any money market fund meeting the requirements of a "cash item" as set
forth in Section 3(a)(1)(C) of the Investment Company Act of 1940, as amended,
and any regulations, no-action letters, exemptive orders or interpretations
promulgated thereunder. The Company believes that the Amendment will allow it
greater flexibility in investing the funds held in trust from its initial public
offering, as well as reducing its tax liability, by allowing the Company to
invest in tax-free money market funds.
11
Item 2. Management's 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 were formed on April 25, 2005, to serve as a vehicle to acquire, through a
merger, capital stock exchange, asset acquisition or other similar business
combination, one or more domestic or international assets or an operating
business in the healthcare industry. Our initial business combination must be
with a target business or businesses whose fair market value is at least equal
to 80% of net assets at the time of such acquisition. We intend to utilize cash
derived from the proceeds of our recently completed public offering, our capital
stock, debt or a combination of cash, capital stock and debt, in effecting a
business combination.
On August 3, 2005, we consummated our initial public offering of 9,000,000
units. On August 16, 2005, we consummated the closing of an additional 400,000
units that were subject to the underwriters' over-allotment option. Each unit
consists of one share of common stock and one redeemable common stock purchase
warrant. Each warrant entitles the holder to purchase from us one share of our
common stock at an exercise price of $6.00.
Our net proceeds from the sale of our units, including amounts from exercise of
the underwriters' over-allotment option, after deducting certain offering
expenses of approximately $1,220,000, including $720,000 evidencing the
underwriters' non-accountable expense allowance of 1% of the gross proceeds
(excluding the proceeds from the underwriters' over-allotment), and underwriting
discounts of approximately $4,512,000, were approximately $69,450,000. Of this
amount, $67,928,000 is being held in trust and the remaining $1,522,000 is being
held outside of the trust. The remaining proceeds are available to be used by us
to provide for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative expenses. We will use
substantially all of the net proceeds of this offering to acquire a target
business, including identifying and evaluating prospective acquisition
candidates, selecting the target business, and structuring, negotiating and
consummating the business combination. To the extent that our capital stock is
used in whole or in part as consideration to effect a business combination, the
proceeds held in the trust fund as well as any other net proceeds not expended
will be used to finance the operations of the target business. We believe we
will have sufficient available funds outside of the trust fund to operate
through July 31, 2007, assuming that a business combination is not consummated
during that time. From July 28, 2005 through July 28, 2007, we anticipate
approximately $200,000 of expenses for legal, accounting and other expenses
attendant to the due diligence investigations, structuring and negotiation of a
business combination, an aggregate of $180,000 for the administrative fees
payable to Equity Dynamics, Inc. and The Lan Group (a total of $7,500 per month
for two years), $600,000 for expenses for the due diligence and investigation of
target
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (continued)
businesses, $50,000 of expenses for legal and accounting fees relating to our
SEC reporting obligations and $492,000 for general working capital that will be
used for miscellaneous expenses and reserves. We do not believe we will need to
raise additional funds in order to meet the expenditures required for operating
our business. However, we may need to raise additional funds through a private
or public offering of debt or equity securities if such funds are required to
consummate a business combination that is presented to us. We would only
consummate such a financing simultaneously with the consummation of a business
combination.
Commencing on July 28, 2005 and ending upon the acquisition of a target
business, we began incurring a fee of $6,000 per month for office space and
certain other additional general and administrative services from Equity
Dynamics, Inc., an affiliate of which John Pappajohn, (our chairman of the board
and secretary) is the President and principal stockholder, and Matthew P. Kinley
(our President and Treasurer) is a Senior Vice President. We have also agreed to
pay another affiliated third party, The Lan Group, of which Dr. Derace Schaffer
(our Chief Executive Officer and Vice Chairman) is the sole owner, approximately
$1,500 per month for office space and certain additional general and
administrative services.
We have granted a purchase option to the representative of the underwriter at
the closing of the offering on August 3, 2005 to acquire 225,000 units at $10
per unit for $100. The fair value of the purchase option was estimated at $3.79
per share or approximately $852,750 in the aggregate. The purchase option was
accounted for as an equity instrument in permanent equity. Accordingly, there
was no impact on our financial position or results of operations, except for
recording the $100 proceeds from the sale.
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, if a suitable business target is
not identified by us prior to the prescribed liquidation date of the trust fund,
we may 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 fund have been invested only in
securities meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act of 1940. Given our limited risk in our exposure to these
short-term securities, 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
executive officer (our principal executive officer), and our president (our
principal financial and accounting officer) of the effectiveness of our
disclosure controls and procedures as of September 30, 2005. Based upon that
evaluation, our chief executive officer and our president 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,
2005, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material legal proceedings pending against us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On August 3, 2005, we consummated our initial public offering of 9,000,000
units. On August 16, 2005, we consummated the closing of 400,000 additional
units that were subject to the underwriters' over-allotment option. Each unit
consists of one share of common stock and one redeemable common stock purchase
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 $75,200,000. Maxim
Group LLC acted as lead underwriter. The securities sold in the offering were
registered under the Securities Act of 1933, as amended, on a registration
statement on Form S-1 (No. 333-124712). The Securities and Exchange Commission
declared the registration statement effective on July 28, 2005.
We paid a total of $4,512,000 in underwriting discounts and commissions, and
approximately $1,220,000 has been paid for costs and expenses related to the
offering.
After deducting the underwriting discounts and commissions and the offering
expenses, the total net proceeds to us from the offering were approximately
$69,450,000, of which $67,928,000 (or $7.22 per unit sold in the offering) was
deposited into a trust fund 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.
For additional information on our use of proceeds from our public offering,
please see item 2 of Part I.
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.
Not applicable.
Item 6.
(a) Exhibits
10.1 Amendment to Trust Agreement
31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification of Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
14
(b) Reports on Forms 8-K
On August 3, 2005, the Company filed a Current Report on Form 8-K to report the
consummation of its initial public offering.
On August 16, 2005 the Company filed a Current Report on Form 8-K to report the
sale of additional units in its initial public offering.
15
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.
HEALTHCARE ACQUISITION CORP.
Date: November 14, 2005 By: /s/ Derace L. Schaffer, M.D
-------------------------------------------
Derace L. Schaffer, M.D.
Vice-Chairman and CEO
(Principal executive officer)
Date: November 14, 2005 By: /s/ Matthew P. Kinley
-------------------------------------------
Matthew P. Kinley
President, Treasurer and Director
(Principal financial and accounting officer)
16
AMENDMENT NO. 1
TO
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Amendment No. 1 (the "Amendment") to the Investment Management
Trust Agreement (the "Agreement") dated August 3, 2005, is made as of October
__, 2005 by and between HEALTHCARE ACQUISITION CORP. (the "Company") and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY (the "Trustee"). Any terms used
herein but not defined shall have the meaning set forth in the Agreement.
WHEREAS, the Company's Registration Statement on Form S-1, File No.
333-124712 for its initial public offering of securities (the "IPO") was
declared effective as of July 28, 2005 by the Securities and Exchange
Commission; and
WHEREAS, the funds received by the Company in the IPO, including funds
received upon exercise of a portion of the underwriters' overallotment option,
have been deposited in a trust account managed by the Trustee; and
WHEREAS, the Company and the Trustee desire to enter into this
Amendment to clarify certain terms and conditions pursuant to which the Trustee
shall hold and invest the Property;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
The term "Government Security.", wherever used in the Agreement, shall
be replaced by the term "Permitted Security." As used herein, Permitted Security
means (i) any Treasury Bill issued by the United States, having a maturity of
one hundred and eighty days or less, or (ii) as determined by the Company in its
sole discretion, any money market fund meeting the requirements of a "cash item"
as set forth in Section 3(a)(1)(C) of the Investment Company Act of 1940, as
amended, and any regulations, no-action letters, exemptive orders or
interpretations promulgated thereunder.
The Agreement shall otherwise remain in full force and effect.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of
the date first written above.
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, as Trustee
By:
---------------------------------------------------
Name:
Title:
HEALTHCARE ACQUISITION CORP.
By:
---------------------------------------------------
Name:
Title:
MAXIM GROUP, LLC, as representative of the
Underwriters, pursuant to Section 5(c) of the Agreement
By:
---------------------------------------------------
Name:
Title:
CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER
I, Derace L. Schaffer, M.D., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Healthcare Acquisition
Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: November 14, 2005 By: /s/ Derace L. Schaffer, M.D
------------------------------
Derace L. Schaffer, M.D.
Vice-Chairman and CEO
(Principal executive officer)
17
CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER
I, Matthew P. Kinley, hereby certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Healthcare Acquisition
Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; 3. Based on my
knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the
periods presented in this report; 4. The registrant's other certifying officers
and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: November 14, 2005 By: /s/ Matthew P. Kinley
--------------------------------------------
Matthew P. Kinley
President, Treasurer and Director
(Principal financial and accounting officer)
18
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), the
undersigned officer of Healthcare Acquisition Corp., a Delaware corporation (the
"Company"), does hereby certify, to such officer's knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the
"Form 10-Q") of the Company fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained
in the Form 10-Q fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: November 14, 2005 By: /s/ Derace L. Schaffer, M.D
------------------------------
Derace L. Schaffer, M.D.
Vice-Chairman and CEO
(Principal executive officer)
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
19
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code), the
undersigned officer of Healthcare Acquisition Corp., a Delaware corporation (the
"Company"), does hereby certify, to such officer's knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 (the
"Form 10-Q") of the Company fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, and information contained
in the Form 10-Q fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: November 14, 2005 By: /s/ Matthew P. Kinley
-----------------------------------------
Matthew P. Kinley
President, Treasurer and Director
(Principal financial and accounting officer)
A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.
20