Altimmune – SEC Filing

View:

Download DOC

Download PDF

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For The Fiscal Year Ended December 31, 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 of incorporation) (I.R.S. Employer Identification No.)

2116 Financial Center
666 Walnut Street
Des Moines, Iowa 50309
(Address of principal executive offices, including zip code)

(515) 244-5746
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.0001 par value per share
Warrants to purchase shares of Common Stock
(Title Of Class)

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes |_| No |X|.

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes |_| No |X|.

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange
Act.

Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |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 |_|.

The aggregate market value of the outstanding common stock, other than
shares held by persons who may be deemed affiliates of the registrant, computed
by reference to the closing sales price for the Registrant's Common Stock on
March 27, 2006, as reported on the American Stock Exchange, was approximately
$75,670,000. As of March 27, 2006, there were 11,650,000 shares of common stock,
par value $.0001 per share, of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

PART I

Item 1. Business..........................................................................................................5
Item 1A. Risk Factors.....................................................................................................13
Item 1B. Unresolved Staff Comments........................................................................................28
Item 2. Properties.......................................................................................................29
Item 3. Legal Proceedings................................................................................................29
Item 4. Submission of Matters to a Vote of Security Holders..............................................................29

PART II

Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.....30
Item 6. Selected Financial Data..........................................................................................34
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations............................35
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................................35
Item 8. Financial Statements and Supplementary Data......................................................................35
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. ...........................36
Item 9A. Controls and Procedures..........................................................................................36
Item 9B. Other Information................................................................................................36

PART III

Item 10. Directors and Executive Officers of the Registrant...............................................................37
Item 11. Executive Compensation...........................................................................................42
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...................43
Item 13. Certain Relationships and Related Transactions...................................................................45
Item 14. Principal Accounting Fees and Services...........................................................................46

PART IV

Item 15. Exhibits and Financial Statement Schedules.......................................................................48

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this Annual Report on Form 10-K that are not
purely historical are forward-looking statements. Our forward-looking statements
include, but are not limited to, statements regarding our or our management's
expectations, hopes, beliefs, intentions or strategies regarding the future. In
addition, any statements that refer to projections, forecasts or other
characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. The words "anticipates," "believe,"
"continue," "could," "estimate," "expect," "intends," "may," "might," "plan,"
"possible," "potential," "predicts," "project," "should," "would" and similar
expressions may identify forward-looking statements, but the absence of these
words does not mean that a statement is not forward-looking. Forward-looking
statements in this Annual Report on Form 10-K may include, for example,
statements about our:

o ability to complete a combination with one or more target
businesses;

o success in retaining or recruiting, or changes required in, our
officers, key employees or directors following a business
combination;

o executive officers and directors allocating their time to other
businesses and potentially having conflicts of interest with our
business or in approving a business combination, as a result of
which they would then o receive expense reimbursements and their
shares of common stock would become eligible for later release from
escrow;

o potential inability to obtain additional financing to complete a
business combination;

o limited pool of prospective target businesses;

o securities' ownership being concentrated;

o potential change in control if we acquire one or more target
businesses for stock; or

o risks associated with operating in the healthcare industry.

The forward-looking statements contained in this Annual Report on Form
10-K are based on our current expectations and beliefs concerning future
developments and their potential effects on us. There can be no assurance that
future developments affecting us will be those that we have anticipated. These
forward-looking statements involve a number of risks, uncertainties (some of
which are beyond our control) or other assumptions that may cause actual results
or performance to be materially different from those expressed or implied by
these forward-looking statements. These risks and uncertainties include, but are
not limited to, those factors described under the heading "Risk Factors." Should
one or more of these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary in material respects from
those projected in these forward-looking statements. We undertake no obligation
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required under
applicable securities laws and/or if and when management knows or has a
reasonable basis on which to conclude that previously disclosed projections are
no longer reasonably attainable.

PART I

Item 1. Business.

Introduction

Healthcare Acquisition Corp. (the "Company", "we", or "us") is a blank
check company organized under the laws of the State of Delaware on April 25,
2005. We were formed 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. To
date, our efforts have been limited to organizational activities, our initial
public offering and the search for a suitable business combination. As of the
date of this filing, we have not acquired any business operations.

Our executive offices are located at 2116 Financial Center, 666 Walnut
Street, Des Moines, Iowa 50309 and our telephone number at that location is
(515) 244-5746. We do not currently have a website and consequently do not make
available materials we file with or furnish to the Securities and Exchange
Commission. We will provide electronic or paper copies of such materials free of
charge upon request.

Recent Developments

A registration statement for our initial public offering was declared
effective on July 28, 2005. On August 3, 2005, we sold 9,000,000 units in the
initial public offering. On August 16, 2005, we sold an additional 400,000 units
pursuant to the overallotment option granted to the representative of the
underwriters in our initial public offering. Each of our units consisted of one
share of our common stock, $.0001 par value per share, 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 on the later of (i) July 28,
2006 or (ii) the consummation of a business combination, and such warrants
expire on the earlier of (i) July 27, 2009 or (ii) their redemption. We received
gross proceeds of approximately $75,200,000 from our initial public offering
(including exercise of the overallotment option) of which $67,928,000 were
placed in trust.

On July 29, 2005, our units commenced trading on the American Stock
Exchange under the symbol "HAQ.U". On October 6, 2005, our units ceased trading
and our common stock and warrants commenced separately trading on the American
Stock Exchange under the symbols "HAQ" and "HAQ.WS", respectively.

Pursuant to an agreement with the representative of the underwriters in
our initial public offering, and subject to Rule 10b5-1 purchase plans, our
officers acquired an aggregate of 354,900 of our warrants in open-market
transactions during the fourth quarter of 2005.

Since the completion of our initial public offering, we have contacted and
continue to contact those industry professionals who we believe can be of
strategic assistance in sourcing potential deals for us, including, investment
bankers, business consultants, accountants and lawyers. Through the
relationships of our board of directors, officers and directors and senior
advisors, we have also made contact with certain large national and
international concerns to determine if they have any interest in divesting any
of their existing interests. We have also sought out owners and institutional
owners of healthcare industry businesses and investment bankers or business
brokerage companies that are active in the healthcare industry.

Overview

The healthcare industry constitutes one of the largest segments of the
United States economy. According to the Centers for Medicare and Medicaid
Services, or CMS, healthcare expenditures have increased from $245.8 billion in
1980 to a forecasted $1.9 trillion in 2005, representing a Compound Annual
Growth Rate, or CAGR, of 9%. Further, in 2003, approximately 64% of total
healthcare expenditures were spent on the following categories: hospital care
(31%), physician and clinical services (23%) and prescription drugs (10%). In
2003, healthcare expenditures totaled $1.7 trillion (or $5,800 per American) and
accounted for 15.3% of Gross Domestic Product, or GDP, which outpaced overall
economic growth by 3%. In the future, national health expenditures are projected
to reach $3.6 trillion by 2014, representing a CAGR of 7.4% over the next ten
years. Health spending is projected to reach 18.7% of GDP by 2014.

Funding for healthcare comes from public and private sources. Medicaid and
Medicare programs were created in the mid 1960's. Medicare focuses on elderly
coverage (over 65 years old) and the disabled of any age. Medicaid provides
coverage for the poor and indigent population and is jointly funded by the
Federal and State governments. In 2002, according to CMS, roughly 34% of
healthcare payments came from Medicaid and Medicare. Private health insurance
supports roughly 35% of total costs. As healthcare costs rise, the private
sector is responding by shifting more of the cost of healthcare to employees by
paying a smaller percent of healthcare premiums. The employee, usually in the
form of a payroll deduction, must pay the amount of the premium not funded by
the employer. However, according to the U.S. Census Bureau, approximately 40
million Americans were uninsured in 2003.

Our management believes that, as a result of continued growth, there will
be numerous acquisition targets within the healthcare sector. Our management
believes that this growth will be driven by the following factors:

EXPANDING AND AGING POPULATION. According to U.S. Census Bureau estimates,
in 2005 the American population is approximately 296 million and growing.
Simultaneously, we are witnessing the "graying of America", whereby the
elderly population is increasing more rapidly than the rest of the
population and represents the largest users of healthcare services.
According to the U.S. Census Bureau, approximately 12% of the U.S.
population was over-65 in 2003 and was forecasted to account for roughly
20% of the population by 2030. By 2010, the number of people in the United
States between the ages of 40 and 60 is expected to grow from roughly 58
million to more than 64 million.

EVOLVING MEDICAL TREATMENTS. Advances in technology have favorably
impacted the development of new medical devices and treatments/therapies.
The products are generally more effective and easier-to-use. Some of these
breakthroughs have reduced hospital stays, costs and recovery periods. The
continued advancement of technological breakthroughs should continue to
boost services administered by healthcare providers.

INCREASED CONSUMER AWARENESS. In recent years, the publicity associated
with new technological advances and new medical therapies has increased
the number of patients visiting healthcare professionals to seek treatment
for new and innovative therapies. Simultaneously, consumers have become
more vocal due to rising costs and reduced access to physicians. Lastly,
the rise in cosmetic procedures has emerged as one of the fastest growing
healthcare segments. Since many cosmetic procedures require out-of-pocket
expenditures, this rise may reflect a growing willingness by consumers to
pay for certain procedures out of their discretionary funds. We believe
that more active and aware consumers will continue to stimulate a wide
variety of healthcare segments.

ACCESS TO CAPITAL. The venture capital community has traditionally
embraced healthcare companies. Capital investments have allowed entities
to grow and expand via consolidation or organic growth. Therefore, we
believe there are many mature companies that may potentially serve as
platforms for future acquisitions and growth. According to Dow Jones
VentureSource, 2,142 healthcare companies raised venture capital financing
rounds from 2001-2004. In that time period, 66 venture-backed healthcare
companies completed initial public offerings and 194 venture-backed
healthcare companies were acquired via merger and acquisition.

Although we may consider a target business in any segment of the
healthcare industry, we are concentrating our search for an acquisition
candidate in the following segments:

o healthcare services;

o healthcare information technology;

o healthcare facilities; and

o medical devices and products.

Our Management Team

Mr. Pappajohn, our chairman and secretary, has been an active private
equity investor in healthcare companies for more than 30 years and has served as
a director of more than 40 public companies. Mr. Pappajohn has been a founder in
several public healthcare companies such as Caremark Rx, Inc., Quantum Health
Resources and Radiologix, Inc. Mr. Pappajohn and Dr. Schaffer, our vice chairman
and chief executive officer, have worked together for more than fifteen years on
a variety of healthcare companies and have co-founded Allion Healthcare, Inc,
Patient Infosystems, Inc. and Radiologix all of which are public companies. In
addition, Mr. Pappajohn and Dr. Schaffer have worked together on many private
healthcare companies, such as Logisticare, Inc. and Source Medical Inc.

Dr. Schaffer serves as a director of Allion Healthcare and Patient
InfoSystems. He has served as chairman of several healthcare companies,
including Radiologix when it was private. He has been an active co-investor and
co-founder of companies with Mr. Pappajohn for more than fifteen years. Dr.
Schaffer has also served as a director on many healthcare boards, including
several health systems and more than ten healthcare services and technology
companies. Dr. Schaffer is also currently a Clinical Professor of Radiology at
Weill Cornell Medical College.

Mr. Kinley, our president and treasurer, has been involved in the
financing and development of more than twenty companies with Mr. Pappajohn in
the past eleven years. Mr. Kinley has worked with Dr. Schaffer for more than
eleven years on healthcare services and technology companies. Mr. Kinley has
also held various positions at KPMG Peat Marwick, working on tax, audit and
merger and acquisition issues.

Effecting a Business Combination

General

We are not presently engaged in any substantive commercial business. We
intend to utilize cash derived from the proceeds of our initial public offering,
our capital stock, debt or a combination of these in effecting a business
combination. Although substantially all of the net proceeds of our initial
public offering are intended to be generally applied toward effecting a business
combination, the proceeds were not otherwise designated for any more specific
purposes. A business combination may involve the acquisition of, or merger with,
a company which does not need substantial additional capital but which desires
to establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself. These
include time delays, significant expense, loss of voting control and compliance
with various Federal and state securities laws. In the alternative, we may seek
to consummate a business combination with a company that may be financially
unstable or in its early stages of development or growth. While we may seek to
effect business combinations with more than one target business, we will
probably have the ability, as a result of our limited resources, to effect only
a single business combination.

We have not identified a target business

To date, although we continue to search for a potential candidate for a
business combination, we have not entered into any definitive agreements with
any target business for a business combination.

Subject to the limitation that a target business have a fair market value
of at least 80% of our net assets at the time of the acquisition, as described
below in more detail, we have virtually unrestricted flexibility in identifying
and selecting a prospective acquisition candidate. Accordingly, there is no
basis for investors to evaluate the possible merits or risks of the target
business with which we may ultimately complete a business combination. To the
extent we effect a business combination with a financially unstable company or
an entity in its early stage of development or growth, including entities
without established records of sales or earnings, we may be affected by numerous
risks inherent in the business and operations of financially unstable and early
stage or potential emerging growth companies. Although our management will
endeavor to evaluate the risks inherent in a particular target business, we
cannot assure you that we will properly ascertain or assess all significant risk
factors.

Sources of target businesses

Target business candidates have been brought to our attention from various
unaffiliated sources, including investment bankers, venture capital funds,
private equity funds, leveraged buyout funds, management buyout funds and other
members of the financial community, who present solicited or unsolicited
proposals. Our officers and directors as well as their affiliates may also bring
to our attention target business candidates. While we do not presently
anticipate engaging the services of professional firms that specialize in
business acquisitions on any formal basis, we may engage these firms in the
future, in which event we may pay a finder's fee or other compensation. In no
event, however, will we pay any of our existing officers, directors or our
stockholders prior to our initial public offering or any entity with which they
are affiliated any finder's fee or other compensation for services rendered to
us prior to or in connection with the consummation of a business combination. We
will not enter into any business combinations with any affiliates of our initial
stockholders, officers or directors.

Selection of a target business and structuring of a business combination

Subject to the requirement that our initial business combination must be
with a target business with a fair market value that is at least 80% of our net
assets at the time of such acquisition, our management has virtually
unrestricted flexibility in identifying and selecting a prospective target
business. In evaluating a prospective target business, (including any such
target business that may have international operations or assets) our management
will consider, among other factors, the following:

o financial condition and results of operation;

o growth potential;

o experience and skill of management and availability of additional
personnel;

o capital requirements;

o competitive position;

o barriers to entry into other industries;

o stage of development of the products, processes or services;

o degree of current or potential market acceptance of the products,
processes or services;

o proprietary features and degree of intellectual property or other
protection of the products, processes or services;

o regulatory environment of the industry; and

o costs associated with effecting the business combination.

These criteria are not intended to be exhaustive. Any evaluation relating
to the merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target business, we will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management, where applicable, and inspection of
facilities, as well as review of financial and other information which will be
made available to us.

The time and costs required to select and evaluate a target business and
to structure and complete the business combination cannot presently be
ascertained with any degree of certainty. Any costs incurred with respect to the
identification and evaluation of a prospective target business with which a
business combination is not ultimately completed will result in a loss to us and
reduce the amount of capital available to otherwise complete a business
combination. While we may pay fees or compensation to third parties for their
efforts in introducing us to a potential target business, in no event, however,
will we pay any of our officers, directors or persons who were stockholders
prior to our initial public offering or any entity with which they are
affiliated any finder's fee or other compensation for services rendered to us
prior to or in connection with the consummation of a business combination, other
than the $7,500 payable monthly to Equity Dynamics, Inc. (an affiliate of our
Chairman, Mr. Pappajohn, and our President, Mr. Kinley) for office space and
certain general and administrative services (a prior arrangement with an
affiliate of our Chief Executive Officer, Derace Schaffer, M.D., pursuant to
which we paid $1,500 a month for office space and certain general and
administrative services, as a portion of the $7,500, was terminated on December
31, 2005). In addition, none of our officers, directors, special advisors or
persons who were stockholders prior to our initial public offering will receive
any finder's fee, consulting fees or any similar fees from any person or entity
in connection with any business combination involving us other than any
compensation or fees that may be received for any services provided following
such business combination.

Fair market value of target business

The initial target business that we acquire must have a fair market value
equal to at least 80% of our net assets at the time of such acquisition. The
fair market value of such business will be determined by our board of directors
based upon standards generally accepted by the financial community, such as
actual and potential sales, earnings and cash flow and book value. If our board
is not able to independently determine that the target business has a sufficient
fair market value, we will obtain an opinion from an unaffiliated, independent
investment banking firm which is a member of the National Association of
Securities Dealers, Inc. with respect to the satisfaction of such criteria.
Since any opinion, if obtained, would merely state that fair market value meets
the 80% of net assets threshold, it is not anticipated that copies of such
opinion would be distributed to our stockholders, although copies will be
provided to stockholders who request it. We will not be required to obtain an
opinion from an investment banking firm as to the fair market value if our board
of directors independently determines that the target business has sufficient
fair market value.

Probable lack of business diversification

While we may seek to effect business combinations with more than one
target business, our initial business combination must be with a target business
which satisfies the minimum valuation standard at the time of such acquisition,
as discussed above.

Consequently, it is probable that we will have the ability to effect only
a single business combination. Accordingly, the prospects for our ability to
execute any potential business plan may be entirely dependent upon the future
performance of a single business. Unlike other entities which may have the
resources to complete several business combinations of entities operating in
multiple industries or multiple areas of a single industry, it is probable that
we will not have the resources to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses. By consummating a business
combination with only a single entity, our lack of diversification may:

o subject us to numerous economic, competitive and regulatory
developments, any or all of which may have a substantial adverse
impact upon the particular industry in which we may operate
subsequent to a business combination, and

o result in our dependency upon the development or market acceptance
of a single or limited number of products, processes or services.

Additionally, since our business combination may entail the simultaneous
acquisitions of several assets or operating businesses at the same time and may
be with different sellers, we will need to convince such sellers to agree that
the purchase of their assets or closely related businesses is contingent upon
the simultaneous closings of the other acquisitions.

Limited ability to evaluate the target business' management

Although we expect most of our management and other key personnel,
particularly our chairman of the board, chief executive officer and president,
to remain associated with us following a business combination, they may be
involved in different capacities than at present, and we may employ other
personnel following the business combination. Although we intend to closely
scrutinize such individuals, we cannot assure you that our assessment will prove
to be correct. In addition, we cannot assure you that new members that join our
management following a business combination will have the necessary skills,
qualifications or abilities to help manage a public company.

Opportunity for stockholder approval of business combination

Prior to the completion of a business combination, we will submit the
transaction to our stockholders for approval, even if the nature of the
acquisition is such as would not ordinarily require stockholder approval under
applicable state law. In connection with seeking stockholder approval of a
business combination, we will furnish our stockholders with proxy solicitation
materials prepared in accordance with the Securities Exchange Act of 1934,
which, among other matters, will include a description of the operations of the
target business and certain required financial information regarding the
business.

In connection with the vote required for any business combination, all
persons who were stockholders prior to our initial public offering, including
all of our officers and directors, have agreed to vote their respective shares
of common stock owned by them immediately prior to our initial public offering
in accordance with the majority of the shares of common stock voted by the
public stockholders. This voting arrangement does not apply to shares purchased
following our initial public offering in the open market by such persons, and
with respect to shares so acquired by such persons, such stockholders may vote
against a proposed business combination and exercise their conversion rights in
the event that the business combination transaction is approved. We will proceed
with the business combination only if a majority of the shares of common stock
voted by the public stockholders are voted in favor of the business combination
and public stockholders owning less than 20% of the shares sold in our initial
public offering exercise their conversion rights. Voting against the business
combination alone will not result in conversion of a stockholder's shares into a
pro rata share of the trust fund. Such stockholder must have also exercised its
conversion rights described below.

Conversion rights

At the time we seek stockholder approval of any business combination, we
will offer each public stockholder the right to have such stockholder's shares
of common stock converted to cash if the stockholder votes against the business
combination and the business combination is approved and completed. The actual
per-share conversion price will be equal to the amount in the trust fund,
inclusive of any interest (calculated as of two business days prior to the
consummation of the proposed business combination), divided by the number of
shares sold in our initial public offering. Without taking into any account
interest earned on the trust fund, the initial per-share conversion price would
be $7.23 or $0.77 less than the per- unit offering price of $8.00. An eligible
stockholder may request conversion at any time after the mailing to our
stockholders of the proxy statement and prior to the vote taken with respect to
a proposed business combination at a meeting held for that purpose, but the
request will not be granted unless the stockholder votes against the business
combination and the business combination is approved and completed. Any request
for conversion, once made, may be withdrawn at any time up to the date of the
meeting. It is anticipated that the funds to be distributed to stockholders
entitled to convert their shares who elect conversion will be distributed
promptly after completion of a business combination. Public stockholders who
convert their stock into their share of the trust fund still have the right to
exercise the warrants that they received as part of the units. We will not
complete any business combination if public stockholders, owning 20% or more of
the shares sold in our initial public offering, exercise their conversion
rights.

Because the initial per share conversion price is $7.23 per share (plus
any interest), which is lower than the $8.00 per unit price paid in our initial
public offering and, which may be lower than the market price of the common
stock on the date of the conversion, there may be a disincentive on the part of
public stockholders to exercise their conversion rights. The term public
stockholders means the holders of common stock sold as part of the units in our
initial public offering or in the open market, including any persons who were
stockholders prior to our initial public offering to the extent that they
purchase or acquire such shares.

Liquidation if no business combination

If we do not complete a business combination within 18 months after the
consummation of our initial public offering (by February 3, 2007), or within 24
months if the extension criteria described below have been satisfied, we will be
dissolved and will distribute to all of our public stockholders, in proportion
to their respective equity interests, an aggregate sum equal to the amount in
the trust fund, inclusive of any interest, plus any remaining net assets. Our
stockholders have waived their rights to participate in any liquidation
distribution with respect to shares of common stock owned by them immediately
prior to our initial public offering. There will be no distribution from the
trust fund with respect to our warrants, which will expire worthless.

If we were to expend all of the net proceeds of our initial public
offering, other than the proceeds deposited in the trust fund, and without
taking into account interest, if any, earned on the trust fund, the initial
per-share liquidation price would be $7.23 or $0.77 less than the per-unit
initial public offering price of $8.00. The proceeds deposited in the trust fund
could, however, become subject to the claims of our creditors which could be
prior to the claims of our public stockholders. We cannot assure you that the
actual per-share liquidation price will not be less than $7.23, plus interest,
due to claims of creditors. Our chairman and all of our executive officers have
agreed pursuant to agreements with us and Maxim Group LLC, the representative of
the underwriters in our initial public offering, that, if we distribute the
proceeds held in trust to our public stockholders, they will be personally
liable under certain circumstances (for example, if a vendor does not waive any
rights or claims to the trust fund) to pay debts and obligations to vendors or
other entities that are owed money by us for services rendered or products sold
to us in excess of the net proceeds of our initial public offering not held in
the trust account, to the extent necessary to ensure that such claims do not
reduce the amount in the trust account. We cannot assure you, however, that they
would be able to satisfy those obligations.

If we enter into either a letter of intent, an agreement in principle or a
definitive agreement to complete a business combination prior to the expiration
of 18 months after the consummation of our initial public offering (by February
3, 2007), but are unable to complete the business combination within the
18-month period, then we will have an additional six months in which to complete
the business combination contemplated by the letter of intent, agreement in
principle or definitive agreement. If we are unable to do so by the expiration
of the 24-month period from the consummation of our initial public offering, we
will then liquidate. Upon notice from us, the trustee of the trust fund will
commence liquidating the investments constituting the trust fund and will turn
over the proceeds to our transfer agent for distribution to our public
stockholders. We anticipate that our instruction to the trustee would be given
promptly after the expiration of the applicable 18-month or 24-month period.

Our public stockholders shall be entitled to receive funds from the trust
fund only in the event of our liquidation or if the stockholders seek to convert
their respective shares into cash upon a business combination which the
stockholder voted against and which is actually completed by us. In no other
circumstances shall a stockholder have any right or interest of any kind to or
in the trust fund. Voting against the business combination alone will not result
in conversion of a stockholder's shares into a pro rata share of the trust fund.
Such stockholder must have also exercised its conversion rights described above.

Competition for target businesses

In identifying, evaluating and selecting a target business, we may
encounter intense competition from other entities having a business objective
similar to ours. Many of these entities are well established and have extensive
experience identifying and effecting business combinations directly or through
affiliates. Many of these competitors possess greater technical, human and other
resources than us and our financial resources will be relatively limited when
contrasted with those of many of these competitors. While we believe there are
numerous potential target businesses that we could acquire with the net proceeds
of our initial public offering, our ability to compete in acquiring certain
sizable target businesses will be limited by our available financial resources.
This inherent competitive limitation gives others an advantage in pursuing the
acquisition of a target business. Further:

o our obligation to seek stockholder approval of a business
combination or obtain the necessary financial information to be
included in the proxy statement to be sent to stockholders in
connection with such business combination may delay or prevent the
completion of a transaction;

o our obligation to convert into cash shares of common stock held by
our public stockholders in certain instances may reduce the
resources available to us for a business combination;

o our outstanding warrants and options, and the future dilution they
potentially represent, may not be viewed favorably by certain target
businesses; and

o the requirement to acquire assets or an operating business that has
a fair market value equal to at least 80% of our net assets at the
time of the acquisition could require us to acquire several assets
or closely related operating businesses at the same time, all of
which sales would be contingent on the closings of the other sales,
which could make it more difficult to consummate the business
combination.

Based upon publicly available information as of the date of this filing,
approximately 44 similarly structured blank check companies have completed
initial public offerings since August 2003 and numerous others have filed
registration statements. Of these companies, only five companies have
consummated a business combination, while eight other companies have announced
they have entered into a definitive agreement for a business combination, but
have not consummated such business combination. Accordingly, there are
approximately 31 blank check companies with approximately $2.1 billion in trust
that are seeking to carry out a business plan similar to our business plan.
While some of those companies have specific industries that they must complete a
business combination in, a number of them may consummate a business combination
in any industry they choose. We may therefore be subject to competition from
these and other companies seeking to consummate a business plan similar to ours
which will, as a result, increase demand for privately-held companies to combine
with companies structured similarly to ours. Further, the fact that only five
such companies has completed a business combination and eight such companies
have entered into a definitive agreement for a business combination may be an
indication that there are only a limited number of attractive target businesses
available to such entities or that many privately-held target businesses may not
be inclined to enter into business combinations with publicly held blank check
companies like us.

Any of these factors may place us at a competitive disadvantage in
negotiating a business combination. Our management believes, however, that our
status as a public entity and potential access to the United States public
equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as us in acquiring a target business with
significant growth potential on favorable terms.

If we effect a business combination, there will be, in all likelihood,
intense competition from competitors of the target business. We cannot assure
you that, subsequent to a business combination, we will have the resources or
ability to compete effectively.

Financial Information

We will not acquire a target business if we cannot obtain audited
financial statements based on United States generally accepted accounting
principles for such target business. We will provide these financial statements
in the proxy solicitation materials sent to stockholders for the purpose of
seeking stockholder approval of our initial business combination. Our management
believes that the need for target businesses to have, or be able to obtain,
audited financial statements may limit the pool of potential target businesses
available for acquisition.

Available Information

We are subject to the information requirements of the Exchange Act.
Therefore, we file periodic reports, proxy statements and other information with
the SEC. Such reports, proxy statements and other information may be obtained by
visiting the Public Reference Room of the SEC at 100 F Street, NW, Washington,
DC 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding issuers that file electronically.

Item 1A. Risk Factors

An investment in our securities involves a high degree of risk. You should
consider carefully all of the material risks described below, together with the
other information contained in this prospectus before making a decision to
invest in our securities.

RISKS ASSOCIATED WITH OUR POTENTIAL BUSINESS

WE ARE A NEWLY FORMED COMPANY WITH NO OPERATING HISTORY AND, ACCORDINGLY, YOU
WILL NOT HAVE ANY BASIS ON WHICH TO EVALUATE OUR ABILITY TO ACHIEVE OUR BUSINESS
OBJECTIVE.

We are a recently formed company with no operating results to date.
Since we do not have any operations or an operating history, you have no basis
upon which to evaluate our ability to achieve our business objective, which is
to acquire one or more domestic or international assets or an operating business
in the healthcare industry. Other than researching prospective business
combinations and conducting initial due diligence, neither we nor any of our
agents or affiliates has yet taken any measure, directly or indirectly, to enter
into a business combination. We will not generate any revenues or income (other
than interest income on the proceeds of our initial public offering) until, at
the earliest, after the consummation of a business combination.

IF WE ARE FORCED TO LIQUIDATE BEFORE A BUSINESS COMBINATION, OUR PUBLIC
STOCKHOLDERS WILL RECEIVE LESS THAN $8.00 PER INITIAL PUBLIC OFFERING PRICE UPON
DISTRIBUTION OF THE TRUST FUND AND OUR WARRANTS WILL EXPIRE WORTHLESS.

If we are unable to complete a business combination and are forced
to liquidate our assets, the per-share liquidation will be less than $8.00
because of the expenses of our initial public offering, our general and
administrative expenses and the anticipated costs of seeking a business
combination after our initial public offering. Furthermore, there will be no
distribution with respect to our outstanding warrants and, accordingly, the
warrants will expire worthless if we liquidate before the completion of a
business combination.

BECAUSE THERE ARE NUMEROUS COMPANIES WITH A BUSINESS PLAN SIMILAR TO OURS
SEEKING TO EFFECTUATE A BUSINESS COMBINATION, IT MAY BE MORE DIFFICULT FOR US TO
COMPLETE A BUSINESS COMBINATION.

IF THIRD PARTIES BRING CLAIMS AGAINST US, THE PROCEEDS HELD IN TRUST COULD BE
REDUCED AND THE PER-SHARE LIQUIDATION PRICE RECEIVED BY STOCKHOLDERS WILL BE
LESS THAN $7.23 PER SHARE.

Our placing of funds in trust may not protect those funds from third party
claims against us. Although we will seek to have all vendors, prospective target
businesses or other entities we engage execute agreements with us waiving any
right, title, interest or claim of any kind in or to any monies held in the
trust account for the benefit of our public stockholders, there is no guarantee
that they will execute such agreements. Nor is there any guarantee that such
entities will agree to waive any claims they may have in the future as a result
of, or arising out of, any negotiations, contracts or agreements with us and
will not seek recourse against the trust account for any reason. Accordingly,
the proceeds held in trust could be subject to claims which could take priority
over the claims of our public stockholders and the initial public offering
per-share liquidation price could be less than $7.23 per share held in the trust
account, plus interest, due to claims of such creditors. If we are unable to
complete a business combination and are forced to liquidate, our chairman and
executive officers will be personally liable under certain circumstances (for
example, if a vendor does not waive any rights or claims to the trust account)
to ensure that the proceeds in the trust fund are not reduced by the claims of
various vendors or other entities that are owed money by us for services
rendered or products sold to us, to the extent necessary to ensure that such
claims do not reduce the amount in the trust fund. However, we cannot assure you
that our executive officers will be able to satisfy those obligations.

WE MAY ISSUE SHARES OF OUR CAPITAL STOCK OR DEBT SECURITIES TO COMPLETE A
BUSINESS COMBINATION, WHICH WOULD REDUCE THE EQUITY INTEREST OF OUR STOCKHOLDERS
AND LIKELY CAUSE A CHANGE IN CONTROL OF OUR OWNERSHIP.

Our certificate of incorporation authorizes the issuance of up to
100,000,000 shares of common stock, par value $.0001 per share, and 1,000,000
shares of preferred stock, par value $.0001 per share. As of the date hereof,
there are 78,500,000 authorized but unissued shares of our common stock
available for issuance (after appropriate reservation for the issuance of shares
upon full exercise of our outstanding warrants and the underwriters warrants)
and all of the 1,000,000 shares of preferred stock available for issuance.
Although we have no commitments as of the date hereof to issue our securities,
we may issue a substantial number of additional shares of our common stock or
preferred stock, or a combination of common and preferred stock, to complete a
business combination. The issuance of additional shares of our common stock or
any number of shares of our preferred stock:

o may significantly reduce the equity interest of current investors in
our securities;

o will likely cause a change in control if a substantial number of our
shares of common stock are issued, which may affect, among other
things, our ability to use our net operating loss carry forwards, if
any, and most likely also result in the resignation or removal of
our present officers and directors; and

o may adversely affect prevailing market prices for our common stock.

Additionally, the healthcare industry is capital intensive, traditionally
using substantial amounts of indebtedness to finance acquisitions, capital
expenditures and working capital needs. If we finance the purchase of assets or
operations through the issuance of debt securities, it could result in:

o default and foreclosure on our assets if our operating revenues
after a business combination were insufficient to pay our debt
obligations;

o acceleration of our obligations to repay the indebtedness even if we
have made all principal and interest payments when due if the debt
security contained covenants that required the maintenance of
certain financial ratios or reserves and any such covenant were
breached without a waiver or renegotiation of that covenant;

o our immediate payment of all principal and accrued interest, if any,
if the debt security was payable on demand; and

o our inability to obtain additional financing, if necessary, if the
debt security contained covenants restricting our ability to obtain
additional financing while such security was outstanding.

OUR ABILITY TO EFFECT A BUSINESS COMBINATION AND TO EXECUTE ANY POTENTIAL
BUSINESS PLAN AFTERWARDS WILL BE TOTALLY DEPENDENT UPON THE EFFORTS OF OUR KEY
PERSONNEL, SOME OF WHOM MAY JOIN US FOLLOWING A BUSINESS COMBINATION AND WHOM WE
WOULD HAVE ONLY A LIMITED ABILITY TO EVALUATE.

Our ability to effect a business combination will be totally dependent
upon the efforts of our key personnel. The future role of our key personnel
following a business combination, however, cannot presently be fully
ascertained. Although we expect most of our management and other key personnel,
particularly our chairman of the board, vice chairman and president to each
remain associated with us following a business combination, we may employ other
personnel following the business combination. While we intend to closely
scrutinize any additional individuals we engage after a business combination, we
cannot assure you that our assessment of these individuals will prove to be
correct. Moreover, our current management will only be able to remain with the
combined company after the consummation of a business combination if they are
able to negotiate the same as part of any such combination. If we acquired a
target business in an all-cash transaction, it would be more likely that current
members of management would remain with us if they chose to do so. If a business
combination were structured as a merger whereby the stockholders of the target
company were to control the combined company following a business combination,
it may be less likely that management would remain with the combined company
unless it was negotiated as part of the transaction via the acquisition
agreement, an employment agreement or other arrangement. In making the
determination as to whether current management should remain with us following
the business combination, management will analyze the experience and skill set
of the target business' management and negotiate as part of the business
combination that certain members of current management remain if it is believed
that it is in the best interests of the combined company post-business
combination. If management negotiates to be retained post-business combination
as a condition to any potential business combination, such negotiations may
result in a conflict of interest.

OUR OFFICERS AND DIRECTORS MAY ALLOCATE THEIR TIME TO OTHER BUSINESSES THEREBY
CAUSING CONFLICTS OF INTEREST IN THEIR DETERMINATION AS TO HOW MUCH TIME TO
DEVOTE TO OUR AFFAIRS. THIS COULD HAVE A NEGATIVE IMPACT ON OUR ABILITY TO
CONSUMMATE A BUSINESS COMBINATION.

Our officers and directors are not required to commit their full time to
our affairs, which may result in a conflict of interest in allocating their time
between our operations and other businesses. We do not intend to have any full
time employees prior to the consummation of a business combination. Each of our
officers are engaged in several other business endeavors and are not obligated
to contribute any specific number of hours per week to our affairs.

If our officers' other business affairs require them to devote more
substantial amounts of time to such affairs, it could limit their ability to
devote time to our affairs and could have a negative impact on our ability to
consummate a business combination.

OUR OFFICERS AND DIRECTORS ARE CURRENTLY AFFILIATED WITH ENTITIES ENGAGED IN
BUSINESS ACTIVITIES SIMILAR TO THOSE INTENDED TO BE CONDUCTED BY US AND
ACCORDINGLY, MAY HAVE CONFLICTS OF INTEREST IN DETERMINING WHICH ENTITY A
PARTICULAR BUSINESS OPPORTUNITY SHOULD BE PRESENTED TO.

Our officers and directors may in the future become affiliated with other
entities, including other "blank check" companies, engaged in business
activities similar to those intended to be conducted by us. Additionally, our
officers and directors may become aware of business opportunities which may be
appropriate for presentation to us as well as the other entities with which they
are or may be affiliated. Further, certain of our officers and directors are
currently involved in other businesses that are similar to the business
activities that we intend to conduct following a business combination. Due to
these existing affiliations, they have prior fiduciary obligations to present
potential business opportunities to those entities prior to presenting them to
us which could cause additional conflicts of interest. Accordingly, they have
conflicts of interest in determining to which entity a particular business
opportunity should be presented.

ALL OF OUR DIRECTORS OWN SHARES OF OUR SECURITIES WHICH WILL NOT PARTICIPATE IN
LIQUIDATION DISTRIBUTIONS AND THEREFORE THEY MAY HAVE A CONFLICT OF INTEREST IN
DETERMINING WHETHER A PARTICULAR TARGET BUSINESS IS APPROPRIATE FOR A BUSINESS
COMBINATION.

All of our directors own shares of common stock in our company which were
issued prior to our initial public offering, but have waived their right to
receive distributions with respect to those shares upon our liquidation if we
are unable to complete a business combination. Additionally, our chairman, chief
executive officer and president have purchased an aggregate of 354,900 warrants
on the open market. These warrants will not be sold until the consummation of a
business combination. The shares and warrants owned by these directors will be
worthless if we do not consummate a business combination. The personal and
financial interests of these directors may influence their motivation in
identifying and selecting a target business and completing a business
combination in a timely manner. Consequently, these directors' discretion in
identifying and selecting a suitable target business may result in a conflict of
interest when determining whether the terms, conditions and timing of a
particular business combination are appropriate and in our stockholders' best
interest.

PERSONS WHO WERE STOCKHOLDERS PRIOR TO OUR INITIAL PUBLIC OFFERING WILL NOT
RECEIVE REIMBURSEMENT FOR ANY OUT-OF-POCKET EXPENSES INCURRED BY THEM TO THE
EXTENT THAT SUCH EXPENSES EXCEED THE AMOUNT IN THE TRUST FUND UNLESS THE
BUSINESS COMBINATION IS CONSUMMATED AND THEREFORE THEY MAY HAVE A CONFLICT OF
INTEREST.

Persons who were stockholders prior to our initial public offering will
not receive reimbursement for any out-of-pocket expenses incurred by them to the
extent that such expenses exceed the amount in the trust fund unless the
business combination is consummated and there are sufficient funds available for
reimbursement after such consummation. The financial interest of such persons
could influence their motivation in selecting a target business and thus, there
may be a conflict of interest when determining whether a particular business
combination is in the stockholders' best interest.

IT IS PROBABLE THAT WE WILL ONLY BE ABLE TO COMPLETE ONE BUSINESS COMBINATION,
WHICH WILL CAUSE US TO BE SOLELY DEPENDENT ON A SINGLE BUSINESS.

The gross proceeds from our initial public offering, including the
exercise of a portion of the overallotment option were approximately
$75,200,000, of which $67,928,000 was placed in trust for use in consummating a
business combination. Our initial business combination must be with a business
with a fair market value of at least 80% of our net assets at the time of such
acquisition. Consequently, it is probable that we will have the ability to
complete only a single business combination, although this may entail the
simultaneous acquisitions of several assets or closely related operating
businesses at the same time. Accordingly, the prospects for our ability to
effect our business strategy may be:

o solely dependent upon the performance of a single business; or

o dependent upon the development or market acceptance of a single or
limited number of products, processes or services.

In this case, we will not be able to diversify our operations or benefit
from the possible spreading of risks or offsetting of losses, unlike other
entities which may have the resources to complete several business combinations
in different industries or different areas of a single industry. Furthermore,
since our business combination may entail the simultaneous acquisitions of
several assets or operating businesses at the same time and may be with
different sellers, we will need to convince such sellers to agree that the
purchase of their assets or businesses is contingent upon the simultaneous
closings of the other acquisitions.

WE MAY BE UNABLE TO OBTAIN ADDITIONAL FINANCING, IF REQUIRED, TO COMPLETE A
BUSINESS COMBINATION OR TO FUND THE OPERATIONS AND GROWTH OF THE TARGET
BUSINESS, WHICH COULD COMPEL US TO RESTRUCTURE THE TRANSACTION OR ABANDON A
PARTICULAR BUSINESS COMBINATION.

Although we believe that the net proceeds of our initial public offering
will be sufficient to allow us to consummate a business combination, in as much
as we have not yet identified any prospective target business, we cannot
ascertain the capital requirements for any particular transaction. If the net
proceeds of our initial public offering prove to be insufficient, either because
of the size of the business combination or the depletion of the available net
proceeds in search of a target business, or because we become obligated to
convert into cash a significant number of shares from dissenting stockholders,
we will be required to seek additional financing. We cannot assure you that such
financing would be available on acceptable terms, if at all. To the extent that
additional financing proves to be unavailable when needed to consummate a
particular business combination, we would be compelled to restructure the
transaction or abandon that particular business combination and seek an
alternative target business candidate. In addition, if we consummate a business
combination, we may require additional financing to fund the operations or
growth of the target business. The failure to secure additional financing could
have a material adverse effect on the continued development or growth of the
target business. None of our officers, directors or stockholders is required to
provide any financing to us in connection with or after a business combination.

PERSONS WHO WERE STOCKHOLDERS PRIOR TO OUR INITIAL PUBLIC OFFERING, INCLUDING
OUR OFFICERS AND DIRECTORS, CONTROL A SUBSTANTIAL INTEREST IN US AND THUS MAY
INFLUENCE CERTAIN ACTIONS REQUIRING STOCKHOLDER VOTE.

Upon consummation of our offering, persons who were stockholders prior to
our initial public offering (including all of our officers and directors)
collectively owned 19.3% of our issued and outstanding shares of common stock,
not including an aggregate of 354,900 warrants purchased on the open market by
our chairman, chief executive officer and president, which are not currently
exercisable. These warrants cannot be sold until after consummation of a
business combination.

Our board of directors is divided into two classes, each of which will
generally serve for a term of two years with only one class of directors being
elected in each year. It is unlikely that there will be an annual meeting of
stockholders to elect new directors prior to the consummation of a business
combination, in which case all of the current directors will continue in office
at least until the consummation of the business combination. If there is an
annual meeting, as a consequence of our "staggered" board of directors,
initially only a minority of the board of directors will be considered for
election and persons who were stockholders prior to our initial public offering,
because of their ownership position, will have considerable influence regarding
the outcome. Accordingly, such stockholders will continue to exert control at
least until the consummation of a business combination. In addition, such
stockholders and their affiliates and relatives are not prohibited from
purchasing our securities in the open market. If they do, we cannot assure you
that persons who were stockholders prior to our initial public offering will not
have considerable influence upon the vote in connection with a business
combination.

OUR OUTSTANDING WARRANTS MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF
COMMON STOCK AND MAKE IT MORE DIFFICULT TO EFFECT A BUSINESS COMBINATION.

In connection with our initial public offering, as part of the units
(including overallotments issued to the underwriters), we issued warrants to
purchase 9,400,000 shares of common stock. To the extent we issue shares of
common stock to effect a business combination, the potential for the issuance of
substantial numbers of additional shares upon exercise of these warrants could
make us a less attractive acquisition vehicle in the eyes of a target business
as such securities, when exercised, will increase the number of issued and
outstanding shares of our common stock and reduce the value of the shares issued
to complete the business combination. Accordingly, our warrants may make it more
difficult to effectuate a business combination or increase the cost of the
target business. Additionally, the sale, or even the possibility of sale, of the
shares underlying the warrants could have an adverse effect on the market price
for our securities or on our ability to obtain future public financing. If and
to the extent these warrants are exercised, you may experience dilution to your
holdings.

IF PERSONS WHO WERE STOCKHOLDERS PRIOR TO OUR INITIAL PUBLIC OFFERING EXERCISE
THEIR REGISTRATION RIGHTS, IT MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OUR
COMMON STOCK AND THE EXISTENCE OF THESE RIGHTS MAY MAKE IT MORE DIFFICULT TO
EFFECT A BUSINESS COMBINATION.

Persons who were stockholders prior to our initial public offering are
entitled to require us to register the resale of their shares of common stock at
any time after the date on which their shares are released from escrow, which,
except in limited circumstances, will not be before July 28, 2009. If such
stockholders exercise their registration rights with respect to all of their
shares of common stock, then there will be an additional 2,250,000 shares of
common stock eligible for trading in the public market. The presence of this
additional number of shares of common stock eligible for trading in the public
market may have an adverse effect on the market price of our common stock. In
addition, the existence of these rights may make it more difficult to effectuate
a business combination or increase the cost of the target business, as the
stockholders of the target business may be discouraged from entering into a
business combination with us or will request a higher price for their securities
as a result of these registration rights and the potential future effect their
exercise may have on the trading market for our common stock.

THE AMERICAN STOCK EXCHANGE MAY DELIST OUR SECURITIES FROM TRADING ON ITS
EXCHANGE WHICH COULD LIMIT INVESTORS' ABILITY TO MAKE TRANSACTIONS IN OUR
SECURITIES AND SUBJECT US TO ADDITIONAL TRADING RESTRICTIONS.

Our securities are listed on the American Stock Exchange, a national
securities exchange. We cannot assure you that our securities will continue to
be listed on the American Stock Exchange in the future prior to a business
combination. Additionally, in connection with our business combination, it is
likely that the American Stock Exchange may require us to file a new initial
listing application and meet its initial listing requirements as opposed to its
more lenient continued listing requirements. We cannot assure you that we will
be able to meet those initial listing requirements at that time.

If the American Stock Exchange delists our securities from trading on its
exchange and we are not able to list our securities on another exchange or to
have them quoted on Nasdaq, our securities could be quoted on the OTC Bulletin
Board, or "pink sheets". As a result, we could face significant material adverse
consequences including:

o a limited availability of market quotations for our securities;

o a determination that our common stock is a "penny stock" which will
require brokers trading in our common stock to adhere to more
stringent rules and possibly resulting in a reduced level of trading
activity in the secondary trading market for our securities;

o a limited amount of news and analyst coverage for our company; and

o a decreased ability to issue additional securities or obtain
additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating the sale of
certain securities, which are referred to as "covered securities". Since we will
be listed on the American Stock Exchange, our securities will be covered
securities. Although the states are preempted from regulating the sale of our
securities, the federal statute does allow the states to investigate companies
if there is a suspicion of fraud, and if there is a finding of fraudulent
activity, then the states can regulate or bar the sale of covered securities in
a particular case. While we are not aware of a state having used these powers to
prohibit or restrict the sale of securities issued by blank check companies
generally, certain state securities regulators view blank check companies
unfavorably and might use these powers, or threaten to use these powers, to
hinder the sale of securities of blank check companies in their states.

IF OUR COMMON STOCK BECOMES SUBJECT TO THE SEC'S PENNY STOCK RULES,
BROKER-DEALERS MAY EXPERIENCE DIFFICULTY IN COMPLETING CUSTOMER TRANSACTIONS AND
TRADING ACTIVITY IN OUR SECURITIES MAY BE ADVERSELY AFFECTED.

If at any time our securities are no longer listed on the American Stock
Exchange or another exchange or quoted on Nasdaq and we have net tangible assets
of $5,000,000 or less and our common stock has a market price per share of less
than $5.00, transactions in our common stock may be subject to the "penny stock"
rules promulgated under the Securities Exchange Act of 1934. Under these rules,
broker-dealers who recommend such securities to persons other than institutional
accredited investors must:

o make a special written suitability determination for the purchaser;

o receive the purchaser's written agreement to a transaction prior to
sale;

o provide the purchaser with risk disclosure documents which identify
certain risks associated with investing in "penny stocks" and which
describe the market for these "penny stocks" as well as a
purchaser's legal remedies; and

o obtain a signed and dated acknowledgment from the purchaser
demonstrating that the purchaser has actually received the required
risk disclosure document before a transaction in a "penny stock" can
be completed.

If our common stock becomes subject to these rules, broker-dealers may
find it difficult to effectuate customer transactions and trading activity in
our securities may be adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult to sell our
securities.

IF WE ARE DEEMED TO BE AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF
1940, OUR ACTIVITIES MAY BE RESTRICTED WHICH, AMONG OTHER PROBLEMS, MAY MAKE IT
DIFFICULT FOR US TO COMPLETE A BUSINESS COMBINATION. SUCH RESTRICTIONS INCLUDE:

o restrictions on the nature of our investments; and

o restrictions on the issuance of securities.

In addition, we may have imposed upon us burdensome requirements, including:

o registration as an investment company;

o adoption of a specific form of corporate structure; and

o reporting, record keeping, voting, proxy and disclosure requirements
and other rules and regulations.

We do not believe that our anticipated principal activities will subject
us to the Investment Company Act of 1940. To this end, the proceeds held in
trust may only be invested by the trust agent in "government securities" with
specific maturity dates, or in money market funds meeting specific requirements
under the Investment Company Act of 1940. By restricting the investment of the
proceeds to these instruments, we intend to meet the requirements for the
exemption provided in Rule 3a-1 promulgated under the Investment Company Act of
1940. If we were deemed to be subject to the act, compliance with these
additional regulatory burdens would require additional expense that we have not
allotted for.

OUR DIRECTORS MAY NOT BE CONSIDERED "INDEPENDENT" UNDER THE POLICIES OF THE
NORTH AMERICAN SECURITIES ADMINISTRATORS ASSOCIATION, INC.

All of our officers or directors own shares of our common stock, and no
salary or other compensation will be paid to our officers or directors for
services rendered by them on our behalf prior to or in connection with a
business combination. We believe that two members of our board of directors are
"independent" as that term is commonly used. However, under the policies of the
North American Securities Administrators Association, Inc., because our
directors may receive reimbursement for out-of-pocket expenses incurred by them
in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations, state
securities administrators could take the position that such individuals are not
"independent." If this were the case, they would take the position that we would
not have the benefit of independent directors examining the propriety of
expenses incurred on our behalf and subject to reimbursement. Additionally,
there is no limit on the amount of out-of-pocket expenses that could be incurred
and there will be no review of the reasonableness of the expenses by anyone
other than our board of directors, which would include persons who may seek
reimbursement, or a court of competent jurisdiction if such reimbursement is
challenged. Although we believe that all actions taken by our directors on our
behalf will be in our best interests, whether or not two of them are deemed to
be "independent," we cannot assure you that this will actually be the case. If
actions are taken, or expenses are incurred that are actually not in our best
interests, it could have a material adverse effect on our business and
operations and the price of our stock held by the public stockholders.

SINCE WE HAVE NOT CURRENTLY SELECTED A PROSPECTIVE TARGET BUSINESS WITH WHICH TO
COMPLETE A BUSINESS COMBINATION, INVESTORS IN OUR SECURITIES ARE UNABLE TO
CURRENTLY ASCERTAIN THE MERITS OR RISKS OF THE TARGET BUSINESS' OPERATIONS.

Since we have not yet identified a prospective target, investors have no
current basis to evaluate the possible merits or risks of the target business'
operations. To the extent we complete a business combination with a financially
unstable company, an entity in its development stage and/or an entity subject to
unknown or unmanageable liabilities, we may be affected by numerous risks
inherent in the business operations of those entities. Although our management
will endeavor to evaluate the risks inherent in a particular target business, we
cannot assure you that we will properly ascertain or assess all of the
significant risk factors. We also cannot assure you that an investment in our
securities will not ultimately prove to be less favorable to investors in our
initial public offering than a direct investment, if an opportunity were
available, in a target business.

WE MAY ACQUIRE A DOMESTIC BUSINESS WITH OPERATIONS OUTSIDE OF THE UNITED STATES,
AND MAY FACE CERTAIN ECONOMIC AND REGULATORY CHALLENGES THAT WE MAY BE UNABLE TO
MEET.

While we expect to acquire a business or assets in the United States, we
may acquire a business or assets with operations outside the United States.
There are certain risks inherent in doing business in international markets,
particularly in the healthcare industry, which is heavily regulated and
controlled in many jurisdictions outside the United States. These risks include:
less developed healthcare infrastructures and generally higher costs;

o difficulty in obtaining the necessary healthcare regulatory
approvals for any potential expansion, and the possibility that any
approvals that may be obtained would impose restrictions on the
operation of the our business;

o the inability to manage and coordinate the healthcare regulatory
requirements of multiple jurisdictions that are constantly evolving
and subject to unexpected change;

o difficulties in staffing and managing foreign operations;

o fluctuations in exchange rates;

o reduced or no protection for intellectual property rights; and

o potentially adverse tax consequences.

Our inability to manage these risks effectively could adversely affect our
proposed business and limit our ability to expand our operations, which would
have a material adverse effect on the our business, financial condition and
results of operations.

RISKS ASSOCIATED WITH THE HEALTHCARE INDUSTRY

Even if we acquire domestic or international assets or operations, of
which no assurances can be given, our proposed business will be subject to
numerous risks, including the following:

CHANGES IN THE HEALTHCARE INDUSTRY ARE SUBJECT TO VARIOUS INFLUENCES, EACH OF
WHICH MAY AFFECT OUR PROSPECTIVE BUSINESS.

The healthcare industry is subject to changing political, economic, and
regulatory influences. These factors affect the purchasing practices and
operations of healthcare organizations. Any changes in current healthcare
financing and reimbursement systems could cause us to make unplanned
enhancements of our prospective products or services, or result in delays or
cancellations of orders, or in the revocation of endorsement of our prospective
products or services by clients. Federal and state legislatures have
periodically considered programs to reform or amend the U.S. healthcare system
at both the federal and state level. Such programs may increase governmental
regulation or involvement in healthcare, lower reimbursement rates, or otherwise
change the environment in which healthcare industry participants operate.
Healthcare industry participants may respond by reducing their investments or
postponing investment decisions, including investments in our prospective
products or services.

Many healthcare industry participants are consolidating to create
integrated healthcare systems with greater market power. As the healthcare
industry consolidates, competition to provide products and services to industry
participants will become even more intense, as will the importance of
establishing a relationship with each industry participant. These industry
participants may try to use their market power to negotiate price reductions for
our prospective products and services. If we were forced to reduce our prices,
our operating results could suffer if we could not achieve corresponding
reductions in our expenses.

ANY BUSINESS WE ACQUIRE WILL BE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION. ANY
CHANGES TO THE LAWS AND REGULATIONS GOVERNING OUR PROSPECTIVE BUSINESS, OR THE
INTERPRETATION AND ENFORCEMENT OF THOSE LAWS OR REGULATIONS, COULD CAUSE US TO
MODIFY OUR OPERATIONS AND COULD NEGATIVELY IMPACT OUR OPERATING RESULTS.

We believe that our prospective business will be extensively regulated by
the federal government and any states in which we decide to operate. The laws
and regulations governing our operations, if any, are generally intended to
benefit and protect persons other than our stockholders. The government agencies
administering these laws and regulations have broad latitude to enforce them.
These laws and regulations along with the terms of any government contracts we
may enter into would regulate how we do business, what products and services we
could offer, and how we would interact with the public. These laws and
regulations, and their interpretations, are subject to frequent change. Changes
in existing laws or regulations, or their interpretations, or the enactment of
new laws or regulations could reduce our revenue, if any, by:

o imposing additional capital requirements;

o increasing our liability;

o increasing our administrative and other costs;

o increasing or decreasing mandated benefits;

o forcing us to restructure our relationships with providers; or

o requiring us to implement additional or different programs and
systems.

For example, Congress enacted the Health Insurance Portability and
Accountability Act of 1996 which mandates that health plans enhance privacy
protections for member protected health information. This requires health plans
to add, at significant cost, new administrative, information and security
systems to prevent inappropriate release of protected member health information.
Compliance with this law is uncertain and has affected the revenue streams of
entities subject to it. Similarly, individual states periodically consider
adding operational requirements applicable to health plans, often without
identifying funding for these requirements. California recently required all
health plans to make available to members independent medical review of their
claims. Any analogous requirements applied to our prospective products or
services would be costly to implement and could affect our prospective revenues.

We believe that our business, if any, will be subject to various routine
and non-routine governmental reviews, audits and investigation. Violation of the
laws governing our prospective operations, or changes in interpretations of
those laws, could result in the imposition of civil or criminal penalties, the
cancellation of any contracts to provide products or services, the suspension or
revocation of any licenses, and exclusion from participation in government
sponsored health programs, such as Medicaid and the State Children's Health
Insurance Program. If we become subject to material fines or if other sanctions
or other corrective actions were imposed upon us, we might suffer a substantial
reduction in revenue, and might also lose one or more of our government
contracts and as a result lose significant numbers of members and amounts of
revenue.

The current administration's issuance of new regulations, its review of
the existing Health Insurance Portability and Accountability Act of 1996 rules
and other newly published regulations, the states' ability to promulgate
stricter rules, and uncertainty regarding many aspects of the regulations may
make compliance with any new regulatory landscape difficult. In order to comply
with any new regulatory requirements, any prospective business we acquire may be
required to employ additional or different programs and systems, the costs of
which are unknown to us at this time. Further, compliance with any such new
regulations may lead to additional costs that we have not yet identified. We do
not know whether, or the extent to which, we would be able to recover our costs
of complying with any new regulations. Any new regulations and the related
compliance costs could have a material adverse effect on our business.

IF WE ARE UNABLE TO ATTRACT QUALIFIED HEALTHCARE PROFESSIONALS AT REASONABLE
COSTS, IT COULD LIMIT OUR ABILITY TO GROW, INCREASE OUR OPERATING COSTS AND
NEGATIVELY IMPACT OUR BUSINESS.

We may rely significantly on our ability to attract and retain qualified
healthcare professionals who possess the skills, experience and licenses
necessary to meet the certification requirements and the requirements of the
hospitals, nursing homes and other healthcare facilities with which we may work,
as well as the requirements of applicable state and federal governing bodies. We
will compete for qualified healthcare professionals with hospitals, nursing
homes and other healthcare organizations. Currently, for example, there is a
shortage of qualified nurses in most areas of the United States. Therefore,
competition for nursing personnel is increasing, and nurses' salaries and
benefits have risen. This may also occur with respect to other healthcare
professionals on whom our business may become dependent.

Our ability to attract and retain such qualified healthcare professionals
will depend on several factors, including our ability to provide attractive
assignments and competitive benefits and wages. We cannot assure you that we
will be successful in any of these areas. Because we may operate in a fixed
reimbursement environment, increases in the wages and benefits that we must
provide to attract and retain qualified healthcare professionals or increases in
our reliance on contract or temporary healthcare professionals could negatively
affect our revenue. We may be unable to continue to increase the number of
qualified healthcare professionals that we recruit, decreasing the potential for
growth of our business. Moreover, if we are unable to attract and retain
qualified healthcare professionals, we may have to limit the number of clients
for whom we can provide any of our prospective products or services.

WE MAY FACE SUBSTANTIAL RISKS OF LITIGATION AS A RESULT OF OPERATING IN THE
HEALTHCARE INDUSTRY. IF WE BECOME SUBJECT TO MALPRACTICE AND RELATED LEGAL
CLAIMS, WE COULD BE REQUIRED TO PAY SIGNIFICANT DAMAGES, WHICH MAY NOT BE
COVERED BY INSURANCE.

Litigation is a risk that each business contends with, and businesses
operating in the healthcare industry do so more than most. In recent years,
medical product companies have issued recalls of medical products, and
physicians, hospitals and other health care providers have become subject to an
increasing number of legal actions alleging malpractice, product liability or
related legal theories. Many of these actions involve large monetary claims and
significant defense costs. We intend to maintain liability insurance in amounts
that we believe will be appropriate for our prospective operations. We also
intend to maintain business interruption insurance and property damage
insurance, as well as an additional umbrella liability insurance policy.
However, this insurance coverage may not cover all claims against us. Insurance
coverage may not continue to be available at a cost allowing us to maintain
adequate levels of insurance. If one or more successful claims against us were
not covered by or exceeded the coverage of our insurance, our financial
condition could be adversely affected.

WE MAY BE DEPENDENT ON PAYMENTS FROM MEDICARE AND MEDICAID. CHANGES IN THE RATES
OR METHODS GOVERNING THESE PAYMENTS FOR OUR PROSPECTIVE PRODUCTS OR SERVICES, OR
DELAYS IN SUCH PAYMENTS, COULD ADVERSELY AFFECT OUR PROSPECTIVE REVENUE.

A large portion of our revenue may consist of payments from Medicare and
Medicaid programs. Because these are generally fixed payments, we would be at
risk for the cost of any products or services provided to our clients. We cannot
assure you that Medicare and Medicaid will continue to pay in the same manner or
in the same amount that they currently do. Any reductions in amounts paid by
government programs for our prospective products or services or changes in
methods or regulations governing payments would adversely affect our potential
revenue. Additionally, delays in any such payments, whether as a result of
disputes or for any other reason, would also adversely affect our potential
revenue.

IF OUR COSTS WERE TO INCREASE MORE RAPIDLY THAN FIXED PAYMENT ADJUSTMENTS WE
RECEIVE FROM MEDICARE, MEDICAID OR OTHER THIRD-PARTY PAYORS FOR ANY OF OUR
POTENTIAL PRODUCTS OR SERVICES, OUR REVENUE COULD BE NEGATIVELY IMPACTED.

We may receive fixed payments for our prospective products or services
based on the level of service or care that we provide. Accordingly, our revenue
may be largely dependent on our ability to manage costs of providing any
products or services and to maintain a client base. We may become susceptible to
situations where our clients may require more extensive and therefore more
expensive products or services than we may be able to profitably deliver.
Although Medicare, Medicaid and certain third-party payors currently provide for
an annual adjustment of various payment rates based on the increase or decrease
of the medical care expenditure category of the Consumer Price Index, these
increases have historically been less than actual inflation. If these annual
adjustments were eliminated or reduced, or if our costs of providing our
products or services increased more than the annual adjustment, any revenue
stream we may generate would be negatively impacted.

WE MAY DEPEND ON PAYMENTS FROM THIRD-PARTY PAYORS, INCLUDING MANAGED CARE
ORGANIZATIONS. IF THESE PAYMENTS ARE REDUCED, ELIMINATED OR DELAYED, OUR
PROSPECTIVE REVENUES COULD BE ADVERSELY AFFECTED.

We may be dependent upon private sources of payment for any of our
potential products or services. Any amounts that we may receive in payment for
such products and services may be adversely affected by market and cost factors
as well as other factors over which we have no control, including regulations
and cost containment and utilization decisions and reduced reimbursement
schedules of third-party payors. Any reductions in such payments, to the extent
that we could not recoup them elsewhere, would have a material adverse effect on
our prospective business and results of operations. Additionally, delays in any
such payments, whether as a result of disputes or for any other reason, would
have a material adverse effect on our prospective business and results of
operations.

MEDICAL REVIEWS AND AUDITS BY GOVERNMENTAL AND PRIVATE PAYORS COULD RESULT IN
MATERIAL PAYMENT RECOUPMENTS AND PAYMENT DENIALS, WHICH COULD NEGATIVELY IMPACT
OUR BUSINESS.

Medicare fiscal intermediaries and other payors may periodically conduct
pre-payment or post-payment medical reviews or other audits of our prospective
products or services. In order to conduct these reviews, the payor would request
documentation from us and then review that documentation to determine compliance
with applicable rules and regulations, including the documentation of any
products or services that we might provide. We cannot predict whether medical
reviews or similar audits by federal or state agencies or commercial payors of
such products or services will result in material recoupments or denials, which
could have a material adverse effect on our financial condition and results of
operations.

IF THE FDA OR OTHER STATE OR FOREIGN AGENCIES IMPOSE REGULATIONS THAT AFFECT OUR
POTENTIAL PRODUCTS, OUR COSTS WILL INCREASE.

The development, testing, production and marketing of any of our potential
products that we may manufacture, market or sell following a business
combination may be subject to regulation by the FDA as "devices" under the 1976
Medical Device Amendments to the Federal Food, Drug and Cosmetic Act. Before a
new medical device, or a new use of, or claim for, an existing product can be
marketed in the United States, it must first receive either 510(k) clearance or
pre-market approval from the FDA, unless an exemption applies. Either process
can be expensive and lengthy. The FDA's 510(k) clearance process usually takes
from three to twelve months, but it can take longer and is unpredictable. The
process of obtaining pre-market approval is much more costly and uncertain than
the 510(k) clearance process and it generally takes from one to three years, or
even longer, from the time the application is filed with the FDA.

In the United States, medical devices must be:

o manufactured in registered and quality approved establishments by
the FDA; and

o produced in accordance with the FDA Quality System Regulation
("QSR") for medical devices.

As a result, we may be required to comply with QSR requirements and if we
fail to comply with these requirements, we may need to find another company to
manufacture any such devices which could delay the shipment of our potential
product to our customers.

The FDA requires producers of medical devices to obtain FDA licensing
prior to commercialization in the United States. Testing, preparation of
necessary applications and the processing of those applications by the FDA is
expensive and time consuming. We do not know if the FDA would act favorably or
quickly in making such reviews, and significant difficulties or costs may
potentially be encountered by us in any efforts to obtain FDA licenses. The FDA
may also place conditions on licenses that could restrict commercial
applications of such products. Product approvals may be withdrawn if compliance
with regulatory standards is not maintained or if problems occur following
initial marketing. Delays imposed by the FDA licensing process may materially
reduce the period during which we have the exclusive right to commercialize any
potential patented products. We may make modifications to any potential devices
and may make additional modifications in the future that we may believe do not
or will not require additional clearances or approvals. If the FDA should
disagree, and require new clearances or approvals for the potential
modifications, we may be required to recall and to stop marketing the potential
modified devices. We also may be subject to Medical Device Reporting
regulations, which would require us to report to the FDA if our products were to
cause or contribute to a death or serious injury, or malfunction in a way that
would likely cause or contribute to a death or serious injury. We cannot assure
you that such problems will not occur in the future.

Additionally, our potential products may be subject to regulation by
similar agencies in other states and foreign countries. Compliance with such
laws or regulations, including any new laws or regulations in connection any
potential products developed by us, might impose additional costs on us or
marketing impediments on such products which could adversely affect our revenues
and increase our expenses. The FDA and state authorities have broad enforcement
powers. Our failure to comply with applicable regulatory requirements could
result in enforcement action by the FDA or state agencies, which may include any
of the following sanctions:

o warning letters, fines, injunctions, consent decrees and civil
penalties;

o repair, replacement, refunds, recall or seizure of our products;

o operating restrictions or partial suspension or total shutdown of
production;

o refusal of requests for 510(k) clearance or premarket approval of
new products, new intended uses, or modifications to existing
products;

o withdrawal of 510(k) clearance or premarket approvals previously
granted; and

o criminal prosecution.

If any of these events were to occur, it could harm our business.

THE FDA CAN IMPOSE CIVIL AND CRIMINAL ENFORCEMENT ACTIONS AND OTHER PENALTIES ON
US IF WE WERE TO FAIL TO COMPLY WITH STRINGENT FDA REGULATIONS.

Medical device manufacturing facilities must maintain records, which are
available for FDA inspectors documenting that the appropriate manufacturing
procedures were followed. Should we acquire such a facility as a result of a
business combination, the FDA would have authority to conduct inspections of
such a facility. Labeling and promotional activities are also subject to
scrutiny by the FDA and, in certain instances, by the Federal Trade Commission.
Any failure by us to take satisfactory corrective action in response to an
adverse inspection or to comply with applicable FDA regulations could result in
enforcement action against us, including a public warning letter, a shutdown of
manufacturing operations, a recall of our products, civil or criminal penalties
or other sanctions. From time to time, the FDA may modify such requirements,
imposing additional or different requirements which could require us to alter
our business methods which could potentially result in increased expenses.

Government Regulation

Although as of the date of this filing we have not entered into any
agreement to acquire any operating business, we believe that any prospective
business we may acquire will be extensively regulated by the federal government
and any states in which we decide to operate. The laws and regulations governing
our operations, if any, are generally intended to benefit and protect persons
other than our stockholders. The government agencies administering these laws
and regulations have broad latitude to enforce them. These laws and regulations
along with the terms of any government contracts we may enter into would
regulate how we do business, what products and services we could offer, and how
we would interact with the public. These laws and regulations, and their
interpretations, are subject to frequent change. Changes in existing laws or
regulations, or their interpretations, or the enactment of new laws or
regulations could reduce our revenue, if any, by:

o imposing additional capital requirements;

o increasing our liability;

o increasing our administrative and other costs;

o increasing or decreasing mandated benefits;

o forcing us to restructure our relationships with providers; or

o requiring us to implement additional or different programs and
systems.

In addition, the development, testing, production and marketing of any
products that we may manufacture, market or sell following a business
combination may be subject to regulation by the FDA as "devices" under the 1976
Medical Device Amendments to the Federal Food, Drug and Cosmetic Act, as
amended. Before a new medical device, or a new use of, or claim for, an existing
product can be marketed in the United States, it must first receive either
510(k) clearance or pre-market approval from the FDA, unless an exemption
applies. Either process can be expensive and lengthy. The FDA's 510(k) clearance
process usually takes from three to twelve months, but it can take longer and is
unpredictable. The process of obtaining pre-market approval is much more costly
and uncertain than the 510(k) clearance process and it generally takes from one
to three years, or even longer, from the time the application is filed with the
FDA.

In the United States, medical devices must be:

o manufactured in registered and quality approved establishments by
the FDA; and

o produced in accordance with the FDA Quality System Regulation, or
QSR, for medical devices.

The FDA requires producers of medical devices to obtain FDA clearance or
approval prior to commercialization in the United States. Testing, preparation
of necessary applications and the processing of those applications by the FDA is
expensive and time consuming. We do not know if the FDA would act favorably or
quickly in making such reviews, and significant difficulties or costs may
potentially be encountered by us in any efforts to obtain FDA clearance or
approval. The FDA may also place conditions on clearances and approvals that
could restrict commercial applications of such products. Product approvals may
be withdrawn if compliance with regulatory standards is not maintained or if
problems occur following initial marketing. Delays imposed by the FDA clearance
or approval process may materially reduce the period during which we have the
exclusive right to commercialize any potential patented products. We may make
modifications to any potential devices and may make additional modifications in
the future that we may believe do not or will not require additional clearances
or approvals. If the FDA should disagree, and require new clearances or
approvals for the potential modifications, we may be required to recall and to
stop marketing the potential modified devices. We also may be subject to Medical
Device Reporting regulations, which would require us to report to the FDA if our
products were to cause or contribute to a death or serious injury, or
malfunction in a way that would likely cause or contribute to a death or serious
injury.

The development, testing, production and marketing of any of our potential
products that we may manufacture, market or sell following a business
combination may be subject to regulation by the FDA as "drugs." All "new drugs"
must be the subject of an FDA-approved new drug application (NDA) and all new
biologics products must be the subject of a biologics license application (BLA)
before they may be marketed in the United States. All generic equivalents to
previously approved drugs or new dosage forms of existing drugs must be the
subject of an FDA-approved abbreviated new drug application (ANDA) before they
may be marketed in the United States. In all cases, the FDA has the authority to
determine what testing procedures are appropriate for a particular product and,
in some instances, has not published or otherwise identified guidelines as to
the appropriate procedures. The FDA has the authority to withdraw existing NDA,
BLA and ANDA approvals and to review the regulatory status of products marketed
under its enforcement policies. The FDA may require an approved NDA, BLA, or
ANDA for any drug or biologic product marketed to be recalled or withdrawn under
its enforcement policy if new information reveals questions about the drug or
biologic's safety or effectiveness. All drugs must be manufactured in conformity
with current good manufacturing practice regulations (GMPs) and drugs and
biologics subject to an approved NDA, BLA, or ANDA must be manufactured,
processed, packaged, held and labeled in accordance with information contained
in those approvals. The required product testing and approval process for new
drugs and biologics ordinarily takes several years and requires the expenditure
of substantial resources. Testing of any product under development may not
result in a commercially-viable product. Even after such time and expenses,
regulatory approval by the FDA may not be obtained for any products developed.
In addition, delays or rejections may be encountered based upon changes in FDA
policy during the period of product development and FDA review. Any regulatory
approval may impose limitations in the indicated use for the product. Even if
regulatory approval is obtained, a marketed product, its manufacturer and its
manufacturing facilities are subject to continual review and periodic
inspections. Subsequent discovery of previously unknown problems with a product,
manufacturer or facility may result in restrictions on the product or
manufacturer, including withdrawal of the product from the market.

Even if required FDA approval has been obtained with respect to a new drug
or biologic product, foreign regulatory approval of a product must also be
obtained prior to marketing the product internationally. Foreign approval
procedures vary from country to country and the time required for approval may
delay or prevent marketing. The clinical testing requirements and the time
required to obtain foreign regulatory approvals may differ from that required
for FDA approval. Although there is now a centralized European Union approval
mechanism for new pharmaceutical products in place, each European Union member
state may nonetheless impose its own procedures and requirements, many of which
are time consuming and expensive, and some European Union member states require
price approval as part of the regulatory approval process. Thus, there can be
substantial delays in obtaining required approval from both the FDA and foreign
regulatory authorities.

Employees

We have three officers, all of whom are also members of our board of
directors. These individuals are not obligated to contribute any specific number
of hours per week and intend to devote only as much time as they deem necessary
to our affairs. The amount of time they will devote in any time period will vary
based on the availability of suitable target businesses to investigate, although
we expect such individuals to devote an average of approximately ten hours per
week to our business. We do not intend to have any full time employees prior to
the consummation of a business combination.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties.

We maintain our executive offices at 2116 Financial Center, 666 Walnut
Street, Des Moines, Iowa 50309. We have agreed to pay Equity Dynamics, Inc., an
affiliated third party of which Mr. Pappajohn is the President and principal
stockholder, and Mr. Kinley a Senior Vice President, approximately $7,500 per
month for office space (located at our executive offices) and certain additional
general and administrative services, such as an allocable share of receptionist,
secretarial and general office services. These offices consist of approximately
2,570 square feet of office space. A prior arrangement with an affiliate of our
Chief Executive Officer, Derace Schaffer, M.D., pursuant to which we paid $1,500
a month for office space and certain general and administrative services, as a
portion of the $7,500, was terminated on December 31, 2005.

We consider our office space adequate for our current operations.

Item 3. Legal Proceedings.

To the knowledge of management, there is no litigation currently pending
or contemplated against us or any of our officers or directors in their capacity
as such.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of securityholders during the fourth
quarter of the fiscal period ended December 31, 2005.

PART II

Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.

Since July 29, 2005, our units, and after their split on October 6, 2005,
our shares of common stock and warrants, have all traded on the American Stock
Exchange under the symbols "HAQ.U", "HAQ," and "HAQ.WS", respectively. On
October 6, 2005, our units ceased trading separately. Prior to July 29, 2005,
there was no established public trading market for our common stock.

The closing high and low sales prices of our units, common stock, and
warrants as reported by the American Stock Exchange, for the quarters indicated
are as follows:

Common Stock Warrants Units
--------------------------------------------------

High Low High Low High Low
2005:
Third Quarter N/A N/A N/A N/A $ 8.35 $ 7.80
Fourth Quarter $ 7.20 $ 6.75 $ 1.75 $ 0.95 $ 8.15 $ 8.02

As of March 22, 2006, there were eight stockholders of record of our
common stock and three holders of record of our warrants. Such numbers do not
include beneficial owners holding shares or warrants through nominee names.

We have not paid any dividends on our common stock to date and do not
intend to pay dividends prior to the completion of a business combination. The
payment of dividends in the future will be contingent upon our revenues and
earnings, if any, capital requirements and general financial condition
subsequent to completion of a business combination. The payment of any dividends
subsequent to a business combination will be within the discretion of our then
board of directors. It is the present intention of our board of directors to
retain all earnings, if any, for use in our business operations and,
accordingly, our board does not anticipate declaring any dividends in the
foreseeable future.

Recent Sales of Unregistered Securities

Since inception in April 2005, we sold the following shares of common
stock without registration under the Securities Act:

Stockholders Number of Shares

John Pappajohn 600,000
Derace L. Schaffer, M.D. 600,000
Matthew P. Kinley 300,000

Such shares were issued on April 25, 2005 in connection with our
organization pursuant to the exemption from registration contained in Section
4(2) of the Securities Act as they were sold to sophisticated, wealthy
individuals. The shares issued to the individuals and entities above were sold
for an aggregate offering price of $25,000 at an average purchase price of
approximately $0.0167 per share. No underwriting discounts or commissions were
paid with respect to such sales. In June 2005, Mr. Pappajohn, Dr. Schaffer and
Mr. Kinley transferred, for an aggregate consideration per share which they paid
us and pro rata to their ownership of our common stock, an aggregate of 30,000
shares of our common stock equally to Mr. Berger and Mr. Schellhammer, two of
our directors. On July 8, 2005, our Board of Directors authorized a stock
dividend of approximately .333333 shares of common stock for each outstanding
share of common stock, effectively lowering the initial purchase price to
approximately $.0125 per share. Further, on July 22, 2005, our Board of
Directors authorized a stock dividend of approximately .125 shares of common
stock for each outstanding share of common stock, effectively lowering the
initial purchase price to approximately $.0111 per share.

Use of Proceeds from our Initial Public Offering

The effective date of our registration statement, which was filed on Form
S-1 under the Securities Act of 1933 (File No. 333-124712), and which relates to
the initial public offering of our units, was July 28, 2005. Each unit consisted
of one share of common stock, $.0001 par value per share, and one warrant to
purchase one share of common stock. A total of 10,350,000 units were registered
at a proposed maximum aggregate offering price of $82,800,000.

The offering was consummated on August 3, 2005, and the sale of a portion
of the overallotment option was consummated on August 16, 2005. The underwriters
of the offering were Maxim Group LLC, Ramius Securities, LLC, Sunrise Securities
Corp. and Broadband Capital Management, LLC. A total of 9,400,000 units were
sold in the offering and the overallotment at $8.00 per unit for an aggregate
offering price of $75,200,000. Each of our units commenced trading its component
share of common stock and warrant separately on October 6, 2005. Our units do
not continue to trade separately from the common stock and warrants.

Our net proceeds from our initial public offering are as set forth in the
following table:

USE OF PROCEEDS

The net proceeds of this offering will be as set forth in the following table:

Gross proceeds $75,200,000
Offering expenses
Underwriting discount (1) (2) $ 4,512,000
Underwriting non-accountable expense
allowance (3) $ 720,000
Legal fees and expenses (including blue
sky services and expenses) $ 200,000
Miscellaneous expenses $ 45,251
Printing and engraving expenses $ 50,000
Accounting fees and expenses $ 25,000
SEC registration fee $ 17,981
NASD registration fee $ 15,778
AMEX Listing Fees $ 75,000
Initial trustee's fee $ 1,000
D & O Insurance $ 70,000

Net Proceeds
Held in trust (2) $67,928,000
Not held in trust $ 1,540,000
Total net proceeds $69,468,000

Use of new proceeds not held in trust
Legal, accounting and other expenses attendant to the due
diligence investigations, structuring and negotiation
of a business combination $ 200,000

Payment for administrative services and support ($7,500 per month
for 24 months) $ 180,000
Due diligence of prospective target business $ 600,000
Legal and accounting fees relating to SEC reporting obligations $ 50,000
Working capital and services $ 510,000
Total $ 1,540,000

(1) Consists of an underwriting discount of 6% of the gross proceeds of
our initial public offering (including any units sold to cover overallotments).

(2) Upon consummation of a business combination, Maxim Group LLC will be
paid an additional underwriting discount in the amount of 1% of the gross
proceeds of our initial public offering (including any units sold to cover
overallotments) out of the funds held in trust, for an aggregate of $752,000.

(3) The 1% non-accountable expense allowance was not payable with respect
to the units sold upon exercise of the underwriters' over-allotment option.

$67,928,000 of the net proceeds of our initial public offering and the
overallotment, or approximately $7.23 per share, were placed in a trust account
at JP Morgan Chase NY Bank maintained by Continental Stock Transfer & Trust
Company, New York, New York, as trustee. The proceeds will not be released from
the trust fund until the earlier of the completion of a business combination or
our liquidation. The proceeds held in the trust fund may be used as
consideration to pay the sellers of a target business with which we ultimately
complete a business combination. Any amounts not paid as consideration to the
sellers of the target business may be used to finance operations of the target
business or to effect other acquisitions, as determined by our board of
directors at that time.

We have agreed to pay Equity Dynamics, Inc., an affiliated third party of
which Mr. Pappajohn is the President and principal stockholder, and Mr. Kinley a
Senior Vice President, approximately $7,500 per month for office space and
certain additional general and administrative services. A prior arrangement with
an affiliate of our Chief Executive Officer, Derace Schaffer, M.D., pursuant to
which we paid $1,500 a month for office space and certain general and
administrative services, as a portion of the $7,500, was terminated on December
31, 2005. As of December 31, 2005, approximately $37,500 was paid pursuant to
these arrangements.

In accordance with their agreement with the representative of the
underwriters in our initial public offering, Mr. Pappajohn, Dr. Schaffer and Mr.
Kinley purchased, pursuant to the guidelines set forth in SEC Rule 10b5-1 in
connection with Rule 10b5-1 plans, an aggregate of 354,900 of our warrants, for
aggregate consideration of $386,070, on the open market at prices up to $1.20
per warrant. The Rule 10b5-1 plans terminated on January 6, 2006, and no further
purchases are planned.

Prior to the closing of a business combination, we have agreed to obtain
keyman life insurance in the amount of $3,000,000 in the aggregate on the lives
of certain members of our management for a three year period. Based on current
estimates, the premium for such life insurance policies, of which we will be the
sole beneficiary, is expected to be approximately $5,000 per year. Effective
January, 2006, keyman life insurance was obtained for Matt Kinley and Derace
Schaffer in the amount of $1,500,000 each.

We intend to use the excess working capital (approximately $510,000) being
held in reserve in the event due diligence, legal, accounting and other expenses
of structuring and negotiating business combinations exceed our estimates, as
well as for reimbursement of any out-of-pocket expenses incurred by persons who
were stockholders prior to our initial public offering in connection with
activities on our behalf as described below. We expect that due diligence of
prospective target businesses will be performed by some or all of our officers
and directors and may include engaging market research firms and/or third party
consultants. Our officers and directors do not receive any compensation for
their due diligence of prospective target businesses, but are reimbursed for any
out-of-pocket expenses (such as travel expenses) incurred in connection with
such due diligence activities. As of December 31, 2005, we have reimbursed
$67,642 to such persons. We believe that the excess working capital will be
sufficient to cover the foregoing expenses and reimbursement costs.

It is also possible that we could use a portion of such excess working
capital to make a deposit, down payment or fund a "no-shop" provision with
respect to a particular proposed business combination, although we do not have
any current intention to do so. In the event that we were ultimately required to
forfeit such funds (whether as a result of our breach of the agreement relating
to such payment or otherwise), we may not have a sufficient amount of working
capital available outside of the trust account to conduct due diligence and pay
other expenses related to finding another suitable business combination without
securing additional financing. Thus, if we were unable to secure additional
financing, we would most likely fail to consummate a business combination in the
allotted time and would be forced to liquidate.

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.

Mr. Pappajohn, Dr. Schaffer and Mr. Kinley loaned us a total of $250,000
which was used to pay a portion of the expenses of the initial public offering,
such as SEC registration fees, NASD registration fees, AMEX listing fees and
legal and accounting fees and expenses. These loans were repaid out of the net
proceeds of our initial public offering not placed in trust.

The net proceeds of the initial public offering not held in the trust fund
and not immediately required for the purposes set forth above may only be
invested by the trust agent in "government securities" with specific maturity
dates, or in money market funds meeting specific requirements under the
Investment Company Act of 1940, in each case in such a manner that we are not
deemed to be an investment company under the Investment Company Act. We believe
that, as a result of our initial public offering, we will have sufficient
available funds to operate until at least August 2007, assuming that a business
combination is not consummated during that time.

Other than the $7,500 aggregate per month general and administrative
service fees described above, no compensation of any kind (including finder's
and consulting fees) will be paid to any persons who were stockholders prior to
our initial public offering, or any of their affiliates, for services rendered
to us prior to or in connection with the consummation of the business
combination. However, such stockholders will receive reimbursement for any
out-of-pocket expenses incurred by them in connection with activities on our
behalf, such as identifying potential target businesses and performing due
diligence on suitable business combinations. After the consummation of a
business combination, if any, to the extent our management remains as officers
of the resulting business, we anticipate that they may enter into employment
agreements, the terms of which shall be negotiated and which we expect to be
comparable to employment agreements with other similarly-situated companies in
the healthcare industry. Further, after the consummation of a business
combination, if any, to the extent our directors remain as directors of the
resulting business, we anticipate that they will receive compensation comparable
to directors at other similarly-situated companies in the healthcare industry.

Item 6. Selected Financial Data.

The following tables should be read in conjunction with our financial
statements and the notes thereto appearing elsewhere in this Annual Report on
Form 10-K. The selected financial data has been derived from our financial
statements, which have been audited by LWBJ, LLP, independent registered public
accounting firm, as indicated in their report included elsewhere herein.

SELECTED FINANCIAL DATA
For the period April 25, 2005 (inception) to December 31, 2005

Income statement data

Investment income $ 586,074

Total expenses (260,779)
------------
Income before provision for income taxes 325,295
------------
Provision for income taxes 48,000

Net income $ 277,295
============
Basic earnings per share $ 0.04
============
Diluted earnings per share $ 0.03
============
Weighted average basic shares outstanding 7,869,200
============
Weighted average diluted shares outstanding 8,323,201
============

Balance sheet data

Cash $ 1,398,181

Investments held in trust 68,636,069

Other current assets 52,500
------------
Total assets $ 70,086,750
============

Total liabilities 410,535
Common stock, subject to possible redemption 13,578,807

Total stockholders' equity 56,097,408
------------
Total liabilities and stockholders' equity $ 70,086,750
============

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

The following discussion should be read in conjunction with our financial
statements and footnotes thereto contained in this report.

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 $69,468,000. Of this
amount, $67,928,000 is being held in trust and the remaining funds are 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 August 2007, assuming that a business combination is not consummated
during that time. 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.

Item 7A. 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 of the trust
account we may not engage in, any substantive commercial business. Accordingly,
the risks associated with foreign exchange rates, commodity prices, and equity
prices are not significant.

Item 8. Financial Statements and Supplementary Data.

Reference is made to pages F-1 through F-12 comprising a portion of this
Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our management carried out an evaluation, with the participation of Derace
L. Schaffer, M.D., our principal executive officer, and Matthew P. Kinley, our
principal financial officer, of the effectiveness of our disclosure controls and
procedures as of December 31, 2005. Based upon that evaluation, Dr. Schaffer and
Mr. Kinley 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 three months ended December 31, 2005 that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors and Executive Officers of the Registrant.

Our current directors and executive officers are as follows:

NAME AGE POSITION
John Pappajohn 77 Chairman of the Board and Secretary

Derace L. Schaffer, M.D. 57 Vice Chairman and Chief Executive Officer

Matthew P. Kinley 38 President, Treasurer and Director

Edward B. Berger 76 Director

Wayne A. Schellhammer 53 Director

JOHN PAPPAJOHN has served as our chairman and secretary since April 2005.
Since 1969, Mr. Pappajohn has been the President and principal stockholder of
Equity Dynamics, Inc., a financial consulting firm, and the sole owner of
Pappajohn Capital Resources, a venture capital firm. He also serves as a
director of the following public companies: Allion Healthcare, Inc., American
CareSource Holdings, Inc., MC Informatics, Inc., PACE Health Management Systems,
Inc. and Patient InfoSystems, Inc. Mr. Pappajohn has been an active private
equity investor in healthcare companies for more than 30 years and has served as
a director of more than 40 public companies. Mr. Pappajohn has been a founder in
several public healthcare companies such as Caremark Rx, Inc., Quantum Health
Resources, and Radiologix, Inc. Mr. Pappajohn and Dr. Schaffer have worked
together for more than fifteen years on a variety of healthcare companies, and
they have co-founded Allion Healthcare, Inc., Patient Infosystems, Inc., and
Radiologix, Inc., all of which are public companies. In addition, Mr. Pappajohn
and Dr. Schaffer have worked together on many private healthcare companies, such
as Logisticare, Inc. and Source Medical Inc. Mr. Pappajohn received his B.S.C.
from the University of Iowa.

DERACE L. SCHAFFER, M.D. has served as our vice chairman and chief
executive officer since April 2005. Dr. Schaffer is the founder and CEO of The
Lan Group, a venture capital firm specializing in healthcare and high technology
investments. He also serves as a director of the following public companies:
Allion Healthcare, Inc., American CareSource Holdings, Inc., and Patient
InfoSystems, Inc. He has served as chairman of several healthcare companies
including, Radiologix, Inc when it was private. He has been an active
co-investor with Mr. Pappajohn for more than fifteen years on a variety of
healthcare companies, and they have co-founded Allion Healthcare, Patient
Infosystems and Radiologix, all of which are public companies. In addition, Mr.
Pappajohn and Dr. Schaffer have worked together on many private healthcare
companies, such as Logisticare, Inc. and Source Medical Inc. Dr. Schaffer served
as chief executive officer and chairman of the board of Ide Imaging Group, P.C.
from 1980 to 2001. Dr. Schaffer has served as a director on many healthcare
boards of directors including several health systems and more than ten
healthcare services and technology companies. Dr. Schaffer received his
postgraduate radiology training at Harvard Medical School and Massachusetts
General Hospital, where he served as Chief Resident. Dr. Schaffer is currently
also a Clinical Professor of Radiology at Weill Cornell Medical College.

MATTHEW P. KINLEY has served as our president, treasurer and a director
since April 2005. Since 1995, he has served as Senior Vice President of Equity
Dynamics, Inc., a financial consulting firm, and Pappajohn Capital Resources, a
venture capital firm, both owned by John Pappajohn. Mr. Kinley has been involved
in the financing and development of more than 20 companies with Mr. Pappajohn in
the past ten years. Mr. Kinley has worked with Dr. Schaffer for more than ten
years on healthcare services and technology companies. From 1990 through 1995,
Mr. Kinley was manager and held various positions at KPMG Peat Marwick, working
on tax, audit and merger and acquisition issues. Mr. Kinley received his B.A. in
Business, with highest honors, from the University of Northern Iowa in May 1990.

EDWARD B. BERGER has served as a director since April 2005. He is Chairman
and Chief Executive Officer of Equity Acquisitions Incorporated, a position he
has held since January 2004, Chairman of the Board of Directors of Southwest
Business Systems, Chairman and CEO of Berger Equities Inc., director and
Chairman of the Audit Committee of CardSystems Solutions and a director of
Compass Bank of Tucson, AZ., and American CareSource Holdings, Inc. both public
companies. Mr. Berger has extensive healthcare experience: past President and
CEO of Palo Verde Hospital; past President and member of the Board of Trustees
of Kino Community Hospital; past member of the Long Range Planning Committee of
Tucson Medical Center, all in Tucson, AZ. Mr. Berger is currently an Adjunct
Professor in Political Science at Pima Community College and is the Chairman of
the MBA Advisory Council, Eller Graduate School of Management at the University
of Arizona. He has been admitted to practice law before the U.S. Supreme Court,
U.S. Court of Appeals for the 9th Circuit and the U.S. District Court-Arizona.
He is admitted to the New York Bar, the Arizona Bar and the District of Columbia
Bar. Mr. Berger received his Juris Doctor degree from New York Law School. Mr.
Berger is a member of both our Audit Committee and our Nominating Committee.

WAYNE A. SCHELLHAMMER has served as a director since June 2005. Mr.
Schellhammer is Chairman and Chief Executive Officer of American Care Source
Holdings, Inc., a public company, a position he has held since October of 2004.
He served as President and CEO of Iowa Health Physicians, an affiliate of the
Iowa Health System, for five years, as President and CEO of InTrust for five
years and as Vice President of Physician Services and Payer Contracting for the
Iowa Health System, a hospital and physician integrated health system, for five
years. Mr. Schellhammer has also held senior executive positions with KPMG
Consulting (now BearingPoint) for two years, Wellcare of New York, a subsidiary
of a public company, Wellcare HealthPlans, Inc., for five years, as well as a
national cardiac consulting firm. He has spent a total of 30 years in the
healthcare industry and is a graduate of the University of Minnesota. Mr.
Schellhammer is a member of both our Audit Committee and our Nominating
Committee.

Our board of directors is divided into two classes with only one class of
directors being elected in each year and each class serving a two-year term. The
term of office of the first class of directors, consisting of Mr. Berger and Mr.
Schellhammer, will expire at our first annual meeting of stockholders. The term
of office of the second class of directors, consisting of Mr. Pappajohn, Dr.
Schaffer and Mr. Kinley, will expire at the second annual meeting.

These individuals will play a key role in identifying and evaluating
prospective acquisition candidates, selecting the target business, and
structuring, negotiating and consummating its acquisition. None of these
individuals has been a principal of or affiliated with a public company or blank
check company that executed a business plan similar to our business plan and
none of these individuals is currently affiliated with such an entity. However,
we believe that the skills and expertise of these individuals, their collective
access to acquisition opportunities and ideas, their contacts, and their
transaction expertise should enable them to identify and effect an acquisition
although we cannot assure you that they will, in fact, be able to do so.

Dr. Schaffer, Mr. Pappajohn and Mr. Kinley may be deemed to be our
"parents" and are deemed our "promoters," as these terms are defined under the
Federal securities laws.

Director Independence

Our board of directors has determined that Mr. Berger and Mr. Schellhammer
are "independent directors" as defined in the American Stock Exchange listing
standards and Rule 10A-3 of the Exchange Act. We intend to locate and appoint at
least two additional independent directors to serve on the board of directors
and one additional independent director to serve on each of our audit committee
and nominating committee prior to July 28, 2006.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers, directors and persons who beneficially own more than ten percent
of our common stock to file reports of ownership and changes in ownership with
the SEC. These reporting persons are also required to furnish us with copies of
all Section 16(a) forms they file. Except for the Form 3 of Mr. Kinley filed on
August 5, 2005 and the Form 3 of Mr. Schellhammer filed on August 3, 2005, all
of these reports were filed in a timely manner.

Board Committees

Our board of directors established an audit committee and a nominating
committee. Our board of directors adopted charters for these committees, as well
as a code of conduct and ethics that governs the conduct of our directors,
officers and employees.

Audit Committee

Our audit committee currently consists of Mr. Berger and Mr. Schellhammer.
The independent directors we appoint to our audit committee will each be an
independent member of our board of directors, as defined by the rules of the
American Stock Exchange and the SEC. Each member of our audit committee will be
financially literate under the current listing standards of the American Stock
Exchange, and our board of directors has determined that Mr. Berger qualifies as
an "audit committee financial expert," as such term is defined by SEC rules. We
intend to locate and appoint at least one additional independent director on our
audit committee prior to July 28, 2006.

The audit committee reviews the professional services and independence of
our independent registered public accounting firm and our accounts, procedures
and internal controls. The audit committee also recommends the firm selected to
be our independent registered public accounting firm, reviews and approves the
scope of the annual audit, review and evaluates with the independent public
accounting firm our annual audit and annual consolidated financial statements,
reviews with management the status of internal accounting controls, evaluates
problem areas having a potential financial impact on us that may be brought to
the committee's attention by management, the independent registered public
accounting firm or the board of directors, and evaluates all of our public
financial reporting documents.

Nominating Committee

We have established a nominating committee of the board of directors,
which consists of Mr. Berger and Mr. Schellhammer, each of whom is an
independent director as defined by the rules of the American Stock Exchange and
the SEC. The nominating committee is responsible for overseeing the selection of
persons to be nominated to serve on our board of directors. The nominating
committee considers persons identified by its members, management, stockholders,
investment bankers and others. We intend to locate and appoint at least one
additional independent director on our nominating committee prior to July 28,
2006.

The guidelines for selecting nominees, which are specified in the
nominating committee charter, generally provide that persons to be nominated
should be actively engaged in business endeavors, have an understanding of
financial statements, corporate budgeting and capital structure, be familiar
with the requirements of a publicly traded company, be familiar with industries
relevant to our business endeavors, be willing to devote significant time to the
oversight duties of the board of directors of a public company, and be able to
promote a diversity of views based on the person's education, experience and
professional employment. The nominating committee evaluates each individual in
the context of the board as a whole, with the objective of recommending a group
of persons that can best implement our business plan, perpetuate our business
and represent shareholder interests. The nominating committee may require
certain skills or attributes, such as financial or accounting experience, to
meet specific board needs that arise from time to time. The nominating committee
does not distinguish among nominees recommended by stockholders and other
persons.

Code of Conduct and Ethics

We have adopted a code of conduct and ethics applicable to our directors,
officers and employees in accordance with applicable federal securities laws and
the rules of the American Stock Exchange. You can review this document by
accessing our public filings at the SEC's web site at www.sec.gov. In addition,
a copy of the code of conduct and ethics will be provided without charge upon
request to us. We intend to disclose any amendments to or waivers of certain
provisions of our code of ethics within 5 business days of such amendment or
waiver or as otherwise required by the SEC.

Conflicts of Interest

Potential investors should be aware of the following potential conflicts
of interest:

o None of our officers and directors are required to commit their full
time to our affairs and, accordingly, they will have conflicts of
interest in allocating management time among various business
activities.

o In the course of their other business activities, our officers and
directors may become aware of investment and business opportunities
o which may be appropriate for presentation to our company as well
as the other entities with which they are affiliated. They may have
conflicts of interest in determining to which entity a particular
business opportunity should be presented.

o Our officers and directors may in the future become affiliated with
entities, including other blank check companies, engaged in business
activities similar to those intended to be conducted by our company.

o Since our directors beneficially own shares of our common stock
which will be released from escrow only in certain limited
situations, our board may have a conflict of interest in determining
whether a particular target business is appropriate to effect a
business combination. The personal and financial interests of our
directors and officers may influence their motivation in identifying
and selecting a target business, completing a business combination
timely and securing the release of their stock.

o Our officers and directors who purchase common stock in the open
market are required to vote such shares in favor of a business o
combination. Accordingly, these initial stockholders will not be
eligible to exercise the conversion rights that are available to our
public stockholders.

o In the event we elect to make a substantial down payment, or
otherwise incur significant expenses, in connection with a potential
business combination, our expenses could exceed the remaining
proceeds not held in trust. Our officers and directors may have a
conflict of interest with respect to evaluating a particular
business combination if we incur such excess expenses. Specifically,
our officers and directors may tend to favor potential business
combinations with target businesses that offer to reimburse any
expenses in excess of our available proceeds not held in trust.

o Our officers and directors may have a conflict of interest with
respect to evaluating a particular business combination if the o
retention or resignation of any such officers and directors were
included by a target business as a condition to any agreement with
respect to a business combination.

In general, officers and directors of a corporation incorporated under the
laws of the State of Delaware are required to present business opportunities to
a corporation if:

o the corporation could financially undertake the opportunity;

o the opportunity is within the corporation's line of business; and

o it would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of the corporation.

Accordingly, as a result of multiple business affiliations, our officers
and directors may have similar legal obligations relating to presenting business
opportunities meeting the above-listed criteria to multiple entities. In
addition, conflicts of interest may arise when our board evaluates a particular
business opportunity with respect to the above-listed criteria. We cannot assure
you that any of the above mentioned conflicts will be resolved in our favor.

In order to minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of our officers and directors has agreed
in principle, until the earlier of a business combination, our liquidation or
such time as he ceases to be an officer or director, to present to us for our
consideration, prior to presentation to any other entity, any business
opportunity which may reasonably be required to be presented to us under
Delaware law, subject to any pre-existing fiduciary obligations they might have.

Each of our directors has, or may come to have, to a certain degree, other
fiduciary obligations. In addition all of our officers and directors have
fiduciary obligations to those companies on whose board of directors they sit.

To the extent that they identify business opportunities that may be
suitable for the entities to which they owe a fiduciary obligation, our officers
and directors will honor those fiduciary obligations. Accordingly, they may not
present opportunities to us that otherwise may be attractive to us unless the
entities to which they owe a fiduciary obligation and any successors to such
entities have declined to accept such opportunities. Additionally, certain of
our directors and officers are directors of companies, both public and private,
which may perform business activities in the healthcare industry similar to
those which we may perform after consummating a business combination. Mr.
Pappajohn is a director of the following such public companies: Patient
InfoSystems, Inc., Allion Healthcare, Inc., PACE Health Management Systems, Inc.
and American CareSource Holdings, Inc. Mr. Pappajohn is a director of the
following private company: Partners Imaging LLC. Dr. Schaffer is a director of
the following such public companies: Patient InfoSystems, Inc., Allion
Healthcare, Inc., and American CareSource Holdings, Inc., as well as the
following such private companies: Partners Imaging LLC and Source Medical Inc.
Mr. Berger is a director of the following public company: American CareSource
Holdings, Inc. Mr. Schellhammer is Chairman and Chief Executive Officer of
American Care Source Holdings, Inc.

In connection with the vote required for any business combination, all of
our stockholders prior to our initial public offering, including all of our
officers and directors, have agreed to vote their respective shares of common
stock which were owned prior to our initial public offering in accordance with
the vote of the public stockholders owning a majority of the shares of our
common stock sold in our initial public offering. Any shares of common stock
acquired by such stockholders in the open market will be considered as part of
the holdings of public stockholders and will have the same rights as other
public stockholders, including voting and conversion rights with respect to a
potential business combination, and persons who were stockholders prior to our
initial public offering may thus vote against a proposed business combination
with respect to such shares. Accordingly, they may vote on a proposed business
combination with respect to shares acquired in the open market any way they so
choose. In addition, they have agreed to waive their respective rights to
participate in any liquidation distribution occurring upon our failure to
consummate a business combination but only with respect to those shares of
common stock acquired by them prior to our initial public offering and not with
respect to any shares acquired in the open market.

To further minimize potential conflicts of interest, we have agreed not to
consummate a business combination with an entity which is affiliated with any of
such stockholders unless we obtain an opinion from an independent investment
banking firm that the business combination is fair to our stockholders from a
financial point of view. We expect that any such opinion will be included in our
proxy solicitation materials, furnished to stockholders in connection with their
vote on such a business combination.

Item 11. Executive Compensation.

None of our executive officers or directors has received any cash
compensation for services rendered. Commencing on the effective date of our
initial public offering through the acquisition of a target business, we have
agreed to pay Equity Dynamics, Inc., an affiliated third party of which Mr.
Pappajohn (our Chairman and Secretary) is the President and principal
stockholder, and Mr. Kinley (our President and Treasurer) is a Senior Vice
President, approximately $7,500 per month for office space and certain
additional general and administrative services. A prior arrangement with an
affiliate of our Chief Executive Officer, Derace Schaffer, M.D., pursuant to
which we paid $1,500 a month for office space and certain general and
administrative services, as a portion of the $7,500, was terminated on December
31, 2005. During 2005, approximately $37,500 was incurred under these
arrangements. This agreement is for our benefit and is not intended to provide
Mr. Pappajohn compensation in lieu of a salary. We believe that such fees are at
least as favorable as we could have obtained from an unaffiliated third party.
Other than this $7,500 per-month fee, no compensation of any kind, including
finder's and consulting fees, will be paid to any of our initial stockholders,
including our officers and directors, or any of their respective affiliates, for
services rendered prior to or in connection with a business combination.
However, persons who were stockholders prior to our initial public offering,
including our officers and directors, will receive reimbursement for any
out-of-pocket expenses incurred by them in connection with activities on our
behalf, such as identifying potential target businesses and performing due
diligence on suitable business combinations. After the consummation of a
business combination, if any, to the extent our management remains as officers
of the resulting business, we anticipate that they may enter into employment
agreements, the terms of which shall be negotiated and which we expect to be
comparable to employment agreements with other similarly-situated companies in
the healthcare industry. Further, after the consummation of a business
combination, if any, to the extent our directors remain as directors of the
resulting business, we anticipate that they will receive compensation comparable
to directors at other similarly- situated companies in the healthcare industry.
Any and all such amounts shall be fully disclosed to stockholders, to the extent
then known, in the proxy solicitation materials furnished to our stockholders.
It is unlikely the amount of such compensation will be known at the time of a
stockholder meeting held to consider a business combination, as it will be up to
the directors of the post-combination business to determine executive and
director compensation. In this event, such compensation will be publicly
disclosed at the time of its determination in a Form 8-K, as required by the
SEC.

Performance Graph

We have not included the performance graph index as we became a reporting
company on July 28, 2005. We do not expect that our securities will trade at
prices much different than the amounts paid for such securities in our initial
public offering until such time that we complete a business combination, if we
are able to do so.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

The following table sets forth information as of March 27, 2006, based on
information obtained from the persons named below, with respect to the
beneficial ownership of shares of our common stock by (i) each person known by
us to be the owner of more than 5% of our outstanding shares of common stock,
(ii) each director and (iii) all officers and directors as a group. Except as
indicated in the footnotes to the table, the persons named in the table have
sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them.

Amount
and nature
of beneficial Percent
Name and Address of Beneficial Owner (1) ownership of class

John Pappajohn (2) 882,000 7.57%
Derace L. Schaffer, M.D. (3) 882,000 7.57%
Matthew P. Kinley (4) 441,000 3.79%
Edward B. Berger 22,500 *
Wayne A. Schellhammer 22,500 *
Amaranth LLC, Amaranth Advisors LLC and Nicholas M. Maounis (5) 875,450 7.51%
Sapling, LLC (6) 681,815 5.85%
Fir Tree Recovery Master Fund, LP (6) 335,185 2.88%

All directors and executive officers as a group (5 persons) 2,250,000 19.31%

* Represents beneficial ownership of less than 1%.

(1) Does not include shares of common stock issuable upon exercise of warrants
which are beneficially owned by certain of the persons named in the above
table but which are not exercisable until the later of (i) July 28, 2006
or (ii) the consummation by us of a business combination. Unless otherwise
indicated, the business address of each of the individuals is 2116
Financial Center, 666 Walnut Street, Des Moines, Iowa 50309.

(2) Does not include 141,960 warrants purchased on behalf of such person
pursuant to the guidelines set forth in SEC Rule 10b5-1 in connection with
a Rule 10b5-1 Plan. See footnote 1, above.

(3) Does not include 141,960 warrants purchased on behalf of such person
pursuant to the guidelines set forth in SEC Rule 10b5-1 in connection with
a Rule 10b5-1 Plan. See footnote 1, above.

(4) Does not include 70,980 warrants purchased on behalf of such person
pursuant to the guidelines set forth in SEC Rule 10b5-1 in connection with
a Rule 10b5-1 Plan. See footnote 1, above.

(5) Based on information contained in a Schedule 13G/A filed by Amaranth LLC,
Amaranth Advisors LLC and Nicholas M. Maounis in February 2006. Amaranth
LLC, Amaranth Advisors LLC and Nicholas M. Maounis have shared power to
vote or to direct the vote, and shared power to dispose or direct the
disposition, of 875,450 shares of our common stock. The address for each
of Amaranth LLC, Amaranth Advisors LLC and Nicholas M. Maounis is One
American Lane, Greenwich CT 06831

(6) Based on information contained in a Schedule 13G filed by Sapling LLC in
August 2005. Sapling may direct the vote and disposition of the 681,815
shares of Common Stock, and Fir Tree Recovery may direct the vote and
disposition of 335,185 shares of Common Stock. The address of both Sapling
LLC and Fir Tree Recovery is 535 Fifth Avenue, 31st Floor New York, New
York 10017

All of the shares of our common stock outstanding prior to our initial
public were placed in escrow with Continental Stock Transfer & Trust Company, as
escrow agent, until the earliest of:

o July 28, 2008; or

o the consummation of a liquidation, merger, stock exchange or other
similar transaction which results in all of our stockholders having
the right to exchange their shares of common stock for cash,
securities or other property subsequent to our consummating a
business combination with a target business.

During the escrow period, the holders of these shares are not be able to
sell or transfer their securities except to their spouses and children or trusts
established for their benefit, but will retain all other rights as our
stockholders, including, without limitation, the right to vote their shares of
common stock and the right to receive cash dividends, if declared. If dividends
are declared and payable in shares of common stock, such dividends will also be
placed in escrow. If we are unable to effect a business combination and
liquidate, none of these stockholders will receive any portion of the
liquidation proceeds with respect to common stock owned by them prior to our
initial public offering.

Item 13. Certain Relationships and Related Transactions.

In April 2005, we issued 1,500,000 shares of our common stock to the
individuals set forth below for an aggregate amount of $25,000 in cash, at an
average purchase price of approximately $0.0167 per share, as follows:

Name Number of Shares Relationship to Us

John Pappajohn 600,000 Chairman and Secretary
Derace L. Schaffer, M.D. 600,000 Vice-Chairman and CEO
Matthew P. Kinley 300,000 President, Treasurer and director

Further, in June 2005, Mr. Pappajohn, Dr. Schaffer and Mr. Kinley
transferred, for an aggregate consideration per share which they paid us and pro
rata to their ownership of our common stock, an aggregate of 30,000 shares of
our common stock equally to Mr. Berger and Mr. Schellhammer.

On July 8, 2005, our board of directors authorized a stock dividend of
approximately .333333 shares of common stock for each outstanding share of
common stock, effectively lowering the initial purchase price to approximately
$.0125 per share.

On July 22, 2005, our board of directors authorized a stock dividend of
approximately .125 shares of common stock for each outstanding share of common
stock, effectively lowering the initial purchase price to approximately $.0111
per share.

The holders of the majority of these shares will be entitled to require
us, on up to two occasions, to register these shares. The holders of the
majority of these shares may elect to exercise these registration rights at any
time after the date on which these shares of common stock are released from
escrow. In addition, these stockholders have certain "piggy-back" registration
rights on registration statements filed subsequent to the date on which these
shares of common stock are released from escrow. We will bear the expenses
incurred in connection with the filing of any such registration statements.

In connection with our initial public offering, Mr. Pappajohn, Dr.
Schaffer and Mr. Kinley loaned us a total of $250,000 which was used to pay a
portion of the expenses of our initial public offering, such as SEC registration
fees, NASD registration fees, AMEX listing fees and legal and accounting fees
and expenses. These loans were repaid out of the net proceeds of our initial
public offering not placed in trust.

We agreed to pay Equity Dynamics, Inc., an affiliated third party of which
Mr. Pappajohn is the President and principal stockholder, and Mr. Kinley a
Senior Vice President, approximately $7,500 per month for office space and
certain additional general and administrative services. A prior arrangement with
an affiliate of our Chief Executive Officer, Derace Schaffer, M.D., pursuant to
which we paid $1,500 a month for office space and certain general and
administrative services, as a portion of the $7,500, was terminated on December
31, 2005. As of December 31, 2005, we have paid approximately $37,500 under
these arrangements.

We will reimburse our officers and directors for any reasonable out-of-
pocket business expenses incurred by them in connection with certain activities
on our behalf such as identifying and investigating possible target businesses
and business combinations. There is no limit on the amount of accountable
out-of-pocket expenses reimbursable by us, which will be reviewed only by our
board or a court of competent jurisdiction if such reimbursement is challenged.
As of December 31, 2005, we have reimbursed such persons an aggregate of $67,642
in connection with these activities.

Persons who were stockholders prior to our initial public offering,
including our officers and directors, will not receive reimbursement for any
out-of- pocket expenses incurred by them to the extent that such expenses exceed
the amount in the trust fund unless the business combination is consummated and
there are sufficient funds available for reimbursement after such consummation.
The financial interest of such persons could influence their motivation in
selecting a target business and thus, there may be a conflict of interest when
determining whether a particular business combination is in the stockholders'
best interest.

Other than the reimbursable out-of-pocket expenses payable to our officers
and directors, no compensation or fees of any kind, including finders and
consulting fees, will be paid to any persons who were stockholders prior to our
initial public offering, officers or directors who owned our common stock prior
to our initial public offering, or to any of their respective affiliates for
services rendered to us prior to or with respect to the business combination.

After the consummation of a business combination, if any, to the extent
our management remains as officers of the resulting business, we anticipate that
our officers and directors may enter into employment agreements, the terms of
which shall be negotiated and which we expect to be comparable to employment
agreements with other similarly-situated companies in the healthcare industry.
Further, after the consummation of a business combination, if any, to the extent
our directors remain as directors of the resulting business, we anticipate that
they will receive compensation comparable to directors at other
similarly-situated companies in the healthcare industry.

All ongoing and future transactions between us and any of our officers and
directors or their respective affiliates, including loans by our officers and
directors, will be on terms believed by us to be no less favorable than are
available from unaffiliated third parties and such transactions or loans,
including any forgiveness of loans, will require prior approval in each instance
by a majority of our uninterested "independent" directors (to the extent we have
any) or the members of our board who do not have an interest in the transaction,
in either case who had access, at our expense, to our attorneys or independent
legal counsel.

Item 14. Principal Accounting Fees and Services

Description of Professional Services

Audit Fees. The aggregate fees for professional services rendered by LWBJ,
LLP (LWBJ) for the audit of the Company's financial statements for fiscal year
2005, which includes fees related to the initial public offering and related
audits, review of financial statements included in our quarterly reports on Form
10-Q, and the 2005 year end audit were approximately $50,000.

Audit-Related Fees. Audit-related fees are for assurance and related
services including, among others, consultation concerning financial accounting
and reporting standards. There were no aggregate fees billed for audit-related
services rendered by LWBJ.

Tax Fees. Fees for professional services rendered by LWBJ for tax
compliance, tax planning and tax advice for the fiscal year ended December 31,
2005 were approximately $3,000.

All Other Fees. There were no fees paid to LWBJ for services other than
audit services and audit-related services rendered by LWBJ for the fiscal year
ended December 31, 2005.

Pre-Approval Policies

The Audit Committee is responsible for appointing, setting compensation,
and overseeing the work of the independent auditor. The Audit Committee has
established a policy regarding pre-approval of all audit and permissible
non-audit services provided by the independent auditor. A centralized service
request function is used to provide an initial assessment of requests for
services by the independent auditor. The request must be specific as to the
particular services to be provided. Requests approved during the initial
assessment are aggregated and submitted to the Audit committee for final
approval. The independent auditor may not perform services, whether associated
with audit or non-audit functions, unless the services have been approved prior
to their performance by the Company's Audit Committee. Each fiscal year, the
Audit Committee negotiates and pre-approves the fee for the annual audit of the
Company's Consolidated Financial Statements. Each fiscal year, the Audit
Committee may also specifically pre-approve certain audit services,
audit-related services, tax services and other services. At the present time,
the Audit Committee has not delegated any authority for approval of any
services. All audit and permissible non-audit services provided by the
independent auditor have been approved by the Audit Committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Financial Statements

For the period from April 25, 2005 (inception) to December 31, 2005

Contents

Report of Independent Registered Public Accounting Firm....................F-1

Audited Financial Statements

Balance Sheet..............................................................F-2
Statement of Operations....................................................F-3
Statement of Stockholders' Equity..........................................F-4
Statement of Cash Flows....................................................F-5
Notes to Financial Statements......................................F-6 to F-12

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Healthcare Acquisition Corp.

We have audited the accompanying balance sheets of Healthcare Acquisition Corp.
(a corporation in the development stage) as of December 31, 2005, and the
related statements of operations, stockholders' equity, and cash flows for the
period from April 25, 2005 (inception) to December 31, 2005. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Healthcare Acquisition Corp. (a
corporation in the development stage) as of December 31, 2005, and the results
of its operations and its cash flows for the period from April 25, 2005
(inception) to December 31, 2005, in conformity with accounting principles
generally accepted in the United States of America.

/s/ LWBJ, LLP

LWBJ, LLP
West Des Moines, Iowa

March 14, 2006

F-1

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Balance Sheet

December 31, 2005

Assets

Current assets
Cash and cash equivalents $ 1,398,181
Cash held in trust 68,636,069
Prepaid expense 52,500
-----------
Total current assets 70,086,750
-----------
Total assets $70,086,750
===========

Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 6,996
Accrued expenses 98,996
State income tax payable 48,000
Capital based taxes payable 115,000
Deferred interest 141,543
-----------
Total current liabilities 410,535
-----------

Common stock, subject to possible redemption
1,879,060 shares, at conversion value 13,578,807
-----------

Stockholders' equity

Preferred stock, $.0001 par value, 1,000,000 shares authorized; none issued
Common stock, $.0001 par value, 100,000,000 shares authorized;
11,650,000 (which includes 1,879,060 subject to possible conversion)
issued and outstanding 1,165

Common stock warrants (9,400,000 outstanding) --
Paid-in capital in excess of par 55,818,948
Equity accumulated during the development stage 277,295
-----------
Total stockholders' equity 56,097,408
-----------
Total liabilities and stockholders' equity $70,086,750
===========

See accompanying notes to the financial statements.

F-2

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Statement of Operations

For the period from April 25, 2005 (inception) to December 31, 2005

Revenues

Interest income $ 19,548

Interest and dividend income from Trust Fund 566,526
----------
Total revenues
586,074

Costs and expenses

Capital based taxes 115,000

Management fees 37,986

Insurance 37,500

Travel 27,741

General and administrative 40,052

Formation costs 2,500
----------

Total expenses 260,779
----------

Income before taxes 325,295

Provision for income taxes 48,000

----------

Net income $ 277,295
==========

Basic earnings per share $ 0.04
==========

Diluted earnings per share $ 0.03
==========

Weighted average basic shares outstanding 7,869,200
==========

Weighted average diluted shares outstanding 8,323,201
==========

See accompanying notes to the financial statements.

F-3

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Statements of Stockholders' Equity

For the period from April 25, 2005 (inception) to December 31, 2005

Equity
Accumulated
Common Common Common Additional During the
Stock Par Stock Paid in Development Stockholders'
Shares Amount Warrants Capital Stage Equity
------------ ------------ ------------ ------------ ------------ ------------

Common shares issued to initial
stockholders at $.0111 per share 2,250,000 $ 150 $ 24,850 $ -- $ 25,000

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 -- -- -- 277,295 277,295
------------ ------------ ------------ ------------ ------------ ------------

Balance at December 31, 2005 11,650,000 $ 1,165 $ -- $ 55,818,948 $ 277,295 $ 56,097,408
============ ============ ============ ============ ============ ============

See accompanying notes to the financial statements.

F-4

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Statement of Cash Flows

For the period from April 25, 2005 (inception) to December 31, 2005

Operating activities
Net income $ 277,295
Increase in prepaid insurance (52,500)
Increase in accounts payable and accrued expenses 24,996
Increase in state income tax payable 48,000
Increase in capital based taxes payable 115,000
Increase in deferred interest 141,543
------------
Net cash provided by operating activities 554,334
------------

Investing activities
Cash held in Trust Fund (68,636,069)
------------

Financing activities
Gross proceeds from initial public offering 75,200,000
Proceeds from issuance of unit option 100
Proceeds from notes payable, stockholders 250,000
Payments made on notes payable, stockholders (250,000)
Proceeds from sale of common stock 25,000
Payments made for costs of initial public offering (5,745,184)
------------
Net cash provided by financing activities 69,479,916
------------
Net increase in cash 1,398,181

Cash, beginning of period --
------------
Cash, end of period $ 1,398,181
============

Supplemental schedule of non-cash financing activities
Accrual of deferred offering costs $ 80,996

See accompanying notes to the financial statements.

F-5

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements

December 31, 2005

1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Healthcare Acquisition Corp. (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 December 31, 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 2). 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 approximately 90.3% of the
gross proceeds of this offering (approximately $7.23 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
Company's first business combination or (ii) the liquidation of the Company. In
October 2005, the Company entered into an amendment to its trust agreement which
permits it 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.
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.

F-6

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements (continued)

1. Nature of Operations and Summary of Significant Accounting Policies
(continued)

Nature of Operations (continued)

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 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) has been classified as common stock subject to
possible conversion in the accompanying December 31, 2005 balance sheet and
19.99% of the related interest earned on cash held in the Trust Fund has been
recorded as deferred revenue.

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 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 2.)

F-7

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements (continued)

1. Nature of Operations and Summary of Significant Accounting Policies
(continued)

Earnings Per Share

Basic earnings per share is computed by dividing income available to common
stockholders (the numerator) by the weighted-average number of common shares
(the denominator) for the period. The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued. The
denominator in the calculation is based on the following weighted-average number
of common shares at December 31, 2006:

Basic 7,869,200
Add:
Shares issuable pursuant to
Common Stock Warrants 454,001
---------
Diluted 8,323,201
=========

As stated in Note 8, Warrants began trading separately from the Company's stock
on October 6, 2005.

Derivative Financial Instruments

As described in Note 4, 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.

F-8

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements (continued)

1. Nature of Operations and Summary of Significant Accounting Policies
(continued)

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

Current tax expense related entirely to state taxes, amounted to $48,000 for the
year ended December 31, 2005.

At December 31, 2005, the Company had a net operating loss carryforward for
federal income tax purposes of approximately $274,000, which is available to
offset future federal taxable income.

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 to reduce deferred tax assets to the amount
expected to be realized.

The Company recorded a deferred income tax asset for the tax effect of net
operating loss carryforwards and temporary differences related to revenue
recognition aggregating to approximately $145,000 at December 31, 2005. In
recognition of the uncertainty regarding the ultimate amount of income tax
benefits to be derived, the Company has recorded a full valuation allowance at
December 31, 2005.

The effective tax rate differs from the statutory rate of 34% primarily due to
substantially all interest being tax exempt for federal tax purposes and the
valuation allowance.

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.

2. 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"). 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.

3. Notes Payable, Stockholders

The Company issued unsecured promissory notes to three Initial Stockholders,
amounting to $250,000, who are also officers. These notes were non-interest
bearing and were repaid from the proceeds of this Offering.

F-9

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements (continued)

4. 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 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.

5. 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 $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.
Subsequent to December 31, 2005, the entire monthly fee of $7,500 shall be paid
to one affiliate of the Initial Stockholders.

F-10

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements (continued)

5. Commitments and Contingencies (continued)

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.

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.

6. 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.

7. 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, assuming they occurred at the beginning of the
period.

F-11

HEALTHCARE ACQUISITION CORP.
(a corporation in the development stage)

Notes to Financial Statements (continued)

8. Common Stock Warrants

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.

9. Summarized Quarterly Data (unaudited)

Financial information for each quarter for the period from April 25, 2005
(inception) to December 31, 2005 is as follows:

April 25, 2005
June 30, September 30, December 31, (inception) to
2005 2005 2005 December 31, 2005
------------ ------------ ------------ ------------------

Total revenue $ -- $ 206,261 $ 379,813 $ 586,074
Income (loss) from operations (2,500) 156,476 171,319 325,295
Net income (loss) (2,500) 146,476 133,319 277,295
Basic earnings per share -- .02 .01 .04
Diluted earnings per share -- .02 .01 .03

F-12

(b) Exhibits.

The following exhibits, which are numbered in accordance with Item 601 of
Regulation S-K, are filed herewith or, as noted, incorporated by reference
herein:

EXHIBIT
NO. DESCRIPTION
- --------------------------------------------------------------------------------

1.1.1 Underwriting Agreement among the Registrant and Maxim Group LLC.(3)

1.1.2 Amendment No. 1 to the Underwriting Agreement among the Registrant and
Maxim Group LLC. *

3.1 Amended and Restated Certificate of Incorporation. (4)

3.2 By-laws. (1)

4.1 Specimen Unit Certificate. (1)

4.2 Specimen Common Stock Certificate. (1)

4.3 Specimen Warrant Certificate. (1)

4.4 Form of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant. (3)

10.1.1 Letter Agreement among the Registrant, Maxim Group LLC and John
Pappajohn. (2)

10.1.2 Letter Agreement among the Registrant, Maxim Group LLC and Derace L.
Schaffer, M.D. (2)

10.1.3 Letter Agreement among the Registrant, Maxim Group LLC and Matthew P.
Kinley. (2)

10.1.4 Restated Letter Agreement among the Registrant, Maxim Group LLC and
Edward B. Berger. (3)

10.1.5 Letter Agreement among the Registrant, Maxim Group LLC and Wayne A.
Schellhammer. (3)

10.2 Form of Investment Management Trust Agreement between Continental
Stock Transfer & Trust Company and the Registrant. (3)

10.2.1 Amendment No. 1 to of Investment Management Trust Agreement between
Continental Stock Transfer & Trust Company and the Registrant.(5)

10.3 Form of Stock Escrow Agreement between the Registrant, Continental
Stock Transfer & Trust Company and the Initial Stockholders. (3)

10.4 Form of Registration Rights Agreement among the Registrant and the
Initial Stockholders. (4)

10.5.1 Office Services Agreement by and between the Registrant and Equity
Dynamics, Inc. (1)

10.5.2 Office Services Agreement by and between the Registrant and The Lan
Group. (1)

10.6.1 Promissory Note, dated April 28, 2005, issued to John Pappajohn, in
the amount of $70,000. (1)

10.6.2 Promissory Note, dated April 28, 2005, issued to Derace L. Schaffer,
M.D., in the amount of $70,000. (1)

10.6.3 Promissory Note, dated April 28, 2005, issued to Matthew P. Kinley, in
the amount of $35,000. (1)

10.6.4 Promissory Note, dated July 26, 2005, issued to John Pappajohn, in the
amount of $30,000. (4)

10.6.5 Promissory Note, dated July 26, 2005, issued to Derace L. Schaffer,
M.D., in the amount of $30,000. (4)

10.6.6 Promissory Note, dated July 26, 2005, issued to Matthew P. Kinley, in
the amount of $15,000. (4)

10.7 Form of Unit Option Purchase Agreement between the Registrant and
Maxim Group LLC. (3)

10.8 Form of Warrant Purchase Agreement by and between the Registrant, John
Pappajohn and Maxim Group LLC. (2)

14 Code of Ethics. (3)

31.1 Rule 13a-14(a)/15d-14(a) Certification *

31.2 Rule 13a-14(a)/15d-14(a) Certification *

32.1 Section 1350 Certification *

32.2 Section 1350 Certification *

99.1 Audit Committee Charter. (3)

99.2 Nominating Committee Charter. (3)

- -------------------------------

1. Incorporated by reference to the Registration Statement on Form S-1 of the
Registrant filed on May 6, 2005.

2. Incorporated by reference to the Registration Statement on Form S-1/A of
the Registrant filed on June 10, 2005.

3. Incorporated by reference to the Registration Statement on Form S-1/A of
the Registrant filed on July 12, 2005.

4. Incorporated by reference to the Registration Statement on Form S-1/A of
the Registrant filed on July 27, 2005.

5. Incorporated by reference to the Quarterly Report on Form 10-Q filed by
the Registrant on November 14, 2005.

* filed herewith

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.

By: /s/ Derace L. Schaffer, M.D.
-----------------------------------
Name: Derace L. Schaffer, M.D.
Title: Vice-Chairman and CEO (principal
executive officer)

---------------------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature Title Date
- -------------------------------------------------------------------------------------------------------------

/s/ John Pappajohn
- --------------------------------------
John Pappajohn Chairman and Secretary March 30, 2006

/s/ Derace L. Schaffer, M.D.
- --------------------------------------
Derace L. Schaffer, M.D. Vice-Chairman and CEO March 30, 2006
(principal executive officer)

/s/ Matthew P. Kinley
- --------------------------------------
Matthew P. Kinley President, Treasurer and Director
(principal financial and accounting officer) March 30, 2006

/s/ Edward B. Berger
- --------------------------------------
Edward B. Berger Director March 30, 2006

/s/ Wayne Schellhammer
- --------------------------------------
Wayne Schellhammer Director March 30, 2006

                                 AMENDMENT NO. 1

                                       TO

                             UNDERWRITING AGREEMENT

            This Amendment No. 1 (the "Amendment") to the Underwriting Agreement
(the  "Agreement")  dated  July 28,  2005,  is made as of March 20,  2006 by and
between HEALTHCARE ACQUISITION CORP. (the "Corporation") and MAXIM GROUP LLC, as
representative of the underwriters (the "Representative"). Any terms used herein
but not defined shall have the meaning set forth in the Agreement.

            WHEREAS, the Corporation and the Representative desire to enter into
this  Amendment  to  clarify  the   enforceability  of  certain  provisions  the
Corporation's amended and restated charter (the "Charter");

            NOW,  THEREFORE,  in consideration of the mutual  agreements  herein
contained, the parties hereto agree as follows:

            1. The following  provisions  (A) through (E) shall apply during the
period   commencing  from  the  filing  of  Charter  and  terminating  upon  the
consummation of any "Business Combination",  and may not be amended prior to the
consummation of any Business  Combination.  A "Business  Combination" shall mean
the acquisition by the Corporation,  whether by merger,  capital stock exchange,
asset or stock acquisition or other similar type of transaction, of assets or an
operating business in the healthcare industry ("Target Business").

            A.  Prior  to the  consummation  of any  Business  Combination,  the
Corporation  shall submit such  Business  Combination  to its  stockholders  for
approval  regardless  of whether  the  Business  Combination  is of a type which
normally  would require such  stockholder  approval  under the GCL. In the event
that a majority of the IPO Shares (defined below) cast at the meeting to approve
the  Business   Combination   are  voted  for  the  approval  of  such  Business
Combination,  the  Corporation  shall be authorized  to consummate  the Business
Combination;  provided that the  Corporation  shall not  consummate any Business
Combination  if 20% or more in interest  of the  holders of IPO Shares  exercise
their conversion rights described in paragraph B below.

            B.  In  the  event  that  a  Business  Combination  is  approved  in
accordance with the above paragraph A and is consummated by the Corporation, any
stockholder  of the  Corporation  holding  shares of Common Stock ("IPO Shares")
issued in the  Corporation's  initial public offering  ("IPO") of securities who
voted  against the Business  Combination  may,  contemporaneous  with such vote,
demand that the  Corporation  convert his IPO Shares into cash.  If so demanded,
the Corporation  shall convert such shares at a per share conversion price equal
to the  quotient  determined  by  dividing  (i) the amount in the Trust Fund (as
defined below), inclusive of any interest thereon, calculated as of two business
days prior to the proposed consummation of the Business Combination, by (ii) the
total  number  of  IPO  Shares.  "Trust  Fund"  shall  mean  the  trust  account
established by the  Corporation at the  consummation of its IPO and into which a
certain amount of the net proceeds of the IPO are deposited.

            C. In the event that the Corporation  does not consummate a Business
Combination by the later of (i) 18 months after the  consummation  of the IPO or
(ii) 24 months  after the  consummation  of the IPO in the event  that  either a
letter of intent,  an  agreement  in  principle  or a  definitive  agreement  to
complete a Business Combination was executed but was not consummated within such
18 month period (such later date being referred to as the  "Termination  Date"),
the officers of the Corporation shall take all such action necessary to dissolve
and liquidate the  Corporation as soon as reasonably  practicable.  In the event
that the  Corporation  is so dissolved and  liquidated,  only the holders of IPO
Shares (at such time) shall be entitled to receive liquidating distributions and
the Corporation shall pay no liquidating distributions with respect to any other
shares of capital stock of the Corporation.




            D. A holder of IPO Shares shall be entitled to receive distributions
from the Trust Fund only in the event of a liquidation of the  Corporation or in
the event he demands  conversion of his shares in accordance  with  paragraph B,
above. In no other  circumstances shall a holder of IPO Shares have any right or
interest of any kind in or to the Trust Fund.

            E. The Board of Directors shall be divided into two classes: Class A
and Class B. The number of  directors  in each class shall be as nearly equal as
possible.  Prior to the IPO,  there shall be elected two Class A directors for a
term expiring at the  Corporation's  first Annual  Meeting of  Stockholders  and
three Class B directors for a term expiring at the  Corporation's  second Annual
Meeting of Stockholders. Commencing at the first Annual Meeting of Stockholders,
and at each  annual  meeting  thereafter,  directors  elected to  succeed  those
directors  whose terms expire shall be elected for a term of office to expire at
the second  succeeding  annual  meeting of  stockholders  after their  election.
Except as the GCL may otherwise require,  in the interim between annual meetings
of stockholders or special  meetings of stockholders  called for the election of
directors  and/or the  removal of one or more  directors  and the filling of any
vacancy in that connection, newly created directorships and any vacancies in the
Board of Directors,  including unfilled vacancies  resulting from the removal of
directors  for cause,  may be filled by the vote of a majority of the  remaining
directors  then in  office,  although  less  than a quorum  (as  defined  in the
Corporation's  Bylaws), or by the sole remaining  director.  All directors shall
hold office until the expiration of their  respective  terms of office and until
their  successors  shall have been elected and qualified.  A director elected to
fill a vacancy  resulting  from the death,  resignation or removal of a director
shall serve for the  remainder  of the full term of the  director  whose  death,
resignation  or removal  shall have created such vacancy and until his successor
shall have been elected and qualified.

            2. The  Corporation  acknowledges  that the  purchasers  of the Firm
Units and the Option  Units in the  Offering  shall be deemed to be third  party
beneficiaries of this Amendment.

            3. The Representative  and the Corporation  specifically agree that,
except  pursuant  to its own terms,  this  Amendment  shall not be  modified  or
amended in any way.

            4.  Terms  used  herein  but  not  defined  herein  shall  have  the
definitions set forth in the Agreement or the Charter, as applicable.

            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.


                                   HEALTHCARE ACQUISITION CORP.


                                   By:  /s/  Matthew P. Kinley
                                        -------------------------------------
                                        Name: Matthew P. Kinley
                                        Title:  President



                                   MAXIM GROUP, LLC, as Representative


                                   By:  /s/ Clifford Teller
                                        -------------------------------------
                                        Name: Clifford Teller
                                        Title: Director of Investment Banking

                                                                    Exhibit 31.1

                                 CERTIFICATIONS


      I, Derace L. Schaffer, M.D., certify, that:

1.    I have reviewed this Annual Report on Form 10-K 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 issuer as of, and for, the periods covered by this report;

4.    The  issuer's  other   certifying   officer  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))  and  internal
      control  over  financial  reporting  (as  defined  in  Exchange  Act Rules
      13a-15(f) and 15d-15(f)) for the issuer and have:

      a)    designed such  disclosure  controls and  procedures,  or caused such
            disclosure  controls  and  procedures  to be  designed  under  our a
            supervision,  to ensure that  material  information  relating to the
            issuer, 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)    designed such internal control over financial  reporting,  or caused
            such internal control over financial  reporting to be designed under
            b our supervision,  to provide  reasonable  assurance  regarding the
            reliability of financial  reporting and the preparation of financial
            statements  for  external  purposes  in  accordance  with  generally
            accepted accounting principles;

      c)    evaluated the effectiveness of the issuer's  disclosure controls and
            procedures and presented in this report are conclusions  about the c
            effectiveness of the disclosure  controls and procedures,  as of the
            end of the period  covered by this report based on such  evaluation;
            and

      d)    disclosed in this report any change in the issuer's internal control
            over financial  reporting that occurred during the issuer's fourth d
            quarter  that has  materially  affected or is  reasonably  likely to
            materially  affect,  the issuer's  internal  control over  financial
            reporting;

5.    The issuer's other certifying  officer and I have disclosed,  based on our
      most recent  evaluation of internal control over financial  reporting,  to
      the  issuer's  auditors and the audit  committee of the issuer'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  issuer'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 issuer's internal
            control over financial reporting.

Date: March 30, 2006               By: /s/ Derace L. Schaffer, M.D.
                                       -----------------------------------------
                                       Derace L. Schaffer, M.D.
                                       Vice Chairman and Chief Executive Officer

                                                                    Exhibit 31.2

                                 CERTIFICATIONS

      I, Matthew P. Kinley, certify, that:

1.    I have reviewed this Annual Report on Form 10-K 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 issuer as of, and for, the periods presented in this report;

4.    The  issuer's  other   certifying   officer  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))  and  internal
      control  over  financial  reporting  (as  defined  in  Exchange  Act Rules
      13a-15(f) and 15d-15(f)) for the issuer and have:

      a)    designed such  disclosure  controls and  procedures,  or caused such
            disclosure  controls  and  procedures  to be  designed  under  our a
            supervision,  to ensure that  material  information  relating to the
            issuer, 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)    designed such internal control over financial  reporting,  or caused
            such internal control over financial  reporting to be designed under
            b our supervision,  to provide  reasonable  assurance  regarding the
            reliability of financial  reporting and the preparation of financial
            statements  for  external  purposes  in  accordance  with  generally
            accepted accounting principles;

      c)    evaluated the effectiveness of the issuer's  disclosure controls and
            procedures and presented in this report are conclusions  about the c
            effectiveness of the disclosure  controls and procedures,  as of the
            end of the period  covered by this report based on such  evaluation;
            and d) disclosed in this report any change in the issuer's  internal
            control over financial  reporting that occurred  during the issuer's
            fourth d  quarter  that has  materially  affected  or is  reasonably
            likely to  materially  affect,  the issuer's  internal  control over
            financial reporting;

      d)    disclosed in this report any change in the issuer's internal control
            over financial  reporting that occurred  during the issuer's  fourth
            quarter  that has  materially  affected or is  reasonably  likely to
            materially  affect,  the issuer's  internal  control over  financial
            reporting;

5.    The issuer's other certifying  officer and I have disclosed,  based on our
      most recent  evaluation of internal control over financial  reporting,  to
      the  issuer's  auditors and the audit  committee of the issuer'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  issuer'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 issuer's internal
            control over financial reporting.

Date: March 30, 2006                          By: /s/ Matthew P. Kinley
                                                  ----------------------------
                                                  Matthew P. Kinley.
                                                  President

                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                                   AS ADDED BY
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report of Healthcare  Acquisition Corp. (the
"Company")  on Form 10-K for the year ended  December 31, 2005 as filed with the
Securities and Exchange Commission (the "Report"), I, Derace L. Schaffer,  M.D.,
Vice Chairman and Chief Executive Officer of the Company,  certify,  pursuant to
18 U.S.C. ss.1350, as added by ss.906 of the Sarbanes-Oxley Act of 2002, that:

1.    The Report fully complies with the  requirements of Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and

2.    To my knowledge,  the information contained in the Report fairly presents,
      in  all  material  respects,   the  financial  condition  and  results  of
      operations of the Company as of and for the period covered by the Report.


Date: March 30, 2006        By: /s/ Derace L. Schaffer, M.D.
                                -----------------------------------------
                                Derace L. Schaffer, M.D.
                                Vice Chairman and Chief Executive Officer

                                                                    Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                                   AS ADDED BY
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report of Healthcare  Acquisition Corp. (the
"Company") on Form 10-K for the period ended December 31, 2005 as filed with the
Securities  and  Exchange  Commission  (the  "Report"),  I,  Matthew P.  Kinley,
President of the Company,  certify,  pursuant to 18 U.S.C.  ss.1350, as added by
ss.906 of the Sarbanes-Oxley Act of 2002, that:

1.    The Report fully complies with the  requirements of Section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and

2.    To my knowledge,  the information contained in the Report fairly presents,
      in  all  material  respects,   the  financial  condition  and  results  of
      operations of the Company as of and for the period covered by the report.


Date: March 30, 2006                            By:   /s/ Matthew P. Kinley
                                                      ----------------------
                                                      Matthew P. Kinley
                                                      President