Add
MBH to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MBH > SEC Filings for MBH > Form 10-Q on 14-Aug-2008 | All Recent SEC Filings |
14-Aug-2008
Quarterly Report
The following Management's Discussion and Analysis ("MD&A") is intended to
help the reader understand the results of operations, financial condition, and
cash flows of the Company. MD&A is provided as a supplement to, and should be
read in conjunction with, our financial statements and the accompanying notes to
the financial statements.
Special Note About Forward-Looking Statements
Certain statements in MD&A that are not historical information, including
estimates, projections, statements relating to our business plans, objectives
and expected operating results, and the assumptions upon which those statements
are based, are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are based on current expectations and assumptions that are subject to
risks and uncertainties which may cause actual results to differ materially from
the forward-looking statements. A detailed discussion of risks and uncertainties
that could cause actual results and events to differ materially from such
forward-looking statements is included in the section entitled "Risk Factors" in
our Annual Report on Form 10-K for the year ended December 31, 2007. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events, or otherwise.
Trends That May Affect Our Business
Our ability to consummate a business combination may depend on our access to
the debt capital markets. Our ability to access the capital markets for future
offerings may be limited by adverse market conditions resulting from, among
other things, general economic conditions and contingencies and uncertainties
that are beyond our control. If there is a deterioration or disruption in the
debt capital markets, and public or private financing is not available when
needed or is not available on terms acceptable to us, our ability to consummate
a business combination may be materially impaired.
Overview
We were incorporated in Delaware on June 2, 2006. We were formed to serve as
a vehicle for the acquisition of an operating business through a merger, capital
stock exchange, stock purchase, asset acquisition, or other similar business
combination (the "Business Combination"). We have neither engaged in any
operations nor generated any revenue to date. We are considered to be in the
development stage and are subject to the risks associated with activities of
development stage companies. We have selected December 31st as our fiscal year
end.
On April 23, 2007, the Company completed its initial public offering ("IPO")
of 18,750,000 units ("Units"), consisting of one share of common stock and one
warrant, and on May 8, 2007, the Company completed the closing of an additional
2,812,500 Units that were subject to the underwriters' over-allotment option.
The 21,562,500 Units sold in the IPO, including the 2,812,500 Units subject to
the over-allotment option, were sold at an offering price of $8.00 per Unit,
generating total gross proceeds of $172,500,000. Of the net proceeds after
offering expenses of the IPO and the Private Placement, $170,962,500 was placed
in a trust account maintained at Continental Stock Transfer & Trust Co. (the
"Trust Account"). Except for payment of taxes, the proceeds will not be released
from the Trust Account until the earlier of (i) the completion of a Business
Combination or (ii) liquidation of the Company. Public stockholders voting
against the Company's initial Business Combination will be entitled to convert
their common stock into a pro rata share of the amount held in the Trust Account
(including the amount held in the Trust Account representing the deferred
portion of the underwriters' discounts and commissions), including any interest
earned on their pro rata share (net of taxes payable), if the Business
Combination is approved and consummated. Public stockholders who convert their
stock into a pro rata share of the Trust Account will continue to have the right
to exercise any warrants they may hold.
If we are unable to find a suitable target business by April 23, 2009 we will
be forced to liquidate. If we are forced to liquidate, the per-share liquidation
may be less than the price at which public stockholders purchased their shares
because of the expenses related to our initial public offering, our general and
administrative expenses and the anticipated costs of seeking a Business
Combination. Additionally, if third parties make claims against us, the offering
proceeds held in the Trust Account could be subject to those claims, resulting
in a further reduction to the per-share liquidation price. Under Delaware law,
our stockholders who have received distributions from us may be held liable for
claims by third parties to the extent such claims have not been paid by us.
Furthermore, our warrants will expire worthless if we liquidate before the
completion of a Business Combination.
Since the IPO, we have been actively engaged in sourcing a suitable Business
Combination candidate. We have met with target companies, service professionals
and other intermediaries to discuss our Company, the background of our
management and our combination preferences. In the course of these discussions,
we have also spent time explaining the capital structure of the IPO, the
combination approval process and the timeline under which we are operating
before the proceeds of the offering are returned to investors.
Consistent with the disclosures in our prospectus dated April 17, 2007, we
have focused our search on companies in the healthcare industry. Overall, we
would gauge the environment for target companies to be competitive and we
believe that private equity firms and strategic buyers represent our biggest
competition. Our management believes that many of the fundamental drivers of
alternative investment vehicles like our company are becoming more accepted by
investors and potential Business Combination targets; these include a difficult
environment for initial public offerings, a cash-rich investment community
looking for differentiated opportunities for incremental yield and business
owners seeking new ways to maximize their shareholder value while remaining
invested in the business. However, there can be no assurance that we will find a
suitable Business Combination in the allotted time.
Public stockholders voting against our initial Business Combination will be
entitled to convert their common stock into a pro rata share of the amount held
in the Trust Account (including the amount held in the Trust Account
representing the deferred portion of the underwriters' discounts and
commissions), including any interest earned on their pro rata share (net of
taxes payable), if the Business Combination is approved and consummated. Public
stockholders who convert their stock into a pro rata share of the Trust Account
will continue to have the right to exercise any warrants they may hold.
In connection with the IPO, we agreed to pay the underwriters additional
underwriting fees of $6,037,500, including units exercised with the
over-allotment option which, the underwriters have agreed to defer until the
consummation of our initial Business Combination. We expect that such fees will
be paid out of the proceeds held in the Trust Account.
On February 6, 2008, we entered into a Stock Purchase Agreement (the "Stock
Purchase Agreement") with Critical Homecare Solutions Holdings, Inc. ("CHS"), a
Delaware corporation, Kohlberg Investors V, L.P. (the "Seller's Representative")
and the other stockholders of CHS (each, together with the Seller's
Representative, the "Seller" and collectively the "Sellers").
Pursuant to the terms of the Stock Purchase Agreement, we will acquire all of
the outstanding capital stock of CHS for $420.0 million, subject to working
capital and certain other customary adjustments as set forth in the Stock
Purchase Agreement. We intend to fund the purchase price and the acquisition
costs and provide additional capital to CHS for growth and expansion through a
combination of approximately $180.0 million of cash in the Trust Account,
approximately $180.0 million of debt, a $35.0 million equity issuance of our
common stock to certain Sellers and a commitment from MBFHP to acquire up to an
additional $50.0 million in shares of our common stock. The shares of our common
stock to be issued to certain Sellers and the shares that are subject to the
commitment from MBFHP will be priced at the closing per share price of our
common stock on the date of close, estimated at $8.27.
On April 22, 2008, CHS, the Sellers and we entered into Amendment No. 1 to
the Stock Purchase Agreement. Amendment No. 1 was entered into to provide for
the issuance of 4,000 shares of Series A Convertible Preferred Stock, $0.001 par
value ("Preferred Shares"), by CHS to certain Sellers and to include the
Preferred Shares in the outstanding capital stock of CHS to be acquired by us in
the transaction. In addition, Amendment No. 1 amended the Stock Purchase
Agreement to indicate that CHS will appoint a designee of the Kohlberg Entities,
as defined in the Stock Purchase Agreement, to the Board of Directors of the
Company rather than nominate a designee for election as previously contemplated.
On July 7, 2008, CHS, the Sellers and we entered into Amendment No. 2 to the
Stock Purchase Agreement. Amendment No. 2 extended the termination date from
June 30, 2008 to July 31, 2008.
On July 31, 2008, the financing commitment letter with Jefferies Finance LLC,
dated February 6, 2008, expired pursuant to its terms. We will seek alternative
sources of financing in connection with the transactions contemplated by the
Stock Purchase Agreement. Also on July 31, 2008, CHS, the Sellers and we entered
into Amendment No. 3 to the Stock Purchase Agreement. Pursuant to Amendment
No. 3, the parties, have agreed to set the termination date of the Stock
Purchase Agreement as August 29, 2008, subject to the parties' ability to secure
a new committed credit facility on or before August 29, 2008, and our ability to
acquire at least 16,171,875 warrants from certain MBH warrant holders in
privately negotiated transactions and subsequently retire such warrants. If both
of these conditions are met, the termination date will be extended to
September 30, 2008. In connection with meeting these conditions, MBFHP and the
Sellers will seek to revise certain terms of the Stock Purchase Agreement,
including increasing the Sellers' equity participation and decreasing MBFHP's
share purchase commitment.
The closing of the acquisition and the issuance of equity to MBFHP pursuant
to its commitment are subject to stockholder approval. The closing of the
acquisition is also subject to customary regulatory approvals, including
approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and
other customary closing conditions.
Results of Operations, Financial Condition and Liquidity
Net income of $717,128 reported for the quarter ended June 30, 2008 and net
income of $1,706,112 reported for the six month period ended June 30, 2008
consisted primarily of interest income earned on cash held in the Trust Account.
Formation and operating costs were $113,840 and $307,995 for the three and six
months ended June 30, 2008. Formation and operating costs consist primarily of
legal, accounting and printing fees and expenses. We expect to use substantially
all of the net proceeds from our initial public 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 Account as well as any other net proceeds not
expended will be used to finance the operations of the target business. In the
event that we do not have sufficient available funds outside of the Trust
Account to operate through April 23, 2009, assuming that a Business Combination
is not consummated during that time, we may have to secure additional sources of
liquidity. On August 7, 2008, we entered into a $300,000 unsecured non-revolving
line of credit facility as evidenced by a letter agreement with MBF Healthcare
Management, LLC, an affiliate of several of our officers. The proceeds of this
line of credit will be used for purposes of funding our operating costs through
April 2009. The line of credit bears interest at a rate of 5% per annum and all
interest and principal is payable upon the earlier of the consummation of a
Business Combination or our dissolution. No amounts have yet been drawn on this
line of credit. Until we enter into a Business Combination, we expect to use our
available resources for general working capital as well as legal, accounting and
due diligence expenses for structuring and negotiating a Business Combination
and legal and accounting fees relating to our Securities and Exchange Commission
reporting obligations.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business through April 23, 2009.
However, we may need to raise additional funds through a private offering of
debt or equity securities if such funds are required to consummate a Business
Combination that is presented to us.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet financing arrangements and
have not established any special purpose entities. We have not guaranteed any
debt or commitments of other entities or entered into any options on
non-financial assets.
Recent Accounting Pronouncements
In September 2006, FASB issued SFAS No. 157, Fair Value Measurements ("SFAS
No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 does not impose fair value measurements on items not already accounted
for at fair value; rather it applies, with certain exceptions, to other
accounting pronouncements that either require or permit fair value measurements.
Under SFAS No. 157, fair value refers to the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants in the principal or most advantageous market. The standard
clarifies that fair value should be based on the assumptions market participants
would use when pricing the asset or liability. In February 2008, the FASB issued
FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157 ("FSP
FAS 157-2"), which delays the effective date of SFAS No. 157 for all
non-financial assets and liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis, until
fiscal years beginning after November 15, 2008. These non-financial items
include assets and liabilities such as non-financial assets and liabilities
assumed in a business combination, reporting units measured at fair value in a
goodwill impairment test and asset retirement obligations initially measured at
fair value. We adopted the provisions of SFAS No. 157 for assets and liabilities
recognized at fair value on a recurring basis effective January 1, 2008. The
partial adoption of SFAS No. 157 did not have a material impact on our financial
statements. We are currently assessing the impact of SFAS 157 for non-financial
assets and non-financial liabilities on our financial statements.
This standard requires that a company measure its financial assets and
liabilities using inputs from the three levels of the fair value hierarchy. A
financial asset or liability classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value
measurement. The three levels are as follows:
[ ] Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
[ ] Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).
[ ] Level 3 - Unobservable inputs reflect our judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. We develop these inputs based on the best information available, including our own data.
As of the January 1, 2008 and June 30, 2008, we have no financial assets or
liabilities that are measured at fair value.
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159 ("SFAS No. 159") "The Fair Value Option for Financial Assets and
Financial Liabilities." SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value. The provisions of
SFAS No. 159 were effective for us beginning January 1, 2008. The adoption of
SFAS No. 159 did not have a material impact on our financial statements.
On December 4, 2007, the FASB issued SFAS No. 141R (revised 2007) Business
Combinations, which will change the accounting for business combinations. Under
SFAS No. 141R, an acquiring entity will be required to recognize all the assets
acquired and liabilities assumed in a transaction at the acquisition-date fair
value with limited exceptions. SFAS No. 141R retains the purchase method of
accounting for acquisitions, but requires a number of changes, including
expensing acquisition costs as incurred, capitalization of in-process research
and development at fair value, recording noncontrolling interests at fair value
and recording acquired contingent liabilities at fair value. SFAS No. 141R will
apply prospectively to business combinations with an acquisition date on or
after the beginning of the first annual reporting period beginning after
December 15, 2008. Both early adoption and retrospective application are
prohibited. SFAS No. 141R will have an impact on the accounting for our business
combinations once adopted, but the effect depends on the terms of our business
combinations subsequent to January 1, 2009, if any.
A variety of proposed or otherwise potential accounting standards are
currently under study by standard-setting organizations and various regulatory
agencies. Because of the tentative and preliminary nature of these proposed
standards, we have not determined whether implementation of such proposed
standards would be material to our financial statements.
Critical Accounting Policies
A description of our critical accounting policies is contained in our Annual
Report on Form 10-K for the year ended December 31, 2007.
|
|