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| AXC > SEC Filings for AXC > Form 10-K on 31-Mar-2009 | All Recent SEC Filings |
31-Mar-2009
Annual Report
Overview
We were formed on August 24, 2006, for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with a technology or technology-related business that has operations or facilities located in Israel, or that intends to establish operations or facilities in Israel, such as research and development, manufacturing or executive officer, following our initial business combination. We intend to utilize cash derived from the proceeds of our initial public offering, our capital stock, debt, or a combination of cash, capital stock and debt, in effecting a business combination.
We have neither engaged in any operations nor generated any revenues through December 31, 2007. Our entire activity since inception through June 22, 2007 was related to our formation and our initial public offering on June 22, 2007. Since that date, we have been searching for prospective target businesses to acquire.
On June 22, 2007, we closed our initial public offering of 21,562,500 units (including the underwriters' over-allotment option of 2,812,500 units) with each unit consisting of one share of our common stock and one warrant, each to purchase one share of our common stock at an exercise price of $6.00 per share. The units from the initial public offering (including the underwriters' over-allotment option) were sold at an offering price of $8.00 per unit. On June 22, 2007, we also closed on private placements of an additional 3,625,000 warrants at $1.00 per warrant to certain of our initial stockholders. Our common stock and warrants started trading separately on July 11, 2007.
We generated gross proceeds of $176,125,000 from the sale of the units in the initial public offering and the private placements. Total expenses from the offering and private placements were approximately $12,695,000, which included underwriting discounts and commissions, non-accountable expense allowance, and other offering-related expenses. Net proceeds, after deducting total expenses were $163,430,000, of which $163,050,000 was deposited into the trust account and the remaining proceeds of $380,000 became available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The amount deposited into the trust account includes $6,468,750 representing the deferred underwriting discounts and commissions and non-accountable expenses. The amounts deposited into the trust account remain on deposit in the trust account earning interest. Up to $2,000,000 of the interest earned on the trust account was available to be, and since has been, released to us to fund our working capital requirements in connection with our search for a business combination.
Critical Accounting Policies
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 these estimates.
Deferred income taxes are provided for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for tax purposes. Valuation allowances are provided against the deferred tax asset amounts when the realization is uncertain.
The proceeds of the initial public offering that are in our trust account are used to purchase U.S. Treasury Bills and money market investments and held until the investments reach maturity. The investments are recorded at market value which approximates their carrying amount and includes accrued interest.
We must seek stockholder approval to effect any business combination. We will proceed with a 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 40% of the shares sold in the initial public offering exercise their conversion rights and vote against the business combination. Public stockholders voting against the combination may demand that we convert his or her shares at an initial conversion price of $7.88 per share plus interest earned thereon in the trust account, net of taxes payable and $2,000,000 of interest income that has been released from the trust account to fund our working capital. Accordingly, we have classified the contingent shares at $7.86 and related deferred interest outside of permanent equity and liabilities in the mezzanine area on the balance sheet.
Results of Operations for the Year Ended December 31, 2008
We reported net income of $3,095,463 for the year ended December 31, 2008, consisting of $3,911,842 of interest income, offset by $816,379 of operating expenses and $0 of income tax.
Our trust account earned interest of $3,890,725 for the year ended December 31, 2008, and its funds outside the trust account earned interest of $21,117. Until we enter into a business combination, we will not generate operating revenues.
For the year ended December 31, 2008, we incurred expenses of $160,938 for consulting and professional fees, $169,950 for insurance expense, $120,000 for rental expense pursuant to our lease of office space and other operating costs of $365,431.
The consulting and professional fees of $160,938 for the year ended December 31, 2008 relate primarily to legal fees of approximately $119,133, and auditing, tax and accounting fees of approximately $41,805.
The insurance expense of $169,950 for the year ended December 31, 2008 relates to the amortization of the prepaid directors and officers insurance policy which was acquired May 1, 2008.
The other operating costs of $365,431 for the year ended December 31, 2008 relate primarily to travel expenses of approximately $47,959, franchise tax expenses of approximately $253,500, Alternext annual fees of approximately $32,300 and other miscellaneous costs of approximately $31,472.
Results of Operations for the Year Ended December 31, 2007
We reported net income of $2,861,322 for the year ended December 31, 2007, consisting of $3,136,241 of interest income, offset by $274,919 of operating expenses and $0 of income tax.
Our trust account earned interest of $3,131,435 for the year ended December 31, 2007, and its funds outside the trust account earned interest of $4,806. Until we enter into a business combination, we will not generate operating revenues.
For the year ended December 31, 2007, we incurred expenses of $86,755 for consulting and professional fees, $91,650 for insurance expense, $65,000 for rental expense pursuant to our lease of office space and other operating costs of $31,514.
The consulting and professional fees of $86,755 for the year ended December 31, 2007 relate primarily to legal fees of approximately $66,755, and auditing, tax and accounting fees of approximately $20,000.
The insurance expense of $91,650 for the year ended December 31, 2007 relates to the amortization of the prepaid directors and officers insurance policy which was acquired May 1, 2007.
The other operating costs of $31,514 for the year ended December 31, 2007 relate primarily to travel expenses of approximately $21,595, and other miscellaneous costs of approximately $9,919.
Results of Operations for the Period from August 24, 2006 (inception) to December 31, 2006
We had a net loss of $5,000 for the period ended December 31, 2006 as a result of formation and operating costs. Additionally, deferred offering costs of approximately $307,855 were incurred in 2006. These costs consisted of professional fees of approximately $140,000, road show and travel expenses of approximately $75,176, and regulatory and filing fees of approximately $92,679. We had no income in 2006. We had no funds in trust as of December 31, 2006.
Liquidity and Capital Resources
We have neither engaged in any operations nor generated any revenues through December 31, 2008. Our entire activity since inception through June 22, 2007 was related to our formation and our initial public offering on June 22, 2007. Since that date, we have been searching for prospective target businesses to acquire.
On June 22, 2007, we closed our initial public offering of 21,562,500 units (including the underwriters' over-allotment option of 2,812,500 units) with each unit consisting of one share of our common stock and one warrant, each to purchase one share of our common stock at an exercise price of $6.00 per share. The units from the initial public offering (including the underwriters' over-allotment option) were sold at an offering price of $8.00 per unit. On June 22, 2007, we also closed on private placements of an additional 3,625,000 warrants at $1.00 per warrant to certain of our initial stockholders. Our common stock and warrants started trading separately on July 11, 2007.
We generated gross proceeds of $176,125,000 from the sale of the units in the initial public offering and the private placements. Total expenses from the offering and private placements were approximately $12,695,000, which included underwriting discounts and commissions, non-accountable expense allowance, and other offering-related expenses. Net proceeds, after deducting total expenses were $163,430,000, of which $163,050,000 was deposited into the trust account and the remaining proceeds of $380,000 became available to be used to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The amount deposited into the trust account includes $6,468,750 representing the deferred underwriting discounts and commissions and non-accountable expenses. The amounts deposited into the trust account remain on deposit in the trust account earning interest. Up to $2,000,000 of the interest earned on the trust account was available to be, and since has been, released to us to fund our working capital requirements in connection with our search for a business combination.
In connection with our initial public offering, we issued an option, for $100 in the aggregate, to I-Bankers Securities, Inc. and CRT Capital Group LLC, underwriters in the offering, to purchase up to 1,125,000 units in the aggregate, consisting of one share of common stock and one warrant, at $8.80 per unit, commencing on the later of the consummation of the business combination and June 18, 2008 and expiring June 18, 2012. The warrants underlying the units will have terms that are identical to those issued in the offering, except that the warrants underlying such units will expire on June 18, 2012. The purchase option, the 1,125,000 units, the 1,125,000 shares of common stock and the 1,125,000 warrants underlying the units, and the 1,125,000 shares of common stock underlying the warrants, have been deemed compensation by the NASD and were therefore subject to a 180-day lock-up under Rule 2710(g)(1) of the NASD Conduct Rules. Additionally, such securities may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person, until December 18, 2008, 18 months following June 18, 2007, the date our registration statement was declared effective, except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.
Although the purchase option and its underlying securities have been registered under the registration statement, the holder of the purchase option will be entitled to one demand and unlimited piggy-back registration rights for a period of five and seven years, respectively, following the completion of the offering.
We will use substantially all of the net proceeds of the initial public offering and private placements to acquire a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination. The proceeds held in the trust account will not be released until the earlier of the completion of a business combination or our dissolution. Upon consummation of our initial business combination, the proceeds held in the trust account will be used to pay the underwriters a deferred fee equal to 3.75% of the gross proceeds of the offering, or $6,468,750, less $0.30 for each share of common stock converted to cash in connection with our initial business combination.
We anticipated that prior to the consummation of a business combination, the $380,000 of proceeds initially held outside of the trust account, as well as one half of the interest earned on the trust account, net of taxes payable on such interest, up to a maximum of $2.0 million, would have been sufficient to cover our operating expenses through June 18, 2009 and to cover the expenses incurred in connection with a business combination. $2,000,000 of the interest earned on the trust account has been released to us to fund our working capital requirements in connection with our search for a business combination. The LOI provides for up to $1 million of our fees and expenses incurred in connection with the proposed business combination to be paid by Bioness.
Assuming that a business combination is not consummated during that time, we anticipate making the following expenditures during this time period:
· approximately $1,380,000 of expenses for legal, accounting and other expenses attendant to the due diligence investigations, structuring and negotiating of a business combination, including without limitation third party fees for assisting us in performing due diligence investigations of perspective target businesses;
· approximately $300,000 of expenses in legal and accounting fees relating to our SEC reporting obligations;
· approximately $240,000 of expenses in fees relating to our office space and certain general and administrative services;
· approximately $460,000 for general working capital that will be used for miscellaneous expenses, including reimbursement of any out-of-pocket expenses incurred by our existing stockholders, directors and officers in connection with activities on our behalf, of which approximately $400,000 is for director and officer liability and other insurance premiums; and
· if we must dissolve and liquidate, $50,000 to $75,000 for dissolution and liquidation costs.
We do not believe we will need additional financing in order to meet the expenditures required for operating our business. However, we may need to obtain additional financing to the extent such financing is required to consummate a business combination, in which case we may issue additional securities or incur debt in connection with such business combination, although we have not entered into any such arrangement and have no current intention of doing so.
M.O.T.A. Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd have loaned us an aggregate of $219,000 the payment of a portion of the offering expenses and have incurred an additional $120,930 of liabilities relating to our initial offering. These non-interest bearing loans were initially payable on September 14, 2007, were deferred to October 2007 and were thereafter repaid. The last payment on the loans was made on October 10, 2007.
Commencing on June 18, 2007, we began paying a fee of $10,000 per month for certain general and administrative services including office space, utilities and secretarial support to LMS Nihul, an affiliate of M.O.T.A. Holdings Ltd., FSGL Holdings Ltd and OLEV Holdings Ltd, three of our initial stockholders. In addition, in June 2006, certain of our officers and directors and their affiliates loaned us an aggregate of $200,000 to us for payment of offering expenses on our behalf. These loans were repaid following our initial public offering from the proceeds of the offering.
Contractual Obligations
We do not have any long-term debt, capital-lease obligations, purchase obligations or other long-term liabilities. However, as discussed above, we incur a fee for general and administrative services including office space, utilities and secretarial support in the amount of $10,000 per month until the earlier of a our consummation of a business combination or liquidation.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
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