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MWRX > SEC Filings for MWRX > Form 10-K on 27-Mar-2014All Recent SEC Filings

Show all filings for MERGEWORTHRX CORP.

Form 10-K for MERGEWORTHRX CORP.


27-Mar-2014

Annual Report


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

You should read this discussion together with the Financial Statements, related Notes and other financial information included elsewhere in this Form 10-K. The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Critical Accounting Policies and Estimates

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. In preparing these financial statements, we make assumptions, judgments and estimates that can have a significant impact on amounts reported in our financial statements. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis we evaluate our assumptions, judgments and estimates and make changes accordingly. We believe that, of the significant accounting policies discussed in Note 2 to our financial statements appearing elsewhere in this Form 10-K, the following accounting policies require our most difficult, subjective and/or complex judgments:

Redeemable Securities

We account for redeemable Common Stock in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 480-10-S99-3A, Classification and Measurement of Redeemable Securities, which provides that securities that are optionally redeemable by the holder for cash or other assets are classified outside of permanent equity in temporary equity.

Fair Value Measurement

The Company adopted Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing US GAAP that requires the use of fair value measurements which establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity's own assumptions.

Recent Accounting Pronouncements

We do 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.

Overview

We are a blank check company formed for the purpose of entering into an Initial Business Combination with one or more businesses or entities. We are focusing our efforts to identify a prospective target business in the healthcare industry, with specific focus on the specialty pharmacy, infusion pharmacy and/or drug distribution sectors based in the U.S. However, we are not limited to a particular geographic region or business industry or section and we may pursue opportunities in any location or business sector or industry that we believe is attractive.

On July 2, 2013, we consummated our IPO of 6,600,000 shares of common stock. The shares were sold at an offering price of $8.00 per share, generating gross proceeds of $52,800,000, or generating proceeds net of underwriters' discount and offering related expenses in aggregate of $50,333,392. In connection with the IPO, we granted the underwriters a 45-day option to purchase up to an additional 990,000 shares to cover over-allotments. On July 3, 2013, the underwriters exercised the over-allotment option in full. On July 8, 2013, we consummated the sale of an additional 990,000 shares that were subject to the underwriters' over-allotment option, for aggregate additional proceeds of $7,920,000, and proceeds net of the underwriters' discount of $7,642,800.

Simultaneously with each of the consummation of the IPO and the exercise of the over-allotment option, we consummated the Private Placement of an aggregate of 634,250 Sponsor Shares and 79,200 Sponsor Shares, respectively, to our Sponsors and their designees. The Sponsor Shares were sold at an offering price of $8.00 per share, generating gross proceeds of $5,707,600.

Of the net proceeds from our IPO and the Private Placement, $63,452,400 was placed in a trust account at UBS Financial Services, Inc. with Continental Stock Transfer & Trust Company acting as trustee. Except as described in this Form 10-K, these proceeds will not be released until the earlier of the completion of an Initial Business Combination and our redemption of 100% of the outstanding public shares of common stock upon our failure to consummate an Initial Business Combination on or before December 26, 2014. As of December 31, 2013, the Company holds a total of $63,452,417 in the Trust Account, or $8.36 per share.

Results of Operations

Our entire activity since inception up to the closing of our IPO on July 2, 2013 was in preparation for that event. Since the offering, our activity has been limited to the evaluation of Initial Business Combination candidates, and we will not be generating any operating revenues until the closing and completion of our Initial Business Combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in view of current low interest rates on risk-free investments (U.S. Treasury securities). We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. We expect our expenses to increase substantially after this period.

For the period from January 22, 2013 (inception) through December 31, 2013, we had net losses of $195,764, which consist of formation and operating costs.

Liquidity and Capital Resources

We presently have no revenue, have had losses since inception and have no operations other than the active solicitation of a target business with which to complete an Initial Business Combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.

As of December 31, 2013, we have cash and cash equivalents of $219,160 available for working capital and $63,452,417 cash held in trust, including interest.

Prior to the consummation of our initial business combination, we will have available to us the $219,160 of proceeds held outside the trust account (as of December 31, 2013) and all interest income on the balance of the trust account (less amounts released to us to pay taxes or dissolution expenses) that will be released to us to fund our working capital requirements. Should this amount be insufficient, we may need to raise additional capital through loans or additional investments from our initial shareholders, officers, directors, or third parties. None of the initial shareholders, officers or directors is under any obligation to advance funds to, or invest in, us. We may not have sufficient funds to allow us to operate until December 26, 2014, which is the date we are required to liquidate, assuming that an Initial Business Combination is not consummated during that time. Over this time period, we will be using these funds for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Initial Business Combination. We anticipate that we will incur approximately:

$350,000 of expenses for the search for target businesses and for the legal, accounting and other third-party expenses attendant to the due diligence investigations, structuring and negotiating of our Initial Business Combination, and preparation and filing of proxy materials to obtain shareholder approval of our Initial Business Combination;

$10,000 of reimbursement for out-of-pocket expenses incurred by our officers, directors and sponsors in connection with the due diligence and investigation of a target business;

$50,000 of expenses in legal and accounting fees relating to our SEC reporting obligations; and

$25,000 for general working capital that will be used for corporate administration, filing and other regulatory fees, miscellaneous expenses, liquidation obligations and reserves.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (less amounts released to us for working capital purposes or to pay taxes and deferred underwriting commissions) to consummate our initial business combination. We may use all interest earned on the trust account for purposes of working capital, to pay taxes and dissolution expenses. To the extent that our capital stock or debt is used, in whole or in part, as consideration to consummate our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As stated above, in order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our initial shareholder, officers and directors may, but are not obligated to, loan us funds as may be required. If we consummate an initial business combination, we would repay such loaned amounts. In the event that the initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment, other than the interest income earned on such proceeds.

We may need to raise additional funds in order to meet the expenditures required for operating our business. Due to the costs of undertaking in-depth due diligence, regulatory compliance, and negotiating potential initial business combinations, we may have insufficient funds available to operate our business prior to our initial business combination and borrowing additional funds for working capital from our officers and directors. Moreover, we may need to obtain additional financing either to consummate our initial business combination or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination, in which case we may issue additional securities or incur debt in connection with and contemporaneous with such business combination. Subject to compliance with applicable securities laws, we would only consummate such financing simultaneously with the consummation of our initial business combination. In the current economic environment, it has become especially difficult to obtain acquisition financing. These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2013.

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