Item 1. BUSINESS.
Introduction
We are a blank check company incorporated
as a British Virgin Islands, or BVI, business company with limited liability and formed for the purpose of acquiring, engaging
in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, or engaging in
any other similar business combination with one or more businesses or assets. Notwithstanding the foregoing, we intend to focus
on operating businesses that have their primary operations in Mongolia.
We will seek to capitalize on the
significant strength of our management team to identify, acquire and operate a business operating primarily in Mongolia, although
we may pursue acquisition opportunities in other geographic regions. While we may pursue an acquisition opportunity in any business
industry or sector, we intend to initially focus on those industries or sectors that complement our management team’s background,
such as the natural resources sector and any related sectors. We have not established specific criteria that would trigger our
consideration of businesses outside Mongolia or the natural resources sector. We also may focus on other geographic regions or
industries if we believe that those regions or industries are better able to provide attractive financial returns to our investors.
To date our efforts have been limited to
organizational activities, activities relating to our initial public offering (“IPO”) and activities relating to identifying
and evaluating prospective acquisition candidates. The registration statement for the IPO was declared effective July 14, 2011.
We consummated the IPO of 8,050,000 units on July 20, 2011 (including the underwriters’ exercise of their over-allotment
option in full). Simultaneously with the consummation of the IPO, we consummated the private sale to our sponsor of 4,166,667 sponsor
warrants at $0.75 per warrant (for an aggregate purchase price of $3,125,000). Upon the closing of the IPO and the private
placement, $80,237,500 ($9.97 per share) was placed in a trust account. These proceeds include approximately $2,415,000 in
deferred underwriting commissions, which will be paid only upon the consummation of our business combination.
We have not generated any revenues, other
than interest income earned on the proceeds held in the trust account from our IPO. As of February 29, 2012, approximately $80,241,787
was held in the trust account including $4,287 in accrued interest) and we had cash outside of the trust account of $392,625. Up
to $800,000 in interest income on the balance of the trust account (net of taxes payable) may be available to us to fund our working
capital requirements but given the current interest rates, it is doubtful that we will earn such amount of interest. The current
low interest rate environment may make it more difficult for such investments to generate sufficient funds, together with the amounts
available outside the trust account, to locate, conduct due diligence, structure, negotiate and close our initial business combination.
Through February 29, 2012, we had not withdrawn any funds from interest earned on the funds held in the trust account. Other than
the deferred underwriting discounts and commissions, no amounts are payable to the underwriters of our IPO in the event of a business
combination.
Opportunities in Mongolia
Mongolia is a landlocked country
in Central Asia, bordering Russia on the north and China on the south, east and west. At 1,564,116 square kilometers and with a
population of 3.1 million people, Mongolia is the world’s 19
th
largest country and the most sparsely populated
independent country in the world. The literacy rate is 98%. It is a relatively young parliamentary democracy with a market based-economy.
Until 1990, politically and economically, Mongolia was dominated by the Soviet Union. In 1990, the country held a constitutional
referendum and a vote in 1992, which led to its first democratic change of government. Since then, Mongolia has held elections
every four years. Mongolia has a seventy-six member unicameral parliament. The next parliamentary election will be held in 2012
and the next presidential election will be held in 2013.
Following the collapse of the Soviet
Union in 1990, and the withdrawal of aid, Mongolia’s economy suffered a steep recession and sharp inflation. By 2000, as
a result of a combination of aid from the International Monetary Fund, the adoption of free market reforms and privatization of
much of the economy, the economy had stabilized. The economy is principally based on minerals, agriculture and related services.
Between 2002 and 2008, Mongolia’s economy enjoyed strong, steady growth. According to official government estimates, gross
domestic product, or GDP, increased from approximately $1.0 billion in 2002 to approximately $5.0 billion in 2008. Over this period,
GDP per capita increased from approximately $450 to approximately $1,652. In the second half of 2008 and the first half of 2009,
as a result of the fall in global metal prices, Mongolia’s economy contracted quite sharply. In 2010, Mongolia’s economy
recovered strongly with GDP of approximately $5.7 billion and GDP per capita increasing to approximately $2,038 due to the following
factors: (1) an increase in production, (2) an increase in exports to China and (3) an increase in commodity prices.
We believe the development of the natural
resources sector in Mongolia provides significant opportunities for investment. Mongolia possesses large deposits of minerals including
coal, copper, gold, iron ore, uranium, and rare earth metals. Golomt Bank, one of Mongolia’s largest corporate banks, estimates
the value of the proven reserves of the 10 biggest mines in the country at $2.4 trillion. However, management believes that this
figure substantially underestimates the total value of Mongolia’s mineral wealth. In particular, management believes that
reserves of oil are likely to prove to be significantly higher than current official figures. In addition, based on its discussions
with government officials and other sources in Mongolia, management believes that approximately 75% of Mongolia has yet to be properly
explored for mining deposits. Moreover, even in the remaining 25% of Mongolia which has been subject to more detailed scrutiny,
it believes modern technology has yet to be fully utilized in the exploration for natural resource.
According to Mongolia’s Office
of National Statistics, total exports of minerals in 2011 were $4.78 billion, an increase of 65% from 2010, which in turn were
approximately $2.9 billion, a 54% increase from 2009. Mineral exports accounted for 55% of Mongolia’s GDP in 2011, compared
to approximately 50% of Mongolia’s GDP in 2010. Specifically, coal exports increased to 21 million tons in 2011from 16.6
million tons in 2010. In 2009 exports of coal were 7.1 million tons. Iron ore exports increased to 5.7 million tons in 2011 from
3.5 million tons in 2010. In 2009 iron ore exports were 1.6 million tons. In 2011, copper concentrate exports increased to 572,000
tons from 569,000 in 2010. In 2009, exports of copper concentrate were 587,000 tons. In 2011, gold exports were 2.7 tons, a decrease
from 5.1 tons in 2010. In 2009, gold exports were 10.9 tons. The Mineral Resource and Petroleum Authority of Mongolia forecasts
that Mongolia’s exports of minerals will increase by more than fivefold over the next four to six years. Much of this increase
in exports will go to China, with whom Mongolia shares a border of 4,677 kilometers, and which consumed 93% of Mongolia’s
exports in 2011. In 2010 and 2009, China consumed 74% and 86% respectively of Mongolia’s exports. As a result of the growth
in the mining sector, we believe Mongolia will be one of the world’s fastest growing economies over the next few years. Golomt
Bank expects GDP to rise from $5.7 billion in 2010 to approximately $25.0 billion by 2015. Real GDP growth for 2011 was 17.2%,
compared to approximately 8% in 2010, GDP is expected to grow again strongly in 2012, and then to accelerate further in 2013, as
Oyu Tolgoi, one of the world’s largest copper mines, and the first of Mongolia’s large, new mining projects, comes
on line. According to press reports, Tavan Tolgoi, which contains coal deposits in excess of 6.0 billion tons, and which is the
second new, major project has already started initial production and is steadily moving to full production.
Management believes Mongolia will
present rich opportunities to invest in the natural resources sector, both directly and indirectly in the form of suppliers and
service providers. Currently, it believes that less than 25% of the country has been properly explored so the potential for the
discovery and development of large, new ore bodies remains substantial. Mongolia is well endowed in copper, coal, iron ore, gold,
industrial metals such as zinc, lead, molybdenum, and uranium. The domestic supply chain is still in the early stages of development
but management expects to see the emergence of many companies involved in exploration, contractual development and many other ancillary
services. In addition, substantial investment will be required to improve the country’s infrastructure. The government has
laid out ambitious plans to build approximately 8,000 kilometers of roads and approximately 5,000 kilometers of railways. Management
believes that the size of the investment required to fulfill these plans is currently beyond the government’s own resources
and substantial external and private funding is likely to be required. In addition, as GDP per capita is expected to increase from
approximately $2,000 currently to $8,000 in 2015, we believe there will be opportunities to invest in other areas of the economy,
including finance, retail, consumer services and real estate. Finally, management believes there are potentially attractive investments
in the manufacturing and agriculture sectors as modern management techniques and technology are applied.
Business Strategy
Blue Wolf MHC Ltd., our sponsor,
provided us with our initial capital, and certain members of our sponsor (including Messrs. Kraus (our Chief Executive Officer
and Chairman), Edwards (our President and Chief Financial Officer), and Ireland (the chief executive officer of a member of our
sponsor), each of whom is a member of our board of directors) have assisted us in identifying potential acquisition targets to
consummate our initial business combination. Our officers and directors each have more than twenty years of experience managing,
advising, acquiring, financing and investing in companies in a variety of industries and geographics. Our management has analyzed
and studied the business opportunities present in Mongolia and have assembled an experienced team of local professionals and other
contacts in Mongolia. We believe that our management’s various contacts and sources, ranging from private and public company
contacts, private equity groups and investment bankers to attorneys, accountants and business brokers, will allow us to generate
attractive acquisition opportunities.
We anticipate structuring our initial
business combination to acquire 100% of the equity interest or assets of the target business or businesses. We may, however, structure
our initial business combination to acquire less than 100% of such interests or assets of the target business, but we will only
consummate such business combination if we will become the majority shareholder of the target or are otherwise not required to
register as an “investment company” under the Investment Company Act of 1940, as amended, or the Investment Company
Act. We will not consider any transaction that does not meet this criterion. Even though we will own a majority interest in the
target, our shareholders prior to the business combination may collectively own a minority interest in the post business combination
company, depending on valuations ascribed to the target and us in the business combination transaction. For example, we could pursue
a transaction in which we issue a substantial number of new shares in exchange for all of the outstanding capital stock of a target.
In this case, we would acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial
number of new shares, our shareholders immediately prior to our initial business combination could own less than a majority of
our outstanding shares subsequent to our initial business combination.
Our management team will focus on
creating shareholder value by leveraging its experience in the management, operation and finance of businesses to improve the efficiency
of operations and implement strategies to grow revenue (either organically or through acquisitions). Consistent with this strategy,
we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target
businesses. We will use these criteria and guidelines in evaluating acquisition opportunities, but we may decide to enter into
our initial business combination with a target business that does not meet these criteria and guidelines.
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Companies with the Ability to Participate in the Growth of Mongolia
. According to figures published by the Mongolian government and certain Mongolian banks, and based on research conducted by our management, the Mongolian economy is growing rapidly, led by expansion of the mining sector across a variety of minerals, including coal, iron ore, copper, gold, and industrial metals. Accompanying the expansion of the mining sector is the rapid growth in transportation infrastructure and a variety of other sectors that supply and service companies involved in the extraction of minerals. We will seek businesses that are able to participate in this growing economy.
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Companies with Strategies for Regional Expansion
. Mongolia is geographically located next to China and shares a border with China’s northwestern provinces of Xinjiang, Gansu and Inner Mongolia. While the growth rate of China’s GDP in 2010 was just over 10% according to the CIA Fact Book, the GDP for certain of these provinces grew at a faster rate. For example, according to a report by Deutsche Bank Global Markets Research, the 2010 GDP for Inner Mongolia, the Chinese province with the longest contiguous border with China, was approximately 15%. Management believes that Mongolia and other countries in the Central Asian region will benefit from China’s growth environment and we will seek investment opportunities with the potential to benefit from expansion within the region.
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Companies with Opportunity to Strengthen Management and Add Value
. We will seek to acquire one or more businesses with a strong management team that provides a platform for us to further develop the acquired business’ management capabilities and leverage the experience of our officers, directors and members of our sponsor. We will place a strong emphasis on the quality of a business’ management, which we will assess as a result of direct contacts with the management as well as meetings with suppliers, customers and competitors. We believe that the operating expertise of our officers and directors is well suited to complement the target’s management team.
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Businesses with Revenue and Earnings Growth Potential
. We will seek to acquire one or more businesses that have the potential for significant revenue and earnings growth through increased production capacity, expense reduction and synergistic follow-on acquisitions and increased operating leverage. We will also seek businesses with the prospect for increased product margins.
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Companies with Potential for Positive Operating Cash Flow Generation
. We will seek to acquire one or more businesses that either currently have, or have the potential to generate, positive operating cash flow, as defined by generally accepted accounting principles in the United States. We will focus on one or more businesses that have predictable revenue streams and definable working capital and capital expenditure requirements. We also may seek to prudently leverage this cash flow in order to enhance shareholder value.
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Businesses with a Proven Business Model
. We will seek to acquire one of more businesses that have demonstrated an ability to implement a successful business model in Mongolia. However, Mongolia is a developing economy and many businesses have only recently been established or may have not had sufficient time to prove their business model. As such, it may be challenging to find and acquire a business with a proven business model.
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These criteria are not intended to
be exhaustive. Any evaluation relating to the merits of a particular initial business combination may be based, to the extent relevant,
on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the
event that we decide to enter into our initial business combination with a target business that does not meet the above criteria
and guidelines, we will disclose that the target business does not meet the above criteria in our shareholder communications related
to our initial business combination, which would be in the form of tender offer documents or proxy solicitation materials that
we would file with the Securities and Exchange Commission (“SEC”).
Our management team has a broad range
of operational experience across a variety of sectors. Mr. Lee Kraus, our Chief Executive Officer and Chairman, founded Composite
Capital Advisors, LLC (an affiliate of Composite Capital, LLC), a natural resources financial advisory firm focused principally
on clients’ activities in Central Asia, including Kazakhstan and Uzbekistan, served as interim chief operating officer of
Max Petroleum, Plc, an exploration and production company with assets in Kazakhstan and listed on the London Stock Exchange and
the Frankfurt Stock Exchange, and worked in the Natural Resources group at Dresdner Kleinwort focusing on mergers and acquisitions.
Mr. Kraus also was involved in restructuring, privatizing and financing natural resources companies in the former Soviet Union
and in Eastern Europe through his work at Lazard Frères & Co. and in Morgan Stanley’s Natural Resources group.
Our management team also has significant expertise in equity investing within a broad range of subsectors across natural resources,
including oil and gas exploration, mining, oil refining and petrochemical projects. Mr. Kraus has also taken a number of private
companies public through the initial public offering process. Early in his career, Mr. Kraus was an oilfield services engineer
with Schlumberger and a system consulting engineer who designed control systems for refineries and chemical plants. Mr. Nicholas
Edwards, our President and Chief Financial Officer, was a partner at Warburg Pincus, where he founded and was responsible for its
Japanese equity business. Following the acquisition of Warburg Pincus Asset Management by Credit Suisse in 2000, Mr. Edwards became
the global head of its Japanese equities division. Subsequently, he founded Nicholas Edwards Investments, Japan, a Japan-focused
investment management company.
Over the course of their careers,
the members of our management team have developed a broad international network of contacts and corporate relationships that we
believe will serve as a useful source of investment opportunities. This network has been developed through our management team’s:
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experience in sourcing, acquiring, operating, financing and selling businesses;
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reputation for integrity and fair dealing with sellers, capital providers and target management teams;
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significant experience as advisors on transactions;
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experience in executing transactions under varying economic and financial market conditions;
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experience in operating in developing environments around the world; and
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knowledge of the natural resources sector including oil and gas, refining and marketing, pipelines, mining, precious metals, agriculture, and chemicals.
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This network has provided our management
team with a flow of referrals that have resulted in numerous transactions. We believe that the network of contacts and relationships
of our management team will provide us with an important source of investment opportunities. In addition, we anticipate that target
business candidates will be brought to our attention from various unaffiliated sources, including investment market participants,
private equity groups, investment banking firms, consultants, accounting firms and large business enterprises. Certain members
of our management team have spent the last few years working with Asia-based businesses and have developed a wide network of professional
services contacts and business relationships in that region.
Certain members of our sponsor will
assist us in identifying potential acquisition targets and consummating our initial business combination. Messrs. Kraus and Edwards
have substantial knowledge of, and contacts in, Mongolia and we expect that they will identify appropriate targets for our initial
business combination. Once they have identified appropriate targets, we expect that Mr. Ireland, who is chief executive officer
of Geologic Resource Partners LLC, a member of our sponsor, will assist us in our due diligence review of our acquisition targets.
Messrs. Kraus and Ireland have significant experience in the natural resources sector and will be important in evaluating the results
of any studies or analyses of reserves for targets in the natural resources or related sectors. We believe the experience and insight
of the foregoing persons will enable us to identify and consummate an initial business combination.
In evaluating a prospective target
business, we expect to conduct a thorough due diligence review which will encompass, among other things, meetings with incumbent
management and employees, document reviews, inspection of facilities, as well as a review of financial and other information which
will be made available to us.
We are not prohibited from pursuing
an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek
to complete our initial business combination with a company that is affiliated with our sponsor, officers or directors, we, or
a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of
the Financial Industry Regulatory Authority, or FINRA, that our initial business combination is fair to our shareholders from a
financial point of view.
Each of our officers and directors
has agreed that until the earliest of our initial business combination, our redemption of our public shares if we fail to complete
our initial business combination by April 20, 2013 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 with an enterprise value of $60,000,000
or more, subject to any pre-existing fiduciary or contractual obligations he might have. If any of our officers or directors becomes
aware of a business combination opportunity that falls within the line of business of any entity to which he has pre-existing fiduciary
or contractual obligations, he may be required to present such business combination opportunity to such entity prior to presenting
such business combination opportunity to us. For example, Messrs. Kraus and Edwards may present to Blue Wolf Fund L.P. or Composite
Capital, LLC suitable opportunities in Central Asia and Mongolia with an aggregate value of less than $60,000,000 before they may
present such opportunities to us. Our officers and directors have agreed not to participate in the formation of, or become an officer
or director of, any other blank check company until we have entered into a definitive agreement regarding our initial business
combination or we have failed to complete our initial business combination by April 20, 2013.
Effecting our initial business combination
General
We are not presently engaged in,
and we will not engage in, any operations for an indefinite period of time until after our initial business combination. We intend
to effectuate our initial business combination using cash from the proceeds of the IPO and the private placement of the sponsor
warrants, our shares, debt or a combination of these as the consideration to be paid in our initial business combination.
If our initial business combination
is paid for using shares or debt securities, or not all of the funds released from the trust account are used for payment of the
purchase price in connection with our business combination or used for redemptions of purchases of our ordinary shares, we may
apply the cash released to us from the trust account that is not applied to the purchase price for general corporate purposes,
including for maintenance or expansion of operations of acquired businesses, the payment of principal or interest due on indebtedness
incurred in consummating our initial business combination, to fund the purchase of other companies or for working capital.
We may seek to raise additional funds
through a private offering of debt or equity securities in connection with the consummation of our initial business combination,
and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in
the trust account. Subject to compliance with applicable securities laws, we would consummate such financing only simultaneously
with the consummation of our business combination. In the case of an initial business combination funded with assets other than
the trust account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the
terms of the financing and, only if required by law or the NASDAQ Capital Market, we would seek shareholder approval of such financing.
There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial business combination.
At this time, we are not a party to any arrangement or understanding with any third party with respect to raising any additional
funds through the sale of securities or otherwise.
Fair market value of target business or businesses
The target business or businesses
or assets with which we effect our initial business combination must have a collective fair market value equal to at least 80%
of the value of the trust account (excluding taxes) at the time of the agreement to enter into such initial business combination.
If we acquire less than 100% of one or more target businesses in our initial business combination, the aggregate fair market value
of the portion or portions we acquire must equal at least 80% of the value of the trust account at the time of the agreement to
enter into such initial business combination. However, we will always acquire at least a controlling interest in a target business.
The fair market value of a portion of a target business or assets will likely be calculated by multiplying the fair market value
of the entire business by the percentage of the target we acquire. We may seek to consummate our initial business combination with
an initial target business or businesses with a collective fair market value in excess of the balance in the trust account. In
order to consummate such an initial business combination, we may issue a significant amount of debt, equity or other securities
to the sellers of such business and/or seek to raise additional funds through a private offering of debt, equity or other securities.
If we issue securities in order to consummate such an initial business combination, our shareholders could end up owning a minority
of the combined company’s voting securities as there is no requirement that our shareholders own a certain percentage of
our company (or, depending on the structure of the initial business combination, an ultimate parent company that may be formed)
after our business combination.
The fair market value of a target
business or businesses or assets will be determined by our board of directors based upon standards generally accepted by the financial
community, such as actual and potential gross margins, the values of comparable businesses, earnings and cash flow, book value
and, where appropriate, upon the advice of appraisers or other professional consultants. If our board of directors is not able
to independently determine that the target business or assets has a sufficient fair market value to meet the threshold criterion,
we will obtain an opinion from an unaffiliated, independent investment banking firm that is a member of FINRA or a body of equivalent
status in a non-US jurisdiction with respect to the satisfaction of such criterion. Notwithstanding the foregoing, unless we consummate
a business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking
firm that the price we are paying is fair to our shareholders.
Permitted purchases of our securities
If we seek shareholder approval of
our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the
tender offer rules, prior to the consummation of our initial business combination, our memorandum and articles of association will
permit the release to us from the trust account amounts necessary to purchase up to 15% of the shares sold in our IPO (1,207,500
shares) at any time commencing after the filing of a preliminary proxy statement for our initial business combination and ending
on the record date for the vote to be held to approve our initial business combination. Purchases will be made only in open market
transactions at times when we are not in possession of any material non-public information and may not be made during a restricted
period under Regulation M under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It is intended
that purchases will comply with Rule 10b-18 under the Exchange Act, which provides a safe harbor for purchases made under certain
conditions, including with respect to timing, pricing and volume of purchases. If the conditions of Rule 10b-18, as in effect at
the time we wish to make such purchases, are not satisfied, it is likely that we will not make such purchases. Any purchases we
make will be at prices (inclusive of commissions) not to exceed the per-share amount then held in the trust account (approximately
$9.97 per share). We can purchase any or all of the 1,207,500 shares (15% of the shares sold in our IPO) we are entitled to purchase.
It will be entirely in our discretion as to how many shares are purchased. Purchasing decisions will be made based on various factors,
including the then current market price of our ordinary shares and the terms of the proposed business combination. All shares purchased
by us will be immediately cancelled. Such open market purchases, if any, would be conducted by us to minimize any disparity between
the then current market price of our ordinary shares and the per-share amount held in the trust account. A market price below the
per-share trust amount could provide an incentive for purchasers to buy our shares after the filing of our preliminary proxy statement
at a discount to the per-share amount held in the trust account for the sole purpose of voting against our initial business combination
and exercising redemption rights for the full per-share amount held in the trust account. Such trading activity could enable such
investors to block our initial business combination by making it difficult for us to obtain the approval of such business combination
by the vote of a majority of our outstanding ordinary shares that are voted.
In addition, in the event we seek
shareholder approval of our business combination and we do not conduct redemptions in connection with our business combination
pursuant to the tender offer rules, we may enter into privately negotiated transactions to purchase public shares effective as
of the consummation of the business combination from shareholders who would have otherwise elected to have their shares redeemed
in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the trust account. Our
sponsor, directors, officers, advisors or their affiliates also may purchase shares in privately negotiated transactions either
prior to or following the consummation of our initial business combination. Such a purchase would include a contractual acknowledgement
that such shareholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees
not to exercise its redemption rights. In the event that we or our sponsor, directors, officers, advisors or their affiliates purchase
shares in privately negotiated transactions from public shareholders who have already elected to exercise their redemption rights,
such selling shareholders would be required to revoke their prior elections to redeem their shares.
The purpose of such purchases would
be to (i) increase the likelihood of obtaining shareholder approval of the business combination or (ii), where the purchases are
made by our sponsor, directors, officers, advisors or their affiliates, to satisfy a closing condition in an agreement with a target
that requires us to have a minimum net worth or a certain amount of cash at the closing of the business combination, where it appears
that such requirement would otherwise not be met. This may result in the consummation of our initial business combination that
may not otherwise have been possible.
As a consequence of any such purchases
by us:
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the funds in our trust account that are so used will not be available to us after the business combination;
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the public “float” of our ordinary shares may be reduced and the number of beneficial holders of our securities may be reduced, which may make it difficult to maintain the listing or trading of our securities on a national securities exchange;
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because the shareholders who sell their shares in a privately negotiated transaction or pursuant to market transactions as described above may receive a per share purchase price payable from the trust account that is not reduced by a pro rata share of the deferred underwriting commissions or taxes payable, our remaining shareholders may bear the entire payment of such deferred commissions and taxes payable (as well as, in the case of purchases which occur prior to the consummation of our initial business combination, up to $50,000 of net interest that may be released to us from the trust account to fund our dissolution expenses in the event we do not complete our initial business combination by April 20, 2013). That is, if we seek shareholder approval of our initial business combination, the redemption price per share payable to public shareholders who elect to have their shares redeemed will be reduced by a larger percentage of the taxes payable than it would have been in the absence of such privately negotiated or market transactions, and shareholders who do not elect to have their shares redeemed and remain our shareholders after the business combination will bear the economic burden of the deferred commissions and taxes payable because such amounts will be payable by us; and
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the payment of any premium would result in a reduction in book value per share for the remaining shareholders compared to the value received by shareholders that have their shares purchased by us at a premium.
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Our sponsor, officers, directors
and/or their affiliates anticipate that they will identify the shareholders with whom our sponsor, officers, directors or their
affiliates may pursue privately negotiated purchases by either the shareholders contacting us directly or by our receipt of redemption
requests submitted by shareholders following our mailing of tender offer materials in connection with our initial business combination.
To the extent that our sponsor, officers, directors, advisors or their affiliates enter into a private purchase, they would identify
and contact only potential selling shareholders who have expressed their election to redeem their shares for a pro rata share of
the trust account or vote against the business combination. Pursuant to the terms of such arrangements, any shares so purchased
by our sponsor, officers, advisors, directors and/or their affiliates would then revoke their election to redeem such shares. The
terms of such purchases would operate to facilitate our ability to consummate a proposed business combination by potentially reducing
the number of shares redeemed for cash.
Redemption rights for public shareholders upon
consummation of our initial business combination
We will provide our shareholders
with the opportunity to redeem their shares upon the consummation of our initial business combination at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the trust account, including interest (net of taxes payable), divided
by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is
approximately $9.97 per public share. Our sponsor has agreed to waive its right to receive liquidating distributions if we fail
to consummate our initial business combination within the requisite time period. However, if our sponsor or any of our officers,
directors or affiliates acquires public shares in or after our IPO, they will be entitled to receive liquidating distributions
with respect to such public shares if we fail to consummate our initial business combination by April 20, 2013.
Manner of Conducting Redemptions
Unlike many blank check companies
that hold shareholder votes and conduct proxy solicitations in conjunction with their initial business combinations and provide
for related redemptions of public shares for cash upon consummation of such initial business combinations even if not required
by law, if a shareholder vote is not required by law or the NASDAQ Capital Market and we do not decide to hold a shareholder vote
for business or other legal reasons, we will, pursuant to our memorandum and articles of association:
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offer to redeem our public shares pursuant to Rule 13e-4 and Regulation 14E of the Exchange Act, which regulate issuer tender offers, and
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file tender offer documents with the SEC prior to consummating our initial business combination which will contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and we will not be permitted to consummate our initial business combination until the expiration of the tender offer period.
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In the event we conduct redemptions
pursuant to the tender offer rules, our offer to redeem shall remain open for at least 20 business days, in accordance with Rule
14e-1(a) under the Exchange Act.
In connection with the successful
consummation of our business combination, we may redeem pursuant to a tender offer up to that number of ordinary shares that would
permit us to maintain net tangible assets of $5,000,001. However, the redemption threshold may be further limited by the terms
and conditions of our proposed initial business combination. For example, the proposed business combination may require: (i) cash
consideration to be paid to the target or members of its management team, (ii) cash to be transferred to the target for working
capital or other general corporate purposes or (iii) the allocation of cash to satisfy other conditions in accordance with the
terms of the proposed business combination. In the event the aggregate cash consideration we would be required to pay for all shares
that are validly tendered plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination
exceed the aggregate amount of cash available to us, we will not consummate the business combination, we will not purchase any
shares pursuant to the tender offer and all shares will be returned to the holders thereof following the expiration of the tender
offer. Additionally, since we are required to maintain net tangible assets of at least $5,000,001 (which may be substantially higher
depending on the terms of our potential business combination), the chance that the holders of our ordinary shares electing to redeem
in connection with a redemption conducted pursuant to the proxy rules will cause us to fall below such minimum requirement is increased.
When we conduct a tender offer to
redeem our public shares upon consummation of our initial business combination, in order to comply with the tender offer rules,
the offer will be made to all of our shareholders, not just our public shareholders. Our sponsor has agreed to waive its redemption
rights with respect to its founder shares and public shares in connection with any such tender offer.
If, however, shareholder approval
of the transaction is required by law or the NASDAQ Capital Market, or we decide to obtain shareholder approval for business or
other legal reasons, we will:
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conduct the redemptions in conjunction with a proxy solicitation pursuant to Regulation 14A of the Exchange Act, which regulates the solicitation of proxies, and not pursuant to the tender offer rules, and
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file proxy materials with the SEC.
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In the event that we seek shareholder
approval of our initial business combination, we will distribute proxy materials and, in connection therewith, provide our public
shareholders with the redemption rights described above upon consummation of the initial business combination.
If we seek shareholder approval,
we will consummate our initial business combination only if a majority of the outstanding ordinary shares voted are voted in favor
of the business combination. In such case, our sponsor has agreed to vote its founder shares and any public shares purchased during
or after the offering in favor of our initial business combination and our officers and directors in their individual capacities
(excluding their affiliates) have also agreed to vote any public shares purchased during or after the offering in favor of our
initial business combination. Each public shareholder may elect to redeem their public shares irrespective of whether they vote
for or against the proposed transaction. In addition, our sponsor has agreed to waive its redemption rights with respect to its
founder shares and public shares in connection with the consummation of our initial business combination.
Limitation on redemption rights upon consummation
of our initial business combination if we seek shareholder approval
Notwithstanding the foregoing, if
we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our business
combination pursuant to the tender offer rules, our memorandum and articles of association provides that a public shareholder,
individually or together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert
or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights
with respect to more than an aggregate of 10% of the shares sold in our IPO. We believe this restriction will discourage shareholders
from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption
rights as a means to force us or our management to purchase their shares at a significant premium to the then-current market price
or on other undesirable terms. Absent this provision, a public shareholder holding more than an aggregate of 10% of the shares
sold in our IPO could threaten to exercise its redemption rights if such holder’s shares are not purchased by us or our management
at a premium to the then-current market price or on other undesirable terms. By limiting our shareholders’ ability to redeem
no more than 10% of the shares sold in our IPO, we believe we will limit the ability of a small group of shareholders to unreasonably
attempt to block our ability to consummate our initial business combination, particularly in connection with our initial business
combination with a target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. We
will resolve any disputes relating to whether a public shareholder is acting in concert or as a “group” either by requiring
certifications under the penalty of perjury to such effect by public shareholders or via adjudication in court.
Tendering share certificates in connection
with a tender offer or redemption rights
We may require our public shareholders
seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,”
to either tender their certificates to our transfer agent prior to the expiration date set forth in the tender offer documents
or proxy materials mailed to such holders, or in the event we distribute proxy materials, up to two business days prior to the
vote on the proposal to approve the business combination in the event we distribute proxy materials, or to deliver their shares
to the transfer agent electronically using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, at the
holder’s option. The tender offer or proxy materials, as applicable, that we will furnish to holders of our public shares
in connection with our initial business combination will indicate whether we are requiring public shareholders to satisfy such
delivery requirements. Accordingly, a public shareholder would have from the time we send out our tender offer materials until
the close of the tender offer period, or up to two days prior to the vote on the business combination if we distribute proxy materials,
as applicable, to tender its shares if it wishes to seek to exercise its redemption rights. Given the relatively short exercise
period, it is advisable for shareholders to use electronic delivery of their public shares.
There is a nominal cost associated
with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System.
The transfer agent will typically charge the tendering broker $35.00 and it would be up to the broker whether or not to pass this
cost on to the redeeming holder. However, this fee would be incurred regardless of whether or not we require holders seeking to
exercise redemption rights to tender their shares. The need to deliver shares is a requirement of exercising redemption rights
regardless of the timing of when such delivery must be effectuated.
Any request to redeem such shares,
once made, may be withdrawn at any time up to the date set forth in the tender offer materials or the date of the shareholder meeting
set forth in our proxy materials, as applicable. Furthermore, if a holder of a public share delivered its certificate in connection
with an election of redemption rights and subsequently decides prior to the applicable date not to elect to exercise such rights,
such holder may simply request that the transfer agent return the certificate (physically or electronically). It is anticipated
that the funds to be distributed to holders of our public shares electing to redeem their shares will be distributed promptly after
the completion of our initial business combination.
If the initial business combination
is not approved or completed for any reason, then our public shareholders who elected to exercise their redemption rights would
not be entitled to redeem their shares for the applicable pro rata share of the trust account. In such case, we will promptly return
any certificates delivered by public holders who elected to redeem their shares.
If our initial proposed business
combination is not consummated, we may continue to try to consummate our initial business combination with a different target by
April 20, 2013.
Redemption of public shares and liquidation
if no initial business combination
Our sponsor, officers and directors
have agreed that we must complete our initial business combination by April 20, 2013. We may not be able to find a suitable target
business and consummate our initial business combination within such time period. If we are unable to consummate our initial business
combination by April 20, 2013, we will, as promptly as reasonably possible but not more than five business days thereafter, distribute
the aggregate amount then on deposit in the trust account (less up to $50,000 of the net interest earned thereon to pay dissolution
expenses), pro rata to our public shareholders by way of redemption and cease all operations except for the purposes of winding
up of our affairs. This redemption of public shareholders from the trust account shall be done automatically by function of our
memorandum and articles of association and prior to any voluntary winding up, although at all times subject to the BVI Business
Companies Act, 2004 of the British Virgin Islands, or the Companies Act.
The redemption will trigger automatic
distribution procedures and any subsequent necessary action by us in the discretion of our directors, resulting in our voluntary
liquidation and subsequent dissolution. In connection with such a voluntary liquidation, the liquidator would give notice to creditors
inviting them to submit their claims for payment, by notifying known creditors (if any) who have not submitted claims and by placing
a public advertisement in the British Virgin Islands Official Gazette and a BVI newspaper, and taking any other steps he considers
appropriate to identify the company’s creditors, after which our assets would be distributed. As soon as the affairs of the
company are fully wound-up, the liquidator must complete his statement of account and make a notificational filing with the Registrar.
We would be dissolved once the Registrar issues a Certificate of Dissolution.
We will instruct the trustee to distribute
the aggregate amount then on deposit in the trust account (less up to $50,000 of the net interest earned thereon to pay dissolution
expenses), pro rata, to our public shareholders. Our sponsor has agreed to waive its redemption rights with respect to its founder
shares if we fail to consummate our initial business combination by April 20, 2013. However, to the extent our sponsor, or any
of our officers, directors or affiliates acquire public shares in the open market, they will be entitled to redemption rights with
respect to such public shares if we fail to consummate our initial business combination by April 20, 2013. There will be no redemption
rights or liquidating distributions with respect to our warrants, which will expire worthless in the event we do not consummate
our initial business combination by April 20, 2013. We will pay the costs of our liquidation of the trust account from our remaining
assets outside of the trust account. However, if those funds are not sufficient to cover these costs and expenses, we may request
the trustee to release to us an amount of up to $50,000 of such accrued interest to pay those costs and expenses. However, the
liquidator may determine that he or she requires additional time to evaluate creditors’ claims (particularly if there is
uncertainty over the validity or extent of the claims of any creditors). Also, a creditor or shareholder may file a petition with
the BVI court which, if successful, may result in our liquidation being subject to the supervision of that court. Such events might
delay distribution of some or all of our assets to our public shareholders.
Additionally, in any liquidation
proceedings of the company under British Virgin Islands law, the funds held in our trust account may be included in our estate
and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any such claims deplete
the trust account we may not be able to return to our public shareholders the liquidation amounts payable to them.
If we were to expend all of the net
proceeds of our IPO, other than the proceeds deposited in the trust account, and without taking into account interest, if any,
earned on the trust account, the per-share redemption amount received by shareholders upon our dissolution would be approximately
$9.97. The proceeds deposited in the trust account could, however, become subject to the claims of our creditors which would have
higher priority than the claims of our public shareholders. The actual per-share redemption amount received by shareholders may
be less than $9.97, plus interest (net of any taxes payable).
Although we seek to have all vendors,
service providers, prospective target businesses or other entities with which we do business 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 shareholders,
there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented
from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility
or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage
with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute
an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives
available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes
that such third party’s engagement would be significantly more beneficial to us than any alternative. Examples of possible
instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant
whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that
would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver.
In addition, there is no 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. In order to protect the amounts held in the trust account, Messrs. Kraus and Edwards have agreed that they will be jointly
and severally liable to us, if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective
target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to
below approximately $9.97 per share, except as to any claims by a third party who executed a waiver of any and all rights to seek
access to the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities,
including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third
party, Messrs. Kraus and Edwards will not be responsible to the extent of any liability for such third party claims. However, Messrs.
Kraus and Edwards may not be able to satisfy those obligations. None of our officers will indemnify us for claims by third parties
including, without limitation, claims by vendors and prospective target businesses. We have not independently verified whether
such persons have sufficient funds to satisfy their indemnity obligations and, therefore, our existing shareholders may not able
to satisfy those obligations. We believe the likelihood of our existing shareholders having to indemnify the trust account is limited
because we endeavor to have all vendors and prospective target businesses as well as other entities execute agreements with us
waiving any right, title, interest or claim of any kind in or to monies held in the trust account.
In the event that the proceeds in
the trust account are reduced below approximately $9.97 per share and any member of our sponsor asserts that he is unable to satisfy
any applicable obligations or that it has no indemnification obligations related to a particular claim, our independent directors
would determine whether to take legal action against such member of our sponsor to enforce its indemnification obligations. While
we currently expect that our independent directors would take legal action on our behalf against such member of our sponsor to
enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment
may choose not to do so in any particular instance. Accordingly, due to claims of creditors, the actual value of the per-share
redemption price may be less than $9.97 per share.
We will seek to reduce the possibility
that Messrs. Kraus and Edwards will have to indemnify the trust account due to claims of creditors by endeavoring to have all vendors,
service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving
any right, title, interest or claim of any kind in or to monies held in the trust account. Messrs. Kraus and Edwards will also
not be liable as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities
under the Securities Act. If the Company is deemed insolvent for the purposes of the BVI Insolvency Act, 2003 (the “Insolvency
Act”) (i.e. (i) it fails to comply with the requirements of a statutory demand that has not been set aside under section
157 of the Insolvency Act; (ii) execution or other process issued on a judgment, decree or order of a British Virgin Islands court
in favour of a creditor of the company is returned wholly or partly unsatisfied; or (iii) either the value of the company’s
liabilities exceeds its assets, or the company is unable to pay its debts as they fall due), then there are very limited circumstances
where prior payments made to shareholders or other parties may be deemed to be a “voidable transaction” for the purposes
of the Insolvency Act. A voidable transaction would include, for these purposes, payments made as “unfair preferences”
or “transactions at an undervalue”. A liquidator appointed over an insolvent company who considers that a particular
transaction or payment is a voidable transaction under the Insolvency Act could apply to the British Virgin Islands courts for
an order setting aside that payment or transaction in whole or in part.
Additionally, if the Company enters
insolvent liquidation under the Insolvency Act, the funds held in our trust account will likely be included in our estate and subject
to the claims of third parties with priority over the claims of our shareholders. To the extent any insolvency claims deplete the
trust account you may not be able to return to our public shareholders the liquidation amounts due them.
Our public shareholders will be entitled
to receive funds from the trust account only in the event of a redemption to public shareholders prior to any winding up in the
event we do not consummate our initial business combination or our liquidation or if they redeem their shares in connection with
an initial business combination that we consummate. In no other circumstances shall a shareholder have any right or interest of
any kind to or in the trust account. In the event we seek shareholder approval in connection with our initial business combination,
a shareholder’s voting in connection with the business combination alone will not result in a shareholder’s redeeming
its shares to us for an applicable pro rata share of the trust account. Such shareholder must have also exercised its redemption
rights described above.
Competition
In identifying, evaluating and
selecting a target business for our initial business combination, we may encounter intense competition from other entities having
a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds,
and operating businesses seeking strategic acquisitions. Many of these entities are well established and have significant experience
identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater
financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our
available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business.
Furthermore, the requirement that we acquire a target business or businesses having a fair market value equal to at least 80% of
the value of the trust account at the time of the agreement to enter into the business combination, our obligation to pay cash
in connection with our public shareholders who exercise their redemption rights and the number of our outstanding warrants and
the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of these factors
may place us at a competitive disadvantage in successfully negotiating our initial business combination.
Employees
We currently have two executive officers.
These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of
their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they
will devote in any time period will vary based on whether a target business has been selected for our initial business combination
and the stage of the business combination process we are in. We do not intend to have any full time employees prior to the consummation
of our initial business combination.
Periodic Reporting and Financial Information
The Company registered its securities under
the Exchange Act, and has reporting obligations, including the requirement that we file annual and quarterly reports with the SEC. The
public may read and copy materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, DC 20549, on official business days during the hours of 10:00 am to 3:00 pm. You may obtain information
about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet
site that contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
Item 1A. RISK FACTORS.
An investment in our securities involves a high degree of
risk. You should consider carefully all of the risks described below, together with the other information contained in this report,
before making a decision to invest in our units. If any of the following events occur, our business, financial condition and operating
results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose
all or part of your investment.
We are a recently formed blank check company in the development
stage with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business
objective.
We are a recently formed blank check company with no operating
results to date. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business
objective of completing our initial business combination with one or more target businesses. We have no material plans, arrangements
or understandings with any prospective target business concerning our initial business combination and may be unable to complete
our initial business combination. If we fail to complete our initial business combination, we will never generate any operating
revenues.
Our public shareholders may not be afforded an opportunity
to vote on our proposed business combination, unless such vote is required by law or the NASDAQ Capital Market, which means we
may consummate our initial business combination even though a majority of our public shareholders do not support such a combination.
We may not hold a shareholder vote before we consummate our
initial business combination unless the business combination would require shareholder approval under applicable state law or the
rules of the NASDAQ Capital Market or if we decide to hold a shareholder vote for business or other legal reasons. Accordingly,
we may consummate our initial business combination even if holders of a majority of our public shares do not approve of the business
combination.
Your only opportunity to affect the investment decision
regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash,
unless we seek shareholder approval of the business combination.
Because our board of directors may consummate our initial business
combination without seeking shareholder approval, public shareholders may not have the right or opportunity to vote on the business
combination, unless we seek such shareholder vote. Accordingly, your only opportunity to affect the investment decision regarding
a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at
least 20 business days) set forth in our tender offer or proxy documents mailed to our public shareholders in which we describe
our business combination.
The ability of our public shareholders to redeem
their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it
difficult for us to enter into our initial business combination with a target.
We may enter into a transaction agreement
with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If
too many public shareholders exercise their redemption rights, we may not be able to meet such closing condition, and as a result,
would not be able to proceed with the business combination. Furthermore, in no event will we redeem our public shares in an amount
that would cause our net tangible assets to be less than $5,000,001. Our memorandum and articles of association requires us to
provide all of our public shareholders with an opportunity to redeem all of their shares in connection with the consummation of
any initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible
assets to be less than $5,000,001 or such greater amount necessary to satisfy a closing condition as described above, we would
not proceed with such redemption and the related business combination and may instead search for an alternate business combination.
Prospective targets would be aware of these risks and, thus, may be reluctant to enter into our initial business combination transaction
with us.
The ability of a large number of our shareholders
to exercise redemption rights may not allow us to consummate the most desirable business combination or optimize our capital structure.
In connection with the successful
consummation of our business combination, we may redeem up to that number of ordinary shares that would permit us to maintain net
tangible assets of $5,000,001. If our business combination requires us to use substantially all of our cash to pay the purchase
price, the redemption threshold may be further limited. Alternatively, we may need to arrange third party financing to help fund
our business combination in case a larger percentage of shareholders exercise their redemption rights than we expect. If the acquisition
involves the issuance of our shares as consideration, we may be required to issue a higher percentage of our shares to the target
or its shareholders to make up for the failure to satisfy a minimum cash requirement. Raising additional funds to cover any shortfall
may involve dilutive equity financing or incurring indebtedness at higher than desirable levels. This may limit our ability to
effectuate the most attractive business combination available to us.
The requirement that we maintain a minimum net
worth or retain a certain amount of cash could increase the probability that our business combination would be unsuccessful and
that you would have to wait for liquidation in order to redeem your shares.
If, pursuant to the terms of our
proposed business combination, we are required to maintain a minimum net worth or retain a certain amount of cash in trust in order
to consummate the business combination and regardless of whether we proceed with redemptions under the tender or proxy rules, the
probability that our business combination would be unsuccessful is increased. If our business combination is unsuccessful, you
would not receive your pro rata portion of the trust account until we liquidate. If you are in need of immediate liquidity, you
could attempt to sell your shares in the open market; however, at such time our shares may trade at a discount to the pro rata
amount in our trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds
expected in connection with our redemption until we liquidate or you are able to sell your shares in the open market.
The requirement that we complete our initial business
combination by April 20, 2013 may give potential target businesses leverage over us in negotiating our initial business combination
and may decrease our ability to conduct due diligence on potential business combination targets as we approach our dissolution
deadline, which could undermine our ability to consummate our initial business combination on terms that would produce value for
our shareholders.
Any potential target business with which
we enter into negotiations concerning our initial business combination will be aware that we must consummate our initial business
combination by April 20, 2013. Consequently, such target businesses may obtain leverage over us in negotiating our initial business
combination, knowing that if we do not complete our initial business combination with that particular target business, we may be
unable to complete our initial business combination with any target business. This risk will increase as we get closer to the timeframe
described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination
on terms that we would have rejected upon a more comprehensive investigation.
We may not be able to consummate our initial business
combination by April 20, 2013, in which case we would cease all operations except for the purpose of winding up and we would redeem
our public shares and liquidate.
Our sponsor, officers and directors
have agreed that we must complete our initial business combination by April 20, 2013. We may not be able to find a suitable target
business and consummate our initial business combination within such time period. If we are unable to consummate our initial business
combination by April 20, 2013, we will, as promptly as reasonably possible but not more than five business days thereafter, distribute
the aggregate amount then on deposit in the trust account (less up to $50,000 of the net interest earned thereon to pay dissolution
expenses), pro rata to our public shareholders by way of redemption and cease all operations except for the purposes of winding
up of our affairs, as further described herein. This redemption of public shareholders from the trust account shall be done automatically
by function of our memorandum and articles of association and prior to any voluntary winding up.
Our purchase of ordinary shares in the open market
may support the market price of the ordinary shares and/or warrants during the buyback period and, accordingly, the termination
of the support provided by such purchases may materially adversely affect the market price of the units, ordinary shares and/or
warrants.
Unlike many blank check companies, if we
seek shareholder approval of our initial business combination, prior to the consummation of our initial business combination, our
memorandum and articles of association will permit the release to us from the trust account amounts necessary to purchase up to
1,207,500 shares (15% of the shares sold in our IPO) at any time commencing after the filing of a preliminary proxy statement for
our initial business combination and ending on the record date for the vote to be held to approve our initial business combination.
Purchases will be made only in open market transactions at times when we are not in possession of material non-public information
and will not be made during a restricted period under Regulation M under the Exchange Act. Consequently, if the market does not
view our initial business combination positively, these purchases may have the effect of counteracting the market’s view
of our initial business combination, which would otherwise be reflected in a decline in the market price of our securities. The
termination of the support provided by these purchase may materially adversely affect the market price of our securities.
If we seek shareholder approval of our business
combination, we, our sponsor, directors, officers, advisors and their affiliates may elect to purchase shares from shareholders,
in which case we or they may influence a vote in favor of a proposed business combination that you do not support.
If we seek shareholder approval of
our business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer
rules, we may enter into privately negotiated transactions to purchase public shares following consummation of the business combination
from shareholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant
to the proxy rules. Our sponsor, directors, officers, advisors or their affiliates also may purchase shares in privately negotiated
transactions either prior to or following the consummation of our initial business combination. Such a purchase would include a
contractual acknowledgement that such shareholder, although still the record holder of our shares is no longer the beneficial owner
thereof and therefore agrees not to exercise its redemption rights. In the event that we or our sponsor, directors, officers, advisors
or their affiliates purchase shares in privately negotiated transactions from public shareholders who have already elected to exercise
their redemption rights, such selling shareholders would be required to revoke their prior elections to redeem their shares. Although
neither we nor they currently anticipate paying any premium purchase price (over trust value) for such public shares, in the event
we or they do, the payment of a premium may not be in the best interest of those shareholders not receiving any such premium. Nevertheless,
because any payment of a premium by us will be made only from proceeds released to us from the trust account following completion
of a business combination, no such payments will reduce the per share amounts available in the trust account for redemption in
connection with the business combination. In addition, the payment of a premium by us after the consummation of our initial business
combination may not be in the best interest of the remaining shareholders who do not redeem their shares. Such shareholders may
experience a reduction in book value per share compared to the value received by shareholders that have their shares purchased
by us at a premium. In addition, in the event we seek shareholder approval of our business combination, our memorandum and articles
of association will permit the release to us from the trust account amounts necessary to purchase up to 1,207,500 shares (15% of
the shares sold in our IPO) if the underwriters’ over-allotment option is exercised in full). It is intended that purchases
will comply with Rule 10b-18 under the Exchange Act, which provides a safe harbor for purchases made under certain conditions,
including with respect to timing, pricing and volume of purchases. If the conditions of Rule 10b-18, as in effect at the time we
wish to make such purchases, are not satisfied, it is likely that we will not make such purchases. Any purchases we make will be
at prices (inclusive of commissions) not to exceed the per-share amount then held in the trust account, approximately $9.97 per
share).
The purpose of such purchases would
be to (1) increase the likelihood of obtaining shareholder approval of the business combination or (2), where the purchases are
made by our sponsor, directors, officers, advisors or their affiliates, to satisfy a closing condition in an agreement with a target
that requires us to have a minimum net worth or a certain amount of cash at the closing of the business combination, where it appears
that such requirement would otherwise not be met. This may result in the consummation of an initial business combination that may
not otherwise have been possible.
Our purchases of ordinary shares in the open market
or in privately negotiated transactions would reduce the funds available to us after the business combination.
If we seek shareholder approval of
our business combination and we do not conduct redemptions in connection with our business combination pursuant to the tender offer
rules, we may privately negotiate transactions to purchase shares effective immediately following the consummation of the business
combination from shareholders who would have otherwise elected to have their shares redeemed. In addition, in the event we seek
shareholder approval of our business combination, our memorandum and articles of association will permit the release to us from
the trust account of amounts necessary to purchase up to 1,207,500 shares (15% of the shares sold in our IPO). As a consequence
of such purchases, the funds in our trust account that are so used will not be available to us after the business combination.
Purchases of ordinary shares in the open market
or in privately negotiated transactions by us or our sponsor, directors, officers, advisors or their affiliates may make it difficult
for us to list our ordinary shares on a national securities exchange.
If we or our sponsor, directors,
officers, advisors or their affiliates purchase ordinary shares in the open market or in privately negotiated transactions, the
public “float” of our ordinary shares and the number of beneficial holders of our securities would both be reduced,
possibly making it difficult to continue the quotation, listing or trading of our securities on a national securities exchange
upon consummation of our business combination.
Our purchases of ordinary shares in the open market
or in privately negotiated transactions may have negative economic effects on our remaining public shareholders.
If we seek shareholder approval of
our business combination and purchase shares in privately negotiated or market transactions from shareholders who would have otherwise
elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro
rata portion of the trust account, our remaining public shareholders will bear the economic burden of the taxes payable (as well
as, in the case of purchases which occur prior to the consummation of our initial business combination, up to $50,000 of the net
interest that may be released to us from the trust account to fund our dissolution expenses in the event we do not complete our
initial business combination by April 20, 2013). In addition, our remaining public shareholders following the consummation of our
initial business combination will bear the economic burden of the deferred underwriting commission as well as the amount of any
premium we may pay to the per-share pro rata portion of the trust account using funds released to us from the trust account following
the consummation of the business combination. This is because the shareholders from whom we purchase shares in open market or in
privately negotiated transactions may receive a per share purchase price payable from the trust account that is not reduced by
a pro rata share of the taxes payable on the interest earned by the trust account, up to $50,000 of dissolution expenses or the
deferred underwriting commission and, in the case of purchases at a premium, have received such premium.
You will not have any rights or interests in funds
from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced
to sell your public shares or warrants, potentially at a loss.
Our public shareholders shall be
entitled to receive funds from the trust account only in the event of a redemption to public shareholders prior to any winding
up in the event we do not consummate our initial business combination or our liquidation or if they redeem their shares pursuant
to a tender offer in connection with an initial business combination that we consummate. In no other circumstances will a shareholder
have any right or interest of any kind to the funds in the trust account. Accordingly, to liquidate your investment, you may be
forced to sell your public shares or warrants, potentially at a loss.
If we seek shareholder approval of our business
combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of shareholders
are deemed to hold in excess of 10% of our ordinary shares, you will lose the ability to redeem all such shares in excess of 10%
of our ordinary shares.
If we seek shareholder approval of
our initial business combination and we do not conduct redemptions in connection with our business combination pursuant to the
tender offer rules, our memorandum and articles of association provides that a public shareholder, individually or together with
any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group”
(as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than
an aggregate of 10% of the shares sold in our IPO. Your inability to redeem more than an aggregate of 10% of the shares sold in
our IPO will reduce your influence over our ability to consummate our initial business combination and you could suffer a material
loss on your investment in us if you sell such excess shares in open market transactions. As a result, you will continue to hold
that number of shares exceeding 10% and, in order to dispose of such shares, you would be required to sell your shares in open
market transaction, potentially at a loss.
Because of our limited resources and the significant
competition for business combination opportunities, it may be difficult for us to complete our initial business combination. If
we are unable to complete our initial business combination, our public shareholders may receive only approximately $9.97 per share
on our redemption, and our warrants will expire worthless.
We expect to encounter intense competition
from other entities having a business objective similar to ours, including private investors (which may be individuals or investment
partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses
we intend to acquire. Many of these individuals and entities are well-established and have significant experience identifying and
effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of
these competitors possess greater technical, human and other resources than we do and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we believe there are numerous target businesses we could
potentially acquire the proceeds held in our trust account, our ability to compete with respect to the acquisition of certain target
businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of certain target businesses. Furthermore, if we are obligated to pay cash for the ordinary
shares redeemed and, in the event we seek shareholder approval of our business combination, we make purchases of our ordinary shares
in the open market in a manner intended to comply with Rule 10b-18 under the Exchange Act, which provides a safe harbor for purchases
made under certain conditions, including with respect to timing, pricing and volume of purchases, using available funds from the
trust account, then the resources available to us for our initial business combination may be reduced. Any of these obligations
may place us at a competitive disadvantage in successfully negotiating our initial business combination. If we are unable to complete
our initial business combination, our public shareholders may receive only approximately $9.97 per share on our redemption, and
our warrants will expire worthless.
If the net proceeds available to us outside of
the trust account, together with the interest in the trust account (net of taxes payable) which may be released to us for working
capital purposes, are insufficient to allow us to operate through April 20, 2013, we may be unable to complete our initial business
combination.
The funds available to us outside
of the trust account, plus the interest earned on the funds held in the trust account that may be available to us, may not be sufficient
to allow us to operate through April 20, 2013, assuming that our initial business combination is not consummated during that time.
Up to $800,000 of the interest income (net of taxes payable) earned on the trust account may be released to us to fund our working
capital requirements; however, based on the current interest rate environment, we anticipate that approximately $13,500 of interest
income (net of taxes payable) will be available to us through April 20, 2013 . However, our estimate may not be accurate. Of the
funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search
for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision
(a provision in letters of intent designed to keep target businesses from “shopping” around for transactions with other
companies on terms more favorable to such target businesses) with respect to a particular proposed business combination, although
we do not have any current intention to do so. If we are unable to fund such down payments or “no shop” provisions,
our ability to close a contemplated transaction could be impaired. Furthermore, if we entered into a letter of intent where we
paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether
as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence
with respect to, a target business. If we are unable to complete our initial business combination, our public shareholders may
only receive approximately $9.97 per share on our redemption, and our warrants will expire worthless.
The current low interest rate environment could
limit the amount available to fund our search for a target business or businesses and complete our initial business combination
since we will depend on interest earned on the trust account to fund our search, to pay our taxes and to complete our initial business
combination.
Of the net proceeds of our IPO, only $392,625
remains available to us as of February 29, 2012 to fund our working capital requirements. The current interest rate environment
may make it more difficult for us to generate sufficient interest from the proceeds in the trust account to structure, negotiate
or close our initial business combination. In such event, we would need to borrow funds from our sponsor or management team to
operate or may be forced to liquidate. Neither our sponsor nor our management team is under any obligation to advance funds to
us in such circumstances. If we are unable to complete our initial business combination, our public shareholders may only receive
approximately $9.97 per share on our redemption, and our warrants will expire worthless.
Subsequent to our consummation of our initial
business combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other
charges that could have a significant negative effect on our financial condition, results of operations and our share price, which
could cause you to lose some or all of your investment.
Even if we conduct thorough due diligence
on a target business with which we combine, this diligence may not surface all material issues that may be present inside a particular
target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that
factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be
forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result
in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously
known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash
items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative
market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants
to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination
debt financing.
If third parties bring claims against us, the
proceeds held in the trust account could be reduced and the per-share redemption amount received by shareholders may be less than
approximately $9.97 per share.
Our placing of funds in the trust
account may not protect those funds from third party claims against us. Although we seek to have all vendors, service providers,
prospective target businesses or other entities with which we do business 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 shareholders, such parties
may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against
the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims,
as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim
against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such
claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and
will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s
engagement would be significantly more beneficial to us than any alternative.
Examples of possible instances where
we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute
a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no
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. Upon redemption
of our public shares, if we are unable to complete our initial business combination within the required time frame, or upon the
exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment
of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly,
the per-share redemption amount received by public shareholders could be less than the approximately $9.97 per share, due to claims
of such creditors. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, Messrs.
Kraus and Edwards will not be responsible to the extent of any liability for such third party claims. However, we have not asked
Messrs. Kraus and Edwards to reserve for such indemnification obligations and Messrs. Kraus and Edwards may not be able to satisfy
those obligations. We have not independently verified whether such persons have sufficient funds to satisfy their indemnity obligations
and, therefore, our existing shareholders may not be able to satisfy those obligations. We believe the likelihood of our existing
shareholders having to indemnify the trust account is limited because we will endeavor to have all vendors and prospective target
businesses as well as other entities execute agreements with us waiving any right, title, interest or claim of any kind in or to
monies held in the trust account.
Our independent directors may decide not to enforce
indemnification obligations against Messrs. Kraus and Edwards, resulting in a reduction in the amount of funds in the trust account
available for distribution to our public shareholders.
In the event that the proceeds in
the trust account are reduced below approximately $9.97 per share and any member of our sponsor asserts that he is unable to satisfy
his obligations or that he has no indemnification obligations related to a particular claim, our independent directors would determine
whether to take legal action against such member of our sponsor to enforce his indemnification obligations. While we currently
expect that our independent directors would take legal action on our behalf against such member of our sponsor to enforce his indemnification
obligations to us, it is possible that our independent directors in exercising their business judgment may choose not to do so
in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of
funds in the trust account available for distribution to our public shareholders may be reduced below approximately $9.97 per share.
If we are deemed to be an investment company under
the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted,
which may make it difficult for us to complete our initial business combination.
If we are deemed to be an investment
company under the Investment Company Act, our activities may be restricted, including restrictions on the nature of our investments
and restrictions on the issuance of securities, each of which may make it difficult for us to complete our initial business combination.
In addition, we may have imposed upon us burdensome requirements, including registration as an investment company, adoption of
a specific form of corporate structure and reporting, record keeping, voting, proxy and disclosure requirements and other rules
and regulations.
If we were deemed to be subject to
the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we
have not allotted funds and may hinder our ability to consummate our initial business combination. If we are unable to complete
our initial business combination, our public shareholders may only receive approximately $9.97 per share on our redemption, and
our warrants will expire worthless.
Changes in laws or regulations, or a failure to
comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted
by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements.
Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and
regulations and their interpretation and application also may change from time to time and those changes could have a material
adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or
regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
We are not subject to the supervision of the Financial
Services Commission of the British Virgin Islands and so our shareholders are not protected by any regulatory inspections in the
British Virgin Islands.
We are not an entity subject to any
regulatory supervision in the British Virgin Islands by the Financial Services Commission. As a result, shareholders are not protected
by any regulatory supervision or inspections by any regulatory agency in the British Virgin Islands and we are not required to
observe any restrictions in respect of our conduct save as disclosed in our memorandum and articles of association.
If we are unable to consummate our initial business
combination, our public shareholders may be forced to wait until April 20, 2013 before redemption from our trust account.
If we are unable to consummate our
initial business combination by April 20, 2013, we will, as promptly as reasonably possible but not more than five business days
thereafter, distribute the aggregate amount then on deposit in the trust account (less up to $50,000 of the net interest earned
thereon to pay dissolution expenses), pro rata to our public shareholders by way of redemption and cease all operations except
for the purposes of winding up of our affairs, as further described herein. Any redemption of public shareholders from the trust
account shall be effected automatically by function of our memorandum and articles of association prior to any voluntary winding
up. If we are required to wind-up, liquidate the trust account and distribute such amount therein, pro rata, to our public shareholders,
as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of
the Companies Act. In that case, investors may be forced to wait beyond April 20, 2013 before the redemption proceeds of our trust
account become available to them, and they receive the return of their pro rata portion of the proceeds from our trust account.
We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we consummate our
initial business combination prior thereto and only then in cases where investors have sought to redeem their ordinary shares.
Only upon our redemption or any liquidation will public shareholders be entitled to distributions if we are unable to complete
our initial business combination.
If we liquidate, distributions, or part of them,
may be delayed while the liquidator determines the extent of potential creditor claims.
Pursuant to, among other documents,
our memorandum and articles of association, if we do not complete our initial business combination by April 20, 2013, this will
trigger an automatic redemption of our ordinary shares using the available funds in the trust account pursuant to our memorandum
and articles of association, resulting in our repayment of available funds in the trust account together with our subsequent voluntary
liquidation as may be determined by our directors. In connection with such a voluntary liquidation, the liquidator would give notice
to our creditors inviting them to submit their claims for payment, by notifying known creditors (if any) who have not submitted
claims and by placing a public advertisement in the British Virgin Islands Official Gazette and a British Virgin Islands newspaper,
and taking any other steps he considers appropriate, after which our assets would be distributed.
As soon as our affairs are fully
wound-up, if we were to liquidate, the liquidator must complete his statement of account and will then notify the Registrar of
Corporate Affairs in the British Virgin Islands (the “Registrar”) that the liquidation has been completed. However,
the liquidator may determine that he or she requires additional time to evaluate creditors’ claims (particularly if there
is uncertainty over the validity or extent of the claims of any creditors). Also, a creditor or shareholder may file a petition
with the British Virgin Islands court which, if successful, may result in our liquidation being subject to the supervision of that
court. Such events might delay distribution of some or all of our assets to our public shareholders.
In any liquidation proceedings of
the company under British Virgin Islands law, the funds held in our trust account may be included in our estate and subject to
the claims of third parties with priority over the claims of our shareholders. To the extent any such claims deplete the trust
account we may not be able to return to our public shareholders the redemption amounts payable to them.
The ordinary shares issuable upon exercise of
the warrants are not registered under the Securities Act or states securities laws at this time, and such registration may not
be in place when you decide to exercise your warrants, thus precluding you from being able to exercise your warrants and causing
your warrants to expire worthless.
The ordinary shares issuable upon
exercise of the warrants are not registered under the Securities Act or any state securities laws at this time. If the shares issuable
upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their
warrants on a cashless basis under certain circumstances specified in the warrant agreement. However, no warrant will be exercisable
for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants,
unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising
holder, unless an exemption is available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified,
such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase of
units will have paid the full unit purchase price solely for the ordinary shares included in the units. If and when the warrants
become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying ordinary
shares for sale under all applicable state securities laws.
The grant of registration rights to our sponsor
and holders of our sponsor warrants may make it more difficult to complete our initial business combination, and the future exercise
of such rights may adversely affect the market price of our ordinary shares.
Pursuant to the registration rights
agreement entered into concurrently with the closing of our IPO, our sponsor and its permitted transferees can demand that we register
the founder shares, holders of our sponsor warrants and their permitted transferees can demand that we register the sponsor warrants
and the ordinary shares issuable upon exercise of the sponsor warrants and holders of warrants that may be issued upon conversion
of working capital loans may demand that we register such warrants or the ordinary shares issuable upon conversion of such warrants.
The registration rights will be exercisable with respect to the founder shares and the sponsor warrants and the ordinary shares
issuable upon exercise of such sponsor warrants. We will bear the cost of registering these securities. The registration and availability
of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our
ordinary shares. In addition, the existence of the registration rights may make our initial business combination more costly or
difficult to conclude. This is because the shareholders of the target business may increase the equity stake they seek in the combined
entity or ask for more cash consideration to offset the negative impact on the market price of our ordinary shares that is expected
when the securities owned by our sponsor, holders of our sponsor warrants or their respective permitted transferees are registered.
Because we have not selected a particular business
or geographic focus or any specific target businesses with which to pursue our initial business combination, you will be unable
to ascertain the merits or risks of any particular target business’ operations.
We may pursue acquisition opportunities
in any geographic region, but may rely upon our management team’s background in Asia. Also, while we may pursue an acquisition
opportunity in any business industry or sector, we intend to initially focus on those industries or sectors that complement our
management team’s background, such as natural resources. Except for the limitations that a target business have a fair market
value of at least 80% of the value of the trust account and that we are not permitted to effectuate our initial business combination
with another blank check company or similar company with nominal operations, we will have virtually unrestricted flexibility in
identifying and selecting a prospective acquisition candidate. To the extent we consummate our initial business combination, we
may be affected by numerous risks inherent in the business operations with which we combine. For example, if we combine with a
financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks
inherent in the business and operations of a financially unstable or a development stage entity. Although our officers and directors
will endeavor to evaluate the risks inherent in a particular target business, we may not properly ascertain or assess all of the
significant risk factors or that we will have adequate time to complete due diligence. Furthermore, some of these risks may be
outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target
business. An investment in our units may not ultimately prove to be more favorable to investors than a direct investment, if such
opportunity were available, in an acquisition target.
We may seek investment opportunities outside of
our management’s area of expertise and our management may not be able to adequately ascertain or assess all significant risks
associated with the target company.
There is no limitation on the industry
or business sector we may consider when contemplating our initial business combination. We may therefore be presented with a business
combination candidate in an industry unfamiliar to our management team, but determine that such candidate offers an attractive
investment opportunity for our company. In the event we elect to pursue an investment outside of our management’s expertise,
our management’s experience may not be directly applicable to the target business or their evaluation of its operations.
Although we identified general criteria and guidelines
that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with
a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial
business combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified specific
criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter
into our initial business combination will not have all of these positive attributes. If we consummate our initial business combination
with a target that does not meet some or all of these guidelines, such combination may not be as successful as a combination with
a business that does meet all of our general criteria and guidelines. In addition, if we announce our initial business combination
with a target that does not meet our general criteria and guidelines, a greater number of shareholders may exercise their redemption
rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum
net worth or a certain amount of cash. In addition, if shareholder approval of the transaction is required by law or the NASDAQ
Capital Market, or we decide to obtain shareholder approval for business or other legal reasons, it may be more difficult for us
to attain shareholder approval of our initial business combination if the target business does not meet our general criteria and
guidelines. If we are unable to complete our initial business combination, our public shareholders may only receive approximately
$9.97 per share on our redemption, and our warrants will expire worthless.
Management’s flexibility in identifying
and selecting a prospective acquisition candidate, along with our management’s financial interest in consummating our initial
business combination, may lead management to enter into an acquisition agreement that is not in the best interest of our shareholders.
Subject to the requirement that our
initial business combination must be with one or more target businesses or assets having an aggregate fair market value of at least
80% of the value of the trust account (excluding any taxes) at the time of the agreement to enter into such initial business combination,
we will have virtually unrestricted flexibility in identifying and selecting a prospective acquisition candidate. Investors will
be relying on management’s ability to identify business combinations, evaluate their merits, conduct or monitor diligence
and conduct negotiations. Management’s flexibility in identifying and selecting a prospective acquisition candidate, along
with management’s financial interest in consummating our initial business combination, may lead management to enter into
an acquisition agreement that is not in the best interest of our shareholders, which would be the case if the trading price of
our ordinary shares after giving effect to such business combination was less than the per-share trust liquidation value that our
shareholders would have received if we had dissolved without consummating our initial business combination.
We are not required to obtain an opinion from
an independent investment banking firm, and consequently, an independent source may not confirm that the price we are paying for
the business is fair to our shareholders from a financial point of view.
Unless we consummate our initial
business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking
firm that the price we are paying is fair to our shareholders from a financial point of view. If no opinion is obtained, our shareholders
will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted
by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials,
as applicable, related to our initial business combination.
We may issue additional ordinary or preferred
shares to complete our initial business combination or under an employee incentive plan after consummation of our initial business
combination, which would dilute the interest of our shareholders and likely present other risks.
Our memorandum and articles of association
authorize the issuance of an unlimited amount of both ordinary shares of no par value and preferred shares of no par value. We
may issue a substantial number of additional ordinary or preferred shares to complete our initial business combination or under
an employee incentive plan after consummation of our initial business combination. Although no such issuance of ordinary or preferred
shares will affect the per share amount available for redemption from the trust account, the issuance of additional ordinary or
preferred shares:
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may significantly dilute the equity interest of investors in our IPO, who will not have pre-emption rights in respect of such an issuance;
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may subordinate the rights of holders of ordinary shares if preferred shares are issued with rights created by amendment of our memorandum and articles of association by resolution of the directors senior to those afforded our ordinary shares;
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could cause a change in control if a substantial number of ordinary shares is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and
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may adversely affect prevailing market prices for our units, ordinary shares and/or warrants.
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Resources could be wasted in researching acquisitions
that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or merge with another
business.
We anticipate that the investigation
of each specific target business and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and
other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others.
If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction
likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to consummate
our initial business combination for any number of reasons including those beyond our control. Any such event will result in a
loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge
with another business. In addition, in the event we seek shareholder approval of our initial business combination, we may use funds
released to us from the trust account to purchase up to 1,207,500 shares (15% of the shares sold in our IPO) in the open market
and these purchases would have the effect of reducing the funds available in the trust account for future business combinations.
If we are unable to complete our initial business combination, our public shareholders may only receive approximately $9.97 per
share on our redemption, and our warrants will expire worthless.
We may qualify as a passive foreign investment
company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.
If we are determined to be a PFIC
for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined below) of our ordinary
shares or warrants, the U.S. Holder may be subject to increased U.S. federal income tax liability and may be subject to additional
reporting requirements. Our actual PFIC status for our initial taxable year ending February 29, 2012 may depend on whether we qualify
for the PFIC start-up exception (discussed further, below). We likely will be a PFIC for our initial taxable year ending February
29, 2012 unless we complete a business combination in our current taxable year ending February 28, 2013 and are not treated as
a PFIC for either of our taxable years ending February 28, 2013 or February 28, 2014. Our actual PFIC status for any taxable year,
however, will not be determinable until after the end of such taxable year. Accordingly, there can be no assurance with respect
to our status as a PFIC for our current taxable year or any subsequent taxable year. In addition, we may not provide timely financial
information that would be required for U.S. investors to make a potentially favorable “qualified electing fund” election,
and such election would be unavailable with respect to our warrants in all cases. We urge U.S. investors to consult their own tax
advisors regarding the possible application of the PFIC rules.
The discussion below of the PFIC
rule applicable to “U.S. Holders” will apply to a beneficial owner of our securities that is for U.S. federal income
tax purposes (i) an individual citizen or resident of the United States; (ii) a corporation (or other entity treated as a corporation)
that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof
or the District of Columbia; (iii) an estate whose income is includible in gross income for U.S. federal income tax purposes regardless
of its source; or (iv) a trust if (A) a U.S. court can exercise primary supervision over the trust’s administration and one
or more U.S. persons are authorized to control all substantial decisions of the trust, or (B) it has a valid election in effect
under applicable U.S. Treasury regulations to be treated as a U.S. person.
A foreign (i.e., non-U.S.) corporation
will be a PFIC if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of
the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively,
a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined
based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation
in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income.
Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active
conduct of a trade or business) and gains from the disposition of passive assets.
Because we are a blank check
company, with no current active business, we believe that it is likely that we will meet the PFIC asset or income test beginning
with our initial taxable year ending February 29, 2012. However, pursuant to a start-up exception, a corporation will not be a
PFIC for the first taxable year the corporation has gross income, if (1) no predecessor of the corporation was a PFIC; (2) the
corporation satisfies the IRS that it will not be a PFIC for either of the first two taxable years following the start-up year;
and (3) the corporation is not in fact a PFIC for either of those years. The applicability of the start-up exception to us will
not be known until after the close of our taxable year ending February 28, 2013.
If we are determined to be
a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our ordinary shares
or warrants and, in the case of our ordinary shares, the U.S. Holder did not make a timely qualified electing fund (“QEF”)
election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) ordinary shares, as described
below, such holder generally will be subject to special rules with respect to:
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any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares or warrants; and
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any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares).
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Under these rules,
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the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares or warrants;
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the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we are a PFIC, will be taxed as ordinary income;
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the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and
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the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.
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In general, if we are determined
to be a PFIC, a U.S. Holder will avoid the PFIC tax consequences described above in respect to our ordinary shares by making a
timely QEF election to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings
and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S.
Holder in which or with which our taxable year ends. A U.S. Holder may make a separate election to defer the payment of taxes
on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.
A U.S. Holder may not make
a QEF election with respect to its warrants to acquire our ordinary shares. As a result, if a U.S. Holder sells or otherwise disposes
of such warrants (other than upon exercise of such warrants), any gain recognized generally will be subject to the special tax
and interest charge rules treating the gain as an excess distribution, as described above, if we were a PFIC at any time during
the period the U.S. Holder held the warrants. If a U.S. Holder that exercises such warrants properly makes a QEF election with
respect to the newly acquired ordinary shares (or has previously made a QEF election with respect to our ordinary shares), the
QEF election will apply to the newly acquired ordinary shares, but the adverse tax consequences relating to PFIC shares, adjusted
to take into account the current income inclusions resulting from the QEF election, will continue to apply with respect to such
newly acquired ordinary shares (which generally will be deemed to have a holding period for purposes of the PFIC rules that includes
the period the U.S. Holder held the warrants), unless the U.S. Holder makes a purging election. The purging election creates a
deemed sale of such shares at their fair market value. The gain recognized by the purging election will be subject to the special
tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election,
the U.S. Holder will have a new basis and holding period in the ordinary shares acquired upon the exercise of the warrants for
purposes of the PFIC rules.
In order to comply with the requirements
of a QEF election, a U.S. Holder must receive a PFIC annual information statement from us. If we determine we are a PFIC for any
taxable year, we will endeavor to provide to a U.S. Holder such information as the IRS may require, including a PFIC annual information
statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will
have timely knowledge of our status as a PFIC in the future or of the required information to be provided.
Although a determination as
to our PFIC status will be made annually, an initial determination that our company is a PFIC will generally apply for subsequent
years to a U.S. Holder who held ordinary shares or warrants while we were a PFIC, whether or not we meet the test for PFIC status
in those subsequent years. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which
the U.S. Holder holds (or is deemed to hold) our ordinary shares, however, will not be subject to the PFIC tax and interest charge
rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime
with respect to such shares for any taxable year of us that ends within or with a taxable year of the U.S. Holder and in which
we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC
and the U.S. Holder holds (or is deemed to hold) our ordinary shares, the PFIC rules discussed above will continue to apply to
such shares unless the holder makes a purging election, as described above, and pays the tax and interest charge with respect to
the gain inherent in such shares attributable to the pre-QEF election period.
After our initial business combination, it is
likely that a majority of our directors and officers will live outside the United States and all of our assets will be located
outside the United States; therefore investors may not be able to enforce federal securities laws or their other legal rights.
It is likely that after our initial
business combination, a majority of our directors and officers will reside outside of the United States and all of our assets will
be located outside of the United States. As a result, it may be difficult, or in some cases not possible, for investors in the
United States to enforce their legal rights, to effect service of process upon all of our directors or officers or to enforce judgments
of United States courts predicated upon civil liabilities and criminal penalties on our directors and officers under United States
laws.
We are dependent upon our officers and directors
and their loss could adversely affect our ability to operate.
Our operations are dependent upon
a relatively small group of individuals and, in particular, our officers and directors. We believe that our success depends on
the continued service of our officers and directors, at least until we have consummated our initial business combination. In addition,
our officers and directors are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts
of interest in allocating management time among various business activities, including identifying potential business combinations
and monitoring the related due diligence. We do not have an employment agreement with, or key-man insurance on the life of, any
of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental
effect on us.
Our ability to successfully effect our initial
business combination and to be successful thereafter will be largely dependent upon the efforts of our key personnel, some of whom
may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability
of our post-combination business.
Our ability to successfully effect
our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target
business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior
management or advisory positions following our initial business combination, it is likely that some or all of the management of
the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial business
combination, our assessment of these individuals may not prove to be correct. These individuals may be unfamiliar with the requirements
of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar
with such requirements.
Our key personnel may negotiate employment or
consulting agreements with a target business in connection with a particular business combination. These agreements may provide
for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of
interest in determining whether a particular business combination is the most advantageous.
Our key personnel may be able to
remain with the company after the consummation of our initial business combination only if they are able to negotiate employment
or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the
negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments
and/or our securities for services they would render to us after the consummation of the business combination. The personal and
financial interests of such individuals may influence their motivation in identifying and selecting a target business. However,
we believe the ability of such individuals to remain with us after the consummation of our initial business combination will not
be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is
no certainty, however, that any of our key personnel will remain with us after the consummation of our initial business combination.
Our key personnel may not remain in senior management or advisory positions with us. The determination as to whether any of our
key personnel will remain with us will be made at the time of our initial business combination.
We may have a limited ability to assess the management
of a prospective target business and, as a result, may effect our initial business combination with a target business whose management
may not have the skills, qualifications or abilities to manage a public company.
When evaluating the desirability
of effecting our initial business combination with a prospective target business, our ability to assess the target business’
management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s
management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected.
Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company,
the operations and profitability of the post-combination business may be negatively impacted.
The officers and directors of an acquisition candidate
may resign upon consummation of our initial business combination. The loss of an acquisition target’s key personnel could
negatively impact the operations and profitability of our post-combination business.
The role of an acquisition candidate’s
key personnel upon the consummation of our initial business combination cannot be ascertained at this time. Although we contemplate
that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate
following our initial business combination, it is possible that some members of the management team of an acquisition candidate
will not wish to remain in place.
Certain of our officers and directors are now,
and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to
be conducted by us and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a
particular business opportunity should be presented.
Until we consummate our business
combination, we intend to engage in the business of identifying and combining with one or more businesses. Our executive officers
and directors are, or may in the future become, affiliated with entities that are engaged in a similar business.
Our officers may become involved
with subsequent blank check companies similar to our company. Our officers also may become aware of business opportunities which
may be appropriate for presentation to us and the other entities to which they owe certain fiduciary duties. Accordingly, they
may have conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts
may not be resolved in our favor or that a potential target business would not be presented to another entity prior to its presentation
to us.
Our officers, directors, security holders and
their respective affiliates may have competitive pecuniary interests that conflict with our interests.
We have not adopted a policy that
expressly prohibits our directors, officers, security holders or affiliates from having a direct or indirect pecuniary or financial
interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest.
In fact, we may enter into our initial business combination with a target business that is affiliated with our sponsor, our directors
or officers, although we do not intend to do so. Nor do we have a policy that expressly prohibits any such persons from engaging
for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict
between their interests and ours.
We may engage in our initial business combination
with one or more target businesses that have relationships with entities that may be affiliated with our executive officers, directors
or existing holders which may raise potential conflicts of interest.
In light of the involvement of our
sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor,
officers and directors. Our directors also serve as officers and board members for other entities. Our sponsor, officers and directors
are not currently aware of any specific opportunities for us to consummate our initial business combination with any entities with
which they are affiliated, and there have been no preliminary discussions concerning a business combination with any such entity
or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would
pursue such a transaction if we determined that such affiliated entity met our criteria for our initial business combination and
such transaction was approved by a majority of our disinterested directors. Despite our agreement to obtain an opinion from an
independent investment banking firm regarding the fairness to our shareholders from a financial point of view of a business combination
with one or more domestic or international businesses affiliated with our executive officers, directors or existing holders, potential
conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our
public shareholders as they would be absent any conflicts of interest. Our directors have a fiduciary duty to act in the best interests
of our shareholders, whether or not a conflict of interest may exist.
Since our sponsor will lose its entire investment
in us if our initial business combination is not consummated and our officers and directors have significant financial interests
in us, a conflict of interest may arise in determining whether a particular acquisition target is appropriate for our initial business
combination.
In March 2011, our sponsor purchased
an aggregate of 2,012,500 founder shares for an aggregate purchase price of $25,000, or approximately $0.012 per share. The founder
shares will be worthless if we do not consummate an initial business combination. In addition, members of our sponsor purchased
an aggregate of 4,166,667 sponsor warrants, each exercisable for one ordinary share at $12.00 per share, for a purchase price of
$3,125,000, or $0.75 per warrant, that will also be worthless if we do not consummate our initial business combination. In addition,
591,912 founder shares are subject to forfeiture by our sponsor as follows: (1) 304,924 are subject to forfeiture in the event
the last sale price of our shares does not equal or exceed $15.00 per share (as adjusted for share splits, share dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within at least one 30-trading day period within 36 months following the
closing of our initial business combination and (2) 286,988 founder shares are subject to forfeiture in the event the last sale
price of our shares does not equal or exceed $12.50 per share (as adjusted for share splits, share dividends, reorganizations,
recapitalizations and the like) for any 20 trading days within at least one 30-trading day period within 36 months following the
closing of our initial business combination.
We may issue notes or other debt securities, or
otherwise incur substantial debt, to complete our initial business combination, which may adversely affect our financial condition
and thus negatively impact the value of our shareholders’ investment in us.
Although we have no commitments as
of the date of this report to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to
incur substantial debt to complete our initial business combination. We and our officers and directors have agreed that we will
not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind
in or to any monies held in the trust account. As such, no issuance of debt will affect the per share amount available for redemption
from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:
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default and foreclosure on our assets if our operating revenues after our initial business combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
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our inability to pay dividends on our ordinary shares;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.
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We may only be able to complete one business combination,
which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack
of diversification may negatively impact our operations and profitability.
As of February 29, 2012, we had $80,241,742
in our trust account (including interest earned thereon as of such date) that we may use to complete a business combination.
We may effectuate our initial business
combination with a single target business or multiple target businesses simultaneously. However, we may not be able to effectuate
our initial business combination with more than one target business because of various factors, including the existence of complex
accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating
results and the financial condition of several target businesses as if they had been operated on a combined basis. By consummating
our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive
and regulatory developments. Further, we would 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. Accordingly, the prospects for our success may be:
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solely dependent upon the performance of a single business, property or asset, or
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dependent upon the development or market acceptance of a single or limited number of products, processes or services.
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This lack of diversification may
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 our initial business combination.
We may attempt to simultaneously consummate business
combinations with multiple prospective targets, which may hinder our ability to consummate our initial business combination and
give rise to increased costs and risks that could negatively impact our operations and profitability.
If we determine to simultaneously
acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase
of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult
for us, and delay our ability, to complete the initial business combination. With multiple business combinations, we could also
face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence
investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations
and services or products of the acquired companies in a single operating business. If we are unable to adequately address these
risks, it could negatively impact our profitability and results of operations.
We may attempt to consummate our initial business
combination with a private company about which little information is available, which may result in our initial business combination
with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy,
we may seek to effectuate our initial business combination with a privately held company. By definition, very little public information
exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business
combination on the basis of limited information, which may result in our initial business combination with a company that is not
as profitable as we suspected, if at all.
We may not be able to maintain control of a target
business after our initial business combination.
We may structure our initial business
combination to acquire less than 100% of the equity interests or assets of a target business, but we will only consummate such
business combination if we will become the majority shareholder of the target or are otherwise not required to register as an investment
company under the Investment Company Act. Even though we will own a majority interest in the target, our shareholders prior to
the business combination may collectively own a minority interest in the post business combination company, depending on valuations
ascribed to the target and us in the business combination transaction. For example, we could pursue a transaction in which we issue
a substantial number of new shares in exchange for all of the outstanding capital stock of a target. In this case, we acquire a
100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our shareholders
immediately prior to such transaction could own less than a majority of our outstanding shares subsequent to such transaction.
In addition, other minority shareholders may subsequently combine their holdings resulting in a single person or group obtaining
a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that we will
not be able to maintain our control of the target business.
Unlike many blank check companies, we do not have
a specified maximum redemption threshold. The absence of such a redemption threshold will make it easier for us to consummate our
initial business combination with which a substantial majority of our shareholders do not agree.
Since we have no specified percentage
threshold for redemption contained in our memorandum and articles of association, our structure is different in this respect from
the structure that has been used by many blank check companies. Many blank check companies would not be able to consummate an initial
business combination if the holders of the company’s public shares voted against a proposed business combination and elected
to redeem or convert more than a specified percentage of the shares sold in such company’s initial public offering, which
percentage threshold has typically been between 19.99% and 39.99%. As a result, many blank check companies have been unable to
complete business combinations because the amount of shares voted by their public shareholders electing conversion exceeded the
maximum conversion threshold pursuant to which such company could proceed with our initial business combination. As a result, we
may be able to consummate our initial business combination even though a substantial majority of our public shareholders do not
agree with the transaction and have redeemed their shares or, if we seek shareholder approval of our initial business combination
and do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, have entered into
privately negotiated agreements to sell their shares to us or our sponsor, officers, directors, advisors or their affiliates. However,
in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001.
Furthermore, the redemption threshold may be further limited by the terms and conditions of our initial business combination. In
such case, we would not proceed with the redemption of our public shares and the related business combination, and instead may
search for an alternate business combination.
The exercise price for the public warrants is
higher than in many similar blank check company offerings in the past, and, accordingly, the warrants are more likely to expire
worthless.
The exercise price of the warrants
is higher than is typical in many similar blank check companies. Historically, the exercise price of a warrant was generally less
than the purchase price of the units in the initial public offering. The exercise price for our public warrants is $12.00 per share.
As a result, the warrants are less likely to ever be in the money and more likely to expire worthless.
In order to effectuate a business combination,
blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments.
We may seek to amend our memorandum and articles of association or governing instruments in a manner that will make it easier for
us to consummate our initial business combination that our shareholders may not support.
In order to effectuate our initial
business combination, blank check companies have, in the recent past, amended various provisions of their charters and modified
governing instruments. For example, blank check companies have amended the definition of business combination, increased redemption
thresholds and changed industry focus. We may seek to amend our charter or governing instruments in order to effectuate our initial
business combination. However, we and our directors and officers have agreed not to propose any amendment to our memorandum and
articles of association that would affect the substance and timing of our obligation to redeem our public shares if we are unable
to consummate our initial business combination by April 20, 2013.
The provisions of our memorandum and articles
of association relating to the rights and obligations attaching to our ordinary shares may be amended prior to the consummation
of our initial business combination with the approval of the holders of 65% of our outstanding ordinary shares, which is a lower
amendment threshold than that of many blank check companies. It may be easier for us, therefore, to amend our memorandum and articles
of association to facilitate the consummation of our initial business combination that a significant number of our shareholders
may not support.
Many blank check companies have a
provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s
pre-business combination activity, without approval by a certain percentage of the company’s shareholders. Typically, amendment
of these provisions requires approval by between 90% and 100% of the company’s public shareholders. Our memorandum and articles
of association provides that, prior to the consummation of our initial business combination, its provisions related to pre-business
combination activity and the rights and obligations attaching to the ordinary shares, may be amended if approved by holders of
65% of our issued and outstanding ordinary shares. Prior to our initial business combination, if we seek to amend any provisions
of our memorandum and articles of association relating to shareholders’ rights or pre-business combination activity, we will
provide dissenting public shareholders with the opportunity to redeem their public shares in connection with any such vote on any
proposed amendments to our memorandum and articles of association. Other provisions of our memorandum and articles of association
may be amended prior to the consummation of our initial business combination if approved by a majority of the votes of shareholders
who being so entitled attend and vote at the general meeting or by resolution of the directors. Following the consummation of our
initial business combination, the rights and obligations attaching to our ordinary shares and other provisions of our memorandum
and articles of association may be amended if approved by a majority of the votes of shareholders who being so entitled attend
and vote at the general meeting or by resolution of the directors. Our sponsor, which beneficially owns 20% of our ordinary shares,
will participate in any vote to amend our memorandum and articles of association and will have the discretion to vote in any manner
they choose. As a result, we may be able to amend the provisions of our memorandum and articles of association which govern our
pre-business combination and the rights and obligations attaching to the ordinary shares behavior more easily that many blank check
companies, and this may increase our ability to consummate our initial business combination with which you do not agree. However,
we and our directors and officers have agreed not to propose any amendment to our memorandum and articles of association that would
affect the substance and timing of our obligation to redeem our public shares if we are unable to consummate our initial business
combination by April 20, 2013.
We may be unable to obtain additional financing
to complete our initial business combination or to fund the operations and growth of a target business, which could compel us to
restructure or abandon a particular business combination. If we are unable to complete our initial business combination, our public
shareholders may only receive approximately $9.97 per share on our redemption, and our warrants will expire worthless.
Although we believe that $80,241,787
of proceeds held in the trust account (including interest earned thereon as of February 29, 2012) that may be available to us for
our initial business combination, will be sufficient to allow us to consummate our initial business combination, because we have
not yet identified any prospective target business we cannot ascertain the capital requirements for any particular transaction.
If this amount proves to be insufficient, either because of the size of our initial business combination, the depletion of the
available net proceeds in search of a target business, the obligation to repurchase for cash a significant number of shares from
shareholders who elect redemption in connection with our initial business combination or the terms of negotiated transactions to
purchase shares in connection with our initial business combination, we may be required to seek additional financing or to abandon
the proposed business combination. Financing may not be available on acceptable terms, if at all. The current economic environment
has made it especially difficult for companies to obtain acquisition financing. To the extent that additional financing proves
to be unavailable when needed to consummate our initial business combination, we would be compelled to either restructure the transaction
or abandon that particular initial business combination and seek an alternative target business candidate. If we are unable to
complete our initial business combination, our public shareholders may only receive approximately $9.97 per share on our redemption,
and our warrants will expire worthless. In addition, even if we do not need additional financing to consummate our initial business
combination, we may require such 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 shareholders is required to provide any financing to us in connection with or after our initial business combination.
Our sponsor controls a substantial interest in
us and thus may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not
support.
Our sponsor beneficially owns 20%
of our issued and outstanding ordinary shares (assuming they are not required to forfeit their founder earn out shares). Accordingly,
they may exert a substantial influence on actions requiring a shareholder vote, potentially in a manner that you do not support,
including amendments to our memorandum and articles of association. If our sponsor purchases any additional ordinary shares in
the aftermarket or in privately negotiated transactions, this would increase their control. Neither our sponsor nor, to our knowledge,
any of our officers or directors, has any current intention to purchase additional securities, other than as previously disclosed.
Factors that would be considered in making such additional purchases would include consideration of the current trading price of
our ordinary shares. In addition, our board of directors, whose members were elected by our sponsor, is and will be divided into
three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each
year. It is unlikely that there will be an annual meeting of shareholders to elect new directors prior to the consummation of our
initial business combination, in which case all of the current directors will continue in office until at least the consummation
of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors,
only a minority of the board of directors will be considered for election and our sponsor, because of its ownership position, will
have considerable influence regarding the outcome. Accordingly, our sponsor will continue to exert control at least until the consummation
of our initial business combination.
If we do not hold an annual meeting of shareholders
until after the consummation of our initial business combination, shareholders will not be afforded an opportunity to elect directors
and to discuss company affairs with management until such time.
Unless otherwise required by law
or the NASDAQ Capital Market, or we decide for other business or legal reasons, we do not currently intend to call an annual meeting
of shareholders until after we consummate our initial business combination. If our shareholders want us to hold a meeting prior
to our consummation of our initial business combination, they may do so by members holding not less than thirty percent of voting
rights in respect of the matter for which the meeting is requested making a request in writing to the directors in accordance with
Section 82 of the Companies Act. Under British Virgin Islands law, we may not increase the required percentage to call a meeting
above thirty percent. Until we hold an annual meeting of shareholders, public shareholders may not be afforded the opportunity
to elect directors and to discuss company affairs with management.
We may amend the terms of the warrants in a manner
that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding public warrants.
Pursuant to the warrant agreement
between Continental Transfer & Stock Company, as warrant agent, and us, the terms of the warrants may be amended without the
consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at
least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders.
Accordingly, we may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding
public warrants approve of such amendment. Although our ability to amend the terms of the warrants with the consent of at least
65% of the then outstanding warrants is unlimited, examples of such amendments could be amendments to, among other things, increase
the exercise price of the warrants, shorten the exercise period or decrease the number of ordinary shares purchasable upon exercise
of a warrant.
We may redeem your unexpired warrants prior to
their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding
warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that
the last reported sales price of the ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day
period ending on the third business day prior to proper notice of such redemption provided that on the date we give notice of redemption
and during the entire period thereafter until the time we redeem the warrants, we have an effective registration statement under
the Securities Act covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to them
is available. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register
or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants
could force you (1) to exercise your warrants and pay the exercise price therefore at a time when it may be disadvantageous for
you to do so, (2) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or
(3) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to
be substantially less than the market value of your warrants. None of the sponsor warrants will be redeemable by us so long as
they are held by members of the sponsor or their permitted transferees.
Our warrants may have an adverse effect on the
market price of our ordinary shares and make it more difficult to effectuate our initial business combination.
We issued warrants to purchase 8,050,000
ordinary shares as part of our IPO and an aggregate of 4,166,667 sponsor warrants, each exercisable to purchase one ordinary share
at $12.00 per share. In addition, if our sponsor makes any working capital loans, it may convert up to $500,000 of those loans
into additional sponsor warrants at $0.75 per warrant. To the extent we issue ordinary shares to effectuate our initial business
combination, the potential for the issuance of a substantial number of additional ordinary shares upon exercise of these warrants
could make us a less attractive acquisition vehicle to a target business. Such warrants, when exercised, will increase the number
of issued and outstanding ordinary shares and reduce the value of the ordinary shares issued to complete the business combination.
Therefore, our warrants may make it more difficult to effectuate our initial business combination or increase the cost of acquiring
the target business.
A market for our securities may not develop, which
would adversely affect the liquidity and price of our securities.
An active trading market for our
securities may never develop or, if developed, it may not be sustained. Additionally, if our securities become delisted from the
NASDAQ Capital Market for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for
equity securities not listed on a national exchange, the liquidity and price of our securities may be more limited than if we were
listed on the NASDAQ Capital Market or another national exchange. You may be unable to sell your securities unless a market can
be established and sustained.
Our securities may not continue to be listed on
the NASDAQ Capital Market in the future, which could limit investors’ ability to make transactions in our securities and
subject us to additional trading restrictions.
Our securities may not continue to
be listed on the NASDAQ Capital Market in the future. Additionally, in connection with our business combination, the NASDAQ Capital
Market will 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 may not be able to meet those initial listing requirements at that time.
If the NASDAQ Capital Market delists
our securities from trading on its exchange, we could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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a reduced liquidity with respect to our securities;
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a determination that our ordinary shares are a “penny stock” which will require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our ordinary shares;
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a limited amount of news and analyst coverage for our company; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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Because we must furnish our shareholders with
target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination
with some prospective target businesses.
The United States federal proxy rules
require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include
historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure
in connection with our tender offer or proxy documents, whether or not they are required under the tender offer rules. These financial
statements must be prepared in accordance with, or be reconciled to, accounting principles generally accepted in the United States
of America, or GAAP, and the historical financial statements must be audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target
businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements
in accordance with federal proxy rules and timely consummate our initial business combination.
Compliance obligations under the Sarbanes-Oxley
Act of 2002 may make it more difficult for us to effectuate our initial business combination, require substantial financial and
management resources, and increase the time and costs of completing an acquisition.
Section 404 of the Sarbanes-Oxley
Act of 2002, or the Sarbanes-Oxley Act, requires that we evaluate and report on our system of internal controls and requires that
we have such system of internal controls audited beginning with our Annual Report on Form 10-K for the year ending February 28,
2013. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly
burdensome on us as compared to all public companies because a target company with which we seek to complete our initial business
combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls.
The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the
time and costs necessary to complete any such acquisition.
We may re-incorporate in another jurisdiction
in connection with our initial business combination, and the laws of such jurisdiction will likely govern all of our material agreements
and we may not be able to enforce our legal rights.
In connection with our initial business
combination, we may relocate the home jurisdiction of our business from the British Virgin Islands to another jurisdiction. If
we determine to do this, the laws of such jurisdiction would likely govern all of our material agreements. The system of laws and
the enforcement of existing laws in such jurisdiction may not be as certain in implementation and interpretation as in the United
States. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business,
business opportunities or capital. Any such reincorporation and the international nature of our business will likely subject us
to foreign regulation.
You may face difficulties in protecting your interests,
and your ability to protect your rights through the U.S. federal courts may be limited, because we are incorporated under British
Virgin Islands law.
We are a company incorporated under
the laws of the British Virgin Islands. As a result, it may be difficult for investors to enforce judgments obtained in the United
States courts against our directors or officers.
Our corporate affairs will be governed
by our memorandum and articles of association, the Companies Act and the common law of the British Virgin Islands. The rights of
shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors
to us under British Virgin Islands law are governed by the Companies Act and the common law of the British Virgin Islands. The
common law of the British Virgin Islands is derived from English common law, and whilst the decisions of the English courts are
of persuasive authority, they are not binding on a court in the British Virgin Islands. The rights of our shareholders and the
fiduciary responsibilities of our directors under British Virgin Islands law may not be as clearly established as they would be
under statutes or judicial precedent in some jurisdictions in the United States. In particular, the British Virgin Islands has
a less developed body of securities laws as compared to the United States, and some states, such as Delaware, have more fully developed
and judicially interpreted bodies of corporate law. In addition, while statutory provisions do exist in British Virgin Islands
law for derivative actions to be brought in certain circumstances, shareholders in BVI companies may not have standing to initiate
a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought,
and the procedures and defenses that may be available in respect to any such action, may result in the rights of shareholders of
a BVI company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders
may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred.
The British Virgin Islands courts
are also unlikely:
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to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws where that liability is in respect of penalties, taxes, fines or similar fiscal or revenue obligations of the company; and
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to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.
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There is no statutory recognition
in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will
in certain circumstances recognize such a foreign judgment and treat it as a cause of action in itself which may be sued upon as
a debt at common law so that no retrial of the issues would be necessary provided that the U.S. judgment:
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the U.S. court issuing the judgment had jurisdiction in the matter and the company either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process;
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is final and for a liquidated sum;
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the judgment given by the U.S. court was not in respect of penalties, taxes, fines or similar fiscal or revenue obligations of the company;
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in obtaining judgment there was no fraud on the part of the person in whose favor judgment was given or on the part of the court;
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recognition or enforcement of the judgment would not be contrary to public policy in the British Virgin Islands; and
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the proceedings pursuant to which judgment was obtained were not contrary to natural justice.
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In appropriate circumstances, a British
Virgin Islands Court may give effect in the British Virgin Islands to other kinds of final foreign judgments such as declaratory
orders, orders for performance of contracts and injunctions.
As a result of all of the above,
public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members
of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.
Our memorandum and articles of association permit
the board of directors by resolution to amend our memorandum and articles of association, including to create additional classes
of securities, including shares with rights, preferences, designations and limitations as they determine which may have an anti-takeover
effect.
Our memorandum and articles of association
permits the board of directors by resolution to amend the memorandum and articles of association including to designate rights,
preferences, designations and limitations attaching to the preferred shares as they determine in their discretion, without shareholder
approval with respect the terms or the issuance. If issued, the rights, preferences, designations and limitations of the preferred
shares would be set by the board of directors and could operate to the disadvantage of the outstanding ordinary shares the holders
of which would not have any pre-emption rights in respect of such an issue of preferred shares. Such terms could include, among
others, preferences as to dividends and distributions on liquidation, or could be used to prevent possible corporate takeovers.
We may issue some or all of such preferred shares in connection with our initial business combination. Notwithstanding the foregoing,
we and our directors and officers have agreed not to propose any amendment to our memorandum and articles of association that would
affect the substance and timing of our obligation to redeem our public shares if we are unable to consummate our initial business
combination by April 20, 2013.
Risks Associated with Acquiring and Operating a Business
in Emerging Market Countries
If we effect our initial business combination
with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact
our operations.
If we effect our initial business
combination with a company located outside of the United States, we would be subject to any special considerations or risks associated
with companies operating in the target business’ home jurisdiction, including any of the following:
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rules and regulations or currency redemption or corporate withholding taxes on individuals;
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laws governing the manner in which future business combinations may be effected;
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exchange listing and/or delisting requirements;
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tariffs and trade barriers;
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regulations related to customs and import/export matters;
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tax issues, such as tax law changes and variations in tax laws as compared to the United States;
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currency fluctuations and exchange controls;
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challenges in collecting accounts receivable;
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cultural and language differences;
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employment regulations;
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crime, strikes, riots, civil disturbances, terrorist attacks and wars; and
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deterioration of political relations with the United States.
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We may not be able to adequately address
these additional risks. If we were unable to do so, our operations might suffer.
Because of the costs and difficulties inherent in managing
cross-border business operations, our results of operations may be negatively impacted.
Managing a business, operations, personnel
or assets in another country is challenging and costly. Any management that we may have (whether based abroad or in the U.S.) may
be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal regimes and
labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing cross-border
business operations, personnel and assets can be significant (and much higher than in a purely domestic business) and may negatively
impact our financial and operational performance.
If social unrest, acts of terrorism, regime changes, changes
in laws and regulations, political upheaval, or policy changes or enactments occur in a country in which we may operate after we
effect our initial business combination, it may result in a negative impact on our business.
Political events in another country may
significantly affect our business, assets or operations. Social unrest, acts of terrorism, regime changes, changes in laws and
regulations, political upheaval, and policy changes or enactments could negatively impact our business in a particular country.
Many countries have difficult and unpredictable legal
systems and underdeveloped laws and regulations that are unclear and subject to corruption and inexperience, which may adversely
impact our results of operations and financial condition.
Our ability to seek and enforce legal protections,
including with respect to intellectual property and other property rights, or to defend ourselves with regard to legal actions
taken against us in a given country, may be difficult or impossible, which could adversely impact our operations, assets or financial
condition. Rules and regulations in many countries are often ambiguous or open to differing interpretation by responsible individuals
and agencies at the municipal, state, regional and federal levels. The attitudes and actions of such individuals and agencies are
often difficult to predict and inconsistent. Delay with respect to the enforcement of particular rules and regulations, including
those relating to customs, tax, environmental and labor, could cause serious disruption to operations abroad and negatively impact
our results.
If relations between the United States and foreign governments
deteriorate, it could cause potential target businesses or their goods and services to become less attractive.
The relationship between the United States
and foreign governments could be subject to sudden fluctuation and periodic tension. For instance, the United States may announce
its intention to impose quotas on certain imports. Such import quotas may adversely affect political relations between the two
countries and result in retaliatory countermeasures by the foreign government in industries that may affect our ultimate target
business. Changes in political conditions in foreign countries and changes in the state of U.S. relations with such countries are
difficult to predict and could adversely affect our operations or cause potential target businesses or their goods and services
to become less attractive. Because we are not limited to any specific industry, there is no basis for you to evaluate the possible
extent of any impact on our ultimate operations if relations are strained between the United States and a foreign country in which
we acquire a target business or move our principal manufacturing or service operations.
If any dividend is declared in the future and
paid in a foreign currency, you may be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you will actually
ultimately receive.
If you are a U.S. holder of our ordinary
shares, you will be taxed on the U.S. dollar value of your dividends, if any, at the time you receive them, even if you actually
receive a smaller amount of U.S. dollars when the payment is in fact converted into U.S. dollars. Specifically, if a dividend is
declared and paid in a foreign currency, the amount of the dividend distribution that you must include in your income as a U.S.
holder will be the U.S. dollar value of the payments made in the foreign currency, determined at the spot rate of the foreign currency
to the U.S. dollar on the date the dividend distribution is includible in your income, regardless of whether the payment is in
fact converted into U.S. dollars. Thus, if the value of the foreign currency decreases before you actually convert the currency
into U.S. dollars, you will be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you will actually ultimately
receive.
If our management following our initial business
combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with
such laws which could lead to various regulatory issues.
Following our initial business combination,
our management will likely resign from their positions as officers of the company and the management of the target business at
the time of the business combination will remain in place. Management of the target business may not be familiar with United States
securities laws. If new management is unfamiliar with our laws, they may have to expend time and resources becoming familiar with
such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our
operations.
After our initial business combination, substantially
all of our assets will likely be located in a foreign country and substantially all of our revenue will be derived from our operations
in such country. Accordingly, our results of operations and prospects will be subject, to a significant extent, to the economic,
political and legal policies, developments and conditions in the country in which we operate.
The economic, political and social
conditions, as well as government policies, of the country in which our operations are located could affect our business. The economies
in Asia differ from the economies of most developed countries in many respects. For the most part, such economies have grown at
a rate in excess of the United States; however, (1) such economic growth has been uneven, both geographically and among various
sectors of the economy and (2) such growth may not be sustained in the future. If in the future such country’s economy experiences
a downturn or grows at a slower rate than expected, there may be less demand for spending in certain industries. A decrease in
demand for spending in certain industries could materially and adversely affect our ability to find an attractive target business
with which to consummate our initial business combination and if we effect our initial business combination, the ability of that
target business to become profitable.
Currency policies may cause a target business’
ability to succeed in the international markets to be diminished.
In the event we acquire a non-U.S.
target, all revenues and income would likely be received in a foreign currency, the dollar equivalent of our net assets and distributions,
if any, could be adversely affected by reductions in the value of the local currency. The value of the currencies in our target
regions fluctuate and are affected by, among other things, changes in political and economic conditions. Any change in the relative
value of such currency against our reporting currency may affect the attractiveness of any target business or, following consummation
of our initial business combination, our financial condition and results of operations. Additionally, if a currency appreciates
in value against the dollar prior to the consummation of our initial business combination, the cost of a target business as measured
in dollars will increase, which may make it less likely that we are able to consummate such transaction.
Because foreign law could govern almost all of
our material agreements, we may not be able to enforce our rights within such jurisdiction or elsewhere, which could result in
a significant loss of business, business opportunities or capital.
Foreign law could govern almost all
of our material agreements. The target business may not be able to enforce any of its material agreements or that remedies will
be available outside of such foreign jurisdiction’s legal system. The system of laws and the enforcement of existing laws
and contracts in such jurisdiction may not be as certain in implementation and interpretation as in the United States. The judiciaries
in Asia are relatively inexperienced in enforcing corporate and commercial law, leading to a higher than usual degree of uncertainty
as to the outcome of any litigation. As a result, the inability to enforce or obtain a remedy under any of our future agreements
could result in a significant loss of business and business opportunities.
Many of the economies in Asia are experiencing
substantial inflationary pressures which may prompt the governments to take action to control the growth of the economy and inflation
that could lead to a significant decrease in our profitability following our initial business combination.
While many of the economies in Asia
have experienced rapid growth over the last two decades, they currently are experiencing inflationary pressures. As governments
take steps to address the current inflationary pressures, there may be significant changes in the availability of bank credits,
interest rates, limitations on loans, restrictions on currency conversions and foreign investment. There also may be imposition
of price controls. If prices for the products of our ultimate target business rise at a rate that is insufficient to compensate
for the rise in the costs of supplies, it may have an adverse effect on our profitability. If these or other similar restrictions
are imposed by a government to influence the economy, it may lead to a slowing of economic growth. Because we are not limited to
any specific industry, the ultimate industry that we operate in may be affected more severely by such a slowing of economic growth.
Many industries in Asia are subject to government
regulations that limit or prohibit foreign investments in such industries, which may limit the potential number of acquisition
candidates.
Governments in many Asian countries
have imposed regulations that limit foreign investors’ equity ownership or prohibit foreign investments altogether in companies
that operate in certain industries. As a result, the number of potential acquisition candidates available to us may be limited
or our ability to grow and sustain the business which we ultimately acquire will be limited.
If a country in Asia enacts regulations in industry
segments that forbid or restrict foreign investment, our ability to consummate our initial business combination could be severely
impaired.
Many of the rules and regulations
that companies face concerning foreign ownership are not explicitly communicated. If new laws or regulations forbid or limit foreign
investment in industries in which we want to complete our initial business combination, they could severely impair our candidate
pool of potential target businesses. Additionally, if the relevant central and local authorities find us or the target business
with which we ultimately complete our initial business combination to be in violation of any existing or future laws or regulations,
they would have broad discretion in dealing with such a violation, including, without limitation:
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revoking our business and other licenses;
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requiring that we restructure our ownership or operations; and
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requiring that we discontinue any portion or all of our business.
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Any of the above could have an adverse effect
on our company post-business combination and could materially reduce the value of your investment.
Corporate governance standards in Asia may not be as strict
or developed as in the United States and such weakness may hide issues and operational practices that are detrimental to a target
business.
General corporate governance standards in
some countries are weak in that they do not prevent business practices that cause unfavorable related party transactions, over-leveraging,
improper accounting, family company interconnectivity and poor management. Local laws often do not go far enough to prevent improper
business practices. Therefore, shareholders may not be treated impartially and equally as a result of poor management practices,
asset shifting, conglomerate structures that result in preferential treatment to some parts of the overall company, and cronyism.
The lack of transparency and ambiguity in the regulatory process also may result in inadequate credit evaluation and weakness that
may precipitate or encourage financial crisis. In our evaluation of a business combination we will have to evaluate the corporate
governance of a target and the business environment, and in accordance with United States laws for reporting companies take steps
to implement practices that will cause compliance with all applicable rules and accounting practices. Notwithstanding these intended
efforts, there may be endemic practices and local laws that could add risk to an investment we ultimately make and that result
in an adverse effect on our operations and financial results.
Risks Associated with Acquiring and Operating a Business
In Mongolia
Legislation in Mongolia may be subject to conflicting
interpretations.
The Mongolian legal system shares
several of the qualitative characteristics typically found in a developing country and many of its laws, particularly with respect
to matters of taxation, are still evolving. The legal framework in Mongolia is, in many instances, based on recent political reforms
or newly enacted legislation, which may not be consistent with long-standing local conventions and customs. Local institutions
and bureaucracies responsible for administrating laws may lack a proper understanding of the laws or the experience necessary to
apply them in a modern business context. Many laws have been enacted, but in many instances they are neither understood nor enforced
and may be applied in an inconsistent, arbitrary manner, while legal remedies may be uncertain, delayed or unavailable. A transaction
or business structure that would likely be regarded under a more established legal system as appropriate and relatively straightforward
might be regarded in Mongolia as outside the scope of existing Mongolian law, regulation or legal precedent. As a result, certain
business arrangements or structures and certain tax planning mechanisms may carry significant risks. In particular, when business
objectives and practicalities dictate the use of arrangements and structures that, while not necessarily contrary to settled Mongolian
law, are sufficiently novel within a Mongolian legal context, it is possible that such arrangements may be invalidated.
The legal system in Mongolia has
inherent uncertainties that could limit the legal protections available to us, which include: (1) inconsistencies between laws;
(2) limited judicial and administrative guidance on interpreting Mongolian legislation; (3) substantial gaps in the regulatory
structure due to delay or absence of implementing regulations; (4) the lack of established interpretations of new principles of
Mongolian legislation, particularly those relating to business, corporate and securities laws; (5) a lack of judicial independence
from political, social and commercial forces; and (6) bankruptcy procedures that are not well developed and are subject to abuse.
The Mongolian judicial system has relatively little experience in enforcing the laws and regulations that currently exist, leading
to a degree of uncertainty as to the outcome of any litigation. It may be difficult to obtain swift and equitable enforcement,
or to obtain enforcement of a judgment by a court of another jurisdiction. In addition, while legislation has been enacted to protect
private property against expropriation and nationalization, due to the lack of experience in enforcing these provisions and political
factors, these protections may not be enforced in the event of an attempted expropriation or nationalization. Expropriation or
nationalization of any of our assets, or portions thereof, potentially without adequate compensation, could have a material adverse
effect on our business and operations.
Application of and amendments to legislation could
adversely affect mining rights or make it more difficult or expensive to engage in mining activities.
The government of Mongolia has, in
the past, expressed its strong desire to foster, and has to date protected the development of, an enabling environment for investments
in the mining sector. However, there are political constituencies within Mongolia which have espoused ideas that would not be regarded
by the mining industry as conducive to investment if they were to become law or official government policy. The present government
or a future government may not refrain from enacting legislation or adopting government policies that may limit or restrict mining
activities.
Mining operations in Mongolia are
subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports, taxes and royalties,
labor standards, occupational health, waste disposal, protection and remediation of the environment, mine safety, transportation
safety and other matters. Compliance with these laws and regulations increases the costs of exploring, drilling, developing, constructing,
operating and closing mines and other facilities. Since Mongolian legal requirements change frequently, are subject to interpretation
and may be enforced to varying degrees in practice, we are unable to predict the ultimate cost of complying with these requirements
or their effect on our operations. Furthermore, changes in governments, regulations and policies and practices could have an adverse
impact on our future cash flows, earnings, results of operations and financial condition.
Certain industries in Mongolia may be subject
to government regulations that limit or prohibit foreign investments in such industries, which may limit the potential number of
acquisition candidates.
Mongolia is in the process of implementing
a new Foreign Investment Law, which will require government approval for investments of more than 33% and MNT100 billion (approximately
$75.0 million), and parliamentary approval for investments of more than 49% and MNT100 billion in three strategic sectors: Minerals,
Banking and Finance, and Media and Telecommunications. The Mongolian parliament passed this bill on May 18, 2012, but is still
subject to possible veto by the President. As a result, the number of potential acquisition candidates available to us may be limited
or our ability to grow and sustain the business which we ultimately acquire may be limited.
It is not yet clear how the approval
process from the government of the new Foreign Investment Law will be implemented. If this law and future laws forbid or limit
foreign investment in industries in which we want to complete a business transaction, they could severely impair our candidate
pool of potential target businesses. Additionally, if the relevant central and local authorities find us or the target business
with which we ultimately complete a business transaction to be in violation of any existing laws or regulations, they would have
broad discretion in dealing with such a violation, including, without limitation:
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Revoking our business and other licenses;
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Requiring that we restructure our ownership or operations; and
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Requiring that we discontinue any portion or all of our business.
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Any of the above could have an adverse
effect on our company post-business transaction and could materially reduce the value of your investment.
Uncertainties regarding VAT reimbursement and
possible revisions to the Mongolian royalty fee system could adversely affect our financial position.
A value-added tax at a rate of 10%
is payable in respect of all goods sold, work performed and services provided within Mongolia. Value-added tax is also payable
in respect of goods imported into Mongolia and in respect of certain service fee payments made by Mongolian taxpayers to non-resident
service providers. If a legal entity is registered as a value-added taxpayer, it can obtain credits for such tax paid to its suppliers
of goods and services and can use such credits to offset value-added, or other, taxes owed in Mongolia. However, the Value-Added
Tax Law provides certain conditions which can limit the ability of a legal entity to register as a value-added taxpayer. Additionally,
the Value-Added Tax Law exempts all sales of mineral products with the exception of exported “finished mineral products”.
While we do not believe that we are currently subject to the Value-Added Tax Law, there is no assurance that we will not be subject
to such law in the future.
Our ability to carry on business in Mongolia is
subject to political risk.
The ability of companies to efficiently
conduct their business activities is subject to changes in government policy or shifts in political attitudes within Mongolia that
are beyond our control. Government policy may change to discourage foreign investment, nationalization of mining industries may
occur or other government limitations, restrictions or requirements not currently foreseen may be implemented. Our future assets
in Mongolia may be subject to nationalization, requisition or confiscation, whether legitimate or not, by any authority or body.
The provisions under Mongolian law for compensation and reimbursement of losses to investors under such circumstances may not be
effective to restore the value of our original investment. In addition, Mongolia may experience political instability. Such instability
could have an adverse effect on economic or social conditions in Mongolia and may result in outbreaks of civil unrest, terrorist
attacks or threats or acts of war in the affected areas, any of which could materially and adversely affect our business, prospects,
financial condition and results of operations.
Changes in, or more aggressive enforcement of,
laws and regulations could adversely impact our target business.
Mining operations and exploration
activities are subject to extensive laws and regulations. These relate to production, development, exploration, exports, imports,
taxes and royalties, labor standards, occupational health, waste disposal, protection and remediation of the environment, mine
decommissioning and reclamation, mine safety, toxic substances, transportation safety and emergency response and other matters.
Compliance with these laws and regulations increases the costs of exploring, drilling, developing, constructing, operating and
closing mines and other facilities. It is possible that the costs, delays and other effects associated with these laws and regulations
may impact our decision as to whether to enter into a business combination with a target. Since legal requirements change frequently,
are subject to interpretation and may be enforced to varying degrees in practice, we are unable to predict the ultimate cost of
compliance with these requirements or their effect on operations. The agreements, licenses or legislation upon which our ownership
interests are based may be interpreted and enforced in a way that materially adversely affects our rights and obligations. Furthermore,
changes in regulations and policies and practices could have an adverse impact on our future cash flows, earnings, results of operations
and financial condition.
Economic conditions in Mongolia could be influenced
by economic conditions in other emerging market countries, which could have an adverse effect on our business and operations.
The Mongolian market and the Mongolian
economy are influenced by economic and market conditions in other countries. Moreover, financial turmoil in any emerging market
country tends to adversely affect prices in capital markets of all emerging market countries, including Mongolia, as investors
move their money to more stable, developed markets. Financial problems or an increase in the perceived risks associated with investing
in emerging economies could dampen foreign investment in Mongolia and adversely affect the Mongolian economy. A loss of investor
confidence in the financial systems of other emerging markets may cause volatility in Mongolian financial markets and to the Mongolian
economy in general, which may have an adverse effect on our business and operations.
Selective or other governmental action may have
an adverse effect our business and the value of investments in Mongolia
Governmental authorities have a degree
of discretion in Mongolia and at times appear to act arbitrarily. Government entities also may use common or minor defects in official
or other documentation to delay or invalidate the issue or registrations of rights or licenses or to void transactions. Our potential
competitors may receive preferential treatment from the government and governmental authorities, potentially giving them a competitive
advantage. Selective or arbitrary government action, if directed at our operations, could have a material adverse effect on our
business, results of operations and prospects and on the value of investments in Mongolia. Any such selective action by governmental
authorities could adversely us.
Changes in law could occur with limited notice
and with no or little public consultation.
In certain instances, changes in
Mongolian law have occurred with limited notice and with no or little public consultation. For example, in 2006, the government
implemented a windfall tax applicable to certain minerals and changes to the Mining Law, both of which had a material adverse effect
on certain companies operating in Mongolia, with limited notice and with no or little public consultation. Similar actions may
occur in the future in relation to laws or regulations applicable to us.
Corruption in Mongolia could have an adverse effect
on our business and operations.
Surveys have indicated that there
may be some pockets of corruption in Mongolia. Corruption could adversely effect us by favoring our competitors over us. In addition,
false accusations of corruption or other alleged wrongdoing by us or our officers or directors may be spread by newspapers, competitors
or others to gain a competitive advantage over us or for other reasons. Mongolian press reports have also alleged selective investigations
and prosecutions by the government to further its interests. In the event we become the target of corruption allegations, we may
need to cease or alter certain activities or embark on expensive litigation to protect our business and employees, which could
adversely affect our operations and financial condition.
Fluctuations in global metal prices may negatively
impact the Mongolian economy and the attractiveness of consummating our initial business combination.
The Mongolian economy is highly dependent
on the exportation of minerals, with mineral exportation accounting for approximately 50% of Mongolia’s GDP in 2010. A large
proportion of such minerals consist of metals such as iron ore, copper and gold. The metals industry as a whole is cyclical and,
at times, pricing and availability of metal can be volatile due to numerous factors beyond our control, including general domestic
and international economic conditions, labor costs, sales levels, competition, consolidation of metals producers, higher raw material
costs for the producers of metals, import duties and tariffs and currency exchange rates. For example, world metal prices fell
in 2008 and 2009 and the Mongolian economy constricted as a result. Notwithstanding recent price increases, metals prices may decline
in 2012, and declines in those prices could adversely impact the expected expansion of the Mongolian economy and GDP growth, as
well as the attractiveness of consummating our initial business combination with a target business with operations in Mongolia.