UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-32587 ----------------- HEALTHCARE ACQUISITION CORP. (Exact name of registrant as specified in its charter) Delaware 20-2726770 (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 2116 Financial Center 666 Walnut Street Des Moines, Iowa 50309 (Address of principal executive offices) (zip code) (Registrant's telephone number, including area code): (515) 244-5746 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_|. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act. Large accelerated filer |_| Accelerated filer |_| Non-accelerated filer |X| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No |_|. As of May 15, 2006, there were 11,650,000 shares of common stock, par value $.0001 per share, of the registrant outstanding.
HEALTHCARE ACQUISITION CORP. Table of Contents PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Balance Sheet 2 Statements of Operations 3 Statements of Stockholders' Equity 4 Statements of Cash Flows 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk 12 Item 4. Controls and Procedures 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits 13 SIGNATURES 14
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Healthcare Acquisition Corp. We have reviewed the accompanying balance sheet of Healthcare Acquisition Corp. (a corporation in the development stage) as of March 31, 2006, and the related statements of operations, stockholders' equity and cash flows for the three months ended March 31, 2006 and the period from April 25, 2005 (inception) to March 31, 2006. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with United States generally accepted accounting principles. We have previously audited, in accordance with auditing standards of the Public Company Accounting Oversight Board (United States), the balance sheet of Healthcare Acquisition Corp. as of December 31, 2005, and the related statements of operations, stockholders' equity and cash flows for the period from April 25, 2005 (inception) to December 31, 2005 (not presented herein); and in our report dated March 14, 2006, we expressed an unqualified opinion on those financial statements. LWBJ, LLP West Des Moines, Iowa May 15, 2006 1
PART I - FINANCIAL INFORMATION Item 1. Financial Statements. HEALTHCARE ACQUISITION CORP. (a corporation in the development stage) BALANCE SHEETS <TABLE> <CAPTION> March 31, 2006 December 31, 2005 -------------- ----------------- <S> <C> <C> Assets (audited) Current assets Cash and cash equivalents $ 1,322,615 $ 1,398,181 Cash held in trust 69,124,399 68,636,069 Prepaid expense 50,328 52,500 -------------- ----------------- Total current assets $ 70,497,342 $ 70,086,750 ============== ================= Liabilities and stockholders' equity Current liabilities Accounts payable $ 54,737 $ 6,996 Accrued expenses 85,487 98,996 State income tax payable 81,000 48,000 Capital based taxes payable 156,293 115,000 Deferred revenue 239,160 141,543 -------------- ----------------- Total current liabilities 616,677 410,535 -------------- ----------------- Common stock, subject to possible redemption 1,879,060 shares, at conversion value 13,578,807 13,578,807 -------------- ----------------- Stockholders' equity Preferred stock, $.0001 par value, 1,000,000 shares authorized; none issued and outstanding -- -- Common stock, $.0001 par value, 100,000,000 shares authorized; 11,650,000 shares issued and outstanding (which includes 1,879,060 subject to possible conversion) 1,165 1,165 Common stock warrants (9,400,000 outstanding) -- -- Paid-in capital in excess of par 55,818,948 55,818,948 Equity accumulated during the development stage 481,745 277,295 -------------- ----------------- Total stockholders' equity 56,301,858 56,097,408 -------------- ----------------- Total liabilities and stockholders' equity $ 70,497,342 $ 70,086,750 ============== ================= </TABLE> See accompanying notes to financial statements. 2
HEALTHCARE ACQUISITION CORP. (a corporation in the development stage) STATEMENTS OF OPERATIONS <TABLE> <CAPTION> For the For the Period from Three Months April 25, 2005 Ended (inception) to March 31, 2006 March 31, 2006 -------------- ------------------- <S> <C> <C> Revenues Interest income $ 14,310 $ 33,858 Interest and dividend income from Trust Fund 390,713 957,239 -------------- ------------------- Total revenues 405,023 991,097 Costs and expenses Capital based taxes 41,168 156,168 Management fees 22,500 60,486 Insurance 22,500 60,000 Legal fees 45,820 55,356 Travel 19,403 47,144 General and administrative 16,182 46,698 Formation costs -- 2,500 -------------- ------------------- Total expenses 167,573 428,352 -------------- ------------------- Income before taxes 237,450 562,745 Provision for income taxes 33,000 81,000 -------------- ------------------- Net income $ 204,450 $ 481,745 ============== =================== Basic earnings per share $ 0.02 Diluted earnings per share $ 0.01 Weighted average basic shares outstanding 11,650,000 Weighted average diluted shares outstanding 13,725,325 </TABLE> See accompanying notes to financial statements. 3
HEALTHCARE ACQUISITION CORP. (a corporation in the development stage) STATEMENTS OF STOCKHOLDERS' EQUITY For the period from April 25, 2005 (inception) to March 31, 2006 <TABLE> <CAPTION> Equity Accumulated Common Common Common Additional During the Stock Par Stock Paid in Development Stockholders' Shares Amount Warrants Capital Stage Equity ---------- ------ -------- ------------ ------------ ------------- <S> <C> <C> <C> <C> <C> <C> Common shares issued to initial stockholders at $.0111 per share 2,250,000 $ 150 -- $ 24,850 $ -- $ 25,000 Stock dividend - July 8, 2005 -- 50 -- (50) -- -- Stock dividend - July 22, 2005 -- 25 -- (25) -- -- Sale of 9,000,000 units, net of underwriters' discount and offering expenses (includes 1,799,100 shares subject to possible conversion) 9,000,000 900 -- 66,364,920 -- 66,365,820 Proceeds of exercise of underwriters' over-allotment option for 400,000 units, net of commissions. (includes 79,960 shares subject to possible conversion). 400,000 40 -- 3,007,960 -- 3,008,000 Proceeds subject to possible conversion of 1,879,060 shares -- -- -- (13,578,807) -- (13,578,807) Proceeds from issuance of unit options -- -- -- 100 -- 100 Net income -- -- -- -- 277,295 277,295 ---------- ------ -------- ------------ ------------ ------------- Balance at December 31, 2005 11,650,000 $1,165 $ -- 55,818,948 $ 277,295 $ 56,097,408 ---------- ------ -------- ------------ ------------ ------------- Net income -- -- -- -- 204,450 204,450 ---------- ------ -------- ------------ ------------ ------------- Balance at March 31, 2006 11,650,000 $1,165 -- $ 55,818,948 $ 481,745 $ 56,301,858 ========== ====== ======== ============ ============ ============= </TABLE> See accompanying notes to financial statements. 4
HEALTHCARE ACQUISITION CORP. (a corporation in the development stage) STATEMENTS OF CASH FLOWS <TABLE> <CAPTION> For the Period from April 25, 2005 For the Three Months (inception) to Ended March 31, 2006 March 31, 2006 -------------------- -------------------- <S> <C> <C> Operating activities Net income $ 204,450 $ 481,745 Adjustments to reconcile net income to net cash provided by operating activities: Decrease (increase) in prepaid expenses 2,172 (50,328) Increase in accounts payable and accrued expenses 34,232 59,228 Increase in deferred revenue 97,617 239,160 Increase in income tax payable 33,000 81,000 Increase in capital based taxes payable 41,293 156,293 -------------------- -------------------- Net cash provided by operating activities 412,764 967,098 -------------------- -------------------- Investing activities Increase in cash held in Trust Fund (488,330) (69,124,399) -------------------- -------------------- Financing activities Gross proceeds from Initial Public Offering -- 75,200,000 Proceeds from issuance of unit option -- 100 Proceeds from notes payable, stockholders -- 250,000 Proceeds from issuance of common stock -- 25,000 Payments made on notes payable, stockholders -- (250,000) Payments made for costs of Initial Public Offering -- (5,745,184) -------------------- -------------------- Net cash provided by financing activities -- 69,479,916 -------------------- -------------------- Net increase (decrease) in cash (75,566) 1,322,615 Cash, beginning of period 1,398,181 -- -------------------- -------------------- Cash, end of period $ 1,322,615 $ 1,322,615 ==================== ==================== Supplemental schedule of non-cash financing activities Accrual of deferred offering costs $ -- $ 80,996 </TABLE> See accompanying notes to financial statements. 5
NOTES TO FINANCIAL STATEMENTS 1. Basis of Presentation The financial statements at March 31, 2006 and for the three months ended March 31, 2006 are unaudited. In the opinion of management, all adjustments (consisting of normal accruals) have been made that are necessary to present fairly the financial position of Healthcare Acquisition Corp. (the "Company") as of March 31, 2006 and the results of its operations and its cash flow for the three months ended March 31, 2006 and the period from April 25, 2005 (inception) to March 31, 2006. Operating results for the interim period are not necessarily indicative of the results to be expected for the full year. 2. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Healthcare Acquisition Corp. (the "Company") was incorporated in Delaware on April 25, 2005, as a blank check company whose objective is to acquire, through a merger, capital stock exchange, asset acquisition or other similar business combination, a currently unidentified operating business. Primarily all activity through March 31, 2006 relates to the Company's formation, evaluating prospective target businesses and the public offering described below. Accordingly, the Company is a corporation in the development stage. The Company has selected December 31 as its fiscal year-end. The registration statement for the Company's initial public offering ("Offering") was declared effective July 28, 2005. The Company consummated the Offering on August 3, 2005 (and 400,000 units subject to the underwriters' over-allotment option on August 16, 2005) and received net proceeds of approximately $69,450,000 (Note 3). The Company's management has broad discretion with respect to the specific application of the net proceeds of this Offering, although substantially all of the net proceeds of the Offering are intended to be generally applied toward consummating a business combination with an operating domestic or international company in the healthcare industry, a "target business". In evaluating a prospective target business, the Company will consider, among other factors, the financial condition and results of operation; growth potential; experience and skill of management; availability of additional personnel; capital requirements; competitive position; barriers to entry into other industries; stage of development of the products, processes or services; degree of current or potential market acceptance of the products, processes or services; proprietary features and degree of intellectual property or other protection of the products, processes or services; regulatory environment of the industry; and costs associated with effecting the business combination. These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors, as well as other considerations deemed relevant by the Company in effecting a business combination consistent with its business objective. There are no assurances the Company will be able to successfully effect a business combination. An amount of $67,928,000 or approximately 90.3% of the gross proceeds of this offering (approximately $7.23 per unit) are being held in an interest bearing trust account at JP Morgan Chase NY Bank maintained by Continental Stock Transfer & Trust Company ("Trust Fund") and invested in United States Treasury Bills or short-term securities having a maturity of one hundred eighty (180) days or less, until the earlier of (i) the consummation of the Company's first business combination or (ii) the liquidation of the Company. In October 2005, the Company entered into an amendment to its trust agreement which permits it to invest the funds held in trust not only in treasury bills having a maturity of 180 days or less, 6
2. Nature of Operations and Summary of Significant Accounting Policies (continued) Nature of Operations (continued) but also in any money market fund meeting the requirements of a "cash item" as set forth in Section 3(a)(1)(C) of the Investment Company Act of 1940, as amended, and any regulations, no-action letters, exemptive orders or interpretations promulgated thereunder. The Company believes that the amendment will allow it greater flexibility in investing the funds held in trust from its initial public offering, as well as reducing its tax liability, by allowing the Company to invest in tax-free money market funds. The placing of funds in the Trust Fund may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, prospective target businesses or other entities it engages, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Fund, there is no guarantee that they will execute such agreements. The Company's officers have severally agreed that they will be personally liable to ensure that the proceeds in the Trust Fund are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to the Company. However, there can be no assurance that the officers will be able to satisfy those obligations. The remaining proceeds, not held in trust, may be used to pay for business, legal and accounting expenses, expenses which may be incurred related to the investigation and selection of a target business, and the negotiation of an agreement to acquire a target business, and for continuing general and administrative expenses. The Company's first business combination must be with a business with a fair market value of at least 80% of the Company's net asset value at the time of acquisition. The Company, after signing a definitive agreement for the acquisition of a target business, will submit such transaction for stockholder approval. In the event that stockholders owning 20% or more of the outstanding stock excluding, for this purpose, those persons who were stockholders prior to the Offering, vote against the business combination or request their conversion right as described below, the business combination will not be consummated. All of the Company's stockholders prior to the Offering, including all of the officers and directors of the Company ("Initial Stockholders"), have agreed to vote their 2,250,000 founding shares of common stock in accordance with the vote of the majority in interest of all other stockholders of the Company ("Public Stockholders") with respect to any business combination. After consummation of the Company's first business combination, all of these voting safeguards will no longer be applicable. With respect to the first business combination which is approved and consummated, any Public Stockholder who voted against the business combination may demand that the Company redeem his or her shares. The per share redemption price will equal the amount in the Trust Fund as of the record date for determination of stockholders entitled to vote on the business combination divided by the number of shares of common stock held by Public Stockholders at the consummation of the Offering. Accordingly, Public Stockholders holding 19.99% of the aggregate number of shares owned by all Public Stockholders may seek redemption of their shares in the event of a business combination. Such Public Stockholders are entitled to receive their per share interest in the Trust Fund computed, without regard to the shares held by Initial Stockholders. Accordingly, a portion of the net proceeds from the Offering (19.99% of the amount held in the Trust Fund) has been classified as common stock subject to possible conversion in the accompanying March 31, 2006 balance sheet and 19.99% of the related interest earned on cash held in the Trust Fund has been recorded as deferred revenue. 7
2. Nature of Operations and Summary of Significant Accounting Policies (continued) Nature of Operations (continued) The Company's Amended and Restated Certificate of Incorporation provides for mandatory liquidation of the Company, without stockholder approval, in the event that the Company does not consummate a business combination within eighteen (18) months from the date of the consummation of the Offering, or twenty-four (24) months from the consummation of the Offering if certain extension criteria have been satisfied. In the event of liquidation, it is likely that the per share value of the residual assets remaining available for distribution (including Trust Fund assets) will be less than the initial public offering price per share in the Offering (assuming no value is attributed to the Warrants contained in the Units to be offered in the Offering discussed in Note 3.) Net Income Per Common Share Net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Derivative Financial Instrument As described in Note 5, the Company has granted a Purchase Option to a representative of its underwriters. Based on Emerging Issues Task Force 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settle in, a Company's Own Stock, the sale of the Purchase Option was reported in permanent equity and accordingly, there is no impact on the Company's financial position and results of operation, except for the $100 in proceeds from sale. Subsequent changes in fair value will not be recognized as long as the Purchase Option continues to be classified as an equity instrument. The Company has determined, based on the Black-Scholes option pricing formula, the fair value of the Purchase Option at date of issuance, was $3.79 per share or approximately $852,750 total, using a risk- free interest rate of 4.0%, expected life of five years and estimated volatility of 60.0%. The volatility calculation of 60.0% is based on the 365-day average volatility of a representative sample of eight (8) healthcare companies in the information technology and services niches with market capitalizations between $200 million and $910 million ("Representative Sample"). Because the Company did not have a trading history, the Company needed to estimate the potential volatility of its common stock price, which depends on a number of factors which could not be ascertained at this time. The Company referred to the 365-day volatility of the Representative Sample because its management believed that the volatility of these representative companies was a reasonable benchmark to use in estimating the expected volatility for the Company's common stock post-business combination. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. 8
2. Nature of Operations and Summary of Significant Accounting Policies (continued) Income Taxes Deferred income taxes are provided for the differences between the basis of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The effective tax rate differs from the statutory rate of 34% due to primarily all interest income being generated from tax-exempt securities. Recent Accounting Pronouncements The Company does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. 3. Initial Public Offering On July 28, 2005, the Company sold 9,000,000 units ("Units") in the Offering. On August 16, 2005 an additional 400,000 Units were sold. Each Unit consists of one share of the Company's common stock, $.0001 par value and one Redeemable Common Stock Purchase Warrant ("Warrant"). Each Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $6.00 commencing the later of the completion of a business combination with a target business or one (1) year from the effective date of the Offering and expiring four (4) years from the effective date of the Offering. The Warrants will be redeemable by the Company at a price of $.01 per Warrant, upon thirty (30) days notice after the Warrants become exercisable, only in the event that the last sales price of the common stock is at least $11.50 per share for any twenty (20) trading days within a thirty (30) trading-day period ending on the third day prior to date on which notice of redemption is given. The warrants began trading separately from the Company's common stock on October 6, 2005. In connection with the Offering, the Company paid the underwriter a discount of 6% of the gross proceeds of the Offering and a non-accountable expense allowance of 1% of the gross proceeds of the Offering. 4. Notes Payable, Stockholders The Company issued unsecured promissory notes to three Initial Stockholders, amounting to $250,000, who are also officers. These notes were non-interest bearing and were repaid from the proceeds of the Offering. 5. Unit Option In connection with the Offering, the Company issued to the representative of the underwriters for $100, an option to purchase up to a total of 225,000 units, exercisable at $10 per unit ("Purchase Option"). In lieu of payment of the exercise price in cash, the holder of the Purchase Option has the right (but not the obligation) to convert any exercisable portion of the Purchase Option into units using a cashless exercise based on the difference between current market value of the units and its exercise price. The Warrants issued in conjunction with these units are identical to those offered by the prospectus, except that they have an exercise price of $7.50 (125% of the exercise price of the Warrants included in the Units sold in the Offering). This option commences on the later of the consummation of a business combination and one (1) year from the date of the prospectus and expiring five (5) years from the date of the prospectus. 9
5. Unit Option (continued) Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following July 28, 2005. However, the option may be transferred to any underwriter and selected dealer participating in the Offering and their bona fide officers or partners. The purchase option grants to holders demand and "piggy back" rights for periods of five (5) and seven (7) years, respectively, from July 28, 2005 with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions, which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of common stock at a price below its exercise price. 6. Commitments and Contingencies The Company presently occupies office space in one location, provided by an affiliate of an Initial Stockholder. This affiliate has agreed that, until the Company consummates a business combination, it will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time. The Company currently pays this affiliate $7,500 per month for such services under an office services agreement. Upon completion of a business combination or liquidation, the Company will no longer be required to pay this monthly fee. The Company has engaged a representative of the underwriters, on a non-exclusive basis, as its agent for the solicitation of the exercise of the Warrants. To the extent not inconsistent with the guidelines of the NASD and the rules and regulations of the Securities and Exchange Commission, the Company has agreed to pay the representative for bona fide services rendered, a commission equal to 4% of the exercise price for each Warrant exercised more than one (1) year after July 28, 2005 if the exercise was solicited by the underwriters. In addition to soliciting, either orally or in writing, the exercise of the Warrants, the representative's services may also include disseminating information, either orally or in writing, to Warrant holders about the Company or the market for its securities, and assisting in the processing of the exercise of the Warrants. No compensation will be paid to the representative upon the exercise of the Warrants if: o the market price of the underlying shares of common stock is lower than the exercise price; o the holder of the Warrants has not confirmed in writing that the underwriters solicited the exercise; o the Warrants are held in a discretionary account; o the Warrants are exercised in an unsolicited transaction; or o the arrangement to pay the commission is not disclosed in the prospectus provided to Warrant holders at the time of exercise. The Initial Stockholders, who are holders of 2,250,000 issued and outstanding shares of common stock, are entitled to registration rights pursuant to an agreement signed on the effective date of the Offering. The holders of the majority of these shares are entitled to request the Company, on up to two (2) occasions, to register these shares. The holders of the majority of these shares can elect to exercise these registration rights at any time after the date on which these shares of common stock are released from escrow. In addition, these stockholders have certain "piggy-back" registration rights on registration statements filed subsequent to the date on which these shares of common stock are released from escrow. The Company will bear the expenses incurred in connection with the filing of any such registration statements. 10
7. Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences, as may be determined from time to time by the Board of Directors. 8. Common Stock On July 8, 2005, the Company's Board of Directors authorized a .333333 to 1 stock dividend. On July 22, 2005, the Company's Board of Directors authorized a ..125 to 1 stock dividend. All references in the accompanying financial statements to the number of shares of stock have been retroactively restated to reflect these transactions. 9. Common Stock Warrants Each Warrant entitles the holder to purchase from the Company one share of common stock at an exercise price of $6.00 commencing the later of the completion of a business combination with a target business or one (1) year from the effective date of the Offering and expiring four (4) years from the effective date of the Offering. The Warrants will be redeemable by the Company at a price of $.01 per Warrant, upon thirty (30) days notice after the Warrants become exercisable, only in the event that the last sales price of the common stock is at least $11.50 per share for any twenty (20) trading days within a thirty (30) trading-day period ending on the third day prior to date on which notice of redemption is given. The warrants began trading separately from the Company's common stock on October 6, 2005. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "could", "would", "expect", "plan", "anticipate", "believe", "estimate", "continue", or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission filings. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) We were formed on April 25, 2005, to serve as a vehicle to acquire, through a merger, capital stock exchange, asset acquisition or other similar business combination, one or more domestic or international assets or an operating business in the healthcare industry. Our initial business combination must be with a target business or businesses whose fair market value is at least equal to 80% of net assets at the time of such acquisition. We intend to utilize cash derived from the proceeds of our recently completed public offering, our capital stock, debt or a combination of cash, capital stock and debt, in effecting a business combination. On August 3, 2005, we consummated our initial public offering of 9,000,000 units. On August 16, 2005, we consummated the closing of an additional 400,000 units that were subject to the underwriters' over-allotment option. Each unit consists of one share of common stock and one redeemable common stock purchase warrant. Each warrant entitles the holder to purchase from us one share of our common stock at an exercise price of $6.00. Our net proceeds from the sale of our units, including amounts from exercise of the underwriters' over-allotment option, after deducting certain offering expenses of approximately $1,220,000, including $720,000 evidencing the underwriters' non-accountable expense allowance of 1% of the gross proceeds (excluding the proceeds from the underwriters' over-allotment), and underwriting discounts of approximately $4,512,000, were approximately $69,468,000. Of this amount, $67,928,000 is being held in trust and the remaining funds are being held outside of the trust. The remaining proceeds are available to be used by us to provide for business, legal and accounting due diligence on prospective acquisitions and continuing general and administrative expenses. We will use substantially all of the net proceeds of this offering to acquire a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination. To the extent that our capital stock is used in whole or in part as consideration to effect a business combination, the proceeds held in the trust fund as well as any other net proceeds not expended will be used to finance the operations of the target business. We believe we will have sufficient available funds outside of the trust fund to operate through August 2007, assuming that a business combination is not consummated during that time. We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, we may need to raise additional funds through a private or public offering of debt or equity securities if such funds are required to consummate a business combination that is presented to us. We would only consummate such a financing simultaneously with the consummation of a business combination. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices. We are not presently engaged in and, if a suitable business target is not identified by us prior to the prescribed liquidation date of the trust fund, we may not engage in, any substantive commercial business. Accordingly, we are not and, until such time as we consummate a business combination, we will not be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices. The net proceeds of our initial public offering held in the trust fund have been invested only in securities meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940. Given our limited risk in our exposure to these short-term securities, we do not view the interest rate risk to be significant. 12
Item 4. Controls and Procedures. Our management carried out an evaluation, with the participation of our chief executive officer (our principal executive officer), and our president (our principal financial and accounting officer) of the effectiveness of our disclosure controls and procedures as of March 31, 2006. Based upon that evaluation, our chief executive officer and our president concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There has not been any change in our internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended March 31, 2006, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. There are no material legal proceedings pending against us. Item 1A. Risk Factors. Not applicable. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. There were no unregistered sales of our equity securities during the quarter ended March 31, 2006. For additional information on our use of proceeds from our public offering, please see item 2 of Part I. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits 31.1 Section 302 Certification of Chief Executive Officer 31.2 Section 302 Certification of Chief Financial Officer 32.1 Section 906 Certification of Chief Executive Officer 32.2 Section 906 Certification of Chief Financial Officer 13
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HEALTHCARE ACQUISITION CORP. Date: May 15, 2006 By: /s/ Derace L. Schaffer, M.D ----------------------------------- Derace L. Schaffer, M.D. Vice-Chairman and CEO (Principal executive officer) Date: May 15, 2006 By: /s/ Matthew P. Kinley ----------------------------------- Matthew P. Kinley President, Treasurer and Director (Principal financial and accounting officer) 14