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Monday, October 02, 2006

IPO Alert: Blank Check Company Heading to China

There is a new prospectus filed for "China Opportunity Acquisition Corp." that is a blank check company IPO filing, but this one is for a China play.

China Opportunity Acquisition Corp. is a newly formed blank check company organized for the purpose of acquiring, through a stock exchange, asset acquisition or other similar business combination, an operating business, or control of such operating business, through contractual arrangements, that has its principal operations located in the People’s Republic of China. Our efforts to identify a prospective target business will not be limited to a particular industry. We do not have any specific business combination under consideration and we have not (nor has anyone on our behalf) contacted any prospective target business or had any discussions, formal or otherwise, with respect to such a transaction.

This is an initial public offering of our securities. Each unit that we are offering has a price of $6.00 and consists of one share of our common stock and two warrants. Each warrant entitles the holder to purchase one share of our common stock at a price of $5.00. Each warrant will become exercisable on the later of our completion of a business combination and _____, 2007 [one year from the date of this prospectus], and will expire on ______, 2010 [four years from the date of this prospectus], or earlier upon redemption.

This deal is being brought to you by EarlyBirdCapital, Inc.

While this is actually common and fairly generic to see in a "blank check" IPO prospectus ahead of an offering, you just have to love this quote from the prospectus:

To date, we have not selected any target business or target industry on which to concentrate our search for a business combination. None of our officers, directors, promoters and other affiliates has engaged in discussions on our behalf with representatives of other companies regarding the possibility of a potential merger, capital stock exchange, asset acquisition or other similar business combination with us, nor have we, nor any of our agents or affiliates, been approached by any candidates (or representatives of any candidates) with respect to a possible business combination transaction with us. Additionally, we have not, nor has anyone on our behalf, taken any measure, directly or indirectly, to identify or locate any suitable business combination candidate, nor have we engaged or retained any agent or other representative to identify or locate such a business combination candidate. We have also not conducted any research with respect to identifying the number and characteristics of the potential business combination candidates. As a result, we cannot assure you that we will be able to locate a target business or that we will be able to engage in a business combination with a target business on favorable terms.

The company will have 24 months to complete the process of finding and buying a Chinese operation, otherwise it will cease operations and return the escrowed funds.

MANAGEMENT

Here is the board of directors: Harry Edelson, 73; Chairman/CEO. Nicholas Puro, 48; President, Secretary, Director. Barry M. Shereck, 64; CFO and Director. Rose-Marie Fox, 55; Director.

Since August 1984, Harry Edelson has been the managing partner of Edelson Technology Partners, which manages a series of five venture capital technology funds (the ‘‘Edelson Funds’’) for ten multinational corporations (AT&T, Viacom, Ford Motor, Cincinnati Bell, Colgate Palmolive, Reed Elsevier, Imation, Asea Brown Boveri and UPS) and two large pension funds. Mr. Edelson is a former president of the Analyst Club, the oldest club on Wall Street founded in 1925 and is a founding member of the China Investment Group LLC, an organization formed to provide a forum for update and exchange of its members’ knowledge of China. Mr. Edelson was honored in the Knesset by receiving the Israel 50th Anniversary Award from the Premier of Israel. Mr. Edelson is a member of the Asia Society and The China Cultural Foundation. He is also an advisor to The China Cultural Foundation. He has given numerous speeches in Hong Kong, China and the United States on investing in China. Mr. Edelson received a B.S. from Brooklyn College and an M.B.A. from New York University.

Nicholas Puro has served as our president, secretary and a member of our board of directors since our inception. Since March 2006, Mr. Puro has been the president of TEMPTIME Corporation, a leader in time-temperature technology for pharmaceutical and food products and a former portfolio company of the Edelson Funds. From September 1999 to March 1, 2006, he was a partner of the Edelson Funds. From January 1996 to September 1999, Mr. Puro was a partner at Pavia & Harcourt, a multinational law firm based in New York. Mr. Puro is a member of the National Venture Capital Association, the New York Private Equity Network and the New York Sate Bar Association. Mr. Puro received a B.S. from Seton Hall University and a J.D. from Fordham University Law School.

Barry M. Shereck has served as our chief financial officer and a member of our board of directors since our inception. Since May 2003, Mr. Shereck has been engaged primarily as an independent consultant providing financial and strategic consulting service to private and public companies. From September 2000 to May 2003, Mr. Shereck served as chief financial officer of Miavita, Inc., a health and wellness behavior change company targeted to individuals through major health care providers. From November 1997 to May 2000, he served as the chief financial officer of The Duck Corporation-On2 Technologies, Inc., a high tech digital video technology company. From July 1996 to October 1997, he served as the chief financial officer of Concord Camera Corp., a manufacturer of single use and reusable cameras. Mr. Shereck received a B.Sc. from McGill University and an M.B.A. from the Columbia University Graduate School of Business. Mr. Shereck is also a CPA.

Rose-Marie Fox has served as a member of our board of directors since our inception. In 1990, Ms. Fox founded Cornerstone Financial Co. LLC, a private firm specializing in equity capital and mergers and acquisitions for Chinese middle market companies, and has been its president since that date. From 1985 to 1990, Ms. Fox was a senior vice president in corporate finance at Lehman Brothers Inc. From 1976 to 1983, Ms. Fox was the district engineer of AT&T. Ms. Fox has served on the advisory board and investment committee of Edelson Technology Partners. Ms. Fox received a B.A. from Manhattanville College and an M.B.A. from the Wharton School of Business.

Special Advisors:

Dr. Daxi Li; has 14 years experience in investment banking and venture capital; founded the Chinese Association of Science and Businessin 1997. Bailin Zheng; spent the past 35 years with the Bank of China (BOC). China Investment Group LLC; formed in October 2003 by a small group of experienced business professionals with significant China expertise.

The directors and officers had a prior share issuance. In August, 2000 the company issued 1.5 million shares of common stock for a total of $25,000.00, or a purchase price of $0.0167 per share. Here is the break-down of which officer and group owns which number of shares: Harry Edelson; 1,130,000 shares. Nicholas Puro; 70,000 shares. Barry M. Shereck; 70,000 shares. Rose-Marie Fox; 70,000 shares. Bailin Zheng and Daxi Ling; 60,000 shares each. China Investment Group LLC; 40,000 shares.

EARLYBIRD's HISTORY

Here is more information on EarlyBird.

This is not EarlyBird's first blank check IPO, and it isn't even its first blank check IPO for China. In August, 2005 the company raised $30 million for two different blank check IPO's: Chardan North China Acquisition Corporation (CNCA-OTC) and its warrants (CNCAU-OTC) and Chardan South China Acquisition Corporation (CSCA-OTC) and its warrants (CSCAU-OTC). In November 2004, EarlyBird also raised $18 million for China Unistone Acquisition Corp. (CUAQ-OTC). You will have to review the charts and news headlines or filings to garner your own opinion, but these stocks have shown some interesting stock moves and have trading histories with volume trading on most days.

EarlyBird also was behind a company called GuruNet, which is now Answers.com (ANSW-NASDAQ). That was only an $11.75 million security sale, and ANSW is now valued at $85 million after its wild stock rides in 2004 to 2006. ANSW climbed from $5.00 to $25.00+ before coming back down to today's nearly $11.00 price.

CONCLUSION

These blank check IPO's are often thought of as sketchy companies because they are deemed the equivalent of public-private equity or the step brother. They are in essence a future reverse merger where a public shell is acquired and a private company is rolled up into the operation, although you really have to trust in the management and underwriters since you do not know what you are ultimately investing in. The street is usually skeptical on blank check IPO's, but there is some silver lining in that EarlyBird has experience doing these deals as their specialty and they have actually shown that they have been able to make the stocks move. We'll have to see what the real operating intent is before signing off on this one.

Jon C.Ogg
October 2, 2006
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