The healthcare industry constitutes one of the largest segments of the United States economy. According to CMS, total healthcare expenditures increased from $245.8 billion in 1980 to a projected $1.9 trillion in 2005, which represents a CAGR of 9%. Expressed as a percentage of GDP, national healthcare spending has increased from 8.8% in 1980 to a projected 15.7% in 2005. In 2003, healthcare expenditures totaled $1.7 trillion (or $5,800 per capita) and accounted for 15.3% of GDP, which outpaced overall economic growth by 3%. In 2003, approximately $1.088 trillion, or 64%, of total healthcare expenditures were spent on the following categories: $527 billion (31%) on hospital care; $391 billion (23%) on physician and clinical services; and $170 billion (10%) on prescription drugs. In the future, CMS projects that national healthcare expenditures will reach $3.6 trillion by 2014, representing a CAGR of 7.4% over the next ten years. CMS also projects that healthcare spending will reach 18.7% of GDP by 2014.

Domestically, funding for healthcare comes from public and private sources. Medicaid and Medicare programs were created in the mid-1960s. Medicare focuses on coverage of the elderly (over 65 years old) and the disabled of any age. Medicaid provides coverage for the poor and indigent population and is jointly funded by the Federal and State governments. In 2002, according to CMS, roughly 34% of healthcare payments came from Medicaid and Medicare, while private health insurance supported roughly 35% of total costs. As healthcare costs rise, the private sector is responding by shifting more of the cost of healthcare to employees by paying a smaller percentage of healthcare premiums. The employee, usually in the form of a payroll deduction, must pay the amount of the premium not funded by the employer. However, according to the U.S. Census Bureau, approximately 40 million Americans were uninsured in 2003.

The Company’s management believes that, as a result of continued growth in the healthcare industry, there will be acquisition targets within the healthcare sector. The Company believes that the growth and opportunity in the healthcare industry has been driven and will continue to be driven by several key trends, including expanding and aging population, internationalization, evolving medical treatments, increased consumer awarenes, fragmentation, and accesss to capital.

Although the Company may consider a target business in any segment of the healthcare industry, it intends to concentrate its search for an acquisition candidate in the following segments: healthcare services; healthcare information technology; healthcare facilities; diagnostics; life sciences; and medical equipment, devices and supplies.

The healthcare industry is highly regulated and any business the Company acquires would likely be subject to numerous rules and regulations. The federal and state governments extensively regulate the healthcare industry and are often significant sources of revenue for healthcare companies. In particular, the Company’s business could rely heavily on the Medicare and Medicaid government payment programs, each of which is financed, at least in part, with federal money. If the Company participates in these government payment programs, it would be subject to additional oversight and regulatory scrutiny. In addition to federal oversight, state jurisdiction is based upon the state’s authority to license certain categories of healthcare professionals and providers and the state’s interest in regulating the quality of healthcare in the state, regardless of the source of payment.

Following a business combination, the company’s management intends to exercise care in structuring its arrangements and its practices to comply with applicable federal and state laws and regulations. If the Company has been found to have violated any rules or regulations that could adversely affect its business and operations, the violations may delay or impair its ability to complete a business combination. Additionally, the laws in the healthcare industry are subject to change, interpretation and amendment, which could adversely affect the Company’s ability to conduct its business following a business combination.