PROS & CONS

Process

In a reverse takeover, shareholders of the private company purchase control of the public shell company and then merge it with the private company. The publicly traded corporation is called a "shell" since all that exists of the original company is its organizational structure. The private company shareholders receive a substantial majority of the shares of the public company and control of its board of directors. The transaction can be accomplished within weeks.

The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing, the shell company issues a substantial majority of its shares and board control to the shareholders of the private company. The private company's shareholders pay for the shell company by contributing their shares in the private company to the shell company that they now control. This share exchange and change of control completes the reverse takeover, transforming the formerly privately held company into a publicly held company.

In the U.S., if the shell is a SEC-registered company, the private company does not go through an expensive and time-consuming review with state and federal regulators because this process was completed beforehand with the public company. However, a comprehensive disclosure document containing audited financial statements and significant legal disclosures is required by the Securities and Exchange Commission for reporting issuers. The disclosure is filed on Form 8-K and is filed immediately upon completion of the reverse merger transaction.

Benefits

The advantages of public trading status include the possibility of commanding a higher price for a later offering of the company's securities. Going public through a reverse takeover allows a privately held company to become publicly held at a lesser cost, and with less stock dilution than through an initial public offering (IPO). While the process of going public and raising capital is combined in an IPO, in a reverse takeover, these two functions are separate. A company can go public without raising additional capital. Separating these two functions greatly simplifies the process.

In addition, a reverse takeover is less susceptible to market conditions. Conventional IPOs are risky for companies to undertake because the deal relies on market conditions, over which senior management has little control. If the market is off, the underwriter may pull the offering. The market also does not need to plunge wholesale. If a company in registration participates in an industry that's making unfavorable headlines, investors may shy away from the deal. In a reverse takeover, since the deal rests solely between those controlling the public and private companies, market conditions have little bearing on the situation.

The process for a conventional IPO can last for a year or more. When a company transitions from an entrepreneurial venture to a public company fit for outside ownership, how time is spent by strategic managers can be beneficial or detrimental. Time spent in meetings and drafting sessions related to an IPO can have a disastrous effect on the growth upon which the offering is predicated, and may even nullify it. In addition, during the many months it takes to put an IPO together, market conditions can deteriorate, making the completion of an IPO unfavorable. By contrast, a reverse takeover can be completed in as little as thirty days.

Drawbacks

Reverse takeovers always come with some history and some shareholders. Sometimes this history can be bad and manifest itself in the form of currently sloppy records, pending lawsuits and other unforeseen liabilities. Additionally, these shells may sometimes come with angry or deceitful shareholders who are anxious to "dump" their stock at the first chance they get. This is where we step in and insure the RTO is a clean vehicle.

One way the acquiring or surviving company can safeguard against the "dump" after the takeover is consummated is by requiring a lockup on the shares owned by the group from which they are purchasing the public shell. We go one step further by recovering these share’s placing them in escrow thus insuring they never hit the market and drive your price down. In other words, other shareholders that have held stock as investors in the company being acquired pose no threat in a dump scenario because the number of shares they hold is not significant.

Reverse mergers may have other drawbacks. Private-company CEOs may be naive and inexperienced in the world of publicly traded companies unless they have past experience as an officer or director of a public company. This is why you need the services of a knowledgeable consultancy firm to guide you through the rough waters. In addition, reverse merger transactions only introduce liquidity to a previously private stock if there is bona fide public interest in the company. A comprehensive investor relations and investor marketing program may be an indirect cost of a reverse merger. We say don’t just hire us as an IR firm. Hire as many as you can afford. If you want investors to know about your company the key to all is ADVERTISE!!

Future Financing

The greater number of financing options available to publicly held companies is a primary reason to undergo a reverse takeover. These financing options include:

The issuance of additional stock in a secondary offering

An exercise of warrants, where stockholders have the right to purchase additional shares in a company at predetermined prices. When many shareholders with warrants exercise their option to purchase additional shares, the company receives an infusion of capital.

Other investors are more likely to invest in a company via a private offering of stock when a mechanism to sell their stock is in place should the company be successful.

In addition, the now-publicly held company obtains the benefits of public trading of its securities:

Increased liquidity of company stock
Possible higher company valuation
Greater access to capital markets
Ability to acquire other companies through stock transactions
Ability to use stock incentive plans to attract and retain employees

Summary

To summarize all we can say is Google our name and read. Read the good the bad and the ugly. You will see that we stand firm by our clients protecting their interest. Your research will show that short sellers and toxic financiers use USA freedom of speech provisions to slander our good work and assistance we provide to companies. These company destroyers hold no prisoners. They go after service providers and principals of the service providers.

Yes.. its true that there are always two sides to any story.

However, don’t take our for it. Keep researching and soon you will stumble upon multimillion dollar judgements in our favor won for slander. Some of these stock bashers given the opportunity to prove their allegations, some never show up for court!

With success comes criticism and scrutiny.

We say roll with the punches and make your business dream a reality. After all you put this all together and we acknowledge your hard work and efforts as a small business owner. We are here to assist you every step of the way!