Reverse Merger
By Joseph Quinones, Thu Dec 8th

Reverse Merger; One of Several Options

Small and mid-size companies looking to go public usually thinkIPO (Initial Public offering), but find it difficult to get anunderwriter to look at them. They go out and engage a consultantthat advises them to do a reverse merger and they usually jumpinto it head first without exploring the options. 1. If you haveread some of my previous articles you may find this repetitious,but I can’t emphasis enough the importance of selecting a goodconsultant. A consultant that is working for you and you alone,and does not have an interest in selling you a corporate shelland getting your company trading, so that they can sell theirstock and move on to the next victim. What are the options? (1)An initial public offering (ipo) is the absolute best but themost difficult and most expensive but with the financing that israised it will enable the company to be listed on one of themore visible markets. Such as Nasdaq Small Cap, or AmericanStock Exchange. And if your company is big enough it may qualifyfor the Nasdaq National Market System, which would make yourcompany attractive to analyst and institutional investors. (2) AReverse Merger is for the those small and mid-size companiesthat are aggressive and will like to grow quickly and find thatby being a public company they can achieve those goal sooner. Iwill give you some of the benefits of being a public companylater. In a reverse merger the privately held company purchasesa publicly traded company with substantially no assets (a“shell”). The shell issues stock to the owners of the privatecompany. The shell issues sufficient stock, usually 90-95%enough to effectively control the public company. The publiccompany will normally change its name to the private company’sname and elect a new Board of Directors which will appoint theofficers. The public corporation will usually have a base ofshareholders sufficient to meet the 300 shareholders requirementfor eventual admission to quotation on the NASDAQ Small CapMarket or the American Stock Exchange (if the private company’sfinancial condition substantiates either NASDAQ or AMEXrequirements). Although some shells have as few as 35-50shareholders and currently listed (or can apply for listing onthe OTC Bulletin Board or the NQB Pink Sheets. (3) Regulation D(504) offering. Under the Act of 1933, any offer tosell must either be registered with the Securitiesand Exchange Commission or meet and exemption. Regulation Dprovides three exemption from registration requirements,allowing some smaller companies to offer and sell theirsecurities without having to register the with theSEC. While companies using a Regulation D exemption do not haveto register their and usually do not have to filereports with the SEC. They must file what is known as form D.Under Regulation D (504) you are allowed to raise up to$1,000,000.00

In a twelve month period. Some of thecharacteristics of Regulation D are: can be sold toan unlimited number of persons. General solicitation oradvertising can be used to market this securities. Thesesecurities are freely traded and not “restricted” whichinvestors can sell their in the open market withoutregistration. This are not exempt from the SecuritiesAct of 1933 anti fraud provision. Benefit of going public: Youraccess to capital will increase, since you can contact morepotential investors. Your company may become more widely known.You can obtain financing more easily in the future if investorinterest in your company grows. Controlling shareholders such asthe company’s officers or directors, may have a ready market fortheir shares at retirement. Your company may be able to attractand retain more highly qualified personnel if it can offer stockoptions, bonuses or other incentive with a known market value.Company can use stock for acquisition purposes. Joseph Quinonesis President and founder of Genesis Corporate Advisors, prior tothat he was President and founder of JDQ financial Group, Inc. afull service broker dealer which Mr. Quinones proceeded to buildup from a one man operation to the point where it employed manytraders, and advised numerous clients while generating millionsin revenues. For additional information please visit:www.genesiscorporateadvisors.com

About the author:Joseph Quinones is President and founder of Genesis CorporateAdvisors, prior to that he was President and founder of JDQfinancial Group, Inc. a full service broker dealer which Mr.Quinones proceeded to build up from a one man operation to thepoint where it employed many traders, and advised numerousclients while generating millions in revenues