Reverse Merger: A Vision Without A Strategy Is A Prescription For Failur

Many business owners with a dream to take their company public often neglect to prepare and plan for the future, very few small and mid-size companies have a business plan.

A business plan is like a road map, and can be likened to when you go on a journey. Sometimes you need to change direction, it doesn’t mean your destination changes, you are just getting there via a different route.

A vision is some thing that is birthed in the mind and soul of the individual, some people act on it and others procrastinate for a period of time only to see someone else take their dream and bring it to fruition.

The dream giver will only allow you to sit on your dream for so long before giving it to someone else. You often hear people saying “ I had that idea two or three years ago”, what good is an idea without taking action, but with the action there must be a strategy.

Businesses don’t plan to fail, they fail because they fail to plan. Entrepreneurs usually are visionaries who get an idea and run with it but, if you look at the successful ones they always had a plan, and a team to help them bring their dream to the market plece.

The team can sometimes get you to the top, but it’s the strategy that takes you over the top, so don’t settle for second best, be the best.

If you look at a twenty year chart of Microsoft Corporation, or Yahoo Inc. You will find that at one time their stock traded under a dollar but through brilliant strategies they were able to accomplished great things.

Just like Bill Gates had a plan so must you develop one. Bill Gates also had Paul Allen so must you find someone who can complement your weak point. If you are not a good strategist go out and find yourself one who is not a yes man.

The phrase “no man is an island” is most applicable in the corporate environment, where team work is essential for success.

In small companies the dreamer is required at times to do everything and become efficient in every task, which is beneficial because he should know the functions of every department in the company. But he should have competent personnel in those position in order for him to be able to see the entire picture.

This is where being a public company comes in handy, it allow the entrepreneur to use the company stock as an incentive to attract more competent and better qualified personnel and retain them. It also makes it possible for the company stock to be used for acquisition purposes.

Team work is essential in order to be able to succeed. I remember in the 1980's investing in a company the appear to have a dream team for it’s management, everyone involved in management had a PHD and an ego to match it. A friend of mine who was the investment banker for the company related to me how he attended a meeting with the company and it was complete chaos, each person appear to think that their opinion was the only one deserving of consideration. Needless to say the company eventually file for chapter eleven.

An entrepreneur must check his ego and keep it under control in order be able to lead those around him, nobody likes to work with an egomaniac.

I believe that meetings can be useful or a waste of time, if all you do at a meeting is inform the staff of what you are doing or what you would like them to do, you are wasting valuable time that could be use to implement the corporate strategy. This can be done with a memo.

In order for a meeting to be of some value it must include a free exchange of ideas, a good leader seeks to know what those who are in the corporate battle field think. Because they are the one who are in the trenches, in a position to be able to hear what customers and employees are thinking and saying.

A good advisory service can sometimes be beneficial to assist in the evaluation of potential merger and acquisition candidates, to help identify potential candidates for joint ventures, or investment. Also helps with the due diligence process, the structuring of the transaction and the development of corporate strategies for growth and investment.

A good advisory service will evaluate your company and advise you as

to the best way to go public, either traditional IPO, Reverse Merger or Regulation D (504) offering.

Once the decision has been made on which method to use in going public (for many small companies is either Reverse merger or Regulation D (504) offering.) The consultant used, must be able to guide you through the intricacies of the public arena. And have financial industry contacts.

Don’t sit on your dream waiting for the perfect situation because it may never come, had Bill Gates waited until Microsoft’s public shares could justify a higher price before going public, he might still be waiting.

Microsoft and Yahoo are not isolated situation but just two of many who looked at the challenge and saw an opportunity. I guess the old saying “ faint hearts never won fair ladies “ is still apropos today.

For additional information please contact Genesis Corporate Advisor.
http://www.genesiscorporateadvisors.com

Reverse Merger: Have They Taken the Reverse out of Reverse Merger?

Are the promoters and consultants destroying the market for Reverse Merger? First lets take a look at reverse merger. In a Reverse Merger, an operating private company merges with a public company that has little or no assets, nor know liabilities (the “shell”).

In some rare instances, the shell may have some amount of cash remaining for investment in the new enterprise. The public corporation is called a “shell” since all that exists of the original company is its corporate shell structure and shareholders.

The private company owners obtain the majority of the shell corporation stock (usually 90-95%) through a new issue of stock for the private enterprise or assets.

The public corporation will normally change its name to the private company’s name and elect a new board of directors which will appoint the officers.

The public corporation will usually have a base of shareholder sufficient to to meet the 300 shareholder requirement for eventual admission to quotation on the NASDAQ Small-Cap Market, Or some other market.

Now to the problem or the devil is in the details: The private company goes out perform the proper due diligence on a “shell” after finding it to be clean, and with no adverse past history to disqualify it, goes ahead completes the purchase.

After paying an astronomical price, say in the neighborhood of $500,000.00- to 700,000.00 for a Bulletin Board shell they get 90-95% of the stock.

Not only is the price extravagant, he will also take the reverse out of Reverse Merger, by insisting on a stipulation that you won’t do a reverse split and reduce the number of shares outstanding. By reverse splitting the shares you are reducing his 10%. Which was the original intent of the reverse merger.

What a bargain $500,000.00 or more for 90% of nothing and it gets better, Lets say the company has 300 shareholders and those 300 shareholders collectively own 500,000 shares and in some cases more, and the shell has 30,000,000 million shares outstanding which the owner(s) of the shell get keep 10% or 3.000,000 share. I am using the old math not the new.

After the market maker files and the company is trading on the Otcc Bulletin Board. Your problems begin, lets say friends and acquaintances hear your company is now public and go out and buy some shares driving the price to say $3.50,

now those 300 share holder who received their stock for pennies decide that they have hit the lottery and start selling making it necessary for you to go out and buy stock in the open market.

Now back to basic math, supposing you want to maintain the 3.50 price so you go out and buy the stock. 500,000 x 3.50 = $1,750,000.00 forcing you to go raid the kid’s piggy bank if you don’t have the spare change.

Now what about the 3,000,000 shares in the hands of the “shell” owner? 3,000.000 x 3.50 = $10,500,000.00, Time to ask the wife for loan.

And don’t forget about those astute market makers and trader that are aware of the stock that will be coming out and depress the price of your company’s stock.

Being the enterprising individual that they are, they will establish a short position on the stock of your company, after all they are entitle to make a living too.

Before you jump from the Empire State Building make sure there is net down below waiting for you.

Don’t get me wrong a reverse merger can be done if you have a consultant that is looking out for you and is not part of the triumvirate (shell owner, securities Attorney and consultant). And in a few cases the same individual is performing all three functions.

I wouldn’t recommend for you to go step out in to the mine field without a mine detector, in some of my previous articles I suggested way to check the smooth talking consultants and shell owners before they take you to the cleaners.

Also be aware that there are alternate way to go public the Reverse merger is only one of several option, so don’t jump without looking, if you feel that you must do a Reverse merge insist on obtaining all the stock and not a share less.

In order to prepare you to deal with the complexities of the public arena I would have to write a book not an article, but I will continue to try and inform through articles so that you will be prepare if you decide to take the plunge and go public.

There are honest hard working consultants out there, in over 25 years in the business I have personally come across two of them. But there must be more.

If you want to know about the alternatives to a reverse merger get in touch with me through our website: www.genesiscorporateadvisors.com the alternatives may not be cheap but they are cheaper than paying $500,000.00 for 90% of nothing.

The answer to the title of this article is a resounding yes! They have taken the reverse out of Reverse merger.

For additional information please visit:
http://www.genesiscorporateadvisors.com

Reverse Merger, IPO Or Direct Public Offering (DPO), Which One Is Right For You?

A direct public offering is when a company raises capital by selling its shares directly to what is refer to as affinity groups, unlike an IPO which are sold by a broker dealer to its customers and the general public through other broker dealers who have customers interested in buying shares in the company.

In IPO’s you have a firm commitment underwriting, where the underwriters promise to purchase the securities for their own account if they can not sell them to customers.

Best-effort underwriting: The underwriters do not guarantee any specific number of shares to be sold, they merely act as brokers.

In an IPO the lead underwriter is refer to as the syndicate manager, he keeps the book and invites other broker dealers to join the syndicate. In an firm commitment underwriting, an eastern underwriters agreement makes members liable for any unsold securities, regardless of how much of their allotment they sold. The eastern underwriting agreements have joint and several liability.

A western underwriting a agreement: In a firm commitment underwriting, it makes underwriters liable severally but not jointly. If one syndicate member can not sell its entire allotment, only he must buy the unsold securities.

In a direct public offering the company sells the shares to affinity groups, who fall in this category? Customers, suppliers, distributors, friends, employees and other members the community.

In a direct public offering the company place its shares in the hand of those people who are familiar with the company and know the company’s product and management, and are most likely to hold the shares longer because they feel comfortable with the company’s prospects for the future.

Direct public offerings are considerably less expensive than IPO’s and most effective for smaller offerings, for large offerings the sales staff and customer base of a broker dealer are usually necessary.

Since the affinity group is already familiar with the company and its practices it doesn’t put pressure on the company to change the way it does business, and will remain loyal to the company because of it’s presence in the community.

DPO’s are preferable to venture capital financing because it allows the present management to execute its business plan without outside interference. When a small company turns to a single large investor they tend to surrender the freedom to make all the decisions.

In a DPO like other method of going public today audited financial statements are required, unlike a reverse merger you choose your shareholders and you don’t have to deal with shady, unscrupulous shell owners.

Shell owners usually keep between 5-15% of the shares outstanding and are quick to liquidate, and besides they do not have an interest in the well being of the company’s share price. Even if you insert a stipulation in the contract that they can not sell for a year they will find a way of shorting the stock and destroying the share price.

This make DPO a preferable option even for companies that don’t need financing but would like to go public. If you are in the kind of business that keep records of your customer in order to bill them or for follow ups you already have a head start.

You must be able to contact those affinity group in order to market the shares to them, a popular business that has a lot of client but does not have the contact information is at disadvantage because it’s unable to contact its customer.

There are other ways to market the company’s stock for example a medical supply company might try contacting doctor in the area or by purchasing a mailing list.

But the best way is when you have an established relationship with your affinity group and are in constant contact with them, by mail, newsletter, or email.

Sometime a supplier or distributor may want to purchase an interest in the company in order retain the business and keep competitors from stealing the client.

A DPO does not always require audited financials but if you plan on going public you will need them. So you must hire an auditing firm. A foreign company must use a Certified International Accounting Firm.

A good Attorney that has experience with Direct Public Offerings, one that is familiar with the process and does not have to waste time researching and learning.

You must prepare sales material that provides a good deal of information about the company, you want investors feel that your company has a future.

You should always have a business plan, it will show investor that you have strategy for making the company succeed and doing it one step at a time.

By setting dates for the implementation of each step in your plan it shows investors that you have things well under control, but allow some time in case you must make adjustments.

If you wish to take your company public then you must file a form SB with the Securities and Exchange Commission and a form 15c211 must be filed with the NASD.

A DPO is an alternative to an IPO or Reverse Merger for a company wishing to go public or obtain financing, it allows the company owner(s) to call the shots instead of an underwriter or a shell owner.

We assist companies in going public through Reverse Merger, DPO and assist them in finding an underwriter if the company prefers and IPO.

Which one is right for you? We can help you decide.

For additional information visit our website:
http://www.genesiscorporateadvisors.com

Sarbanes-Oxley: The Wrong Solution To A Legitimate Problem.

Sarbanes-Oxley Act or the accountants full employment act as I like to call it, refers to legislation introduced by Senator Paul Sarbanes (D) MD and Representative Michael Oxley (R) Ohio and passed in July of 2002 in response to the Enron and Worldcom scandals.

Whenever the nation is confronted by a problem or crisis Congress feels that they must pass some sort of legislation in order to give the impression that they are doing something to fix the problem.

The legislation usually only addresses the symptom and not the cause, just like Doctors today who are no longer healthcare providers but pill pushers, they prescribe one medication for the illness and another for the side affects, without regard to the damage cause to vital organs such as kidney and liver.

When there is a problem congress passes legislation, and when there isn’t a problem congress passes legislation and then passes more legislation to deal with the problems the legislation causes.

When you put a bunch of crazy people and lock them in a building you have an Asylum, when you have a bunch of lawyers together in a building you also have an asylum.

We as a nation expect and demand too much from the politician in Washington, next we will be asking them to pass a law banning hurricanes and floods, which will have the same affect as Sarbanes-Oxley.

No legislation Congress can pass will stop the criminal mind from circumventing it. When you have people using all their creative powers to come up with ways to circumvent existing laws that are flaw to begin with.

When you have a bunch of Senators and Representative and their staff, most of who have never spent a day in business legislate conduct and behaviors for businessman, you end creating more problem than you set out to fix.

The reputation of lawyer is just below that of Witch Doctors and Rain Dancer, yet we send them to Washington to set up laws to govern every area of our lives.

Sarbanes-Oxley also known as Sarbox is intended to restore faith in U.S. financial system, but is storing vast amounts of data the answer: This may help prosecutors later to convict the wrong doers but it does not provide the transparency needed.

Under Sarbox publicly traded companies must have policies and controls in place to secure, documents and process material information dealing with their financial results.

This piece of legislation was intended to be apply to publicly traded companies with revenues over 25 millions, But like every other bad medicine it has side affects that must be dealt with.

Some large companies are making small Corporation public and private institute Sarbanes-oxley internal controls, as a condition for doing business with them. This is very costly venture for small companies that need every penny to grow their business.

If Sarbox was intended to protect the investing public what right do large corporation have to demand that private companies comply?

Over the last ten years the Fortune 500 companies have loss over 15 million jobs while small businesses have created 20 million new jobs. But many of this small company need to pour their resource into their businesses in order grow and in some cases to stay in business.

These creators of wealth must be allow to continue their ingenious work and provide fuel to our economy without impediment from Sarbox,

Venture Capital money is to expensive and SBA loans are sham so how can small companies comply with these expensive internal control without cutting back on hiring and other vital areas.

Why are small companies being held to higher standard when the law requires something less?

I keep hearing that relief is on the way, but I Hope it comes from the Securities and Exchange Commission and not from Congress the last thing we need is another piece of legislation.

What good are internal controls when the people reviewing them are the ones abusing them, Sarbox requires public companies to improve their corporate reporting and oversight and to increase operational transparency, accountability, and truthfulness.

I don’t think that any one in their right mind believes for second that had Sarbox been in the law at the time it would have stop the people at Enron and worldcom.

If they want laws to deal effectively with Enron and Worldcom like problems maybe they should get Ken Lay (Enron) and Bernie Ebbers (Worldcom) to write them.

In 1933 When President Roosevelt was asked why selected a person of such questionable character as Joseph P. Kennedy to head the newly created SEC, Roosevelt Replied “It takes a crook to catch a crook”

So lets make Ebbers and Lay Pay their debt to society by drafting legislation to protect the investing public from the likes of them.

Maybe we should enforce the laws already in the book and make sure these people spend a very long time behind bars as an example to anyone thinking of doing the same.

We can also stop letting Hollywood set the moral standard for our children, kids today spend an enormous amount of time behind the tv screen and too many weekends at the theater.

And maybe the real culprit is our educational system, where kids are being taught at every level that everything is relative, and that there are not absolutes.

If everything is relative then this individuals did not commit any crime after all they were just out to make a few bucks and their tactic were well within the scope of relativity.

Today we live in a society where even judges are offended by the Ten Commandments, it’s understandable it is very offensive to be told “Thou shalt not steal” somebody might actually obey and refrain from stealing.

There is a bible verse that says “Do not be deceived God cannot be mocked. A man reaps what he sow” we have been sowing too much into relativity and not enough into absolutes.

And now we are paying the price, you always reap more than you sow, if you sow one tomato seed you will reap a tomato plant with lots of tomatoes.

So lets start by reforming Sarbox and increase transparency and not bureaucracy, lets allow the creative minds that have giving us 20 million new jobs in ten years and great technological advances continue to work without hindrance.

Maybe we don’t have the answer but until we can come up with a workable solution we should refrain from passing legislation or maybe we should elect fewer lawyers to public office.

For additional information please visit: http://www.genesiscorporateadvisors.com

Corporate Shells.

A corporate shell could be likened to a house that had been occupied by a family. Prior to the family moving out it was a home. But now it is just shell, a skeleton, a plain house with nobody in it, but if a family was to purchase the house and move in, it becomes a home.

Similar, a corporate shell was once the home of an operating company but once the operating company ceases to reside there because of adverse circumstances ( bankruptcy or liquidation ) all that remains is the shell.

Buying and selling corporate shells has become big business, just a couple of years ago a corporate shell sold for approximately $150,000.00 today they go for upward of $500.000.00. Talk about inflation! The increase in price is due to increase scrutiny by the Securities and exchange commission and the demand for shell by Chinese companies seeking to become listed in the United States.

As usual when there is money to be made the vultures appear with their unscrupulous practices. In most cases the shells are own by the same operators who are also acting as consultants to the companies they are helping to become public. This may be a conflict of interest but they are able to hide their ownership well with the help of securities lawyer who may also have a piece of the shell.

The situation described above creates a huge conflict of interest that the regulators have yet to figure out because of the intricacy of the many participant who work in harmony and are able to conceal their actions from the regulators.

If the consultant indirectly own a shell and is trying to sell it to the company that they are advising, how well is he going to represent the client when it comes to price and the amount of shares that they are to Retain? And how about with assisting the company in performing the proper research on the shareholder list and the history of the shell.

Don’t get me wrong there are many honest and well meaning consultants and shell vendors who established the shells for the sole purpose of creating a vehicle for private companies to go public, Just like you have the unscrupulous characters that appear every time there is an opportunity to make money, you also have honest enterprising individual who see an opportunity and take advantage of it.

Once the operating company purchases the corporate shell and merges into it, the owner of the private company receives a majority of the shell corporation stock (usually 90-95% ) through a new issue of stock for the private enterprise.

The public corporation will normally change its name to the private company’s name and elect a new Board of Directors which will appoint the officers of the company. The public corporation will usually have a base of shareholders sufficient to meet the requirements for listing on the Nasdaq Small Cap Market of Nasdaq Bulletin Board. Although some shell have as few as 35-50 shareholders and are currently listed on Bulletin Board or the NQB pink sheets.

At our company we don’t have an inventory of shells nor do we recommend a single vendor, instead we recommend several and after the private company selects a vendor we approach the process as if we were buying the shell for ourselves.

For more information please visit our website: http://www.genesiscorporateadvisors.com