Merger, Acquisition & Transaction Consultants

King & Associates, P.C.

We provide the following services:

PROFESSIONAL SERVICES PROVIDED

We usually have knowledge of, or own, several dozen clean public shells for sale from $150,000 to $1,000,000 through reverse mergers which can take less then a few weeks once the details of the deals are agreed. (NOTE 1) Click Here to see  list of available public shells.

 

For more information about this service:

Email: Doug@ReverseMergersHome.com

Public Shells for Sale

We do business valuations consisting of about 100 pages to assist corporations in obtaining financing and provide information to public shareholders to assist their stock price.  Click here to example of valuation report.

For more information about this service:

Email: Doug@ReverseMergersHome.com

Business Valuations

The reputation of Douglas M King in due diligence is unsurpassed in the industry. An example of the specificity and thoroughness of our due diligence checklist we require selling corporations to complete can be viewed by clicking below. (NOTE 3)  Click here to copy of our Due Diligence Checklist.

For more information about this service:

Email: Doug@ReverseMergersHome.com

Due Diligence

Douglas M King has been personally involved in the financing of over one billion dollars for ventures and corporations of every type. He has the contacts to arrange unlimited capital for any merger, acquisition or transaction of any size. (Note 2)

For more information about this service:

Capital Raising

Email: Doug@ReverseMergersHome.com

NOTE 1: Some of the benefits of going public are 1) it is significantly easier to raise capital, 2) shareholders have liquidity and an exit strategy 3) public stock can be used for acquisitions, 4) public stock can be used for employee benefits, 5) an additional value of the company is created, 6) public shares (S-8) can easily be used to pay professional fees, officers and directors, 7) warrants issued as part of stock dividends can be used to raise cash for the company when the trading price of the stock exceeds the strike price of the warrants, 8) public companies receive more attention from major newspapers, magazines and periodicals and 9) the prestige of being a public company automatically makes you more valuable.

 

 

NOTE 2: It will be significantly easier to raise unsecured capital after your business is public for all the reasons listed in Note 1, above.

 

 

NOTE 3: SUMMARY OF DUE DILIGENCE PROCEDURES

 

Many SEC lawyers claim to be experts in due diligence, but only Douglas M. King was an actual financial auditor for a Big Eight accounting firm before he attended law school. This makes Douglas M. King imminently more qualified to perform due diligence.

 

Risks associated with reverse mergers can be mitigated only through careful due diligence. The first step in the reverse merger process is finding a suitable public shell and making sure it is "clean." Companies become public shells in one of two basic ways. The type that you want to look for was formerly an operating company that was taken public some years back by a reputable underwriter. Typically this type of public shell has liquidated its operations for some legitimate business purpose and distributed the bulk of its assets to shareholders. In the hope of creating additional value through a reverse merger, shareholders have decided to keep the shell alive by continuing to make the bare-bones-required SEC filings.

The type of shell company that you want to stay away from never really had an operating business or an underwritten public offering. These companies are typically created by a promoter through a distribution of shares to friends and family. Companies of this type are usually left to season for several years so that the SEC Rule 144 minimum holding periods become satisfied (allowing resale of restricted shares in the public market). Then, through the filing of a simple SEC form, the company voluntarily undertakes to become a reporting public company.

Finding public shells is pretty easy. Informal markets for the purchase and sale of public shells have developed and there is even an online market for trading in public shells. Public Shells that have no significant assets can be purchased outright for prices generally ranging between $210,000 to $1,000,000.

But more commonly, the transaction is structured in a way that the existing shareholders retain a percentage of the equity (typically 15-20 percent) instead of receiving a purchase price. If they are successful in finding the right merger candidate, this retained stake in the company can end up being worth a lot more than an upfront purchase price. Most of the available public shells trade either in the OTC Bulletin Board market or through the "pink sheets" because they do not meet the size criteria required for listing on a national securities exchange.

In evaluating public shells, it is extremely important to perform thorough due diligence. Since the liabilities of the public shell survive the reverse merger, it is imperative to research potential contingent or undisclosed liabilities and to seek adequate indemnification and other protections from reputable and creditworthy sources.

As a tip, beware of companies that were previously engaged in a hazardous or controversial activity that could be ripe for tort or environmental claims. These types of claims may lay dormant, only to awaken once value has been created in the company through the reverse merger. Another potential source of trouble could arise from unpaid payroll taxes or liability from IRS audits relating to prior periods.

One should also review the quality and timeliness of the public shells public filings and the public shells corporate charter and other governing documents. The shareholder list should also be carefully examined to determine the composition of existing shareholders and to make sure that they dont all have the same last name or live in the same city, which would indicate that there may never have been a true public offering.

In reviewing the public shells corporate charter, it is imperative to check whether there are sufficient authorized but unissued shares to accomplish the reverse merger, as any required increase in the authorized number of shares may cause delays in obtaining required shareholder approvals and may result in the need for filing proxy materials with the SEC.

Among the most important and often overlooked considerations is a background check and a gut check on the public shells controlling shareholders. On the background side, pay attention to a history of disciplinary actions or bankruptcy filings. On a personal level, the principals on both sides of the transactions should meet, establish a comfort level and determine if their goals for the transaction are consistent.

Reverse mergers are generally structured as a merger of the private company into the public shell (or a subsidiary of the public shell) with the public shell being the surviving entity. The operative document is a merger agreement between the public shell, the private company and, ideally, the major shareholders of the public shell.

Since the public shell is virtually devoid of assets, the only effective recourse if a problem does develop with the public shell will be against the major shareholders and only to the extent that they have agreed to personally stand behind the representations and warranties. Assuming the principal shareholders are willing to personally sign the merger agreement, it is important to research their financial viability. If the existing controlling shareholders strongly resist signing the merger agreement, this can be a cue to step up your due diligence review or to find another public shell.

 

At a minimum, due diligence should involve reviewing copies of any comment letters received from the SEC staff and the  responses of the public shell to those comments. If the SEC staff has commented that it believes the public shell may be a blank check company, then careful consideration should be given to the public shells response and whether the proposed acquisition is consistent with the response given by the public shell to the SEC staff.

 

An analysis should be done regarding the duration of the public shells existence, the amount of revenue generated by the public shell since inception, the amount spent by the public shell to develop its business plan, and the extent of any progress made toward achieving the goals of that business plan. Also, consideration should be given to the reasons why the public shell decided to wind down its business or sell off its assets. After considering these factors, then the attorney and his client must make a judgment call regarding the risk of the SEC staff or NASD taking the position that the public shell was in fact a blank check company at the time it issued securities.

 

A conservative approach should be taken in this regard, because if it is later determined that the public shell was a blank check company at the time it issued its securities, the public shell loses all value and the public shell must go through the registration process from start to finish.

 

From the perspective of an investor making an investment in a public shell or a company that has only minimal operations, but is nevertheless in the process of becoming a public shell, registration rights are key. The ability to demand registration of your shares for resale would be the best case scenario, but piggyback registration rights would be sufficient. As discussed above, without these registration rights, the stock acquired from a blank check company or a company with only minimal operations could become worthless.

 

For a list of current active private investors click here.