FREQUENTLY ASKED QUESTIONS

What is the most important thing the private company
must do?
The private company must have or be able to obtain audited financial statements for the past 2 years.

What does a shell cost?
The private company must employ and pay his own auditors and attorneys. These costs will vary with the age and size of the private company together with the complexity of the transaction.

In the first quarter of 2001, shells were "sold" at prices ranging from US$350,000 to $650,000. These are usually paid as consulting fees or in the purchase of shares outside of the merger transaction. However, consulting and finders fees range from nothing to as high as $1 million depending on the financial condition and prospects of the private company. (Shares in the shell are often available from one or more selling shareholders who have no interest in the new company and just want to be assured of getting some of their money back.)

The other cost to the private company is the dilution which ranges from 10% to 40% of the outstanding shares at the conclusion of the transaction. Obviously, there would be a difference between the corner gas station and a division of Exxon.

Are third party finders protected by the shell company board of directors?
They usually are if the "finder" has made it clear to all parties as to which side he is representing in the transaction.

How long does it take?
Normally about 30 days after the private company has furnished the shell company its current audited financial statements. In the event the transaction is reviewed by one or more governmental agencies it can take considerably longer. After the transaction is structured the attorneys will have a good idea as to the length of time.

What are the advantages of being a "public" company?
Publicly traded securities are a currency that can be used to acquire other companies, reward employees, and to raise additional funds. Publicly traded securities can also be used to settle estate problems such as the transfer of the business fairly to both the heirs that work for the company and those that do not.
Venture firms that must liquidate on or before a certain date often find the window is closed for IPO's They can solve this problem by distributing the investment in a private company through a reverse shell merger.

What are the disadvantages of being a public company? Public companies are required to file quarterly, annual, and special reports which become available to competitors, employees, friends, customers, and creditors over the internet. Some companies may not want this public disclosure about their companies.

If a company is losing money and sales are decreasing, the price of its stock may be depressed. If this is the case it may be extremely difficult to raise additional funds should they be required to replace the losses.

What are the listing requirements?

Listing requirements vary throughout the World but generally are based upon the net worth and number of shareholders of the company. Also taken into consideration is the credibility of the company and reputation of the officers and directors. Here are a few links to the current listing requirements of a number of exchanges throughout the World:

NASDAQ CAYMAN RUSSIAN SWITZERLAND

PACIFIC CARACAS THAILAND MACEDONIAN

president@mergerstation.com