WHY I THINK REVERSE MERGER WILL HAPPEN
I am not an expert on reverse mergers, but after some DD and thought here is my take. The deal will become finalized because both parties will financially benefit from the deal closing. They both want it to be completed.
UVCL Incentive
The CEO has fiduciary responsibility to the shareholders. Pure Romance had 2006 Revenues of $60 million. Supposedly 20% profit margin. Most people are calculating EPS of $0.06, but i think that is high, I will use $0.04. Using a conservative multiple of 8, is $0.32 EPS. That is very excellent for shareholders, so CEO should complete this deal.
Is there any other incentive for the CEO? Perhaps. Here is from the November 15, 2006 10Q:
NOTES PAYABLE - RELATED PARTY TRANSACTIONS
On March 31, 2006, the Company entered into a secured promissory note with Sean Y. Fulda, the CEO and Chairman of the Company in exchange for $250,000 of accrued salary. The note is due within sixty (60) days and accrues interest at twelve (12%) annually. The note can be converted into common stock after the due date at the request of the Holder. As of November 10, 2006 the note would convert into approximately 25,000,000 (twenty five million) shares if converted at the current price of $0.01 (one cent) per share.
IF I interpret this correctly, The CEO Fulda probably is sitting on 25 million shares of UVCL right now. Now, IF the reverse merger happens, this stock will quickly reach it's fair value of $0.32 a share. Mr. Fulda will have 25 million shares of the new company worth approximately $8,000,000. The CEO wants this deal done.
PureRomance Incentive
I am sure UVCL never heard of Pure Romance, so PureRomance most likely approached UVCL, so they want the merger. Check this out:
UVCL
MAJOR DIRECT HOLDERS (FORMS 3 & 4)
Holder Shares Reported
UNIVERCELL HOLDINGS INC 101,039,349 25-Feb-05
IF this is correct UVCL holds 101 million shares of it's own stock. I am not positive, but I think that these shares will probably go with the stock as a company asset. So IF the deal finalizes, Pure Romance will own 101 million shares of their new company stock. This is huge (if correct). Any time they wanted funds for expansion they could just sell some of that stock. 5 million shares at .32 is $1.6 million.
No dilution, no debt, no interest payments, no loan approvals. Pure Romance could fund all the growth they desire. Very shrewd.
There is also the possible matter of tax loss carryforwards that might benefit PureRomance since they already have profits. I have no details of this.
In Summary UVCL shareholders get a growing business making profits, CEO Fulda gets 25 million shares of the new company worth millions, PureRomance gets their company publicly listed, 101 million shares of their new company (instant painless financing), and possible future tax benefits.
All 3 parties want this reverse merger completed. IMHO
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