CruiseCam International, Inc. (fka fka CCMC)

[Xilo]

Hello all. I like what I see with the RM news. I was doing some digging and found this. Once you read it, can you explain to me as to whether or not this will affect the ability to trade this after the merger? The below link is where I found what is talked about below. Anyway, let me know,

thanks

Xilo.

http://www.reversemergerblog.com/

Guest Blogger Tim Keating Weighs in on Rule 144(i) Changes...Let the Debate Begin
Intro from me: I have asked my good friend and client Tim Keating, with whom I have a respectful disagreement as to the impact of certain aspects of the recent SEC changes to Rule 144, to write a piece setting forth his view of the issue to be posted here, and he has offered the below. Take a read since, as you know, I always do my best here to offer a fair and balanced view of all issues relating to the RM world. I may wait to respond until after the SEC provides a response to my request for interpretive guidance on this issue:


SEC Rule 144 Changes:
The Glass is Half Empty for Reverse Merger Sponsors

Timothy J. Keating
President, Keating Investments, LLC


July 17, 2008 - Last month, I delivered a speech to the Reverse Merger Conference in Los Angeles titled: “Self-Filings: The New Preferred Private-to-Public Path.” My thesis was that certain of the rule changes to Rule 144 that went into effect on February 15, 2008 were clearly not understood by most of the participants in the PIPEs/reverse merger industry and disastrous for reverse merger sponsors. My good friend David Feldman argues that the changes to Rule 144 which shortened the waiting period from one year to six months were the best thing that has happened to the PIPEs industry in many years. Since I primarily look at the world through the lenses of a reverse merger sponsor, I wholeheartedly disagree. In fact, I see the Rule 144 change glass as half empty—at best.

For reverse merger sponsors, there are three major causes for concern in the Rule 144 changes.

First, the SEC explicitly created a doctrine of “separate, but not equal” by adding an extra six-month holding period to PIPE investments made at the time of a reverse merger. Based on excellent disclosure reforms codified in law in 2005, there is no conceivable justification or rationalization for this extra waiting period. One can only conjecture that certain senior SEC staffers still have a visceral allergic reaction to reverse mergers and felt compelled to “do something” to maintain an official taint on this activity.

Second, and far worse, the SEC’s change to the definition of a shell company contained in Footnote 172 (which states that a “start up” company or one with limited operations is not a shell company) on the one hand will benefit a handful of tiny public companies. On the other hand, it has flung Pandora’s Box wide open by providing massive financial incentive to scammers through the creation of hundreds of phony public companies. By not thinking through the unintended consequences of certain aspects of this footnote, the SEC has unwittingly fostered an environment for small cap stock fraud like never before.

Third, and worst of all, Section 144(i) now states that if a company was ever a shell company, and is not current with its financial filings, then its restricted securities held by persons who acquired such securities when the issuer was a shell or former shell can never be freely traded. What does this mean? Providing that a former shell issuer is current with all of its required SEC filings over the previous 12 months, an investor in a shell or former shell can still sell under Rule 144 beginning one year after the reverse merger is completed (or pursuant to an effective resale registration statement). But if a former shell issuer fails at any time to file a periodic report and thus is no longer current with its SEC reporting requirements, under these circumstances (and this is the part that the PIPEs/reverse merger community is not grasping), an investor in a shell or former shell cannot sell under Rule 144 even if the investor has held the stock for more than a year after the reverse merger. This restriction remains in effect unless and until the former shell issuer becomes current with its SEC reporting requirements. This operative word is “ever” (as in ever a shell company), and the law is retroactive. Investors in companies that were once shells and that “go dark” by delisting and/or trading on the Pink OTC Market are screwed forever unless of course they are fortunate enough to have sold their stock when the issuer was current in its SEC filings. Shares held by a shell or former shell investor will never be freely tradable under the new Rule 144(i), and we surmise that no attorney would be willing to opine to have the restrictive legend removed from such certificates other than in connection with an actual 144 sale when the issuer is current in its reporting obligations. The simple consequence is that investors in shell and former shell companies no longer ever have stock that is freely tradable as was the case under old Rule 144(k).

David Feldman has written a letter to the SEC requesting interpretive guidance that the new Rule 144(i) not be applied retroactively. Who knows whether this retroactive relief will be forthcoming? Even if this relief is granted, without further rule changes, it does nothing to help repeal the rule going forward.

In 2007, there were nine traditional IPOs that raised less than $25 million in new capital. Also in 2007, there were 222 reverse mergers, 107 of which involved a simultaneous PIPE financing. In other words, over 90% of the companies that went public last year did so through the combination of a reverse merger and PIPE.

Even though the SEC may not like reverse mergers, it should nonetheless adopt a neutral stance as to how capital is formed, take immediate action to provide a bright line definition of a shell, create a level playing field that does not disadvantage honest reverse merger sponsors, halt trading in stocks that merge with Footnote 172 shells (which are simple to identify) and equalize the Rule 144 holding period for any PIPE investor to six months. If the SEC truly wants to deter reverse merger activity over the long term, it should form a blue ribbon committee to explore and understand the reasons why the U.S. small cap IPO has nearly become extinct. Antiquated and irrelevant rules will surely figure in the findings.

Labels: SEC