KAT Exploration Inc (KATX)

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More about Reverse Mergers...

I found this article here: http://www.tcc5.com/reverse_mergers_c.htm

Reverse Merger, also known as a reverse takeover, is when you merge what is called a public shell (also referred to as a public shell corporation or public shell company) with a private business entity. The shareholders of the private company purchase control of the public shell corporation to merge them together.

After merging the active business enterprise with the public shell company, the result is a public company with an ongoing business in it. The shareholders now own a majority of the shares in the public company and control the board of directors.

The old public shell then changes its name to the name of the private business that was reverse merged during the merger consolidation. You can also do a Direct Public Offering (DPO) to go public.

To complete this transaction, the private company and the public shell company must exchange information on each other and negotiate the terms of the reverse merger. They must then sign a share exchange agreement.

The SEC, in an effort to offer greater transparency to investors in general, asks that companies that are being merged during a reverse merger with a public shell to provide as much information as if they were doing an S-1 registration.

Other considerations when contemplating going public via a reverse merger are the history and baggage the shell company can bring along, since some of it could be of an unsavory nature and can include careless form filing, terrible paperwork or missed regulatory deadlines.

The pool of investors of the shell company is also an item to consider. There could be less-than-happy-campers in that group and individuals with a grudge that could cause trouble for the merged entity.

A reverse merger by itself doesn't raise capital, since it's only used as a tool for taking a private company public. You can always take your company public directly. Most people consider it helpful for a company to become a publicly traded business to raise money - as opposed to staying a privately held enterprise. Of course, successfully raising capital always comes down to a variety of factors, such as: the management team, your industry’s potential and the line of business your company happens to be engaged in.

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