You are essentially correct. Not all r/m end up also having a r/s, but in the world of penny stocks, that's pretty much how they do it. Not all the time. Here is an article that might help:
A reverse merger happens when a publicly trading company merges with a private company and the private company survives, occupying and operating in the publicly traded company's legal shell. The private company takes over controlling ownership of the stock of the public company and management of the company, usually changing the company's name to its own and changing the stock symbol. It is not necessary for both companies to be in the same business; in fact, usually they are in very different businesses.
Reverse Split
Some new companies employ a further strategy to increase the number of shares available for use in raising capital. Since the new company has controlling interest, it holds a shareholder vote to reverse-split the authorized number of shares from 100 million to perhaps 10 million and, in the example, as an original shareholder, your number of shares will be reduced from 100 shares in the new company to 10 shares. This would be a 1-for-10 reverse split. The company then holds another vote to authorize 200 million more shares and issues 100 million new shares to raise capital. This further dilutes the value of your original shares. Many companies that have gone public through reverse mergers have large numbers of shareholders who own 10 shares or fewer.
The main reason for the r/s is to give the new owners the vast majority control, usually in the mid 90/s or higher (in my experneice). Sometimes lower, but vast majority. And because the vast majority of penny stocks are domiciled in states where no shareholder approval or vote is needed, the owners can pretty much do what they want. There are limits to what they can do, but their purposes, the no shareholder approval or vote works just fine!
And therein lies the problem for Kim. He only owns what, 55% of the stock? Not enough. Trouble is (for him), FINRA said no to his r/s. He went around FINRA to the SEC, but that was more of a pipe dream. The SEC is not going reverse FINRA's ruling on a penny stock company.
So, from Kim's pov, the only thing he can do is sell the 'shell.' There is no business associated with NGCG. He didn't tell the truth in his filing.
On page 17, he gives this as the company business:
A. A description of the issuer's business operations;
New Generation Consumer Group Inc. is a US based metal/minerals company with a primary focus on the rare metals, headquartered in Los Angeles, California. NGCG specializes in metals such as Lithium, Gold and Silver. There will be a emphasis on niche based metals such as Lithium due to the growing demand because of the new energy storage technology.
That's a flat out lie. NGCG is a shell. Period.
NGCG is supposedly associated with Vican Trading. Well, Kalisky has recently put his metals company, Vican Trading into Receivership (I-Glow gave me a heads up a short while ago, so I looked into it a little further):
Scroll down to June 8, 2017. In Canada, it 'appears' that Kalisky’s entire company has filed a “BIA” (Bankruptcy Insolvency Act.) Not just the Metals portion of his company, but the entire company: Vican Product Distribution Canada, Inc.
Then there’s the complete lack of communication. The last official press release was on 11-7-2016. I would say that he has abandoned NGCG. It is a shell. Lying in a filing, claiming they are in a specific business, when he knows full well they aren't, tells me all I need to know about him. He needs to sell this SHELL and give the shareholders a chance to recoup their losses.
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