Shell Company Seeks Reverse Merger

The market is down and funding is scarce, so it's probably not a good time to go public, but ISPs that seek to take the "reverse-merger" route should look into merging with TELS, a company with no assets or liabilities.

by ISP-Planet Staff [July 31, 2001]

It may not be a good time to become a public company, but ISPs wishing to find a "reverse-merger" candidate can look into TELS.

TELS Corporation (OTC Bulletin Board: TELS) announced that it has sold its operations. The Board of Directors is seeking a merger partner for the TELS "public shell" with a desire to be "public" and a future potential to increase shareholder value.

TELS sold its assets and subsidiaries to Dr. and Mrs. John L. Gunter for their assumption of about $1,700,000 in liabilities. The only operating subsidiary, TEL electronics, inc.(R), has approximately $1 million in assets and projects a small profit for 2001. TELS reported net losses (not including discontinued operations) of $98,334 and $449,363 in 2000 and 1999, respectively, and expects a small loss for the first half of 2001.

The Board believes the main impetus for this short-term trend was substantial cash loans from the Gunters and short-term expense reductions, all of which will probably have serious adverse effects in the future. The Board does not believe this trend suggests long-term success and believes there are more risks ahead for TELS as a public company and thus acted to preserve some future opportunity for its shareholders.

The Board believes other alternatives to be much less promising. Houlihan Valuations Advisors, a national business valuation and financial opinion firm, analyzed the terms of the sale. The transaction was deemed by Houlihan to be fair to shareholders of TELS from a financial perspective.

TELS will remain a public company with essentially zero assets and zero liabilities. With no liabilities, control issues or other encumbrances, the Board believes that TELS should now be an attractive reverse merger candidate for any private company seeking to go public. The Board believes that TELS is now in a position to seek appropriate merger candidates that have sound future opportunities and that can increase shareholder value.

Note that there used to be tax benefits to this procedure, and those benefits may have changed. Please consult professional legal and financial advisers before taking this drastic step.

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