RAE Systems, Inc. (RAE) is one of those rare instances where a company successfully pulled off a reverse merger. In RAE’s case, they merged into the Nettaxi shell, which had approximately $7.0 million in cash when the merger closed on April 9, 2002. (There were a number of homeland security related reverse mergers completed subsequent to 9/11.)
Prior to the close of the reverse merger, Nettaxi completed a one for 5.67 reverse split. The old shareholders of Nettaxi ended up with 7,896,764 shares of the new company; the shareholders of RAE received 36,073,574 shares and the consultants who put the deal together ended up with 960,000 shares.
On April 5, 2002, two days prior to the close of the reverse merger, the stock closed at $1.42 (it popped to $1.87 the next day). The stock closed at $4.92 on Friday.
Using the April 5, 2002 price of $1.42, the old shareholders ended up with shares having a value of $11.2 million, a 60% premium for their cash. The shareholders of RAE ended up with shares having a value of $51.2 million and the consultants ended up with shares valued at $1.4 million.
sec.gov
On April 9, 2002, our merger with Nettaxi.com (“Nettaxi”) was consummated. Nettaxi, as the surviving corporation in the transaction and the Registrant, changed its name to RAE Systems, Inc. Our stockholder received approximately 80% of the merger entity at the effective time of the merger and our management team continued in the existing roles with our Company. Accordingly, our merger with Nettaxi has been accounted for as a reverse acquisition whereby, for accounting purposes, we were deemed to be the acquiror and Nettaxi is deemed to be the acquired entity. As Nettaxi had effectively ceased all revenue generating activities nine months prior to our merger and had planned to abandon (and did abandon) its business model with effect from the consummation of the merger, Nettaxi was deemed to be in substance a shell company. Accordingly, our merger with Nettaxi has been treated as a recapitalization with no goodwill. For this reason, pro forma information giving effect to the merger is not presented. |
