The standards required of small start-ups for attracting investment have risen in recent years. Venture capital funds are in no rush to open their purses. They exercise care in their investments. Many small companies have realized that in order to obtain financing from investment institutions, they must go to Wall Street. At the same time, getting there is not a simple matter. There, too, in order to hold an IPO, a company must demonstrate that it has large revenues and good profits, or at least some kind of horizon.
Given this situation, more than a few companies enter Wall Street through the back door a reverse merger with a stock exchange shell, into which they insert their activity. Soon, if all goes as planned, SpaceLogic Ltd., a company founded in the early 1980s, will use this method for getting a Nasdaq listing.
SpaceLogic develops and markets automated baggage handling and airport security systems, and logistics application software. CEO Gary Koren founded the company as part of a group. In 1998, the group was reorganized to focus on new technologies, and SpaceLogic was organized in its current form, together with its 85%-owned subsidiary, SecureLogic. SpaceLogic has almost no cash reserves left, and plans to raise money in the course of its reverse merger.
Based in Netanya, SpaceLogic has 20 employees. The company focuses on three areas: an airport system that combines various screening technologies, designed to detect explosives in baggage or carried by people; a system for automated moving of baggage in airports; and software for managing the airport supply chain. Terminal 3 at Ben Gurion Airport is a SpaceLogic customer.
SpaceLogic plans to merge with Monterey Bay Tech (OCTBB: MYBI), whose current share price is $1.35, reflecting a market cap of $15 million. The initial agreements between the companies were signed in November, and the share has soared 350% since then. Monterey Bay will also acquire the other 15% of SecureLogic. When the deal is completed, the SpaceLogic shareholders will own 68.8% of the merged company.
SpaceLogic plans to issue more shares, bringing the total number of shares to 55 million. At the current share price, its market cap will be $75 million. It is important to note that the trading volume in the company’s share is fairly small, and the share can therefore easily rise and fall.
SpaceLogic had $3.6 million in revenue in 2004, compared with $4.8 million in 2003. The company had an operating loss of $88,000 and a net loss of $136,000 in 2004, compared with an operating profit of $209,000 and a net loss of $83,000 in 2003.
Published by Globes [online], Israel business news - www.globes.co.il - on April 7, 2005