Liberator adopts 'shell'strategy

Sunday, June 30, 2002

STUART, Fla. - Liberator Medical Supplies, a $5.5 million HME with plans to grow much bigger, merged with the "shell" of a failed publicly traded company last month and hopes to raise cash by eventually selling additional stock.
A "shell" is a public company with no underlying business. In what's called a "reverse merger", there's an exchange of stock that allows the private company to become the majority owner of the new public entity.

While rare among HMEs, a reverse merger eliminates a ton of paperwork and allows a private company to go public more quickly and less expensively than if it were to follow standard Security and Exchange Commission (SEC) regulations.

"I'm looking at potential acquisitions, mergers, a whole new exciting world out there," said Liberator Medical's CEO, Mark Libratore. "There is a larger universe in this dimension. It can be world wide. It has unlimited potential."

Libratore founded mail-order pharmacy giant Liberty Medical in 1993, and eventually sold it to PolyMedica. He started Liberty Medical in 2000.

Companies that buy shells do so with an eye toward eventually raising money through a secondary stock offering, or arranging financing in exchange for stock equity. In today's tight lending market, buying a shell could provide easier access to cash than more conventional methods, such as asset-based financing, said mergers and acquisition expert Dexter Braff.

Of course, it's no slam dunk that a reverse merger will generate investor interest, said Braff and other industry sources.

"But this is the only way to go public for a small homecare company," said Michael Garippa, the former CEO of HME roll-up Millennium Home Care. "This way they have instant public stock and they can over time try to create analyst following, create some positive spin and buzz and eventually do a secondary public offering."

The preferred way to go public is to issue an IPO based on the strength of your company and not be associated with the shell of some failed company, said Garippa, who gave Libratore a 25% chance of succeeding with the shell.

While acknowledging the challenges, one industry consultant pointed out that over the past two years people have made a lot of money investing in healthcare stocks so Libratore may have timing on his side.

"Now they can say, 'Look at the publicly traded healthcare companies," said Schuyler Hoss, president of Northwest Healthcare Management. '"Look at Apria. Look at Gentiva. A lot of people made a lot of money and if you want to make money, too, here's your vehicle."'
Libratore acquired for a "small amount of stock" the shell of "Oasis Entertainment's Fourth Movie Project," a failed movie company that trades on the OTC Bulletin Board. The new company will be called Liberator Medical Supplies and apply for a new trading symbol.

Libratore called Oasis a "clean shell." While the company may have fizzled, it has no skeletons in the closet that will dog Liberty Medical, he said.

"The only thing I can say is that every company started out small and someone believed in it and someone invested in it," he said. "You have to do some promotion, but the best promotion is to grow your business." HME