Cash is obsolete! Okay, I'm not saying you don't need money anymore. Here's what I mean. Yesterday, by lunchtime, I had paid a bill via the Internet, spoken to my mother using a calling card and ordered flowers online for a friend's birthday. No cash needed. Which brings me to the two OTCBB companies I wanted to write about today. Trustcash Holdings Inc (TCHH: OTCBB) offers anonymous payment solutions for internet shopping. Paivis Corp (PAVCE: OTCBB) is a telecommunications company specializing in selling prepaid ?point-of-sale activated? and live cards.



In December last year, the companies had agreed to a merger in which Paivis would become a wholly-owned subsidiary of Trustcash. According to the merger transaction, Trustcash had agreed to exchange shares of its preferred stock at an exchange ratio that values Paivis shares at $0.65 per common share. Later in the month, the conversion ratio was set at one preferred share of Trustcash for every five shares of Paivis common stock. The combined entity formed by the merger would include Paivis's acquisition targets, Detroit Phone Cards and AAAA Media Services. The combined revenue stream is estimated at approximately $73 million.

In January, the companies said that they had agreed to negotiate and amend the merger agreement to provide a simpler structure that will benefit shareholders and make it easier to understand the value of the transaction. As part of the simplification process, the merger agreement would include a cash component. Moreover, Mistral Ventures Inc agreed to contribute between $2 million and $7 million towards the financing required by Trustcash for the merger. Mistral has also agreed to provide at least $150,000 towards miscellaneous working capital. Trustcash CEO Greg Moss said, ?With an investor stepping in to provide capital and pledge their support in funding the Merger it is strong statement to our business plan.? The companies expect to finalize the new terms shortly.

The merger not only includes financing, which would help the combined entity to move forward with the business plan, it is also expected to result in cost synergies. Earlier in December, Trustcash had signed an agreement to provide its services to the customers of renowned photographer J. Stephen Hicks? website, Digital Desire.

The value of purchases made last year using prepaid cards is estimated to have exceeded $100 billion. According to research from Aite Group, stored value transactions are expected to surge to $257 billion by the end of 2009. Co-author of the report Gwenn B'zard said, ?In coming years, sheer size and rapid growth will place the prepaid market at the forefront of the competition among card processors.?

While consumer acceptance of stored value cards is rising, so is competition in this market. Forming strategic partnerships and consolidations could be the way to survive competition.

Shares of both Trustcash and Paivis are trading close to their 52-week lows of $0.08 and $0.01, respectively. It remains to be seen how well the two companies can integrate their forces to generate value.

The writer does not own shares in the above stocks.