How can the OTCBB be used as a Stepping Stone to the AMEX and NASDAQ?
INTRODUCTION There are two trading systems that are separate from the National Market: the Over the Counter Bulletin Board (OTCBB) and the National Quotation Service Bureau (NQS), commonly known as the Pink Sheets. Together, the OTCBB and Pink Sheets make up the OTC market in the United States. The OTCBB and the Pink Sheets are quotation mediums, rather than stock exchanges. OTC securities are traded by a community of market makers who enter quotes and trade reports through a sophisticated, closed computer network. In the last ten years, there has been a dramatic increase in trading using the OTCBB as a critical “stepping stone” to create capital structure and maximize the companies market cap value creating improved business metrics that are worthy of an outstanding NASDAQ or AMEX listing. In this paper, the significance of trading on the OTC Bulletin Board, its potential to move companies into greater exchange possibilities and the fluidity of this process will be explored. WHAT IS THE OTCBB The OTC Bulletin Board (OTCBB) is a regulated quotation service that displays real-time quotes, last-sale prices and volume information for approximately 3,800 companies. The OTCBB has grown from a daily volume of 29MM shares with $100MM market volume since its introduction in 1990 to more than 40MM shares and $400MM market volume today. Currently the 3,800 companies are traded by nearly 300 market makers, quoting an average of 39,000 positions daily. All Market Makers subscribing to NASDAQ Level 3 (more info later) service and in compliance with SEC Rule 15c2-11 are eligible to “ voluntarily” participate in the OTCBB and may enter or exit at will. A further breakdown shows 475 banks, 28 insurance companies and 3,265 companies trading; although 25% of the OTC companies have financial SIC codes. The largest company on the OTCBB is Publix Super Markets with a $9B market cap and $15B in revenues. Heroes, Inc., as of November 2001, was the smallest, with a $302k market cap and revenues of $6.5m. Some 2,000 OTCBB companies have an average market cap of $1m or less. OTCBB data is now fed into more than 450,000 Level I terminals. Since 1993, all trades have been reported in real-time, and since January 1999, every company trading on the OTCBB must be a reporting entity. On Feb. 8, 2001, the SEC approved a proposal prohibiting member firms from trading ahead of customer limit orders. The new issues market in the U. S. is the largest in the world. As such, it has various sectors that appeal to many companies unsuccessful in attracting funds from other markets and/or sources. This is especially true of firms in hightechnology industries. For example, a high-technology company in Asia often prefers to issue securities in the U.S. public markets rather than in its domestic market. There is a venue that even companies in relatively early stages of development can issue securities to the public: the Over-The-Counter Bulletin Board. Biotechnology firms and firms specializing in computers, communications, and related areas have actively participated in this market in the past few years. Now, the attractiveness of the OTCBB market is causing momentum to build among development stage companies in other industries. Comparing the Bulletin Board with its larger NASDAQ counterparts, one can see the inherent magnetism. Although the OTCBB like NASDAQ does have real-time electronic quotes for domestic issues and does have requirements for issuers to remain listed, it is unlike the NASDAQ in the following important ways. It does not: • impose listing standards therefore it has no minimum quantitative listing requirements; • assess listing and maintenance fees to issuers;
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• •
maintain relationships with quoted issuers; and have the same obligations for Market Makers.
Because of these material distinctions, the OTCBB is a terrific alternative to venture capital or the traditional underwritten initial public offering of a private company. HISTORICAL POSITION OF THE OTCBB As good a fit as the OTCBB is for development stage companies, many issuers wonder why the technique is not more widely used. There are several reasons, chief among which are: 1. The OTCBB’ historic position among other trading platforms. s 2. The pervading misconception within the corporate finance community. 3. The media focuses on sound bite size sensationalism. The OTCBB “step-child” image has led to a lack of understanding among issuers and some investors. An important reason why this venue is not more often utilized is simply a lack of education among executives about the process and its benefits. The pervading viewpoint among executives is probably that the OTC market is simply composed of the Bulletin Board and Pink Sheets, the latter still burdened with a less than sterling reputation as an obscure corner of the securities market. This however, is not true. It’ important to realize what the over-the-counter market really is and just how prevalent it is in the s mainstream investment community. The financial definition of over-the-counter securities refers to securities, which are not traded on an exchange. For such securities, broker/dealers negotiate directly with one another over computer networks and by phone, and the NASD monitors their activities. The Bulletin Board is but a small part of the OTC environment; there are several components of the OTC widely used by institutions as well as individuals: • • • • • Pink Sheets: A daily listing of bid and ask prices for over-the-counter stocks not included in the daily NASDAQ over-the-counter listings, published by the National Quotation Bureau and used by brokerages. Forex: An over-the-counter market where buyers and sellers conduct foreign exchange transactions. Intrastate Offering: An over-the-counter securities offering limited to investors residing within one specific state. Third Market: Over-the-counter trading of listed securities among institutional investors and broker/dealers for their own accounts, rather than as agents for investors. Corporate Bonds: High yield and corporate bonds have always traded on OTC although there is a push to automate the process coming from inside as well as outside of the industry.
The over-the-counter equity m arket actually consists of four tiers. The first three tiers -- the NASDAQ National Market, the NASDAQ Small Cap Market and the OTC Bulletin Board -- have automated quotation (the “aq” in NASDAQ). They also have execution systems that are owned and operated by the NASDAQ Stock Market, Inc. NASDAQ, in turn, is owned by the NASD, a self-regulated body under the supervision of the SEC. If it sounds incestuous, that’because it is. s The fourth tier of the over-the-counter equities market has no automated distribution of quotes, although one is in the making. Trading information for companies that trade at the fourth level can be found only in a publication known as the Pink Sheets, giving rise to the name “the Pink Sheet market.” The origins of the Pink Sheets go back to 1904, when the National Quotation Bureau began as a paper-based, inter-dealer quotation service linking competing market makers in OTC securities across the country. Since that time, the
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Pink Sheets and the Yellow Sheets (another version o same) have been a central resource for trading f information in non-NASDAQ OTC stocks and bonds. Recently, Pink Sheets has been transformed to utilize the power of the Internet and the advances in web based technology to increase the timeliness of information. In September of 1999, Pink Sheets introduced the Electronic Quotation Service, an Internetbased, real-time quotation service for OTC equities and bonds for market makers and brokers but the Pink Sheets remain outside the purview of the NASDAQ primarily because they are owned and operated by Pink Sheets LLC, a privately owned company. The NASDAQ National Market is where the big boys, the Intels, Microsofts and Dells of the world trade. The Small Cap market attracts up-and-comers that are not household names like Digital Recorders, AlphaNet Solutions, and CollegeLink.com. These two segments are where the media focuses as well as the investment banks that traditionally underwrite initial public offerings. Since approval, the Bulletin Board has evolved to include DPPs, foreign securities and ADRs. Examples of companies that trade OTCBB include Central Hudson Gas & Electric Corp, First National Community Bancorp, Inc and Speedlane Communications. The opportunity that the Bulletin Board offers smaller companies is much maligned or even ignored by the media in favor of more “exciting”market activity. For example the traditional underwritten initial public offering (IPO) market has hypnotized media and masses alike due in large part to valuation hype and trading volatility. For example, IPOs have historically enjoyed first-day gains averaging around 16%. However, from April through June of 1999, 33% of IPOs posed first-day gains of more that 100%. During the first three months of 2000, the percentage of companies with 100% gains raced to over 40% (the average first-day gain was a little over 112%) and fully 16% of deals exceeded 200% gains on day one! These spectacular first day advances attracted an enormous amount of media attention. Unfortunately for the issuing companies, this type of “branding event”is arguably the most expensive marketing a company could ever endure. However, the high initial valuation doesn’ often last, a quick look at the tape now reveals that many of these “high t flyers are either no longer in existence or have floundered leaving their management teams and founders with virtually worthless equity and sometime stratospheric tax bills related to options exercise strategies gone awry. A second factor that attracts headlines is market volatility. The media loves a sound bite and it’ hard to s ignore events like the more than $300 billion in wealth that evaporated during the week of April 14 due to the big board nosedive. In addition, this downturn stimulated extensive margin calls that supplied even more fodder for reporters. Although first-day runs and wide swings contribute to the notoriety of select companies, it can also produce the potential for unhappy shareholders. OTCBB companies do not have the market cap to attract the kind of attention that companies trading on exchanges do, which can be advantageous during periods of extreme volatility prevalent in today’ market environment. Although listing s on the OTCBB hasn’been a popular strategy in the past, it probably w ill be more broadly utilized in the near t future because of the changing dynamics of the securities business and the advent of the BBXSM (more about that in a later section). IPO Overview The standard IPO process is a two -stage underwriting procedure based on price and allocation discrimination. Shares are allocated in a close to the vest manner with institutional investors favored and retail investors generally excluded, regardless of their pricing expectations or level of demand. This “closed” IPO process allows lead managers to deliberately under-price deals, which is the catalyst for enormous first day gains. While such a run-up in price benefits favored institutional investors, the issuing company and retail investors suffer. OTCBB listing allows companies to maximize that amount of money taken into the company coffers from investors and simultaneously put the stock in the hands of retail shareholders. Reducing the percentage of non-institutional holders can lower the probability that a company’ stock will experience wild fluctuations in share price. CFOs want the highs valued currency created when share price trends upward but they also want the cash balance that a fairly priced offering provides. OTCBB listing can offer the best of both worlds.
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HOW DOES THIS PROCESS WORK? NASDAQ Listing Requirements: For initial listing, a company must satisfy one of the following to be in compliance: the stockholders’ equity requirement, the market value of listed securities requirement or the net income requirement. Under Marketplace Rule 4200(a)(19), listed securities is defined as “securities quoted on NASDAQ or listed on a national securities exchange.” Seasoned companies (those companies already listed or quoted on another marketplace) qualifying only under market value of listed securities requirement must meet the market value of listed securities and the bid price requirements for 90 consecutive trading days prior to applying for listing. Publicly held shares is defined as total shares outstanding less any shares held by officers, directors or beneficial owners of 10% or more. In the case of ADRs/ADS, for initial inclusion only, at least 100,000 shall be issued. Round lot holders are shareholders of 100 shares or more. An Electronic Communications Network (“ ECN”) is not considered a market maker for the purpose of these rules.
NASDAQ Market Requirements
NASDAQ National Market NASDAQ National Market NASDAQ Small Cap (Entry Standards) Market Alternative (Entry Standards) Market Alternative Market 1 2 (Entry Standards)
Form of Security
Registration under the Securities Exchange Act of 1934 Quantitative Minimum Standards Shareholders 400 of Record Operating History Not applicable Minimum Bid $5 Price Per Share Net Tangible $4 million Assets Pre -Tax Earnings $750,000 in most recent year or 2 of last 3 years Net Income $400,000 in most recent year or 2 of last 3 years Total Assets Not applicable Total Equity Not applicable Shares of 500,000 Public Float Market Value $3 million of Float Market Makers 2
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American Depositary Receipt American Depositary Receipt American Depositary or foreign security or foreign security Receipt or foreign security Full registration required Full registration required Full registration (Form 20-F) (Form 20-F) required (Form 20-F)
400 3 years $3 $12 million Not applicable Not applicable Not applicable Not applicable 1,000,000 $15 million 2
300 Not applicable $3 Not applicable Not applicable Not applicable $4 million $2 million 100,000 $1 million 2 4
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Fees* Initial
Annual
$5,000 plus $0.005 per share up to 5 million shares, $0.0025 for 5-15 million shares, $0.001 over 15 million shares. Maximum $50,000 Maximum fee of $8,000. $2,000 participation fee plus the sum of $500 or $0.0005 per share, whichever is higher, up to a maximum of $6,000
$5,000 plus $0.005 per share up to 5 million shares, $0.0025 for 5-15 million shares, $0.001 over 15 million shares. Maximum $50,000 Maximum fee of $8,000. $2,000 participation fee plus the sum of $500 or $0.0005 per share, whichever is higher, up to a maximum of $6,000
$5,000 plus $0.001 per share or $1,000, whichever is greater. Maximum $10,000 Minimum fee of $500 or $0.0005 per share, whichever is higher, up to a maximum of $6,000
*As of May 1996
This information was brought to you courtesy of Citibank.
AMEX Listing Requirements Listing Standards for U.S. Companies: The American Stock Exchange has established certain quantitative and qualitative standards for the initial listing of U.S. companies. Quantitative Standards: Standard 1 Shareholders’ equity: $4 million; Pre-tax income $750,000 in last fiscal year or in two of its last three fiscal years. Distribution1 800 public shareholders and 500,000 shares publicly held O R 400 public shareholders and 1 million shares publicly held O R 400 public shareholders, 500,000 shares publicly held and average daily trading volume of 2,000 shares for prior 6 months. Price $3. Market value public float: $3 million Standard 2 Shareholders’equity: $4 million; History operations 2 years; Distribution1 800 public shareholders and 500,000 shares publicly held OR 400 public shareholders and 1 million shares publicly held OR 400 public shareholders, 500,000 shares publicly held and average daily trading volume of 2,000 shares for prior 6 months. Price $3. Market value public float: $15 million. Standard 3 Shareholders’ equity: $4 million; Total market capitalization $50 million. Distribution1 800 public shareholders and 500,000 shares publicly held OR 400 public shareholders and 1 million shares publicly h OR 400 eld public shareholders, 500,000 shares publicly held and average daily trading volume of 2,000 shares for prior 6 months. Market value public float: $15 million. Qualitative Standards: In evaluating listing eligibility, the Exchange also considers qualitative factors such as the nature of a company’ business, market for its products, reputation of its management, historical record and pattern of s growth, financial integrity, demonstrated earnings power and future outlook.
Public shareholders and public float do not include shareholders or shares held directly or indirectly by any officer, director, controlling shareholder or other concentrated (10 percent of greater) affiliated or family holdings.
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Initial Listing and Annual Listing Fees Number of Shares Initial Listing* Annual Up to 5 million $35,000 $15,000 5+ to 10 million $45,000 $17,500 10+ to 15 million $55,000 $20,000 15+ to 25 million $65,000 $20,000 25+ to 50 million $65,000 $22,500 More than 50 million $65,000 $30,000 * The initial listing fee includes a one-time $5,000 application processing charge, of which $1,500 is nonrefundable. Non-U.S. issuer applicants pay 50 percent of the initial listing fee, to a maximum of $32,500. Additional Shares Previously Listed Equity Issues — Additional shares will be subject to a $.02 per share listing fee, per application, subject to a minimum fee of $2,000 (for 100,000 shares or less) and a maximum fee of $22,500 (for 1.125 million shares or more). The maximum fee for listing additional shares is $45,000 per year. In cases where a new class of securities is to be listed in substitution for a previously listed class, there is a fee of $5,000 in addition to the normal per share listing fee. AMEX Market Requirements
Regular Listing Requirements American Depositary Receipt or equivalent Full registration required Form 20-F) Alternate Listing Requirements American Depositary Receipt or equivalent Full registration required (Form 20-F)
Form of Security Registration Under the Securities Exchange Act of 1934 Distribution Guidelines
(applies to regular and alternate guidelines)
Public Float, US Public Float, Worldwide Stockholders, US Stockholders, Worldwide
Domestic Standard 1 500,000 Not applicable 800 Not applicable
Domestic Standard 2 1,000,000 Not applicable 400 Not applicable
Domestic Standard 3 500,000 Not applicable 400 Not applicable
Average Daily Volume, US
Not applicable
Not ap plicable
2,000 shares minimum for prior 6 months Alternate Listing Requirements $15 million $4 million 3 years $3 Not applicable
Domestic Standard 4 Not applicable 1,000,000 Not applicable 800 (round-lot holders) Not applicable
Financial Guidelines Regular Listing Requirements $3 million $4 million Not applicable $3 $750,000 in latest fiscal year or 2
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Market Value of Public Float Stockholders’Equity History of Operations Minimum Stock Price Pre-Tax Income
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of most recent 3 years
Fees* Calculated on the basis of the number of securities listed
Initial Annual
* As of December, 1996
$2,500 minimum $25,000 maximum $6,500 minimum $14,500 maximum
$2,500 minimum $25,000 maximum $6,500 minimum $14,500 maximum
This information was brought to you courtesy of Citibank.
THE SUCCESS OF THE OTCBB The OTCBB is an excellent spring board for becoming a fully reporting company and is an important step towards getting on the NASDAQ SC exchange as exemplified by the number of companies that have gone from the OTCBB to listed exchanges in the past 18 months as opposed to the number of IPOs during 2003. Until June 18, 2003 Wall Street investment bankers say they had priced either five or seven IPOs in 2003; that’ according to whom you wish to believe. With such a small number of companies going public, it’ hard s s to believe how the financial press and various financial reporting services can get so confused. The number is now either 6 or 8 for the year! Compare that with the number of companies moving from OTCBB to larger exchanges. According the AMEX March 31, 2003 weekly activity report, there were 12 companies that listed on AMEX in the first quarter verses 9 in the same period last year. An astounding 75% were upgrades from the OTC Bulletin Board. The NASDAQ had 21 for the same period verses 23 the prior year, while it too had a large percentage of OTC Bulletin Board listings, showing 15 having switched verses 13 from the prior year, or a 15% increase. The bottom line for candidates is that listing on a bigger exchange is more than ever from OTCBB source. Here’ a list of the “graduates” from the past year+. s
Deletion Date OTCBB Symbol Exchange/Market Symbol Issue Name Exchange/Market Class Market Value
02/10/2004 02/04/2004 01/20/2004 01/06/2004 12/09/2003 12/08/2003 11/24/2003 11/19/2003 11/10/2003 11/10/2003 11/05/2003 11/04/2003
LALW TLKO ECSN CSHS INVS CLUO ADDM OMEX AURNF TGLEF BOVI ASCP
LI TKO ECI CKN IED CKX AEY OMR AZK TGA BVX ACD
Laidlaw International, Inc. Common NYSE Stock Telkonet, Inc. Common Stock Encision Inc. Common Stock Cash Systems Inc Common Stock INVESTools Inc Common Stock Calcasieu Real Estate & Oil Co Preferred Stock ADDvantage Technologies Group, Inc. Common Stock Odyssey Marine Exploration, Inc. Common Stock AMEX AMEX AMEX AMEX AMEX AMEX AMEX
N/A * 89,193,808 20,043,157 105,033,834 74,091,901 14,391,113 47,449,362 161,791,855 92,614,317 88,056,110 41,537,732 57,619,762
Aurizon Mines, Ltd. Ordinary Shares AMEX (Canada) Transglobe Energy Corporation AMEX Ordinary Shares (Canada) Bovie Medical Corporation Common AMEX Stock Asconi Corporation New Common Stock AMEX
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10/30/2003 10/29/2003 10/16/2003 10/09/2003 10/03/2003 10/01/2003 09/16/2003 09/12/2003 09/10/2003 09/08/2003 09/08/2003 08/29/2003 08/19/2003 08/11/2003 07/30/2003 07/28/2003 07/14/2003 07/01/2003 06/25/2003 06/25/2003 06/19/2003 06/16/2003 06/12/2003 06/10/2003 06/10/2003 06/05/2003 06/04/2003 06/04/2003 06/04/2003 06/02/2003 05/15/2003 05/14/2003 05/12/2003 05/06/2003 05/06/2003
METLF TRIL INDF ACLY SPCS BISP BRLCV CNSJV PROH BIOV MEXC RAEE CARA IMMT PNWT USEC GBGLF CVCOV FWFC QCMM CYCY PANC HSLA JENN KMRT INTN ESEX MTLS MTLWV NBTF HTLF DLTO MMTH TTPE YAKC
MRB TIV IF AXK SSI BPA BRLC CNO PRW BIV MXC RAE CPD IMM PNO UUU GBN CVCO FWFC QMM ATC PRZ HOM JEN KMRT INTN EYW MLT MLT.WS NBTF HTLF DFC MCBK TPE YAKC
Metallica Resources, Inc. Ordinary Shares (Canada) Tri-Valley Corporation Common Stock
AMEX AMEX
75,322,368 126,843,827 32,238,188 44,797,799 N/A * 48,537,950 207,636,185 N/A * 106,803,748 51,263,358 13,107,110 164,704,856 259,505,238 119,407,610 5,857,524 15,420,939 45,818,564 61,828,000 67,635,771 10,087,560 19,685,940 54,560,487 38,222,039 27,703,481 20 105,542,003 39,250,407 75,580,163 356,000 75,571,966 265,567,446 71,734,026 26,673,302 32,814,920 N/A
Indonesia Fund, Inc. (The) Common AMEX Stock Accelr8 Technology Corporation Common Stock SpectraSite, Inc. Common Stock Biosante Pharmaceuticals, Inc. Common Stock AMEX NYSE AMEX
NASDAQ Brillian Corporation Common Stock NNM Conseco, Inc. Common Stock New When Issued Pro Pharmaceuticals, Inc. Common Stock Bioenvision, Inc. Co mmon Stock NYSE AMEX AMEX
Mexco Energy Corporation Common AMEX Stock RAE Systems Inc Common Stock AMEX
Caraco Pharmaceutical Laboratories, AMEX Ltd. Common Stock Immtech International Inc. Common AMEX Stock Path 1 Network Technologies, Inc. New Common Stock AMEX
Universal Security Instruments, Inc. AMEX Common Stock Great Basin Gold Ltd Cavco Industries Inc W/I First Washington Financial Corporation Q Comm International Inc Cycle Country Accessories Corporation PainCare Holdings Inc Home Solutions of America Inc Jennifer Convertibles Inc Kmart Holdin g Corporation INTAC International Inc Essex Corporation Metals USA Inc New AMEX NASDAQ NNM NASDAQ SCM AMEX AMEX AMEX AMEX AMEX NASDAQ NNM NASDAQ SCM AMEX AMEX
Metals USA Inc New Wt 10/31/2007 AMEX When -Issued NB&T Financial Group Inc Heartland Financial USA Inc Delta Financial Corporation Monmouth Community Bancorp Teton Petroleum Company Yak Communications (USA) Inc NASDAQ SCM NASDAQ NNM AMEX NASDAQ SCM AMEX NASDAQ SCM
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05/05/2003 05/01/2003 04/25/2003 04/16/2003 04/16/2003 04/16/2003 04/15/2003 04/01/2003 04/01/2003 03/24/2003 03/21/2003 03/07/2003 03/07/2003 03/06/2003 03/04/2003 02/28/2003
BFCFA MBTF SFLK IHTC IPSU IPSUZ ARRI IBTB SJOE FBGI IABI MLMG MLMGW WGII ANLX NIHD
BFCF MBTF SFLK INB IPSU IPSUW ARD IRW SJOE FBGI IAX MTLM MTLMW WGII NLX NIHD
BFC Financial Corp CL A MBT Financial Corporation SAFLINK Corporation Integrated Health Technologies Inc Imperial Sugar Company Imperial Sugar Company Wts 8/29/2008 Arena Resources Inc IBT Bancorp Inc St Joseph Capital Corporation First Shares Bancorp Inc International Absorbents Inc Metal Management Inc New Metal Management Inc Series A Wts 2006 New Washington Group International Inc New Analex Corporation NII Holdings Inc CL B
NASDAQ NNM NASDAQ NNM NASDAQ SCM AMEX NASDAQ NNM NASDAQ NNM AMEX N/A NASDAQ SCM NASDAQ SCM AMEX NASDAQ SCM NASDAQ SCM NASDAQ NNM N/A NASDAQ NNM
54,584,199 339,210,328 116,537,139 23,357,700 64,890,000 N/A 29,919,523 N/A 33,330,234 13,422,937 14,443,060 75,023,443 N/A 390,000,000 N/A 412,000,000
* Market Value Data is not available for NYSE listed securities. The Market Value Data shown for each issue is the Value of the issue on the day it was deleted from the OTCBB.
Additionally, the key to the success of the OTCBB as a stepping-stone to NASDAQ and AMEX is its propensity to ensure a company’ continued growth with a relatively short transition time into a larger s exchange program. Here are some personal testimonies from companies who used the OTC Bulletin Board and are now trading on the NASDAQ or AMEX: I. Decorize Inc., (AMEX: DCZ) a home-furnishings importer, went public with a listing on the over-thecounter bulletin board on July 5, 2001 -- just 16 months after CEO Jon Baker cofounded the company in his horse barn in Springfield, Mo. In December, Baker, 49, applied for the company to make the leap to the American Stock Exchange, which -- with its more rigorous listing requirements -- would increase the likelihood that investment firms like Merrill Lynch and Morgan Stanley would recommend the company’ s stock to their institutional and individual clients. Three months later, on March 5 2002, Baker walked into his office and found the Amex approval letter waiting for him. “ Getting on the Amex, that changes the world for us,” says Baker.
DECORIZE INC (AMEX:DCZ) Quote data by Reuters
Last Trade: Trade Time: Change: Prev Close:
0.70
Mar 19 0.04 (6.06%) 0.66
Day’ Range: s 52wk Range: Volume: Avg Vol (3m) :
0.65 - 0.70 0.45 - 1.77 1,500 25,454
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Open: Bid: Ask: 1y Target Est:
0.70 N/A N/A N/A
Market Cap: P/E (ttm): EPS (ttm) : Div & Yield:
8.20M N/A -0.29 N/A (N/A)
II. On April 29, 1999, E. David Gable’ improbable dream came true. Carnegie International Corp., a small s Internet support and computer telephony holding company he took over three years earlier, graduated from the OTC Bulletin Board to a listing on the American Stock Exchange. Gable, a former car dealer, even rang the opening bell in honor of the listing for the company he had initially run out of his attic. “This was everything I’ ever worked for,”says the 54-year-old Baltimore native. After he took over in 1996, he took d Carnegie public via a so-called reverse merger with Electronic Card Acceptance Corp. (ECAC) and DAR Products Corp., two bulletin-board companies in very different businesses: credit-card transactions and grip technology. III. Swissray International (SRYL), a Swiss digital x -ray equipment manufacturer, took only 3 months to take Swissray (initially quoted on OTCBB and moved to NASDAQ after 9 months) public via a reverse merger. Afterwards, the company placed two follow-on equity offerings, raising a total of $10 million and thus quickly recouping the initial reverse-merger. During the ensuing three years, Swissray increased its sales 3.5-fold and successfully launched a number of new products. With the total annual sales of $13.2 million, total assets of $24.4 million and equity of $6.6 million, Swissray’ market capitalization reached s about $27 million. The shares became actively traded around just 6 months after the reverse merger was completed. At this favorable valuation, the average daily volume was around 2.5 million shares or $3 million. Therefore, Swissray’ entire capitalization turned around in only 9 weeks. s
SWISSRAY INTL (Other OTC:SRYI.PK) Quote data by Reuters
Last Trade: Trade Time: Change: Prev Close: Open: Bid: Ask: 1y Target Est:
23.50
Mar 19 3.50 (17.50%) 20.00 15.05 N/A N/A N/A
Day’ Range: s 52wk Range: Volume: Avg Vol (3m) : Market Cap: P/E (ttm): EPS (ttm) : Div & Yield:
15.00 - 25.00 N/A - N/A 9,133 0 0 0.00 N/A N/A (N/A)
IV. Nutrisystem.com Inc. of Horsham, Pa., which specializes in weight loss programs, completed a reverse merger at the same time it got an infusion of $7.6 million in private money. (Its assets totaled $8.4 million.) “It was early enough in our evolution that private placement was preferable to an IPO,”said Chief Financial Officer James Brown.
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The stock now trades on the OTC Bulletin Board, but it moved up to the NASDAQ. The NASDAQ application and approval process took about six weeks. The company decided THIN, its new stock symbol, is in and NSCI, the old one, is out; it retained that symbol when it lost its NASDAQ listing. Brown has taken part in an IPO but says the reverse merger “definitely was easier.”
NUTRI/SYSTEM INC (OTC BB:THIN.OB) Quote data by Reuters
Last Trade: Trade Time: Change: Prev Close: Open: Bid: Ask: 1y Target Est:
3.41
Mar 19 0.16 (4.92%) 3.25 3.29 3.39 x 500 3.40 x 500 N/A
Day’ Range: s 52wk Range: Volume: Avg Vol (3m) : Market Cap: P/E (ttm): EPS (ttm) : Div & Yield:
3.20 - 3.59 0.51 - 3.59 176,638 80,151 96.69M 100.29 0.034 N/A (N/A)
CONCLUSION Daily news articles report that it is becoming increasingly difficult for early stage companies to raise capital. Capital market conditions indicate that this status may continue. Overcoming this condition will require companies to execute a new approach by designing their business plan so it can succeed through raising small rounds of capital in planned follow-on offerings. This process envisions harmonizing a continuous capitalraising effort that begins by funding the company with a small initial round of founders capital, to raising a small private round to raising a larger interim round (PP, 504, Reg. S or bridge loan) to preparing, filing and funding a small SB-2 offering and making the company a publicly traded entity by listing it on NASDAQ’ s tier three market, the OTC Bulletin Board and in 2003, transitioning to the BBX. This is a model that will allow companies to create a capital structure that is Wall Street-acceptable and then maximizes the company’ market cap value by making its early milestone becoming publicly traded. The s OTCBB, as just one of the OTC programs, can provide companies with the experience needed to fully engage greater exchange entities such as the NASDAQ and AMEX proving to bring a most lucrative growth transition.
Corporate Office 2975 Huntington Dr. #201 San Marino, CA 91108 Tel (626) 688-1669 Fax (626) 457-5726
World Capital Market Inc. Philip (Ming) Xu President and CEO
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