Ventana Capital Partners is seeking China based companies who want to go public in the US. We have received several calls from investment bankers seeking to provide funding to companies that meet certain criteria. Companies must be able to demonstrate they are earning in excess of $5 million (US) net income per year, their financial information can be audited and that there is substantial growth in their industry sector. The companies chosen will have the ability to raise the capital they are seeking and go public via a reverse merger into a NASDAQ OTC Bulletin Board shell. Funding for the entire transaction will be provided by US based private investors and investment banking firms. To qualify prospective China based companies will only need to provide audited financials by a reputable audit firm. Interested parties should contact Ralph Amato at 858 729 0075 or email Ralph@ventanacapitalpartners.com

Last year 69 Chinese companies went public via a reverse merger into an OTCBB shell. That represented almost 34% of the total number of OTCBB reverse mergers. Most of the companies also received a PIPE financing and those companies performed quite well in the public marketplace.

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This is the second year in a row that I have witnessed softness in the marketplace for OTCBB shells during the month of May. I have now dubbed this the “May Effect”. Again there are more Sellers of shells than there are Buyers. This is partly due to the influx of new shells coming to market because of their inability to raise capital for their companies. The opportunities to raise capital this year have become more difficult in these economic times. Funding sources are very particular when it comes to funding a PIPE transaction. Companies must now have a sold history of both revenues and earnings and offer cheap valuations to attract capital. Startups are really feeling the pinch and finding it very difficult to get funded. So it is no surprise that companies that fail to attract much needed capital are deciding that it is too expensive to stay public and are opting to take their companies private through the sale of the shell.

This year the quality of the shells and the due diligence packages I have received have greatly improved. So if you are contemplating taking your company public this is by far the best time of year to do so. Just make sure you have a company that has expanding revenues, profits and a solid business plan for growth.

Last year excess shell inventory was swallowed up by smart Buyers and by late June prices returned to their normal levels. By mid summer Buyers were paying substantially higher prices through the end of last year. One shell closed for a $900,000 price tag in December, 2007.

If you are contemplating the purchase of an OTCBB shell give us a call. We can provide several options to fit your circumstances. Please contact Ralph Amato at Ventana Capital Partners at either 858 729 007 or Ralph@ventanacapitalpartners.com .

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Conclusion

Hopefully after having read my ten part series both Buyers and Sellers of OTCBB shells will understand that it is very important to have someone looking out for your interests before during and after the sale or purchase of a shell. Shells are costly so why take chances? As they say an ounce of prevention is worth a pound of cure.

As Sellers Rep

For Sellers Ventana Capital Partners will get you a fair price for your shell and hold your hand during the entire transaction from start to finish. You will end up selling your shell sooner to a qualified Buyer and you will be certain that you have received proper due diligence on the company being backed into your shell.

As Buyers Rep

For Buyers Ventana Capital Partners will eliminate a daisy chain of finders. Buy calling Ventana you have direct access to the Seller thus saving you a substantial amount of money on the purchase of your shell. You can feel confident that the shells we do present to you will meet your criteria and have been “scrubbed” resulting in a complete due diligence package that will satisfy your SEC counsel upon review.

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Sellers Transaction Concerns

The Seller usually has three basic concerns when it comes to selling his shell.

1. Is the Buyer backing a legitimate company into his OTCBB shell?
2. Does the Buyer have the money to close on the shell?
3. Will his due diligence package satisfy Buyers counsel?

Ventana Capital Partners takes great pains to make sure that the Buyer of the shell is a legitimate candidate. Much of the work in finding an appropriate Buyer for the shell is to perform due diligence on the proposed Buyer. Ventana will review prospective Buyer’s business plan and audited financials before recommending Seller move forward with the transaction.

In certain cases where there are broker dealers or investment banks that are purchasing a shell without identifying what company they are backing into the shell the Seller should receive certain representations and warranties as to purpose of the sale of the shell. It is best to receive and investigate previous deals performed by Buyers who are seeking to put the shell on the “shelf” until they find an appropriate company to reverse into the shell.

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The Due Diligence Package

The proper preparation of the due diligence package also saves the Buyer a substantial amount of money on due diligence review. Many times we have seen Buyers spend several thousand dollars on the review of a shell by their counsel only to find out the Seller can not provide adequate due diligence to close on the transaction. The Buyer then has to start all over and find yet another shell to purchase and go through the same process again. Buyers that purchase their shells through Ventana can be assured that we have organized and reviewed all of the due diligence documentation and it is sufficient for Buyer and his counsel to close on the shell transaction. Our normal transaction starts with a review of the Corporate Shell Profile followed by an LOI and deposit that gives Buyer’s counsel a ten (10) day free look at the due diligence package. Buyer’s attorney then prepares the Stock Purchase Agreements (“SPA’s) for both Buyer and Seller to sign. Upon signature of the SPA’s the stock certificates and signed stock powers are sent to escrow agent along with the remaining funds to close on the transaction. This entire process takes three weeks from start to finish.

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Pre Sale Due Diligence

Proper preparation of the due diligence package is essential to both the Buyer and the Seller. For the Seller it allows him to prepare all of the documents in advance of the sale of the shell and locate any missing pieces. To my company, Ventana Capital Partners, it exhibits that the Seller is organized and co-operative. If a Seller balks about completing the due diligence questionnaire and supplying the backup documents we have requested then he will not be able to sell his shell to a Buyer because he will not be able to satisfy Buyers counsel due diligence requests.

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Pre Sale Due Diligence

At Ventana Capital Partners we have developed, in conjunction with several attorneys, an eleven page due diligence list for Sellers of OTCBB shells. We do this for several reasons. First of all it conveys to the Seller what the Buyers attorney will be demanding as far as due diligence documentation. Secondly, it gives Ventana an opportunity to review all of the due diligence material before we present the shell to prospective Buyers. It also allows Ventana to assist the Seller with obtaining any missing documentation that would be a deal breaker upon due diligence review by Buyers counsel. Lastly, it allows Ventana to shorten the due diligence review or “free look” period in half because Ventana has 100% of the due diligence ready to deliver to Buyers counsel once Buyer and Seller have signed the letter of Intent (the “LOI”).

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Pre Sell Preparation

Ventana Capital Partners (“Ventana”) only represents Buyers and Sellers of OTCBB shells on an exclusive basis. This allows Ventana to represent the Buyer or Seller properly without having to deal with the daisy chain of finders who will use a shotgun approach. If a Seller allows anyone or everyone to try to sell their shell they are making a major mistake. If a Seller’s OTCBB shell is seen by too many Buyers there can be a perceived notion in the marketplace that the shell is tainted – that someone has found something wrong when going through the due diligence process. At some point they will start getting the response “oh, I have seen that shell presented to me several times from various finders”. At that point the Seller will have to take the shell off the market or reduce their price considerably because of market perception.

Ventana has witnessed shell Sellers who previously stated “no one has seen their shell” only to find it has already been shopped to death for the last six months. We have also seen shells were the Seller did not want to sign an exclusive agreement with us to represent them. Guess what happens? Ventana receives several calls from a daisy chain of finders a week or two later trying to get us to sell the same shell for them; which we politely refuse.

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After the Closing

The reason that we at Ventana Capital Partners go beyond the call of duty when it comes to the sale or purchase of an OTCBB shell is simple. We take pride in what we do, who we represent and what we deliver. As a company who represents both shell Buyers and Sellers we have to be available to all parties after the sale. Ventana does business with a number of law firms who are actively involved in the reverse merger space and we enjoy favorable ongoing relationships with most of the major firms. Buyers counsel look to us to provide any deficient documentation or to assist with contacting the Sellers legal or accounting representatives. We will always do what it takes to get the job accomplished.

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After the Sale

In two recent sales of shells where my company, Ventana Capital Partners, represented the Seller of the shell we had to track down the previous Sellers to provide additional information to the Buyer’s counsel. In both cases the Buyers representative was nowhere to be found after the sale. I was contacted directly by the Buyers counsel seeking help with documents due from the previous shell owners CPA firm and in another case additional documents that were “overlooked” and were missing after the closing. This is a common occurrence for companies like Ventana who are involved in these types of transactions on a daily basis. In both instances we were successful in tracking down and delivering the desired information that both attorney firms sought.

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