1. Have you considered exchanging equity in lieu of cash for the purchase of the shell?

There are certain sellers of OTCBB shells who prefer to back a substantial new company into their shell rather than sell it for cash. If you have an established company with a history of revenues and earnings along with a compelling story for future growth, then you may be a candidate for this type of transaction. The positive is that you do not need to write a check for somewhere between $550,000 and $900,000. The negative is that instead of giving up 1% to 3% of the company you will most likely give up 8% to 10% of the company depending on the valuation of your established company. If a seller is willing to take on the substantial risk of betting on your ability and your company and give up control of his shell, he will want the equivalent of approximately $2,000,000 in shares. If you have a company with a current valuation of $50,000,000 or above this is not such a big deal. However, if your company can only command a valuation of $10,000,000, then the seller will own 20% of your company – and that’s before you raise any additional money which will cause further dilution.

There are many things to consider when going this route, so it is best to take your time and think through your options.

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