1. What percentage of the shares do you need deliverable? Will 51% work or do you need a 99% delivery shell?

The other area to address is what type of shell you need. If you want a shell that delivers 51% of the stock, then you will be on the low side of the pricing model. If you want a shell that delivers 99% and has a large block of free trading shares from non affiliates, you are going to be in the neighborhood of $750,000 to $900,000.

If you are planning to raise capital then you must consider your situation and circumstances. For example if you already have a PIPE financing lined up and your only contingency is to gain trading status on the OTCBB, then you should opt for the 51% shell. You can purchase the shell, perform the reverse merger, and simultaneously reverse the shares down to a very small float. You then change the name of the old shell company to your new company name and decide on the share capitalization of the new company. Make sure you take into consideration the additional issuance of shares for the PIPE transaction when you are structuring your shares capitalization. You then issue new restricted shares to the officers and directors of the company. Then you get your funding in place via the PIPE transaction and issue additional shares to those investors. Those investors are the ones who will ultimately become your new share “float” because they will receive registration rights when they fund your deal. The price of the PIPE shares will most likely determine the starting price of your stock.

If you do not have adequate funds to purchase the shell outright you can sometimes use non affiliate investors to purchase the non affiliate or free trading shares of the shell. They will own a greater portion of your company, but if they are also investing in a private placement of the company they are in for the long haul: that is the type of investor you want.

There are many variations on what I have just described. For further information contact me at 858.729.0075 or send me an email at Ralph@ventanacapitalpartners.com

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