OTCBB Shells

Over the Counter Bulletin Board (OTCBB) shells are public companies that are fully reporting. In other words they file quarterly reports (10Q) and annual reports (10K) with the Securities and Exchange Commission (the “SEC”). The Companies are audit reviewed quarterly and fully audited one a year by a PCAOB certified CPA firm. They are considered a “shell” because they have minimal operations. OTCBB shells have to adhere to the same stringent rules and regulations mandated by the SEC as their counterparts who are listed on NASDAQ, AMEX and the NYSE.

The cost to acquire an OTCBB shell can be anywhere between $500,000 and $1,000,000. The price fluctuation has to do with several variables: i.e. liabilities, number of shareholders, free trading shares, etc.

Pink Sheet Shells

Pink Sheet Shells (PSS) are public companies that are NOT fully reporting. Therefore, they have no one that is “watching over them” on behalf of the investing public. They have no audited financials and there is usually very little information about their history available to a prospective Buyer. So why do Buyers want them? First of all, PSS sell for $170,000 to $200,000, considerably cheaper than an OTCBB shell. Secondly, they are already approved for trading by the NASD. However, to gain listing on the OTCBB the Buyer of the PSS must have the new company complete a two year audit by a PCAOB certified CPA firm and then file a Form 10 registration statement with the SEC. What most Buyers do not understand is that the SEC loathes Pink Sheet deals because it is near impossible for the new Buyer to supply the history of the PSS prior to his purchase. The SEC surely will ask the registrant to supply all documentation from inception of the shell. The result is a long drawn out process that will take several months and cost the Buyer hundreds of thousands of dollars in attorney fees. And there is no guarantee your registration statement will go ‘effective” (gain approval). Now if you can find a PSS with documentation from its inception (and I am yet to find one) then you can complete your registration process in three to four months.

The real question is “how much time do you have and how soon do you want to raise capital for your company”. Raising capital via a PIPE transaction for an OTCBB shell that is fully reporting is more viable than raising capital at a steep discount for a PSS.

Don’t be penny wise and dollar foolish. The purchase of an OTCBB shell is quicker and a cleaner transaction. Purchasing a PSS is a lot like buying a “pig in a poke” whose meaning is “An offering or deal that is foolishly accepted without being examined first”.

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