Can any company go public?
Yes, virtually any company can go public with their own trading symbol on the OTC Bulletin Board.
Will you be successful in taking us public?
YES. The SEC reviews registration statement but does not make any subjective on the merits of your filing. They review to assure that all of the information required by the rules and regulations is included. The SEC does not block registration statements. As long as the control persons of your company don’t have issues that you have not disclosed to us, and as long as the officers do not have serious legal issues and they cooperate with us during the process, you will become publicly traded.
Does the SEC care that my company is a start-up or development stage company?
No. They only care that everything is filed correctly and that all disclosures are made. Many biotech companies are public and have yet to discover or create a product.
Does the SEC care that your company does not have the funds to implement your business plan?
No. The SEC doesn’t care about your financial ability to implement your business plan as long as it’s fully and accurately disclosed and you actually intend to implement the business plan described in your filing.
Does the SEC care you or the other officers or directors has had a personal or business bankruptcy?
No. But it must be disclosed.
Does it matter how large your auditing firm is?
No. the SEC only cares that your auditor is registered as a PCAOB auditor.
How long does it take to go public direct on OTC Bulletin Board?
It typically takes about 6 to 9 months to become a trading company on the OTC Bulletin Board by direct filings, start to finish. Much of this depends on the speed in which you answer questions and provide information when requested.
How is the initial price of the stock determined?
The initial stock price is determined by the market maker with approval of FINRA. The initial price is based on several factors including the price of the last public offering, assets, and other considerations. The initial price is largely irrelevant, as the first orders in the system will set the price of the stock. In other words, the initial quote price of a stock typically has a very large spread, or difference between the bid and offer price. For example, it may be 2 cents bid by 50 cents offer/ask. But once buy and sell orders enter the system, the quote will reflect those orders.
How long does it take to do a reverse merger into a public shell company?
It typically takes only about a month to complete a reverse merger into a public OTCBB shell company and begin trading.
How do I complete a reverse merger?
The reverse merger process includes extensive due diligence on the public shell being considered for the merger, preparation of sale all reverse merger legal documents (Stock Purchase Agreements or Reorganization Agreement (separate agreements for convertible notes, options and warrants, etc., as needed), attorney tradeability opinion letters on any free-trading shares being transferred in the reverse merger deal, post-reverse merger work, for non-reporting company (name change and reverse/forward stock split submissions to FINRA, and any miscellaneous restructuring of share or capital structure), and more. We provide everything needed to complete the merger including but not limited to the foregoing.
Can you list a foreign corporation directly on the OTCBB?
Yes, the filing is different for a foreign corporation that wishes to go public direct on the OTCBB or Pink Sheets and the cost is a bit more. Instead of an S-1 registration, we would file a F-1 registration statement, which is a completely different document, with more SEC review than the S-1. Or, we can simply structure so that the foreign corporation is owned by a U.S. holding corporation. This is simpler and much less costly.
Do you raise money for me when you take us public?
Although many times a reverse merger or S-1 registration will be accompanied by funding event, MD Capital does not raise capital for your company but we can introduce you to investors and investment bankers who can raise money for you given your company meets certain criteria. The pricing and negotiating of the transaction is up to the company.
What is Difference Between Conventional IPO and Direct Filing?
A conventional IPO involves the registration of a company’s stock so that the company’s stock may be legally sold to the public, coupled with;
engagement of an underwriter (brokerage firm) who is to sell the registered stock to its clients with the resulting funds raised going to the company.
A direct filing IPO involves the registration of a company’s stock so that the company’s stock may be legally sold to the public without an underwriter and without the money raising step of a conventional IPO.
What is Difference Between IPO and Private Placement?
An IPO involves the registration of a company’s stock so that the company’s stock may be legally sold to the public, generally coupled with the engagement of an underwriter (brokerage firm) who is to sell the registered stock to its clients and/or the general public with the resulting funds raised going to the company. Public dissemination of information is allowed.
A Private Placement involves the sale of a company’s stock under an public offering exemption, to investors previously known to the company. Public dissemination of information is NOT allowed.
What is an Accredited Investor?
If an individual, the individual’s annual income during each of the prior two (2) years must have exceeded $200,000 (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and would need to be reasonably expected that their individual annual income during the current year would also exceed $200,000 or;
If an individual, the individual’s joint (with spouse) annual income during each of the prior two (2) years must have exceeded $300,000 and ould need to be reasonably expected that their individual annual income during the current year would also exceed $300,000 or;
If an individual, the individual’s or joint net worth must exceed $1,000,000. (Explanation: In calculating net worth you may include equity in personal property and real estate, including your principal residence, cash, short term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)
Who pays for the company’s audited financials?
You pay for your own audit. We can recommend experienced auditors if you need one.
How much does the financial audit cost?
An audit can cost anywhere from $5,000 for a brand new corporation to $100,000 or more for an extremely complicated company audit. We can recommend very good and reasonable auditors who give special pricing to our clients.
What is the difference between the Pink Sheets and the OTC Bulletin Board (OTCBB)?
The Pink Sheets and the OTC Bulleting Board are competing quotation services for OTC securities. The Pink Sheets is a privately owned company, while NASDAQ operates the OTCBB. Unlike the OTCBB, issuers do not have to be fully reporting companies with the Securities and Exchange Commission (SEC) to be quoted on the Pink Sheets. Because of this greater transparency, it is widely accepted as fact that the OTCBB is a better trading market than the Pink Sheets. Thus, we only focus on the OTCBB.
What is a CUSIP number and does my company require one?
CUSIP stands for Committee on Uniform Securities Identification Procedures. A CUSIP number is a nine digit number issued by Standard & Poors in the United States and CDS in Canada. A CUSIP number uniquely identifies the issuer and the security and is used by the financial community as an identifier for their computer systems. A CUSIP number is a requirement for eligibility for the booked based system in the United States.
What does DTC Eligible mean?
DTC stands for Depository Trust & Clearing Corporation. Stocks held by DTC are kept in the name of its partnership nominee (Cede & Co.). Not all securities are eligible to be settled through DTC (“DTC-eligible”). First a little history: DTC eligibility used to be almost automatic after a company cleared its registration statement and its 15c2-11. One of the company shareholders would deposit their shares with their broker, who would apply for DTC-eligibility through a clearing firm affiliated with DTC. Once done, the stock could then be bought and sold electronically through brokers or online. Recently, this ‘automatic’ DTC eligibility approval by DTC is no longer occurring for many smaller companies going public. Some are having trouble even finding a broker or clearing firm even willing to submit the DTC-eligibility application. The cause of the change is easy to pinpoint, but as usual, the reaction by DTC, clearing firms, and brokerages is not so easy to understand. In Jan 2009, FINRA issued a notice to its broker-dealer members reminding the of their responsibility to insure federal securities laws and FINRA rules are complied with when they are participating in the sales of unregistered securities. Since these brokerage firms were charged with investigating the stock issuances of issuers to make certain there were no unregistered distributions, smaller companies were immediately hit the hardest, because they have the shortest operating histories and are more likely to trigger red flags with FINRA. The end result is that it has left many companies, and even attorneys, at a loss as to how to become DTC-eligible. The problem is that many shareholders of these non-eligible companies cannot deposit or trade their shares. Obviously, this is a huge problem. We have also heard that name changes or stock splits or other things that cause companies to obtain a new CUSIP would also cause the company to be required to re-apply for DTC eligibility. In a nutshell, a company needs to be ‘real’ and not a ‘shell’ in order to become DTC eligible.
What is a “Blank Check Company”?
A blank check company is a development stage company with no specific business plan or purpose or one that has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies. Even though this company is created through a filing with the SEC under the 1933 “Selling Stock” Act, the SEC’s Rule 419 specifically provides that, even though registered, stock in this kind of a shell cannot trade so long as the company is a shell company.
How is MD Capital Compensated?
MD Capital charges fees, equity or combination of both for their consulting services. We are not compensated for raising capital for companies, this is the role of a licensed broker/dealer or investment banker.