FREQUENTLY ASKED QUESTIONS
1. How long until our
shares are trading?
2. Are there hidden
costs associated with going public?
3. Can shares be sold
prior to a company being called to trade?
4. What assurances are
there of completing the process of going public?
5. What assurances are
there of raising capital?
6. Are there any limits
to tha amount of money raised?
7. How is the share value
determined?
8. Your company arranges
the introduction to investor relations service providers. Who
are these people, what are their fees, and in general, what options
are available for a company to market its shares?
9. What are restricted
versus unrestricted shares?
10.Who are the transfer
agents and market makers? What role do they play?
11.Our company has
a book value of $2 million, if your retained interest is 10%,
does this imply its position is automatically worth $200,000?
12.Is your retained
interest held in the form of unrestricted shares?
13.Do we have full
control over the appointment of Officers and Directors for the
company? Do we have full control over the issuance of stock and
in general, the company's day-to-day affairs?
Q: How
long until our shares are trading?
A:
Assuming your company can provide all necessary information to
meet SEC requirements, obtain Board of Director approval and provide
audited financial statements in a timely fashion, you can expect
to be trading within 180 days following execution of the agreement.
Q: Are there hidden costs associated with going public?
A:
While not hidden, there are on-going administrative costs and
reporting obligations which should be anticipated and budgeted.
Monthly maintenance fees to share transfer agents, incorporation
costs, quarterly shareholder and SEC reporting, the production
of annual audited statements, and the annual shareholders' meeting
are some examples.
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Q: Can shares be sold prior to a company being called to
trade?
A:
No. However under certain conditions funds may be raised
in a private transaction. Each situation requires specific
review.
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Q:
What assurances are there of completing the process of going public?
A: The attorneys, consultants, auditors, and market makers we
have assembled assure the process will be completed provided
the company submits accurate and required documentation. Our experience
significantly reduces the turnaround time for regulatory and SEC
comments or deficiency letters and in any event we manage and
respond to these circumstances at our cost, until the process
is completed.
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Q: What assurances are there of raising capital?
A: There are no guarantees. However, investors who are solicited
prior to an initial listing are attracted by entry level pricing
(as set by management) and the public company structure provides
those investors with the assurance of a bonafide exit strategy.
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Q: Are
there any limits to the amount of money raised?
A: From a practical standpoint of dilution and market perception,
yes. However, depending on the type of financing documents registered
with the regulators, there is no upper limit.
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Q: How is the
share value determined?
A: Unlike an IPO, where investment dealers set the price and
offer the stock to the market, the merger structure provides the
company with the framework to market their stock initially on
terms and conditions they control. Management can calculate
share value based on the net present valuation of future corporate
earnings, as detailed in the company’s business plan, discounted
at a rate required by investors. This calculated value, however,
often differs from the price the market is prepared to pay based
on demand and supply pressures.
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Q: Your
company arranges the introduction to investor relations service
providers. Who are these people, what are their fees, and in general,
what options are available for a company to market its shares?
A: Presuming the securities of the company are registered and
trading OTC BB or higher, there are some options, all of which
are available, and none are to the exclusion of the other.
- There are the public relations firms
who produce and disseminate press releases, and other marketing
material. Costs are relatively minimal based on fees
for service.
- There are mass marketers. One firm,
for example, in Rhode Island solicits investors through e-mail.
They have over 100,000 addresses of active investors. Their
fee in most cases, may be negotiated as a function of the
share issue.
- There are "promoters" who
have sales staff trained to solicit and garner interest in
the secondary market.
Finally, corporate exposure is built into the process.
Existing shareholders and contacts offer a base of investors.
Upon SEC registration, the company is automatically exposed to
all member brokers.
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Q: What
are restricted versus unrestricted shares?
A: Unrestricted shares may be traded or sold the day the
company is "called to trade". Typically, restricted
shares must be held for a period of one year. Refer to SEC Rule
144.
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Q: Who are the transfer agents and market makers? What role do
they play?
A: Our transfer agent of record is Olde Monmouth Stock Transfer
Company Inc., located in Atlantic Highlands, New Jersey.
The transfer agent maintains shareholder records and distributes
stock certificates accordingly. The market maker is the broker
of record who maintains the "bid and ask" on the stock.
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Q:
Our company has a book value of $2 million, if your retained interest
is 10%, does this imply its position is automatically worth $200,000?
A: Yes, in theory. However, book value and market
value often have no correlation. Shareholders have invested in
your company and similarly, our shareholders have invested in
us. Your company brings operating value to the table while
our company brings market value, and together we have a
vested interest to support each other.
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Q: Is your retained interest held in the form of unrestricted
shares?
A: Yes.
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Q: Do
we have full control over the appointment of Officers and Directors
for the company? Do we have full control over the issuance of
stock and in general, the company's day-to-day affairs?
A: Yes. We do not insist on board or management representation.
The company is free to operate as it sees fit.
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