Direct Public Offering

The following will describe in detail the qualifications of a private company that one wants to go public and trade on the Over-The-Counter Bulletin Board (OTCBB), and eventually on the larger exchanges if one so desires. This article also delineates the process of using the Direct Public Offering (DPO) in order to get a company qualified to trade on the OTCBB.

The Company with which one intends to go public or the company one intends to merge with a public shell must be doing business. Though it can merge with one, the original business, itself, can't be a shell corporation merely being in existence for a period of time. Ideally, the Company should be doing business for at least 9 to 12 months. In addition, the Company must have transactions totaling from $300,000 to $500,000. The Company does not need to have assets, but it is extremely helpful, in the qualification process, for it to own assets worth $100,000 or more.

THE PROCESS
The Company that one wants to go public will be merged into another company. A Nevada corporation or Wyoming corporation are favorable. Nevada, like Wyoming, has no state income taxes. After the merger, the Private Placement Memorandum (PPM) and Subscription Agreement (SA) are constructed. The regulators at the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) require at least 35 to 40 small private market investors before the Company can qualify as a public OTCBB company using the DPO method. We may work together to acquire the 35 to 40 investors.

Before we continue to explain the DPO process, we’ll first point out that there are 3 methods to take a company public:

    1. IPO: When filing an IPO, the Company has to guarantee the SEC that the Company will raise a certain number of dollars. For instance, if they will say they will raise $5,000,000 and then are not able to raise     the full $5,000,000, they do not receive approval as a public company. It costs approximately $250,000 (or more) to file and finish an IPO. If the Company is unsuccessful in raising the $5,000,000, the costs have been spent for nothing.

    2. REVERSE MERGER: A reverse Merger with an OTCBB public shell costs from $450,000 to $500,000 USD. The private company is merged with the public shell. The shell’s company name and stock symbol are then changed. It is a costly way to go public. Most foreign entities prefer the Reverse Merger option because of the relative speed in getting their companies public.

    3. DPO: As was discussed before, at least 35 to 40 small investors need to participate using a "Regulation D," "Rule 506" Private Placement Memorandum (PPM) along with a signed Subscription Agreement. A multitude of documents are filed with the SEC and more are filed with FINRA. The difference between an IPO and a DPO is that a DPO does not guarantee to the SEC that they will raise a set amount of money. Using the same $5,000,000 figure used above, when filing forms using the DPO method, we ask the SEC for a fully-registered public offering to raise $5,000,000. In addition, we ask that the document be valid for 12 months. Even if no money is raised, the company still achieves public status. The DPO method does not have the risk of an IPO. In addition, we can take a company public using the DPO method for a little as $60,000. The person taking the company public is only required to come up with $10,000 to $15,000. The remainder of the funds are raised through the private offering. Plus the original 10 to 15 thousand can also be reimbursed from the proceeds of the offering. So, as you can see, the savings using the DPO method over the IPO method is significant.

As stated before, the company that will be going public will be merged into a Nevada corporation. A Private Placement Memorandum and Subscription Agreement will be drafted and at least 35 to 40 investors must invest $1,000 to $10,000 each. Once the PPM offering is funded, then the Company’s financial statement is audited by a CPA firm that is approved by the SEC. When the audit is complete, the Company’s securities lawyer files the documents with the SEC. After documents are approved, the Company’s lawyer files the proper forms with FINRA. A stock symbol will be issued and the Company receives a “Letter to Trade."

During the two weeks after the Letter to Trade is delivered to the Company by FINRA, we do what we call “the dribble.” On small and basic start-up companies, the 35+ investors have paid only 2 to 4 cents per share. During “the dribble,” we will sell shares to them at 4 to 8 cents per share. This will double the money the 35+ investors have already invested and sets up the IR and stock promoters to move the Company’s stock upward.

There are a number of people on our team who will help the Company when we execute what we call “The Launch.” All of these people are involved in Investors Relations (IR) and stock promotion. They help to draw attention to the stock and bring in many people to the trading table. 

At the end of two weeks of doing “the dribble,” we then launch our trading. Our network traded over 900,000,000 shares of stock in December of 2010 with a gold mining company. Energy, gold, and silver deals are very hot as of this writing. So that there is no confusion, the number above, as incredible as it sounds is factual.

We believe we have the best Investor Relations team in existence. Some of these people include former IR directors of major corporations.

We hold a small percentage of shares of stock in the Company for the things we do. That is one of the reasons we have the lowest cash price on the street for taking companies public.

We must note here that none of the information contained herein is to be considered legal or tax advice. If such advice is needed the services of a licensed attorney and/or accountant should be sought. Nor is it an offer to buy or sell securities. It is for general informational purposes only. That being said, when we take your company public, the process is handled by our network which does include licensed attorneys and accountants and a multitude of other individuals to help guide the process within the proper legal and tax framework.

Please call Abstract Law.com, Monday through Friday, 9am to 5pm, (Eastern Standard Time) at: (347) 766-0LAW / 766-0529.