OTCQB
The OTC Markets Group, Inc. (“OTC Markets”) is a private company that operates an electronic inter-dealer quotation system that allows FINRA registered broker-dealers to insert, update, and withdraw quotes for specific securities. In the OTC market, the two inter-dealer quotation systems are OTC Link, operated by OTC Markets Group and the OTC Bulletin Board, operated by FINRA.
OTC Markets does not require companies whose securities are quoted on its system to meet any eligibility requirements. Companies quoted by OTC Markets are categorized according to the level of disclosure they provide to the public through OTC Markets’ website.
The OTCQB and the OTC Bulletin Board are competing inter-dealer quotation systems for OTC securities. OTC Markets Group is a publicly-traded company currently trading on the OTCQX U.S. Premier marketplace. The OTC Bulletin Board is operated by FINRA.
The OTC market and broker-dealers’ activities in the market are regulated by FINRA, the SEC and various state securities regulators. As well, companies with SEC-registered securities are regulated by the SEC. OTC Markets Group is neither a stock exchange nor self-regulatory organization and is not regulated by FINRA or the SEC.
OTC Markets Group’s quotation and trading system is only open to registered broker-dealers and those broker-dealers are subject to FINRA rules and regulations regarding their conduct and use of the OTC Markets Group systems.
There are no financial or qualitative standards to be in the OTC Markets Group’s OTC Link system. In order to be quoted on the OTCQB the issuer must be reporting with the SEC. An issuer becomes reporting in one of three ways, by registering a class of securities under the Securities Exchange Act of 1934, the Securities Act of 1933, as amended or engaging in a reverse merger with an SEC reporting company. In the event the issuer goes public through a reverse merger, it must file a Form 8k within the four days of the transaction and provide the information that would be found in a registration statement.
Under any of the foregoing scenarios at a minimum, the issuer must provide the disclosures below in their periodic reports and filings with the SEC.
Financial Statements Disclosures.
Financial statements must be audited by a firm that is a member of the Public Company Accounting Oversight Board (“PCOAB”). The PCAOB is a private, nonprofit corporation that oversees auditors of public companies. SEC rules allow smaller reporting companies to provide less financial information than larger reporting issuers. Rule 405 defines a smaller reporting company as a company that: (i) had a public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate number of shares of its common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in its principal market; (ii) in the case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing, computed by multiplying the aggregate number of such shares held by non-affiliates before filing plus the number of such shares included in the registration statement by the public offering price of the shares; or (iii) if the public float as calculated under paragraph (1) or (2) above is zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.
The financial statements required for issuers who are not smaller reporting companies are:
♦ Audited balance sheets (consolidated if you have subsidiaries) as of the end of each of the two most recent fiscal years or if your company been in existence for less than one fiscal year, an audited balance sheet as of a date within 135 days of the date of filing the registration statement.
♦ Audited statements of income and cash flows for each of the three fiscal years preceding the date of the most recent audited balance sheet being filed or such shorter period as the issuer has been in existence.
♦ Interim reviewed financial statements for the current period if the filing is more than 135 days after the end of the issuer’s fiscal year end.
♦ Date of financial statements: Each amendment must include updated interim or audited financial statements if the financial statements in the prior filing are more than 135 days old.
If you are a smaller reporting company you must provide the following financial statements:
♦ Audited balance sheet as of the end of each of the most recent two fiscal years, or as of a date within 135 days if the issuer has existed for a period of less than one fiscal year.
♦ Audited statements of income, cash flows and changes in stockholders’ equity for each of the two fiscal years preceding the date of the most recent audited balance sheet (or such shorter period that the issuer has been in business).
♦ Interim reviewed financial statements for the current period if the filing is more than 135 days after the end of your fiscal year.
♦ Date of financial statements: Each amendment must include updated interim or audited financial statements if the financial statements in the prior filing are more than 135 days old.
Business Disclosures.
This section describes the general character of the issuer’s business and includes a brief description of the organizational history of the company, its principle products and services, potential markets and customers, methods for distributing products and services, availability of raw materials, intellectual property, competitive conditions, research and development expenses, costs associated with complying with regulations, and the number of full and part time employees.
Risk Factors.
This section describes the risks and uncertainties of investing in the issuer. This may include limited financial resources, a limited operating history, adverse economic conditions in a particular industry, lack of a market for the securities offered, industry competition, government regulation, and/or reliance on key personnel or on a limited number of suppliers, distributors, or customers.
Management and compensation.
This section identifies the issuer’s officers and directors and provides information on the issuer’s compensation and benefits plan, material transactions between the issuer and its officers and directors, as well as material legal proceedings involving the issuer or its officers and directors.
Stock offering.
This section describes the distribution plan for the securities being registered including the offering size.
Use of proceeds.
This section sets forth the planned uses of the proceeds from the sale of the securities being registered.
Management’s discussion and analysis of financial condition and results of operations.
This section provides a comparison of the issuer’s financial statements on an interim period and annual basis. The analysis covers at least the three most recent fiscal years, unless the company has been in operation for a shorter period of time, and it focuses on material changes or nonrecurring items that may make the comparison of results misleading.
For further information about this article, please contact Brenda Hamilton, Securities Attorney at (561) 416-8956 or info@gopublic101.co, This information is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information concerning the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490, Rule 506 private placement offerings, Regulation A, Rule 504 offerings, Rule 144, SEC reporting requirements, SEC registration on Form S-1 and Form 10, Pink Sheet listing, OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, go public direct transactions and direct public offerings please visit www.gopublic101.com pr contact Hamilton and Associates at 101 Plaza Real South, Suite 202N, Boca Raton Florida, (561) 416-8956 or by email at info@securitieslawyer101.com. Please note that the prior results discussed herein do not guarantee similar outcomes.