| Traditional Underwriting | | | | $75,000 to $150,000 |
| | | | |
| Time: | | | | Capital: |
| | | | |
| 6 to 12 months | | | | May raise money and stock is now valued and |
| | | | tradable |
| Cost: | | | | |
| | | | Problems: |
| $175,000 to $500,000. (The company will be | | | | |
| out of pocket at least 50% of this amount | | | | None |
| prior to completion. | | | | |
| | | | Advantages: |
| Capital: | | | | |
| | | | Public company can be "Custom Designed" to |
| Typically raises more capital than other | | | | the operating companies specifications. |
| types of transactions. | | | | Shareholders of operating company receive |
| | | | registered shares. New corporation so no |
| Problems: | | | | "SKELETONS" in the company. Financial |
| | | | expertise during the transaction. Market |
| Underwriting may be delayed or canceled. | | | | support after the transaction. Automatic |
| Issue Price may be changed by market | | | | shareholder base friendly to the "Small Cap" |
| conditions or underwriter. | | | | market. |
| | | | |
| Reverse Merger or Buy an Existing "Public | | | | Preparation for a |
| Shell" | | | | |
| | | | Reverse Merger or Public Shell Merger |
| Time: | | | | |
| | | | Locate a Suitable Public Shell - Public |
| 2 weeks to 60 days | | | | shells can often be found by consulting with |
| | | | securities law firms or CPA - Audit firms |
| Cost: | | | | that deal with public companies. |
| | | | |
| $150,000 to $400,00 | | | | It is important to start with a clean shell: |
| | | | Due diligence on the public shell cannot be |
| Capital: | | | | over emphasized, advice from your securities |
| | | | counsel, auditors, and a financial consultant |
| Does not raise money but stock is now valued | | | | should be utilized. As was mentioned, many |
| and tradable | | | | shells are created for the express purpose of |
| | | | merging with a private company. These shells |
| Problems: | | | | have no predecessor entities, and, as a |
| | | | result, little baggage in the way of a |
| Potential "skeletons" in acquired shell. | | | | business failure or other skeletons in the |
| Control shareholders of operating company may | | | | closets. |
| receive restricted shares. | | | | |
| | | | Comprehensive Business Plan - Potential |
| Advantages: | | | | investors, public shareholders, auditors, |
| | | | securities counsel, brokers and market makers |
| Typically Reverse Merger or Public Shell | | | | will want to see a well documented business |
| Merger is the quickest way to get public. | | | | plan. |
| Non-control investors may receive registered | | | | |
| or trading shares. | | | | Strong Management Team - Public investors |
| | | | demand strong management teams. |
| Merge with a Brand New Flex Financial Public | | | | |
| Company | | | | Convincing Marketing Plan - Public companies |
| | | | need the ability to show good sales and |
| Time: | | | | earning growth. |
| | | | |
| 4 to 8 months | | | | Product or Service - Public companies should |
| | | | be able to develop strong or dominant |
| Cost: | | | | position in their business segment. |
| | | | |