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Secondary Trading

The National Securities Market Improvement Act of 1996 limited the authority of states to impose restrictions upon sales of securities made pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file reports under Sections 13 or 15(d) of the Exchange Act. As a result of Prosperity, Inc. (the "Public Shell") reporting status, sales of the Public Shell's common stock in the secondary market by the holders thereof may then be made pursuant to Section 4(1) of the Securities Act (sales other than by an issuer, underwriter or broker) without qualification under state securities acts.

Following a business combination, a target company will normally wish to cause the Public Shell's common stock to trade in one or more United States securities markets. The target company may elect to take the steps required for such admission to quotation following the business combination or at some later time.

In order to qualify for listing on the Nasdaq SmallCap Market, a company must have at least:

  1. net tangible assets of $4,000,000 or market capitalization of $50,000,000
    or net income for two of the last three years of $750,000;
  2. public float of 1,000,000 shares with a market value of $5,000,000;
  3. a bid price of $4.00;
  4. three market makers;
  5. 300 shareholders and
  6. an operating history of one year or, if less than one year, $50,000,000
    in market capitalization.

For continued listing on the NASDAQ SmallCap Market, a company must have at least:

  1. net tangible assets of $2,000,000 or market capitalization of $35,000,000
    or net income for two of the last three years of $500,000;
  2. a public float of 500,000 shares with a market value of $1,000,000;
  3. a bid price of $1.00;
  4. two market makers; and
  5. 300 shareholders.

If, after a business combination, the Public Shell does not meet the qualifications for listing on the NASDAQ SmallCap Market, the Company may apply for quotation of its securities on the OTC Bulletin Board. In certain cases the Public Shell may elect to have its securities initially quoted in the "pink sheets" published by the National Quotation Bureau, Inc.

To have its securities quoted on the OTC Bulletin Board a company must:

  1. be a company that reports its current financial information to the
    Securities and Exchange Commission, banking regulators or insurance
    regulators;

  2. has at least one market maker who completes and files a Form 211
    with NASD Regulation, Inc.

The OTC Bulletin Board is a dealer-driven quotation service. Unlike the NASDAQ Stock Market, companies cannot directly apply to be quoted on the OTC Bulletin Board, only market makers can initiate quotes, and quoted companies do not have to meet any quantitative financial requirements. Any equity security of a reporting company not listed on the NASDAQ Stock Market or on a national securities exchange is eligible.

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