FAQ ON GOING PUBLIC

Many entrepreneurs have preconceived notions about taking their company public, most of which are not accurate. Nine little known facts:

1. You do not need a brokerage firm or investment banking firm to take your company public.

Many companies opt to go public through a direct public offering. In these registered public offerings, a private company follows the same rules and regulations that are followed by companies who go public with an investment banking firm.

2. You do not need to go public through a reverse merger.

Many companies falsely believe that they are too small or are not interesting enough to go public so they decide to go public through a reverse merger transaction. The truth is that virtually any company can go public through a direct public offering.

3. You do not need to give up control of your company.

Senior executives of small to medium size companies believe that they will lose control of their company during the process to become public. While there are additional constraints due to government regulations and investor demands, it is rare for a company to give up control. When companies do give up control during the initial public offering process, they always do so voluntarily as they have a choice not to proceed with the transaction.

4. You can significantly increase your personal wealth by going public.

Going public is a great way to generate immense wealth. Private companies are often valued at far less than their publicly traded counterparts. The mere process of becoming public adds enormous value to the shares of any private business.

5. You can provide yourself and your investors with an exit strategy and liquidity.

Companies go public for many reasons. One of the benefits of being public includes the fact that insiders and their investors can liquidate their holdings over time.

6. You can use newly issued stock to acquire other companies and grow your business.

Many companies want to go public because they understand that issuing stock to acquire other companies is a tremendous advantage. What private company would not be interested in hearing an offer from a publicly traded company?

7. You can generally raise capital easier, faster and at a lower cost after going public.

Investors have a natural preference to invest in publicly traded companies. As a result, they are more willing to invest in publicly traded companies.

8. You can issue stock options to attract and retain high quality employees and consultants.

Smart and talented people are always hard to get. Public companies can effectively use stock options as a nice incentive that their private companies can not offer.

9. You do not need any minimum level of sales, profits or assets to become public.

Many private companies think they need to achieve certain milestones to become publicly traded. The fact is: there are absolutely no sales, profit or asset requirements for a private company to go public.

ADVANTAGES OF A REVERSE MERGER

Advantages of Going Public through a Reverse Merger

Increased Valuation: Typically publicly traded companies enjoy substantially higher valuations than private companies.

Capital Formation: Raising capital is usually easier because of the added liquidity for the investors, and it often takes less time and expense to complete an offering.

Acquisitions: Making acquisitions with public stock is often easier and less expensive.

Incentives: Stock options or stock incentives can be useful in attracting management and retaining valuable employees.

Financial Planning: Public company stock is often easier to use in estate planning for the principals. Public stock can provide a long term exit strategy for the founders.

Reduced Costs: The costs are significantly less than the costs required for an initial public offering.

Reduced Time: The time frame requisite to securing public listing is considerably less than that for an IPO.

Reduced Risk: Additional risk is involved in an IPO in that the IPO may be withdrawn due to an unstable market condition even after most of the upfront costs have been expended.

Reduced Management Time: Traditional IPOs generally require greater attention from senior management.

Reduced Business Requirements: While an IPO requires a relatively long and stable earnings history, the lack of an earnings history does not normally keep a privately held company from completing a reverse merger.

Reduced Dilution: There is less dilution of ownership control, compared to a traditional IPO.

Reduced Underwriter Requirements: No underwriter is needed: (a significant factor to consider given the difficulty companies face in attracting an investment banking firm to commit to an offering.)

RULE 15C-211

5c211 Was designed to allow fully reporting public companies to have their securities quoted on the Over-The-Counter Bulletin Board (“OTCBB”) by filing some simple disclosure.

Rule 15C211 Under SEC Rule 15C211, a U.S. securities broker or dealer may not publish a quotation for any security unless certain information concerning the issuer is available and the broker or dealer has a reasonable basis for believing that the information is accurate. The information requirement is satisfied, in simple terms, if:

1) a Securities Act registration statement (F-6, F-1) has been filed within the last 90 days,

2) the issuer is complying with filing requirements and has in its records the issuer's most recent annual report,

3) the issuer is complying with Rule 12g3-2(b),

4) the broker or dealer has on record information relating to the issuer, its securities, its business, products and facilities. Management information, financial statements of the issuer and certain other data must also be on record.

Form 15C211, also known as Form 211, refers to the specific filing form a broker/dealer must provide containing the information necessary to publish a quotation on the company.Your attorney should prepare the form. For more information visit www.tracyfirm.com

Reverse merger: A reverse merger is a method by many of our small and mid-cap companies to initially go public, is the purchase of, and reverse merger into, an existing public shell company. This is inexpensive compared with conventional Initial public offerings (IPO). this is also a simplified fast track method by which a private company can become a public company.

In a reverse merger, an operating Private company merges with a public company that has little or no assets, nor known liabilities (the "shell"). In some rare instances, the shell may have some amount of cash remaining for investment into the new enterprise. The public corporation is called a "shell" since all that exists of the original company is its corporate shell structure and shareholders. The private company owners obtain the majority of the shell corporation's stock (usually 90-95%) through a new issue of stock for the private enterprise or asset.

The public corporation will normally change its name to the private company's name and elect a new Board of Directors which will appoint the officers. The public corporation will usually have a base of shareholders sufficient to meet the 300 shareholder requirement for eventual admission to quotation on the NASDAQ Small Cap Market or American Stock Exchange (if the private company's financial condition substantiates other NASDAQ or AMEX requirements), although some shells have as few as 35-50 shareholders, and are currently listed (or can apply for listing) on the OTC Bulletin Board or the NQB Pink Sheets.

ALTERNATIVE TO THE IPO

A few years ago, it seemed that nearly every company was going public with an IPO to gain capital investment, but now, with this route effectively blocked to smaller companies, entrepreneurs, angel investors and employees are increasingly looking at the opportunity of a reverse merger with a trading shell on the OTC Bulletin Board, the Pink Sheets or Form 10.

Through the reverse merger, your private company merges into a publicly listed company called a "shell" and gains control. This gives you listed stock that can be leveraged to raise capital.

Investor Peter Klamka of Ann Arbor, Michigan a stake holder in fast growing solar energy company Girasolar Inc (OTC: GRSR) stated that he thinks "the best way to go public in the current climate for most private companies, is with a Form 10 shell. It can be the least expensive method with the opportunity to avoid problems associated with most trading shells."

At a purchase cost of approximately $50-100K, a Form 10 blank check shell company is an attractive vehicle for private companies searching for a route onto the public markets. But, under the purview of the Worm/Wulff Letters, blank check shares are prevented from instantaneously trading after Form 10-SB shells complete a reverse merger with a private firm, regardless of how long the shells have been reporting public companies.

The alternative is an already trading shell listed on the Pink Sheets or OTCBB, which, with acquisition costs ranging from $150K up to $1 Million is a much more expensive option.

The greatest benefit of using a Form 10 shell company as your route to public ownership is that the purchasing company will retain most if not all of the stock in the shell. Overall the process takes longer, but is ultimately a much better deal for shareholders and the company alike.