Reporting Requirements

OTCBB or Bulletin Board Shells are in high demand by private companies seeking to go public because they are Reporting Companies and subject to all the reporting requirements of the SEC. OTCBB or Bulletin Board Shells offer owners of acquisition candidates the opportunity to acquire a controlling ownership interest in a publicly registered company without incurring the cost and time required to conduct an initial public offering.

Reporting companies are required to be "transparent" in their operations so that investors can make an informed decision before investing. In addition, in reverse merger transactions, merger candidates can make an assessment as to the current and future potential value of the stock to be issued to the private company shareholders in a reverse merger transaction.

The Securities Exchange Act of 1934, as amended requires the filing of numerous reports, including periodic reports on Form 8-K; quarterly reports on Form 10-Q; annual reports on Form 10-K; proxy solicitations on Schedule 14-A; Proxy Information Statements on Schedule 14-C; and officer and director ownerships reports on Forms 3, 4 & 5.

These filings include annual reports on Form 10-K; quarterly reports on Form 10-Q; periodic reports on Form 8-K and proxy filings on Schedules 14C and 14A.

Annual reports on Form 10-K must contain audited financial statements comparing the last two fiscal years (large public companies must compare three years). The financial statements must be prepared in accordance with generally accepted accounting principles (GAAP) and the audit must be completed by a Public Company Accounting Oversight Board (PCAOB) qualified auditor. In addition to the financial statements, the Form 10-K contains detailed information about the reporting company.

In particular, the Form 10-K contains information about the current company business and business and corporate history; risk factors; property; legal proceedings; the market for the company's stock; stock trading information; control and affiliated shareholder information; unregistered sales of equity securities; disagreements with accountants and auditors; information regarding officers and directors including names and background, compensation and stock ownership; information regarding principal stockholders; and related party transactions.

In addition, the Form 10-K contains a management discussion and analysis which includes a discussion of the company's liquidity and source of funds, financial statements, explanations for changes from prior years and a discussion of future operations, including plans, trends and the expected costs and sources of funds for the operations.

The Form 10-Q is an abbreviated version of the Form 10-K containing reviewed (not audited) quarterly financial statements and a management discussion and analysis with the same requirements as the Form 10-K.

Periodic reports on Form 8-K report certain events that occur in between the quarterly and annual filings and must be filed within four (4) days of the reportable event. Reportable events include, but are not limited to;

• Entry into, changes in, and the termination of material agreements
• Bankruptcies and receiverships
• The completion of the acquisition or disposition of assets outside the ordinary course of business
• Material changes in the results of operations or financial condition of the company
• The creation of direct financial obligations or off balance sheet arrangements
• Changes in exchange listings or delistings
• The sale of unregistered securities
• Material modifications to the rights of security holders
• Changes of and disagreements with auditors
• Changes in control
• Changes of Officers or Directors
• Modifications or amendments to articles of incorporation or bylaws
• Any other material event.

Moreover, when a OTCBB or Bulletin Board Shell consummates a transaction which changes it from a shell company to an operating business, a Form 8-K must be filed which includes audited financial statements of the operating business as well as current information such as would be found in a registration statement. Such 8-K is often referred to as a "super 8-K".

The acquisition of a Bulletin Board Shell is succeeded by a reverse merger of the private entity into the dormant OTCBB Shell. For the inexperienced, the process is complex, and success hinges on retaining experienced securities legal counsel.