The OTC Markets Group, formerly known as the National Quotation Bureau (NQB), is an organization that facilitates the trade of Over The Counter (OTC) stocks and other securities. An Over The Counter stock is a financial security that does not trade on a formal stock exchange. Rather, these securities are traded through a dealer network such as the OTC Market Group which include electronic quoting and lower listing requirements than a formal exchange. OTC securities are highly regulated securities by FINRA and the SEC.

The OTC Markets Group was formally established in its present form in 2010, and provides information on over 10,000 OTC securities. Presently, a network of over 100 established broker-dealers (institutions that act as a financial securities broker and/or dealers) trade on the OTC Markets system.

The OTC Markets Group platform is segregated into 3 distinct market tiers: the OTCQX, the OTCQB, and the Pink. Each of these different tiers is separated based on perceived risk levels, which depend on the quality and regularity of a listed company’s reporting information and disclosures.

OTCQX:

The OTCQX divides its listing criteria between U.S. companies and International companies, though they are very similar.  The OTCQX has two tiers of quotation for U.S. companies: (i) OTCQX U.S. Premier (also eligible to quote on a national exchange); and (ii) OTCQX U.S. and two tiers for International companies: (i) OTCQX International Premier; and (ii) OTCQX International.  Quotation is available for American Depository Receipts (ADR’s) or foreign ordinary securities of companies traded on a Qualifying Foreign Stock Exchange, and an expedited application process is available for such companies.

Issuers on the OTCQX must meet specified eligibility requirements.  Moreover, OTC Markets have the discretionary authority to allow quotation to substantially capitalized acquisition entities that are analogous to SPAC’s.

OTCQX – Requirements for Admission

To be eligible to be quoted on the OTCQX U.S., companies must:

  • Have $2 million in total assets as of the most recent annual or quarter end;

  • As of the most recent fiscal year end have at least one of the following: (i) $2 million in revenues; (ii) $1 million in net tangible assets; (iii) $500,000 in net income; or (iv) $5 million in market value of publicly traded securities;

  • Meet one of the following penny stock exemptions under Rule 3a51-1 of the Exchange Act: (i) have a bid price of $5 or more; or (ii) have net tangible assets of $2 million if the Company has been in continuous operation for at least three years, or $5,000,000 if the Company has been in continuous operation for less than three years which qualification can be satisfied as of the end of a fiscal period or as a result of an interim capital raise; or (iii) have average revenue of at least $6,000,000 for the last three years;

  • Not be a blank check or shell company as defined by the Securities Act of 1933 (“Securities Act”);

  • Not be in bankruptcy or reorganization proceedings;

  • Be in good standing in its state of incorporation and in each state in which it conducts business;

  • Have a minimum of 50 beneficial shareholders owning at least one round lot (100 shares) each;

  • Be quoted by a market maker on the OTC Link;

  • Have a minimum bid price of $0.10 per share for its common stock as of the close of business on each of the 30 consecutive calendar days immediately preceding the Company’s application for OTCQX. If (i) there has been no prior public market for the Company’s securities in the U.S. and (ii) FINRA has approved a Form 211, then the Company may apply to OTC Markets for an exemption from the minimum bid price requirements, which exemption is at the sole discretion of OTC Markets. In the event that the Company is a Seasoned Public Issuer (i.e., has been in operation and quoted on either OTC Link, the OTCBB or an exchange for at least one year) that completed a reverse stock split within 6 months prior to applying for admission to OTCQX U.S., the Company must have a minimum bid price of $0.10 per share for its common stock as of the close of business on each of the 5 consecutive trading days immediately preceding the Company’s application for OTCQX, after the reverse split;

  • Have GAAP compliant (i) audited balance sheets as of the end of each of the two most recent fiscal years, or as of a date within 135 days if the Company has been in existence for less than two fiscal years, and audited statements of income, cash flows and changes in stockholders’ equity for each of the fiscal years immediately preceding the date of each such audited balance sheet (or such shorter period as the Company has been in existence), and must include all going concern disclosures including plans for mitigation; and GAAP compliant (ii) unaudited interim financial reports, including a balance sheet as of the end of the Company’s most recent fiscal quarter, and income statements, statements of changes in stockholders’ equity and statements of cash flows for the interim period up to the date of such balance sheet and the comparable period of the preceding fiscal year; and

  • Be included in a Recognized Securities Manual or be subject to the reporting requirements of the Exchange Act.

 

To be eligible to be quoted on the OTCQX International, companies must:

  • Have U.S. $2 million in total assets as of the most recent annual or quarter end;

  • As of the most recent fiscal year end, have at least one of the following: (i) U.S. $2 million in revenues; (ii) U.S. $1 million in net tangible assets; (iii) U.S. $500,000 in net income; or (iv) U.S. $5 million in global market capitalization;

  • Meet one of the following penny stock exemptions under Rule 3a51-1 of the Exchange Act: (i) have a bid price of U.S. $5 or more; or (ii) have net tangible assets of U.S. $2 million if the company has been in continuous operation for at least three years, or U.S. $5,000,000 if the company has been in continuous operation for less than three years; or (iii) have average revenue of at least U.S. $6,000,000 for the last three years;

  • Be quoted by a market maker on the OTC Link (which requires a 15c2-11 application if the company is not already quoted on a lower tier of OTC Markets);

  • Not be in bankruptcy or reorganization proceedings;

  • Be included in a Recognized Securities Manual or be subject to the reporting requirements of the Exchange Act;

  • Have its securities listed on a Qualifying Foreign Stock Exchange for a minimum of the preceding 40 calendar days; provided, however, that in the event the company’s securities are listed on a non-U.S. exchange that is not a Qualified Foreign Stock Exchange, then at the company’s request and subsequent to the company providing OTC Markets Group with personal information forms for each executive officer, director, and beneficial owner of 10% or more of a class of the company’s securities and such other materials as OTC Markets Group deems necessary to make an informed determination of eligibility, OTC Markets Group may, upon its sole and absolute discretion, consider the company’s eligibility for OTCQX International;

  • Meet one of the following conditions: (i) be eligible to rely on the registration exemption found in Exchange Act Rule 12g-2(b) and be current and compliant in such requirements; or (ii) have a class of securities registered under Section 12(g) of the Exchange Act and be current in its SEC reporting requirements; or (iii) if such company is not eligible to rely on the exemption from registration provided by Exchange Act Rule 12g3-2(b) because it does not (A) meet the definition of “foreign private issuer” as that term is used in Exchange Act Rule 12g3-2(b) or (B) maintain a primary trading market in a foreign jurisdiction as set forth in Exchange Act Rule 12g3-2(b)(ii), and is not otherwise required to register under Section 12(g), be otherwise current and fully compliant with the obligations of a company relying on the exemption from registration provided by Exchange Act Rule 12g3-2(b).

 

To be eligible to be quoted on the OTCQX U.S. Premier, companies must:

  • Satisfy all of the eligibility requirements for OTCQX U.S. set forth above;

  • Have (i) At least (a) 500,000 publicly held shares; and (b) $1 million in market value of publicly held shares; and (ii) at least (a) $500,000 in net income (in the latest fiscal year or in two of the last three fiscal years); or (b) $2.5 million in stockholders’ equity; or (c) $35 million in market value of listed securities;

  • Have a minimum of 100 beneficial shareholders owning at least one round lot (100 shares) each;

  • Have a minimum bid price of $1.00 per share for its common stock as of the close of business on each of the 30 consecutive calendar days immediately preceding the Company’s application for OTCQX. If (i) there has been no prior public market for the Company’s securities in the U.S. and (ii) FINRA has approved a Form 211 and (iii) the bid price is equal to or greater than $1.00, then the Company may apply to OTC Markets for an exemption from the 30-day minimum bid price requirements, which exemption is at the sole discretion of OTC Markets. In the event that the Company is a Seasoned Public Issuer (i.e., has been in operations and quoted on either OTC Link, the OTCBB or an exchange for at least one year) that completed a reverse stock split within 6 months prior to applying for admission to OTCQX U.S., the Company must have a minimum bid price of $1.00 per share for its common stock as of the close of business on each of the 5 consecutive trading days immediately preceding the Company’s application for OTCQX, after the reverse split;

  • Conduct annual shareholders’ meetings and submit annual financial reports to its shareholders at least 15 calendar days prior to such meetings.

 

To be eligible to be quoted on the OTCQX International Premier, companies must:

  • Satisfy all of the eligibility requirements for OTCQX International set forth above;

  • As of its most recent fiscal year end, (i) have (a) revenue of U.S. $100 million; (b) global market capitalization of U.S. $500 million, (c) aggregate cash flow for the three preceding years of U.S. $100 million; and (d) minimum cash flow in each of the two preceding years of $25 million; or (ii) have (a) revenue of U.S. $75 million and (b) global market capitalization of $750 million.

OTCQB:

To be eligible to be quoted on the OTCQB, all companies will be required to:

  • Meet a minimum closing bid price on OTC Markets of $.01 for each of the last 30 calendar days;

  • In the event that there is no prior public market and a 15c2-11 application has been submitted to FINRA by a market maker, OTC Markets can waive the bid requirement at its sole discretion;

  • In the event that a Company is a seasoned public issuer that completed a reverse stock split within 6 months prior to applying to the OTCQB, the Company must have a post reverse split minimum bid price of $.01 at the close of business on each of the 5 consecutive trading days immediately before applying to the OTCQB;

  • In the event the Company is moving to the OTCQB from the OTCQX, it must have a minimum closing bid price of $.01 for at least one (1) of the 30 calendar days immediately preceding;

  • Companies may not be subject to bankruptcy or reorganization proceedings the Company’s application;

  • Either be subject to the reporting requirements of the Securities Exchange Act of 1934 and be current in such reporting obligations or, if an international issuer, be eligible to rely on the registration exemption found in Exchange Act Rule 12g-2(b) and be current and compliant in such requirements or be a bank current in its reporting obligations to its bank regulator;

  • Not be in bankruptcy or reorganization proceedings;

  • Be duly organized, validly existing and in good standing under the laws of each jurisdiction in which it is organized and does business;

  • Submit an application and pay an application and annual fee;

  • Maintain a current and accurate company profile on the OTC Markets website;

  • Use an SEC registered transfer agent and authorize the transfer agent to provide information to OTC Markets about the Company securities, including but not limited to, shares authorized, shares issued and outstanding, and share issuance history; and

  • Submit an OTCQB Annual Certification confirming the accuracy of the current company profile and providing information on officers, directors and controlling shareholders.

 

OTC PINK:

The OTC Pink, which includes the highest-risk, highly speculative securities, is further divided into three tiers: Current Information, Limited Information and No Information, based on the level of disclosure and public information made available by the company either through the SEC or posted on OTC Markets.  There are no qualitative standards beyond disclosure for OTC Pink companies, which include companies in all stages of development as well as shell and blank check entities.

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