Core Viewpoint - The OTC market is emerging as a favored alternative for Chinese companies seeking access to U.S. capital, offering a more flexible and tailored listing solution compared to traditional exchanges like the NYSE and NASDAQ [1]. Group 1: Financial Barriers - Traditional exchanges impose strict financial requirements, often excluding companies in specific development stages, particularly in tech and biotech sectors that may not yet be profitable [2]. - The OTC market does not have rigid profitability requirements, focusing instead on growth potential and innovative business models, thus providing crucial early-stage capital access for startups [2]. - Unlike NASDAQ, which has minimum market capitalization and cash flow requirements, the OTC market allows smaller, less stable companies to list and gain capital attention, paving the way for future growth [2]. Group 2: Equity Structure - The choice of listing venue significantly impacts a company's equity structure and governance strategies [4]. - NASDAQ mandates quantitative requirements for public shareholding and shareholder numbers, which can force companies to dilute ownership prematurely [4]. - The OTC market offers more flexibility, allowing founders or core teams to maintain higher control over their companies, which is particularly beneficial for those pursuing long-term strategies [4]. Group 3: Compliance Disclosure - Ongoing compliance costs are a critical consideration for companies post-listing [6]. - Listing on NASDAQ requires adherence to stringent, high-frequency disclosure standards, resulting in high compliance costs [6]. - The OTC market simplifies disclosure requirements, allowing companies to focus more on business development while ensuring basic transparency [6]. - Companies can gradually adapt their governance structures after listing on the OTC market, facilitating a smoother transition to potential upgrades to main exchanges in the future [6].

Core Insights - Increasing number of Asian companies are targeting the US capital markets, often starting with the OTC market before seeking to transition to NASDAQ [1] - The article outlines the main pathways for transitioning to NASDAQ, analyzes suitable listing methods for different types of companies, and discusses key preparations to enhance the success rate of this transition [1] Group 1: Main Pathways to NASDAQ - Two primary pathways for transitioning from OTC to NASDAQ are identified: the OTC cultivation pathway and the reverse merger pathway [2][5] - The OTC cultivation pathway is suitable for companies that have achieved stable profitability and wish to enhance their valuation before transitioning [2] - The reverse merger pathway allows companies to expedite their entry into the US capital market by acquiring a shell company listed on the OTC market [5] Group 2: OTC Cultivation Pathway - Key steps for the OTC cultivation pathway include ensuring financial reporting meets SEC standards, enhancing stock liquidity and market capitalization, meeting NASDAQ listing criteria, and submitting a NASDAQ listing application [2][6] - This pathway helps companies build market credibility and investor base gradually, aiming for a higher valuation upon transition [3] Group 3: Reverse Merger Pathway - Key steps for the reverse merger pathway involve selecting a "clean" shell company, completing equity swaps, enhancing stock trading activity, and formulating a clear transition plan to NASDAQ [6][8] - The main advantage of the reverse merger pathway is speed, with the process potentially completed in 3 to 6 months, and it is less complex than traditional IPOs [8] - This pathway is best suited for companies with clear post-listing development plans and time-sensitive objectives [8]

Core Viewpoint - The article outlines the process and requirements for companies to go public on NASDAQ, emphasizing the importance of proper accounting practices and compliance with U.S. standards to avoid complications during the IPO process [1][3]. Group 1: Listing Requirements - Companies can list on NASDAQ if they have a net profit of $500,000 after tax or a net asset exceeding $5 million [1]. - The article aims to share the entire operational process for listing under the new policy [1]. Group 2: Accounting Practices - Companies must adhere to U.S. accounting standards, especially for Chinese companies that often follow different accounting principles [3]. - Many small and medium-sized enterprises in China face challenges with financial management, leading to discrepancies in their financial statements [3][4]. - Issues such as improper revenue recognition and non-compliant invoicing practices are common, which can complicate the listing process [3][4]. Group 3: Importance of Professional Accounting - Engaging a professional accounting team is crucial to eliminate potential issues before the audit process begins [4]. - U.S. auditors require clean financial statements without reservations; otherwise, the reports may not be accepted by NASDAQ and the SEC [5]. - A clean audit report is essential for gaining recognition from investment banks during the IPO process [5]. Group 4: IPO Process and SEC Review - The IPO process consists of 13 steps, with the initial accounting phase being critical as it influences the number of SEC review rounds [5][9]. - The first round of SEC questions often involves financial matters, which can lead to multiple rounds of review if not addressed properly [6][8]. - Companies may face significant delays if they receive numerous financial questions in the first round, potentially extending the IPO timeline from one year to two years [5][9].