OTC Village: A "Facebook" for Over-the-Counter Bulletin Board Companies

Includes: CLBS, OISI
by: Debra Fiakas

Companies with securities listed on the Over-the-Counter Bulletin Board have something that national exchange listed securities do not - their own social utility, a “Facebook” for small fry. OTC Village is a self-described electronic investor relations and communications portal for OTC/BB companies. Interested companies can sign up for membership and use the OTC Village web site as a platform to communicate with current and prospective investors.

The founders, Jeff Corbin and Todd Fromer, certainly know the investor relations field. They run KCSA, a worldwide investor relations firm based in New York. It does not take the intellect of a rocket scientist to realize that one of the primary impediments to cogent communications with shareholders for an OTC/BB company is budgetary. OTC/BB companies rarely can justify the expenditures to hire consultants for the usual full-court press offered by investor relations consultants. National exchanges often provide considerable assistance in helping listed companies with programs to “meet and greet” investors, but OTC/BB companies get very little outside assistance.

OTC Village is intended to fill the void at an affordable price. The web site offers a tutorial on how to use the portal as well as investor relations tips and best practices guidelines. It is possible for the company to link directly to the OTC Village from the corporate web site. Of course, the social networking sites for people like MySpace and Facebook have worked because they have visitor traffic. OTC Village has set up a page for visitors called "My OTC Village". Interested parties can look up information about companies, sign up for e-mail alerts and chat with other investors on message boards. The verdict is still out on whether OTC Village will be able to screen out chat room visits by those who use misinformation to influence trading. We note that "My OTC Village" requires a registration questionnaire, but it asks very little information. OTC Village has just swung its doors open to the world so I imagine there are a few kinks to work out in the program.

OTC Village has its first converts - NeoStem, Inc. (NEOI.OB) and Opthalmic Imaging System (OTC:OISI). Both companies are still at early stages of development, have complex and innovative business operations and limited resources to get their message out to shareholders and investors.

Neostem Based in New York City, NeoStem operates an adult stem cell bank. Deposited cells are used for autologous or personal use. Customers include adults who wish to have their stem cells collected and banked for future therapeutic use against such diseases as diabetes, heart disease and cancer. Stem cells are thought to have regenerative therapies for wound healing and immune system fortification. NeoStem has no revenue so far and is still operating at a loss. At the end of September 2006, it had $1.3 million in cash in the bank and operations are burning about $1.0 million per quarter. A good share of spending is for business development, branding and public relations efforts.

OIS-logo Ophthalmic Imaging System has a little larger nest egg of $5.9 million in cash and equivalents. The company also generated cash so far this year - $1.6 million in the first nine months of 2006 - principally from $1.6 million earnings on $6.4 million in sales during that same period. The company has $5.9 million in cash in the bank. OIS’s business of designing and marketing digital imaging systems and software has ready demand among physicians in the ocular health field. Since OIS is targeting an easily identifiable customer base, the cost of customer acquisition is modest. Consequently, the operating profit margin is near 14%.

Both NeoStem and OIS need to cultivate awareness and support among a variety of constituents, customers, partners, shareholders, and new investors alike. While the messages to each constituency may be slightly different none are delivered in private and every message has meaning for bystanders. Thus the corporate exposure for each company on OTC Village contributes to awareness for investors as well as other "stakeholders.” This could be good bargain for small companies with big dreams.

Disclosure: Author has no position in above-mentioned stocks nor any affiliation with OTC Village.