Crocodile tiers for the Pink Sheets

By: Cydney Posner

According to the press release pasted below, the Pink Sheets will now have a kind of faux tier system, using symbols to denote the level of disclosure provided by the company. The purpose of the new system is "to provide more transparency to investors on the ability and willingness of issuers to provide adequate public disclosure in a credible and timely manner."

The categories will be based upon the level, quality and timeliness of a company's disclosure. For example, the Pink Sheets has, in a display of some delicacy, adopted a skull and crossbones icon to mean "public interest concern," for stocks with unsolicited spam, questionable promotion and the like. Of the seven categories, the "premium" is the OTCQX, which commences trading in January 2007 (and actually does sound like a tier). That category will be available for companies that have "substantial operating businesses and provide credible disclosure to the public." The Pink Sheets estimates that the highest category would apply to about 20% of the companies listed on the Pink Sheets or OTC Bulletin Board. To be designated as OTCQX or the next category, Emerging Equities List, companies will be required to submit an application and agree to provide a minimum level of disclosure. The Pink Sheets will commence displaying icons for categories other than OTCQX on May 1, 2007.

:: NEWS RELEASE

FOR IMMEDIATE RELEASE:

New York, NY - November 6, 2006 - Pink Sheets, LLC today announced the introduction of new categories for the companies traded on the Pink Sheets Electronic Interdealer Quotation and Trading System. The decision to start categorizing each security traded on the Pink Sheets is a move to provide more transparency to investors on the ability and willingness of issuers to provide adequate public disclosure in a credible and timely manner. Pink Sheets is a quotation and trading venue that does not have minimum disclosure standards. Trading is driven by OTC market demand rather than the traditional exchange listing process. Therefore, categorizing securities by their level of disclosure will greatly enhance the capital formation process. The categories are based on the level, quality and timeliness of a company's disclosure. The initiative is similar to the various markets that NASDAQ uses to classify companies as well as the identifiers that NASDAQ and NYSE use to label companies that are late or delinquent in disclosure. Pink Sheets will implement the new categories on May 1, 2007.

Companies that have substantial operating businesses and provide credible disclosure to the public qualify for the premium tier OTCQX, which commences trading on January 2007. For more information on OTCQX, please see our website at www.otcqx.com. Approximately 20% of the current Pink Sheets or OTC Bulletin Board traded companies could qualify for an OTCQX listing. All Pink Sheets quoted securities of issuers that are not able or willing to meet the high standards of OTCQX will be placed in one of the following categories and labeled as such on www.pinksheets.com effective May 1, 2007:

• Emerging Equities List represents companies that provide credible disclosure, including GAAP audited financials, but may not have sufficient business operations to qualify for OTCQX. To qualify for this category, companies are required to provide a letter from an attorney regarding the quality of their disclosure. These companies will have an Emerging Equity List logo next to their symbol.
• SEC Currentindicates that the companies are SEC reporting and current in their financial reporting. Pink Sheets will track filings made through the SEC's EDGAR system and automatically categorize a company based on their filing status.
• Adequate Current Information indicates companies that conform to Pink Sheets Guidelines for Providing Adequate Current Information. An audit is not required, but a letter from an attorney regarding the completeness of disclosure is required. Federal or state regulated banks, insurance companies and companies listed on non-U.S. stock exchanges will only need to supply the information they file with their primary regulator in English and will not be required to provide an attorney letter.
• Limited Information Available applies to companies with some information posted in the last six months, either through the SEC's EDGAR system or the Pink Sheets News Service, but may not be current or complete. A yield sign will be displayed next to the symbol.
• Public Interest Concern  is for stocks with unsolicited spam, questionable promotion or other public-interest concerns. A Skull and Crossbones icon will be displayed next to the symbol. If there is no current information available for a company that is the subject of unsolicited spam, their quotes will also be blocked on pinksheets.com.
• No Information is for all other Pink Sheets stocks. A stop sign will be displayed next to the symbol.

"The creation of the OTCQX and the forthcoming Pink Sheets categories are the next step in our continuing efforts to improve the Pink Sheets trading environment," commented Cromwell Coulson, Chairman and CEO of Pink Sheets. "We have transformed the Pink Sheets from a nearly dormant paper-based quotation service to a fully integrated electronic quotation, trading and disclosure system with almost $25 billion in volume of trading in the first quarter of this year and market maker participation from 200 of the largest securities firms in the world. Because of our highly efficient trading platform, over 90% of inter-dealer trading in OTC Bulletin Board securities now trades through our systems. In addition, we have given issuers the ability to communicate with the investment public through our website, pinksheets.com, which registers over 100 million page views from investors each month."

Additional efforts to enhance transparency and investor confidence include successfully persuading the NASD to require its members to include Pink Sheets and OTC Bulletin Board securities in the monthly short-interest reports. Pink Sheets has also petitioned the SEC to create rules that would expose illegal promotion activities such as spam e-mails that can tarnish the reputation of good companies and diminish the price of their stock.

"Companies are known by the company they keep, and we hope that in providing these new categories, companies that provide disclosure to the public will clearly stand apart from those companies that are of lesser quality," concluded Mr. Coulson.

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