Tag Archives: go public otc markets

SEC Exchange Act Filings for Foreign Private Issuers After Going Public in the US

A Foreign Private Issuer (“FPI”) that has registered securities under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 (“Exchange Act”) or is required to file under Section 15(d) of the Exchange Act after completing its F-1 Registration Statement is required to file the following reports with the SEC:

Annual Report for Foreign Issuers on SEC Form 20‐F

SEC Form 20‐F is only filed by foreign issuers and can be used as an Annual Report, just like a Form 10‐K would be filed by domestic United States domiciled issuers. The information required to be disclosed in an SEC Form 20‐F includes the same information that would be found in a 10-K for a United States domestic issuer:

  1. operating results;
  2. liquidity and capital resources;
  3. trend information;
  4. off‐balance sheet arrangements;
  5. consolidated statements and other financial information;
  6. significant business changes;
  7. selected financial data;
  8. risk factors;
  9. history and development of the issuer;
  10. business overview; and
  11. organizational structure.

Foreign Issuers Filing SEC Reports on Form 6‐K

In addition to an Annual Report on Form 20-F, an FPI must also file Form 6‐K with the SEC. Form 6‐K generally takes the place of both the 10‐Q and the 8-K that US domestic issuers are required to file with the SEC.   When filed in order to provide the information contained in a 10-Q, Form 6-K will include financials. In other instances, the Form 6-K will include timely disclosure of material events, which would be filed in an 8-K by US domestic issuers.

However, unlike in an 10‐Q or 8‐K, there are no specific disclosures required by Form 6‐K for foreign issuers. Instead, an FPI must file a 6‐K with the SEC promptly whenever the following occurs:

  1. The foreign issuer makes information public pursuant to the laws of its home domicile or the laws in the jurisdiction in which it is incorporated; or
  2. The foreign issuer is required to file information with a stock exchange on which its securities are traded and which was made public by that exchange; or
  3. The foreign issuer is required to distribute information to its shareholders.

US Securities Lawyer for Foreign Companies Going Public in the United States

Foreign companies going public on the OTC Bulletin Board or OTC Markets in the United States, or those seeking to dual list their securities in the US markets like the NASDAQ can contact securities attorney Matt Stout for a no cost consultation at (410) 429-7076 or mstout@otclawyers.com.

Matheau J. W. Stout, Esq. works with foreign management of US companies and foreign domiciled corporations to help them go pubic in the US via F-1 Registration Statement and filing the Form 20-F.

Can a Start Up Go Public via S-1 as a Shell Company?

Filing an IPO via S-1 Registration Statement gives any private US corporation the opportunity to go public on the OTC Bulletin Board or OTC Markets.   Contrary to popular belief, the SEC does not require companies going public to exceed any minimum asset or revenue criteria.  Any US domiciled corporation can go public using Form S-1 even if it is a brand-new start up with very few assets and zero revenue.

The Decision to Declare Shell Company Status in an S-1

If a start up company’s S-1 Registration Statement shows few assets and operations, the SEC staff member reviewing the S-1 may request that the start up either declare itself to be a shell company as defined in Securities Act Rule 405, or provide a legal analysis in support of its belief that it should not be considered a shell.

Under Rule 405, in order to meet the definition of a “shell company” the Issuer must have

  1. No or nominal assets; or
  2. Assets consisting solely of cash or cash equivalents; and
  3. No or nominal operations.

What Happens if an Issuer Declares Shell Status in an S-1?

For those Issuers which truly are “shells” (such as those with no business model other than to find an operating company to merge into or acquire), declaring shell company status will require the Issuer to revise its prospectus, including the cover page and prospectus summary, to disclose that the Issuer is a shell company.

A shell company Issuer will also need to disclose in the Risk Factors section, the consequences of “shell status” including restrictions on the Issuer’s ability to use registration statements on Form S-8, the limitations on the ability of its shareholders to use Rule 144 and potential illiquidity of its securities.

Declaring shell status in an S-1 when the company is actually a shell does not prevent the S-1 from being declared Effective.  However, according to the “Evergreen Rule” it does have lasting implications (forever) for shareholders looking to deposit and clear restricted stock in the future under Rule 144.

Is a Startup Company Considered a Shell Company Under Rule 144?

No, a start-up company was specifically not intended to be classified as a shell company under Rule 144, and if the S-1 is documented properly, a startup will not need to declare itself a “shell company.”

According to Footnote 172 to SEC Release No. 33-8869 (which was the release that accompanied the final amendments to Rule 144), the amendments to Rule 144 were not intended to capture a “start-up” company or a company with limited operating history that was in the early stages of development.

This footnote was intended to address the concerns of several comments to Release No. 3-8869 that defined a shell company, and the primary concern was that the definition of a shell company was too broad as it would capture and include almost every business in its early stages of development, and specifically those in the start-up phase of operations.

Footnote 172 addressed these concerns in providing that a “start-up company” is excluded from the definition of a shell company since “such a company doesn’t not meet the condition of having no or nominal operations”.

Securities Lawyer for Start Up Companies Going Public via S-1 Registration Statement

Startup entrepreneurs seeking an IPO on the OTC Bulletin Board (“OTCBB”) or the OTC Markets OTCQB can contact securities attorney Matt Stout for a free consultation at (410) 429-7076 or mstout@otclawyers.com.

 

S-1 Registration under the Securities Act of 1933

An S-1 Registration Statement is the most common way for a microcap company to “go public.” The S-1 is filed under the Securities Act of 1933, which has two primary goals:

  1. To require that companies provide the public with financial and other significant information concerning securities offered for sale; and
  2. To prohibit “deceit, misrepresentations, and other fraud” in the sale of securities to the public.

The SEC accomplishes these goals by requiring companies to disclose important financial information through the registration of securities following a specific format, such as the S-1.

S-1 Registration Statements for Companies Going Public

More microcap companies have success “going public” on the OTC Bulletin Board and OTC Markets by filing an S-1 Registration Statement than by any other method.

The SEC reviews S-1 Registration Statements to make sure they provide transparent disclosure of important facts and audited financials so that the public is informed of all risks involved in investing in an S-1.

The process of preparing, filing and amending an S-1 based on SEC comments is well known by experienced microcap securities lawyers, like Matt Stout.

What Information Does an S-1 Registration Statement Include?

A properly documented S-1 Registration Statement will provide the SEC with all of the necessary facts, including:

  1. A description of the company’s assets, operations and business model;
  2. A description of the security, such as common stock, to be offered for sale;
  3. Information about management, including the officers and directors of the company; and
  4. Financial statements certified by a PCAOB auditor.

It is important to note that the SEC does not have minimum asset or operations requirements for a company to go public via S-1.   Even start up companies with no revenue and few assets are eligible to file an S-1 Registration Statement.  The only requirement is that the company’s audited financials and disclosures accurately reflect the truth.

SEC Comments and Amendments to an S-1 Registration Statement

An S-1 Registration Statement, including its disclosures, audited financials, and prospectus, becomes visible to the public on SEC.gov as soon as it is posted via the SEC’s EDGAR filing system.

The SEC’s Division of Corporate Finance reviews the S-1 within 30 days of filing and provides SEC Comments, which are requests for clarification and further information.   The company then revises its S-1 Registration Statement to answer the SEC’s questions by filing an S-1/A amendment on SEC.gov.   The SEC Comments, along with a company’s responses, are also made available to the public on SEC.gov after an S-1 is declared Effective.

The SEC Comment and S-1 Amendment process continues for as many rounds as necessary until the SEC is satisfied that the company’s disclosures and financials are clear and understandable to the public.  Once the SEC has approved the last S-1/A, the company files a Request for Acceleration and their S-1 is made Effective.

After the S-1 is Effective, the company’s securities lawyer works with a Market Maker who sponsors the company under 15c211 to obtain its FINRA trading symbol or “ticker.”

S-1 Lawyer Helps Microcap Companies Go Public on the OTC Markets

S1 attorney Matt Stout drafts and amends S-1 Registration Statements for microcap companies and start up entrepreneurs seeking to go public on the OTC Bulletin Board (OTCBB) or OTC Markets (OTCQB).  The S-1 process is handled under an agreed upon flat legal fee, that includes responding to all SEC comments and as many S-1/A amendments as are necessary for the S-1 to be declared Effective.

As part of the S-1 process, companies are introduced to all other service providers needed, including a PCAOB auditor, Transfer Agent, EDGAR filer, and Market Maker who sponsors the company for its FINRA trading symbol after the S-1 is declared Effective.

Entrepreneurs interested in learning more about going public via S-1 Registration Statement can contact OTC securities attorney Matheau J. W. Stout, Esq. at (410) 429-7076 or mstout@otclawyers.com for a free consultation.

 

 

 

Anatomy of an S-1 Registration Statement

All US companies seeking to go public on the OTC Markets may use SEC Form S-1 to conduct an initial public offering (“IPO”).  S-1 Registration Statements can be filed efficiently by an experienced OTC securities attorney and if the S-1 follows a standard procedure using best practices, this helps the SEC review and approve an S-1 in a timely fashion.

S-1 Registration Statements have Two Main Parts

  1. Part I is the Prospectus.  The Prospectus is the legal “selling” document. In the Prospectus, the Issuer of the securities must describe, in easy to understand plain English, important facts about its business operations , financial condition, results of operations, risk factors, and management. It must also include audited financials. The Prospectus must be delivered to everyone who buys securities, and everyone who is offered the securities.
  2. Part II contains additional information that the Issuer is not obligated to deliver to Investors but must still file with the SEC, such as copies of material contracts and agreements.

Specific Disclosures About the Company Required in an S-1 Prospectus

All successful S-1 Registration Statements must include specified disclosures about the Issuer in the Prospectus, including:

  1. A description of the Issuer’s business, properties, and competition;
  2. A description of the risks of investing in the Company;
  3. A discussion and analysis of the Issuer’s financial results and financial condition as seen through the eyes of management (Management Discussion & Analysis or “MD&A”);
  4. The identity of the Issuer’s Officers and Directors, including their compensation;
  5. A description of material transactions between the Issuer and its Officers, Directors, and Affiliates;
  6. A description of material legal proceedings (litigation) involving the Issuer and/or its Officers and Directors; and
  7. A description of the Issuer’s material contracts and agreements, if any.

Other Disclosure Requirements in an S-1 Registration Statement

The S-1 must also disclose certain information about the offering, including:

  1. A description of the securities being offered;
  2. The plan for distributing the securities, including whether or non an underwriter is involved or commissions will be paid; and
  3. The planned use of the proceeds of the securities offering.

Regulation S-K Provides Guidelines for Non-Financial S-1 Disclosure

Regulation S-K provides guidance to Issuer’s on both the form and content rules for non-financial portions of S-1 Registration Statements.

Regulation S-X Provides Guidelines for Financial S-1 Disclosure

S-1 Registration Statements also must include financial statements that comply with the form and content requirements of Regulation S-X. For US domiciled companies seeking to go public on the OTC Bulletin Board or OTCMarkets OTCQB, these financial statements must be prepared according to GAAP.

S-1 Audited Financials Must Be Signed Off by a PCAOB Auditor

All S-1 Registration Statements also must include financial statements audited by a PCAOB Auditor, which an independent certified public accountant registered with the Public Company Accounting Oversight Board.

Securities Attorney for Going Public via S-1

Matheau J. W. Stout helps microcap companies go public on the OTC Bulletin Board and OTC Markets OTCQB via S-1 Registration Statement.  All legal work necessary is covered by an agreed upon flat fee.  We can introduce you to PCAOB auditors, Transfer Agents, EDGAR filers, and Market Makers as part of the S-1 process.  Contact securities lawyer Matt Stout for a free consultation at (410) 429-7076 or mstout@otclawyers.com.

When Does the 90-Day Reporting Period Required by Rule 144(c)(1) Begin?

Companies that go public via S-1 Registration Statement can later file an 8-A12(g) or an 8-A12(b) in order to become “subject to” the reporting requirements of the Securities Exchange Act of 1934 (“Exchange Act”).

Filing the SEC Form 8-A makes the company a “mandatory SEC filer” rather than a “voluntary filer” and allows shareholders to clear restricted stock under a Rule 144 holding period of six months rather than one year.

In order to qualify for the six month holding period under Rule 144, the public company must have been subject to the SEC reporting requirements for 90 days.  The question arises as to when the 90 Day Reporting Period begins.

The Effective Date of the S-1 Starts the 90 Day Reporting Period

When a company goes public via S-1 Registration Statement, and then files a registration statement pursuant to Exchange Act Section 12(g), the 90-day reporting period required by Rule 144(c)(1) begins on the Effective date of the S-1.

Contact Securities Attorney Matt Stout to Discuss Going Public via S-1

Microcap companies seeking to go public on the OTC Bulletin Board and OTC Markets OTCQB via S-1 Registration Statement or to become subject to the Exchange Act can contact S-1 Lawyer Matt Stout at no cost to discuss the process at mstout@otclawyers.com or (410) 429-7076.

 

What are Bid and Ask Prices?

Companies with the goal to go public on the OTC Markets are ultimately looking for their stock to trade.  In the over-the-counter markets,  the most basic terms to understand are the “bid” and “ask.”

What is the Bid?

The “bid” is the highest price a Market Maker will pay to purchase a specific number of shares of stock.  For instance, on a penny stock, a Market Maker may quote a bid of $0.05 and a size of 10,000, meaning that you can sell up to 10,000 shares to the Market Maker at five cents a share.

What is the Ask?

The “ask” is the lowest price at which a Market Maker will sell a specific number of shares of stock.  The ask price is also known as the “offer” price.  The ask price is almost always higher than the bid price.  For example, on the same penny stock, the Market Maker may quote an ask of $0.06 and a size of 20,000, meaning that you can buy up to 20,000 shares from the Market Maker at six cents a share.

What is the Spread?

The spread is the difference between the bid and the ask price.  In the example above, the spread is $0.01.  Market makers make money on the difference between the bid price and the ask price.

In thinly traded markets where volume in a microcap stock is very low, the spread is higher.  When trading volume increases, more shares are bought and sold so a Market Maker will decrease the spread to encourage more volume.  Eventually, multiple Market Makers compete for business by constantly adjusting their bid and ask prices to facilitate trading.