Tag Archives: OTCQB

What is a Resale S-1 Registration Statement?

In a Resale S-1 Registration Statement, securities previously acquired privately are registered for resale to the general public.

Who are the Selling Shareholders in a Resale S-1?

In a typical example, investors in a company’s Private Placement (“PPM”) are told that their shares will be “registered for resale” at a later date.  In a Resale S-1, these investors are referred to as “Selling Shareholders”, and their names are listed in a table, along with the number of shares, and an explanatory note detailing the method and date of purchase.  The PPM Offering Documents, including a Subscription Agreement, are usually included in the Resale S-1 as Exhibits.

In another example, shares previously awarded to consultants, founders or employees for services can also be registered for sale in a Resale S-1.  The supporting documentation showing the origin and history of those shares would likewise be included as Exhibits.

All of this Selling Shareholder documentation is reviewed by the company’s PCAOB auditor so that the cost basis, and value of consideration is included in the audit.

What Makes a Resale S-1 Different?

The main difference in a Resale S-1 is when the Selling Shareholders sell their shares, they keep all of the money from the sale,  and the company does not receive any funds.   Even so, the company typically pays for the cost of the Resale S-1 Registration Statement, including the audit.

How Does a Company Benefit from a Resale S-1?

One way a company benefits from a Resale S-1 is by demonstrating to future PPM investors that the company keeps its promise to later register shares.   It also benefits the company by creating a “Float.”  The Float is the block of non-affiliate, free trading shares available to trade “on the market.”

In order to justify the expense of preparing a Resale S-1, a company will typically also register a certain number of new S-1 shares itself.  When the company sells these newly registered S-1 shares to the public, the company keeps those funds.

Private Placement followed by IPO and Resale S-1 Combination

One of the most common strategies for going public on the OTC Bulletin Board or OTC Markets via S-1 Initial Public Offering (“IPO”) is to file a new S-1 Registration Statement following a Private Placement Offering.  This S-1 registers both new shares for the company to sell, and also includes Selling Shareholders who bought stock in the Private Placement (“PPM”).

Many companies use the strategy of filing a quick PPM for friends and family before filing an S-1 Registration Statement as way of obtaining some of the 35 non-affiliate shareholders Market Makers are looking for prior to sponsoring the company for a ticker symbol under 15c211.  This also helps to defray some of the administrative costs associated with going public.

In order for this strategy to be effective, the PPM documents and consideration needs to be in order so that the company’s PCAOB auditor can efficiently include the Selling Shareholders into the S-1 audit.  An experienced OTC securities attorney can help companies do both a PPM and a Resale S-1 from start to finish.

Securities Attorney for Private Placements and S-1 Resale Registrations

Matt Stout is a securities attorney focused on taking companies public on the OTC Bulletin Board and OTC Markets.   When companies engage Matt Stout as securities counsel, the PPM to S-1 process is handled efficiently and all representation is under an agreed-upon flat fee, which includes responding to all SEC Comment Letters.

Companies interested in learning more about Private Placement Offerings and S-1 Registration Statements can contact Matheau J. W. Stout, Esq. for a no cost consultation at (410) 429-7076 or mstout@otclawyers.com.

Graphics Used in S-1 Registration Statements

Many companies filing IPOs to go public on the OTC Bulletin Board or OTC Markets using S-1 Registration Statements choose to include text or artwork inside the front and back cover pages of the prospectus.

Graphics are permitted in an S-1 Registration Statement, subject to certain best practices.

  1. Registrants should refer to Rule 304 of Regulation S-T to ensure that the graphics are in compliance;
  2. The graphic presentations must accurately represent their actual current business;
  3. Graphics must not depict products that do not exist or are not the Registrant’s actual products;
  4. Registrants cannot include testimonials or statistical data that are taken out of context; and
  5. Registrants should not identify specific customers that are not representative of the registrant’s overall customer base;
  6. Graphics should not use industry jargon or terms that are unfamiliar to the average investor;
  7. The graphic presentation should not include extensive narrative text that repeats information already contained in the Summary or Business Overview sections;
  8. Graphic presentations cannot be confusing or obscure other Prospectus disclosures, and
  9. No graphic presentation should give prominence to selected portions of the Registrant’s business or operations.

S-1 Attorney Offers No Cost Consultations to Discuss Going Public

Microcap companies and entrepreneurs seeking to go public on the OTCQB or OTCBB via S-1 Registration Statements can contact OTCMarkets securities attorney 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.

 

S-1Registration Statements

We File S-1 Registration Statements

We represent OTC Bulletin Board and OTC Markets Pink Sheet public companies in the preparation and filing of S-1 Registration Statements with the SEC.

This includes private companies seeking to “go public” via S-1 and those established OTCBB, OTCQB and Pink Sheet companies that are registering a class of securities previously sold through a private placement.

PCAOB Auditors

We work closely with several PCAOB Auditors and can recommend an auditing firm to prepare financials to accompany the S-1 when needed.

If an Issuer already has an auditor, we can work with that firm to prepare the S-1 filing, and to coordinate the timing of the S-1 with the completion of the audit.

Market Makers

We work alongside several market makers that sponsor microcap companies which seek to “go public” through the filing of an SEC S-1 Registration Statement.

In these cases, in order to obtain a trading symbol, and become DTC eligible, the company will need a relationship with a broker-dealer acting as a “market maker” that will complete Form 211 on the company’s behalf.

If a company already has a market maker lined up, chances are good we have worked with the broker-dealer before, and that I can assist with due diligence and issue the legal opinion which accompanies the 15c2-11.

Business Plan

Sometimes companies seeking to file an S-1 worry too much about polishing their “business plan” and would do well to get the process of preparing their S-1 started before the business plan presentation is polished and SEC ready.

This is because PCAOB audits take time, and these S-1 audits should be addressed first.   Until the auditor has been provided with all of the financials needed to complete the SEC audit, the clock has not started ticking on the S-1.

The business plan can be polished while the auditor is at work and when needed we can refer management to specialists who edit business plans for S-1 filings.

We help Coordinate the S-1 Process

We help coordinate the S-1 process by serving as a liaison between the company, its auditors and the market maker, and in the meantime, I can assist with the review of the company’s business plan.

As a practical matter, because the format of an S-1 Registration Statement demands answers to specific questions, the very process of beginning the S-1 will help management complete the business plan.

Matt Stout, OTC securities lawyer, welcomes inquires from both current and future OTC Bulletin Board and OTC Markets Pink Sheet companies with questions on the S-1 process at (410) 429-7076 or mstout@otclawyers.com.

Beneficial Ownership Reporting Under Exchange Act Sections 13(d) and 13(g)

Many Affiliate Shareholders of OTC microcap companies are familiar with the Rule 144 reporting requirements and volume trading limitations for the beneficial owners of greater than 10% of an Issuer’s securities.

Section 13 Applies to Exchange Act Reporting Issuers

However, many are unaware that all owners of greater than 5% in any Issuer which has registered a class of its equity securities under Section 240.13 of the Securities Exchange Act of 1934 (“Exchange Act”), are supposed to file Beneficial Ownership Reports with the SEC.

Investors Owning Greater than 5% Must File Schedule 13 Reports

Under Regulation 13D-G, beneficial owners must continue to file these Schedule 13D or the more abbreviated 13G reports as long as their holdings exceed 5%. These Beneficial Ownership Reports provide the SEC with certain background information as well as the investor’s “intentions” which is why these Schedule 13 reports are filed in connection with a tender offer.

Investors seeking further information on the reporting requirements in connection with a tender offer, or with questions on securities law compliance in general, can contact Matt Stout, securities lawyer at (410) 429-7076 or mstout@otclawyers.com.

 

Do OTC Markets Issuers Need Audited Financials?

Public companies quoted on the OTC Markets OTCQX and OTCQB marketplaces require financials audited by a PCAOB auditor.  Those securities quoted on the OTC Markets Pink Sheet market tier do not required audits, though many Pink Sheets do have audited financials.

Audited Financials Not Required for Non Sec Reporting Companies

FINRA does not require the financial statements of Pink Sheets, which are not SEC reporting companies, to be audited for the Form 211 in the 15c2-11 process. Non SEC reporting companies are those that do not publish their financials and disclosures using the 10-Q, 10-K and 8-K using the SEC’s EDGAR filing system.

Unaudited Financials of US Issuers Must Be Prepared in Accordance with GAAP

However, OTC Markets Pink Sheet Issuers that are US companies should have financials that are prepared in accordance with GAAP. Foreign Issuers, meaning those Issuers that are incorporated offshore as opposed to US corporations that have business headquarters or operations outside of the US, are allowed to post financials that do not follow GAAP if they are prepared in accordance with their home country’s accepted accounting standards.

PInk Current Issuers Without Audits Require an Attorney Letter

Whether a US or foreign Issuer, a public company that wants to maintain Pink Current status on OTCMarkets.com will require an Attorney Letter  with Respect to Current Information at least annually, if they do not file reports with the SEC and do not publish audited financials. Companies that want to maintain Pink Limited Information (Pink Yield Sign) are not required to have audited financials.

Issuers with questions regarding PCAOB audits or questions about filing Form 15 with the SEC to transfer to the OTC Markets Alternative Reporting Standard (thus avoiding audits) can contact Matheau J. W. Stout, Esq. at (410) 429-7076 or mstout@otclawyers.com.

Are S-8 Shares Free Trading?

S-8 Shares Are Free Trading When Form S-8 Is Filed

One reason why employees and consultants of OTC Bulletin Board or OTC Markets OTCQB Issuers like to receive S-8 Shares is that  an S-8 is immediately effective upon filing. This means that S-8 stock is free trading upon filing Form S-8 for employees and consultants who are not Affiliates.   S-8 stock is still subject to the Rule 144 volume limitations if owned by officers, directors and other Issuer control persons.

SEC Reporting Company Requirements To Use S-8

In order to meet the requirements of S-8 Shares, the OTC Issuer doing an S-8 offering must meet every one of the SEC’s requirements for S-8 stock.  The Public Company Issuer MUST:

  1. be “fully reporting to the SEC,” subject to the reporting requirements under Section 13 or 15 (d) of the Exchange Act;
  2. have filed all SEC reports for the past year (or for whatever shorter period the Issuer was required to file SEC reports);
  3. show that the consultant provided “bona fide services” to the Issuer;
  4. show that the services provided by the consultant were not “in connection with the offer or sale of securities in a capital raising transaction”;
  5. show that the services provided by the consultant were not “in connection with directly or indirectly promoting or maintaining a market for the Issuer’s securities”;
  6. The consultant must be a natural person (an individual) since Form S-8 cannot be used to issue stock to a corporation or other entity;
  7. The consulting agreement must be between the Issuer and the natural person; and
  8. The Issuer must issue the stock directly to the natural person as opposed to a corporate entity.

All SEC reporting companies, including OTCBB and OTC Markets OTCQB issuers can discuss the process of creating and registering S-8 Shares for employees and consultants by contacting securities lawyer Matheau J. W. Stout at (410) 429-7076 or mstout@otclawyers.com.

When Does an Issuer Need to File an 8-K?

An 8-K is Filed When Something Material Happens

One of the most often asked questions of a securities attorney is when an Issuer is required to file an 8-K.  There is a laundry list of specific events that require the filing available at SEC.gov and on the Form 8-K itself.  But it is helpful for management of small public “bulletin board” companies, listed on the OTCMarkets OTCQB, to look at these requirements as more of an opportunity to both document and share news, instead of trying to find a way “not to file” to avoid administrative hassle and costs.

The short answer is whenever there is a material development or the occurrence of an “event” that the Issuer’s shareholders (and the investing public) should know about.  These material events may differ greatly when comparing a development stage, micro cap company with Google or Microsoft, and therefore it likely that a development stage company should actually be filing more 8-Ks if it is actively operating.

Microcap Issuers Should Provide As Much Information As Possible to Shareholders

At the Law Office of Matheau J. W. Stout, Esq., we advise our OTCQB and OTCBB microcap public company clients to err on the side of full disclosure, and if there is a doubt as to whether or not the transaction or event is “material” the Issuer should file the 8-K.  Simply put, there is no penalty for providing shareholders with too much information (“TMI”) as long as that information is accurate and the SEC appreciates those public companies which go above and beyond in communicating with their shareholders.

File an 8-K When News Goes Out In a Press Release

Although it may seem obvious, quite often, development stage OTCQB and bulletin board public companies are so eager to issue good news to the public through press releases that they forget to file the 8-K.  In general, if the news is press release worthy, it might very well be considered material, and there should be an 8-K filed within four (4) business days of the occurrence of the event.   Because of the difference in market cap, shareholder base, revenue and cash flow, the signing of (or loss of ) a Letter of Intent or Purchase Order for $50,000 may not be material for Google, but it may be radically good (or bad) news for a newly reporting Issuer still in the development stage with few assets and no revenue.

This kind of thinking (that there is no such thing as “TMI”) prevents many problems.  When small public companies take the time to think hard about whether the news being distributed can be easily and well documented, that moment of pause can save many headaches later.