Tag Archives: S-1 Registration Statement

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.

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.

Overview of the SEC’s Comment Letter Process

What is the Purpose of the SEC Comment Letter Process?

The goal of the SEC’s Division of Corporation Finance is to ensure that investors are provided with material information to make informed investment decisions.  One method the SEC uses to achieve this goal is to issue SEC Comment Letters when a company’s disclosures or financials in SEC filings need correction or require further explanation.

Through the SEC’s filing review process, SEC staff monitors and selectively reviews company filings posted under the Securities Act of 1933 and Securities Exchange Act of 1934 in order to “enhance compliance with disclosure and accounting requirements.”

The SEC focuses on disclosures that appear to be inconsistent with SEC rules or recognized accounting standards, or those which appear “to be materially deficient in their rationale or in clarity.”

What is an SEC Comment Letter?

SEC Comment Letters follow a consistent format, using numbered paragraphs that quote the specific language in an S-1 or other SEC filing which needs clarification.  While a S-1 Registration Statement is being reviewed, these SEC Comment Letters are not available to the public.  After an S-1 is declared Effective, all SEC Comment Letters become visible on SEC.gov and are marked UPLOAD.

How Does a Company Respond to an SEC Comment Letter?

A company’s securities attorney then helps the company respond in the same format, listing each comment and reply by number, in a question and answer (“Q&A”) fashion, so that each numbered paragraph is addressed in order.

After an S-1 Registration Statement becomes Effective, these response letters from the company or its securities counsel are also visible on the SEC’s EDGAR system under CORRESP meaning “correspondence.”  At the same time a company responds to SEC Comments, it also amends its S-1 or other SEC filing using the guidance provided by the SEC Comments, and those amendments are likewise posted to EDGAR.

When Does the SEC Issue Comment Letters?

After an S-1 Registration Statement is filed, initial SEC Comments are issued within Thirty (30) Days and often in as few as Two (2) Weeks.  Depending on the nature of the S-1, including the company’s business model and the complexity of its financials, there can be several rounds of SEC Comments, and company responses, which help an Issuer to refine disclosures and explain financials.

The SEC Comment Letter process is expected when a company files an Initial Public Offering (“IPO”) in an S-1 to first sell securities to the public.   There is nothing inherently bad about receiving an SEC Comment Letter.  An experienced securities compliance attorney can help companies use SEC Comments as guidance to make their SEC filings more transparent and easier to understand.

In addition to the expected SEC Comments to an S-1 filing or to any other Registration Statement, the Division of Corporation Finance can technically also issue an SEC Comment Letter for any public company filing an 8-K, 10-Q or 10-K report on SEC.gov if there are questions.

Securities Attorney  for Responding to SEC Comments

Securities lawyer Matt Stout represents OTC Bulletin Board and OTC Markets companies in responding to SEC Comments on S-1 Registration Statements and any Securities Act or 34 Act filings.  Companies seeking guidance on going public by filing an IPO via S-1, or those in receipt of an SEC Comment Letter can contact Matheau J. W. Stout, Esq. for a no cost consultation at (410) 429-7076 or mstout@otclawyers.com.

 

 

 

 

 

Do I Need 35 Shareholders Before Filing an S-1 Registration Statement?

No.  There is no minimum shareholder requirement to file an S-1.  Many startup companies with just one founding shareholder file S-1 Registration Statements as the first step to go public. So only one shareholder is required, along with audited financial statements, in order to file the S-1.

When are the 35 Shareholders Needed to Go Public?

The 35 shareholder requirement only applies at the time of the Company’s 15(c)211 application for a FINRA trading symbol, which a Market Maker does not sponsor until all SEC comments are cleared, and after the S-1 is declared Effective by the SEC.

Should a Company Acquire 35 Shareholders via Private Placement or After the S-1 is Effective?

While it is true that many companies acquire these 35 shareholders via Private Placement Memorandum (“PPM”) before the S-1 is filed, it is just as common for companies to sell free trading S-1 shares to friends, family and to the public as soon as the S-1 is declared Effective, in order to meet FINRA’s 35 shareholder threshold.

In many cases, it might be easier for the company to sell the S-1 shares after the Effective Date, since they are free trading and the investors may perceive less of a risk than buying restricted shares in the same company through a Pre-S-1 PPM.

The key is that those 35 shareholders are not required until sometimes months after the S-1 process is started, since the Market Maker cannot even sponsor the Form 15(c)211 application for the FINRA trading symbol until the S-1 is declared Effective.

Should We Delay our S-1 to Do a Larger Private Placement?

With that timing in mind, it makes little sense for private companies to wait forever to file their S-1 under the guise of attempting to sell more shares in a PPM.  Instead, some savvy companies considering an IPO via S-1 Registration Statement will use a Private Placement only to attract some already interested friends and family investors as shareholders so that they do not delay their S-1 audit.

Doing so allows those PPM friends and family shareholders to be listed in the S-1 as “Selling Shareholders” but also allows the S-1 audit to be completed without wasting a lot of time.   Since the audit is typically the most time-consuming part of the S-1, the sooner the PCAOB audited financials are ready, the sooner the company can go public.

OTC Markets Securities Lawyer for Companies Going Public

Matheau J. W. Stout, Esq. is securities lawyer with a practice focused on taking microcap companies public on the OTB Bulletin Board and OTC Markets OTCQB.  Entrepreneurs with questions about taking a company public via S-1 can contact Matt Stout at (410) 429-7076 or mstout@otclawyers.com for a no-cost consultation.

 

 

 

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.

 

 

 

Initial Public Offerings on the OTC Markets

What is an IPO on the OTC Markets?

The term “initial public offering” or IPO, refers to the first time a company sells stock to the general public.  To register an IPO, a microcap company seeking to become quoted on the OTC Bulletin Board or OTC Markets files an S-1 Registration Statement.

SEC Comments and Amendments to an S-1

S-1 Registration Statements for IPOs are reviewed by the SEC to monitor compliance. When reviewing an S-1, the SEC staff concentrates on disclosures that may conflict with SEC rules or need further explanation to make them clear. The SEC then issues comments, which the company uses to revise and amend its S-1 Registration Statement.  The amendments are marked S-1/A.

When an S-1 Registration Statement is Declared Effective

After all SEC staff comments have been addressed by the Issuer, the SEC will issue an order declaring the S-1 Registration Statement Effective.  This is shown as EFFECT on SEC.gov, and means the Issuer may sell stock under the S-1 to any investor.

After an S-1 is declared Effective, all of the SEC’s comments and the Issuer’s replies are also made visible on SEC.gov under CORRESP, which is short for “correspondence.”

How do I invest in an OTC Markets IPO?

Microcap companies filing an S-1 Registration Statement to go public usually do not have underwriters.  Instead, the Issuer’s Officers and Directors communicate directly with investors and the stock is sold via Subscription Agreement after the S-1 is declared Effective. S-1 stock purchased soon after the Effective date is free trading, and can be deposited by the Investor into a brokerage account and sold “on the market.”

In order to invest in a microcap OTC Markets IPO, a prospective Investor will need to contact the Issuer or its securities attorney, using the information on the first page of an S-1 to indicate their interest in purchasing stock once the S-1 is declared Effective.

OTC Securities Lawyer Files S-1 Registration Statements for Microcap Companies

Private companies seeking to go public on the OTC Markets can contact securities lawyer Matt Stout for a free consultation at (410) 429-7076 or mstout@otclawyers.com.  All S-1 Registration Statements are prepared under an agreed-upon flat fee.   Matheau J. W. Stout, Esq. can provide introductions to an entire team of S-1 professionals including PCAOB auditors, Transfer Agents, EDGAR filers, Market Makers and DTC Eligibility specialists.

 

Authorized US Representative for F-1 Registration Statements

Foreign companies that are not incorporated or domiciled in the United States use SEC Form F-1 Registration Statement to “go public.”   The Form F-1 is similar to the familiar S-1 Registration Statement used by domestic or US based companies to file an IPO.   One difference is that the F-1 requires the signature of the Registrant’s Authorized US Representative, which is most often the company’s US based securities attorney.

Who Qualifies as an Authorized US Representative on Form F-1?

The term Authorized US Representative is discussed in Securities Act Release No. 6360 (Nov. 20, 1981), which states that

the Commission generally accepts the signature of an individual who is an employee of the registrant or an affiliate, or who is the registrant’s counsel or underwriter in the United States for the offering, because the signature clearly identifies an individual that is connected with the offering as subject to the liability provisions of the Securities Act. By similar reasoning, the Commission generally has refused to accept the appointment of a newly formed or shell corporation in the United States as the authorized representative.

US Securities Lawyer for Foreign Companies Going Public

US based securities attorney Matheau J. W. Stout, Esq. serves as Authorized US Representative on Form F-1 Registration Statements for foreign companies seeking to go public on the OTC Markets.   OTC Securities Lawyer Matt Stout can work alongside local counsel outside of the United States to coordinate the filing of a Form F-1, and subsequent quarterly and annual filings, and can recommend PCAOB auditors familiar with Non US companies going public.

 

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.

How to Update the Prospectus for a Continuous Offering on Form S-1

If a microcap company files an S-1 Registration Statement for a continuous securities offering, how should its prospectus be updated to reflect new information in subsequent 10-Q and 10-K reports?

When SEC Form S-1 is used for a continuous offering, the prospectus may should be revised periodically to reflect new information because unlike Form S-3, the S-1 does not provide for incorporation by reference of subsequently filed periodic reports.

Post Effective Amendments to Form S-1

For example, in a continuous offering on a Form S-1 pursuant to Rule 415(a)(1)(ix), an OTCQB company wants to update the prospectus to include Exchange Act reports filed after the effective date of the Form S-1.

In that case, if the company files a post-effective amendment, it could incorporate by reference previously filed Exchange Act reports like the 10-K and 10-Q if it satisfied the conditions in Form S-1 allowing incorporation by reference.

Item 512(a)(1) of Regulation S-K also requires some changes, including a Section 10(a)(3) update, to be reflected in a post-effective amendment.

Rule 424(b) Prospectus Supplement

Other changes can be made in a prospectus supplement filed pursuant to the various categories under Rule 424(b) of the Securities Act of 1933.

S-1 Registration Statement Attorney Free Consultation

Matheau J. W. Stout, Esq. answers questions regarding S-1 Registration Statements and going public via S-1 at mstout@otclawyers.com or (410) 429-7076.  There is no cost for an initial consultation to explain the mechanics of filing an IPO via S-1 in order to become a publicly traded company on the OTC Bulletin Board or OTC Markets.