Tag Archives: S-1

S-1 Registration Statements and Incorporating SEC Filings by Reference

S-1 Incorporation by Reference of Previously Filed Exchange Act Reports

The SEC allows S-1 Registration Statement filers to use “backwards” incorporation by reference of previously filed Securities Exchange Act reports, like the 10-K, 10-Q, 8-K and other documents.

When an S-1 becomes Effective the prospectus filed as part of the Form S-1 Registration Statement must identify all previously filed Exchange Act reports and materials that are incorporated by reference.

Incorporation by Reference via Pre-Effective Amendment to an S-1

When an S-1 registrant wants to incorporate by reference an Exchange Act report that is filed after the filing date of the S-1 Registration Statement (or S-1/A) but prior to Effectiveness, a Pre-Effective Amendment must include a specific reference to such Exchange Act report in the Prospectus filed as part of the S-1.

Exchange Act Reports Must Be Readily Accessible on a Website

The ability to incorporate by reference a previously filed Exchange Act reports and other materials in an SEC Form S-1 is only allowed when the Issuer makes its incorporated Exchange Act reports and other materials readily accessible on a website maintained by or for the Issuer.  There are widgets available that make this requirement easy to satisfy, either by providing actual copies of the Exchange Act reports or by providing direct links to the SEC filings on EDGAR.

Microcap Securities Attorney Helps Companies Go Public Via S-1

Management of microcap companies seeking to file an S-1 Registration Statement to go public on the OTC Bulletin Board or OTC Markets OTCQB can contact S-1 Lawyer Matt Stout for a no cost consultation at mstout@otclawyers.com or (410) 429-7076.


What is the S-1 Quiet Period?

The S-1 “Quiet Period,” starts when a company files an S-1 Registration Statement with the SEC and ends when the SEC staff declares the S-1 “Effective.”

During the S-1 Quiet Period, the federal securities laws place certain limitations on what information a company can release to the public. Companies that fail to comply with S-1 Quiet Period may be found to be “gun-jumping.”

Well-Known Seasoned Issuers and the S-1 Quiet Period

Well-known seasoned issuers, (“WKSI”) include those household names every investor recognize trade on the NYSE or NASDAQ.  They are in the regular habit of releasing news anyway and are thus permitted anytime to use oral and written communications, including a “free writing prospectus,” subject to enumerated conditions (including, in some cases, filing with the Commission).  WKSI are eligible to file a Form S-3 rather than an S-1.

No OTC Markets or OTC Bulletin Board company is going to fall under the category of a Well-Known Seasoned Issuer, and all Issuers with stock quoted on the over-the-counter markets should be especially careful with all communications during the S-1 Quiet Period.

SEC Reporting Issuers and the S-1 Quiet Period

All SEC reporting issuers are permitted to continue publishing or posting regularly released factual business information and forward-looking information.  This applies to those already public companies that are filing an S-1 Registration Statement after already having a trading symbol or “ticker” and after already being subject to the reporting requirements of Section 12 of the Securities Exchange Act of 1934.

This would not apply to a company which is doing its “IPO” or initial public offering, since by nature that company is private, and not yet “fully reporting” under the Securities Exchange Act of 1934.  That is, the Company is not yet releasing 10-K, 10-Q, and 8-K filings as required under the 34 Act.

Non-Reporting Issuers and the S-1 Quiet Period

Non-reporting issuers include both private companies filing an S-1 Registration Statement in order to “go public” on the OTC Bulletin Board (“OTCBB”) or OTCQB and those already public voluntary filers, Pink Sheet or Gray Sheet companies that are not SEC filers under the 34 Act.

These Non-Reporting companies can, at any time, continue publishing factual business information that is regularly released and intended for use by persons other than in their capacity as investors or potential investors.

Companies going public on the OTCBB or OTCQB by filing an S-1 Registration Statement should carefully consider the content and tone of all communications, whether they are news releases or simply posts on their blog or website.  Any reference to the the pending S-1 Registration Statement, the prospectus, or the offering, is a bad idea during the S-1 Quiet Period and may be considered “gun jumping.”

If Non-Reporting companies feel compelled to release any news during the S-1 Quiet Period they should have such news or press releases reviewed by experienced securities legal counsel prior to such releases.  S-1 lawyer Matt Stout can review news releases before they are posted.

Permitted Communications and the S-1 Quiet Period

The key issue to the S-1 Quiet Period is timing.   Communications by all Issuers more than 30 days before filing an S-1 Registration Statement will be permitted by the SEC so long as they do not reference a securities offering that is the subject of a pending or contemplated S-1 Registration Statement.

Companies planning to file an S-1 Registration Statement should review all of their past communications to see if they may have inadvertently run afoul of this 30 day guideline, and if so, should consult with an experienced S-1 lawyer like Matheau J. W. Stout, Esq. to decide when the file their S-1 Registration Statement.

S-1 Lawyer Matt Stout Can Advise Companies on the S-1 Quiet Period

Companies interested in going public via S-1 or those public Issuers planning a resale S-1 to register securities already sold in a Private Placement can contact S-1 securities lawyer Matt Stout at (410) 429-7076 or mstout@otclawyers.com.


Pros and Cons of Going Public Via S-1

Benefits of Going Public via S-1 Registration

  1. Filing an S-1 Registration Statement may provide increased access to capital.
  2. The new public company may attract increased attention from institutional investors who invest only in S-1 registered stock.
  3. A secondary trading market may develop in the future in securities registered in the S-1.
  4. Filing an S-1 may create a future exit strategy for officers and directors if a public market develops for the public company’s securities.
  5. The public company may attract and retain talented personnel by offering stock, or options through a future S-8 plan.
  6. Once an S-1 is effective and a trading symbol is issued by FINRA, transparency is increased since employees and OTC Markets investors can view a public company’s filings and share price at any time.

Obligations for Companies Filing an S-1 Registration

  1. Companies going public via S-1 Registration Statement must keep SEC filings current so shareholders have sufficient public information describing the company’s management, business model, operations, and audited financials.
  2. New public companies filing an S-1 will incur ongoing administrative and compliance costs to retain a PCAOB auditor and experienced securities lawyer.
  3. Officers and Directors of companies that go public via S-1 Registration Statement may be liable if the Company does not meet its legal and compliance obligations.
  4. Public companies filing an S-1 registration must follow certain rules and provide disclosure when undertaking material corporate actions, including seeking shareholder approval.
  5. S-1 Registration Statements require time and money to do properly, and companies must allocate both in order to go public successfully via S-1.

Experienced S-1 Registration Statement Lawyer Matt Stout

Experienced securities lawyer Matt Stout takes companies public via S-1, and files S-1 Registration Statements for entrepreneurs seeking to go public on the OTC Markets and OTC Bulletin Board.   Entrepreneurs with questions on the going public via S-1 process can contact Matheau J. W. Stout, Esq. at (410) 429-7076 or mstout@otclawyers.com.


Regulation D, Rule 506 Private Placement

What is the Difference Between 506(b) and 506(c)?

Rule 506(b) Private Placement

Under Rule 506(b), a company stays under the Section 4(a)(2) “safe harbor” exemption, only if the following requirements are met:

  1. No general solicitation or advertising is used to market the securities.
  2. The company can sell securities to an unlimited number of “accredited investors” and up to 35 non-accredited investors.
  3. The company must give non-accredited investors disclosure documents, which are similar to those used in registered offerings.  (The private placement documents will generally include at least an Offering Memorandum, Subscription Agreement and Investor Questionnaire.)
  4. The company must be available to answer questions by prospective investors.
  5. Financial statement requirements are the same as for Rule 505.

Rule 506(c) Private Placement

In contrast, under Rule 506(c), a company is permitted to advertise and solicit the general public.   However, the private offering under 506(c) can stay under the safe harbor of Section 4(a)(2) if:

  1. All investors are accredited investors.
  2. The company takes “reasonable steps” to verify that its investors are accredited.  This process can include reviewing tax returns W-2 forms, bank statements, brokerage statements, or credit reports.

In either case, companies considering raising capital under Rule 506 would benefit by having their documentation prepared by a qualified securities attorney.

Private Placement Before S-1 Registration Statement

This is especially important if the company is considering “going public” later and potentially registering these same private placement shares for resale in an S-1 Registration Statement.

Private Placement and S-1 Lawyer Matt Stout helps companies navigate the going public process from start to finish.  Matt Stout can answer questions about how to structure a private placement before filing an S-1 at (410) 429-7076 or mstout@otclawyers.com.

What is a PCAOB Auditor?

Entrepreneurs seeking to go public via S-1 Registration Statement soon learn that their financials must be audited by a PCAOB Auditor.

Experienced OTC Markets securities lawyers like Matt Stout can make referrals to excellent PCAOB Auditors.

What is the PCAOB?

A PCAOB auditor is a public accounting firm registered with the The Public Company Accounting Oversight Board (“PCAOB”).   The PCAOB is a private-sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002.  The mission of the PCAOB is to oversee accounting professionals who provide independent audit reports for publicly traded companies.

Responsibilities of the PCAOB

  1. Register public accounting firms;
  2. Establish auditing, quality control, ethics, and independence standards and criteria relating to auditing public companies;
  3. Perform inspections and investigations;
  4. Conduct disciplinary proceedings of PCAOB registered accounting firms; and
  5. Enforce compliance with the Sarbanes-Oxley Act.

The SEC Has Authority Over the PCAOB

The SEC ultimately has the authority over the PCAOB and can do the following:

  1. Oversee the PCAOB’s operations;
  2. Appoint or remove PCAOB members;
  3. Approve the PCAOB rules and budget; and
  4. Hear appeals of PCAOB inspection reports and disciplinary actions.

Referrals to PCAOB Auditors for S-1 Registration Statements

Experienced securities attorney Matt Stout provides introductions and referrals to qualified PCAOB auditors to those going public via S-1.

PCAOB Auditors for Start Up and Development Stage Companies

OTCLawyers works with seasoned PCAOB auditors every day, including those who will audit start up and development stage companies who want to file an S-1 Registration Statement.

PCAOB Auditors for Foreign Management and Companies

Matt Stout, S-1 securities attorney, can refer foreign companies and Nevada corporations with foreign management to PCAOB Auditors, many of whom speak several languages.

We have worked with management in many countries.  Communication by email, teleconference and Skype make it possible for S-1 lawyers and PCAOB Auditors to efficiently work with Non US Management seeking an S-1 Registration Statement for foreign companies seeking an F-1.

S-1 Securities Lawyer Matt Stout

Entrepreneurs interested in going public via S-1 Registration Statement can contact OTC securities lawyer Matt Stout at (410) 429-7076 or mstout@otclawyers for a flat fee quote and time line.


Pros and Cons of Going Public

Advantages of Going Public

Entrepreneurs seek to take companies public for many reasons, including:

  1. To raise funds through increased access to capital; and
  2. To create or increase liquidity in the company’s securities, which can provide shareholders with a hope of selling their stock in the open market.
  3. To fund a roll up strategy, in which they acquire other businesses using the public company’s stock as currency.
  4. To attract and compensate consultants and employees by using the public company’s stock, such as in an S-8 Plan.
  5. To create investor awareness of the public company’s brand and technology.

Perceived Disadvantages to Going Public

Entrepreneurs perceive some disadvantages to taking a company public, such as

  1. Going Public via S-1 Registration Statement requires time and some money to complete.
  2. Administrative compliance for SEC filers includes audited financials, and filing SEC reports like 10-K, 10-Q and 8-K.
  3. The public company’s shareholders must be aware of and in most cases approve your corporate actions.
  4. Transparency is required, since financials and disclosures are all available to the general public.

In the end, the decision to go public is made by entrepreneurs who believe that transparency is a good thing, and that securities compliance is a small price to pay for the potential upside and liquidity that is possible for shareholders in public companies.

OTC Markets Securities Lawyer Taking Companies Public

Entrepreneurs can discuss going public under a flat fee via S-1 Registration Statement on the OTC Markets or OTC Bulletin Board with securities lawyer Matt Stout at (410) 429-7076 or mstout@otclawyers.com.



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.

What is an SEC Comment Letter?

The term SEC Comment Letter generally refers to correspondence from the Securities and Exchange Commission (“SEC”) staff to public companies which are SEC filers.  An SEC Comment Letter is sent by the SEC to an Issuer when an Issuer’s SEC filing needs further clarification.

SEC Comments on an S-1 Registration Statement

One example of an SEC Comment Letter is in response to an Issuer’s filing of an S-1 Registration Statement.  An S-1 Comment Letter is sent by SEC staff who review the disclosures set forth in an S-1 when there are questions that need to be answered or typos which need to be corrected.  There may be a series of SEC Comment Letters and Issuer response letters that go back and forth until the S-1 is finalized and declared effective by the SEC staff.

SEC Comment Letters on 10-K, 10-Q, Reg A, and 8-K Filings

The SEC can also issue an SEC Comment Letter in response to disclosures made in a public company’s 10-K, 10-Q, Regulation A, or 8-K, or in any other SEC filing, such as a Form 10.

SEC Comment Letters are Searchable in EDGAR

SEC comment Letters and the responses by Issuers or their securities lawyers are contained in the SEC’s EDGAR database as “correspondence.” The SEC made this correspondence public record in 2005 for filings made after August 1, 2004 which were reviewed by the SEC staff.

SEC Comment Letters Can Address Questions of Disclosure

SEC Comment Letters usually ask for additional information so the SEC staff can understand the Issuer’s disclosure.  Sometimes the SEC requests that an Issuer revise disclosures in a document already filed with the SEC if the facts and circumstances warrant such a change.  In other cases, the SEC will allow prior filings to remain, but request that the Issuer provide additional or different disclosures in future SEC filings.

Are SEC Comment Letters Legally Binding?

There are often several rounds of letters between the SEC and an Issuer’s securities attorney  until the SEC is satisfied with the information provided and changes made. SEC Comment Letters provide SEC staff positions on the issues discussed but are not an official or legally binding statement of the SEC’s views on the particular issues. SEC Comment Letters are expressly limited to the specific facts and circumstances of the named filing in question and do not automatically apply to other filings or to other SEC filers.

Experienced Securities Lawyers Can Respond to SEC Comment Letters

OTC public companies that received an SEC Comment Letter in response to an S-1 Registration Statement or to any other disclosure in an SEC Filing can contact securities attorney Matt Stout at (410) 429-7076 or mstout@otclawyers.com.


Obligation to File Reports Under the Securities Exchange Act of 1934

Exchange Act Reporting Requirements

When a public company registers its securities under the Securities Act of 1933 (the “Securities Act”) through the filing of an S-1 Registration Statement, it must continue to file periodic reports with the SEC under the Securities Exchange Act of 1934 through at least the end of the fiscal year in which the S-1 becomes effective.

After the end of that fiscal year, the public company must continue reporting to the SEC unless its obligation to report is suspended.   The SEC will suspend an Issuer’s filing obligations if

  1. The number of shareholders falls below 300 for the class of securities offered; or
  2. The number of shareholder is below 500 for the class of securities offered and the Issuer had less than $10 million in total assets in each of the last 3 fiscal years.

An Issuer can request that the SEC suspend its filing obligations by filing a Form 15.   From there, Issuers usually choose to become a Pink Sheet and file under the Alternative Reporting Standard used by the OTC Markets Group.

There are two situations in which a public company would still have the obligation to file SEC Exchange Act reports, regardless of its preference for the alternative reporting standard:

  1. If the public company lists its securities on an exchange, like the New York Stock Exchange, the NYSE MKT or the NASDAQ; or
  2. If the Issuer has record shareholders greater than 2,000.

What is a Blank Check Company?

A Blank Check Company is defined by the SEC under the Securities Act of 1933, Rule 419, as a company that has

  1. no specific business plan or purpose, or
  2. has indicated that its business plan is to engage in a merger or acquisition with an unidentified operating business, and
  3. is issuing “penny stock.”

These blank check companies are sometimes referred to as 419 shells.  Blank check companies are similar to a special purpose acquisition company (SPAC) in that both are created to consummate a business combination with an unidentified target company.

S-1 Registration Statements and Blank Check Companies

When filing an S-1 Registration Statement for a development stage start up company, is it not uncommon for initial SEC comments to question whether or not the registrant is a blank check company.  If the company is not a blank check under Rule 419, then the response to the SEC would include information supporting the company’s specific business purpose and a bona fide plan of operations.

Companies that are concerned about being incorrectly labeled a blank check company or 419 shell should take care to draft the business plan portion of the S-1 with sufficient detail so that the question answers itself.

Entrepreneurs considering taking their companies public via S-1 Registration Statement can contact securities attorney Matt Stout with questions at (410) 429-7076 or via mstout@otclawyers.com.