Form S-1 Registration Statements

1. Form S-1 Registration Statements What companies Need To Know about Form S-1 & going public

2. Form S-1 Benefits & Going Public When a company sells shares, the shares must be covered by an effective registration statement or exempt from the Securities & Exchange Commission’s registration statement requirements.  Form S-1 is the most commonly used registration statement form. The form offers flexibility to issuers allowing issuers to structure their securities offerings in a variety of ways depending upon their particular needs. All companies qualify to use Form S-1 regardless of their size, line of business and type of security being registered. Even after The Jumpstart Our Business Startups Act (“JOBS Act”), Form S-1 is the most commonly used method of raising capital and going public. The Form can be used to register shares for seed stockholders or larger accredited investors. Form S-1 provides transparency to investors and provides a cost and time effective solution for companies seeking to raise capital and go public.

3. Form S-1 & The JOBS Act The JOBS Act allows an “emerging growth company” to submit a draft of its Form S-1 registration statement and exhibits to the Securities and Exchange Commission (“SEC”) on a confidential basis.  This is particularly useful to companies in going public transactions who are unfamiliar with the SEC registration statement process. Issuers filing  initial public offerings as well as direct public offerings can submit their filings on a confidential basis. All issuers qualify to register securities on Form S-1 and it is the most commonly used registration statement in going public transactions. Using Form S-1 eliminates many of risks and costs of reverse mergers and public shell companies including DTC Chills, Global Locks and SEC trading suspensions.

4.  Form S-1 Structures In Going Public Transactions Form S-1 can be used for a variety of securities offering structures. The most common structures are discussed below. Initial Public Offerings-IPO An IPO is used in a going public transaction where an investment banking firm assists the private company with raising capital by selling securities that have been registered under with the SEC.  Many will not meet the income, asset, revenue or capital requirement standards that investment banking firms now have for IPO’s and as a result, these issuers conduct direct public offerings. Direct Public Offerings – DPO A Direct Public Offering involves registering securities with the SEC on a Form S-1 Registration Statement, either on its own behalf in a primary offering or on behalf of its selling security holders in a secondary offering.   Direct Public offerings are frequently used to raise capital in connection with going public transactions that involve filing a registration statement on Form S-1.

5. Secondary Offerings – Selling Shareholder Registration Statements Going Public Transactions can be structured a variety of ways.  Many going public transactions involve the filing of a secondary registration statement registering shares held by existing stockholders so that the company can meet FINRA’s requirements for Form 211 and assignment of a stock ticker symbol. This type of offering is also known as a secondary offering. In a secondary registration statement, the issuer does not receive any proceeds from the sale of the securities subject to the registration statement and such proceeds are received by the selling stockholders. Form S-1 Disclosures Private companies going public should be aware of the expansive disclosure required by Form S-1 prior to making the decision to use Form S-1 to go public.  A registration statement on Form S-1 has two principal parts.  Part I of the registration statement is the prospectus which requires that the company provide line item disclosures about its business operations, financial condition, and management.  Part II contains information that doesn’t have to be delivered to investors.

6. Financial Statements in Form S-1 Registration Statements | Going Public Form S-1 requires financial statements be audited by a firm that is a member of the Public Company Accounting Oversight Board (“PCAOB”).  SEC rules allow smaller reporting companies to provide less financial information than larger reporting issuers. Rule 405 defines a smaller reporting company as a company that: (i) had a public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate number of shares of its common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in its principal market; (ii)  in the case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public float of less than $75 million as of a date within 30 days of the date of the filing, computed by multiplying the aggregate number of such shares held by non-affiliates before filing plus the number of such shares included in the registration statement by the public offering price of the shares; or (iii) if the public float as calculated under paragraph (i) or (ii) above is zero, had annual revenues of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.

7. Financial Statement Requirements in Form S-1 l Larger Issuers The financial statements required for a company that does not qualify as a smaller reporting company are: ♦ Audited balance sheets (consolidated if you have subsidiaries) as of the end of each of the two most recent fiscal years or if your company been in existence for less than one fiscal year, an audited balance sheet as of a date within 135 days of the date of filing the registration statement. ♦ Audited statements of income and cash flows for each of the three fiscal years preceding the date of the most recent audited balance sheet being filed or such shorter period as the issuer has been in existence. ♦ Interim reviewed financial statements for the current period if the filing is more than 135 days after the end of the issuer’s fiscal year end. ♦ Each amendment must include updated interim or audited financial statements if the financial statements in the prior filing are more than 135 days old.

8. Smaller Reporting Company Disclosures in Form S-1 Registration Statements Smaller reporting companies going public may elect to provide the following disclosures in their registration statement: ♦ Audited balance sheet as of the end of each of the most recent two fiscal years, or as of a date within 135 days if the issuer has existed for a period of less than one fiscal year. ♦ Audited statements of income, cash flows and changes in stockholders’ equity for each of the two fiscal years preceding the date of the most recent audited balance sheet (or such shorter period that the issuer has been in business). ♦ Interim reviewed financial statements for the current period if the filing is more than 135 days after the end of your fiscal year. ♦ Date of financial statements: Each amendment must include updated interim or audited financial statements if the financial statements in the prior filing are more than 135 days old.

9. Business & Operations Disclosure in Form S-1 Registration Statements  This business section of the registration statement describes the general character of the issuer’s business and includes a brief description of the organizational history of the company, its principal products and services,  potential markets and customers,  methods for distributing products and services, availability of raw materials,  intellectual property,  competitive conditions, research and development expenses, costs associated with complying with  regulations, and the number of full and part time employees. Risk Factor Disclosures in Form S-1 Registration Statements The risk factor section of a Form S-1 registration statement describes the risks and uncertainties of investing in the issuer.  This may include limited financial resources, a limited operating history, adverse economic conditions in a particular industry, lack of a market for the securities offered, industry competition, government regulation, and/or reliance on key personnel or on a limited number of suppliers, distributors, or customers.

10. Officer & Director Disclosures in Form S-1 Registration Statements • Form S-1 requires that the issuer provide detailed disclosure about a company’s executive officers including, among other information: • The names and ages of all its executive officers and all persons chosen to become executive officers. • All positions and offices with the company held by each executive officer. • The term of office of each executive officer and the period during which he or she has served as an executive officer. • Any arrangement or understanding between any executive officer and any other person(s) (naming that person) under which the executive officer was or is to be selected as an executive officer. • Each executive officer’s business experience during the past five years, including the executive officer’s principal occupations and employment; the name and principal business of any corporation or other organization in which those principal occupations and employment were carried on; and whether any of those corporations or organizations is a parent, subsidiary or other affiliate of the company.

11. Officer & Director Disclosures in Form S-1 - Continued Form S-1 also requires that the issuer provide information about the issuer’s compensation and benefits plan, material transactions between the issuer and its officers and directors, as well as material legal proceedings involving the issuer or its officers and directors. Form S-1 Incorporation By Reference Form S-1 registration statements, require expansive disclosure of all items required by Regulation S-K.  An issuer can  incorporate certain information into its Form S-1 if it is already a public company subject to the reporting requirements of the Securities Exchange Act that has filed all Exchange Act reports during the past 12 months that were required to be filed and has filed an annual report on Form 10-K for its most recent fiscal year.  Issuers meeting these requirements can incorporate its Exchange Act reports that have been filed on or before the date of the Form S-1 registration statement. The Form S-1 registration statement will not be continuously updated every time the issuer files a new Exchange Act report. 

12. Form S-1 Incorporation By Reference - Continued The issuer can amend its registration statement to include any Exchange Act reports that are filed between the date of the original filing of the registration statement and the date of the amendment. Form S-1 – SEC Comments & Effectiveness of the Registration Statement The SEC reviews registration statements including those on Form S-1 for compliance with its disclosure requirements. If a registration statement is not complete or inaccurate, the SEC will render comments to the Company.  The company must respond to the comments and provide amendments to its registration statement addressing any deficiencies.  Once the SEC is satisfied that the registration statement complies with its disclosure requirements it will declare the registration statement effective. Once the SEC declares the registration statement effective, the issuer should file a post-effective amendment to incorporate any Exchange Act reports that were filed after the S-1 effective date.  Alternatively, the issuer can file and distribute a prospectus supplement containing the information from the Exchange Act reports filed after the registration statement becomes effective.

13. Misstatements in Form S-1 Registration Statements If the registration statement, at the time it becomes effective, contains an untrue statement of a material fact or omits to state a material fact necessary to make other statements not misleading, Section 11 of the Securities Exchange Act of 1933 imposes liability on the issuer and its management as well as other third parties. The Securities Act holds individuals who help prepare a registration statement on behalf of an issuer responsible for any misrepresentations and omissions in the registration statement. Section 11(a) of the Securities Act, 15 U.S.C. § 77k(a), makes several categories of persons and entities responsible for material misstatements or omissions in a registration statement. A majority of the issuer’s board of directors, as well as its principal executive officer or officers, principal financial officer, and its controller or principal accounting officer, must sign the registration statement used in the going public transaction.  

14. Misstatements in Form S-1 Registration Statements - Continued The issuer, as well as each signer is subject to potential civil liability under § 11(a) of the Securities Act for material misstatements or omissions in the registration statement.  In addition, any person who controls the issuer or any other responsible party is subject to liability. In addition to the issuer and its officers and directors, attorneys, accountants and underwriters are liable under Section 11(a) of the Securities Act. Going public transactions are often complex.  They can be structured in a variety of ways, and can offer a number of risks.  If not properly structured going public transactions can result in a company becoming subject to the SEC’s reporting requirements without a ticker symbol. If you are going to offer and sell securities, or go public using an SEC registration statement you will need the assistance of an experienced securities lawyer to guide you through the registration process and ensure all required disclosures are made.

15. For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton Florida, (561) 416-8956, by email at info@securitieslawyer101.com or visit www.securitieslawyer101.com.  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes. Hamilton & Associates | Securities LawyersBrenda Hamilton, Going Public Attorney101 Plaza Real South, Suite 202 NorthBoca Raton, Florida 33432Telephone: (561) 416-8956Facsimile: (561) 416-2855www.SecuritiesLawyer101.com

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