Going Public Attorneys & Drafting Disclosures

The Going Public Attorney & Disclosures

A going public attorney is one of the most important participants in the going public process.  The going public attorneys at Hamilton & Associates Law Group have provided private companies with their going public solutions for over ten years. A skilled going public attorney can design and implement the going public structure most beneficial to your company without the risks associated with reverse merger transactions.  A going public attorney will assist an issuer with structuring its securities offering.  There are a wide range of structures available including direct public offerings (“DPO”), slow public offerings (“Slow PO”), Initial Public Offerings (“IPO’s) and SEC registration statements. Soon companies who qualify will be allowed to use Regulation A+ to raise capital.Issuers using an SEC registration statement have a variety of structures available to them when designing their going public transactions.  Hiring the right going public attorney is critical to ensure the most cost and time effective going public solution for your private company to become publicly traded. Regardless of the structure, companies must provide transparency to investors in their securities offering.

Companies considering a securities offering should be aware of the disclosures required by the securities laws.  The issuer’s going public attorney and auditor play significant roles in drafting these disclosures.

Registration statements require expansive disclosures. 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 certain disclosures about its business operations, financial condition, and management.  Part II contains information that doesn’t have to be delivered to investors.  A skilled going public attorney can draft the disclosures for the Form S-1 and assist management in compiling information required for its auditor. Some of the same disclosures are required in exempt offerings in order to provide transparency to investors.

Financial Statement Requirements | Going Public Attorneys

Financial statements included in a registration statement must 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 (1) or (2) 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.

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.

♦ 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.

Smaller Reporting Company Disclosures in Registration Statements | Going Public Attorneys

Smaller reporting companies and their going public attorneys 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.

Business Related Disclosures in Registration Statements | Going Public Transactions

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 Registration Statements | Going Public Attorneys

The risk factor section of a 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.

Other Required Disclosures in Registration Statements | Going Public  Attorneys

This registration statement requires that the issuer identify its officers and directors and provide information on 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.

This section of the registration statement describes the distribution plan for the securities being registered in the going public transaction including the offering size.

This section sets forth the planned uses of the proceeds from the sale of the securities being registered in the registration statement.

Misstatements in Registration Statements Used in Going Public Transactions

Each company going public requires a skilled going public attorney to assist them in making required SEC disclosures.  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. Section 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.  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.  The liabilities associated with drafting registration statement disclosures mandate that the issuer engage a skilled and experienced going public attorney.

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.

This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group 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.  For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, FINRA Rule 6490Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 , IPO’s, OTC Pink Sheet listings, Form 10 and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected].  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com