Use of Proceeds In Form S-1 Registration Statements – Form S-1

Companies going public using Form S-1 have several options in how to structure their transaction when registering securities with the Securities and Exchange Commission (“SEC”).  They can seek to raise capital using the registration or they can simply register shares on behalf of existing shareholders.  If the issuer seeks to raise capital using the registration statement expansive disclosures are required of the use of proceeds.Companies going public with Form S-1 have several options in how to structure their transaction when registering securities with the Securities and Exchange Commission (“SEC”).  Form S-1 enables issuers to raise capital using the registration statement or register shares on behalf of existing shareholders.  If the issuer seeks to raise capital using the S-1’s registration statement expansive disclosure is required of the  intended use of proceeds.

Item 504 or Regulation S-K establishes the requirements for disclosure of Form S-1 proceeds in the registration statement.

The issuer must disclose its intended use based upon different percentages of the amounts of money raised.  The use of proceeds section describes how the funds raised in a securities offering will be spent.

Form S-1 registration statements that do not register capital shares for an issuer to sell such as a resale or selling shareholder registration statement do not contain a use of proceeds.   If an issuer plans to raise capital then the information is required.

When an issuer conducts a securities offering on a best efforts basis, the SEC requires the information be presented for different percentages such as  25%, 50%, 75% and 100%.  The SEC requires that the issuer provide a detailed explanation about the intended use of offering proceeds in this section. For example, if a company intended to buy inventory, it would have provide a footnote that included the cost of the facility and what would occur if it did not raise enough money to purchase all inventory planned.

For more information about going public, securities law or our other services please contact a Securities Attorney at Hamilton & Associates Law Group, P.A. 01 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 or by email at [email protected].   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 and compliance 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.

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