The basic Registration Statement form for public offerings is Form S-1.
What goes into the Public Sale of Free Trading Stock Form S-1?
Both disclosure about you and your company and audited and interim stub period financial statements of your company are required to be included in Form S-1.
The disclosure items you are required to include in a Form S-1 registration statement as set forth in detail in SEC Regulation S-K are:
The financial statements you are required to include if you are not a smaller reporting company in a Form S-1 registration statement under Rules 3-01 and 3-02 of SEC Regulation S-X are:
Audited balance sheets (consolidated if you have subsidiaries) as of the end of each of the two most recent fiscal years. 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 your company has been in existence.
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.
Rule 8-01 of Regulation S-X specifies the periods your financial statements must cover if you are a smaller reporting company, as follows:
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 as the registrant 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.
SEC Rule 405 defines a smaller reporting company as a company that:
1. If your stock is trading: 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 worldwide number of shares of its voting and non-voting 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 the principal market for the common equity.
2. If you are not trading: 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 of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus the number of such shares included in the registration statement by the estimated public offering price of the shares.
3. If your 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.
Your financial statements must be audited by a firm that is a member of the Public Company Accounting Oversight Board, or PCAOB. The PCAOB is a private, nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee the auditors of public companies.
A little note of caution here. The SEC process involves full disclosure. You cannot keep any secrets about your business anymore. Just make sure you are prepared to live with full disclosure before you decide to move forward with the going public process. What types of offerings can you make using the Public Sale of Free Trading Stock Form S-1?
There are various types of public offerings, including:
Initial Public Offering, or IPO.
An offering of your company’s stock through an underwriter.
Direct Public Offering, or DPO.
An offering of your company’s stock by your company itself, without an underwriter.
Selling Stockholder Offering.
An offering of stock by people who are already stockholders in your company.
Private Investment in Public Equity or PIPE
A private investment in public equity, or PIPE, transaction involves selling stock in a private placement and agreeing to file a registration statement with the SEC immediately after the private placement closes for the stock you sold in the placement, thus giving the investors in your private placement free trading stock, or public equity.
Equity Line
In an Equity Line transaction, your company establishes a line of credit with an investor/lender. You draw down on the Equity Line by giving the investor/lender registered, free trading shares of your stock, generally at a discount to market price. Most Equity Lines require certain price and volume targets to be met before you can draw on the line. One risk in Equity Lines is that sales of your stock depress the market price, thus requiring you to issue larger and larger amounts of stock in your company in order to draw on the Equity Line.