A 1934 Act Registration Statement (Form 10) is used to register a class of securities under the Securities Exchange Act of 1934 but does not register an offering of new securities. Upon filing and effectiveness of a Form 10, the Registrant is subject to the periodic reporting requirements of Section 13 of the Securities Exchange Act of 1934. A form 10 can be filed voluntarily filed by an Issuer.
In addition, a Company is required to file a Form 10 and register securities under the Exchange Act of 1934 within one hundred and twenty days after the last day of its first fiscal year ended on which the issuer has total assets exceeding $10,000,000 and a class of equity security (other than an exempted security) held of record by five hundred or more but less than seven hundred and fifty persons,
- Upon filing a form 10 a registrant becomes subject to the periodic reporting requirements of Section 13
- If the Company is already publicly traded, such as on the Pink Sheets, it would qualify to be quoted and traded on the Over the Counter Bulletin Board or OTCBB. Tto do this they would have to have a market maker either file a 15c2-11 application to move from the Pink Sheets to the Bulletin Board or they would have to file a 15C211 exemption if the company qualifies
- If the Company is not already publicly traded, if they have free trading shareholders, they request that a market maker apply to quote their stock on either the pink sheets or bulletin board (bulletin board is better) by filing a 211 application with the NASD
- Since by definition, there must be freely traded stock for a company to trade its stock, if a company does not have such free trading stock, upon filing a Form 10, they would still be subject to the reporting requirements of the Exchange Act of 1934, but they would not qualify to have their stock quoted or traded on either the Pink Sheets or Bulletin Board (or anywhere else)
- In this case, after filing the Form 10 the Company could engage in an offering of its securities, through the filing of a registration statement under the Securities Act of 1933 and thereafter could request that a market maker file a 15c2-11 to quote and trade their stock on the Pink Sheets or Bulletin Board
A 1933 Act registration statement is used to register securities for sale, either directly from the Issuer to the public (a new or initial issuance) or for resale by existing securities holders.
The Registration Statement is the disclosure document required to be filed with the Securities and Exchange Commission (SEC) in connection with the Initial Public Offering. The Registration Statement is a two-part document. The first part is the prospectus, which is provided to the public. The second part contains supplemental information which is available to the public on the SEC website and EDGAR system. Many regulations must be adhered to when drafting a Registration Statement, particularly in regard to the accounting methods that may be used and the details of various provisions.
The requirements for a small business issuer (Form SB-1 or SB-2) are slightly less cumbersome than the standard Form S-1. All Registration Statements require audited financial statements for the previous two years that must be updated and kept current throughout the registration process. At no time during the process can the current financial statements be more than 135 days old.
The Registration Statement requires full disclosure pertaining to the company’s business, risk factors of the offering, management’s discussions and analysis of the company’s financial condition, financial results of operations, material transactions with insiders and use of proceeds raised in the offering. The business description covers such matters as products or services of the company, marketing and distribution, key customers, relevant government regulations, management, employees and technology. Information must be provided regarding the underwriting agreements, plan for distributing the securities, identification of officers, directors and control shareholders, and details regarding compensation plans to management.
All companies can use Form S-1 to register their securities offerings.
If your company qualifies as a “small business issuer,” it can choose to file its registration statement using one of the simplified small business forms. A small business issuer is a United States or Canadian issuer:
- that had less than $25 million in revenues in its last fiscal year, and
- whose outstanding publicly-held stock is worth no more than $25 million.
Form SB-1 – To Raise $10 Million or Less
Small business issuers offering up to $10 million worth of securities in any 12-month period may use Form SB1.
Form SB-2 – To Raise Capital in Any Amount
If your company is a “small business issuer,” it may register an unlimited dollar amount of securities using Form SB-2, and may use this form again and again so long as it satisfies the “small business issuer” definition.
Form SB-2 also permits the company to:
- Provide audited financial statements, prepared according to generally accepted accounting principles, for two fiscal years. In contrast, Form S-1 requires the issuer to provide audited financial statements, prepared according to more detailed SEC regulations, for three fiscal years; and
- Include less extensive narrative disclosure than Form S-1 requires, particularly in the description of your business, and executive compensation.
SEC staff examines registration statements for compliance with disclosure requirements. If a filing appears incomplete or inaccurate, the staff usually informs the company by letter. The company may file correcting or clarifying amendments. Once the company has satisfied the disclosure requirements, the staff declares the registration statement effective. The company may then begin to sell its securities. The SEC can refuse or suspend the effectiveness of any registration statement if it concludes that the document is misleading, inaccurate, or incomplete.
Regardless of the size of your offering all federal and state compliance requirements must be strictly adhered to. Consequently, it is imperative to retain a law firm that possesses extensive experience in serving OTCBB Companies.
