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SEC Rules 3a5-4 and 3a44-2

On February 6, 2024, the Securities and Exchange Commission adopted new Rules 3a5-4 and 3a44-2 (“Final Rules”) that interpret Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934 (“Exchange Act”) which provide the definitions of “dealer” and “government securities dealer,” respectively.

For any person that owns or controls at least $50 million in total assets and is not a registered investment company, central bank, sovereign entity or international financial institution, if that person engages in the following activities for its own account as part of a regular business, it would be deemed under the Exchange Act as a “dealer” or “government securities dealer:”

  • Regularly expressing trading interest that is at or near the best available prices on both sides of the market for the same security and that is communicated and represented in a way that makes it accessible to other market participants; or
  • Earning revenue primarily from capturing bid-ask spreads, by buying at the bid and selling at the offer, or from capturing any incentives offered by trading venues to liquidity supplying trading interest.

The final rules define “own account” to mean an account: (i) held in the name of that person; or (ii) held for the benefit of that person. With a view to deterring the establishment of multiple legal entities or accounts to evade appropriate regulation, the Final Rules include an anti-evasion provision that prohibits persons from evading the registration requirements by: (1) engaging in activities indirectly that would satisfy the qualitative factors; or (2) disaggregating accounts. Note that there is no requirement in the statutory text of either Section 3(a)(5) or Section 3(a)(44) that dealers have customers.

The Final Rules are not the exclusive means of establishing that a person is a dealer or government securities dealer; otherwise applicable SEC interpretations and precedent will continue to apply.

Other commentators note that: “Hedge funds and other [proprietary trading funds] PTFs that use high-volume trading strategies will need to review this standard and the SEC’s guidance carefully to determine whether their activities will now result in a dealer registration obligation.  The SEC noted in particular that market participants employing “automated, algorithmic trading strategies that rely on high frequency trading strategies to generate a large volume of orders and transactions” would be captured by this standard if they have established themselves as “significant market intermediaries” and “critical sources of liquidity.””

If a client is determined to fall within the definitions, it will be required to:

  • Register with the SEC under Section 15(a) or Section 15C, as applicable;
  • Become a member of a Self Regulatory Organization (i.e., FINRA); and
  • Comply with federal securities laws and regulatory obligations and applicable SRO and Treasury rules and requirements.

The Final Rules will be effective on or about April 8, 2024 (60 days following the date of publication of the adopting release in the Federal Register).

See the Final Rules here: https://www.sec.gov/files/rules/final/2024/34-99477.pdf

See the SEC Fact Sheet here: https://www.sec.gov/files/34-99477-fact-sheet.pdf

Sichenzia Ross Ference Carmel LLP Closes Over 100 Capital Markets Transactions Valued At Over $700 Million in 2023

SRFC further demonstrated its presence by representing organizations on IPOs, public and private offerings, and other market activity in 2023.

New York, NY – February 8th, 2024 – Today, Sichenzia Ross Ference Carmel LLP (“SRFC”), a full-service law firm internationally recognized for its securities and litigation practices, announced that it has closed over 100 transactions, ranging from $1.1 million to $70 million. In 2023, with the total value of these transactions surpassing $700 million. The transactions on behalf of both issuers and underwriters included initial public offerings, secondary public offerings, registered direct offerings and private placements.

SRFC provides world-class, personalized and cost-effective solutions, representing broker-dealers, businesses and individuals in all types of commercial litigation and arbitration. In October of 2023, Sichenzia Ross Ference LLP combined forces with Carmel, Milazzo & Feil to form SRFC and currently consists of approximately 70 experienced attorneys in offices including New York City, California and Florida.

Notable transaction highlights from 2023 include:

“Sichenzia Ross Ference Carmel is proud to be one of the most prolific securities law firms in the country, representing some of the most dynamic companies entering the market today,” said Greg Sichenzia, Founding Partner at SRFC. “Expectations are high for 2024, especially for the return of a strong IPO market and participation from global issuers and underwriters. We look forward to growth on behalf of the firm, its people and our clients In our first full year as SRFC.”

A full list of transactions can be found here

About Sichenzia Ross Ference Carmel LLP
SRFC is a full-service law firm with a nationally recognized corporate, securities, and litigation practice that provides experienced representation in all matters involving the securities industry. In addition to handling routine to complex commercial matters, SRFC’s renowned litigation and regulatory department specializes in defending broker-dealers, registered persons, public and private corporations, and individuals in investigations and enforcement proceedings before the SEC, FINRA, and other regulatory bodies, as well as litigations and arbitrations across all forums in the securities industry, including class action lawsuits, shareholder derivative actions, and matters involving allegations of fraud, misrepresentation or other securities violations.

Finally, SRFC has a burgeoning expungement practice, where it represents registered persons seeking to have false and harmful customer complaints removed from their industry records. In addition to SRFC’s well-known securities practice, we have expertise in multiple disciplines including complex commercial litigation in an array of matters from shareholder derivative actions, partnership disputes, breach of contract, etc. SRFC practice groups include tax and trust and estates, notably providing sophisticated estate planning for its high-net-worth clients.

Follow SRFC on LinkedIn and X (formerly Twitter)

Media contact:
FischTank PR
srfc@fischtankpr.com

 

Is The IPO Market Back In Business?

As written by Gregory Sichenzia and originally published by Crunchbase.

It’s difficult to determine who is watching the IPO market closer: investors or startups.

From a high level, the consensus appears to be that with interest rates set to recede at some point in the first half of 2024, coupled with the resiliency of the U.S. economy and recent GDP and inflations numbers, the IPO market is back in business.

Nasdaq CEO Adena Friedman recently explained while at the Consumer Electronics Show that close to 100 companies have recently filed confidentiality with the SEC for initial public offerings and plan to list on Nasdaq — suggesting a major rebound for the IPO market.

But those of us who work with new issuers on a near daily basis know: This IPO market will not be like the ones of the past five years.

Gone are the days where a company could slap “ESG,” “cryptocurrency,” “artificial intelligence” or “EV” on its website and instantly raise tens, if not hundreds, of millions of dollars in private and public offerings.

H1 2024 expectations

Let’s start with some of the drivers and trends beyond just falling interest rates.

First, interest rates don’t just mean “cheap money” for startups and emerging tech companies. They also mean that the CDs and Treasury notes where retail and institutional investors parked their money the past two years will no longer yield 5%-plus. Investors who did so were smart, and they’ll be smart again — meaning it will be time to withdraw those assets and place them elsewhere, creating even more opportunity for issuers and underwriters to attract shareholders.

Further, some of the largest public companies in the world, such as NvidiaMicrosoft and, until a few weeks ago, Tesla, have all thrived lately, placing the market at all-time highs. Investors are happy and will take those same profits and start hunting for high-growth opportunities in IPOs.

Without delving too much into politics, some investors and banks are so convinced that former President Trump will win, they’re placing bets on more deregulated capital markets. There is always a push and pull between Democratic and Republican candidates, with the former advocating for tighter regulations that have the potential to slow capital markets activity, while the latter seeks to create a more friendly environment for issuers and underwriters.

That’s not to say each bank or company raising capital believes this, but it is a constant theme in the market feedback we receive.

The biggest trend we’re seeing in the U.S. IPO market right now is more mature companies seeking to go public. Reddit, a brand that has been around forever and rumored to go public several times, is a prime example. Another is Amer Sports, which makes Wilson tennis rackets, and is targeting a valuation of up to $8.7 billion for its U.S. initial public offering.

Many people, including me, believe this deal will be a bellwether event for the IPO market, and that if successful, we may see a cascade of offerings quickly follow.

Lastly, the U.S. economy’s ability to not just avoid recession but to actually grow is resulting in international companies seeking exposure to U.S. capital markets.

We are seeing this in many regions of the world, particularly Southeast Asia and parts of Europe where revenue-producing, high-growth technology and consumer brands are thriving. Companies there see the U.S. as the right venue for liquidity events, and thus are engaging banks to help them raise capital.

It’s important to remember that all of this can change at any moment. Concern over when interest rates will fall has already led to some volatile trading days and hesitant IPOs in 2024.

I predict we’ll see a number of companies quietly test the waters these next couple months, and that Q2 will be when we really see filings and listings pick up. Until then, stay tuned to Fed guidance, inflation and job reports, and exciting companies seeking exposure in the U.S.’ resilient stock market.

Sichenzia Ross Ference Carmel LLP

New Financial Thresholds For Pre-Merger Notification For 2024 Announced

On January 22, 2024, the Federal Trade Commission (the “FTC”) announced new jurisdictional thresholds for the Hart-Scott-Rodino Act (“HSR”).

The FTC enforces the federal antitrust laws, specifically Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2; Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45; and Sections 3, 7, and 8 of the Clayton Act, 15 U.S.C. §§ 14, 18, 19.

Pre-Merger Notification Changes. Section 7 of the Clayton Act prohibits mergers and acquisitions where “in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”

Remember, unless an exemption applies, the parties to the merger must file with the FTC and the Department of Justice a Premerger Notification Form and pay the filing fee if the transaction meets three tests:

  • the Commerce Test – If either party is engaged in commerce or in any activity affecting commerce;
    (2) the Size of Transaction Test – see chart below; and
    (3) the Size of Person Test – see chart below.

The FTC is required to adjust the thresholds annually based on the change in gross national product. For 2024, the thresholds are:

TEST

THRESHOLD

Size of Transaction

$119.5 Million

Size of Person

$23.9 Million and $239 Million

Transaction Size above which Size of Person Test Does Not Apply

$478 Million

Notification Thresholds

$119.5 Million

$239 Million

$1.195 Billion

25% of stock worth $2.39 Billion

Filing Fee Changes. The FTC also raised the filing fees for the Premerger Notification:

Size of Transaction

Filing Fee

Greater than $119.5 Million but less than $173.3 Million

$30,000.00

At least $173.3 Million but less than $526.5 Million

$105,000.00

At least $536.5 Million but less than $1.073 Billion

$260,000.00

At least $1.073 Billion but less than $2.0 Billion

$415,000.00

At least $2.0 Billion but less than $5.0 Billion

$830,000.00

$5.0 Billion or more

$2,335,000.00

Interlocking Director Changes. Section 8 of the Clayton Act makes it illegal, subject to certain exceptions, for a person to serve as a director or officer for two competing companies when the companies' profits or competitive sales exceed threshold limits. The FTC increased the thresholds so that an interlocking director would be illegal if each company has capital, surplus, and undivided profits aggregating more than $48,559,000 (Section 8(a)(1)), unless one of the companies' competitive sales against the other are less than $4,855,900 (Section 8(a)(2)(A)) or other de minimis exemptions apply (Section 8(a)(2)(B) and (C)).

Penalty Increase. The maximum civil penalty for violations of the HSR increased from $50,120 per day to $51,744 per day.

Effective Dates. The increased HSR thresholds and filing fees will be effective in late February 2024 (30 days after publication in the Federal Register). The increased civil penalties became effective January 10, 2024 for civil penalties assessed after the effective date, including civil penalties for which the associated violation predated the effective date.

See the FTC Press Release: https://www.ftc.gov/news-events/news/press-releases/2024/01/ftc-announces-2024-update-size-transaction-thresholds-premerger-notification-filings

This memorandum is provided by Sichenzia Ross Ference Carmel LLP for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

SEC Issues New Cybersecurity Rule, In Effect For December 31st Year End Companies

On July 26, 2023, the Securities and Exchange Commission issued the Final Rule on Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure (the “Cybersecurity Rule”). The Cybersecurity Rule requires public companies to disclose both material cybersecurity incidents they experience and, on an annual basis, material information regarding their cybersecurity risk management, strategy, and governance.

Companies are just starting to file their Form 10-Ks with their cybersecurity disclosures set forth in new Item 1(c) pursuant to new Regulation SK, Item 106.

New Regulation S-K Item 106 requires registrants to describe their processes, if any, for assessing, identifying, and managing material risks from cybersecurity threats, as well as whether any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect the registrant. Item 106 also requires registrants to describe the board of directors’ oversight of risks from cybersecurity threats and management’s role and expertise in assessing and managing material risks from cybersecurity threats. (Emphasis mine.)

Foreign private issuers have similar disclosure obligations in new Item 16K of the Form 20-F.

Note that companies are enhancing their cybersecurity Risk Factors along with this new disclosure.

With respect to the annual Form 10-K and Form 20-F cybersecurity disclosures, all registrants (including Smaller Reporting Companies) must provide such disclosures beginning with their annual reports for fiscal years ending on or after December 15, 2023.

The disclosures being filed now touch on the following subjects:

  • Which entities within the company address cybersecurity risk (i.e., the senior management person who heads up the process; the Board of Directors; the Audit Committee, etc.).
  • Whether the company has a cybersecurity risk management policy approved by the Board of Directors (SRFC should be drafting such policies for clients);
  • What the cybersecurity risk management policy covers;
  • How often cybersecurity threats are assessed;
  • How the company manages the risks (e.g., end-user training, layered defenses, identifying and protecting critical assets, strengthening monitoring and alerting, and engaging experts).

See the Final Cybersecurity Rule here: https://www.sec.gov/files/rules/final/2023/33-11216.pdf

See the SEC Fact Sheet here: https://www.sec.gov/files/33-11216-fact-sheet.pdf

See the SEC Small Entity Compliance Guide here: https://www.sec.gov/corpfin/secg-cybersecurity

SEC Issues New SPAC/De-SPAC Rules: A Definitive Guide

On January 24, 2024, the Securities and Exchange Commission (“SEC”) adopted final rules relating to special purpose acquisition companies (“SPACs”). This email just touches on the material aspects of the final rules which consist of 581 pages. You can see the final rule here: https://www.sec.gov/files/rules/final/2024/33-11265.pdf

Definitions:

  • De-SPAC transaction” means a business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, involving a special purpose acquisition company and one or more target companies (contemporaneously, in the case of more than one target company).
  • Special purpose acquisition company means a company that has: (1) indicated that its business plan is to: (i) conduct a primary offering of securities that is not subject to the requirements of Rule 419 under the Securities Act of 1933 (“Securities Act”); (ii) complete a business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, with one or more target companies within a specified time frame; and (iii) return proceeds from the offering and any concurrent offering (if such offering or concurrent offering intends to raise proceeds) to its security holders if the company does not complete a business combination, such as a merger, consolidation, exchange of securities, acquisition of assets, reorganization, or similar transaction, with one or more target companies within the specified time frame; or (2) represented that it pursues or will pursue a special purpose acquisition company strategy.
  • “SPAC sponsor” means any entity and/or person primarily responsible for organizing, directing, or managing the business and affairs of a special purpose acquisition company, excluding, if an entity is a SPAC sponsor, officers and directors of the special purpose acquisition company who are not affiliates of any such entity that is a SPAC sponsor.
  • “Target company” means an operating company, business or assets.

Registered Offerings by SPACs: The new rules cover: (i) the forepart of the registration statement and the prospectus cover page; (ii) a new summary section; and (iii) a new dilution table.

SPAC sponsor; conflicts of interest: The focus is on identifying the SPAC sponsors and their compensation, including: (i) identifying the controlling persons; (ii) the extent to which the SPAC sponsor, its affiliates, and the promoters are involved in other special purpose acquisition companies; (iii) any agreement between the SPAC sponsor and the SPAC, its officers, directors, or affiliates with respect to determining whether to proceed with a de-SPAC transaction; (iv) the nature (e.g., cash, shares of stock, warrants and rights) and amounts of all compensation to be paid and whether any shares have been transferred, surrendered or cancelled; (v) any actual or potential conflicts of interest; and (vi) any fiduciary duties of each officer and director of the SPAC to other companies.

De-SPAC Transactions: The new rules cover: (i) the forepart of the registration statement and the prospectus cover page: (A) whether the SPAC has received an appraisal; (B) whether any material financing transactions that have occurred since the SPAC IPO or will occur in connection with the consummation of the de-SPAC transaction; (C) the compensation to be received in the de-SPAC transaction; and (D) any material conflicts of interest that have or may occur; (ii) a new summary section; and (iii) a new dilution table.

Background of and reasons for the de-SPAC transaction; terms of the de-SPAC transaction; effects: The registration statement must cover, among other things: (i) how the de-SPAC transaction came about; (ii) the material terms of the transaction; (iii) the financing of the transaction; (iv) differences in the rights of the stockholders of the two companies; (iv) the accounting treatment of the transaction; (v) the tax consequences of the transaction; and (vi) any material interests in the de-SPAC transaction or any related financing transaction held by the SPAC sponsor or the SPAC’s officers or directors.

Board determination about the de-SPAC transaction: Requires disclosure of: (i) whether the SPAC Board found the deal advisable and in the stockholders’ best interests; (ii) the factors used by the Board to reach their decision; (iii) whether the de-SPAC transaction is structured so that approval of at least a majority of unaffiliated security holders of the SPAC is required; (iii)  whether the Board has retained an unaffiliated representative to act solely on behalf of unaffiliated security holders for purposes of negotiating the terms of the de-SPAC transaction; and (iv) whether the de-SPAC transaction was approved by a majority of the SPAC board who are not employees.

Reports, opinions, appraisals, and negotiations: Requires disclosure if the SPAC or SPAC sponsor has received any report, opinion (other than an opinion of counsel) or appraisal from an outside party or an unaffiliated representative relating to the fairness and other matters of the de-SPAC transaction, and if so, summarize it.

Tender offer filing obligations: If the SPAC files a Schedule TO  for any redemption of securities offered to security holders, such Schedule TO must provide additional information from the Proxy Rules and the tender offer must be done in compliance with the Issuer Tender Offer Rules.

Projections: If projections are used in the registration statement, the SPAC must disclose their purpose, assumptions used, and whether the target company has approved them, among other things.

Forward Looking Statements: The rules adopt a definition of “blank check company” under the Private Securities Litigation Reform Act (“PSLRA”) that make the safe harbor for forward-looking statements under the PSLRA unavailable for such blank check companies, including SPACs.

Interactive Data File: The disclosure must comply with Rule 405 of Regulation S-T and the EDGAR Filer Manual. This requirement will become effective on or about May 28, 2025 (490 days after publication in the Federal Register).

Shell Company Mergers. The Final Rule also deals with shell company mergers. Under Rule 145a in certain business combination transactions where reporting shell companies, including SPACs, are parties, the combined company will be required to register the deemed sale of its securities to the pre-transaction reporting shell company shareholders at the time of the business combination, unless there is an available exemption. Thus, the target company will be a co-issuer/co-registrant and its directors and officers will have to sign the registration statement and will be subject to liability under the securities laws.

Amendments to Regulation S-X: The final Rules amend financial statement requirements and the forms and schedules filed in connection with business combination transactions involving shell companies (other than business combination related shell companies), including de-SPAC transactions, to align more closely required disclosures about the target company with those required in a Form S-1 or F-1 for an IPO, including: (i) expanding the circumstances in which target companies may report two years, instead of three years, of audited financial statements; and (ii) further aligning the requirements for audited financial statements in these transactions with those required in a registered IPO.

Effective Date: Except as for the IDF rule, the rules become effective on or about May 28, 2024 (125 days after publication in the Federal Register).

See the Fact Sheet here: https://www.sec.gov/files/33-11265-fact-sheet.pdf

See the Press Release here: https://www.sec.gov/news/press-release/2024-8

This memorandum is provided by Sichenzia Ross Ference Carmel LLP for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

New Federal Disclosure Requirements for Corporations and Limited Liability Company

What’s New: Starting January 1, 2024, pursuant to the new Federal Corporate Transparency Act (“CTA”) all persons filing for a new non-exempt corporation or limited liability company (“LLC”) in any State (including the District of Columbia or any U.S. Territory) or in any foreign country must also register their “beneficial owners” and “company applicants” with the U.S. Department of the Treasury’s division of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). First reports must be filed within 90 days of the company’s organization. Sichenzia Ross Ference Carmel (“SRFC”) is advising clients to file concurrently upon organization. Any reporting company that was created before January 1, 2024, must file a report no later than January 1, 2025. Please contact your SRFC attorney to schedule your filing this year.

Who is Exempt?: Certain companies regulated by the Securities and Exchange Commission or the
Federal banking agencies are exempt. Check with your SRFC attorney to find out of your company
is exempt from the registration requirement.

What if We Don’t File?: The willful failure to report complete or updated beneficial ownership
information to FinCEN, or the willful provision of or attempt to provide false or fraudulent
beneficial ownership information may result in a civil or criminal penalties, including civil
penalties of up to $500 for each day that the violation continues, or criminal penalties including
imprisonment for up to two years and/or a fine of up to $10,000.
Senior officers of an entity that fails to file a required BOI report may be held accountable for that
failure.

Who is a “Beneficial Owner”?: A beneficial owner is any individual who, directly or indirectly:
• Exercises substantial control over a reporting company; OR
• Owns or controls at least 25 percent of the ownership interests of a reporting company.
Each of the bold faced terms have complex definitions under the regulations. For example,
“substantial control” may include persons “who have substantial influence over important
decisions made by the reporting company…”
“Ownership interests” include equity, profit interests, convertible instruments, and options and the
“catch all” provision.

There are exemptions to the beneficial owner definitions, including minor children, custodians,
employees, inheritors and creditors. To determine who in the company must file as a Beneficial
Owner, please confer with your SRFC attorney.

Who is the “Company Applicant”?: If the company is organized after January 1, 2024, the
individual who is primarily responsible for directing or controlling the filing must file as the
Company Applicant. SRFC believes that to be the incorporator of the corporation, the organizer of
the LLC or member of senior management of the Company who has asked SRFC to assist in the
organization of the company. (There is no Company Applicant for entities formed before January
1, 2024).

What Details Are In The Filing?: Reporting companies must provide:
– Full legal name
– Trade name if any
– U.S. address
– Jurisdiction of formation
– IRS Taxpayer ID number

The Beneficial Owner and the Company Applicant must provide:
– Full legal name
– Date of birth
– Current address
– Image of either passport or driver’s license

How To File: Your filing will be coordinated with your SRFC attorney who will assist with the
preparation of the organization and FinCEN documents in conjunction with a third-party filing
service that will be the “direct applicant” under the CTA. The filing service will charge a separate
fee for filing directly with FinCEN. You can avoid that fee if you wish to file yourself directly on
the FinCEN website.

Updates/Changes Must Be Filed: If there is any change to the required information about the
reporting company, its Beneficial Owners or the Company Applicant in a previously filed report,
the company must file an updated BOI report no later than 30 days after the date on which the
change occurred. If an inaccuracy is identified in a BOI report, the company must correct it no
later than 30 days after the date your company became aware of the inaccuracy or had reason to
know of it.

Your Information Is NOT Publicly Available: These reports are not available to the public (even
through the Freedom of Information Act), but will be accessible by law enforcement at the federal,
state and local levels. Financial institutions may also have access upon their customer’s consent.

Questions? If you have any questions about this new filing requirement, please contact your SRFC
attorney.

This memorandum is provided by Sichenzia Ross Ference Carmel LLP for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

Sichenzia Ross Ference Carmel LLP Successfully Represents Global System Dynamics, Inc. in NASDAQ Delisting Hearing

Press Release – New York, NY – January 5th, 2023 – Sichenzia Ross Ference Carmel LLP announced today that it represented Global Systems Dynamics, Inc. (NASDAQ: GSD, GSDWW, GSDWU) (“GSD” or the “Company”) in front of a NASDAQ hearing panel, to determine the future of GSD’s listing on the Nasdaq Capital Markets. The hearing was a success, with GSD being granted a conditional extension to complete their business combination with DarkPulse, Inc. (OTC: DPLS), and re-evaluating NASDAQ status by April 1st, 2024.

GSD is a newly organized blank check company incorporated in January 2021 as a Delaware corporation, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

Rick Iler, CFO of GSD, stated, “We are very excited to report that we have been granted a conditional extension to accomplish our business combination by Nasdaq by April 1, 2024. We will continue to work diligently to meet the stipulations of the Staff. Once completed, we remain confident that this transaction will create significant shareholder value.

The Sichenzia Ross Ference Carmel LLP team was led by partner Ross Carmel, and associate Mohit Agrawal.

Sichenzia Ross Ference Carmel LLP

Ross Carmel Quoted in Law360’s “Pent Up’ Demand For IPOs Could End Drought In 2024″

Press Release – New York, NY – January 4th, 2023 – Ross Carmel, partner of Sichenzia Ross Ference Carmel LLP, was quoted today in an informative article by Tom Zanki.

The article, titled “Pent Up’ Demand For IPOs Could End Drought In 2024”, examines the possibility of initial public offerings rebounding compared to the last two years, notably forecasting which organizations will join the market and which IPOs may accelerate.

“Which companies will jump first is yet another question. Capital markets attorneys will watch
whether a marquee name — financial payments startup Stripe Inc. has been rumored among
top IPO prospects for years — will open the door for more deals.

Stripe last raised $6.5 billion in a private round last March at a $50 billion valuation in a
financing that was largely designed to allow Stripe employees the ability to sell their equity.
Sichenzia Ross Ference Carmel LLP partner Ross Carmel noted that Stripe’s many private
investors will eventually want the liquidity that public markets provide.

Stripe was also reportedly on track to turn a profit in 2023, which could boost its appeal with
public investors. Stripe declined to comment on whether it is considering an IPO.

Ax well, when asked for his thoughts on how Stripe fares amongst the top IPOs, Ross had this to say:

“Stripe has probably the best opportunity to be the one to open the floodgates.”

Press here to read the full article and more at Law360.

Sichenzia Ross Ference Carmel LLP

Gregory Sichenzia Quoted in Private Banker International’s “Private Banking and Markets in 2024: What’s the Outlook?”

Press Release – New York, NY – December 26th, 2023Gregory Sichenzia, founding partner of Sichenzia Ross Ference Carmel LLP, was quoted today in an informative article by Patrick Brusnahan.

The article, titled “Private banking and markets in 2024: What’s the outlook?”, outlines a clear-cut set path for banking in the new year, and how interest and inflation will affect the projected outcome.

When contacted for an interview, Greg stated the following:

“In 2024, interest rates will continue to dominate headlines, but this time because of their stabilisation and decline, which will create a more active IPO and capital markets climate, as well as a big boost to the overall economy.

The resurgence of the IPO market is clear, as activity typically increases when the cost of capital gets cheaper, which ultimately needs to be deployed. In 2024, I expect Stripe will be the company that opens the markets and the floodgates because all of the private venture capital and banking money that’s gone into it over the past few years. If a deal with Stripe materialises, large caps will lead the way for opening up small caps.

We’ve already seen big companies performing much better. As I write this, stock markets in mid-December are hitting all-time highs. Right now, we see large cap companies (such as Amazon, Tesla and Google) succeed, and that will start to trickle down to smaller companies in the new year. This is due to investors making money in their portfolios off bigger investments, creating more risk capital available. History tells us when people start feeling more secure in bigger investments, the micro and mid-cap markets thrive.

Further, drops in interest rates also mean home buying will pick up again, which makes many bullish about real estate and broader capital markets.

All of this will result in more lending, which will affect the banking industry. People will be borrowing more money again because the cost of capital comes down. If no one is borrowing money, then they’re not making money. As JFK said, a rising tide lifts all boats.

Overall, we can anticipate that all sectors will improve in the new year. With interest rates and a presidential election year, I forecast a robust stock market and IPO market going into 2024.”

Press here to read the full article and more at Private Bankers International.

Sichenzia Ross Ference Carmel LLP

Sichenzia Ross Ference Carmel LLP Completes 18 Transactions in Past 60 Days, Establishing Itself As One of the Most Prolific Securities Law Firms in the Country

Press Release – New York, NY – December 11, 2023 – Sichenzia Ross Ference Carmel LLP (“SRFC”), a full-service law firm internationally recognized for its securities and litigation practices, today shared a snapshot of the Firm’s activity since announcing that Sichenzia Ross Ference LLP would combine with Carmel, Milazzo & Feil to form SRFC.

With approximately 70 experienced attorneys in offices spanning New York City, California and Florida, SRFC is one of the largest rosters of securities lawyers in the country across mid-sized law firms. SRFC provides creative and cost-effective solutions, boasting a world-class corporate and securities litigation group that represents broker-dealers, businesses and individuals in all types of commercial litigation and arbitration.

In recent months, SRFC has accomplished multiple major transactions, including but not limited to:

Additionally, SRFC celebrated the following milestones:

  • Closed 18 deals in October and November 2023, totaling an amount of $89,350,000 since the combination.
  • Joined the ranks on the Chamber’s New York Regional Guide for 2024.
  • Partner, Ross Carmel’s commentary on the IPO market featured in MarketWatch and MSN
  • Litigation Partner, Scott Furst achieved a case of first-impression victory in the New Jersey Superior Court Appellate Division in October
  • Sponsored the 34th annual St. Jude’s “Wall Street Taste of New York” event

“While initial public offerings and broader capital markets activity are down of late, SRFC remains one of the business law firms on Wall Street, a testament to our dogged work ethic and industry expertise, both of which reflect the bright future of the firm,” said Gregory Sichenzia, Partner at SRFC. “We pride ourselves on our credibility and dedication to our clients, and look forward to achieving the firm’s growth goals and continued success of its clients as 2023 draws to a close.”

About Sichenzia Ross Ference Carmel LLP
SRFC is a full-service law firm with a nationally recognized corporate, securities, and litigation practice that provides experienced representation in all matters involving the securities industry. In addition to handling routine to complex commercial matters, SRFC’s renowned litigation and regulatory department specializes in defending broker-dealers, registered persons, public and private corporations, and individuals in investigations and enforcement proceedings before the SEC, FINRA, and other regulatory bodies, as well as litigations and arbitrations across all forums in the securities industry, including class action lawsuits, shareholder derivative actions, and matters involving allegations of fraud, misrepresentation or other securities violations.

Finally, SRFC has a burgeoning expungement practice, where it represents registered persons seeking to have false and harmful customer complaints removed from their industry records. In addition to SRFC’s well-known securities practice, we have expertise in multiple disciplines including complex commercial litigation in an array of matters from shareholder derivative actions, partnership disputes, breach of contract, etc. SRFC practice groups include tax and trust and estates, notably providing sophisticated estate planning for its high-net-worth clients.

For a full list of transactions, please click here.

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Media contact:
FischTank PR
srfc@fischtankpr.com

Sichenzia Ross Ference Carmel LLP

What Is a 424(b) Filing and Why Is It Important?

If your company is planning to go public or conduct a securities offering in the United States, you’ll need to file a 424(b) prospectus with the Securities and Exchange Commission (SEC). This filing is required under the Securities Act of 1933 and provides important information to potential investors about the securities being offered and the issuer’s business and financial condition.

In this blog post, we’ll provide an overview of 424(b) filings, including the required disclosures and timing.

What Is a 424(b) Filing?

A 424(b) prospectus is a document that is filed with the SEC as part of the registration process for a securities offering. This document is required for all public offerings of securities, including initial public offerings (IPOs) and secondary offerings.

The 424(b) prospectus provides potential investors with detailed information about the securities being offered, including the offering price, number of shares being sold, and any underwriting discounts or commissions. The prospectus also includes information about the issuer, including its business operations, management team, and financial statements. In addition, the prospectus must disclose any material risks associated with the investment, such as risks related to the issuer’s business, industry, and market.

Why Is a 424(b) Filing Important?

The 424(b) prospectus is an important tool for potential investors who are considering investing in a securities offering. By providing detailed information about the securities being offered and the issuer’s business and financial condition, the prospectus helps investors make informed decisions about whether to invest in the offering.

For issuers, the 424(b) filing is also an important step in the securities offering process. By providing the required disclosures, issuers can help to build trust and credibility with potential investors, which can be essential for a successful offering.

What Are the Required Disclosures in a 424(b) Filing?

The 424(b) prospectus must include a range of disclosures, including:

  • A description of the securities being offered, including the number of shares, the offering price, and any underwriting discounts or commissions.
  • A description of the issuer, including its business and financial information, management team, and principal stockholders.
  • A description of the risks associated with the investment, including risks related to the issuer’s business, industry, and market.
  • Information about how the proceeds from the offering will be used.
  • A description of any material legal proceedings, regulatory actions, or other events that could impact the issuer’s financial condition or operations.

Timing of 424(b) Filings

The timing of a 424(b) filing can vary depending on the type of offering. For an IPO, the prospectus must be filed at least 15 days before the anticipated offering date. For a secondary offering, the prospectus must be filed within five days of the offering. The SEC may also require additional disclosures or revisions to the prospectus during the review process.

Conclusion

If your company is planning to go public or conduct a securities offering in the United States, it’s important to understand the requirements for 424(b) filings. By providing detailed disclosures about the securities being offered and the issuer’s business and financial condition, a 424(b) prospectus can help to build trust and credibility with potential investors, which can be essential for a successful offering. Working with experienced securities attorneys can help to ensure that your 424(b) filing is compliant with SEC regulations and provides the necessary disclosures to potential investors.

Understanding 8-K filings: What they are and why they matter

If you’re an investor in publicly traded companies, you’ve likely heard of an 8-K filing. But what exactly is an 8-K, and why is it important for investors to pay attention to them? In this blog post, we’ll provide an overview of 8-K filings and their significance, so you can make informed investment decisions.

What is an 8-K filing?

An 8-K is a report filed with the United States Securities and Exchange Commission (SEC) to announce significant events or changes that may affect a publicly traded company’s financial condition or share price. These filings are required by law and must be submitted within four business days of the occurrence of an event that is deemed “material,” or likely to have an impact on the company’s financial condition or stock price.

Examples of events that may trigger an 8-K filing include changes in management or control of the company, acquisitions or dispositions of assets, bankruptcy or receivership, changes in accounting practices or principles, financial results for a completed fiscal quarter or year, major contracts or agreements entered into or terminated, and changes to the company’s articles of incorporation or bylaws.

Why are 8-K filings important?

The purpose of 8-K filings is to provide investors and analysts with timely information about a company’s operations and financial health. By law, companies are required to disclose any material information that could have an impact on their financial performance or stock price. This helps investors make informed decisions about whether to buy, sell, or hold a particular stock.

For example, if a company announces that it has acquired a competitor or entered into a major contract with a new client, this could be considered material information that would require an 8-K filing. Investors can use this information to assess the potential impact on the company’s future revenue and earnings, and adjust their investment strategy accordingly.

How can investors access 8-K filings?

The SEC maintains an electronic database called EDGAR (Electronic Data Gathering, Analysis, and Retrieval) that provides public access to all filings made by publicly traded companies, including 8-K filings. Investors can search for and access these filings using the SEC’s online portal.

In addition, many financial news websites and investment platforms provide access to 8-K filings, along with expert analysis and commentary. By staying up-to-date on 8-K filings and other material disclosures made by companies, investors can make more informed investment decisions and reduce their exposure to risk.

Conclusion

In summary, 8-K filings are an important tool for investors to stay informed about material events and changes affecting publicly traded companies. By law, companies are required to disclose this information promptly and accurately, giving investors the information they need to make informed decisions about their investments. Investors can access 8-K filings through the SEC’s EDGAR database or through other financial news sources. By staying up-to-date on 8-K filings and other material disclosures, investors can make more informed investment decisions and reduce their exposure to risk. If you have questions about how 8-K filings may affect your investments, it’s always a good idea to consult with an experienced securities attorney.

Reverse Mergers into OTC Companies: Process, Documents, and Timing

A reverse merger into an OTC company can be an attractive option for private companies seeking to go public quickly and at a lower cost. However, it is important to understand the process, documents, and timing involved in this type of transaction to ensure that it is executed successfully and in compliance with regulatory requirements.

The Process

The process of a reverse merger into an OTC company typically involves several steps. First, the private company must identify and negotiate with a suitable OTC company to merge with. This typically involves evaluating potential candidates based on factors such as their financials, industry focus, and management team.

Once a suitable candidate has been identified, the parties will execute a letter of intent or term sheet outlining the basic terms of the transaction. The private company will then conduct due diligence on the OTC company to evaluate its financials, legal history, and other key factors.

The parties will then negotiate and execute definitive merger documents, including a merger agreement and related documents. These documents set forth the terms and conditions of the merger, including the consideration to be paid to the OTC company’s shareholders and the conditions that must be met before the merger can be completed.

The merger must be approved by both the private company’s and the OTC company’s shareholders, which typically involves preparing and filing a proxy statement or information statement with the SEC. Once shareholder approval has been obtained and all other conditions have been satisfied, the merger can be completed.

The Documents

A reverse merger into an OTC company typically involves several key documents. These include:

  • Letter of intent or term sheet: This document outlines the basic terms of the transaction and sets the stage for negotiations.
  • Merger agreement: This is the main document that sets forth the terms and conditions of the merger, including the consideration to be paid to the OTC company’s shareholders, the conditions to closing, and other key terms.
  • Proxy statement or information statement: This document is used to obtain shareholder approval and must be reviewed and approved by the SEC before it can be distributed to shareholders.
  • Other documents: Depending on the specific terms of the transaction, additional documents may be required, such as employment agreements, stock purchase agreements, and escrow agreements.

The Timing

A reverse merger into an OTC company can typically be completed in several months, depending on factors such as the complexity of the transaction, the due diligence process, and the time required to obtain shareholder approval. It is important to work with experienced advisors, such as legal and financial professionals, to help navigate the process and ensure compliance with regulatory requirements.

Conclusion

In summary, a reverse merger into an OTC company can be an attractive option for private companies seeking to go public quickly and at a lower cost. However, it is important to carefully consider the process, documents, and timing involved in this type of transaction, and to work with experienced advisors to ensure that it is executed successfully and in compliance with regulatory requirements.

Understanding Emerging Growth Company Status: Advantages and Disadvantages

As a small business looking to go public, you may have heard of the term “Emerging Growth Company” or EGC. Under the Jumpstart Our Business Startups (JOBS) Act of 2012, companies that meet certain criteria are eligible for EGC status. In this blog post, we’ll explore the requirements to be an EGC, the advantages and disadvantages of this status, and what small businesses should consider before making a decision.

Requirements to be an EGC

To be considered an EGC, a company must meet the following requirements:

  • Annual gross revenues of less than $1.07 billion in its most recently completed fiscal year.
  • Went public within the previous five years.
  • Not have issued more than $1 billion in non-convertible debt in the previous three years.

Advantages of EGC Status

There are several benefits to being classified as an EGC. These benefits include:

  1. Reduced Disclosure Requirements: EGCs are not required to comply with certain disclosure requirements that are normally required of larger public companies. For example, they are not required to provide executive compensation disclosures or certain financial disclosures. This reduced disclosure burden can be particularly beneficial for small businesses that may not have the resources to comply with all of the regulatory requirements that apply to larger public companies.
  2. Exemption from Certain SEC Regulations: EGCs are exempt from certain regulations that apply to larger public companies. For example, they are not required to hold shareholder advisory votes on executive compensation packages. This regulatory relief can provide EGCs with additional flexibility during the IPO process.
  3. Confidential Submission of IPO Registration Statements: EGCs are allowed to submit their initial IPO registration statements on a confidential basis to the SEC. This provides them with additional flexibility and confidentiality during the IPO process.

Disadvantages of EGC Status

There are also some disadvantages to being classified as an EGC. These disadvantages include:

  1. Limited Duration of EGC Status: EGC status is only available for a limited period of time, generally up to five years after the company’s IPO or until it reaches certain revenue and public float thresholds. After this time period expires, the company must comply with all of the regulatory requirements that apply to larger public companies.
  2. Increased Regulatory Scrutiny after EGC Status Expires: Once a company’s EGC status expires, it must comply with all of the regulatory requirements that apply to larger public companies. This can result in increased regulatory scrutiny and compliance costs.
  3. Reduced Investor Confidence: Some investors may view EGCs as riskier investments due to their limited operating history and reduced disclosure requirements. This reduced investor confidence can make it more difficult for EGCs to raise capital and grow their business.

Conclusion

Being classified as an EGC provides certain benefits and regulatory relief measures to small businesses that have recently gone public or are in the process of going public. However, EGC status is only available for a limited period of time and may result in reduced investor confidence and increased regulatory scrutiny after EGC status expires. Companies considering EGC status should carefully weigh the benefits and drawbacks before making a decision. A qualified securities attorney can provide guidance on the pros and cons of EGC status and help small businesses navigate the complex regulations that apply to public companies.

Navigating Nasdaq Annual Meeting Rules: A Guide for Companies and Legal Counsel

As a legal professional, it’s important to stay up-to-date on the rules and regulations that govern annual meetings of companies listed on the Nasdaq Stock Market. Failure to comply with these rules can result in significant legal and financial consequences for the company and its directors.

Here are some of the key Nasdaq annual meeting rules that companies and their legal counsel should be aware of:

  1. Timing and Notice Requirements: Companies must hold annual meetings within 13 months of their previous annual meeting and provide shareholders with at least 10 days’ notice before the meeting.
  2. Shareholder Voting: All matters that are properly brought before the meeting must be put to a shareholder vote, including the election of directors, appointment of auditors, and any other proposals on the meeting agenda.
  3. Shareholder Proposals: Shareholders who meet certain eligibility requirements and submit their proposals within the Nasdaq-established deadline may have their proposals included on the meeting agenda.
  4. Shareholder Participation: Shareholders must have the opportunity to ask questions and make comments during the meeting, subject to reasonable time constraints and rules of order.
  5. Proxy Statements: Companies must provide shareholders with a proxy statement in advance of the meeting, which includes information about the matters to be voted on and the nominees for director.
  6. Record Dates: Companies must provide a record date for determining the shareholders who are entitled to vote at the meeting, which must be no more than 60 days before the meeting date.

It’s important for companies to comply with these rules to ensure that their annual meetings are conducted in a fair and transparent manner, and to avoid any potential violations of Nasdaq rules or regulations. Companies that fail to comply with these rules may face legal action, sanctions from Nasdaq, and reputational damage.

Legal counsel can assist companies in navigating these complex rules and ensuring that they are in compliance with all relevant laws and regulations. An experienced attorney can review the company’s bylaws, provide guidance on the submission of shareholder proposals, draft necessary proxy statements, and help ensure that the company’s annual meeting is conducted in accordance with applicable laws and regulations.

In conclusion, it’s important for companies and their legal counsel to be aware of the Nasdaq annual meeting rules and to take proactive steps to ensure compliance. By doing so, companies can help ensure that their annual meetings are conducted fairly and transparently, and avoid legal and financial consequences.

Staying Compliant: A Guide to Understanding the SEC’s Executive Compensation Rules for Public Companies and Their Legal Counsel

As a legal professional, it’s important to stay up-to-date on the SEC’s executive compensation rules that govern public companies. Failure to comply with these rules can result in significant legal and financial consequences for the company and its directors.

Here are some of the key elements of the SEC’s executive compensation rules that companies and their legal counsel should be aware of:

  1. Disclosure Requirements: Companies must disclose the total compensation of their CEO, CFO, and other named executive officers in their annual proxy statements, including salary, bonuses, stock options, and other forms of compensation.
  2. Performance-Based Compensation: Companies must disclose whether any of their executive compensation is based on performance metrics and provide details about the performance targets that must be met for executives to receive such compensation.
  3. Clawback Policies: Companies must disclose whether they have policies in place to claw back executive compensation if it is later determined that the compensation was based on inaccurate financial statements or other misconduct.
  4. Say-on-Pay Votes: Companies must allow shareholders to vote on executive compensation at least once every three years. This “say-on-pay” vote is advisory in nature, but it provides shareholders with an opportunity to express their views on the company’s executive compensation practices.
  5. Hedging Disclosure: Companies must disclose whether their executive officers and directors are permitted to engage in hedging transactions with respect to the company’s securities.

Compliance with these rules is important to promote transparency and accountability in executive compensation practices and ensure that shareholders have the information they need to make informed decisions about their investments. Failure to comply with these rules can lead to legal action, sanctions from the SEC, and reputational damage.

Legal counsel can assist companies in navigating these complex rules and ensuring that they are in compliance with all relevant laws and regulations. An experienced attorney can review the company’s executive compensation practices, draft necessary proxy statements, and help ensure that the company’s disclosures are accurate and complete.

In conclusion, it’s important for companies and their legal counsel to be aware of the SEC’s executive compensation rules and to take proactive steps to ensure compliance. By doing so, companies can help ensure that their executive compensation practices are transparent and fair, and avoid legal and financial consequences. Legal counsel can play a critical role in this process, helping companies navigate these complex rules and ensuring compliance with all relevant laws and regulations.

Listing on the NYSE American: Understanding the Key Listing Standards

As a company, maintaining a listing on the NYSE American can provide valuable access to capital markets, investors, and other benefits. However, this also means that the NYSE American has certain standards and requirements that companies must meet to maintain their listing. Failure to meet these standards may result in delisting from the exchange, which can have significant consequences for a company’s operations and reputation.

In this blog post, we’ll provide an overview of the NYSE American delisting standards, including both quantitative and qualitative requirements, to help companies understand what they need to do to maintain their listing.

Quantitative Delisting Standards

The NYSE American has several quantitative standards that companies must meet to maintain their listing. These include:

  1. Minimum price per share: Companies must maintain a minimum average closing price of $1.00 over a consecutive 30-day trading period. This means that the company’s stock must not fall below this threshold for an extended period of time.
  2. Minimum market capitalization: Companies must have a market capitalization of at least $50 million over a consecutive 30-day trading period. Market capitalization is calculated by multiplying the company’s share price by the number of outstanding shares.
  3. Minimum stockholders’ equity: Companies must maintain stockholders’ equity of at least $4 million. This represents the residual value of a company’s assets after its liabilities have been paid.
  4. Minimum public float: Companies must have at least 1 million publicly held shares outstanding, with a market value of at least $2.5 million. This ensures that there is sufficient liquidity in the company’s stock for investors to buy and sell.

If a company fails to meet any of these quantitative standards, it will be notified by the NYSE American and given a certain period of time to regain compliance. If the company fails to regain compliance within the specified period, it may be delisted.

Qualitative Delisting Standards

In addition to quantitative standards, the NYSE American also has several qualitative standards that companies must meet to maintain their listing. These include:

  1. Non-compliance with financial standards: If a company fails to meet any of the quantitative standards, it will be notified by the NYSE American and given a certain period of time to regain compliance. If the company fails to regain compliance within the specified period, it may be delisted.
  2. Non-compliance with corporate governance standards: Companies must comply with certain corporate governance requirements, such as having a majority of independent directors on its board or maintaining an audit committee comprised solely of independent directors. Failure to comply with these requirements may result in delisting.
  3. Other issues: The NYSE American may delist a company if it fails to meet other requirements or if there are other issues that the exchange determines make continued listing on the exchange inappropriate.

Conclusion

Maintaining a listing on the NYSE American can provide significant benefits for companies, but it also comes with certain responsibilities. Companies must meet both quantitative and qualitative delisting standards to maintain their listing, and failure to do so can have significant consequences. It’s important for companies to understand these requirements and take steps to ensure compliance to avoid being delisted from the exchange.

If you have questions about NYSE American delisting standards or need assistance with compliance, contact our law firm for guidance and support.

Understanding the 10-Q Report: A Comprehensive Guide

As a publicly traded company, you are required to file various reports with the Securities and Exchange Commission (SEC) to keep investors informed about your financial position and performance. One such report is the 10-Q report, which is a quarterly report that provides a comprehensive update on your financial performance and operations. In this blog post, we’ll provide a detailed guide to the 10-Q report, including its purpose, documents, disclosures, and timing.

Purpose of the 10-Q Report: The 10-Q report is designed to provide investors with a comprehensive update on your financial position, performance, and risks during the previous quarter. It is an important document that helps investors make informed decisions about the companies they invest in. The report includes unaudited financial statements, management discussion and analysis, risk factors, legal proceedings, and other disclosures that provide insight into your company’s operations.

Documents Included in the 10-Q Report: The 10-Q report includes several documents that provide investors with a detailed view of your company’s financial position and performance. Some of the key documents that may be included in the 10-Q report are:

  1. Financial Statements: The 10-Q report includes unaudited financial statements, including a balance sheet, income statement, and cash flow statement, which provide investors with a snapshot of your company’s financial position, performance, and liquidity.
  2. Management Discussion and Analysis (MD&A): The MD&A section of the 10-Q report provides management’s perspective on your company’s financial performance and operations during the previous quarter, and may highlight significant events or trends that could affect your company’s future performance.
  3. Risk Factors: The 10-Q report may include a section on risk factors, which outlines potential risks that could impact your company’s financial performance or operations, such as changes in market conditions, regulatory changes, or competition.
  4. Legal Proceedings: The 10-Q report may disclose any pending legal proceedings or litigation that could have a material impact on your company’s financial position or reputation.
  5. Other Disclosures: The 10-Q report may include additional disclosures related to your company’s operations, such as changes in management, significant events or transactions, or new products or services.

Timing of the 10-Q Report: Public companies are required to file a 10-Q report with the SEC within 45 days after the end of each fiscal quarter. The timing of the report may vary slightly depending on your company’s specific fiscal year-end and reporting requirements. Once the 10-Q report is filed with the SEC, it is made publicly available on the SEC’s website and on your own website.

Conclusion: In conclusion, the 10-Q report is an essential document that provides investors with a detailed update on your company’s financial performance and operations during the previous quarter. By including financial statements, management discussion and analysis, risk factors, legal proceedings, and other disclosures, the 10-Q report helps investors make informed decisions about the companies they invest in. As a publicly traded company, it is essential that you understand the purpose, documents, disclosures, and timing of the 10-Q report to comply with SEC regulations and keep your investors informed.

Beginner’s Guide to the IPO Process

The Initial Public Offering (IPO) Process

An initial public offering (IPO) is when a private company becomes public by selling its shares on a stock exchange. This is a major event for any company, as it allows them to raise capital from the public and become a listed company.

The IPO process can be a complex one, and there are many steps involved. In this blog post, we will take a look at the key steps in an IPO process.

1. Select an investment bank

The first step in the IPO process is for the issuing company to choose an investment bank to advise the company on its IPO and to provide underwriting services. The investment bank is selected according to the following criteria:

  • Reputation
  • Quality of research
  • Industry expertise
  • Distribution, i.e., if the investment bank can provide the issued securities to more institutional investors or to more individual investors
  • Prior relationship with the investment bank

The issuing company will usually issue a letter of intent to the investment bank, which outlines the terms of the underwriting agreement.

2. Due diligence and regulatory filings

Once the investment bank has been selected, the issuing company must undergo due diligence and regulatory filings. This process involves the investment bank reviewing the company’s financial statements, business plan, and other documents. The investment bank will also file the company’s registration statement with the Securities and Exchange Commission (SEC).

The registration statement must contain detailed information about the company, including its financial statements, business plan, and management team. The SEC will review the registration statement and approve it before the company can proceed with the IPO.

3. Pricing

Once the registration statement has been approved, the issuing company and the investment bank will set the price of the shares. The price of the shares will be based on a number of factors, including the company’s financial performance, the market conditions, and the advice of the investment bank.

4. Stabilization

After the shares have been priced, the investment bank will stabilize the market for the shares. This means that the investment bank will buy and sell shares in the market to maintain the price of the shares at a certain level.

The stabilization process is important to prevent the shares from fluctuating too much in the early days of trading.

5. Transition to market competition

Once the stabilization period is over, the shares will be listed on an exchange and begin trading. The issuing company will now be subject to market competition, and its share price will be determined by the supply and demand for its shares.

The IPO process is a complex one, but it is an important step for any company that wants to raise capital from the public and become a listed company.

A Baby Shelf on Form S-3: What You Need to Know

A baby shelf is a provision of Form S-3 that allows companies to register securities for sale up to one-third of their public float over a 12-month period. This can be a useful option for companies that want to raise capital from the public but do not want to have to file a new registration statement each time they want to sell securities.

To qualify for a baby shelf, a company must meet the following requirements:

  • The company must have a public float of at least $75 million.
  • The company must have been subject to the reporting requirements of the Securities and Exchange Act of 1934 for at least 12 months.
  • The company must have filed a Form S-3 registration statement that has been in effect for at least 12 months.

Once a company has qualified for a baby shelf, it can register securities for sale up to one-third of its public float over a 12-month period. The company can sell the securities at any time during the 12-month period, and it does not have to file a new registration statement each time it sells securities.

Baby shelves can be a useful tool for companies that want to raise capital from the public. They can help companies to raise capital quickly and easily, and they can save companies a lot of time and money.

Here are some of the benefits of using a baby shelf:

  • Quick and easy access to capital. A baby shelf allows companies to raise capital quickly and easily, without having to file a new registration statement each time they want to sell securities.
  • Reduced costs. A baby shelf can save companies a lot of time and money, as they do not have to file a new registration statement each time they sell securities.
  • Increased flexibility. A baby shelf gives companies more flexibility in how they raise capital. They can sell securities at any time during the 12-month period, and they do not have to file a new registration statement each time they sell securities.

Here are some of the risks of using a baby shelf:

  • Market conditions. The market conditions may not be favorable for selling securities, which could make it difficult for a company to raise capital.
  • Investor demand. There may not be enough investor demand for the securities, which could make it difficult for a company to sell them.
  • Competition. There may be too much competition from other companies that are also trying to raise capital.

Overall, a baby shelf can be a useful tool for companies that want to raise capital from the public. It can help companies to raise capital quickly and easily, and it can save companies a lot of time and money. However, there are some risks associated with using a baby shelf, and companies should carefully consider these risks before deciding whether or not to use one.

How to Calculate a Baby Shelf

A baby shelf is a provision of Form S-3 that allows companies to register securities for sale up to one-third of their public float over a 12-month period. This can be a useful option for companies that want to raise capital from the public but do not want to have to file a new registration statement each time they want to sell securities.

To calculate a baby shelf, you will need to know the following information:

  • The number of shares of common stock that are outstanding.
  • The number of shares of common stock that are held by insiders and by institutional investors.
  • The public float.

The public float is the number of shares of common stock that are held by the public. To calculate the public float, you will need to subtract the number of shares that are held by insiders and by institutional investors from the number of shares of common stock that are outstanding.

Once you have the public float, you can calculate the baby shelf by multiplying the public float by one-third. This will give you the maximum number of shares of common stock that you can sell under a baby shelf.

For example, if you have 100 million shares outstanding, 10 million shares are held by insiders and by institutional investors, and the public float is 90 million shares, then you can sell up to 30 million shares under a baby shelf.

It is important to note that the baby shelf calculation is based on the public float as of the date of the registration statement. If the public float changes after the registration statement is filed, you may be able to sell more or less securities under the baby shelf.

To calculate the non-affiliate float for purposes of S-3 eligibility, a company may look back 60 days and select the highest of the last sales prices or the average of the bid and ask prices on the principal exchange.

Nasdaq Listing Tiers: A Guide for Companies

Nasdaq is one of the largest stock exchanges in the world, and it offers three tiers of listing for companies: Global Select Market, Global Market, and Capital Market. Each tier has its own requirements, and companies must meet certain standards to list on a particular tier.

The Capital Market is the lowest tier, and it is reserved for companies with the fewest financial requirements. To list on the Capital Market, a company must have a market value of listed securities of at least $15 million, and at least 300 round lot shareholders. Companies that list on the Capital Market must also meet all of Nasdaq’s listing rules.

The Nasdaq Capital Market has the fewest requirements. Companies that list on the Capital Market must meet the following requirements:

  • Market value of listed securities of at least $15 million.
  • Round lot shareholders of at least 300.
  • Stockholders’ Equity of $5 million
  • Unrestricted publicly held shares of 1 million
  • Audited financial statements for the most recent fiscal year.
  • Unaudited interim financial statements for the most recent quarter.
  • Disclosure of corporate governance practices, including its board of directors’ independence, its executive compensation policies, and its proxy voting policies.
  • Compliance with all applicable laws and regulations, including those relating to securities fraud, insider trading, and corporate governance.

The tier of listing that a company chooses depends on a variety of factors, including its financial situation, its growth plans, and its investor base. Companies that are looking to raise capital from the public or that are looking to attract a large number of investors may choose to list on the Global Select Market or the Global Market. Companies that are looking to raise a smaller amount of capital or that are looking to attract a smaller number of investors may choose to list on the Capital Market.

No matter what tier a company chooses, listing on Nasdaq can provide a number of benefits, including access to a large pool of investors, visibility to a global audience, and the ability to raise capital. If you are considering listing your company on Nasdaq, it is important to consult with an investment banker or a securities attorney to discuss your options and to make sure that you meet all of the requirements.

What is a 10-K and Why Should You Care?

A 10-K is an annual report filed with the Securities and Exchange Commission (SEC) by a publicly traded company. It provides a comprehensive overview of the company’s business and financial condition, including audited financial statements.

If you’re an investor, you should care about 10-Ks because they provide you with important information about the companies you’re investing in. By reading a 10-K, you can learn about a company’s business model, its financial health, and its risks. This information can help you make informed investment decisions.

Here are some of the key things you can learn from a 10-K:

  • The company’s business description: This section of the 10-K describes the company’s products or services, its customers, and its competition.
  • The company’s financial statements: The 10-K includes the company’s balance sheet, income statement, and cash flow statement. These statements provide a snapshot of the company’s financial condition at a specific point in time.
  • Executive compensation: The 10-K includes information about the company’s executive compensation, including salaries, bonuses, and stock options.
  • Risk factors: The 10-K includes a section on risk factors that could affect the company’s business. This section is important to read, as it can help you identify any potential risks that could impact your investment.
  • Management’s discussion and analysis of financial condition and results of operations: This section of the 10-K provides management’s perspective on the company’s financial performance. It discusses the company’s strengths, weaknesses, opportunities, and threats.

Reading a 10-K can be a daunting task, but it’s an important one if you’re an investor. By taking the time to read a 10-K, you can learn more about the companies you’re investing in and make more informed investment decisions.

Here are some tips for reading a 10-K:

  • Start with the executive summary: The executive summary provides a high-level overview of the company and its business. It’s a good place to start if you’re not familiar with the company.
  • Read the risk factors: The risk factors section is important to read, as it can help you identify any potential risks that could impact your investment.
  • Pay attention to the financial statements: The financial statements provide a snapshot of the company’s financial condition at a specific point in time. They’re important to read if you’re trying to assess the company’s financial health.
  • Don’t be afraid to ask questions: If you have any questions about the 10-K, don’t be afraid to ask a financial advisor or an investment professional. They can help you understand the information in the 10-K and make informed investment decisions.

Nasdaq Delisting: What You Need to Know

Nasdaq is one of the largest stock exchanges in the world, and it is home to some of the most well-known companies in the world. However, even companies that are listed on Nasdaq can be delisted if they fail to meet the exchange’s listing standards.

There are a number of reasons why a company might be delisted from Nasdaq. Some of the most common reasons include:

  • Failure to meet minimum bid price: The company’s stock must trade at a minimum bid price of $1.00 per share.
  • Failure to meet minimum market capitalization: The company’s market capitalization must be at least $2 million.
  • Failure to meet minimum number of shares outstanding: The company must have at least 300,000 shares outstanding.
  • Failure to meet minimum revenue: The company must have at least $1 million in revenue for the most recent fiscal year.
  • Failure to maintain an independent audit committee: The company must have an independent audit committee.
  • Failure to file regular reports with the SEC: The company must file regular reports with the SEC.
  • Failure to meet corporate governance requirements: The company must meet certain corporate governance requirements.

If a company is delisted from Nasdaq, it can still trade on other exchanges, but it will likely have a much lower market capitalization and be less visible to investors.

There are a few things that companies can do to avoid being delisted from Nasdaq:

  • Make sure that they meet the exchange’s listing standards
  • If they do not meet the standards, take steps to correct the problem
  • Communicate with Nasdaq if they are having problems meeting the standards
  • If they are delisted, try to get listed on another exchange
  • Contact Carmel, Milazzo & Feil to guide you through the process

If you are an investor in a company that is listed on Nasdaq, it is important to be aware of the risks of delisting. If a company is delisted, it could have a significant impact on the value of your investment.

What is a PIPE? Private Placement in a Public Entity

A private placement is when a public company sells securities (shares, bonds, etc.) to a small group of investors, rather than selling them to the general public through an initial public offering (IPO). This type of financing can be a good option for public companies that need to raise capital quickly or that want to avoid the costs and scrutiny associated with an IPO.

There are a few different ways that a public company can conduct a private placement. One way is to sell securities directly to a group of investors, such as institutional investors or wealthy individuals. Another way is to sell securities to a broker-dealer, who will then sell them to investors.

What are the advantages of private placements?

There are a few advantages to conducting a private placement. First, it can be a faster and more efficient way to raise capital than an IPO. Second, it can help to avoid the costs and scrutiny associated with an IPO. Third, it can help to build relationships with investors who may be interested in investing in the company in the future.

What are the disadvantages of private placements?

However, there are also a few disadvantages to conducting a private placement. First, it can be more expensive than an IPO. Second, it can be more difficult to find investors who are willing to invest in a private placement. Third, it can be more difficult to get the same level of disclosure and transparency as an IPO.

When should a public company conduct a private placement?

Overall, a private placement can be a good option for public companies that need to raise capital quickly or that want to avoid the costs and scrutiny associated with an IPO. However, it is important to be aware of the risks and disadvantages before conducting a private placement.

Here are some of the factors that public companies should consider when deciding whether to conduct a private placement:

  • The amount of capital the company needs to raise
  • The timeline for raising the capital
  • The company’s financial condition
  • The company’s business plan
  • The company’s investor relations strategy

If you are a public company that is considering conducting a private placement, it is important to consult with an experienced securities attorney to discuss the specific risks and benefits of private placements.

Going to the ATM. At the Market Public Offering

An at-the-market (ATM) offering is a type of secondary offering whereby a public company sells its existing shares directly to the market at prevailing market prices through a broker-dealer. The company can sell shares through an ATM offering at any time, and the amount of shares sold can vary depending on the company’s needs.

ATM offerings are a common way for companies to raise capital, and they can be a good option for companies that want to avoid the costs and scrutiny associated with a traditional secondary offering. ATM offerings can also be a good way for companies to raise capital quickly, as they can be done without having to file a prospectus or obtain shareholder approval.

However, there are also some risks associated with ATM offerings. For example, if the market price of the company’s shares falls below the offering price, the company could lose money. Additionally, ATM offerings can dilute the value of existing shares.

Overall, ATM offerings can be a good way for companies to raise capital, but it is important to weigh the risks and benefits before deciding whether to do an ATM offering.

What is the purpose of an ATM offering?

The purpose of an ATM offering is to raise capital for the company. The company can use the proceeds from the offering for any purpose, such as to repay debt, fund an acquisition, or invest in research and development.

How does an ATM offering work?

An ATM offering works by allowing the company to sell its shares directly to the market at prevailing market prices. The company can sell shares through an ATM offering at any time, and the amount of shares sold can vary depending on the company’s needs.

When a company conducts an ATM offering, it will typically hire a broker-dealer to help it sell the shares. The broker-dealer will then sell the shares to investors at the prevailing market price. The company will receive the proceeds from the sale of the shares, which it can then use for whatever purpose it deems necessary.

What are the benefits of an ATM offering?

There are a number of benefits to conducting an ATM offering. For example, ATM offerings can help companies to raise capital quickly and easily. Additionally, ATM offerings can help companies to avoid the costs and scrutiny associated with a traditional secondary offering.

ATM offerings can also be a good way for companies to raise capital from a wider range of investors. This is because ATM offerings can be done without having to file a prospectus or obtain shareholder approval. This means that ATM offerings can be open to a wider range of investors, including retail investors and institutional investors.

What are the risks of an ATM offering?

There are also some risks associated with ATM offerings. For example, if the market price of the company’s shares falls below the offering price, the company could lose money. Additionally, ATM offerings can dilute the value of existing shares.

Overall, ATM offerings can be a good way for companies to raise capital, but it is important to weigh the risks and benefits before deciding whether to do an ATM offering.

How does an ATM offering affect the company’s stock price?

The impact of an ATM offering on the company’s stock price can vary depending on a number of factors, such as the size of the offering, the company’s financial condition, and the market conditions. However, generally speaking, ATM offerings can cause the company’s stock price to decline. This is because the sale of new shares increases the supply of shares available to the market, which can drive down the price of the stock.

What are some of the alternatives to ATM offerings?

There are a number of alternatives to ATM offerings, such as traditional secondary offerings, private placements, and debt financing. The best option for a company will depend on a number of factors, such as the amount of capital needed, the company’s financial condition, and the market conditions.

Here are some of the key documents and timing involved in an ATM offering:

  • Equity Distribution Agreement: This is an agreement between the company and the broker-dealer that will be selling the shares. The agreement will outline the terms of the offering, such as the price of the shares and the commission to be paid to the broker-dealer.
  • Prospectus: This is a document that must be filed with the Securities and Exchange Commission (SEC) before the offering can commence. The prospectus will provide information about the company and the offering, such as the company’s financial condition and the use of the proceeds from the offering.
  • Form 8-K: This is a report that must be filed with the SEC within 15 days of the completion of the offering. The Form 8-K will provide information about the results of the offering, such as the amount of shares sold and the proceeds received by the company.

The timing of an ATM offering can vary depending on the company and the market conditions. However, typically, the company will file the prospectus with the SEC and begin the offering process several weeks before it actually needs the proceeds from the offering. This allows the company to gauge investor interest and adjust the terms of the offering as needed.

The company will typically continue to sell shares through the ATM offering until it has raised the desired amount of capital. Once the company has raised the desired amount of capital, it will terminate the ATM offering and cease selling shares.

A Confidentially Marketed Public Offering (CMPO)

A confidentially marketed public offering (CMPO) is a type of public offering that allows a company to raise capital without having to file a prospectus or obtain shareholder approval. In a CMPO, the company sells shares directly to institutional investors without any general solicitation or advertising.

CMPOs are a relatively new type of offering, but they have become increasingly popular in recent years. They offer a number of advantages over traditional public offerings, including:

  • Reduced costs. CMPOs are typically much less expensive than traditional public offerings. This is because they do not require the company to file a prospectus or obtain shareholder approval.
  • Increased flexibility. CMPOs allow companies to raise capital quickly and easily. This is because they do not require the company to go through the traditional public offering process, which can be time-consuming and expensive.
  • Increased confidentiality. CMPOs allow companies to raise capital without having to disclose their financial information to the public. This can be beneficial for companies that are concerned about competitors or investors learning about their financial condition.

However, there are also some disadvantages to CMPOs, including:

  • Reduced liquidity. Shares sold in a CMPO are typically not as liquid as shares sold in a traditional public offering. This is because they are not available to retail investors.
  • Increased risk. CMPOs are considered to be a riskier investment than traditional public offerings. This is because there is less information available about the company and its financial condition.

Overall, CMPOs can be a good option for companies that are looking to raise capital quickly and easily. However, it is important to weigh the risks and benefits before deciding whether to do a CMPO.

Required documents

There are a number of documents that must be filed with the Securities and Exchange Commission (SEC) in order to conduct a CMPO. These documents include:

  • Form 8-K. This report must be filed within 15 days of the completion of the offering. The Form 8-K will provide information about the results of the offering, such as the amount of shares sold and the proceeds received by the company.
  • Prospectus. This is a document that must be filed with the SEC before the offering can commence. The prospectus will provide information about the company and the offering, such as the company’s financial condition and the use of the proceeds from the offering.
  • Form 4. This report must be filed by any person who sells shares in the offering. The Form 4 will disclose the amount of shares sold and the price at which they were sold.

Process

The process of conducting a CMPO typically begins with the company contacting a broker-dealer to discuss the possibility of conducting an offering. The broker-dealer will then help the company to prepare the necessary documents and to file them with the SEC. Once the SEC has approved the offering, the company can begin selling shares to institutional investors.

Timing

The timing of a CMPO can vary depending on a number of factors, such as the company’s financial condition and the market conditions. However, typically, CMPOs are conducted during times when the stock market is strong and when there is a high demand for new investment opportunities.

De-SPAC: A Guide to the Process

A de-SPAC, also known as a reverse merger, is a process by which a special purpose acquisition company (SPAC) merges with a private company to take it public.

The SPAC raises money from investors by selling shares in its initial public offering (IPO). The SPAC then uses the proceeds from the IPO to acquire a private company. The private company then becomes a public company through the merger with the SPAC.

Since 2020, there have been over 1,000 de-SPACs.

There are a number of advantages to de-SPACing. First, it is a faster way to go public than a traditional IPO. Second, it gives private companies access to the public markets without having to go through the traditional IPO process. Third, it gives private companies access to the capital they need to grow their businesses.

However, there are also some disadvantages to de-SPACing. First, there is a risk that the private company will not be able to meet the expectations of investors. Second, there is a risk that the private company will not be able to maintain its growth rate after it goes public. Third, there is a risk that the private company will be acquired by a larger company before it has a chance to grow on its own.

Overall, de-SPACing is a new and innovative way to go public. It offers a number of advantages to private companies, but it also comes with some risks.

Timing

The timing of a de-SPAC can vary depending on a number of factors, such as the market conditions and the specific requirements of the SPAC and the target company. However, typically, de-SPACs are conducted during times when the stock market is strong and when there is a high demand for new investment opportunities.

Documents

The following are some of the documents that are typically filed in connection with a de-SPAC:

  • The S-4 registration statement
  • The definitive agreement
  • The proxy statement
  • The prospectus

Process

The de-SPAC process typically begins with the SPAC identifying a target company that it believes would be a good fit for its business model. The SPAC then conducts due diligence on the target company and negotiates a definitive agreement. Once the definitive agreement is signed, the SPAC files the S-4 registration statement with the Securities and Exchange Commission (SEC). The SEC reviews the S-4 registration statement and typically takes 3-6 months to approve it. Once the S-4 registration statement is approved, the SPAC can begin soliciting votes from its shareholders on the merger. If a majority of the shareholders approve the merger, the SPAC and the target company will merge and the target company will become a public company.

Costs

The costs of a de-SPAC can vary depending on a number of factors, such as the size of the SPAC, the complexity of the transaction, and the legal fees incurred.

Listing Requirements for a Nasdaq IPO: What Companies Need to Know

Going public through an initial public offering (IPO) can be an exciting and rewarding time for companies. It’s a significant milestone in a company’s growth and can provide access to additional capital and increased visibility in the marketplace. However, the process of going public can be complex and requires careful planning and execution. In this blog post, we’ll explore the listing requirements for a Nasdaq IPO and what companies need to know to successfully navigate the process.

Financial Requirements:

One of the key requirements for a Nasdaq IPO is meeting certain financial benchmarks. This includes a minimum of $5 million in stockholders’ equity and a minimum of 1.25 million publicly traded shares outstanding. Additionally, Nasdaq requires a minimum market capitalization of $50 million for listing. Companies must also have at least two years of operating history to list on Nasdaq.

Share Price and Corporate Governance:

Companies must also meet certain share price and corporate governance requirements to list on Nasdaq. The minimum bid price for a company’s stock must be at least $4 per share at the time of listing. Nasdaq also has corporate governance requirements that companies must meet, such as having a majority of independent directors on its board and having an audit committee that meets certain standards.

Disclosure Requirements and Compliance with Laws:

In order to list on Nasdaq, companies must meet certain disclosure requirements and comply with all applicable laws and regulations. This includes filing regular reports with the Securities and Exchange Commission (SEC) and complying with Nasdaq’s own reporting requirements.

Navigating the Nasdaq IPO Process:

Navigating the Nasdaq IPO process can be complex and requires careful planning and execution. It’s important for companies to work closely with their underwriters and legal counsel to ensure that they meet all of the necessary criteria for a successful listing on Nasdaq. This includes carefully reviewing all of the listing requirements, preparing the necessary documentation, and ensuring compliance with all applicable laws and regulations.

Conclusion:

Going public through an IPO can be a significant milestone for companies, but it requires careful planning and execution. The listing requirements for a Nasdaq IPO are complex and require companies to meet certain financial benchmarks, share price requirements, corporate governance requirements, and disclosure requirements. By working closely with legal counsel such as Carmel, Milazzo & Feil and underwriters, companies can successfully navigate the Nasdaq IPO process and achieve a successful listing on one of the major stock exchanges in the United States.

The IPO: Form S-1 vs. Form F-1

Preparing for an initial public offering (IPO) is a complex process that requires careful planning and execution. One of the key components of an IPO is filing a registration statement with the Securities and Exchange Commission (SEC). There are two types of registration statements that companies can file: Form S-1 and Form F-1. In this blog post, we’ll explore the differences between these two forms and what companies need to know to successfully navigate the IPO process.

Form S-1:

Form S-1 is the most commonly used registration statement for U.S. companies that are planning an IPO. This form is also used for other offerings of securities, such as secondary offerings. Form S-1 requires companies to provide detailed information about their business and financial condition. This includes information about the company’s management, operations, risks, and financial statements. Companies must also provide detailed information about their planned use of proceeds from the offering.

One of the benefits of using Form S-1 is that it allows companies to register a wide range of securities, including common stock, preferred stock, debt securities, and warrants. It also allows companies to register securities for resale by selling shareholders.

Form F-1:

Form F-1 is used by foreign companies that wish to list their securities on a U.S. stock exchange, such as the New York Stock Exchange or the Nasdaq. One of the key differences between Form S-1 and Form F-1 is that Form F-1 requires additional information about the issuer and its home country. This includes information about the political and economic conditions in the issuer’s home country, as well as any risks associated with investing in that country.

Companies filing a Form F-1 must also provide financial statements that are prepared in accordance with International Financial Reporting Standards (IFRS) or U.S. Generally Accepted Accounting Principles (GAAP). This is an important consideration for foreign companies that are accustomed to preparing financial statements under different accounting standards.

Conclusion:

In summary, Form S-1 is used by U.S. companies to register securities, while Form F-1 is used by foreign companies that wish to list their securities on a U.S. stock exchange. While both forms require companies to provide detailed information about their business and financial condition, there are some key differences in the information that must be provided, particularly regarding the issuer’s home country and financial statements.

Companies that are considering an IPO should work closely with their legal counsel and underwriters to determine which form is appropriate for their particular situation. The IPO process can be complex and requires careful planning and execution. By understanding the differences between Form S-1 and Form F-1, companies can successfully navigate the registration process and achieve a successful listing on a U.S. stock exchange.

Understanding Secondary Offerings: A Comprehensive Guide for Companies and Shareholders

As a lawyer, I often get asked about secondary offerings and the process involved in conducting one. In this blog post, I will provide a detailed overview of what a secondary offering is, the documents and steps involved in the process, and the timing considerations that should be taken into account.

What is a Secondary Offering?

A secondary offering is the sale of additional shares of a company’s stock by existing shareholders, rather than by the company itself. This type of offering provides a way for existing shareholders to sell some or all of their shares in a company to the public or other investors. The proceeds from the sale of the shares go directly to the selling shareholders, rather than to the company.

Documents and Process Involved

The process of a secondary offering involves several steps and documents that need to be carefully considered and prepared. These steps include:

  1. Registration Statement

The selling shareholders must file a registration statement with the Securities and Exchange Commission (SEC) prior to the offering. This statement contains information about the company, its financial statements, and the securities being offered. It is important to ensure that the information provided in the registration statement is accurate and complete, as any material misstatements or omissions could result in liability for the selling shareholders.

  1. Underwriting Agreement

The selling shareholders will typically work with an investment bank or other underwriter to facilitate the offering. The underwriting agreement sets out the terms of the offering, including the price, number of shares, and other conditions. It is important to ensure that the underwriting agreement is carefully drafted to reflect the terms of the offering and to protect the interests of the selling shareholders.

  1. Prospectus

The prospectus is a document that provides detailed information about the offering to potential investors. It includes information about the company, the shares being offered, and the risks associated with investing in the company. The prospectus must be carefully drafted to ensure that it is accurate and complete, and that it complies with applicable securities laws.

  1. Marketing and Pricing

The underwriter will work to market the offering to potential investors and determine the price at which the shares will be sold. It is important to ensure that the marketing materials and pricing are consistent with the terms of the offering and the disclosures made in the registration statement and prospectus.

  1. Closing

Once the offering is priced and marketed, the underwriter will purchase the shares from the selling shareholders and then resell them to investors. It is important to ensure that the closing process is properly documented and that all necessary approvals are obtained.

Timing Considerations

The timing of a secondary offering can vary depending on a number of factors, including market conditions and the regulatory approval process. The SEC typically reviews registration statements within 30 days of filing, but the process can take longer if the agency has questions or concerns. The underwriting process, marketing, and pricing can also take several weeks or even months to complete. In some cases, the company may need to obtain shareholder approval before the offering can proceed. Overall, the timing of a secondary offering can range from several weeks to several months, depending on the complexity of the offering and the regulatory requirements involved.

Conclusion

A secondary offering can be a complex and time-consuming process that requires careful planning and preparation. As a lawyer, I strongly advise companies and selling shareholders to work with experienced professionals to ensure that all legal and regulatory requirements are properly addressed. This can help to minimize the risk of liability and ensure that the offering proceeds smoothly and efficiently.

Memorandum RE: Pay v. Performance Disclosure Rules

Item 402(v) of Regulation S-K

On August 25, 2022, the Securities and Exchange Commission (SEC) adopted Item 402(v) of Regulation S-K, requiring companies to provide certain “pay versus performance” disclosures regarding the relationship between executive compensation actually paid and the company’s financial performance in any proxy statement or information statement for which Item 402 executive compensation disclosure is required. 

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Client Alert: New York Adopts Revised Regulations for Individuals of Registered Investment Advisers

OVERVIEW

In an effort to modernize its registration function, to better conform to the federal securities registration regime, to cure industry confusion as to certain registration requirements and to better track exam requirement compliance of thousands of investment adviser representatives (“IARs”) providing investment advice to New Yorkers, the New York Investor Protection Bureau of the Department of Law (“Department”) has proposed revisions to its current regulations.

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2020 Income Tax Rates and Deductions

Sichenzia Ross Ference has prepared a tax chart showing all proposed tax changes under Biden vs. current under Trump.

It is a downloadable PDF titled “2020 Income Tax Rates and Deductions” that you can access by clicking the link below.

Click here for 2020 income tax rates and deductions

 

This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on as, specific tax, legal or accounting advice. Each individual’s situation is unique and may require customized advice.  We recommend that you consult your own tax and accounting advisors before engaging in any transaction.  Please contact Robert M. Birnbaum, Esq., or Carolyn M. Glynn, Esq. if you are interested in learning more about this or other estate planning topics.

60 Days And Counting: “Regulation Best Interest” Is Nearly Here. Are Independent Broker-Dealers Ready? What They Need to Know and Do

On June 5, 2019, the United States Securities and Exchange Commission (“Commission”) adopted Rule 15l-1 (“Regulation Best Interest”) under the Securities Exchange Act of 1934 (“Exchange Act”), which has a compliance date of June 30, 2020.[1]  Regulation Best Interest became effective September 10, 2019.  Notwithstanding the host of issues arising from the global pandemic, an economic recession and significant market volatility across essentially every sector, the Commission has made clear that the deadline for compliance with Regulation Best Interest and the related Form CRS requirements will not be delayed or extended.

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SRF CLIENT ALERT: Major Changes for Your IRA Account

Congress has made major changes for IRA accounts effective January 1, 2020:

The End of the Stretch IRA

Before 2020, anyone who inherited an IRA account was able to delay taking distributions from it over the course of his or her lifetime.  This frequently enabled the IRA beneficiary to stretch out the mandatory withdrawals over many decades, meanwhile allowing the IRA account to build up on a tax-deferred basis.  Beginning in 2020, with certain exceptions, anyone who inherits an IRA will have to take all of it out within 10 years.  The timing of the withdrawals during the 10 years is up to the beneficiary, but by the end of 10 years the entire account has to be taken down and all of the deferred income taxes have to be paid.

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Time to Make a Personal Estate Plan for Your (Financial) Exit or IPO

Your years of hard work have finally come to fruition.  Your company is going to go public or your business is going to be sold and what was once a dream is now about to become a reality.  This is the time when many entrepreneurs make million-dollar mistakes and forget about their partner Uncle Sam.  He has been waiting patiently in the wings for you to get rich; the richer you get, the happier he is.

The United States does not have a wealth tax yet, and it may never have one unless Elizabeth Warren is elected President.  However, it does have a death tax and so do a number of states, including New York; the less you plan the higher the death tax will be.  Whether your company will be going public or will be sold privately, you will be in a position to potentially save millions in estate taxes by putting a solid estate plan in place to protect your family.

Here’s the bad news: right now, the federal government has a death tax that will take 40% of everything you own over $11,400,000.  The amount exempt from tax is scheduled to be cut in half in a few years and possibly sooner, depending on the 2020 election.  Many States take a bite as well; for example if you live in New York, the State government has a death tax with rates that could take up to 16% of your assets.

But there’s good news: your company going public or selling your business presents you with an opportunity to potentially save millions in taxes.  It also enables you to structure a plan that will benefit your family and provide for their future well-being for many decades to come.  For more information and guidance on how this can be accomplished, please get in touch with Robert Birnbaum at rbirnbaum@srf.law or Jodi Zimmerman at jzimmerman@srf.law of our Trusts and Estates department. You can also call our office at (212) 930-9700 to speak with our attorneys.

Client Alert: U.S. Senate and House of Representatives Approve 2018 Farm Bill

The long-awaited resurgence of the Agriculture Improvement Act of 2018, colloquially referred to as the 2018 Farm Bill, became more promising yesterday as its latest iteration received overwhelming bipartisan approval as it decidedly passed through the Senate on Tuesday, by a vote of 87-to-13, and easily passed through the House of Representatives, by a vote of 369-to-47. Now, the reality of the 2018 Farm Bill awaits the hand of President Donald Trump, who is expected to sign it into law before the end of the month.

Most notable, the 2018 Farm Bill is set to legalize hemp, a plant that’s nearly identical to marijuana and is a key source of the highly popular health and wellness ingredient cannabinoid, or CBD. If signed into law, the 803-page Bill would be the most significant change to the Controlled Substances Act (the “CSA”) since 1971, which is illustrative of the federal government’s recognition that outdated federal regulations do not sufficiently distinguish between hemp, including CBD derived from hemp, and CBD derived from marijuana.

In contrast to its predecessor, the voluminous 2018 Farm Bill expressly and unambiguously provides that the definition of “marihuana” under the CSA would be amended to exclude “hemp”, which, in turn, is defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” Succinctly, if signed into law, the 2018 Farm Bill would be the first piece of federal legislation that explicitly carves out certain permutations of CBD containing tetrahydrocannabinol (“THC”), the active ingredient that causes the psychoactive effect of marijuana, from the CSA.

Against this backdrop, financial institutions that have been reluctant to establish relationships with hemp-related business because of the inclusion of “hemp” in the CSA’s definition of “marihuana” and the February 14, 2014 guidance from the Department of the Treasury Financial Crimes Enforcement Network, may now turn a new leaf and embrace the estimated $1 billion industry.

Relatedly, and in furtherance of the federal government’s progressive initiative toward the proliferation of the rapidly increasing hemp market, the 2018 Farm Bill also places far-reaching limitations on the States’ abilities to prevent the transport of hemp across interstate commerce. Specifically, the 2018 Farm Bill states, in relevant part, that “No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products,” so long as such hemp or hemp products are produced in accordance with discrete guidelines set forth elsewhere in the 2018 Farm Bill.

Notwithstanding, this monumental shift in cannabis reform should not be misconstrued as a blanket legalization of hemp at the state level. Conversely, the 2018 Farm Bill provides a roadmap for states and Indian tribes to become the “primary regulators” of hemp production by submitting “a plan under which the State or Indian tribe monitors and regulates” the production of hemp within its borders. In this regard, those interested in getting involved in the hemp industry, in any capacity, are cautioned to review the applicable state law, which may carry more stringent restrictions than the 2018 Farm Bill, as well as any other pertinent federal authority.

Finally, it is worth noting that nothing in the 2018 Farm Bill implicates the status quo of marijuana or CBD derived from marijuana, both of which remain illegal under federal law. And while the legal landscape remains somewhat hazy, bipartisan agreement of the 2018 Farm Bill marks a long-overdue, massive step forward for the U.S. hemp industry.

About the authors

S. Ashley Jaber
Latest posts by S. Ashley Jaber (see all)
    Robert Volynsky
    Latest posts by Robert Volynsky (see all)

      California’s New Commercial Financing Disclosure Legislation

      Introduction

      On August 31, 2018, the California State Senate passed novel legislation, Senate Bill 1235, which requires new disclosures for certain commercial financing, such as loans, factoring transactions, and, potentially, merchant cash advances (MCAs). California Governor Jerry Brown has until September 30 to sign this legislation, and it appears likely that he will. continue reading >>

      Under new tax law, sales by foreign partners of U.S. partnership interests are once again taxable.

      In an August 2017 posting we reported that the U.S. Tax Court had held that, notwithstanding an IRS revenue ruling to the contrary, the sale by a foreign partner of his interest in a U.S. partnership was not a taxable transaction to him (assuming he was not otherwise a U.S. taxpayer), just as the sale of stock in a U.S. corporation is not a taxable transaction to a foreign shareholder. (“Tax Court: Foreign investors not taxable on sales/liquidations, of U.S. partnership interests.”)

      continue reading >>

      Partner Jeff Fessler Joins Client ContraVir Pharmaceuticals, Inc. at NASDAQ Opening Bell Ringing

      Press Release – New York, NY – March 22, 2016 – Sichenzia Ross Friedman Ference LLP partner Jeff Fessler joined representatives of client ContraVir Pharmaceuticals, Inc., a biopharmaceutical company focused on the development and commercialization of targeted antiviral therapies, at the NASDAQ MarketSite in Times Square to ring the March 21 closing bell. continue reading >>

      Blog Post – Founding Partner Marc Ross Shares “Regulation A+: Funding The Start-up”

      Overview

      Start-ups looking to raise no more than $50 million now have the ability to do so by a Regulation A+ offering.  The recent amendments to Regulation A, which is Regulation A+, under the Securities Act of 1933, as amended (the “Securities Act”), allow companies to increase the amount of capital that they can raise in a Regulation A offering from $5 million to $50 million over a 12-month period. continue reading >>

      FAST Act Includes Changes to Securities Laws

      By Avital Perlman

      President Obama signed the Fixing America’s Surface Transportation Act, or FAST Act, into law on December 4, 2015.  The FAST Act, which is aimed at improving the country’s surface transportation infrastructure, also contains several sections that amend securities laws to ease regulatory burdens for smaller companies.

      Improving Access to Capital for Emerging Growth Companies, or EGCs continue reading >>

      Utilizing a “Shelf” Registration Statement for a Follow-On Public Offering

      More…

      Background

      Under the Securities Act of 1933, as amended (the “Securities Act”), any public securities offering must be registered with the Securities and Exchange Commission (the “SEC”). In a follow-on public offering, a publicly reporting company offers securities to the public in an offering registered with the SEC subsequent to the completion of the issuer’s initial public offering.

      Form S-3 and Rule 415 Eligibility

      The general form for registration of securities under the Securities Act is Form S-1. A filing made on Form S-1 must include extensive disclosure regarding the issuer and the offering, including, among other things, audited financial statements, a description of the issuer’s business and properties, management’s discussion and analysis of financial condition and results of operations, identification of and certain information regarding officers and directors of the issuer and its principal stockholders, the terms of the offering, and risk factors and plan of distribution (such as underwriting arrangements) for the offering.

      As an alternative to the filing of a Form S-1, issuers that meet the requisite conditions may register offerings on Form S-3, a “short-form” registration pursuant to which certain information about the issuer may be incorporated by reference from previous and future filings made by the issuer with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It should be noted that Form S-1 also allows incorporation by reference under certain conditions, but only to prior filings made under the Exchange Act. By incorporating by reference future filings made by the issuer under the Exchange Act, a Form S-3 registration statement obviates the need to file post-effective amendments when, for example, the issuer’s financial statements included in the initial registration statement are no longer deemed current, or there are otherwise material changes that have occurred to the issuer that are disclosed in filings made with the SEC.

      Accordingly, issuers seeking to do a follow-on public offering will, subject to eligibility, file a Form S-3 rather than a Form S-1. To be eligible to file a registration statement on Form S-3, an issuer must meet the following conditions:

      (i) the issuer is organized under the laws of, and has its principal business operations, in the United States (or files the same reports with the SEC as a domestic issuer subject to the Exchange Act);

      (ii) the issuer has a class of securities registered pursuant to Section 12(b) or 12(g) under the Exchange Act, or is required to file reports under Section 15(d) under the Exchange Act;

      (iii) the issuer has been subject to the requirements of Section 12 or 15(d) of the Exchange Act and has filed all the material required to be filed pursuant to the Exchange Act for a period of at least twelve calendar months immediately preceding the filing;

      (iv) the issuer has filed in a timely manner all reports required under the Exchange Act during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement, other than a Current Report that is required solely pursuant to certain specified 8-K Items; and

      (v) the issuer has not, since the end of the last fiscal year for which its audited financial statements were included in a report filed pursuant to the Exchange Act: (a) failed to pay any dividend or sinking fund installment on preferred stock; or (b) defaulted (i) on any installment or installments on indebtedness for borrowed money, or (ii) on any rental on one or more long term leases, which defaults are material to the financial position of the issuer.

      Follow-on offerings are typically conducted under Rule 415 under the Securities Act, which allows for an “offering to be made on a continuous or delayed basis in the future”. Thus, under Rule 415, an issuer may, at its convenience, file a “shelf” registration statement which includes a “base” prospectus, have the registration statement declared effective by the SEC, and subsequently, when it deems conditions suitable, conduct an offering by taking securities down “off the shelf.” The shelf registration statement will specify a maximum dollar amount, and the type of securities (for example, common stock, preferred stock, warrants, debt securities and/or units consisting of some combination of the foregoing), that may be offered, but will not include specific offering terms. To take securities “off the shelf,” the issuer will file a prospectus supplement which sets forth the specific terms of the offering (for example, underwriting arrangements, and price, number and type of securities). Unlike the original “base” Form S-3 filing, the prospectus supplement does not need to be declared effective by the SEC. The issuer can conduct multiple offerings on a single Form S-3 shelf registration statement, for a period of up to three years from when the shelf Form S-3 was declared effective, by filing a prospectus supplement for each such offering, up to the maximum dollar amount initially registered on the shelf registration statement (subject to any “baby shelf” limitations as discussed below), so long as the issuer remains S-3 eligible (which is determined on an annual basis when the issuer files its Annual Report on Form 10-K). Primary offerings made pursuant to Rule 415 must be made on (or be eligible for) Form S-3 and thus are typically registered on Form S-3.

      “Baby Shelf” Offerings and Calculating “Public Float”

      In addition to the issuer meeting the requirements for the filing of a Form S-3 specified above, primary offerings of common equity for cash made under Form S-3 must also meet the following conditions:

      (i) the aggregate market value of the issuer’s common equity held by non-affiliates of the issuer (sometimes referred to as the “public float”) is $75 million or more; or

      (ii) under what is known as a “baby shelf” offering, for an issuer which has a public float of its common equity of less than $75 million, (a) the aggregate market value of securities sold by the issuer under Instruction I.B.6 of Form S-3 (for primary offerings for cash) during the period of 12 months immediately prior to, and including, the sale is no more than one-third of its public float, (b) the issuer has not been a shell company for more than 12 months, or if it has been a shell company at any time previously, has filed current “Form 10 information” (which includes similar disclosure as required by a Form S-1 registration statement) with the SEC at least 12 months prior thereto, and (c) the issuer has a class of equity securities listed on a national securities exchange.

      Thus, to conduct a “baby shelf” offering, an issuer must have a class of equity securities listed on a national securities exchange, such as the New York Stock Exchange or the Nasdaq Stock Market. This requirement does not apply to companies that have a public float of at least $75 million, which may conduct unlimited “shelf” offerings (subject to meeting the other conditions set forth above). The availability of “baby shelf” offerings to companies with less than $75 million in their public float, which has existed since amendments to Form S-3 were effected in January 2008, has provided an additional incentive for small companies to seek a listing on a national securities exchange while providing such companies with greater opportunities to conduct primary public offerings.

      “Common equity” is defined for purposes of S-3 eligibility as any class of common stock or any equivalent interest and may include non-voting common stock. The calculation of the public float for purposes of determining whether the “baby shelf” limitations apply is based on the price at which the common equity was last sold, or the average of the bid and asked prices of such common equity, for such common equity as of any date within 60 days prior to the date of filing of the shelf Form S-3, multiplied by the number of shares of common equity held by non-affiliates. Non-affiliates are generally presumed to include shareholders other than officers, directors and shareholders who beneficially own 10% or more of the outstanding common equity. An issuer may use the highest such closing price within such 60 day period, multiplied by the number of shares held by non-affiliates as of the date of filing (or the number of shares held by non-affiliates as of any day within such 60 day period, which need not be the same date as the date used for the price of the common equity), to determine whether the “baby shelf” limitations apply or whether the issuer can sell an unlimited amount of securities off the shelf Form S-3. If the public float exceeds $75 million as of the date of the filing of the shelf Form S-3, calculated based on the 60 day lookback period described above, and subsequently falls below $75 million, the issuer will nonetheless not be subject to the “baby shelf” limitations until the issuer files its next Annual Report on Form 10-K, at which time such eligibility is reassessed.

      Similarly, if an issuer is subject to the “baby shelf” limitation of selling only one-third of its public float over a one year period, the amount of securities an issuer may sell under a “baby shelf” offering will be equal to one-third of the public float as determined based on the price at which the common equity was last sold, or the average of the bid and asked prices of such common equity for such common equity as of any date within 60 days prior to the date of sale, multiplied by the number of shares of common equity held by non-affiliates. The date used for the price of the common equity and the date used for the number of shares held by non-affiliates do not need to be the same. For example, if, as of October 20, 2015, the highest closing price of an issuer’s common stock within the past 60 days was $3.00 which occurred on September 10, 2015, and the issuer has 10,000,000 shares of common stock held by non-affiliates as of October 20, 2015, the issuer may calculate its public float as of October 20, 2015 to be equal to $30,000,000 (notwithstanding that there may have been fewer than 10,000,000 shares held by non-affiliates as of September 10, 2015), and may sell up to $10,000,000 of common stock under Instruction I.B.6 of Form S-3 during the one year period ending on October 20, 2015. Further, if the issuer’s public float was less than $75 million as of the date of the filing of the shelf Form S-3, but subsequently, while the Form S-3 is effective, the public float exceeds $75 million, such “baby shelf” limitations will no longer apply. The value of securities underlying warrants included in a “baby shelf” offering will also count towards the “baby shelf” limitations.

      The information in this article is for general, educational purposes only and should not be taken as specific legal advice.

      Download the PDF version here

      About the author

      Jeffrey Cahlon
      Latest posts by Jeffrey Cahlon (see all)

        International Tax Planning II — Inbound

        In our last blog post covering international tax planning, we focused on the unique tax traps related to international acquisitions. In our final installment, we discuss the tax considerations for foreign businesses looking to acquire companies in the U.S.


         

        The U.S. is still the big apple for most foreign businesses, but deciding how to get a bite of it requires careful tax planning.

        continue reading >>

        23 States Legalized Marijuana – Bankruptcy Courts Remind Us That It’s Legal in None of Them

        “There was a time a few years ago when the United States was spoken of in the plural number.
        Men said ‘the United States are’ — ‘the United States have’ — ‘the United States were.’ But the war changed all that.”   The Washington Post, April 24, 1887.   The phrase “United States” became a singular noun after the Civil War. continue reading >>