Management’s Discussion and Analysis of Financial Condition and Results of Operation (MD&A)
Management’s discussion and analysis of financial condition and results of operation, commonly referred to as MD&A is an integral parts of annual (Form 10-K) and quarterly (Form 10-Q) reports filed with the Securities and Exchange Commission (SEC). MD&A is also included in registration statements filed under both the Securities Exchange Act of 1934 (Form 10) and Securities Act of 1933 (Form S-1). MD&A requires the most input and effort from officers and directors of a company and due to the many components of required information, often generates SEC review and comments. Item 303 of Regulation S-K sets forth the required content for MD&A.
A MD&A discussion for quarterly reports on Form 10-Q is abbreviated from the requirements for annual reports on Form 10-K and registration statements. Although quarterly reports must discuss each item enumerated below the discussion is expected to be more focused concentrating on the most relevant and material items. In addition, as with my other blogs, this discussion will be limited to the requirements for small public companies (i.e. those with revenues of less than $75 million).
The SEC has issued guidance and interpretation on MD&A, which is helpful in understanding its required content. Pursuant to the SEC, MD&A has three primary purposes. These are:
• to provide a narrative explanation of a company’s financial statements that enables investors to see the company through the eyes of management;
• to enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and
• to provide information about the quality of, and potential variability of, a company’s earnings and cash flow, so that investors can ascertain the likelihood that past performance is indicative of future performance.
Management, and company counsel, should keep these purposes in mind in drafting and finalizing MD&A. The content should not be overly technical, but neither should it be a forum for marketing content. Now, onto the specific MD&A requirements as set forth in Item 303 of Regulation S-K.
In each annual report on Form 10-K, and registration statements on either Forms 10 or S-1, a company must discuss its financial condition, changes in financial condition and results of operations. In addition to the four areas of discussion listed below, a company must include any other relevant information within its knowledge, which information provides a better or more complete understanding of their finances and financial condition. The four areas of financial discussion include:
A company must identify any known trends or known demands, commitments, events or uncertainties that will result in or reasonably could result in an increase or decrease in liquidity. In addition, a company must identify sources and uses of liquidity and any known changes thereto. Explanations of the information provided is required. In layman terms, liquidity is a discussion of sources of cash and uses of cash, and factors that could change or impact either, both as reflected in the financial period covered by the subject report, and for the future. Although not all inclusive, the discussion, at a minimum, should address all items included in the statement of cash flows provided as part of the financial statements. This item, together with the second area of discussion, capital resources, are considered so important the SEC has issued an interpretive release addressing these two areas separately from the rest of MD&A.
A discussion of capital resources includes all material commitments for capital expenditures, the purpose and the source of funds for these commitments. This would include outstanding debts and obligations and simply put, where the money will come from to pay them. In addition, capital resources include a discussion of trends, favorable and unfavorable, that could impact capital resources. An obvious example would be a change in government regulation directly related to the company’s business.
Results of operations include four areas of discussion: (i) unusual or infrequent events that have impacted on a company’s financial condition. An example would be a discontinuance of a specific product line, or sale of company subsidiary. (ii) trends that could have an impact on sales or revenues or income in general, including trends impacting costs and expenses; (iii) a narrative discussion of increases or decreases in sale or revenues; and (iv)impact of inflation and other external financial conditions.
Off balance sheet arrangements have gained notoriety as a result of the recent economic turmoil caused by the mortgage scandal. An off balance sheet arrangement is any arrangement that could have an impact on a balance sheet, the most obvious example being a guarantee of a third party’s obligation. Accordingly, if a company has such an arrangement to report, they are required to provide a detailed analysis including the potential impact and relative importance of the arrangement.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Form 10-Q – Quarterly Reports SEC Staff Review of Super 8-K’s »
Form 10-Q – Quarterly Reports
All companies that are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to file quarterly reports on Form 10-Q. As my clients are all smaller reporting companies (less than $75 million a year in revenues) and non-accelerated filers, this article will be limited to a discussion of those filers. Form 10-Q must be filed within 45 days of the end of each of the first 3 fiscal quarters of the Company.
A Form 10-K is filed following the end of the fourth fiscal quarter and will be the subject of an upcoming article.
Each filer has the right to file for an extension on Form 12b-25 which will not result in the filing being deemed delinquent. Extensions must be filed no later than the due date of the 10-Q and extends the filing time for up to 5 calendar days.
The cover page of the Form 10-Q contains basic company information, including the type and date of the report, the companies’ name and address, SEC filer name, federal tax id number and telephone number. In addition, on the cover page each company must state whether it is a shell company or not by checking a yes or no box. This small piece of information has big ramifications.
Companies that are, or ever were a shell company are severely restricted in the use of Rule 144, may not register the sale of securities accept in accordance with Rule 419 and must file a Super 8-K containing Form 10 type information within four days of a transaction resulting in them no longer being a shell. Attorney practitioners requested to perform services, or investors considering an investment (either through a PIPE or on the open market) should make it standard operating procedure to review historical 10-Q’s for shell company status.
Item 1 of Part I and the bulk of the Form 10-Q are the financial statements. Rule 8-03 regarding interim financial statements for smaller reporting companies provides that “Interim financial statements may be unaudited; however, before filing, interim financial statements included in quarterly reports on Form 10-Q must be reviewed by an independent public accountant using professional standards and procedures for conducting such reviews, as established by generally accepted auditing standards, as may be modified or supplemented by the Commission.”
Interim financial statements must include a balance sheet as of the end of the companies’ most recent fiscal quarter, a balance sheet as of the end of the preceding fiscal year, and income statements and statements of cash flows for the interim period up to the date of such balance sheet and the comparable period of the preceding fiscal year. In addition, the financial statements must include footnotes.
Item 2 of Part I of the Form 10-Q is the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A). In addition to the financial statements, MD&A is arguably the most important part of a Company’s reporting requirement. Moreover, it is MD&A that requires the most effort and care by company management. In a separate blog, following this blog, I will discuss in-depth the requirements for MD&A. However, in short MD&A is a discussion, in layman’s terms, of a Company’s plans of operation, results of operations, liquidity and capital resources.
Item 3 of Part I of the Form 10-Q, Quantitative and Qualitative Disclosures About Market Risk, is not applicable to smaller reporting companies.
Item 4 (4T for smaller companies) of Part I of the Form 10-Q is an attestation of Controls and Procedures. This item requires the Companies’ principal executive and principal financial officers to attest to the Company’s disclosure controls and procedures and financial controls and procedures. This attestation is in addition to the certifications required at the end of both 10-Q’s and 10-K’s. Both this attestation and the certifications are the result of the enactment of the Sarbanes Oxley Act of 2002.
Item I of Part II of Form 10-Q, Legal Proceedings, requires a disclosure of either a new legal proceeding or one in which there has been material development during that particular quarter. Ongoing legal proceedings should be disclosed by reference to the 10-Q in which it was first reported. The disclosure should include the name of the court or agency in which the proceedings are pending, the date instituted, and the principal parties thereto, a description of the factual basis alleged to underlie the proceeding and the relief sought. Moreover, the Company must include similar information as to any such proceedings known to be contemplated by governmental authorities.
Item 1A of Part II of the Form 10-Q, Risk Factors, is not applicable to smaller reporting companies.
Item 2 of Part II of Form 10-Q, Unregistered Sales of Equity Securities and Use of Proceeds, requires that the Company disclose all unregistered issuances of securities, the person(s) to whom issued, the value of the issuance (price paid, debt cancelled, value of services, etc..) and the exemption relied upon for the issuance. Together with registered issuances, an analyst should be able to balance the total reported outstanding securities for each quarter and year, by reviewing a Companies’ Exchange Act reports, including this section of Form 10-Q. The Use of Proceeds disclosure requirement under this Section refers to a disclosure of the Use of Proceeds of any securities sold pursuant to an effective registration statement, if applicable. Finally, a Company must also report any repurchases of its own securities in this section.
Item 3 of Part II of Form 10-Q, Defaults Upon Senior Securities, requires that Companies’ report if there has been any material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured to any indebtedness exceeding 5% of its total assets.
Item 4 of Part II of Form 10–Q has been removed and is being reserved by the SEC for future use.
Item 5 of Part II of Form 10-Q, Other Information, requires that Companies disclose other material information not otherwise disclosed in this report or previously in a Form 8-K.
Item 6 of Part II of Form 10-Q is a list of exhibits to be included with the Form, including certifications.
A form 10-Q must be signed by the principal executive and principal financial officers. These same individuals are required to execute separate certifications which are attached as exhibits to each Form 10-Q and Form 10-K. By signing the Form 10-Q and certifications, the principal executive and financial officers are attesting personally to the contents of the Form and to the attestations in the certificates and are subject to personal liability therefore.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Mergers and Acquisitions – Deal Protection Measures Management’s Discussion and Analysis of Financial Condition and Results of Operation (MD&A) »
Mergers and Acquisitions – Deal Protection Measures
Many clients ask me how to protect their interests while trying to negotiate a merger or acquisition. During the negotiation period both sides will inevitably incur a certain, acceptable, expenditure of time and expense, and will provide one and other with confidential information. Although a confidentiality agreement protects confidential information, it does not protect against unnecessarily wasting time and expense. Fortunately, there are other measures that can be enacted to safeguard against a flat-out waste of time and money.
Many, if not all, letters of intent contain some sort of exclusivity provision. In deal terminology these exclusivity provisions are referred to as “no shop” or “window shop” provisions. A “no shop” provision prevents one or both parties from entering into any discussions or negotiations with a third party that could negatively affect the potential transaction, for a specific period of time. That period of time may be set in calendar time, such as sixty days, or based on conditions, such as completion of an environmental study, or a combination of both.
A “window shop” provision allows for some level of third-party negotiation or inquiry. Examples of a window shop provision may be that a party cannot solicit other similar transactions, but are not prohibited from hearing out an unsolicited proposal. A window shop provision may also allow the board of directors of a party to shop for a better deal, while giving a right of first refusal if such better deal is indeed received. Window shop provisions generally provide for notice and disclosure of potential “better deals” and either matching or topping rights.
Generally both no shop and window shop provisions provide for a termination fee or other detriment for early termination. The size of the termination fee varies, however, drafters of a letter of intent should be cognizant that if the fee is substantial it likely triggers a reporting and disclosure requirement, which in and of itself could be detrimental to the deal.
Much different from either a no shop or window shop provision is a “go shop” provision. To address a board of directors fiduciary duty in some instances to maximize dollar value for its shareholders, a potential acquirer may request that the target “go shop” for a better deal up front to avoid wasted time and expense. A go shop provision is more controlled than an auction and allows both target and acquiring entities to test the market prior to expending resources.
Another common deal protection is a standstill agreement. A standstill agreement prevents a party from making business changes outside of the ordinary course, during the negotiation period. Example include prohibitions against selling off major assets, incurring extraordinary debts or liabilities, spinning of subsidiaries, hiring or firing management teams and the like.
Finally, many companies protect their interest by requiring significant stockholders to agree to lock-up agreements pending a deal closure. Some lock-ups require that the stockholder agree that they will vote their shares in favor of the deal as well as not transfer or divest themselves of such shares.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Mergers and Acquisitions – Disclosure Matters Form 10-Q – Quarterly Reports »
Mergers and Acquisitions – Disclosure Matters
In a merger and acquisition transaction, there are three basic steps that could invoke the disclosure requirements of the federal securities laws: (i) the negotiation period or pre-definitive agreement period; (ii) the definitive agreement; and (iii) closing.
Generally speaking, the federal securities laws do not require the disclosure of a potential merger or acquisition until such time as the transaction has been reduced to a definitive agreement. Companies and individuals with information regarding non-public merger or acquisition transactions should be mindful of the rules and regulations preventing insider trading on such information. However, there are at least three cases when pre-definitive agreement disclosure may be necessary or mandated.
Item 303 of Regulation S-K which governs the disclosure requirement for Management’s Discussion and Analysis of Financial Condition and Results of Operations requires, as part of this disclosure that the registrant identify any known trends or any known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in the registrant’s liquidity increasing or decreasing in any material way. Further, descriptions of known material trends in the registrant’s capital resources and expected changes in the mix and cost of such resources are required.
Disclosure of known trends or uncertainties that the registrant reasonably expects will have a material impact on net sales, revenues, or income from continuing operations is also required. Finally, the Instructions to Item 303 state that MD&A “shall focus specifically on material events and uncertainties known to management that would cause reported financial information not to be necessarily indicative of future operating results or of future financial condition.”
At first read it would seem clear that a potential merger or acquisition would fit firmly within the required MD&A discussion. However, realizing that disclosure of such negotiations and inclusion of such information could, and often would, jeopardize completing the transaction at all, the SEC has provided guidance. In SEC Release No. 33-6835 (1989) the SEC eliminated uncertainty regarding disclosure of preliminary merger negotiations by confirming that it did not intend for Item 303 to apply, and has not applied, and does not apply to preliminary merger negotiations. In general, the SEC’s recognition that companies have an interest in preserving the confidentiality of such negotiations is clearest in the context of a company’s continuous reporting obligations under the Exchange Act, where disclosure on Form 8-K of acquisitions or dispositions of assets not in the ordinary course of business is triggered by completion of the transaction (more on this below). Clearly, this is a perfect example and illustration of the importance of having competent legal counsel assist in interpreting and unraveling the numerous and complicated securities laws disclosure requirements.
In contrast, when a company registers securities for sale under the Securities Act, the SEC requires disclosure of material probable acquisitions and dispositions of businesses, including the financial statements of the business to be acquired or sold. Where the proceeds from the sale of the securities being registered are to be used to finance an acquisition of a business, the registration statement must disclose the intended use of proceeds.
Again, accommodating the need for confidentiality of negotiations, registrants are specifically permitted not to disclose in registration statements the identity of the parties and the nature of the business sought if the acquisition is not yet probable and the board of directors determines that the acquisition would be jeopardized. Although beyond the scope of this blog, many merger and/or acquisition transactions require registration under Form S-4.
Accordingly, when disclosure is not otherwise required, and has not otherwise been made, the MD&A need not contain a discussion of the impact of such negotiations where, in the company’s view, inclusion of such information would jeopardize completion of the transaction. Where disclosure is otherwise required or has otherwise been made by or on behalf of the company, the interests in avoiding premature disclosure no longer exist. In such case, the negotiations would be subject to the same disclosure standards under Item 303 as any other known trend, demand, commitment, event or uncertainty.
Yes, this is in the correct category, the material definitive agreement referred to here is a letter of intent or confidentiality agreement. Item 1.01 of Form 8-K requires a company to disclose the entry into a material definitive agreement outside of the ordinary course of business. A “material definitive agreement” is defined as “an agreement that provides for obligations that are material to and enforceable against the registrant or rights that are material to the registrant and enforceable by the registrant against one or more other parties to the agreement, in each case whether or not subject to conditions.”
Agreements relating to a merger and acquisition are outside the ordinary course of business. Moreover, although most letters of intent are non-binding by their terms, many include certain binding provisions such as confidentiality provisions, non-compete or non-circumvent provisions, no-shop and exclusivity provisions, due diligence provisions, break up fees and the like. On its face, it appears that a letter of intent would fall within the disclosure requirements in Item 1.01.
Once again, the SEC has offered interpretative guidance. In its final rule release no. 33-8400, the SEC recognizing that disclosure of letters of intent could result in destroying the underlying transaction, as well as create unnecessary market speculation, specifically eliminated the requirement that non-binding letters of intent be disclosed. Moreover, the SEC has taken the position that the binding provisions of the letter, such as non-disclosure and confidentiality are not necessarily “material” and thus do not require disclosure. However, it is important that legal counsel assist the company in drafting the letter, or in interpreting an existing letter to determine if the binding provisions reach the “materiality” standard and thus become reportable. For example, generally large break-up fees or extra-ordinary exclusivity provisions are reportable.
Regulation FD or Fair Disclosure prevents selective disclosure of non-public information. Originally Regulation FD was enacted to prevent companies from selectively providing information to fund managers, big brokerage firms and other “large players” in advance of providing the same information to the investment public at large. Regulation FD requires that in the event of an unintentional selective disclosure of insider information, the company take measures to immediately make the disclosure to the public at large through both a Form 8-K and press release.
The definitive agreement is disclosable in all aspects. In addition to inclusion in Form 10-Q and 10-K, a definitive agreement must be disclosed in Form 8-K within four (4) days of signing in accordance with Item 1.01 as described above. Moreover, following the entry of a definitive agreement, completion of conditions, such as a shareholder vote, will require in-depth disclosures regarding the potential target company, including their financial statements.
The Closing is disclosable in all aspects as is the definitive agreement. Moreover, in addition to item 1.01, the Closing may require disclosures under several or even most of the Items in Form 8-K. Such as Item 2.01 – Completion of disposal or acquisition of Assets; Item 3.02 – Unregistered sale of securities; Item 4.01 – Changes in Certifying Accountant; Item 5.01 Change in Control, etc…
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Mergers and Acquisitions
Mergers and AcquisitionsConfidentiality, Non-Disclosure Agreements
A confidentiality agreement or non-disclosure agreement (“NDA”) is an agreement among the parties to a proposed transaction to keep information secret and in confidence. In the context of a merger and acquisition transaction, NDA’s are important for both the target and acquiring entities. It is critical that an NDA be signed prior to the exchange of any due diligence or embarking upon substantive transaction negotiations.
Protecting Trade Secrets
Generally in a merger and acquisition transaction, the target entity is a closely held private corporation. Accordingly it is critical for the target company to maintain the confidential nature of both its business information, and the fact that it is considering a going public transaction. During the due diligence process, the public acquiring company will be given access to non-public trade secrets, technology, business processes, customer lists, and material information regarding shareholders, debt and equity financing and financial statements.
Loose Lips Sink Ships
If this information were made public or used for any purpose other than to evaluate a potential business transaction, it could materially and adversely affect the value of the target company. Moreover, if a transaction doesn’t go through, a potential acquirer could misuse the information to compete with, or solicit customers or employees from the target company, without the protection of a NDA. Just the knowledge that a transaction is being considered could affect the target’s relationship with its current customers, suppliers and/or employees.
Generally, the public acquiring entity is subject to the disclosure requirements of the Securities Exchange Act of 1934 and its information is already publicly available. However an NDA is still important to protect the public company. That is, if it became publicly known that acquirer was focusing on a particular target, other potential buyers may come to the table to compete.
Shielding Corporate Reputation, Controlling Rumors
Moreover, the acquirer’s business strategy regarding that particular acquisition would become publicly known prior to being legally required. If the acquirer changes its mind and the information was already public, investors may wonder as to why the transaction evaporated and subsequently lose confidence in both entities. An NDA can help protect against unnecessary market rumors and conjecture and potential exposure to insider trading liability. Obviously, an NDA should contain a strong obligation on the part of both parties to keep review information confidential.
Typically an NDA will permit the parties to disclose the information to its affiliates, advisors and key management on a “need to know” basis provided that each information recipient agree to the terms of the NDA.
Limitations of Non-Disclosure Agreements
An NDA only covers confidential information. That is, excluded is information that (i) is already in the possession of the recipient; or (ii) is or becomes available to the public (other than by a breach of the NDA). A properly drafted NDA will provide for procedures in the event a party is compelled, via subpoena or otherwise, to disclose information. Generally, the NDA will provide for an opportunity to learn of and fight the compelling document prior to disclosure.
Lastly, most NDA’s contain some sort of standstill or no shop provision. That is prior to expending time, money, attorney’s fees, other professional fees, etc., the parties will want assurance that the deal is not being shopped around for at least some period of time.
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Reverse Mergers, Acquisitions and Due Diligence Mergers and Acquisitions – Disclosure Matters »
Reverse Mergers, Acquisitions and Due Diligence
Due diligence refers to the legal, business and financial investigation of a business prior to entering into a reverse merger transaction. Although the due diligence process can vary depending on the nature of a transaction (a relatively small acquisition vs. a going public reverse merger)it is arguably the most important component of a transaction (or at least equal with documentation).
Reverse Mergers and Public Shells
In a reverse merger transaction involving a public shell acquiring a private operating business, the bulk of the due diligence will be by the acquiring shell on the target. Although some due diligence is also necessary on the public shell, as a Company subject to the reporting requirements of the Exchange Act of 1934, most, if not all, pertinent information is publicly available on the Securities and Exchange Commission’s (“SEC”) EDGAR database. In the case where the public shell is a non-reporting entity, both sides to the transaction will need to complete extensive, in-depth due diligence on each other.
Analyzing Private Companies Going Public
This article focuses on due diligence by the public acquirer on the private target. At the outset, in addition to requesting copies of corporate records and documents, all contracts, asset chain of title documents, financial statements and the like, the securities attorney for the public acquirer should make themselves familiar with the target’s business, including an understanding of how they make money, what assets are important in revenues, who are their commercial partners and suppliers, and common off balance sheet and other hidden arrangements in that business. It is important to have a basic understanding of the business in order to effectively review the documents and information once supplied, to know what to ask for and to isolate potential future problems.
Addressing Post Closing Issues
In addition to determining whether the transaction as a whole is worth pursuing, proper due diligence will help in structuring the reverse merger transaction and preparing the proper documentation to prevent post closing issues (such as making sure all assignments of contracts are complete, or where an assignment isn’t possible, new contracts are prepared).
Public Records Search
In addition to creating due diligence lists of documents and information to be supplied, counsel for the public acquirer should perform separate checks for publicly available information. In today’s internet world, this part of the process has become dramatically easier. SEC legal counsel should be careful not to miss the basics, such as UCC lien searches, judgment searches, recorded property title and regulatory issues with any of the principals or participants involved in the deal.
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Reverse Merger Attorneys Mergers and AcquisitionsConfidentiality, Non-Disclosure Agreements »
Reverse Merger Attorneys
Many of the Chinese companies that go public in the United States do so via a Reverse Merger. The reverse merger methodology versus the traditional Initial Public Offering (IPO) is the preferred method used by the Chinese and their US-based legal and auditing advisors. Many of these Chinese companies believe, erroneously, that by utilizing the reverse merger process, they can avoid the in-depth disclosure requirements and scrutiny associated with an IPO. However, legally this is not the case.
The failure of Chinese company legal, accounting and market makers to understand the fundamental elements required of Foreign Corporations trading stock on US markets has led to numerous shareholder class action lawsuits, trading suspensions and enforcement actions against publicly traded Chinese companies.
Auditors and Market Makers Fall Short on Due Diligence
Many of the problems resulting from Chinese reverse mergers are due to the failure of corporate counsel, auditors and market makers to thoroughly complete due diligence on the company’s officers, directors, operations and financial statements. Under ordinary circumstances, when preparing SEC filings, legal and accounting professionals can rely on the representations of their clients. However, when the subject Company has opted NOT to list their securities on their country of origin exchange, additional measures must be taken to ensure transparency.
Verify, Then Verify Again
It is always advisable to “kick the tires” of the subject company (visit their facilities, confirm that copies of all agreements have been provided, etc.) but in the case of Chinese entities, it is doubly important (actually it is essential). When providing “going public” services to an operating Chinese business, one that is going public or already trades on the US markets, the key is to verify, verify, verify.
Moreso than in any other scenario, auditors, attorneys and market makers must act as gate keepers so as to keep their Chinese clients compliant with US securities laws. Obviously, due diligence can only go so far, no matter how thorough the evaluation process. In the end, ultimately, auditors, attorneys an market makers are in the unenviable position of relying, to one extent or another, on the documents and attestations provided to them by the officers of the subject company. Forged, fraudulent and outright fictitious corporate documents are becoming all too commonplace.
Further complicating the problems stemming from Chinese companies going public in the United States are the increasing number of subsequent capital raises comprised of domestic, US investors. Once trading on the OTCQB or NASDAQ, the now public entity has a myriad of financing options, to the chagrin of the unsuspecting investment public.
Some regard the Chinese stock market as essentially unregulated, therefore creating an attitude among some officers and directors that US Exchanges are just as forgiving in respect to compliance and overall transparency.
Other issues may stem from the language barrier. Some may even be a result of differences in cultural business practices. In any event, the Securities Act of 1933, as amended, requires that all sales of stock be via either a registration statement or legal exemption to registration. All registration statements require in-depth disclosure in accordance with the legal parameters set forth in Regulation S-K and accounting parameters set forth in Regulation S-X. US regulators and class action counsel have clearly set forth that these standards are not being met.
Failure of Corporate Governance
Also, the lack of corporate governance oversight has intensified the problem. In addition, there are significant accounting differences. Since China does not follow Generally Accepted Accounting Principles (GAAP), confusing, and sometimes irreconcilable, financial statements are provided to domestic, PCAOB, auditing firms.
Hence, with a relatively lax regulatory stock market environment in China (as compared to stringent regulatory oversight in the United States), fundamentally different accounting and auditing procedures, and divergent societal and political structures the Chinese reverse merger debacle should not come as a surprise to anyone.
Civil Suits Against Chinese Companies Mount
Years of poor due diligence practices by US accounting, auditing and law firms has resulted in numerous shareholder class action lawsuits being filed against Chinese companies that have completed a reverse merger or RTO (Reverse Takeover) in the United States.
Because of the highly publicized problems of Chinese reverse merger fraud, some individuals incorrectly assert that the reverse merger process itself is somehow a dubious device used to gain access to domestic exchanges. Nothing could be further from the truth. Since the majority of companies going public in the US are completed via a reverse merger, it stands to reason that that the majority of Chinese companies going public domestically will use the same process.
Chinese Stock Fraud is not Limited to Reverse Mergers
Class action law firms and the investment public are now discovering that Chinese stock fraud is not limited to reverse mergers. Chinese companies that have gone public via S-1 Registration Statements, full blown IPO’s, and alternative methods such as WestPark Capital’s unique WRASP ™ (Public Offering and a Share Exchange hybrid) program have collapsed under close scrutiny as well. Certain reverse mergers or RTO’s were simply the first to fall.
In conclusion the fact of the matter is that the reverse merger process is a legitimate cost-effective and completely legal method of going public and has been used by such companies as: Yahoo, Turner Broadcasting Systems, Occidental Petroleum, Berkshire Hathaway, Texas Instruments and Blockbuster Entertainment to name a few.
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Merger and Acquisitions, Part One – Structuring the Transaction Reverse Mergers, Acquisitions and Due Diligence »
Merger and Acquisitions, Part One – Structuring the Transaction
Mergers and acquisitions come in all sizes, financially speaking, but the sequence of events preceding the transaction is usually fixed. The same procedural points must be addressed regardless of the size of the subject Companies.
Confidentiality Agreement
Generally the first step in an M&A deal is executing a confidentiality agreement and letter of intent (LOI). These documents can be combined or separate. If the parties are exchanging information prior to reaching the letter of intent stage of a potential transaction, they should proceed with execution of a confidentiality agreement right away.
In addition to requiring that both parties keep information confidential, a confidentiality agreement sets forth important parameters on the use of information. For instance, a reporting entity may have disclosure obligations in association with the initial negotiations for a transaction, which would need to be exempted from the confidentiality provisions. Moreover, a confidentiality agreement may contain other provisions unrelated to confidentiality such as a prohibition against solicitation of customers or employees (non-competition) and other restrictive covenants. Standstill and exclusivity provisions may also be included, especially where the confidentiality agreement is separate from the letter of intent.
Letter of Intent (LOI)
Next is the letter of intent (“LOI”). An LOI is generally non-binding and spells out the broad parameters of the transaction. The LOI helps identify and resolve key issues in the negotiation process and hopefully narrows down outstanding issues prior to spending the time and money drafting the transaction contracts and supporting documents. Among other key points, the LOI may set the price or price range, the parameters of due diligence, necessary pre-deal recapitalizations, confidentiality, exclusivity, and time frames for completing each step in the process. It is always highly advisable that an LOI be executed.
The “Who Do” List
Along with an LOI, the parties attorney’s should prepare a “to do” list including a “who do” identification. Setting out a to do list and clarifying who is responsible for what documents and items will help move things along and avoid misunderstandings among the professionals representing the different parties to the transaction.
The next step in the transaction process is due diligence. Although generally the client is responsible for putting together due diligence items, the attorney should correlate and organize the items to ultimately save time and keep the items organized. Prior to exchanging documents the attorneys should be sure that a confidentiality agreement has been executed, either separately or as part of the LOI.
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Registering an IPO on Form S-1, Part Three Reverse Merger Attorneys »
Registering an IPO on Form S-1, Part Three
The second half of the Form S-1 registration statement contains supplemental information and formal legal requirements. This section is compromised of the subject Company’s financial information, sales and issuances of unregistered securities, the legal information regarding the exemptions relied upon in making such sales and issuances. In addition, a list of exhibits and information regarding these items is included as well.
Regulation S-X and PCAOB Auditors
Regulation S-X sets forth the form, content and requirements as to the financial statements that must be reviewed and audited by a PCAOB licensed accounting firm.
Item 601 of Regulation S-K lists required exhibits that must be filed with a Form S-1 (for example, original articles of incorporation and all amendments thereto; material contracts; auditor consent letter; legal opinions, etc.). These exhibits must be filed with the S-1 to become available for public review.
“Plain English” Registration Statements
All registration statements must be written in “Plain English”, as opposed to technical legal or financial industry terminology. The Plain English rule requires that the registration statement be written using the following English grammatical principles: active voice; short sentences; definite, concrete, everyday words; tabular presentations of financial information and other applicable data; bullet lists for complex and material data, whenever possible; avoidance of legal jargon; avoidance of highly technical business terms; and no multiple negatives. The SEC enforces the plain English rule and will not hesitate to request that paragraphs or sections be re-written.
S-1 Filed with the SEC
Once the Form S-1 is filed with the SEC, using the EDGAR and XBRL requirements, the SEC will inform the Issuer if the S-1 will be reviewed. The SEC assigns a team of legal and accounting experts to review the document and provide comments to the Issuer.
In response, the Issuer prepares and files an amendment to the S-1, making the required changes and addressing the comments put forth by the SEC. The issuer then prepares and files a responsive letter which sets forth written direct answers to each of the SEC’s comments. The comment process can, at times, be arduous and repetitive; however, Issuers should note that this is all part of the S-1 process. When the comments are addressed to the satisfaction of the SEC, the commission will issue an order allowing the registration statement to go effective.
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Registering an IPO on Form S-1, Part Two Merger and Acquisitions, Part One – Structuring the Transaction »
Registering an IPO on Form S-1, Part Two
In my first blog on this topic, I set out very generally the time periods involved in an offering, the pertinent regulations and a very brief description of the contents of a registration statement. This Part II begins to explore, on a more in-depth level, the contents of a Form S-1 registration statement. The format of the S-1 is as follows: (i) cover page; (ii) Part I (the prospectus); (iii) Part II (supplemental disclosure); (iv) undertakings; (v) signatures and power of attorneys; (vi) consents; and (vii) exhibits.
Cover Page
The cover page of a Form S-1 is required to set out the following basic information about the issuer and the offering: (i) the issuer’s exact legal name; (ii) the issuer’s state of incorporation; (iii) the issuer’s SIC code; (iv) the Issuer’s tax id number; (v) the address and telephone number of the issuer’s principal executive offices and of its agent for service of process; (vi) the maximum amount of securities proposed to be offered and amount of registration fee; (vii) the approximate date of commencement of the offering; and (viii) whether any of the securities are being registered “on the shelf” pursuant to Rule 415.
The Prospectus, Part 1 of Form S-1
Part I of the Form S-1 sets forth line items specifying required information by referencing the appropriate sections of Regulations S-K and S-X. The following is a brief description of each of the items required in Part 1 of Form S-1.
1. Description of Business, Properties and Legal Proceedings (Items 101 – 103 of Reg. S-K)
Item 101 of Reg S-K requires a description of the business over the prior 5 years (or 3 years for small public companies) or from inception as appropriate. Item 101 sets forth a list of required information (including, for example, year and state of incorporation; products and services; sources of raw materials; environmental issues; government regulations, research and development and number of employees). In addition, parts of Item 101 require discussion of future plans, for example, plans for expansion or increase in employees. Item 101 also requires a description of the Issuer’s competitors specifically and in the industry in general. This paragraph is a brief summary and examples of only a few of the numerous items that must be specifically disclosed and discussed in accordance with Item 101.
Item 102 of Reg S-K requires that the Issuer set forth the location and general character of the physical properties of the Issuer, including how titled and a description of any liens, mortgages or encumbrances.
Item 103 of Reg S-K requires that the Issuer disclose any pending or contemplated legal proceedings, including specifically required information about these proceedings. An Issuer need not disclose legal proceedings in the ordinary course of its business.
2. Securities (Items 201 and 202 of Reg S-K)
Items 201 and 202 requires a description of the securities offering as well as past and future information regarding these securities and all of the Issuers outstanding securities, including, for example, prior market and pricing activity, rights and preferences, outstanding warrants, and dividends.
3. Financial Information (Items 301-305 of Reg S-K)
Small Issuers (under $75 mil in revs) are not required to make disclosure under Items 301 and 302 which require that the Issuer provide a summary of financial data that is contained in the financial statements. All Issuers are required to provide disclosure under Item 303 – Management Discussion and Analysis of Financial Condition and Results of Operation (MD&A). MD&A often makes up the bulk of narrative discussion in a registration statement and is arguably the most important portion of the registration statement for investors to understand the Issuer and its management plans. A detailed discussion of the requirements of this section could fill up multiple blogs on the topic alone. However, very briefly, MD&A requires discussion of key financial elements and changes in those items over the prior 12 months. For example, MD&A would disclose revenues for the current term and prior year and explain why that number increased or decreased (for example, the company may have expanded or cut back on its sales force).
In addition, MD&A requires a detailed discussion of the Issuer’s future plans and the costs and intended source of financing for those plans. An Issuer cannot simply state that it plans to open 10 new locations, but instead would be required to give details as to where those locations were, what progress, if any had been made towards the plan, the costs of the plan and where the money is going to come from.
MD&A requires discussion regarding liquidity and capital resources. This would include breaking out balances owed or owing on various obligations sources and uses of funds for 12, 24 and 36 month periods. MD&A requires a discussion of the industry and competition, both generally and as may specifically effect the Issuer. Again, this is a very brief outline of MD&A.
4. Management and Certain Security Holders (Items 401-404 of Reg S-K)
Items 401 through 404 of Reg S-K requires disclosure of certain information regarding directors, executive officers, key employees and those that own 5% or more of the outstanding securities of the Issuer. Item 401 requires the Issuer to disclose certain biographical information about officers, directors and key employees. This information includes 5 years of business background, name, age, familial relationships among other disclosed individuals, related party transactions, and involvement in certain legal proceeding over the prior 10 years (such as convictions of crimes, governmental enforcement actions, and involvement in bankruptcies). Item 402 requires disclosure of executive compensation, both past, current and as obligated in the future. Item 404 requires disclosure of financial related party transactions.
5. Registration Statement and Prospectus Provisions (Item 501-512 of Reg S-K)
Items 501-512 (often referred to as standardized items) requires different disclosures and information throughout the Form S-1, including specific information on the front and back cover and throughout the Form S-1. For example, how the offering price was determined (Item 505); risk factors (Item 503); use of proceeds (Item 504); dilution (Item 506); disclosure of selling security holders if a secondary offering (Item 507); plan of distribution (Item 508); experts (Item 509); offering expenses (Item 511); and undertakings (Item 512).
The Author
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Registering An IPO On Form S-1, Part One Registering an IPO on Form S-1, Part Three »
A confidentiality agreement or non-disclosure agreement (“NDA”) is an agreement among the parties to a proposed transaction to keep information secret and in confidence. In the context of a merger and acquisition transaction, NDA’s are important for both the target and acquiring entities. It is critical that an NDA be signed prior to the exchange of any due diligence or embarking upon substantive transaction negotiations.
Generally in a merger and acquisition transaction, the target entity is a closely held private corporation. Accordingly it is critical for the target company to maintain the confidential nature of both its business information, and the fact that it is considering a going public transaction. During the due diligence process, the public acquiring company will be given access to non-public trade secrets, technology, business processes, customer lists, and material information regarding shareholders, debt and equity financing and financial statements.
If this information were made public or used for any purpose other than to evaluate a potential business transaction, it could materially and adversely affect the value of the target company. Moreover, if a transaction doesn’t go through, a potential acquirer could misuse the information to compete with, or solicit customers or employees from the target company, without the protection of a NDA. Just the knowledge that a transaction is being considered could affect the target’s relationship with its current customers, suppliers and/or employees.
Generally, the public acquiring entity is subject to the disclosure requirements of the Securities Exchange Act of 1934 and its information is already publicly available. However an NDA is still important to protect the public company. That is, if it became publicly known that acquirer was focusing on a particular target, other potential buyers may come to the table to compete.
Moreover, the acquirer’s business strategy regarding that particular acquisition would become publicly known prior to being legally required. If the acquirer changes its mind and the information was already public, investors may wonder as to why the transaction evaporated and subsequently lose confidence in both entities. An NDA can help protect against unnecessary market rumors and conjecture and potential exposure to insider trading liability. Obviously, an NDA should contain a strong obligation on the part of both parties to keep review information confidential.
Typically an NDA will permit the parties to disclose the information to its affiliates, advisors and key management on a “need to know” basis provided that each information recipient agree to the terms of the NDA.
An NDA only covers confidential information. That is, excluded is information that (i) is already in the possession of the recipient; or (ii) is or becomes available to the public (other than by a breach of the NDA). A properly drafted NDA will provide for procedures in the event a party is compelled, via subpoena or otherwise, to disclose information. Generally, the NDA will provide for an opportunity to learn of and fight the compelling document prior to disclosure.
Lastly, most NDA’s contain some sort of standstill or no shop provision. That is prior to expending time, money, attorney’s fees, other professional fees, etc., the parties will want assurance that the deal is not being shopped around for at least some period of time.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Reverse Mergers, Acquisitions and Due Diligence Mergers and Acquisitions – Disclosure Matters »
Reverse Mergers, Acquisitions and Due Diligence
Due diligence refers to the legal, business and financial investigation of a business prior to entering into a reverse merger transaction. Although the due diligence process can vary depending on the nature of a transaction (a relatively small acquisition vs. a going public reverse merger)it is arguably the most important component of a transaction (or at least equal with documentation).
In a reverse merger transaction involving a public shell acquiring a private operating business, the bulk of the due diligence will be by the acquiring shell on the target. Although some due diligence is also necessary on the public shell, as a Company subject to the reporting requirements of the Exchange Act of 1934, most, if not all, pertinent information is publicly available on the Securities and Exchange Commission’s (“SEC”) EDGAR database. In the case where the public shell is a non-reporting entity, both sides to the transaction will need to complete extensive, in-depth due diligence on each other.
This article focuses on due diligence by the public acquirer on the private target. At the outset, in addition to requesting copies of corporate records and documents, all contracts, asset chain of title documents, financial statements and the like, the securities attorney for the public acquirer should make themselves familiar with the target’s business, including an understanding of how they make money, what assets are important in revenues, who are their commercial partners and suppliers, and common off balance sheet and other hidden arrangements in that business. It is important to have a basic understanding of the business in order to effectively review the documents and information once supplied, to know what to ask for and to isolate potential future problems.
In addition to determining whether the transaction as a whole is worth pursuing, proper due diligence will help in structuring the reverse merger transaction and preparing the proper documentation to prevent post closing issues (such as making sure all assignments of contracts are complete, or where an assignment isn’t possible, new contracts are prepared).
In addition to creating due diligence lists of documents and information to be supplied, counsel for the public acquirer should perform separate checks for publicly available information. In today’s internet world, this part of the process has become dramatically easier. SEC legal counsel should be careful not to miss the basics, such as UCC lien searches, judgment searches, recorded property title and regulatory issues with any of the principals or participants involved in the deal.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Reverse Merger Attorneys Mergers and Acquisitions
Reverse Merger Attorneys
Many of the Chinese companies that go public in the United States do so via a Reverse Merger. The reverse merger methodology versus the traditional Initial Public Offering (IPO) is the preferred method used by the Chinese and their US-based legal and auditing advisors. Many of these Chinese companies believe, erroneously, that by utilizing the reverse merger process, they can avoid the in-depth disclosure requirements and scrutiny associated with an IPO. However, legally this is not the case.
The failure of Chinese company legal, accounting and market makers to understand the fundamental elements required of Foreign Corporations trading stock on US markets has led to numerous shareholder class action lawsuits, trading suspensions and enforcement actions against publicly traded Chinese companies.
Many of the problems resulting from Chinese reverse mergers are due to the failure of corporate counsel, auditors and market makers to thoroughly complete due diligence on the company’s officers, directors, operations and financial statements. Under ordinary circumstances, when preparing SEC filings, legal and accounting professionals can rely on the representations of their clients. However, when the subject Company has opted NOT to list their securities on their country of origin exchange, additional measures must be taken to ensure transparency.
It is always advisable to “kick the tires” of the subject company (visit their facilities, confirm that copies of all agreements have been provided, etc.) but in the case of Chinese entities, it is doubly important (actually it is essential). When providing “going public” services to an operating Chinese business, one that is going public or already trades on the US markets, the key is to verify, verify, verify.
Moreso than in any other scenario, auditors, attorneys and market makers must act as gate keepers so as to keep their Chinese clients compliant with US securities laws. Obviously, due diligence can only go so far, no matter how thorough the evaluation process. In the end, ultimately, auditors, attorneys an market makers are in the unenviable position of relying, to one extent or another, on the documents and attestations provided to them by the officers of the subject company. Forged, fraudulent and outright fictitious corporate documents are becoming all too commonplace.
Further complicating the problems stemming from Chinese companies going public in the United States are the increasing number of subsequent capital raises comprised of domestic, US investors. Once trading on the OTCQB or NASDAQ, the now public entity has a myriad of financing options, to the chagrin of the unsuspecting investment public.
Some regard the Chinese stock market as essentially unregulated, therefore creating an attitude among some officers and directors that US Exchanges are just as forgiving in respect to compliance and overall transparency.
Other issues may stem from the language barrier. Some may even be a result of differences in cultural business practices. In any event, the Securities Act of 1933, as amended, requires that all sales of stock be via either a registration statement or legal exemption to registration. All registration statements require in-depth disclosure in accordance with the legal parameters set forth in Regulation S-K and accounting parameters set forth in Regulation S-X. US regulators and class action counsel have clearly set forth that these standards are not being met.
Also, the lack of corporate governance oversight has intensified the problem. In addition, there are significant accounting differences. Since China does not follow Generally Accepted Accounting Principles (GAAP), confusing, and sometimes irreconcilable, financial statements are provided to domestic, PCAOB, auditing firms.
Hence, with a relatively lax regulatory stock market environment in China (as compared to stringent regulatory oversight in the United States), fundamentally different accounting and auditing procedures, and divergent societal and political structures the Chinese reverse merger debacle should not come as a surprise to anyone.
Years of poor due diligence practices by US accounting, auditing and law firms has resulted in numerous shareholder class action lawsuits being filed against Chinese companies that have completed a reverse merger or RTO (Reverse Takeover) in the United States.
Because of the highly publicized problems of Chinese reverse merger fraud, some individuals incorrectly assert that the reverse merger process itself is somehow a dubious device used to gain access to domestic exchanges. Nothing could be further from the truth. Since the majority of companies going public in the US are completed via a reverse merger, it stands to reason that that the majority of Chinese companies going public domestically will use the same process.
Class action law firms and the investment public are now discovering that Chinese stock fraud is not limited to reverse mergers. Chinese companies that have gone public via S-1 Registration Statements, full blown IPO’s, and alternative methods such as WestPark Capital’s unique WRASP ™ (Public Offering and a Share Exchange hybrid) program have collapsed under close scrutiny as well. Certain reverse mergers or RTO’s were simply the first to fall.
In conclusion the fact of the matter is that the reverse merger process is a legitimate cost-effective and completely legal method of going public and has been used by such companies as: Yahoo, Turner Broadcasting Systems, Occidental Petroleum, Berkshire Hathaway, Texas Instruments and Blockbuster Entertainment to name a few.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Merger and Acquisitions, Part One – Structuring the Transaction Reverse Mergers, Acquisitions and Due Diligence »
Merger and Acquisitions, Part One – Structuring the Transaction
Mergers and acquisitions come in all sizes, financially speaking, but the sequence of events preceding the transaction is usually fixed. The same procedural points must be addressed regardless of the size of the subject Companies.
Generally the first step in an M&A deal is executing a confidentiality agreement and letter of intent (LOI). These documents can be combined or separate. If the parties are exchanging information prior to reaching the letter of intent stage of a potential transaction, they should proceed with execution of a confidentiality agreement right away.
In addition to requiring that both parties keep information confidential, a confidentiality agreement sets forth important parameters on the use of information. For instance, a reporting entity may have disclosure obligations in association with the initial negotiations for a transaction, which would need to be exempted from the confidentiality provisions. Moreover, a confidentiality agreement may contain other provisions unrelated to confidentiality such as a prohibition against solicitation of customers or employees (non-competition) and other restrictive covenants. Standstill and exclusivity provisions may also be included, especially where the confidentiality agreement is separate from the letter of intent.
Next is the letter of intent (“LOI”). An LOI is generally non-binding and spells out the broad parameters of the transaction. The LOI helps identify and resolve key issues in the negotiation process and hopefully narrows down outstanding issues prior to spending the time and money drafting the transaction contracts and supporting documents. Among other key points, the LOI may set the price or price range, the parameters of due diligence, necessary pre-deal recapitalizations, confidentiality, exclusivity, and time frames for completing each step in the process. It is always highly advisable that an LOI be executed.
Along with an LOI, the parties attorney’s should prepare a “to do” list including a “who do” identification. Setting out a to do list and clarifying who is responsible for what documents and items will help move things along and avoid misunderstandings among the professionals representing the different parties to the transaction.
The next step in the transaction process is due diligence. Although generally the client is responsible for putting together due diligence items, the attorney should correlate and organize the items to ultimately save time and keep the items organized. Prior to exchanging documents the attorneys should be sure that a confidentiality agreement has been executed, either separately or as part of the LOI.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Registering an IPO on Form S-1, Part Three Reverse Merger Attorneys »
Registering an IPO on Form S-1, Part Three
The second half of the Form S-1 registration statement contains supplemental information and formal legal requirements. This section is compromised of the subject Company’s financial information, sales and issuances of unregistered securities, the legal information regarding the exemptions relied upon in making such sales and issuances. In addition, a list of exhibits and information regarding these items is included as well.
Regulation S-X sets forth the form, content and requirements as to the financial statements that must be reviewed and audited by a PCAOB licensed accounting firm.
Item 601 of Regulation S-K lists required exhibits that must be filed with a Form S-1 (for example, original articles of incorporation and all amendments thereto; material contracts; auditor consent letter; legal opinions, etc.). These exhibits must be filed with the S-1 to become available for public review.
All registration statements must be written in “Plain English”, as opposed to technical legal or financial industry terminology. The Plain English rule requires that the registration statement be written using the following English grammatical principles: active voice; short sentences; definite, concrete, everyday words; tabular presentations of financial information and other applicable data; bullet lists for complex and material data, whenever possible; avoidance of legal jargon; avoidance of highly technical business terms; and no multiple negatives. The SEC enforces the plain English rule and will not hesitate to request that paragraphs or sections be re-written.
Once the Form S-1 is filed with the SEC, using the EDGAR and XBRL requirements, the SEC will inform the Issuer if the S-1 will be reviewed. The SEC assigns a team of legal and accounting experts to review the document and provide comments to the Issuer.
In response, the Issuer prepares and files an amendment to the S-1, making the required changes and addressing the comments put forth by the SEC. The issuer then prepares and files a responsive letter which sets forth written direct answers to each of the SEC’s comments. The comment process can, at times, be arduous and repetitive; however, Issuers should note that this is all part of the S-1 process. When the comments are addressed to the satisfaction of the SEC, the commission will issue an order allowing the registration statement to go effective.
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
« Registering an IPO on Form S-1, Part Two Merger and Acquisitions, Part One – Structuring the Transaction »
Registering an IPO on Form S-1, Part Two
In my first blog on this topic, I set out very generally the time periods involved in an offering, the pertinent regulations and a very brief description of the contents of a registration statement. This Part II begins to explore, on a more in-depth level, the contents of a Form S-1 registration statement. The format of the S-1 is as follows: (i) cover page; (ii) Part I (the prospectus); (iii) Part II (supplemental disclosure); (iv) undertakings; (v) signatures and power of attorneys; (vi) consents; and (vii) exhibits.
The cover page of a Form S-1 is required to set out the following basic information about the issuer and the offering: (i) the issuer’s exact legal name; (ii) the issuer’s state of incorporation; (iii) the issuer’s SIC code; (iv) the Issuer’s tax id number; (v) the address and telephone number of the issuer’s principal executive offices and of its agent for service of process; (vi) the maximum amount of securities proposed to be offered and amount of registration fee; (vii) the approximate date of commencement of the offering; and (viii) whether any of the securities are being registered “on the shelf” pursuant to Rule 415.
Part I of the Form S-1 sets forth line items specifying required information by referencing the appropriate sections of Regulations S-K and S-X. The following is a brief description of each of the items required in Part 1 of Form S-1.
1. Description of Business, Properties and Legal Proceedings (Items 101 – 103 of Reg. S-K)
Item 101 of Reg S-K requires a description of the business over the prior 5 years (or 3 years for small public companies) or from inception as appropriate. Item 101 sets forth a list of required information (including, for example, year and state of incorporation; products and services; sources of raw materials; environmental issues; government regulations, research and development and number of employees). In addition, parts of Item 101 require discussion of future plans, for example, plans for expansion or increase in employees. Item 101 also requires a description of the Issuer’s competitors specifically and in the industry in general. This paragraph is a brief summary and examples of only a few of the numerous items that must be specifically disclosed and discussed in accordance with Item 101.
Item 102 of Reg S-K requires that the Issuer set forth the location and general character of the physical properties of the Issuer, including how titled and a description of any liens, mortgages or encumbrances.
Item 103 of Reg S-K requires that the Issuer disclose any pending or contemplated legal proceedings, including specifically required information about these proceedings. An Issuer need not disclose legal proceedings in the ordinary course of its business.
2. Securities (Items 201 and 202 of Reg S-K)
Items 201 and 202 requires a description of the securities offering as well as past and future information regarding these securities and all of the Issuers outstanding securities, including, for example, prior market and pricing activity, rights and preferences, outstanding warrants, and dividends.
3. Financial Information (Items 301-305 of Reg S-K)
Small Issuers (under $75 mil in revs) are not required to make disclosure under Items 301 and 302 which require that the Issuer provide a summary of financial data that is contained in the financial statements. All Issuers are required to provide disclosure under Item 303 – Management Discussion and Analysis of Financial Condition and Results of Operation (MD&A). MD&A often makes up the bulk of narrative discussion in a registration statement and is arguably the most important portion of the registration statement for investors to understand the Issuer and its management plans. A detailed discussion of the requirements of this section could fill up multiple blogs on the topic alone. However, very briefly, MD&A requires discussion of key financial elements and changes in those items over the prior 12 months. For example, MD&A would disclose revenues for the current term and prior year and explain why that number increased or decreased (for example, the company may have expanded or cut back on its sales force).
In addition, MD&A requires a detailed discussion of the Issuer’s future plans and the costs and intended source of financing for those plans. An Issuer cannot simply state that it plans to open 10 new locations, but instead would be required to give details as to where those locations were, what progress, if any had been made towards the plan, the costs of the plan and where the money is going to come from.
MD&A requires discussion regarding liquidity and capital resources. This would include breaking out balances owed or owing on various obligations sources and uses of funds for 12, 24 and 36 month periods. MD&A requires a discussion of the industry and competition, both generally and as may specifically effect the Issuer. Again, this is a very brief outline of MD&A.
4. Management and Certain Security Holders (Items 401-404 of Reg S-K)
Items 401 through 404 of Reg S-K requires disclosure of certain information regarding directors, executive officers, key employees and those that own 5% or more of the outstanding securities of the Issuer. Item 401 requires the Issuer to disclose certain biographical information about officers, directors and key employees. This information includes 5 years of business background, name, age, familial relationships among other disclosed individuals, related party transactions, and involvement in certain legal proceeding over the prior 10 years (such as convictions of crimes, governmental enforcement actions, and involvement in bankruptcies). Item 402 requires disclosure of executive compensation, both past, current and as obligated in the future. Item 404 requires disclosure of financial related party transactions.
5. Registration Statement and Prospectus Provisions (Item 501-512 of Reg S-K)
Items 501-512 (often referred to as standardized items) requires different disclosures and information throughout the Form S-1, including specific information on the front and back cover and throughout the Form S-1. For example, how the offering price was determined (Item 505); risk factors (Item 503); use of proceeds (Item 504); dilution (Item 506); disclosure of selling security holders if a secondary offering (Item 507); plan of distribution (Item 508); experts (Item 509); offering expenses (Item 511); and undertakings (Item 512).
Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions
Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.
Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (“Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (“Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.
Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.
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