Going Public Transactions
If you or your company are contemplating any securities transaction,
whether a public offering, a private placement, or any legal transaction involving the issuance
of securities, you should consult an attorney who can provide you with the advice that you need,
for your specific circumstances. Securities law, and corporate finance, is not the area for novices
to play. Incorrect documentation can have serious ramifications for all involved parties.
All of our work is subject to due diligence requirements both as to the entity and principals
For developmental stage companies interested in going public by selling
securities or stock under a fully registered SEC public offering, we can assist with their financing
through direct public offerings (DPO's) or initial public offerings (IPO's), and help them obtain quotation
on the NASD OTC Bulletin Board (NASD OTCBB), NASDAQ, NASDAQ Small Cap, Pacific Stock Exchange (PSE),
or American Stock Exchange (ASE). We can provide directly the necessary professional legal work or the
necessary investment banking and financial advisory consulting services to enable a client to accomplish these objectives. In addition to experienced legal counsel, experienced accounting and audit advisors,
investment bankers, underwriters and broker-dealer firms are essential to a successful offering.
We can do the legal work to help your company sell securities or stock under a fully registered public offering or appropriate exemption from registration, such as Regulation A, Regulation D Rule 504 small
corporate offerings or SCOR offerings, and obtain the necessary blue sky clearance and approval for
If otherwise qualified, we can file a Form 10 for your company to become a
reporting company, and obtain a market maker to file a form 211 with the NASD OTC BB under Rule
15c-211, or a filing with the National Quotation Bureau's pink sheets
Reverse mergers are typically involved when a client company wishes to go public
"instantly" without selling its securities. This is usually accomplished through a "Shell Company",
usually one that is a publicly traded reporting company but which no longer has an active operating
business, or a candidate for merger with a compatible business or one that wants to "spin out" its business
and go private. The first step for the client company is to locate, conduct due diligence and secure a
suitable shell. Secondly, the price must be reasonable for the perceived value to the client.
There are extensive risks in engaging in a reverse merger with a shell company
and such transactions should be approached with caution and experienced counsel on your side. The cost for
obtaining such a vehicle is typically anywhere from $100,000 to $500,000. Some of the many risks are liabilities
(known or unknown), less of a percentage available to the merging company's group of investors, and
issues regarding reporting and auditing. SEC policy mandates that the 8-K filed in a reverse merger
have all the requisite detail of a Form 10 filing, and the SEC may, at its option, review the 8-K
using its Form 10 review process. The result is that a shell acquisition is often as expensive
(considering direct and indirect costs) and time-consuming as an IPO.
For companies wanting to go public without a sale of securities and wishing to
avoid the risks of a reverse merger with a shell company, we can structure a merger-spinoff transaction.
The basic merger-spinoff transaction works like this: We identify a publicly held company (PHC) that
wants to provide additional value to its shareholders by creating for its shareholders an interest in
your promising operating company. The PHC forms a new wholly owned Subsidiary. Our client company
(Client) merges into the Subsidiary, usually with the Client retaining 95% of the merged entity and
the PHC holding 5%. The PHC then dividends the shares of the Subsidiary it owns (5%) to its shareholders
creating a public shareholding base for your company. The resulting merged entity=s shareholders consist
of Client=s shareholders and the shareholders of the PHC. The Subsidiary (merged entity) simultaneously
files registration statements (SB-2 and S-4) with the SEC for the dividend shares and for the shares
issued in the merger to the Client company so that all resulting outstanding shares are fully registered.
The Subsidiary applies for a financial listing with Moody's or Standard & Poor's, gets a market maker and
starts trading Pink Sheets. If the Client wants to trade OTC, the procedure requires filing Form 10 with
the SEC and becoming a reporting company.
Again, we can provide directly the necessary professional legal work to the client or
assist client's counsel by providing the necessary investment banking and financial advisory consulting services
to enable a client to accomplish these projects.