Going Public With Regulation A+ The Reverse Merger

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Securities Lawyer 101

What Is Regulation A+?

On
March
25,
2015,
the
Securities and Exchange Commission(the SEC) adopted
amendments toRegulation Apursuant to the mandate of
Section 401(a) of theJOBS Act.The amended rules known
asAmended A+were adopted to facilitatecapital-raising
by
smaller
companies.
Regulation
A+
expands
existingRegulation A.
Regulation A+ offerings can be used in combination with
direct public offeringsandinitial public offeringsas part of
a going public transaction. The exemption simplifies the
process of obtaining theseed stockholdersrequired by the
Financial Industry Regulatory Authority (FINRA) while
allowing the issuer toraise initial capitaland go public
without a reverse merger.

How Does Regulation A+ Impact Going Public?

Smaller private companies have had limited options when
seeking to raise capital and go public. Because of this many
companies turned to reverse merger transactions.
Regulation A+provides an efficient method for a private
company to go public without a reverse merger or
underwriter.
Tier 2 of Regulation A+ also preempts state blue sky laws.
Regulation A+ changes the going public process by allowing
companies to obtain seed shareholders so that the company
can comply with the rules required by the Financial Industry
Regulatory( FINRA) for a stock ticker symbol. This simplifies
the going public process because the company can conduct
a Regulation A+ direct public offering and then request a
market makerfile itsForm 211to seek aticker symbol.

What Disclosures Does Regulation A+ Require?

Regulation A+ provides a middle groundbetween private and
public company status by allowing companies to transition
betweenbeing private and being an SEC reporting company.
One of the most significant changes from Regulation A+ for
going public transactionsis
thata
company
can
use
Regulation A+s short formregistration statement, toregister
shares on its own behalf and on behalf of selling shareholders.
Form 1-A requires disclosure of itsbusiness, officer and
director biographical information, material risks of the offering,
uses ofofferingproceeds, managements discussion and
analysis,
officeranddirector
compensation,
beneficial
ownership information, related party transaction, and the
security being offered.

What Financial Statements Are Required By Regulation

A+?
Tier 1 and Tier 2 offerings require the company to provide
financial statements for the two most recent fiscal years.
An important distinction between Tier 1 and Tier 2 offerings is
that Tier 2 companies must provide audited financial
statements, while Tier 1 companies may provide unaudited
financial statements.
U.S. based companies must prepare their financial statements
in accordance with U.S. Generally Accepted Accounting
Procedures (GAAP), while Canadian companies may prepare
their financial statements in accordance with either US GAAP
or International Financial Reporting Standards of the
International Accounting Standards Board (IASB IFRS).

How Can A Company Plan For a Regulation A+ Offering?

Planning ahead will prevent many common pitfalls that small
companies encounter during the capital raising process.
Direct public offeringsusingRegulationA+involve
specific
disclosures which must be made onForm 1-A.To avoid delays,
companies should ensure they can provide the financial
statements required by Regulation A.
Form 1-Ais reviewed by the Corporation Finance Division of the
Securities
and
Exchange
Commission
(SEC).
Each
amendment to theForm 1-Awill be reviewed by the SEC and the
company must respond. The company and its going public
attorney will draft these responses and file amendments to the
Form 1-A. When the SEC examiners feel theForm 1-Ahas
satisfied all requirements, the SEC will declare theForm 1-A
effective.

Do I Need A Transfer Agent For A Regulation A+ Offering?

Atransfer agentis the custodian of the companys
shareholder records, including purchases, sales, transfers
and account balances. After completion of thegoing public
transaction, as the companys securities trade actively, it is
critical for the Company to have efficient transfer agent
operations.
Setting up transfer agency early, and then issuing and
shipping shares to the companys initial subscribing
shareholders is a formality that helps avoid confusion and
extra burdens for the company and its shareholders.
Choosing a qualified transfer agent that offers a reasonable
fee structure and terms is an important yet often overlooked
step in the process.An experiencedsecurities attorneywill
usually have a good sense of the field of service providers
and can help you.

How Else Can A Company Plan Ahead For Regulation

A+?
TheSECandFINRAmay examine the companys website,
investor relationsactivity including press releases and other
publicly available information. If either finds improper or
misleading statements, they will issue comments asking
the company to offer explanations.
If theSECbecomes concerned about misleading disclosures
it will not approve the companys Form 1-A offering
circular.IfFINRA believes the company is making untrue or
misleading statements to condition the market for a
companys securities, it will not approve theForm 211
application to initiate quotation or assign a stock ticker
symbol. Addressing areas of concern regarding disclosure
early with securities counsel is much easier than waiting for
an issue to arise.

How Can I obtain More Information?

For further information about the rules & regulations that
apply to Regulation A+ and Reverse Mergers, please contact
Brenda Hamilton, Securities Attorney at 101 Plaza Real S,
Suite 202 N, Boca Raton Florida, (561) 416-8956, by email at
info@securitieslawyer101.com.
Please note that the prior results discussed herein do not
guarantee similar outcomes.
Hamilton & Associates | Securities Lawyer 101
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com

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