Prospectus Disclosure Requirements in Going Public Transactions

Private companies which offer and sell their securities to the public before completion of a going public transaction are subject to the same requirements under the Securities Act of 1933, as amended (the “Securities Act”) as public companies who securities to the public. Section 5 of the 1933 Act provides that an issuer may not use the mails or other means of interstate commerce to offer or sell its securities unless a registration statement is in effect under the Securities Act.

Many companies involved in going public transactions are unfamiliar with the SEC’s prospectus disclosure requirements. Under the Securities Act, issuers that conduct initial public offerings (“IPO”) including in going public transactiona must adequately disclose material information to investors.

This is typically accomplished by filing a Form S-1 registration statement filed with the SEC. Section 5 of the Securities Act also provides that it is unlawful for an issuer to use the mails or other means of interstate commerce to offer and sell its securities to purchasers unless the securities are accompanied or preceded by a prospectus that meets the requirements of Section 10 of the 1933 Act. These disclosures include details of the Company’s business and financial condition as well as the securities the Company proposes to offer.

In going public transactions, these disclosures are most often provided in a Form S-1 Registration Statement which includes a prospectus.Upon effectiveness of its S-1 registration statement, the Company provides potential investors with a prospectus which forms a part of the registration statement.

The prospectus contains two parts.

Part 1 of the Registration Statement

Part I of the registration statement is the prospectus which requires that the company provide certain disclosures. These include detail about the issuer’s business, operations, financial condition, and management.

Part 1 of the Registration Statement

Part II of Form S-1 contains information that doesn’t have to be delivered to investors. Financial statements included in a prospectus included in a Form S-1 must be audited by a firm that is a member of the Public Company Accounting Oversight Board (“PCAOB”). SEC rules allow smaller reporting companies to provide less financial information than larger reporting issuers.

Preliminary Prospectus l Initial Public Offerings

The Company may provide a preliminary prospectus to potential investors before its registration is declared effective.The preliminary prospectus contains substantially all of the information found in a final prospectus except pricing information.A preliminary prospectus will include a price range instead of the final offering price of the security being offered.

Final Prospectus l Initial Public Offerings l Going Public

In IPO’s, a final prospectus must be delivered to all investors with or before they purchase the security being offered. Final prospectus delivery obligations are satisfied when the Company files its final prospectus meeting the requirements of Section 10(a) of the Securities Act on the SEC’s Edgar system.