Going Public Organically - Without SEC Registration

For a private company with good business fundamentals, strong management, a business plan, a vision, mission and purpose in the world AND with historical revenues - -?there are many paths to the capital markets.?See my prior post -https://www.dhirubhai.net/posts/andreacataneo_going-public-all-of-the-ways-today-activity-7087283461249462272-TXa7?utm_source=share&utm_medium=member_desktop

Here, we will be speaking primarily about 7(a), steps to Going Public Organically Without SEC Registration and without a general solicitation exemption.??

For today’s discussion- the focus is on a three step process over time:

1.??????Conduct a compliant friends and family offering round (founders and maybe another 7-10 investors) within the first 6 months to a year in business, raising sufficient capital (but not more than you need) to launch and meet/exceed previously set milestones. .??Be sure to consult securities counsel about your cap structure, which may need to be amended.

2.??????Prepare a compliant private placement memorandum (PPM) or Subscription Booklet for a Regulation D, Rule 506(b) offering about a year or so later, and consider using a Placement Agent (a FINRA licensed investment banker who will vet investors and manage the process).??Bringing on another 40 shareholders will accelerate the admission process on OTC Markets, and this can be done in one offering or more than one over time, with successive offerings being done at a higher valuation.

o??Be sure to rely on an exemption from registration to sell securities (common stock, preferred stock, Units consisting of common stock and warrants, or convertible notes).?Exemptions include ?Regulation D, Regulation A and Regulation CF of the Securities Act of 1933- and we are focusing this discussion on a Regulation D exemption, Rule 506(b).

o??Strictly comply with the Rule.?See SEC.gov | Private placements - Rule 506(b).?The disclosure requirements must be met, or you can risk violation (which could mean a rescission or worse) and issuers are required to notify the SEC and the States where investors reside. ?Blue Sky Compliance is an important discussion for another day. See SEC.gov | Filing and Amending a Form D Notice.?REMEMBER, IN ORDER TO SELL ANY SECURITIES, AN ISSUER MUST EITHER (a) REGISTER THOSE SECURIITES WITH THE SEC; OR (b) RELY ON AND COMPLY WITH AN AVAILABLE EXEMPTION FROM REGISTRATION.

3.??????Interview and select a Market Maker to prepare a 15c211 package with your attorney for review by OTC Markets and by FINRA.??A Market Maker cannot charge for this service, but will likely require that large investors in your company and/or many of the smaller ones open accounts with them.?This makes it far easier for them to “make a market” in your stock.

o??A minimum of 50 round lot shareholders (100 or more shares makes up a “round lot”) is required to trade on OTC Markets- and if this is without SEC registration, those shareholders must have held onto their restricted securities for a minimum of one year under Rule144 ?(also a discussion for another day.?SEC.gov | Rule 144: Selling Restricted and Control Securities)

o??Due to changes in Rule 15c211, listing on OTC Markets as a non-reporting Issuer is more transparent and therefore, more attractive to investors than it once was.?https://blog.otcmarkets.com/2021/10/15/amendd-sec-rule-15c2-11-impact-a-more-transparent-global-otc-markets/---?KEEP IN MIND, MANY LARGER BROKERAGE FIRMS WILL NOT ACCEPT DEPOSITS FROM COMPANIES THAT ARE NOT SEC REPORTING.?

In certain circumstances, public company training wheels make sense before a private company becomes reporting and before it gets listed.??This method enables a company to build a solid shareholder base, learn how to be transparent and compliant and prepare for bigger things.??