What is an S-1 Registration?

Companies use the S-1 registration statement to make disclosures, as required under the Securities Act of 1993, for a public offering of securities. The securities can include, for example, equities (common or preferred stock), warrants, debt offerings, or a combination of these. A company making a public offering is exempted from filing an S-1 (and gets to file a kinder, gentler form) only if it has been filing annual (10-K) and quarterly (10-Q) reports with the SEC for at least three years and meets certain additional criteria. For that reason, an S-1 filing company is sometimes called “unseasoned,” but that term only refers to its trading history as an individual company. Although a firm filing an S-1 can be a fledgling company with few employees it can also be a large division, being spun off of a public company, or a prominent private firm.

The following discussion uses the example of an S-1 for an equity offering from a company that has never previously sold stock to the public. However, many of the comments are applicable to any S-1 filing and also relate to the S-1/A, an amended form that adds detail to the initial document.

From an investor perspective, an initial S-1 form provides the first glimpse of a company’s preliminary prospectus, also known as a “red herring,” which contains a wealth of information about the filing company. Companies often file S-1’s with the SEC long before they make printed prospectuses available to the public, so investors can get a head start on their research by reading SEC filings. Thanks to the electronic dissemination of SEC documents through www.sec.gov this can give you free access to new preliminary prospectuses, as well as amendments and other documents related to initial public offerings, shortly after their filing.

Can You Make Your Small Company Public?

Have You Tried To Raise Money Privately?

FACT – It is easier to attract private placement investment capital if your company’s common stock is already publicly traded. A ticker symbol provides liquidity for shareholders and is a great corporate tool to attract private placement capital. This tool provides assurances to the restricted capital investors that there is a ‘light at the end of the tunnel” and they will be able to realize an eventual return on investment.

Champagnenw specializes in providing the tools necessary for a small developmental stage company’s stock to become listed on a public trading medium in a cost-effective manner. We are your bridge to the public market.

Disadvantages of Going Public

  • Public Reporting – Being public requires certain reporting to the government and to shareholders. This requires time and expense, for example, audited financial statements.
  • Confidentiality – Being a public company requires full disclosure; management can no longer keep the actions and progress of the company confidential.
  • Dilution – By becoming a public company, whether through an IPO, DPO or a “shell merger”, the present shareholders will give up some equity of the company and be diluted in their percentage of ownership.
  • Liability – Management has certain additional liability required by law to the shareholders and to the public. Being public allows additional visibility, which automatically increases the level of liability.
  • Maintaining stock value – Being a public company requires a certain amount of public relations, both to the public and to the financial community, to keep the stock trading at a level, which reflects the value of the company. This requires both time and money.
  • There are several different options available to companies desiring to go public. Each has its own advantages, disadvantages, state and federal requirements, time constraints, and costs. Careful consideration should be given as to the method used to achieve a public company, and the advice of professionals should be sought.

Advantage of Being a Public Company

  • A public offering of company stock will improve the company’s net worth, enabling the company to obtain capital or borrow money on more favorable terms.
  • A public company can more easily expand through acquisitions, using its own stock rather than depleting needed cash.
  • The company may be better able to attract and retain more highly qualified personnel by offering stock options, bonuses, or other incentives involving company stock with an ascertainable market value.
  • Through public ownership of its securities, the company may be in a position to gain prestige, become better known nationally, and improve its business operations.
  • There is an easier possibility of converting debt to equity and to strengthen the company’s balance sheet.
  • An equity offering from a lender’s perspective strengthens the financial condition of the company (reduces leverage).
  • Future financing may be obtained more easily since the company can offer investors security that is liquid, more freely tradable, with an ascertainable market value.
  • Liquidity for the owners of the company, including founders, venture capital and other professional investors, can be achieved under Rule 144 Taking a company public may enable the company to eliminate existing personal guarantees to lenders and others and generally allow the company to avoid any future personal guarantees.
  • Establishing a public market for the stock usually allows the founders and owners to achieve a psychological sense of financial success and self-fulfillment and an exit strategy.

Read: How to Get Listed on OTCBB?

How We Can Help You?

The public markets aren’t just for big companies. In fact, the public markets can offer an excellent environment for small businesses to grow. At CNENW, we’re dedicated to helping small businesses go public.

  • Education. Our first objective is to educate business owners about the process of going public and numerous benefits offered by the public markets.
  • Registration. If your company is a good fit for the public markets, our second goal is to help you register your securities at the state or federal level. Contrary to popular wisdom, it’s possible to begin trading on the public markets without mountains of red tape. We can guide you through the process, helping you keep costs down. Our network of world-class professionals truly cares about small business, and when you allow them to consult on and produce your paperwork, you’ll save hundreds of thousands of dollars in the process of joining the public markets.
  • Compliance. Finally, through our Professional Associates, we work with small public companies to help them maintain compliance with the SEC regulations in order to remain listed as a public company.

The basic registration form is Form S-1. It requires companies to disclose, among other things:

  • A description of the company’s business;
  • Properties of the company;
  • Material transactions between the company and its officers and directors;
  • Competition;
  • Identification of officers and directors and their remuneration;
  • Certain pending legal proceedings;
  • The plan for distributing the securities; and
  • The intended use of the proceeds.

The S-1 is not prepared as a fill-in-the-blank form like a tax return but is similar to a brochure, with the information provided in a narrative format. There are also detailed requirements concerning financial statements, including the requirement that such statements be audited by an independent certified public accountant (PCAOB qualified).

In addition to the information expressly required by the form, the company must also provide any other information necessary to make the statements complete and not misleading.

How to Get Listed on OTCBB? Common FAQs Answered

Following are the requirements to file with the SEC to go public on the OTC Bulletin Board: 

  1. The company is earning revenue, or if not earning revenue, the company can show that it is a real business with one or more employees working fulltime in the business. The company need only be in business for a short time, as little as one month. The company also needs to be incorporated, have a bank account and have auditable financial records

  2. The company has or can obtain no less than 40 shareholders in order to be “public”. If a company is unable to secure 40 shareholders on their own, we may be able to help to obtain the minimum number.

  3. The non-insider shareholders (excluding management) must have purchased a minimum of 400,000 shares of the company’s stock that can be registered with the SEC as the “float” when the company is listed and publicly trading, e.g. 40 shareholders pay $2,000 each and buy shares at 20 cents so they get 10,000 shares each. Those 10,000 shares x 40 shareholders equals 400,000 total shares or $80,000 which in most cases will cover the entire cost of going public.

  4. In order to be eligible to go public the company needs to hire an auditor and obtain an SEC qualified audit.
  5. From the time the audit is complete and the registration statement is filed by H2GO, the fastest the company can become public with a stock symbol is 60 days. Sometimes it can take up to six months if the SEC has a lot of questions about the history of the company or other items contained in the registration statement or audit. Once the company is cleared by the SEC (referred to as “going effective”) it needs to be approved by FINRA (Financial Regulatory Authority). That process takes about 30 days and the company needs to be sponsored by a Market Maker (MM), whom we will assist you with.

  6. Once a company has its stock ticker symbol it can proceed to arrange various different funding programs that are not available to private companies which we and our resources will help to arrange. PIPE funding (Private Investment in Public Equity) would be one of the sources for funding, which may include a line of credit as much as $10 million to help a newly public company get started. 


    Yes, they can. We have been very successful with Asian and European clients

    Will you be successful in taking us public?

    The short answer is, YES! As long as the control persons of your company don’t have issues that you have not disclosed to us, and as long as you are cooperating with us during the process, you will become publicly traded. 

    What do you charge for your service?

    A flat fee of $40,000 with $20,000 due on signing our agreement and the balance of $20,000 when you achieve trading status. 

    What would it cost to buy an existing OTCBB “shell”?

    Fair market value these days is in the $400,000 range and about 10-15% of your company. 

    Will you raise money for me when you take us public?

    No, we take companies public by self-filings. No money is raised as an actual part of this process. That said, we do have many real investment bankers we can refer you to.

    Is there a possibility that there will be any extra costs involved?

    No, except for your financial audit, our fee will include all services to get your company listed publicly on the OTC Bulletin Board with a stock quote. With the exception of your Audits, EDGARIZING costs and Transfer Agent (TA).

    Who pays for the company’s audited financials, if needed?

    You pay for your own audit. We will recommend a very reasonable and experienced auditor if you need one. 

    How much does the financial audit cost?

    An audit can cost anywhere from $4,000 for a startup company with limited operations to $25,000 or more for an extremely complicated company audit. 

    Do you have an accounting firm you can refer us to for our financial audit?

    Yes, we have PCAOB registered accountants who we refer to and, because of the volume of business we send them, give considerable discounts to our clients. Our recommended auditor can give you an estimate of cost after an initial free consultation. 

    What is the difference between the Pink Sheets and the OTC Bulletin Board (OTCBB)?

    The Pink Sheets and the OTC Bulletin Board are competing for quotation services for OTC securities. The Pink Sheets is a privately owned company, while FINRA operates the OTCBB. Unlike the OTCBB, issuers do not have to be fully reporting companies with the Securities and Exchange Commission (SEC) to be quoted on the Pink Sheets. It is widely accepted as fact that the OTCBB is a better and more established trading market than the Pink Sheets. Thus, we only take our clients public on the OTCBB, except in special circumstances.