In addition to the added expensive of complying with the Securities Exchange Act of 1934 disclosure requirements, the marketplace invites speculators who short sell (bet that the price of a stock will go down) and hedge with derivatives, often creating unpredictable volatility and share prices not indicative of the underlying value of the actual business.

No Automatic Liquidity for Issuers

Being public is no guarantee of liquidity either. It’s fantastic for an issuer to state that their stock is being quoted at $5.00 per share, but if there is no volume (the shares are not actually being bought and sold at or near that price) this claim is meaningless. It takes two to tango; a buyer and a seller.

In my recent blog outlining the current problems with the Over the Counter marketplace and shell transactions, I suggested that Rule 419 may be a viable answer to many of the current issues facing this beleaguered sector.

Private Company Marketplace (PCMP)

There is also another opportunity in town that is at least worthy of consideration by small companies seeking capital; the Private Company Market Place (PCMP).

A PCMP is a trading platform, such as SharePost or SecondMarket that provides a marketplace for private shareholders to buy and sell shares of private companies from other private shareholders.  It is on a PCMP that Facebook’s shares currently trade and where pre-IPO Groupon and LInkedin traded.

The NASDAQ of the 1980’s

Recent industry articles have likened these PCMP’s to the NASDAQ marketplace of 30 years ago.  That is, NASDAQ once catered to small emerging companies, providing a place for capital formation and share valuation before they became “big boys” and moved onto a larger exchange such as the NYSE or AMEX.

Now NASDAQ is a “big” exchange, small-cap companies are left with the OTCBB, OTCQB or Pink Sheets.  The problem with this dynamic is that companies trading on the Over the Counter markets still face big public company expense in an economy generating small company revenues.

Staying Private Longer

PCMP’s allow a company to attract capital and establish a market presence and valuation, while staying private longer.  Moreover, since there is no way of shorting or margining private company shares, a PCMP will not attract short term volatile speculators and market manipulators.  Most importantly, PCMP’s provide liquidity and an exit strategy for investors in private companies, something that did not previously exist.

PCMP’s are currently unregulated, other than being subject to the same broker dealer registration requirements for their operators and registration exemption and anti-fraud requirements of all securities transactions.

Let’s see where this goes.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

Recently, the small-cap and reverse merger market has diminished substantially. Operating businesses are wary of completing reverse mergers, and PIPE investors are harder to come by. The reasons for this are easily identifiable.

First – The General State of the Economy

Simply stated, it’s not good.

Second – The Backlash from a Series of Fraud Allegations, SEC Enforcement Actions, and Trading Suspensions of Chinese Company’s Following Reverse Mergers

Chinese company reverse mergers dominated the shell company business for years; now there are none.  Moreover, it is unlikely that this area will recover any time soon. The Chinese government and US regulators must reach agreement and a mutual understanding regarding PCAOB review of Chinese audits.  Even then, it may take years for the stigma to fade.

Third – The Rule 144 Changes Enacted in 2008

As discussed in previous blogs Rule 144(i), as amended, provides in pertinent part that the Rule is unavailable to issuers with no or nominal operations or no or nominal non-cash assets.  That is the rule is unavailable for the use by shareholders of any company that is or was at any time previously, a shell company.  In order to use Rule 144, a Company must have ceased to be a shell company, be subject to the reporting requirements of section 13 or 15(d) of the Exchange Act; filed all reports and other materials required to be filed by section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and have filed current “Form 10 information” with the Commission reflecting its status as an entity that is no longer a shell company, then those securities may be sold subject to the requirements of Rule 144 after one year has elapsed from the date that the issuer filed “Form 10 information” with the SEC.

Accordingly, former shell companies must always remain current in their filings (even 20 years after a merger) and the rule will never be available to former shell non-reporting pink sheet company shareholders.

Fourth – The Problems Clearing Penny Stock with Broker Dealers

Most (almost all) small cap companies are penny stocks as defined by federal regulations.  A penny stock is a stock that trades below $5.00.  In January 2009, FINRA sent a regulatory notice to its member broker dealers warning that they are obligated to trace the origin of stock certificates back to the original issuers or face hefty fines for failing to complete the due diligence. This process is expensive and time consuming and many broker dealers are just not willing to go through the trouble for a penny stock.  Following the regulatory notice,

Penson Financial Services, one of the nation’s largest clearing firms, enacted a policy in response to this and will not clear a stock trading below $.10. In addition to this chilling the clearing process, it has had a negative effect on PIPE investors who are concerned about getting their stock cleared and sold.

Fifth – Issues with DTCC, The Depository Trust & Clearing Corporations

DTC controls the clearing of all stock in street name and through electronic transfers.  If a company’s stock is not DTC eligible it will be illiquid.  Although DTC has not technically changed its rules, they are enforcing them differently.  DTC is now requiring documents which may not exist or which may be impossible to obtain.  For example, DTC requires the original offering document for public issuances.  For a company that went public 10 years ago, subsequently failed and became a shell, and changed management a dozen times in between such offering document can be unattainable.

When that same company now wants to complete a reverse merger with a solid operating business, file a registration statement and become fully reporting and transparent, they may not be able to become DTC eligible.  In addition, DTC has been taking a very long time to clear penny stocks, even when the paper work is in order.  Many months or more can go by without communication. DTC has no time limit requirements so an applicant is at their mercy.

Sixth – Increasing Cost of Reporting Requirements

As of June of this year, all reporting companies must file their reports using XBRL.  XBRL is an interactive tagging system to provide in-depth information on financial statements.  However, for a shell company, or small public company it may simply be a matter of too much information.  No one will look at it and the cost is high, averaging about $10,000 in the first two years alone.

Seventh – New Listing Requirements Imposed by NYSE, AMEX and NASDAQ

The NYSE AMEX and NASDAQ amended its rules so that a Company that goes public via a reverse merger with a shell company must wait at least one year to apply for listing on the NYSE exchange.  The new rule requires that the reverse merger company maintain a post-exchange trading stock price for at least 30 of the most recent 60 trading days prior to the filing of the initial listing application.  In addition to the specific additional listing requirements contained in the new rule, the Exchange may “in its discretion impose more stringent requirements than those set forth above if the Exchange believes it is warranted in the case of a particular reverse merger company based on, among other things, an inactive trading market in the reverse merger company’s securities, the existence of a low number of publicly held shares that are not subject to transfer restrictions, if the reverse merger company has not had a Securities Act registration statement or other filing subjected to a comprehensive review by the SEC, or if the reverse merger company has disclosed that it has material weaknesses in its internal controls which have been identified by management and/or the reverse merger company’s independent auditor and has not yet implemented an appropriate corrective action plan.”  The new listing standards may increase the use of the over the counter markets in a “what else can we do” sort of way, but it also may have a further chilling effect, with operating businesses deciding to go public directly or not going public at all.

Going Public Direct

Going public directly may seem like an obvious response to these issues, but it isn’t that easy.  The days of the mid size NASDAQ broker dealers acting as underwriter for any company with revenues are long over.  Most mid size broker dealers won’t underwrite an IPO for a company with less than $40 mil in revenues and even that is a long shot.  Without an underwriter a company going public directly must complete a DPO (direct public offering).  These offerings are extremely difficult to complete.  Public offerings may not be generally advertised and the ability to solicit investors is highly regulated, and restricted.

Moreover, since a market maker can be deemed an underwriter for filing a 15c2-11 application on behalf of a company completing a DPO, most won’t proceed until the DPO is completely closed out.  A 15c2-11 application is necessary to obtain a trading symbol and have your stock quoted in the aftermarket.  That is, in addition to being limited on who they solicit, the company completing a DPO has to convince investors that eventually, there will be an aftermarket and exit strategy for the investment they make today.

Going Public by Private Placement

The same issues are faced by a Company going public directly by completing a private placement following by S-1 resale registration statement.  The investor is taking the chance that the company will never complete the registration statement and an aftermarket will never develop.  Moreover, the SEC has made it clear that a company cannot sell a private placement with the promise of going public.  The SEC has good reasons for this, many of these companies never do and never intend to go public, but for those that are the real deal, it makes the process difficult.

Rule 419 may provide a good answer.  It won’t solve all the problems, and in particular it doesn’t address the first and second issues discussed above, but it provides a very real solution for the rest.

As discussed in previous blogs, the provisions of Rule 419 apply to every registration statement filed under the Securities Act of 1933, as amended, by a blank check company.  Rule 419 requires that the blank check company filing such registration statement deposit the securities being offered and proceeds of the offering into an escrow or trust account pending the execution of an agreement for an acquisition or merger.

Form 10 Registration Statements

In addition, the registrant is required to file a post effective amendment to the registration statement containing the same information as found in a Form 10 registration statement, upon the execution of an agreement for such acquisition or merger.  The rule provides procedures for a reconfirmation offering allowing the initial investors to decide whether or not to stay in the deal following receipt of the Form 10 information on the operating business.  If 80% of the shareholders do not agree to the merger and stay in the deal, it does not go though.  Rule 419 is the only way to create a blank check company for the purpose of completing a reverse merger with an operating business.

Eliminating the first two issues discussed above, and the issue of reporting expenses, here is how Rule 419 can address the other problems.  I will say upfront, Rule 419 does not solve the issue of reporting costs, and in fact, they are a further deterrence as the Rule 419 Company will be subject to reporting requirements, even while the offering proceeds remain in escrow pending a reverse merger.

Rule 419 Companies Are Not Subject to Shell Company Prohibitions of Rule 144

First, although technically a shell prior to the completion of a reverse merger, most Rule 419 companies are not subject to the shell company prohibitions in Rule 144(i).  The prohibitions for the use of Rule 144 by shell companies, or former shell companies, do not apply to “a business combination related shell company, as defined in Rule 230.405” (see Rule 144(i)(1)(i)).  A business combination related shell company, is defined in Rule 230.405 as a shell company that is “… (2) Formed by an entity that is not a shell company solely for the purpose of completing a business combination transaction (as defined in Rule 230.165(f)) among one or more entities other than the shell company, none of which is a shell company.”  It seems that a Rule 419 company could easily be created that meets the definition of Rule 230.405 and is thus exempted from the provisions of Rule 144(i).

Second, a Rule 419 company can easily provide the necessary paperwork to a broker dealer to meet FINRA requirements.  It is a new company, and all shareholders will either have purchased in the 419 offering itself, or will have received their shares directly from the Issuer in the reverse merger transaction.

Third, and for the same reasons as stated above, DTC clearance should be much easier.  All the documents will be available and easily provided.  All shares traceable and accounted for.   All shares will be registered under the Securities Act of 1933, rather than seeking to trade through an exemption.

The biggest problem with Rule 419 is the legal and accounting expenses of completing the offering, and post effective requirements to complete the reverse merger.  However, with a knowledgeable attorney and reasonable auditor, the process should go smoothly.

However, with all of that being said, the boom in 419 Companies may be just around the corner.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

DTC Eligibility

As detailed in my first two articles in this series, in order to become and remain DTC eligible, and Issuer must have a transfer agent that has completed and has on file with DTC a DTC Operational Arrangements Agent Letter.  In addition, all Issuers must meet the requirements set forth in the DTC Operational Arrangements (OA).  This article begins to discuss the OA necessary for an Issue to become and remain eligible for DTC service.  Moreover, the OA rules relate to and regard all Issuers.  This article will only discuss those rules and requirements for OTC Issuers.

The DTC OA states:

“Generally, the issues that may be eligible for DTC’s book-entry delivery and depository services are those that: (1) have been registered with the United States Securities and Exchange Commission (‘SEC”) pursuant to the Securities Act of 1933, as amended (“Securities Act”); (ii) are exempt from registration pursuant to a Securities Act exemption that does not involve transfer or ownership restrictions; or (iii) are eligible for resale pursuant to Rule 144A or Regulation S (and otherwise meet DTC’s eligibility criteria).”

Applying to DTC

To be eligible, all Issuers, through their applying Participant, must submit the following minimal documentation: (i) an offering document; and (ii) a completed eligibility questionnaire signed by a Participant.

For Book-Entry-Only (“BEO”) securities, in addition to the 2 documents above, an Issuer must provide a DTC Letter of Representation among the Issuer, its transfer agent and DTC.  The Letter of Representation may be a blanket letter, which is Issuer specific and covers all securities by that Issuer or an Issuer Letter of Representation which is used for one time only issuances. Book-Entry-Only (“BEO”) securities are securities for which no physical certs are made available and all securities are maintained by DTC in a Cede & Co, account.  Transactions are made through the FAST program.  Most OTC Issuer securities are not BEO.

DTC Legal Opinion Letters

DTC may request a legal opinion.  Generally such opinion is to confirm either (i) that the SEC registration requirements have been met, or (2) that the security was exempt from SEC registration when issued and is not freely tradeable.  However, DTC can request opinions on other matters, such as when an Issuer changes its name or goes through a reorganization such as a reverse merger.  Foreign Issuers are generally required to provide legal opinion letters.

Although many practitioners believe that DTC rules and eligibility requirements have changed in the past year, in actuality the current rules have been in effect since October 2009.  It is my belief that the examiners response to applications, including the review and comment of applications, has become stricter and more particular in the past year.   That is, the rules haven’t changed, but the application and enforcement of such rules certainly has.

Satisfying DTC Requirements

In particular, Issuer’s are now being required to produce the offering document.  For Issuer’s attempting to make existing securities DTC eligible, it may be difficult, if not impossible, to obtain a copy of an initial offering document.  For example, if an Issuer went public via 504 prior to the 1999 rule changes and subsequently became reporting via a Form 10 (which is not an offering document), the original offering document may have been destroyed, if one ever existed.  In this case, the Issuer will have to work with DTC to provide information satisfactory to their counsel that the securities are indeed free trading and therefore DTC eligible.

Accordingly, it is very important for an Issuer to hire professionals that are familiar with the rules, and who will assist in making sure applications are thorough and complete.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

DTC Requirements for Eligibility

As discussed in my first article on this topic, Issuers, a sponsoring DTC Participant Member must make application to become DTC eligible.  The DTC Operational Arrangements criteria (available on the DTC website) set forth in-depth requirements for eligibility, which will be discussed in a separate articles in this series on DTC eligibility.  In addition to the Operational Arrangements, in order to be DTC eligible, an Issuer’s securities must:

(i)            be issued in a transaction registered with the SEC under the Securities Act of 1933, as amended (“Securities Act”);

(ii)        be issued in a transaction exempt from registration under the Securities Act and that at the time of seeking DTC eligibility, are no longer restricted; or

(iii)       be eligible for resale pursuant to Rule 144A or Regulation S under the Securities Act.

Commonly Requested Issuer Documentation

At the time of application, or during the review of the application, the DTC may request documentation from the Issuer.  The following is a list of the most commonly requested documents.  Further discussion of these documents will be in future blogs in this series.

Although DTC may request additional documents (such as Indemnity letters for tax consequences of a REIT or bond maturity or instruction letters on a Reg A offering), such documents are rarely relevant to an OTC Issuer and accordingly, will not be further discussed.

Letters of Representation and Riders

Book-entry-only (“BEO”) securities are securities for which no physical certs are made available and all securities are maintained by DTC in a Cede & Co. account.  Transactions are made through the FAST program.  For BEO securities, an Issuer must provide a DTC Letter of Representation among the Issuer, its transfer agent and DTC.

The Letter of Representation may be a blanket letter, which is Issuer specific and covers all securities by that Issuer or an Issuer Letter of Representation which is used for only time only issuances.  DTC may request a rider as well.  Generally, riders are required for extra-ordinary situations, such as Regulation S or non U.S. Issuers.

Legal Opinions

DTC may request a legal opinion.  Generally such opinion is to confirm either (i) that the SEC registration requirements have been met, or (2) that the security was exempt from SEC registration when issued and is not freely tradeable.  However, DTC can request opinions on other matters, such as when an Issuer changes its name or undergoes reorganization such as a reverse merger.

Foreign Issuers are almost always required to provide legal opinion letters.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

DTC eligibility has become a major concern for OTC Issuers in the past year.  Obtaining and maintaining eligibility is of utmost importance for the smooth trading of an Issuer’s float in the secondary market.  Moreover, DTC eligibility is a prerequisite for OTC Issuers’ shareholders to deposit securities with their brokers and have such securities be placed in street name.  Most Issuers and many legal practitioners do not know or understand the eligibility requirements or procedures.

The DTC Application Process

First and foremost, like a Form 211 submittal to FINRA, an Issuer cannot make direct application to DTC for eligibility.  An application must be submitted and sponsored by a DTC Participant.  A current list of DTC Participants can be found on the DTC website.  So to start, an Issuer needs to establish a relationship with one of these participants.  A Participant can submit an application for a new offering or for a security that has already been issued and is already trading on the OTC market.  Note that already traded securities will be reviewed for eligibility following a reorganization, such as a reverse merger.

Prior to submittal of the application, the Issuer must have a transfer agent and that transfer agent must have a completed DTC Operational Arrangements Agent Letter on file with DTC and must be participating in DTC’s Fast Automated Securities Transfer (“FAST”) program.  Accordingly, and obviously, this is one of the first questions an Issuer should ask when choosing a transfer agent.

Transfer Agent Attestation Form

In instances where the Issuer’s securities are already issued and outstanding (not a new offering), the Participant will need to submit a copy of the physical certificate and a Transfer Agent Attestation Form.  Please note that the documents referred to in this blog are available on the DTC website and must be submitted in exactly the form provided.  Most of the forms are simple PDF applications that can be uploaded or printed directly from the website.

Note that virtually all DTC eligibility requests, whether for new or already existing securities, require a copy of the offering documentation to be provided to DTC for review.  Accordingly, and obviously, when conducting due diligence on a public shell prior to a reverse merger, acquisition, or other such reorganization transaction, it is important to ensure that such documentation is available or that the shell is already DTC eligible.

DTC Participants Must Answer Comments

A DTC eligibility application will be reviewed for completeness and subject to comments.  It is the responsibility of the Participant sponsoring the application to address the comments and provide all information requested.  An Issuer should work closely with the Participant to make sure all information is accurate, complete and up to date.

Once DTC has identified the legal basis for eligibility of the security, it will notify the Participant whether a legal opinion letter is necessary.   Legal opinion letters must be provided by an experienced securities attorney, properly licensed in the subject jurisdiction and in good standing with their bar association.  Letters will not be accepted from in house counsel and the opining attorney may not have a beneficial ownership interest in the security covered by the letter and may not be an officer, director or employee of the Issuer.

In the next blog I will begin to discuss specific DTC eligibility requirements.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

As a reminder, a promissory note is a written promise by a person, persons or entity to pay a specific amount of money (called “principal”) to another, usually to include a specified amount of interest on the unpaid principal amount.  In addition, a promissory note will include the basic specifics of the debt, including the debtor and creditor, when payment or payments are due, interest rates, if the debt is secured, and whether the debt may be converted into stock or other equity.  A promissory note that may be converted is often referred to as either a debenture or a convertible promissory note.

Notes Can Be Sold or Assigned

Unless specifically prohibited in the language of the note, a promissory note is assignable by the lender.  That is, the lender can sell or assign the note to a third party who the borrower must then repay.  However, a promissory note is never assignable by the borrower, without the express written consent and approval of the lender.  Moreover, convertible promissory notes are generally not assignable unless the third party meets specific criteria.  This is because a convertible promissory note is generally an investment decision (i.e. it can be converted into equity) and the exemption relied upon by the borrower may be limited to the lender meeting certain eligibility.  For example, generally lenders in a convertible promissory note must be accredited and not be disqualified from participating in stock offerings, such as by having a penny stock bar.

Flexibility of Financing

Convertible promissory notes offer flexibility for financing for a small public company.  Generally both the investor/lender and public company/borrower anticipate that the conversion option will indeed be used for repayment of the debt.  However, the lender has the comfort of knowing that if the conversion option is not viable, the debt is still owed in cash.  Securities laws require that there either be an effective registration statement or exemption to registration at the time of conversion.

Securities Act Rule 3(a)(9) is the exemption usually relied upon, however, this rule does not address whether the securities issued in the conversion are restricted or freely tradable.  Section 3(a)(9) of the Securities Act of 1933, provides an exemption from the registration requirements for “[E]xcept with respect to a security exchanged in a case under title 11 of the United States Code, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.”  Since Section 3(a)(9) is a transactional exemption, the new securities issued are subject to the same restrictions on transferability, if any, of the old securities, and any subsequent transfer of the newly issued securities will require registration or another exemption from registration.  Since the new securities take on the character of the old securities, tacking of a holding period is generally permitted allowing for subsequent resales under Rule 144 (assuming all other conditions have been satisfied for use of such rule).

Registration Statements Must be Effective

An effective registration statement or meeting the requirement of Rule 144 are necessary to ensure that when converted, the lender receives freely tradable securities and thus control over its risk.  That is, if the securities are freely tradable, the investor has the right to sell the securities immediately to recoup the loan made to the public company and potentially make a profit on their investment.  Accordingly, a conversion option would not be viable if there was no effective registration statement in place for the underlying securities, or if Rule 144 was unavailable as to the underlying securities.

Generally the lender in a convertible promissory note requires that the small public company file a registration statement to register the underlying securities.  Upon effectiveness of the registration statement, the lender will convert all or a portion of the debt, depending on the negotiated terms of the note, into common stock and sell the stock in the public market place to recoup their original investment.

Convertible Promissory Notes and PIPEs

A convertible promissory note is often the investment vehicle used in PIPE financing.  The convertible note will set a conversion price which is negotiated between the lender/investor and borrower/public company at the time of issuance.  Generally, the note is convertible into common stock at a discount to the market price of the stock at the time of conversion.  In my experience the negotiated discount can vary widely.  A public company with greater liquidity, strong market support, strong financial statements, and the like, would be in a position to negotiate a smaller discount such as 15% – 25%, whereas a public company without these benefits may have to agree to a much higher discount such as 50%-75%.

Although on its face small public companies may be enticed to except this type of financing (they can obtain cash now that is paid back in stock later…), there are some disadvantages that they should be aware of.  For instance, a convertible promissory note which is partially converted or converted in tranches, has the tendency to drive the price of a security down while exponentially increasing the amount of stock in the public float.  For example, if the security is priced at $1.00 and the lender/investor converts $10,000 of debt and immediately sells those securities into the public market, that very selling pressure may drive down the price.

When the lender converted the next $10,000 in debt at a lower price, say $.80, they would get more common stock to cover the same amount of debt.  Upon selling this stock, again, the selling pressure would drive down the price.  as the lender/investor continued to convert into more and more stock to cover the same amount of debt, and sell such stock, the price would be driven down further and further.  Moreover, the amount of stock in the public float would continue to increase, resulting in dilution to the current shareholders and making it much more difficult for the same stock to see an upward movement in its price.

Market Priced Conversion Formulas

Because a market price-based conversion formula can lead to dramatic stock price reductions and corresponding negative effects on both the company and its shareholders, convertible security financings with market price based conversion ratios have colloquially been called “floorless”, “toxic,” “death spiral,” and “ratchet” convertibles.  Commonly public companies complete a reverse split of their outstanding common stock following the completion of a death spiral financing.  In an effort to protect the public markets and existing shareholders from abuses the SEC often limits the amount of stock underlying a convertible promissory note that can be registered at any given time to 30% of the outstanding public float at the time of registration.  The SEC relies on its powers under Rule 419 to limit the amount of securities being registered at any given time.

In summary, convertible promissory notes offer a flexible funding source for small public companies, but as in all funding transactions, the devil is in the details, and a good securities attorney is invaluable.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

Terms of Payment

A promissory note may contain other terms such as the right of the promisee to order payment be made to another person, security or collateral, conversion into stock or other equity, penalties for late payments, a provision for attorney’s fees and costs if there is a legal action to collect, the right to collect payment in full upon certain facts (such as the sale of collateral or a default in the note obligations.

There are legal limitations to the amount of interest which may be charged. When the amount due on the note, including interest and penalties (if any) is paid, the note must be cancelled and surrendered to the person(s) who signed it. The requirements of how a promissory note must be signed are governed by state law and vary from state to state. Some states require that a promissory note by witnessed, others require that it be notarized and some do not require witnessing or a notary.  Notes often contain enforcement provisions, such as notice requirements, jurisdiction and venue.

The note is signed by the person borrowing the money. The note is then kept by the person lending the money as evidence of the loan and the repayment agreement (with a copy usually provided to the borrower).  It is recommended that the debtor sign in blue ink so that there can be no confusion as to which document is the original (and thus enforceable) note.

Liens as Security

In some cases, a promissory note is used when a loan is made for the purchase of real property. When this type of loan is made, the person lending the money often takes a mortgage on the property. That is, the borrower agrees (through a written document that is recorded with the local recorder’s office) that the lender has an interest or lien on the property until such time as the loan is repaid in full. If the loan is not paid in full, the mortgage holder can file a lawsuit, usually called a foreclosure, seeking to have the property sold and the proceeds generated from that sale paid to the lender to satisfy or pay off the loan.

In cases where a loan is used for the purchase of specific personal property (i.e. property that is not land or real estate), a similar type of document can be used to secure the loan or to specify collateral for the repayment of the loan. A security interest can be obtained in the property that is purchased with the borrowed money – this is referred to as a purchase money security interest. If property other than the property purchased with the money is offered as collateral or security on the loan, this type of security is referred to as a non-purchase money security interest. The document that identifies these types of security interest is called a Security Agreement. This document sets forth the details on the type of collateral, location, and how the collateral is handled should the borrower not repay the loan as agreed.

Personal Guarantees

Some promissory notes provide for personal guarantees – if the person borrowing the money is a corporation or is an individual that does not appear to have a solid financial base, another individual will be required to sign the guarantee, thereby promising the lender to pay the loan if the borrower does not. These provisions are enforceable and will bind the person signing the guarantee in the same manner as the person who signed the note.

Unless specifically prohibited in the language of the note, a promissory note is assignable by the lender.  That is, the lender can sell or assign the note to a third party who the borrower must then repay.  However, a promissory note is never assignable by the borrower, without the express written consent and approval of the lender.  Moreover, convertible promissory notes are generally not assignable unless the third party meets specific criteria.

This is because a convertible promissory note is generally an investment decision (i.e. it can be converted into equity) and the exemption relied upon by the borrower may be limited to the lender meeting certain eligibility.  For example, generally lenders in a convertible promissory note must be accredited and not be disqualified from participating in stock offerings, such as by having a penny stock bar.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

To qualify to use an S-8 registration statement the Issuer must: (i) be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended; (ii) have filed all reports required to be filed during the preceding 12 months, or such shorter period of time that the Issuer has been subject to the reporting requirements; (iii) is not a shell company and has not been a shell company for at least 60 calendar days previously; and (iv) if it has been a shell company at any time previously, has filed current Form 10 information with the Securities and Exchange Commission (SEC) at least 60 days previously reflecting that it is no longer a shell company.

So Who Qualifies for S-8 Stock?

An S-8 registration statement is used to register securities to be offered to employees under certain employee benefit plans.  For purposes of an S-8 the term employee benefit plan means any written purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive, pension or similar plan or written compensation contract solely for employees, directors, general partners, trustees (where the registrant is a business trust), officers, or consultants or advisors.

S-8 stock is available to consultants or advisors only if: (i) they are natural persons; (ii) they provide bona fide services to the registrant; and (iii) the services are not in connection with the offer or sale of securities in a capital raising transaction, and do not directly or indirectly promote or maintain a market in the Issuer’s securities.  Accordingly, the SEC has taken the position that Form S-8 cannot be used to register an employee benefit plan that allows for the issuance of securities to unqualified consultants or advisors, even if the Issuer does not intend to issue such securities under the plan following registration.

Attorneys Can, Auditors Can’t

Attorneys are qualified consultants under an S-8 qualified employee benefit plan.  Accordingly, a company can pay attorneys fees with S-8 stock.  Auditors however may not take S-8 stock.

Form S-8 is also subject to the Securities Act of 1933 bad boy provisions.  That is, any Issuer or any entity that at the time was a subsidiary of the issuer, that within the past three years “was convicted of any felony or misdemeanor described in paragraphs (i) through (iv) of [S]ection 15(b)(4)(B) of the Securities Exchange Act of 1934” if ineligible to use Form S-8.

The described wrongdoings include convictions which: (i) involves the purchase or sale of any security, the taking of a false oath, the making of a false report, bribery, perjury, burglary, any substantially equivalent activity however denominated by the laws of the relevant foreign government, or conspiracy to commit any such offense; (ii) arises out of the conduct of the business of a broker, dealer, municipal securities dealer, government securities broker, government securities dealer, investment adviser, bank, insurance company, fiduciary, transfer agent, nationally recognized statistical rating organization, foreign person performing a function substantially equivalent to any of the above, or entity or person required to be registered under the Commodity Exchange Act (7 U.S.C. 1 et seq.) or any substantially equivalent foreign statute or regulation; (iii) involves the larceny, theft, robbery, extortion, forgery, counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or misappropriation of funds, or securities, or substantially equivalent activity however denominated by the laws of the relevant foreign government; or (iv) involves the violation of section 152, 1341, 1342, or 1343 or chapter 25 or 47 of Title 18, or a violation of a substantially equivalent foreign statute.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

The OTCBB, OTCQB and OTCQX Alternative

The BX Market is marketing itself as a more transparent, better regulated, listing alternative to both the OTCBB and OTCQB and OTCQX.  Presumably this means that companies trading on the BX Market would appear to have greater credibility than those on the OTCBB or OTCQB/QX.  The BX Market will be run through joint ventures with NASDAQ and FINRA for application review and maintaining listing requirements.  The BX Market is also touting its technological advances in real time trading and tech services for companies that choose to list their securities for trading on its platform.  Like the OTCBB and OTCQB, the BX Market will not be an exchange but rather a trading platform for the trading of over the counter securities, albeit with new rules related to listing requirements and corporate governance.

Since the BX Market is not an exchange, listed companies will still be required to comply with the various state securities laws and be subject to their review and enforcement.  Currently, exchange listed companies are subject to the federal Private Securities Litigation Reform Act which states that federal law pre-empts (over rules) exchange listed securities. In short, state power is eliminated as to exchange listed securities.

BX Market Listing Requirements

The BX Market will have listing requirements.  According to the BX Venture website the requirements include: (i) a public float of 200,000 shares; (ii) 200 public shareholders each with a minimum of 100 shares; (iii) a market value of listed shares of $2 million; (iv) a minimum of 2 market makers; (v) a minimum bid price of $1.00 for companies not previously listed on an exchange and $0.25 for companies previously exchange traded; (vi) $1 million in equity or $5 million in assets; (vii) a one year operating history; (viii) a 12 month plan to maintain sufficient working capital; (ix) proper corporate governance; (x) prohibition of “bad boy” officers and directors; and (xi) current in its Exchange Act reporting requirements.  There are additional, which can be found on the SEC website in its approval order.

The one year operating history requirement obviously eliminates shell companies from qualifying for listing.  The corporate governance standards will include the requirements to have an independent audit committee; independent directors; compensation committee, code of conduct for officers and directors and holding an annual shareholders meeting.

Neither the OTCBB nor OTCQB have actual listing standards, other than being current with Securities Exchange Act of 1934 reporting requirements.  Moreover, neither the OTCBB or OTCQB require company applications, but rather just market maker applications to FINRA on Form 211 complying with the standards set forth in SEC Rule 15c2-11.

New Motivation for Venture Capitalists

Bob McCooey, Senior Vice President of NASDAQ OMX Group has gone so far as to state that “…the BX Venture Market can provide a new exit opportunity for the long-term investments made by venture capitalists who support job creation and ongoing U.S. competitiveness.”  Presumably the exit strategy he is referring to is the fact that securities listed with the BX Markets will be able to be quoted and traded and that market makers will be on the bid and offer.  Of course, this ability exists now with the OTCBB and OTCQB.  It will remain to be seen if long term venture capitalists will find the idea of future trading on the BX Market more enticing than the current exit strategies available with the OTCBB and OTCQB.

One thing is for sure, the BX Markets will have some power and money behind it.  Currently the NASDAQ OMX Group is the world’s largest exchange company, offering trading technology and platforms over 6 continents and to over 70 exchanges.  Let’s not forget the NASDAQ name.  In fact, the NASDAQ name gave the SEC concern (among other things) in accepting the proposal.  Investors could be easily confused, thinking they were investing in a NASDAQ exchange listed company and not an over the counter security.

Protecting the NASDAQ Name

To counter this concern the BX Market has indicated that companies that refer to themselves as listed on the NASDAQ or NASDAQ exchange will be subject to immediate de-listing from the BX Market.  Still just stating the true fact that the BX Market is owned by and supported by the NASDAQ OMX Group and that is the NASDAQ Listing department that will review and process listing applications for the BX Market, can, and probably will, create confusion.

In summary, the BX Markets will serve as a much needed middle ground between exchange listing and the existing over the counter markets. Since this particular market venue has never existed before, the formative stages should be of particular interest to investors, issuers, securities attorneys, PCAOB auditors and pretty much everyone else in the industry.

Generally speaking, more competition is usually a good thing. Let’s see how this one is received.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.

Companies subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to file quarterly reports on Form 10-Q and annual reports on Form 10-K.  In additional articles, I will discuss in depth the contents and specific disclosure requirements of both forms.  However, in summary, the quarterly report on 10-Q contains unaudited reviewed quarterly financial statements together with management discussion and analysis of those statements.

Form 10-K

The annual report on Form 10-K contains audited annual financial statements, together with management discussion and analysis of those statements as well as other disclosures including but not limited to management bios, management compensation, unregistered issuances of stock, generally background on the registrant, internal control reports, litigation matters and more.

Quarterly reports on form 10-Q are due 45 days from the end of the quarter and annual reports on Form 10-K are due 90 days from the end of the filers fiscal year end.  Each filer has the right to file for an extension on Form 12b-25 which will not result in the filing being deemed delinquent.

Filing Extensions

Extensions must be filed no later than the due date of the 10-Q or 10-K for which the extension is filed.  An extension of up to 15 calendar days is available for Form 10-K and up to 5 calendar days for Form 10-Q. In the event that the extension deadline ends on a weekend or holiday, the filing deadline is extended to the next business day.  The extension period begins to run the day after the report was due. No further extensions are available.  For example if a 10-Q is due on a Monday and a 12b-25 is filed on that Monday, the 10-Q would be due Saturday, however, since that is a weekend, the 10-Q could be filed the next Monday and not be deemed delinquent.

The Impact on Delinquent Filers

Failure to timely file a report will make the registrant a delinquent filer.  The ramifications of being a delinquent filer vary depending on where the registrant’s stock is quoted (over the counter market OTCBB or OTCQB or an exchange such as NASDAQ).  Delinquent filers trading on an exchange, generally face delisting from that exchange and are automatically quoted on the over the counter market.  The exchange, such as NASDAQ, has broad discretion and authority in working with filers to maintain their exchange listing.  The particular rules and regulations of each exchange, and effect of delinquent filing on a registrant’s stock quotation on that exchange, is beyond the scope of this article.

FINRA Rule 6530

FINRA Rule 6530 related to OTCBB eligible securities require that an OTCBB security be current in its Exchange Act reporting requirements.  Filing a report within the extension period following the filing of a 12b-25 is deemed current.  FINRA allows a 30 day grace period prior to removing a registrant from the OTCBB.  However, if a registrant is late in filing its reports 3 times in any 2 year period, it will become ineligible to quote on the OTCBB, without benefit of a grace period.  The registrant can re-apply for quotation after 12 months. The registrant will become ineligible regardless of whether it becomes current thereafter.  This is a bright line rule – one day late, is late!

OTC Markets and the OTCQB

The OTC Markets, which operates the OTCQB, is not a self regulatory organization, but rather is a privately owned and run, for profit, quotation platform.  Accordingly, it is not subject to legislative rules and regulations, its rules are not approved by the SEC, and are not subject to legislative review prior to change.  Quotation on the OTCQB requires that registrants be “current in their SEC reporting requirements.”  A search of the OTC Markets website did not provide any information as to any grace periods or particular standards related to late or delinquent filers.

All delinquent filers, regardless of where quoted, are subject to SEC enforcement proceedings for deregistration.  A deregistered security may not be quoted anywhere or by any medium or by any broker or dealer until re-qualified, either through registration or a new 15c2-11 application. Deregistration is separate and distinct from delisting.  Delisting is the removal of the stock from quotation from a specific exchange (such as NASDAQ or AMEX) or quotation service (such as OTC Markets).  A delisted security may still be quoted by other quotation mediums.  Deregistration is an action by the SEC.  A deregistered security may not be quoted by any medium.

The Author

Attorney Laura Anthony,
Founding Partner, Legal & Compliance, LLC
Securities, Reverse Mergers, Corporate Transactions

Securities attorney Laura Anthony provides ongoing corporate counsel to small and mid-size public Companies as well as private Companies intending to go public on the Over the Counter Bulletin Board (OTCBB), now known as the OTCQB. For more than a decade Ms. Anthony has dedicated her securities law practice towards being “the big firm alternative.” Clients receive fast and efficient cutting-edge legal service without the inherent delays and unnecessary expense of “partner-heavy” securities law firms.

Ms. Anthony’s focus includes but is not limited to compliance with the reporting requirements of the Securities Exchange Act of 1934, as amended, (”Exchange Act”) including Forms 10-Q, 10-K and 8-K and the proxy requirements of Section 14. In addition, Ms. Anthony prepares private placement memorandums, registration statements under both the Exchange Act and Securities Act of 1933, as amended (”Securities Act”). Moreover, Ms. Anthony represents both target and acquiring companies in reverse mergers and forward mergers, including preparation of deal documents such as Merger Agreements, Stock Purchase Agreements, Asset Purchase Agreements and Reorganization Agreements. Ms. Anthony prepares the necessary documentation and assists in completing the requirements of the Exchange Act, state law and FINRA for corporate changes such as name changes, reverse and forward splits and change of domicile.

Contact Legal & Compliance LLC for a free initial consultation or second opinion on an existing matter.