This is not an S-1 traditional IPO. While you can use Reg A+ to make a full IPO to the NASDAQ or the NYSE, we are discussing here the option of listing your company on the OTCQB or the OTCQX markets.
For information on how to conduct a full NASDAQ IPO using Reg A+ click here.
The Securities and Exchange Commission (SEC) rules allow for the sale and purchase of your company’s shares after the Reg A+ offering has been completed.
Reg A+ securities are liquid in the eyes of the SEC and can be bought and sold in the after-market by the general public through stockbrokers when a company uses Reg A+ to list on the NASDAQ, OTCQX, or OTCQB. Any company that completes a Tier 2 RegA+ offering will be qualified for a public listing on the OTC Markets QB and QX marketplace. The listing fee for the OTCQB is $12,000 annually. The OTCQB and OTCQX markets are operated by OTC Markets Group, not by NASDAQ. An attorney or a Broker-Dealer must sponsor your company to list by filing a Form 211 with FINRA, a step that takes 4 to 8 weeks, which will normally be a simple request that will likely be accepted.
Listing on the more prestigious OTCQX market is also available, there are more reporting requirements (to satisfy OTC Markets) - quarterly financials and an initial background check on the executives of the management team. The fees are higher for an OTCQX listing - $20k per year. For OTCQX, the auditor used for the annual audit must be US-GAAP level, as is the case for the OTCQB and for Reg A+ Tier 2 offerings that do not list. Audits are required once per year. These reporting requirements are far easier than for OTCQB and QX companies that were downlisted from the NASDAQ or NYSE - those companies must live up to the full S-1 level of reporting which is highly demanding and expensive.
A company that has completed a Tier 2 RegA+ offering has the option to take the public market listing steps outlined above. It is not a requirement. Clearly, investors will prefer liquidity when you put your company on the OTCQB or OTCQX. We call Reg A+ offerings Simple Public Offerings(TM) and SPO(TM) for short. Because Reg A+ offerings are for less than $75 million of capital - and they are far simpler to make happen than an S-1 IPO. And they are far more cost-effective than an IPO, or a reverse merger. The rules are simpler than for an IPO. The registration process with the SEC is far simpler than for an S-1 IPO.
After a company has completed a Reg A+ offering that does not list on the NASDAQ or the NYSE, the reporting requirements are far simpler than after an S-1 level IPO. (Annual GAAP audit and financials every 6 months).
Estimated costs for the audit and SEC registration process start at $65k for a company with a simple and clean history, more if you hire expensive or inexperienced attorneys or if your company has a complex past. Marketing prep costs will range from $20k to $50k. For a Reg A+ offering for a company that Reg A+ is well suited to, marketing costs can be remarkably low f the capital can be raised from social media fans or happy customers. For companies that have strong consumer appeal but a small current following then marketing costs will usually range from 4 to 8% of the capital raised. Approx total costs to reach the point that your company is live to investors is approx $160k at the low end assuming a simple audit. Allow 4 or 5 months from start to being live to investors.
Compare this with a reverse merger which will typically cost $500k to $1mill (for a shell without bankruptcy in its past) plus marketing costs, and an IPO, which will usually cost $1 to $2 mill out of pocket plus $1mill per year in reporting infrastructure costs.
Contact us to get started.
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.