Regulation A

A great option available to public and private companies for raising capital is Regulation A, the so-called “new kid on the block”. Although Regulation A has been around for many years, it is a relatively unknown and seldom used offering exemption for raising capital. It allows companies to sell securities, such as common stock, preferred stock or warrants without registration. The filing that is made with the U.S. Securities & Exchange Commission (“SEC”) is actually not a registration statement, but rather is an “exemption” from registration known as the Conditional Small Issues Exemption From Registration Under the Securities Act of 1933.

Using Regulation A to obtain a public listing costs much less than acquiring a Pink Sheet shell ($150,000 to $250,000) or an over-the-counter Bulletin Board shell ($450,000 to $700,000). Not only do the persons controlling the shell get cash, they also retain approximately 5% to 15% of the common stock. Also, there are numerous stories of shells that after they were purchased had skeletons in the closet, such as outstanding debts, taxes, lawsuits and even stcok that was unaccounted for.

You can maintain much more more control over your corporate structure if you decide to go through the process of listing the company publicly yourself, also known as a “Direct Public Offering” or DPO. You also avoid having to do a reverse split on the “shell” which could result in numerous calls from angry shareholders who owned stock in the “shell”.

Form 1-A is filed with the SEC and is basically a disclosure document requiring complete information about your company, its management team and last 2 years of financial statements. The financial statements do not have to be audited. The Form 1-A usually goes through 2 or 3 rounds of comments in which further explanation or detail is requested before it is approved or “qualified” by the SEC. Once qualified the company now has securities that can be sold, or that have already been pre-sold to investors. This is important because it helps the company establish a shareholder base. This is an important step in the process of obtaining a public listing on Pink Sheets and obtaining a stock symbol. You can find more information about listing a company on over the counter Pink Sheet market at Pink Sheets.