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An SEC rule issued in 2005 requires companies

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Texan77   Thursday, 10/21/10 01:55:42 AM
Re: Zorax post# 164449
Post # of 220566 
An SEC rule issued in 2005 requires companies merging with a public shell company to file disclosure with the SEC tantamount to the disclosure required in a full-blown IPO. This disclosure is filed in a Form 8-K, called a Super 8-K.

An APO is a quick transaction compared to an initial public offering (IPO). At the closing of an APO, the public shell and private company sign merger documents to complete the reverse merger; file a Super 8K with the Securities and Exchange Commission (SEC), which is the required public disclosure of transaction; file a registration statement with the SEC to register the PIPE shares; release PIPE funds from escrow; and issue a press release announcing the completion of the transaction. The company’s stock now begins trading on the OTCBB, reflecting the new valuation.

A company can close an APO in as little as 30 – 45 days. After the close of an APO, the company is funded and has exactly the same SEC disclosure requirements as an IPO. Approximately 3 to 4 months after the completion of the APO, the company’s registration statement should clear comments and “go effective” with the SEC. When this is accomplished the company can then submit its application to obtain a listing on NASDAQ, AMEX, or NYSE. Listing approval for the exchanges typically takes about one month. At this point analyst research coverage begins and the company focuses on IR efforts, non-deal roadshow, conferences etc.

At the conclusion of a successful APO transaction, a company has received equity funding and has a base of institutional investors. The company has the sponsorship of an investment bank and is exchange listed with analyst coverage. There is now a true market value for the company and the company is positioned to raise additional capital in PIPE transactions.

Closing on the Shell

Upon the closing your SEC attorney has now received all of the due diligence on the shell his client (the “Buyer”). The attorney has also received all of the stock certificates with signed (and usually with gold medallion guaranteed signatures) stock powers from all of the Sellers.

The escrow agent releases the funds held in escrow to the Sellers and the transaction is closed. The shell is now closed but the transaction is far from over. Your attorney will file what is referred to as a super 8K usually within four days of the closing. The super 8K outlines the reverse merger transaction that just took place along with disclosure about the Buyer’s company inclusive of two year audited financials. A super 8K can be rather lengthy – our last client’s attorney filed a 231 page super 8K on December 31st, 2007.

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