Regulatory Requirements

You also should consider what follow-up and on going compliance will be required.

During your filing period with the SEC you will receive several rounds of comments that will need to be addressed by you, your staff, the accountants and of course your SEC attorneys. If your attorney and auditors have performed their services well then you will encounter fewer comments and this will reduce the time frame from start to finish.

Once your company is public, the CFO and his accounting staff will prepare quarterly statements that will be reviewed by your outside audit firm and prepared for filing by your securities attorney. These quarterly filings, called 10Q’s, must be filed with the SEC within 45 days of the end of each quarter. At the end of your calendar year you will then be audited by your CPA firm and your attorney will file a 10K with the SEC. You have 90 days from the end of the year to file your 10K.

Your securities attorney will be aiding you in complying with the regulatory requirements on an ongoing basis. Follow-up compliance is mandatory and will go on indefinitely. In other words, it will not go away. Therefore, it’s an important element to consider before you make the final leap to a public offering. With the introduction of Sarbanes Oxley (“SOX”) compliance has gotten rather expensive. You should earmark at least $200,000 a year to comply with rule 404 of the SOX initiative.

In summary, bringing your company public has a large risk/reward component. If you have a company that, properly funded, could grow exponentially then this is the route to take. If you make to the finish line you will have achieved what many have undertaken but few have achieved. As a public company the value of your company will increase 10X to 20X what it was worth as a private company. The public market also allows you use your stock for liquidity purposes, to raise additional capital, acquire other companies and to attract good management talent. Most importantly, it will increase your net worth substantially.

There are as many upsides as there are downsides to being a public company. In the end you have to make the hard choices. Hopefully, after you have read this series of blogs you will now have a better idea of which direction to take. I always tell my clients the greatest savings you will realize is by doing your homework. Remember “Don’t Expect What You Don’t Inspect”. Good Luck!

Ralph Amato can be reached at www.ventanacapitalpartners.com

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