Registration Statement (Form S-1, F-1, F-6)

An SEC filing used by companies planning to register their securities with the SEC. The S-1 contains the basic business and financial information on an issuer with respect to a specific securities offering.

Shelf Registration (Form S-3, F-3)

A shelf registration statement is a filing with the SEC to register a public offering, usually where there is no present intention to immediately sell all the securities being registered. A shelf registration statement permits multiple offerings based on the same registration. Shelf registration is mostly used for sales of new securities by the issuer (primary offerings), although it might possibly be used for resales of outstanding securities (secondary offerings) or a combination of both.

Primary Offering Type

An outstanding share dilutive primary offering, also known as a follow-on offering or subsequent offering, is when a company itself creates and places new shares onto the market, thus diluting existing shares. This type of offering happens when a company's board of directors agrees to increase the share float and outstanding share count for the purpose of selling more equity.

Secondary Offering Type

A float-dilutive secondary offering does not dilute outstanding shares held by existing shareholders because no new shares are created. The issuing company might not benefit at all because the shares are offered for sale by private shareholders.

Mixed Offering Type

The ability to offer securities for sale with different size, price, and terms which may be determined at the time of sale. Can be a mixture of both a primary and secondary offering, company is registering additional shares of common stock and allows certain stockholders to sell some of their shares in the same offering.

At-The-Market Offering Type

ATMs are a type of shelf-based registered offering under which an exchange-listed issuer incrementally sells shares of its listed securities directly into the market at prevailing market prices.

Registered Direct Offering

An offering of securities that has been registered with the SEC to pre-identified investors. As such, the shares purchased by the investors are not restricted but readily tradable. Most Registered Direct Offerings involve the use of a placement agent who places the securities directly with the investors.

Regulation A Offering

Regulation A offering is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1, for offerings up to $20 million in a 12-month period; and Tier 2, for offerings of up to $75 million in a 12-month period. For offerings of up to $20 million, companies can elect to proceed under the requirements for either Tier 1 or Tier 2.

Value Remaining

How much a company can raise by using a shelf registration.

The Baby Shelf Rule (I.B.6. Restriction)

Companies that have an aggregate market value of voting and non-voting common stock held by non-affiliates of less than $75 million, Instruction I.B.6(a) limits the amount that the company can offer to up to one-third of that market value in any trailing 12-month period. This one-third limitation is referred to as the “baby shelf rule.” The company may look back 60 days and select the highest of the last sales prices or the average of the bid and ask prices on the principal exchange. The availability for a particular takedown is measured as the current allowable offering amount less any amounts actually sold under the same S-3 in prior takedowns. Accordingly, the available offering amount will increase as a company’s stock price increases, and decrease as a stock price decreases.

Automatic Shelf Registration (Form S-3ASR)

The S-3ASR is an automatic shelf registration statement which is immediately effective upon filing for use by well-known seasoned issuers to register unspecified amounts of different specified types of securities.

Shelf Offering / Shelf Takedown (Form 424)

In a shelf offering, underwriters essentially take down securities off the shelf. A shelf offering allows a company to generate money from the sale of a stock over time. For example, if Company A has already issued some common stock, but it wants to issue more stock in order to generate some money to expand, update equipment or fund other expenses, a shelf offering allows it to issue a new series of stock that offers different dividends to stockholders. Company A is then said to be taking down this stock offering off the shelf. A takedown relates to underwritten public offerings of stock, bonds or other securities.

How Long is a S3 Effective?

The Securities and Exchange Commission (SEC) lets companies register shelf offerings for up to three years. This means that if Company A registered a shelf offering for three years in advance, it would have three years to sell the shares. If it doesn't sell the shares within the allotted time, it can extend the offering period by filing replacement registration statements.

Underwriter / Securities Placement Agent

An underwriter or placement agent is a registered broker-dealer that assists the company offering the securities by connecting it with qualified investors who may be interested in purchasing the issuer's securities. The more shares the underwriter can place, the higher the commission for the underwriter.

Convertible Securities

The word Convertible means that the security may be converted into common stock. Pay careful attention to the conversion features of any convertible security because they describe when and how much common stock can be issued and sold upon conversion.

Convertible Note

A form of short-term debt that converts into equity, typically in conjunction with a future financing round. The investor would be loaning money to a company and instead of a return in the form of principal plus interest, the investor would receive equity in the company.

Conversion Price

The conversion price is the amount investors pay per share when exercising their option to exchange convertible securities (convertible bonds or convertible preferred shares) into common stock diluting the value of a company's shares.

Maturity Date

This denotes the date on which the note is due, at which time the company needs to repay it.

Death Spiral Financing

Death spiral financing is the result of a badly structured convertible financing used to fund primarily small cap companies in the marketplace, causing the company's stock to fall dramatically, which can lead to the company's ultimate downfall.

Warrants

Warrants are a right or option to purchase shares of the Company's common stock at a specified price (the Exercise Price) for a specified period of time (the Term). Warrants are sweeteners added to offerings and are dilutive when exercised.

Prefunded Warrants

Prefunded warrants are a type of warrant that allows the warrant holder to purchase a specified number of a company's securities at a nominal exercise price. The nominal exercise price may typically be as low as $0.01 per share (often referred to as "penny warrants"). Unlike standard warrants, prefunded warrants allow the company to receive the exercise price (that would have been due at the time of exercise) as part of the purchase/issuance of the prefunded warrant.

Warrants Exercise Price

This is the price at which the Investor can purchase the shares of common stock, typically at some premium to the market price of the common stock on the Closing Date of the transaction.

Warrants Size

This is the number of shares of common stock that the Investor can receive upon exercising the Warrants.

Warrant Coverage

Warrant coverage gives one or more shareholders the opportunity to gain additional shares as a benefit for buying ownership of the company. It comes in the form of an agreement that the investor will be issued warrants. It gives the holder protection against the dilutive effects of any future new share offerings. This future protection is ironic because the exercise of the warrant is dilutive itself to the existing shares.

Series of Security

Different issues of Preferred Stock and Debentures are delineated by Class and Series. For example, the first series of Preferred Stock a company issues can be called Series A, the second series can be called Series B and so on.

Private Placement

Refers to transactions exempted from the securities registration requirements of the 1933 Act under Section 4(2) that exempts transactions not involving a "public offering" of securities. The term also refers to transactions under Regulation D, 144A, and Regulation S--a series of rules recently promulgated by the SEC. In addition, reference to private placements may also extend to the isolated sale or private transaction exemptions provided for in various state securities laws.

Working Capital

A measure of a company's liquidity, operational efficiency and its short-term financial health. If a company has substantial positive working capital, then it should have the potential to invest and grow. If a company's current assets do not exceed its current liabilities, then it may have trouble growing or paying back creditors, or even go bankrupt.

Cash and Cash Equivalents

Cash and cash equivalents refers to the line item on the balance sheet that reports the value of a company's assets that are cash or can be converted into cash immediately.

Authorized Shares

Authorized shares are defined as the maximum number of shares that a company is legally allowed to issue to investors, as per its own determinations. This can serve as a potential dilution cap and is subject to change by way of a vote from shareholders.

Burn Rate

The burn rate is usually quoted in terms of cash spent per month. For example, if a company is said to have a burn rate of $1 million, it would mean that the company is spending $1 million per month.

Market Value of Publicly Held Shares (MVPHS)

MVPHS is calculated by multiplying the publicly held shares (float), which is total shares outstanding less any shares held by officers, directors, employee stock ownership plans, or beneficial owners of 10% or more, by the closing bid price.

Noncompliance (MVPHS)

Nasdaq companies listed on the Global and Global Select Markets must maintain either $5,000,000 or $15,000,000 MVPHS depending on the listing standard under which they qualify. Companies listed on the Capital Market must maintain $1,000,000 MVPHS. If a Nasdaq-listed company trades below the applicable MVPHS requirement for 30 consecutive business days, it will be notified of the deficiency and afforded a 180 calendar day compliance period to regain compliance with the applicable standard.

Noncompliance (Bid Price)

How does a company regain compliance with the minimum bid price requirement? In order to regain compliance with the minimum bid price requirement, a security must have a closing bid price of $1.00 or more for 10 consecutive business days. If a company is unable to resolve its bid price deficiency during the applicable compliance period, Nasdaq Staff will issue a delisting letter.

What Is Full Ratchet?

Full ratchet anti-dilution protects early-stage investors by ensuring that their percentage ownership is not diminished by future rounds of fundraising. It requires that early investors be compensated for any dilution in their ownership caused by future rounds of fundraising.

What is a Well-Known Seasoned Issuer (WKSI)?

A WKSI is a company that has filed all annual, quarterly and current reports in a timely manner, and either has a greater than $700 million market capitalization or has issued $1 billion in registered debt offerings over the past three years.

SEC MEF Filings

An SEC MEF filing is an SEC filing that concerns registration of up to an additional 20% of securities for an offering, pursuant to the 1933 Securities Act Rule 462(b). Rule 462(b) says that a registration statement and any post-effective amendments for up to an additional 20% of securities will become effective upon filing with the SEC if the registration is for the same class of securities already approved for registration by the SEC. The filing is done by an issuer who is increasing the size of its offering.

Free Writing Prospectus (FWP)

Any written communication that represents an offer to sell or a solicitation of an offer to buy SEC-registered securities that is used after the registration statement has been filed.

No-Par Value Stock

Corporations issue no-par value shares because it helps them avoid liability to stockholders should the stock price tank. For example, if a stock was trading at $5 per share with a par value of $10, the company would have a $5-per-share liability. Most shares issued today are indeed classified as no-par or low-par value stock, where the stock prices are determined by the amount that investors are willing to pay on the open market.

Marketable Securities

Marketable securities are financial instruments that can be sold or converted into cash (at reasonable value) within one year. They are highly liquid investments that are generally issued by businesses to raise funds for operating expenses or expansion. When a business invests in marketable securities, it is usually to generate short-term earnings from excess cash.