option of terminating an investment earlier than originally planned.
component of the return that is not due to systematic influences (market-wide
influences). In other words, abnormal returns are above those predicted by the
market movement alone.
REQUEST. A request to the SEC to waive the statutory 20-day waiting period and
declare the registration statement effective at an earlier date.
change in the value of a firm's foreign currency-denominated accounts due to a
change in exchange rates.
INVESTOR. Potential investors who meet certain minimum net worth and income
tests (as determined by the SEC) as they relate to certain exempt offerings. See
also Sophisticated Investor, and consult with your legal counsel for further
of state doctrine. This
doctrine says that a nation is sovereign within its own borders, and its
domestic actions may not be questioned in the courts of another nation.
AMONG UNDERWRITERS. An agreement among the members of the underwriting
group/syndicate that specifies, among other things, the managing underwriter and
the terms of the underwriting.
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS). The organization that governs
and disciplines the conduct of certified public accountants and establishes
standards for the profession.
HANDS MEETING. A meeting that occurs during preparation for an IPO that is
attended by company representatives, company counsel, the independent
accountants, underwriters, and underwriters' counsel.
A specific type of a best efforts underwriting: If the underwriter is not able
to sell all of the shares being offered, none of the shares will be offered and
the offering will be canceled.
EXCHANGE (AMEX). One of the major stock exchanges.
An individual, usually employed by an investment banking firm, who studies and
analyzes an industry and the publicly held companies operating within the
industry for the purpose of providing investment advice.
INVESTOR (ANGEL). Individuals who invest in businesses
looking for a higher return than they would see from more traditional
investments. In return for their investment they often are highly involved in
the business. Usually they are the bridge from the self-funded stage of the
business to the point that the business needs the level of funding that a
venture capitalist would offer. Funding estimates vary, but usually range from
$50,000 to $1.5 million.
SECURITIES. Securities whose assumed exercise would create an increase in
earnings per share or a reduction in net loss per share; these securities are
generally excluded from the computation of earnings per share.
EFFORTS OFFERING. An underwriting agreement where the underwriters use their
best efforts to sell the stock; however, the underwriters have no obligation to
purchase stock not purchased by investors.
AND ASK. The quoted prices of securities traded in the over-the-counter market.
The bid price is the highest price a buyer is willing to offer, while the ask
price is the lowest price a seller is willing to accept. The difference between
the bid and ask prices is known as the "spread."
SKY LAWS. The name applied to the securities laws of various states enacted to
protect investors. While the SEC regulations are national in application,
various states have securities laws that affect public offerings.
SKY MEMORANDUM. A memorandum setting forth the various securities law provisions
and restrictions applicable to each of the states in which the offering is to be
made. The memorandum is usually prepared by legal counsel.
VALUE PER SHARE. A share of stock's equity value, computed by dividing a
company's net worth (assets minus liabilities) by the number of shares
VALUE STOCK PLANS. Plans in which restricted stock (or options) is sold to
employees based on book value and the company buys back the stock (or options or
shares received upon exercise of the options) at a later date, usually at its
then net book value.
A commonly used term applied to individuals or firms that trade securities.
Brokers execute trades of securities between buyers and sellers in return for a
fee or commission. Brokers do not own the securities in which they trade and,
accordingly, do not share in the risks or rewards of ownership.
VALUATION. An estimate of the worth of a business
entity and its assets.
The total amount of a company's outstanding securities. For purposes of display
in a registration statement, capitalization includes short-term debt, long-term
debt and equity securities.
TABLE. A table presenting the capital structure of the company, both prior to
the offering and assuming that all securities offered are sold.
ENTITY. A subsidiary, division, or lesser business component that is separated
from another entity. This carved-out entity may become a separate registrant
through an IPO.
STOCK. Common stock, stock options, warrants, or other potentially dilutive
instruments issued to employees, consultants, directors, promoters, or others
providing services to an issuer at a price lower than the public offering price.
HELD COMPANY. A company where the equity interests are held by a few individuals
or group of individuals.
The final meeting of the going-public process in which the company delivers its
registered securities to the underwriter and receives payment for the issue. The
closing is usually five to seven days after the effective date of the
In an underwriting, if there is a second (or third) managing underwriter
representing the syndicate, that securities firm will be known as a
LETTER. A letter written by independent accountants to the underwriter as part
of the underwriter's due-diligence reviews. The letter discusses the results of
agreed-upon procedures applied to the company's financial data, as requested by
the underwriters. Comfort letters provide "negative assurance" to the
underwriter and are not included in the registration statement.
LETTER. A letter written by the SEC's review staff that requests modification to
the registration statement or the inclusion of additional information.
COPY. A registration statement or other document displaying signatures that are
printed or typed rather than signed manually. All EDGAR documents are conformed
copies. However, each signatory to that electronic filing also must manually
sign a signature page acknowledging the signature that appears in typed form
within the electronic filing. The manual signature is executed before or at the
time the electronic filing is made.
A document giving consent to the use of an independent accountant's or other
expert's report and name in the registration statement. A conformed document is
filed with the registration statement while a manually signed copy is kept by
STOCK. Limited transferability stock owned by individuals who control the
SECURITIES. Corporate securities (usually preferred stock or bonds) that are
exchangeable into a fixed number of shares of common stock at a stipulated
PERIOD. See Waiting Period.
Financial instruments whose value is based on another security, commodity, or
A reduction in a shareholder's relative ownership percentage of a company or the
company's earnings per share (EPS) as a result of the company's issuance of more
shares. Dilution in an IPO results from a disparity between the IPO price and
the net book value of tangible assets for existing shares and is usually
reflected in the registration statement in tabular format, referred to as a
SECURITIES. Securities whose issuance or exercise would decrease earnings per
QUESTIONNAIRES. Questionnaires circulated by the company's and underwriter's
counsel during the registration process. The questionnaires gather and confirm
various data that must be disclosed in the registration statement.
The process of liquidating a partnership or a corporation.
OF CORPORATION FINANCE. A division of the SEC which, among other things, reviews
registration statements filed with the SEC.
DILIGENCE. A reasonable investigation conducted by the company's officers and
directors, underwriters and lawyers to provide a reasonable ground for belief
that, as of the effective date, the registration statement contains no
significant untrue or misleading information and that no material information
has been omitted.
STAGE. Seed Financing,
Start-up Financing and First-Stage Financing
ARRANGEMENTS. Arrangements in a business acquisition in which sellers receive
additional future consideration for their security interests usually based on
PER SHARE (EPS). A company's net income, generally divided by the number of its
common shares outstanding and adjusted for certain dilutive securities such as
stock options, warrants, and convertible debt.
DATE. The date the SEC allows the registration statement to become effective and
the sale of securities may commence.
DATA, GATHERING, ANALYSIS, AND RETRIEVAL (EDGAR) SYSTEM. The SEC's electronic
system for filing registration statements and periodic reports under the 1933
and 1934 Acts.
STOCK OWNERSHIP PLAN (ESOP). A plan instituted by a company that gives stock to
its employees. The primary purpose of such a plan is to attract and retain good
officers and employees.
METHOD. Method of accounting in which the investor records an investment in the
stock of an investee at cost and adjusts the carrying amount of the investment
to recognize the investor's share of the earnings or losses of the investee
after the date of acquisition (generally applies to investments where stock
ownership is between 20 and 50 percent of the outstanding securities of the
ACCOUNT. An account in which the offering proceeds are kept prior to closing,
usually in a best efforts underwriting.
OFFERING. A securities offering that does not require a registration statement
to be filed with the SEC. Exempt offerings include Regulations A and D and
Independent accountants, engineers, or others whose proficiency in a specific
area qualify them as specialists in their fields.
FORMS. Forms used by foreign companies to comply with the 1933 and 1934 Acts.
Examples include (1) Forms F-1 through F-10, registration statements similar to
Forms S-1 through S-4 and Forms SB-1 and SB-2, and (2) Form 20-F, an annual
report similar to Form 10-K.
LIMITED PARTNERSHIPS. A partnership set up to transfer wealth to family members
while maintaining control over the income-producing property. The donor would
generally be the general partner while the heirs would be the limited partners.
The general partners maintain control over the assets with respect to voting,
investment decisions, and liquidation while the limited partners will not
participate in these decisions. Establishment of family limited partnerships can
be used as a tax strategy to distribute assets to family members without
triggering a taxable event.
LAWS. Laws that require transactions between a company and its officers,
directors, or large shareholders to be fair to the company. These laws apply to
privately held as well as publicly held companies.
PROSPECTUS. A document that must be circulated to all purchasers of stock
disclosing material facts about the company's operations, its financial status
and the details of the offering. It is often preceded by a preliminary
prospectus, also known as a red herring.
ACCOUNTING STANDARDS BOARD (FASB). A private body that establishes financial
accounting and reporting standards in the United States.
PRINTER. A printer that specializes in the printing of financial
documents-including registration statements, prospectuses, and proxy statements.
These printers are also capable of converting your documents to an EDGAR format
and electronically submitting the document to the SEC.
REPORTING RELEASES (FRRs). Releases designed to communicate the SEC's positions
on accounting principles and auditing practices.
COMMITMENT UNDERWRITING. A type of offering in which the underwriter agrees to
purchase all of the shares being offered regardless of whether investors
purchase the shares. Any shares not sold to the public are paid for and held by
the underwriters for their own account.
STAGE FINANCING. Financing of market
CORRUPT PRACTICES ACT (FCPA). An amendment to the 1934 Act that requires
reporting companies to keep adequate accounting records, maintain adequate
internal accounting control systems, and not make certain payments to specified
foreign officials and politicians.
SALES CORPORATION. Entities recognized by the Internal Revenue Code that may
eliminate or defer payment of U.S. corporate income taxes on a portion of the
income generated from export sales.
8-K. A form required to be filed with the SEC when certain significant
reportable events occur (e.g., major acquisitions or legal proceedings).
10-K. An annual report required to be filed with the SEC pursuant to the 1934
Act. Form 10-K includes annual financial statements, related schedules, and
various textual information.
10-KSB. An annual report form required by the 1934 Act that may be filed with
the SEC by small business issuers under Regulation S-B.
10-Q. A quarterly report required to be filed with the SEC pursuant to the 1934
Act; consists primarily of the company's quarterly financial statements.
10-QSB. A quarterly report required by the 1934 Act that may be filed with the
SEC by small business issuers under Regulation S-B.
S-1. The most common form of registration statement used in the initial public
offering of securities by issuers for which no other form is authorized or
S-2. The registration statement used by companies that have been subject to the
1934 Act reporting requirements for at least 36 months and which combines
incorporation by reference with delivery of the annual shareholder report and
S-3. A short-form registration statement available to companies that have been
subject to the 1934 Act reporting requirements for at least 12 months and that
meet certain market value or debt-rating tests. This registration statement also
permits incorporation by reference, but does not require delivery, of the latest
annual report to investors.
S-4. The registration form used to register shares offered in connection with
business combinations (e.g., mergers, consolidations, exchange offers for
securities of another entity).
SB-1. The registration form available to small business issuers to register up
to $10 million of securities, to be sold for cash, in any continuous 12-month
SB-2. The registration form available to small business issuers to register
securities to be sold to the public for cash. This form differs from Form SB-1
in that there is no limitation on the amount that can be raised in the offering.
TAX EXCLUSION. An annual exclusion granted by the Internal Revenue Service that
allows a donor to give up to $10,000 per year to an unlimited number of donees
without incurring gift taxes.
PUBLIC. The process of a privately owned company selling its ownership shares to
the investing public. See Initial Public Offering.
RETAINED ANNUITY TRUST (GRAT). An irrevocable trust that provides an effective
way to reduce gift tax on property while providing an income annuity to the
grantor. At the termination of the trust, the trust principal is paid to the
beneficiary of the trust. A GRAT allows the grantor to retain control while
retaining income from the property granted. A GRAT works particularly well with
GREEN-SHOE OPTION/OVERALLOTMENT OPTION. An option contained in the underwriting agreement
that allows the underwriter to purchase and sell additional shares if the
market's demand for the shares is greater than originally expected.
PROCEEDS. The total dollar amount raised through an initial public offering,
before deduction of discounts or commissions for underwriters and for expenses
for legal, auditing, printing, filing, and blue sky laws.
REGISTRATION. The status of a company that has filed a registration statement
with the SEC prior to the date the SEC declares the registration statement
BY REFERENCE. Certain materials previously filed with the SEC which may, under
certain conditions, be referred to rather than included in the text of
subsequently filed documents.
GUIDES. Guides followed by the SEC staff requiring the disclosure of policies
and practices by certain industries.
POP/INDUSTRY FLURRY. An industry where there has been a significant number of
successful IPOs. Generally, in that industry, there may be many "me
too" companies trying to follow the leaders.
PUBLIC OFFERING (IPO). The offering or sale of a company's securities to the
investing public for the first time (i.e., converting a company from private to
TRADING. The sale or purchase of a company's securities by directors, officers,
and others. See Insiders.
Individuals that may have access to nonpublic information, e.g., officers,
directors, and major shareholders.
INVESTORS. Nonindividual shareholders. Institutional investors include pension
funds, mutual funds, and trusts.
FINANCIAL STATEMENTS. See Stub-Period Financial Information.
OFFERING. A securities offering limited to investors residing in the state in
which the issuer is doing a significant portion of its business. Such offerings
are usually exempt from registration with the SEC.
BANKER. A person or (usually) a firm that, among other things, underwrites
securities, functions as a broker/dealer, and performs corporate finance and
merger and acquisition advisory services. Investment bankers are usually
full-service firms that perform a range of services, as opposed to an
underwriter or broker/dealer, which only provides one specific service.
BACKLOG. The number of companies that have filed initial registration statements
with the SEC but whose registration statements are not yet effective. Also, an
estimate of the gross offering amount of those companies.
A block of securities sold to investors by a company through an offering.
A company offering its securities for sale.
VENTURE. An arrangement whereby two or more parties (the venturers) jointly
control a specific business undertaking and contribute resources towards its
STOCK. See Restricted Stock.
OF INTENT. A nonbinding letter from the underwriter to the company that sets
forth the general terms and conditions of the securities offering.
STOCK. See Restricted Stock.
BUYOUT. An acquisition of a company financed largely by debt.
OFFERING. An offering of securities exempt from registration due to exemptions
for the size of offering and the number of purchasers.
APPLICATION. A document, similar in nature to a registration statement, formally
requesting that an issuer's securities be listed on a national securities
PERIOD. Usually appears as a provision in the underwriting agreement. Represents
the period of time after an IPO during which (at the underwriter's request)
insiders are prohibited from selling their shares. This period can range from a
few months to several years.
MAKING A MARKET. The process by which a securities dealer supports the trading activity of a particular security. The process may include the dealer
purchasing and selling the security in order to balance the market. Such dealers are referred to as "market makers."
MANAGING UNDERWRITER. In a syndicate of underwriters, the managing or lead underwriter functions as the primary decision maker.
MARKET MAKER. An underwriting firm that stands ready to buy and sell a company's stock and thus make a market where shareholders or prospective
shareholders can dispose of or purchase shares.
MERGERS. A business combination where one entity becomes a part of another entity.
MINORITY INTEREST DISCOUNT. For tax purposes, a minority interest discount represents a discounted amount from the fair market value of property or
securities transferred to minority interests due to lack of voting power/control.
MINORITY INTEREST. An individual or aggregate interest held in an entity that is generally less than 50 percent of outstanding voting securities.
NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD). An independent, self-governing association of securities brokers and dealers that helps to
govern, among other things, its members and the over-the-counter stock market.
NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION SYSTEM (NASDAQ). The NASDAQ is the electronic trading
system in the over-the-counter (OTC) market. Unlike the New York (NYSE) or American (AMEX) stock exchanges, the NASDAQ is not physically located in
NEW ISSUE. An initial public offering, or an issue of securities by a corporation (also known as a primary offering).
NEW YORK STOCK EXCHANGE (NYSE). One of the major stock exchanges.
"NO ACTION" LETTER. A letter issued by the SEC stipulating that it does not object to a course of action proposed by a registrant. "No action" letters are
generally issued after a request has been made by a registrant.
NONACCREDITED INVESTOR. Investors that do not meet the accredited investor criteria. See Accredited Investor.
OFFERING CIRCULAR. Sometimes referred to as a private offering memorandum. A document used in certain securities offerings that are exempt from SEC
OPTIONS. A security giving its owner the right to purchase or sell a company's shares at a fixed date and agreed-upon price.
OVER-THE-COUNTER MARKET (OTC). A market for the exchange of stocks not traded on a listed exchange, maintained by dealers. See also National
Association of Securities Dealers.
OVERALLOTMENT OPTION. The sale of shares by the underwriter in excess of those shares initially available. See also Green-Shoe Option.
OWNERSHIP CHANGE. A term defined in the Internal Revenue Code. Generally, it is defined as a change in ownership of a corporation during a three-year
period of greater than 50 percent, which results in limitations on the ability of the corporation to utilize pre-ownership change net operating losses.
PERFORMANCE SHARE PLANS. Incentive compensation plans, whereby the number of shares to be issued to employees is determined by a formula based on
the achievement of predetermined performance criteria (e.g. increases in earnings per share, increases in return on equity, or growth in sales).
PERFORMANCE UNITS PLANS. These plans provide for the award of units to employees, where each unit entitles an employee to receive in cash or stock a
certain amount if certain performance criteria (e.g., sales growth, increases in earnings per share, or return on equity) are attained during the period specified by the
PHANTOM STOCK PLANS. Incentive compensation plans whereby hypothetical (phantom) shares are granted to employees, which entitles the employees to
receive amounts based on the increase in the market price of the stock from the date of grant. Some phantom stock plans also provide for dividend equivalents, i.e.,
employees will receive amounts equal to dividends declared on the stock. Also known as Stock Appreciation Rights (SAR).
POST-EFFECTIVE AMENDMENT. A registration statement amendment filed subsequent to the effective date of registration.
PREFILING CONFERENCE. A conference with the SEC usually attended by a company's principal financial officer together with representatives from the
company's independent accounting firm to discuss unique accounting issues prior to the SEC's registration review process.
PRELIMINARY PROSPECTUS. A document that provides information concerning a forthcoming issue of stock. Also known as a red herring.
PRICE AMENDMENT. Usually the final amendment to a registration statement; includes the offering price and final pro forma financial information.
PRICE EARNINGS RATIO. A measurement of common stock value computed as the price per share divided by earnings per share.
PRICE RANGE. A proposed price-per-share range is often printed on the cover page of a preliminary prospectus. Example: "It is estimated that the offering price
will be $8 to $10 per share."
PRIMARY OFFERING. An offering in which all of the proceeds from the sale of previously unissued stock are received directly by the company.
PRIVATE PLACEMENT. An offering that is exempt from the requirements of registration and is limited in distribution.
PRO FORMA. Financial statements or financial tables prepared as though certain transactions had already occurred. For example, a registration statement might
include a pro forma balance sheet that reflects the anticipated results of the offering.
PROSPECTUS. The primary selling document in an offering distributed to potential investors. The prospectus provides information about the company and the
offering. See also Preliminary Prospectus and Final Prospectus.
PROXY. A document prepared for a shareholder to authorize another person to act on his/her behalf at a shareholders' meeting.
PROXY SOLICITATION. The request to be authorized to vote on someone else's behalf. A proxy statement must be provided to shareholders prior to soliciting
PROXY STATEMENT. An SEC-required statement of information to be furnished to shareholders by those individuals soliciting shareholder proxies.
PUBLIC FLOAT. The aggregate market value of voting common stock held by nonaffiliates.
QUALIFIED INSTITUTIONAL BUYER (QIB). A nonindividual shareholder that owns and manages at least $100 million in securities, with certain exemptions for
broker-dealers, banks, and savings and loan associations.
QUIET FILING. See Silent Filing.
QUIET PERIOD. The period which begins on the date an offering commences (usually once the company and its underwriter reach a preliminary understanding)
and generally ends 90 days following the effective date of the registration statement. Referred to as the quiet period because of the SEC's restrictions on publicity
about the company and/or its offering.
RED HERRING. The preliminary prospectus circulated during the waiting period to potential investors. Commonly referred to as a red herring because the
disclaimer, at one time, was required to be printed in red ink.
REGISTRANT. An entity that must file reports with the SEC.
REGISTRAR. An agent, usually a bank, that physically issues, transfers, and cancels stock certificates as stock transactions occur.
REGISTRATION PERIOD. The time from which a registration statement is filed with the SEC to the day the SEC allows the registration statement to be declared
REGISTRATION STATEMENT. The primary document required to be filed with the SEC in connection with the issuance of securities. Required by the Securities
Act of 1933. A registrant generally uses Form S-1, SB-1, or SB-2 for an initial public offering.
REGULATION A. Provisions of the 1933 Act that contain the rules governing certain public offerings of no more than $5,000,000 which are exempt from
REGULATION D. Provisions of the Securities Act of 1993 that contain the rules for certain private placement offerings.
REGULATION S-B. Specifies the form and content of financial statements as well as the disclosure requirements for the nonfinancial statement portion of filings to
be filed with the SEC by small business issuers. It is an integrated and simplified version of Regulations S-K and S-X.
REGULATION S-K. Contains the disclosure requirements for the nonfinancial statement portion of filings with the SEC.
REGULATION S-T. Governs the preparation and submission of documents filed via the SEC's EDGAR system.
REGULATION S-X. Specifies the financial statements to be included in filings with the SEC and provides rules and guidance on their form and content.
RESTRICTED STOCK. Securities, usually issued in private placements, that have limited transferability. Also called legended stock or lettered stock.
ROAD SHOW. A presentation to potential investors, brokers, and dealers by the company's management and underwriters in order to facilitate a securities offering.
RULE 144A. An SEC exemption permitting the sale of certain restricted stock without registration.
RULE 147. See Intrastate Offering.
RULE 504. A rule under Regulation D that permits an issuer to raise up to $1,000,000 within a 12-month period. Under Rule 504, a company may offer securities
to an unlimited number of investors and need not provide an offering circular to them.
RULE 505. A rule under Regulation D that exempts from registration offers and sales of securities of up to $5,000,000 during any 12-month period. Rule 505 limits
the number of non-accredited investors to 35; however, there can be an unlimited amount of accredited investors.
RULE 506. A rule under Regulation D that allows for the private placement of securities with an unlimited number of accredited investors and up to 35
"sophisticated" non-accredited investors regardless of the dollar amount of the offering.
CORPORATIONS. Corporations that have 35 or fewer shareholders and meet certain
other requirements of the Internal Revenue Code. An S corporation is taxed by
the federal government and some states in a manner similar, but not identical,
to a partnership.
HARBOR RULE. SEC provisions that protect issuers from legal action if specified
requirements have been satisfied or, in certain cases, if a good-faith effort
has been made to comply with specified requirements.
Second-stage Financing. Growth
financing for market penetration.
OFFERING. An offering by the company's shareholders
to sell some or all of their stock to the public. The proceeds of a secondary
offering are received by the selling shareholders, not by the company.
ACT OF 1933 (1933 ACT). Under the 1933 Act, a registration statement containing
required disclosures must be filed with the SEC before securities can be offered
for sale in interstate commerce or through the mail. The 1933 Act also contains
antifraud provisions that apply to offerings of securities.
AND EXCHANGE COMMISSION (SEC). The SEC is the federal agency responsible for
regulating sales and trading of securities through its administration of the
federal securities laws, including the 1933 and 1934 Acts.
EXCHANGE ACT OF 1934 (1934 ACT). The 1934 Act requires companies registered
under the 1933 Act to file periodic reports (e.g., Forms 10-K and 10-Q) with the
SEC and to disclose certain information to shareholders. Companies traded over
the counter with 500 or more shareholders and total assets of more than $10
million and companies that elect to be listed on a national stock exchange must
file a registration statement to register under the Act.
Financing, Third Stage Financing and Going Public.
REGISTRATION. Generally, a registration statement is considered effective only
as long as there is a bona fide public offering. However, there are certain
circumstances where the SEC will permit deliberately delayed or extended
offerings. These are referred to as shelf registrations.
PROFIT RECAPTURE. A requirement, included in the 1934 Act, whereby officers,
directors, and persons deemed to have beneficial ownership of ten percent or
more of a class of a company's equity securities are required to turn over to
the company any profits realized from sale of the company's stock held for less
than six months.
SUBSIDIARY. A business is deemed to be significant if any of the following tests
The registrant's and its other subsidiaries' investments in and advances to the
subsidiary exceed ten percent of the total assets of the registrant and its
subsidiaries consolidated as of the end of the most recently completed fiscal
year (for a proposed business combination accounted for as a pooling of
interests, this condition is also met when the number of common shares exchanged
or to be exchanged by the registrant exceeds ten percent of its total common
shares outstanding at the date the combination is initiated); or
The registrant's and its other subsidiaries' proportionate share of the
subsidiary's total assets (after intercompany eliminations) exceeds ten percent
of the registrant's or its subsidiaries' consolidated total assets as of the end
of the most recently completed fiscal year; or
The registrant's and its other subsidiaries' equity in the income of the
subsidiary from continuing operations before taxes, extraordinary items, and
cumulative effect of accounting changes exceeds ten percent of such income of
the registrant and its subsidiaries as of the end of the most recently completed
fiscal year. These tests are performed in determining whether separate financial
statements are required for businesses acquired or to be acquired or for equity
method investments (materiality thresholds vary depending on the particular
FILING. A filing to the SEC that entails sending a written registration
statement for initial review and waiting until all SEC comments are resolved
before printing the registration statement and prospectus, i.e., the first
printed version is the amended registration statement. Also known as a quiet
BUSINESS ISSUER. A U.S. or Canadian entity with revenues of less than $25
million and whose public float is less than $25 million.
INVESTOR. Potential investors who are capable of evaluating the merits of the
investment venture as related to certain exempt offerings. See also Accredited
Investor, and consult with your legal counsel for further clarification.
The process by which underwriters attempt to stabilize prices through the
purchase of securities for their own account when the market price falls below
the initial public offering price.
ACCOUNTING BULLETINS (SABs). SABs represent accounting interpretations and
practices followed by the SEC staff in administering the disclosure requirements
of the federal securities laws.
OPTION PLANS. Plans whereby employees are granted options to purchase stock of
the company at a stated price within a specified period of time. Stock option
plans may be:
Start-up Financing. The product is prepared for opening up the
market. The company is being built up or is newly in business and its product is
not yet on the market.
(a) Incentive stock option plans (ISOs), which are
accorded favorable tax treatment (i.e., the employee has no tax at grant date or
exercise date and shares are eligible for capital gains treatment on ultimate
sale); however, there are a number of statutory restrictions including a limit
on the number of ISOs that can be exercised in one year and the period of time
that the stock must be held before it can be sold, or
Nonqualified stock option plans, which are plans that are not ISOs. These plans
do trigger a tax upon exercise. The issuing employer, however, can obtain a tax
deduction in the period the option is exercised, whereas it would not have a
deduction when an ISO is exercised.
ORDER. An SEC order suspending effectiveness of an issue's registration and
preventing the issue from being sold, due to deficiencies being present in the
FINANCIAL INFORMATION. Condensed financial statement information reporting
results for the period subsequent to the last audited statements and prior to
the effective date of the registration statement.
OFFERING. An offering of shares by a company after its initial public offering.
A group of investment bankers who act together to underwrite and distribute an
offering, with the intention of achieving wider distribution and spreading the
OFFER. A formal offer, usually by another company, to purchase a company's
shares in order to gain control. Tender offers can be bilateral (friendly) or
TESTING THE WATERS. Companies filing under Regulation A
may test for potential interest in their company either through oral
presentations or in the form of advertisements prior to the filing and delivery
of the offering statement with the SEC.
Third-stage Financing. Developing the production and sales system for
full exploitation of the market potential.
AD. An advertisement, usually in a business periodical, announcing the offering
and its dollar amount, identifying certain members of the underwriting syndicate
and indicating where a copy of the prospectus can be obtained.
AGENT. An agent that keeps records of a company's shareholders and handles the
transfer of shares from one individual to another.
STOCK METHOD. Method by which options, warrants, and their equivalents are
included in earnings-per-share computations. It assumes that the options and/or
warrants are exercised at the beginning of the year (or issue date if later) and
the proceeds are used to repurchase outstanding shares of common stock.
Fiduciary relationship in which a person, called a trustee, holds title to
property for the benefit of another person, known as the beneficiary.
Usually a firm that acts as an intermediary between the company and the
investing public in connection with the sale of the company's securities.
WARRANTS. Compensation to the underwriter in the form of warrants to purchase
DISCOUNT. The commission paid to the underwriter out of the gross proceeds of an
AGREEMENT. Contract between the company and the underwriter that sets forth the
terms and conditions of a securities offering, including the type of
underwriting, the underwriter's compensation, the offering price, and number of
shares. The underwriting agreement is typically signed on the effective date of
the registration. UNIT. A combination of two securities sold for one price. A
unit usually consists of common stock and warrants or common stock and
CAPITAL. Risk financing generally provided to companies unable to obtain other
forms of financing. The financing can take the form of common stock, convertible
preferred stock, or convertible debentures.
PERIOD. The period between the date a registration statement is initially filed
with the SEC and the date the registration statement becomes effective.
A security entitling its owner to purchase shares in a company under specified
The time during which the market is receptive to a particular type of offering.
OR WITHDRAWAL. A termination of any further offering activity by the company or
the underwriter. A proposed offering is withdrawn by formally notifying the SEC.