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05 May Form S-1: Required Financial Statements

Going public takes some fairly decent preparation on the part of the offerer. Nowhere is this more evident than in the financial statements. Prior to your public offering, whether you go public via IPO, DPO or APO via reverse merger, you’ll be required to make certain financial disclosures of fact, in accordance with GAAP (Generally Accepted Accounting Principles) and audited by a PCAOB auditing firm. What follows is a brief description of each of the key financials statements your company will be required to prepare for submittal to the Securities and Exchange Commission.

1. Balance Sheet. Audited, consolidated (if there are subsidiaries) balance sheets for the end of the two most recent years. If your company has been in existence for a year or less, then you must provide an audited balance sheet as of a date within 134 days of the filing of the public registration.

2. Income Statement. Audited income statement for each of the three fiscal years preceding the date of the most recent audited balance sheet being filed. This could be shortened, depending on how long your company has existed.

3. Cash Flow Statement. Audited cash flow statement for each of the three preceding fiscal years.

4. Interim Reviewed Financial Statements. If the filing is over 134 days after the end of your fiscal year, then you’ll be required to submit Interim Reviewed Financials.

Rule 8-01 of Reg S-X provides information and requirements on the specific periods your financials must cover as a smaller reporting public company. Smaller reporting companies are defined as:

  • Company with Trading Stock. A company with a public float of <$75 million as of the previous business day from the company’s most recently completed fiscal quarter. This is computed by multiplying the aggregate number of shares (both voting and non-voting) of the company’s common stock, held by non-affiliates, multiplied by the price at which the common equity was last sold.
  • Company with Non-Trading Stock. If the company’s stock isn’t trading, then the market cap is pegged from the initial registration statement. Using common equity, the company has a public float of <$75 million within 30 days of the date of registration statement filing.
  • Annual Revenues. If, when calculating the public float mentioned above, the public float is zero and the annual revenues were <$50 million.

What’s mentioned above represents a broad description about the financial preparation that needs to occur as part of the going public process.