How Tos for Form SB-2 Self-Filing

Not all going public events require an IPO or even a typical¬†reverse merger. No, sometimes going public is even more simple–at least on the surface. Certainly other options exist including Form 10-SB and SB-2 shells. What follows below is a semi-detailed discussion on the process of self-filing with a Form SB-2. It is by no means exhaustive and fails to cover many of the nuances inherent in such deals, but it should be helpful in providing a brief overview of the process of going public without a reverse merger–a process known as self-filing.

A Network of Pros

As in any meaningful and complex business decision, getting the right group of advisors and technical team behind your efforts is an absolute must. Such wisdom would definitely include the help of compliant accountants, qualified securities attorneys and competent transfer agents. Timely completion is best done through folks familiar with the process and formalities. They need to know where to dot the i’s and cross the proverbial t’s.

Who’s Registered?

Because not all shares in a self-filing will be registered, it is important that from the outset that those shares which are intended to be registered are properly identified and accounted for. In addition, some shareholders may not even be able to sell their shares yet while others may be allowed under Rule 144. It is important to note that for those shareholders who’re not affiliates that have held their shares for two years or more, they–under Rule 144–will not be required to register the shares before trading. For some shareholders, the company may either restrict registration on certain shares or lock-up registered shares for specific people within the organization. For instance, management may have restricted or unregistered shares to prevent them from immediately selling them and having a tanking of the stock. Deciding on which shares should be registered can be critical, depending on the company’s strategy and hopes for sustainability. The right amount of float and restrictions to ensure the stock isn’t unduly manipulated are both important to ensure a smooth transition to “going public.”

Financing can also become an issue in the share registration process. With a few minor exceptions, the SEC will not allow other financing events like PIPEs while a Form SB-2 is under review for issuance. If financing is needed it should be completed prior to the SB-2 filing or after the SB-2 becomes effective. Remember, this could take several months. The exceptions here typically only include large, qualified institutional buyers (known as QIBs).


This is perhaps the most arduous piece of the entire process as it includes: two-year audit by compliant auditors/accountants, declaration of the company’s liquidity situation, full prospectus and any and all information about the company gleaned from management and shareholders. Typically the prospectus will include key industry and company-specific risk factors, including research to substantiate and provide most of the information that the SEC likes investors to be able to see. In essence “the prospectus” document is nothing more than a very detailed business plan outlining the history, present state and future assumptions of the business as told by management. Afterwards, the securities attorneys, accountants and other professionals will get a hold of the business plan and include every other possible risk, threat or opportunity facing the company that they can think of. The difference between a business plan and a prospectus is that a prospectus includes more legal and less rosey language as to how the business is doing and what risks might be involved with the business as a potential investment. The prospectus will also include what’s referred to as MD&A or management discussion and analysis. In this section management outlines, in a very detailed fashion, why and how things have changed with respect to the business on an annual, quarterly and monthly basis. It is a detailed outline of the history and changes to the business and how they occurred.

The tail end of this process includes listing with EDGAR (Electronic Data Gathering, Analysis and Retrieval). Doing so requires obtaining codes and passwords for gaining access to EDGAR on the SEC website to submit filings and support documents at both the outset and on-going as the company needs to maintain current records with the SEC.


We’ve already discussed the details of both SEC and NASD reviewing and commenting in detail. As a sufficient review, an SEC will review for share registration. NASD may also get involved if the selling shareholders are affiliated with a broker-dealer. Comments from the SEC can include both substantial financial disclosure requests to knit-picky cosmetic issues and everything in between. The back and forth is a good disciplined process for both the issuer and the SEC to ensure the offering meets at least the bare minimum threshold requirements for the offering of securities. Auditors and securities attorneys must sign-off on various portions in the SEC and NASD review process.

Get Trading

The last, and perhaps most important step in the filing of a Form SB-2 is getting your market maker to apply for a listing on the OTC. On the OTC exchange–and unlike other exchanges like NYSE and NASDAQ–companies themselves do not apply for a listing. No, on the OTC, getting listed on the exchange is done through a market maker. Because getting listed on an exchange and getting securities/share approval from the SEC are not mutually exclusive processes, it is best to begin the OTC approval process through a market maker even before the SEC approves the filing. The SEC can take 4 to 6 months in commenting and reviewing a filing. Getting the listing process going with the exchange can mean two vital steps are being processed simultaneously. Initiating the process early can ensure the Form SB-2 filing occurs more quickly.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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