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Category Archives: Public markets

“Aged Debt” Not Exchangeable for Unrestricted Securities

“Aged Debt” Not Exchangeable for Unrestricted Securities

This came from our friends over at Sonfield & Sonfield:

We are informed that some folks believe so-called “aged debt” is exchangeable for common stock or other securities that endure a holding period beginning on the date of creation of the debt.  The folks who unfortunately believe this untruth rely on Section 3(a)(9) that exempts transactions: “[E]xcept with respect to a security exchanged in a case under title 11 of the United States Code, any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.

Rule 144(d)(3)(ii) provides that if securities are acquired from an issuer solely in exchange for other securities of the same issuer, the newly acquired securities may tack onto the holding period and shall be deemed to have been acquired at the same time as the securities surrendered for conversion, even if the securities surrendered were not convertible or exchangeable by their terms.  Rule 144 also authorizes the issuer and investor to agree to conversion terms and still benefit from tacking the holding period of a promissory note, or other security that does not have a conversion feature as originally written.

The exemption from registration makes no mention of “debt.”  The exemption applies to exchanges only of securities.

However, the Securities Act provides an exemption from the registration requirements for the offer and sale of securities by issuers in exchange for debt, if:  “The terms and conditions of such issuance and exchange are approved, after a hearing upon the fairness of such terms and conditions at which all persons to whom it is proposed to issue securities in such exchange shall have the right to appear, by any court, or by any official or agency of the United States, or by any State or Territorial banking or insurance commission or other governmental authority expressly authorized by law to grant such approval.”

SEC Staff Bulletin 3 provides that the resale of securities issued in Section 3(a)(10) transactions may be had without regard to Rule 144 if the seller is not an affiliate of the issuer either before or after the Section 3(a)(10) transaction. That is, if the seller is not an affiliate of the issuer, securities issued in a 3(a)(10) transaction are unrestricted and may be immediately sold in the public markets.


© 2018 by Sonfield & Sonfield, all rights reserved.

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Posted by on January 17, 2018 in Business, Public markets

 

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Oppressive regulation of small companies by FINRA

We at Rhodes Holdings LLC feel very strongly about the U.S. financial system, and its ability to provide capital formation for companies in growth mode.  The build up of regulations have strangled our economy and our financial markets.

We agree wholeheartedly with Mr. Sonfield – please read his letter to Senator Cruz (2018-01-04 Letter to Ted Cruz from Robert Sonfield):

2018-01-04 Letter to Ted Cruz from Robert Sonfield

Please join us in working to open up our markets and supporting Mr. Cruz in this endeavor.


© 2018 by Mr. Robert L. Sonfield, Jr. esq. of Sonfield & Sonfield and portions by Rhodes Holdings LLC, all rights reserved.  Please feel free to copy the PDF or image and replicate for purposes of supporting this and communicating with Mr. Cruz.

 
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Posted by on January 6, 2018 in BLOG, Public markets

 

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Definition of an “Accredited Investor”

Definition of an “Accredited Investor”

Here is the official definition of an “accredited investor” according to Regulation D.

 
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Posted by on December 4, 2017 in Business, Public markets

 

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OTC Markets’ update

OTC Markets’ update

Rhodes Holdings LLC and myself, Robert C. Rhodes, are focusing more and more on private companies and their operational funding (and financial oversight), but it is important for all of us to keep track of what’s going on in the OTC markets (not to be confused with the company OTC Markets).  The best way to keep track of what’s going on is to stay on the newsletter list for OTC Markets – here is the latest update / newsletter from them…


© 2017 by Rhodes Holdings LLC, all rights reserved.

 
 

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OTC Markets & promotional data

OTC Markets & promotional data

Today OTC Markets put out its monthly newsletter today (here is a link to my copy of the newsletter, but you should go here and sign up to receive them yourself) and reiterated that it had purchased theOTC.today, which tracks promotional information and has since 2011.  Now, what do you think that they are planning to do with that data?…

Keep up to date with OTC Markets.


© 2017 by Rhodes Holdings LLC and Robert C. Rhodes, all rights reserved.

 
 

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What is the PCAOB auditor process for public companies?

What is the PCAOB auditor process for public companies?

I’ve worked with public companies since 1998 in some form or fashion – either being the investor who provides the equity to “go public”, being the private company who goes through the process of going public, or being the consultant who helps the private companies through the process. One of the most frustrating parts of either “going public” or being public is interacting with the PCAOB auditors. Most of the frustration comes from the process, a good process at that, but a process of completing the audit itself – it’s a process that provides the auditors with the background documents and confirmation that the financial information that they have received is correct.

The Process

For the uninitiated, the process is one that can be daunting the first time you go through it, and can make you hate even your best friend who is a PCAOB auditor, but it is a process that you must be familiar with in order to complete.  Here is the process step by step:

  1. Engagement letter
  2. Requested information list issued from auditor
  3. Information requested sent to auditor
  4. Process information, roll forwards, etc.
  5. First partner review
  6. Client responses to (5)
  7. First audit partner review
  8. Client responses to (7)
  9. Second audit partner review
  10. Client responses to (9)
  11. If 10K, auditor must receive all third party confirmations prior to filing
  12. Partners sign off
  13. EDGAR-ization / XBRL
  14. EDGAR-ized sent to auditor / client for sign off
  15. EDGAR-ized & XBRL filed

Usually after you’ve gone through all of this, it’s time for a vacation because it is a gut wrenching process by which the auditors determine if they have all the detail in order to provide their opinion that the financials are a fair representation of reality.  Remember, this is not an opinion that you have not committed fraud or some other malfeasance, but that you have provided them all of the documentation that they require.

 


© 2017 by Rhodes Holdings LLC and Robert C. Rhodes, all rights reserved.

 
 

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SEC issues abound, getting caught up…

SEC issues abound, getting caught up…

There are just a lot of things happening in the merchant banking world.  First, of course, President Trump’s first 100 days in office have been a slow walk towards the lofty goals he set forth when he was running for office – don’t get me wrong, I believe that he has made strides towards his goals, but they were always long term goals in the first place.  Rolling back regulation, check.  Obamacare reform, well, working on it…

Now onto other updates:

  • I always follow what Alchemy OTC Markets Specialist does and thinks, so here is his latest update – “SEC Issues Progress Report on United States Title III Equity Crowdfunding Growth Rate“.
  • If you are in the public markets and you’re not reading the monthly OTC Markets’ newsletter, you should.  Here is the March 2017 issue.  Here is an excerpt from it that I think all of the PR / IR professionals need to heed, “Make sure to follow and tag us @otcmarkets in your latest news, positive earnings and corporate actions on Facebook and Twitter. Use the hashtag #OTCQB, to make it easier for investors to find your latest updates.

 

 
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Posted by on March 22, 2017 in BLOG, Public markets

 

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