Attorney Laura Anthony Discusses Exchange Act Rule 13a-11 and Form 8-K - YouTube

I'm attorney Laura Anthony founding partner of Legal & Compliance, a full service corporate,

securities, and business transactions law firm.

Today is the continuation in a LawCast series talking about Form 8-K. A public company with

a class of securities registered under either Section 12, or which is subject to Section

15(d) of the Securities Exchange Act of 1934, must file reports with the SEC.

Exchange Act Rule 13a-11 requires the filing of current reports on Form 8-K. Subject to

certain exceptions, a Form 8-K must be filed within four business days after the occurrence

of the event being disclosed.

No extension is available for an 8-K. Companies must file this report with the SEC to announce

major or extraordinary events that shareholders should know about, including entry into material

agreements and the issuances of unregistered securities.

It is these two specific events that are implicated with the entry into corporate financing transactions,

and subsequent conversions of convertible instruments such as convertible debt or preferred

stock.

In particular, Item 1.01 of Form 8-K requires that a company report if it has entered into

a material definitive agreement not made in the ordinary course of business.

Under Item 1.01, the company must report the date of the agreement, the parties to the

agreement, a description of any material relationship between the parties other than the reported

agreement, and a brief description of the terms and conditions of the agreement.

Generally, a corporate finance transaction is an extraordinary agreement.

Item 3.02 of Form 8-K requires that a company report the unregistered sale of securities.

Under Item 3.02, the company must report the unregistered sale of securities if the aggregate

sales or issuances of securities constitutes 5% or more of the outstanding securities since

the last reported number filed with the SEC.

The report must disclose the date, title, and amount of securities sold, the nature

and amount of consideration paid, the Securities Act exemption being relied upon and a brief

explanation of the facts supporting that exemption.

And where applicable, the terms of conversion or exercise.

The Item 3.02 filing requirement is triggered.

If the volume threshold of the underlying equity securities issuable upon conversion

is exceeded, even if those issuances are structured as takedowns over time, such as where a convertible

note is partially converted in multiple tranches.

If it is foreseeable that the total number of securities issued in a corporate finance

transaction or issuable in that corporate finance transaction will exceed 5% of the

current outstanding securities, an Item 3.02 8-K must be filed.

Likewise, where the actual conversions and issuances of securities exceed the 5% threshold

in aggregate, an 8-K is required.

The Item 3.02 8-K must disclose all unregistered issuances that resulted in increasing the

total outstanding securities by the 5% threshold.

As a simple example, if a company reports 10 million shares of outstanding common stock

in its 10-Q and then proceeds to issue 100 thousand shares each in a series of conversions

of a convertible debt, as soon as the total outstanding reaches 10,500,000, the 8-K filing

requirement would be triggered and each of the conversions that led up to that 10,500,000

total outstanding would need to be reported.

I am securities attorney Laura Anthony, founding partner of Legal & Compliance, and producer

of LawCast.

Should you have any questions about today’s topic, please visit SecuritiesLawBlog.com

and LawCast.com, or contact me directly.

Inquiries of a technical nature are always encouraged.