5. The Going-Public Process 42

Other changes in capitalization occur at or prior to the closing date of an IPO; and
An issuer was formerly a subchapter S corporation, a partnership, or a similar tax-exempt enterprise.
Information about the company’s officers, directors, and principal shareholders and their compensation. Form S-1 requires that your company identify and describe the business experience of its executive officers and directors; their compensation (including information on stock options, bonuses, profit-sharingplans, and other benefits); the security holdings of directors and principal shareholders; transactions with and indebtedness of officers, directors, and principal shareholders; and the identity of transactions with, and compensation paid to, its promoters.
MD&A. In this section, management provides investors and users information relevant to the assessment of the financial condition, results of operations, liquidity, and capital resources of the company, with particular emphasis on the company’s prospects for the future. MD&A continues to be an area of focus for the SEC staff when reviewing registration statements and inevitably results in comments (particularly the lack of forward-looking information required by each of the major sections of MD&A). It is therefore imperative that this section be carefully drafted. It must be written as objectively as possible, pointing out both favorable and unfavorable developments, and should be written from the point of view of the management of the company. It should include the following:
Results of operations. A comparison of the income statement amounts for each period presented and an explanation of the reasons for any material changes should be incorporated. The MD&A should also discuss reasons for any recent positive or negative trends, as well as the quality of the company’s earnings. Any known trends or uncertainties that have had or are expected to have a material impact on the company should be analyzed as well. Changes in significant balance sheet items must also be discussed.
Liquidity. Any known trends or any known demands, commitments, events, or uncertainties that will result in or that are reasonably certain to result in the company’s liquidity increasing or decreasing in any material way should be identified. Any course of action the company has taken or proposes to take to remedy any deficiencies should be indicated. Also, the internal and external sources of liquidity should be identified and described, and any material unused sources of liquid assets should be briefly discussed.
Capital resources. A description of the registrant’s material commitments for capital expenditures, the general purpose of such commitments, and the anticipated source of funds needed to fulfill such commitments, should be included in the MD&A. Further, any known material trends, favorable or unfavorable, in the company’s capital resources should be divulged.
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PricewaterhouseCoopers LLP Roadmap for an IPO

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