What is Form 1-A?

Form 1-A is the SEC filing required for Regulation A offerings, which allow companies to raise capital from both accredited and non-accredited investors with lighter disclosure requirements than a traditional IPO. It is the offering statement that gives investors the essential information about the company and the investment, balancing investor protection with reduced regulatory burden for smaller companies seeking capital.

What Is Form 1-A?

Form 1-A is the offering statement that companies must file with the SEC when conducting a Regulation A offering. The SEC staff reviews it and, once comments are resolved, "qualifies" it; only then can the company sell. Qualification is not an endorsement of the investment. Companies may first submit a draft for confidential review, but the draft must be filed publicly at least 21 days before qualification.

Key Components

• Part I: Structured notification data: issuer details, summary financial figures (total assets, revenues, net income), the tier, the amount and price offered, the jurisdictions where it will be sold, and recent unregistered sales
• Part II: The offering circular with detailed disclosures
• Part III: Exhibits, such as the charter, material contracts, the subscription agreement and legal opinion
• Testing the Waters: Solicitation materials used to gauge investor interest before or after filing, which must be filed as an exhibit

Because Part I is filed as structured data, a reader can compare offerings directly: how large the company is, what it is asking for, and at what price. embarc tracks these filers in its list of Reg A issuers.

Required Disclosures

Business Information

• Company Overview: Business description, products, services, and strategy
• Market Analysis: Industry overview, competition, and market opportunity
• Management Team: Background, experience and compensation of directors and executive officers
• Ownership and Related Parties: Principal securityholders and transactions with insiders
• Dilution and Plan of Distribution: How the offering dilutes existing holders and who is selling it, including any broker-dealer or online platform and its fees

Financial Information

• Audited Financials: Required for Tier 2 offerings
• Unaudited Financials: Allowed for Tier 1 offerings, unless audited statements already exist
• Use of Proceeds: Detailed explanation of how funds will be used
• Risk Factors: Comprehensive disclosure of investment risks

After Qualification

• Final Offering Circular: Filed under Rule 253(g) within two business days of qualification or first use
• Continuous Offerings: Must be updated with a post-qualification amendment at least once a year to include current financial statements
• Tier 2 Reporting: Annual reports on Form 1-K, semiannual reports on Form 1-SA, and current reports on Form 1-U for specified events
• Tier 1 Reporting: Only an exit report on Form 1-Z after the offering ends

Benefits and Considerations

Advantages

• Broader Investor Base: Can sell to and market to the general public, accredited or not
• Reduced Costs: Lower compliance costs than full IPO
• Freely Tradable Securities: Shares sold under Reg A are not restricted securities
• Marketing Flexibility: Testing the waters and online distribution, often through Reg A platforms

Repeat issuers show how far the format can stretch: real estate platforms such as the Fundrise eREIT and Groundfloor, and art-share series such as Masterworks, run continuous Tier 2 offerings to retail investors.

Challenges

• State Compliance: Tier 1 offerings must also be registered or qualified under each state's blue sky laws
• Ongoing Reporting: Tier 2 requires annual, semiannual and current reports
• Investment Limits: In Tier 2, a non-accredited individual may invest no more than 10% of the greater of annual income or net worth, unless the securities will be listed on a national exchange
• Market Acceptance: Less familiar to investors than traditional offerings, and most Reg A shares have no active trading market

Conclusion

Form 1-A represents an important middle ground between private placements and public offerings, providing companies with access to broader capital markets while maintaining reasonable disclosure requirements. Understanding the Form 1-A process is essential for companies considering Regulation A as a funding option and for investors evaluating these opportunities. For how it compares with the alternatives, see differences between Reg A, Reg D and Reg CF.

Explore the Data

• Reg A issuers and their offerings
• Reg A platforms that host offerings
• Regulation A explained