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GOING PUBLIC--WATCH FOR THE PITFALLS

 GOING PUBLIC--WATCH FOR THE PITFALLS
 BOULDER, Colo., April 10 /PRNewswire/ -- The following article was


prepared by Dave Cook of Chrisman, Bynum & Johnson. Cook heads up the Corporate Securities Group for Chrisman, Bynum & Johnson, a leading law firm in the Rocky Mountain region. He has more than 25 years of corporate securities experience.
 The Rocky Mountain region has historically been an active market for initial public offerings. During the 1970s it was the penny stock boom, with hundreds of oil and gas companies going public. In the 1980s it was blind pools. In retrospect, most would agree there was often more form than substance in those days.
 But the last 12 months have been different than any other IPO market this area has seen before.
 Major New York underwriters have come into this market to compete for unprecedented corporate finance business. Regional underwriters such as Hanifen, Imhoff and Cohig & Associates are working extended hours to keep up with the pace of IPOs and secondary offerings.
 In addition, major institutions are buying up shares of our local IPOs in record numbers. Consequently, raising $20-$30 million in a matter of days has become commonplace.
 Another change from the quick and dirty deals of the past, is the level of legal sophistication being brought to the process.
 This high quality of professional service bodes well for companies considering going public. However, before jumping into the fray, consider the following words of advice, gleaned from 25 years of helping dozens of companies raise hundreds of millions of dollars through the IPO process.
 1. Most companies are not prepared for the level of due diligence required by the underwriters and their legal counsel. In today's market, underwriters are likely to hire scientific experts, talk to your customers and suppliers and key employees. The process is extremely rigorous and time consuming. In the end, they may know more about your company than some of your top executives. Invariably, something will be unearthed that will be a sensitive issue. Everyone benefits if you can keep your sense of composure and not feel threatened by this exhaustive scrutiny.
 2. There is no substitute for quality accounting and legal help in the IPO scenario. If an underwriter senses your company has not been represented by good, professional legal and accounting help, your deal could be cancelled. Underwriters get very nervous if they detect a lack of knowledge or attention to detail in the financial or legal area. The size and prestige of the accounting or legal firm is not as important as the competency and professionalism of these firms.
 3. Be sure there are no legal skeletons in the closet. For example, have there been any claims or controversies with ex-employees? Hostilities with people in the past, such as inventors who think they own a piece of your technology, can sabotage an underwriting. Look carefully at any promises (real or perceived) made to these past employees. It's always amazing how many people come out of the woodwork when insiders at a company get ready to cash out years of hard work. Be sure you have a clean document regarding the origination of your technology. Run patent and trademark searches to make sure there are no infringements.
 4. Too many IPOs are derailed because the issuer company feels the underwriter's final offering price is too low. Greed can kill the deal. A lower valuation may be hard to swallow, but if the underwriter has good distribution, existing shareowners should recoup most if not all of the balance in the aftermarket as the company grows and more people learn of your stock. It's better to "leave something on the table" so the stock will appreciate following the initial offering.
 5. As the chief executive officer, be prepared to articulate the vision for your company in front of sophisticated analysts and institutional investors. The "road show" part of the IPO process can be very tiring. It's not uncommon to present your story to breakfast and lunch audiences in a dozen cities in just as many days. All this crammed into a two week frenzy of catching planes and setting up slides. Many companies have started utilizing outside speaker training experts to work with their executives on presentation skills. Just as important, however, is to prepare for the Question & Answer session. There are questions you should not answer, such as earnings projections and other material matters not covered in the prospectus.
 6. You may need to have someone bridge finance your deal through the IPO process. Also be prepared for the actual expenses associated with the IPO. For example, to raise $5-$10 million in net proceeds to the company, you may need to spend $75,000-$100,000 on accounting fees, $100,000-$150,000 in legal fees and $75,000-$100,000 in financial printing costs. For a secondary offering, these expenses should be substantially less.
 7. Because of legal liabilities arising out of the securities laws, your senior executives will need to be careful in what is communicated to the outside world. Once a letter of intent is signed with the underwriter to go public, corporate executives must limit their external communications to what is contained in the prospectus. Press releases must be limited to routine announcements.
 8. Watch out for the cheap stock issue. The Securities and Exchange Commission (SEC) could take the position that a company's stock sold to insiders during the 12-month period prior to the effective date may not have been sold at a fair price, resulting in a charge to earnings. Work closely with your accountants and legal counsel on this issue at least a year before going public.
 9. Be prepared to spend six to nine months on the IPO process. There is a long line waiting at the SEC for companies filing their registration statements. Whereas a year ago it took an average of 30 days to receive initial comments from the SEC on a company's registration statement, today it can take twice that long. The danger is the company's audited financial statements can become "stale." A new audit could be mandated, thus holding up the offering and costing more money. Just as dangerous, the company can run out of money waiting for the offering to go effective.
 10. Finally, remember the funds received from an offering are "interest free," but you will pay a "price" in terms of accountability to outside shareowners. This will come in the form of preparing and disseminating SEC filing documents, Annual and Quarterly Reports to shareholders, news releases, etc. In addition, there will be a constant stream of phone calls from investors, stockbrokers and analysts asking probing questions about your company. Someone has to field these calls and handle the documents mentioned above. Inquiries from the business press will also become a way of life. Many companies maintain an ongoing program of holding meetings around the country with members of the investment community. A reputable and well-established investor relations firm can assist you in many of these areas.
 In summary, going public creates exciting opportunities in terms of increased visibility and financing. However, be aware of the risks and challenges that come as well.
 -0- 4/10/92
 NOTE TO EDITORS: Dave Cook is available to meet with you. Photographs are also available.
 /CONTACT: Carl Thompson of Carl Thompson Associates, 303-494-5472, for Dave Cook/ CO: ST: Colorado IN: SU:


BB -- DV005 -- 7128 04/10/92 10:14 EDT
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Date:Apr 10, 1992
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