SEC Forms and EDGAR filings are about as exciting as an insurance seminar, but if the right filing hits and you're the fastest to determine what it means...You can quickly avoid a disaster trade or, when it's good, be the first to get the money!
There are lots of different SEC forms...LOTS...but there are really only a handful that you'll see on a fairly regular basis trading penny stocks. Some of these lead to explosive moves in share price and others, well, not so much.
The other "not so much" ones are important though as they might be a signal of a future action, like some form dilutive financing arrangement and/or reverse split (neither is usually considered a positive).
What is an EDGAR Filing?
EDGAR filings are simply an automated way for publicly traded companies to file required forms with the SEC. EDGAR streamlines the process and automatically verifies and accepts information so a human being doesn't have to analyze each and every one of the thousands of documents filed daily...
The Form 10K is the annual financial report that is due out no later than 90 days from the end of the fiscal year. The Form 10Q is the quarterly report that comes out every three months and is filed within 45 days of the end of the quarter. Both of these SEC Forms cover similar information, but on different timelines.
The tier that the company lists in on the OTC Markets will determine if filing a Form 10K or 10Q is even necessary and/or needs to be audited. It works like this:
What is in the SEC Forms 10K and 10Q?
A common index would look like this:
Like I mentioned, it's not the most exciting subject, but there can be some really good stuff in these SEC Forms. Depending on how new you are to this stock, will really depend on what some of the most important sections are for you.
The Description of Business section would obviously be a good place to start if you know nothing about the company. On the other hand, if you already know a bit about them, then...
The most important information in the SEC Forms 10K and 10Q for a penny stock trader is typically found in:
My suggestion is to familiarize yourself with the layout of these SEC forms...These have great potential to move a stocks price in one direction or another.
Keep in mind, that we are playing hype and typically not trying to invest for the long term in a company...Look for hype like material events and don't focus too much on earnings as most OTC stocks don't have any and/or when they do they tend to show large losses.
Ultimately, hype, share count and convertible notes (which lead to dilution) are our main concerns.
The 8K is a disclosure of material events effecting a companies operations. The 8K must be filed within four business days of the event. These can include events like:
SEC Forms 10, S1 and Reg D
Without getting too long winded on these SEC forms, I'll simply state the to some degree each one of these is essentially a filing to either initially get listed or to sell shares.
Selling shares doesn't always mean it's a bad thing (convertible debt is bad and excessive selling of shares is bad) as for instance, the S1 is used when a company is looking to raise money for a specific project(s). Let's quickly define each of these.
They are very similar in what each does, but it is, for the most part, a different way to do the same thing.
SEC Forms 3 and 4
Anytime (for reporting companies) there is a change in the beneficial ownership of a companies stock of 10% or more a Form 3 must be filed. This happens when maybe a new director comes on board and is given a percentage of the company as part of his/her incentive package and/or if an investors buys a large % of the company.
The Form 4 tells what insiders are doing with their shares. For instance, are they selling their shares or buying more? When insiders buy more this is usually perceived as being a very positive sign and conversely when they sell it is perceived as being a negative.
The 13G is used to report ownership of a companies stock of 5-20%...This can signal a convertible note and massive shares about to hit the market, especially when you XYZ Financial/Holdings/Investments has taken a position not to exceed 9.99%.
Owning no more than 9.99% keeps these toxic financiers from being considered insiders and having to follow the Form 4 rules from above. This way they can dump and dump and dump shares without the need to tell the market what they are doing and how much they are selling.
This is a notice to terminate the registration of a class of securities...Not Good! I don't care what anyone says, with the kind of penny stocks that this site focuses on, this is NOT a good thing.
This means that the company is going to essentially go dark. There will more than likely be no more news, filings, updates of any sort and the company will probably cease to exist in short order. Run for the hills is my personal opinion.
These are some of the most common SEC forms that you'll see, but I would certainly make your way through some different company filings and familiarize yourself with the 10K, 10Q and the 8K's. These tend to be the ones (outside of traditional press releases) that can really get a penny stock to fly high!
for Dummies Guide