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EX-21.1 - EXHIBIT 21.1 - Sidoti & Company, Inc.t1401980_ex21-1.htm
EX-10.1 - EXHIBIT 10.1 - Sidoti & Company, Inc.t1401980_ex10-1.htm
EX-10.2 - EXHIBIT 10.2 - Sidoti & Company, Inc.t1401980_ex10-2.htm
EX-10.3 - EXHIBIT 10.3 - Sidoti & Company, Inc.t1401980_ex10-3.htm
EX-10.5 - EXHIBIT 10.5 - Sidoti & Company, Inc.t1401980_ex10-5.htm
EX-23.5 - EXHIBIT 23.5 - Sidoti & Company, Inc.t1401980_ex23-5.htm
EX-23.3 - EXHIBIT 23.3 - Sidoti & Company, Inc.t1401980_ex23-3.htm
EX-23.4 - EXHIBIT 23.4 - Sidoti & Company, Inc.t1401980_ex23-4.htm
EX-23.1 - EXHIBIT 23.1 - Sidoti & Company, Inc.t1401980_ex23-1.htm
As filed with the Securities and Exchange Commission on October 22, 2014
Registration No. 333-         
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
 
SIDOTI & COMPANY, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
6189
47-2060259
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
122 East 42nd Street
4th Floor
New York, NY 10168
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
 
Peter T. Sidoti
Sidoti & Company, Inc.
122 East 42nd Street
4th Floor
New York, NY 10168
(Name, address, including zip code, and telephone number, including area code, of agent for service)
 
Copies to:
 
Anna T. Pinedo, Esq.
James R. Tanenbaum, Esq.
Morrison & Foerster LLP
250 West 55th Street
New York, NY 10019
Tel: (212) 468-8000
Fax: (212) 468-7900
Mark R. Diamond, Esq.
Francis V. Vargas, III Esq.
Rimon, P.C.
One Embarcadero Center, Suite 400
San Francisco, CA 94111
Tel: (415) 683-5472
Fax: (800) 930-7271
 
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. 
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer 
Accelerated filer 
Non-accelerated filer 
(Do not check if a smaller reporting company)
Smaller reporting company 
 
CALCULATION OF REGISTRATION FEE
 
 
 
Title of Each Class of Securities to be Registered
Proposed Maximum Aggregate
Offering Price(1)
Amount of
Registration Fee
Common stock $0.001 par value per share
$
35,000,000.00
$
4,067.00
 
 
(1)
  • Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 
 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated October 22, 2014
PROSPECTUS
             Shares
[MISSING IMAGE: lg_sidoticompany.jpg]
Sidoti & Company, Inc.
Common Stock
 
We are offering      shares of common stock. This is our initial public offering and no public market exists for our shares.
It is currently estimated that the initial public offering price per share will be between $     and $    . We intend to apply to have our common stock listed on the NYSE MKT, subject to notice of issuance, under the symbol “SDTI.”
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”) and, as such, may elect to comply with certain reduced reporting requirements after this offering.
See “Risk Factors” on page 10 to read about factors you should consider before investing in our common stock.
 
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
 
Per Share
Total
Initial Public Offering Price(1)
$
            
$
            
Underwriting Discount and Commissions(2)
$
$
Net Proceeds (Before Expenses)(3)
$
$
 
(1)
  • Assumes all shares are sold at the initial offering price of $     per share.
(2)
  • Excludes a structuring fee of $       payable, upon the consummation of this offering, to CSCA Capital Advisors, LLC. See “Underwriting.”
(3)
  • We estimate that we will incur approximately $     of expenses in connection with this offering.
The method of distribution being used by the underwriters in this offering differs somewhat from that traditionally employed in underwritten offerings. The underwriters have agreed to use their best efforts to procure potential purchasers for the shares of common stock being offered pursuant to this prospectus. All investor funds received prior to closing will be deposited in an escrow account until closing. See “Underwriting.”
The date of this Prospectus is            , 2014.
 
 
[MISSING IMAGE: t1401980_logo2.jpg]
Sidoti & Company, Inc.

TABLE OF CONTENTS
Prospectus
 
 
Through and including             , 2014 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
 
We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.
Neither we nor any of the underwriters have done anything that would permit a public offering of our common stock or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our common stock and the distribution of this prospectus outside of the United States.

MARKET AND INDUSTRY DATA
The industry, market and competitive position data referenced throughout this prospectus are based on research, industry and general publications, including surveys and studies conducted by third parties. Industry publications, surveys and studies generally state that they have been obtained from sources believed to be reliable. We have not independently verified such third party information. While we are not aware of any misstatements regarding any industry, market or similar data presented herein, such data involve uncertainties and are subject to change based on various factors, including those discussed under the headings “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.
In this prospectus, we use the term “micro-cap” to refer to public companies with market capitalizations less than $500 million and “small-cap” to refer to public companies with market capitalizations between $500 million and $3 billion.


PROSPECTUS SUMMARY
This summary highlights information contained in greater detail elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless otherwise expressly indicated or the context otherwise requires, we use the terms “Sidoti,” the “Company,” “we,” “us,” “our” or similar references to refer (1) prior to the consummation of the reorganization described under “Our History,” to Sidoti Holding Company, LLC and its consolidated subsidiaries and (2) after the reorganization described under “Our History,” to Sidoti & Company, Inc. and its consolidated subsidiaries. All amounts in this prospectus are expressed in U.S. dollars and the financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).
Overview
We are a leading provider of institutional-quality equity research focused on small, publicly-traded companies that meet our proprietary criteria. Our current coverage universe comprises nearly 500 companies across a range of industries. These companies typically have market capitalizations of less than $3 billion and a history of profitability and they generally maintain strong balance sheets. These companies also tend to have limited, if any, equity research coverage by other Wall Street firms. Our approach affords our institutional investor clients with a combination of high-quality research, a small- and micro-cap company focused nationwide sales effort, broad access to corporate management teams and extensive trading support. Our principal services include:
  • Equity Research:   Our commitment to unbiased, institutional-quality independent research has been responsible for our success and reputation since our inception in 1999. Our analysts’ recommendations are principally based on their detailed analysis of each company’s business model and cash flows and their assessment of a company’s investment merit. Our research analysts conduct their own due diligence, including meeting with executive officers and operations and financial professionals, and performing channel checks with customers, suppliers and competitors.
  • Sales and Trading:   Our nationally focused sales and trading team comprises highly experienced professionals who have established relationships with many of the leading institutional investors that focus on small-cap and micro-cap companies. Our small- and micro-cap oriented trading desk, which has been in operation since 2004, employs its extensive experience in assisting institutions with prompt order execution and a competitive commission structure.
  • Access to Corporate Management:   We provide institutional clients with extensive access to the management teams of companies included in our research coverage universe. In 2013, we arranged over 1,000 non-deal related management roadshows for our institutional investor clients. We also organize small-cap and micro-cap investor conferences where our covered companies have the opportunity to present to dedicated small-cap and micro-cap institutional investors. In addition, we regularly facilitate one-on-one meetings between company management personnel and investors. These events are exclusively for our clients.
  • Investment Banking Services:   We also are included as an underwriter, placement agent or initial purchaser primarily in equity securities offerings undertaken by companies for which we provide research coverage. We also offer these companies assistance with block trades, authorized share repurchase programs and similar transactions.
We had revenues of $29.8 million, $30.3 million and $14.1 million and net income of $0.8 million, $0.8 million and $0.3 million, respectively, for 2012, 2013 and the six months ended June 30, 2014.
Our Research-Based Focus
We commenced operations in 1999 as an independent research firm. Although we have grown since inception, our approach remains centered on high-quality research in areas that we believe are underserved — namely the small- and micro-cap sectors. We have introduced new services, such as sales and


trading and investment banking, all relying on the depth of our knowledge and expertise in the small- and micro-cap sectors. We believe that our distinct focus and expertise will enable us to expand into new businesses, such as asset management.
Our research principally targets small, publicly traded companies with a market capitalization of $3 billion or less, a history of profitability and little to no research coverage by other Wall Street brokerage firms. Our recommendations are based solely on a company’s investment merit and are not conditioned upon corporate finance or other fees. Our research process begins with the application of several selection methods and proprietary screens to identify potential research candidates. Once an analyst establishes coverage of a company in a particular industry, that analyst may identify other companies that meet our coverage criteria. In addition, we are occasionally approached by institutional investors who may identify potential research opportunities.
Our analysts conduct their own due diligence and generally avoid companies that limit access to senior management. We strive to focus on a company’s financial and operating fundamentals, including, but not limited to, a comprehensive review of cash flows from operations and earnings. As part of their due diligence, our analysts will typically reach out to a company’s customers, suppliers and competitors. They may also visit company facilities, as appropriate. Many of our analysts cover specific sectors including consumer discretionary, consumer staples, energy, financials, healthcare, industrials, information technology, materials, telecommunications services and utilities. Certain of our analysts concentrate on “special situations” where companies do not neatly fall into any particular industry segment.
Our research on a company starts with an eight-page initiation report that details the company’s cash flows and balance sheet, and includes, among other things, quarterly earnings projections at least six quarters beyond the launch date and a price target. Our rating system consists of two ratings. We launch coverage at a “BUY” rating on companies that we project offer at least 25% capital appreciation potential over the 12-month period from the date of the report, and at a “NEUTRAL” where a stock is unlikely to produce as meaningful a gain. We publish notes and special reports, including our cash flow leaders report and our best of BUY-rated ideas. In conjunction with our exclusive investor forums, we produce supplemental publications covering all of the companies presenting at these client-only events.
We believe that there are approximately 5,000 publicly traded companies that could meet our proprietary coverage criteria, thereby providing us with an opportunity to expand significantly our coverage universe.
Market Opportunities
Since the mid-1990s, there have been many acquisitions of U.S. investment banking firms that we would consider our direct peers or competitors. Most of these firms were acquired by larger financial institutions, including U.S. and international depository institutions, insurance companies and investment banking firms. We believe this continued industry consolidation has led to:
  • the tendency of major financial institutions — and firms acquired by them — to focus their investment banking resources (including corporate finance and research) on more mature industry segments, companies with larger market capitalizations and larger investment banking transactions that may offer larger investment banking fees and may be attractive to a greater number of institutional investors;
  • a reduction of equity research coverage, specifically of small- and micro-cap companies, due to a decrease in the number of firms interested in covering small- and micro-cap companies and a shift in the focus of acquired financial institutions toward coverage of companies with larger market capitalizations; and
  • restructurings and downsizings within the remaining boutique investment banks, due to competition from larger investment banking firms and an overall decline in demand for investment banking services, resulting in the further reduction of investment banking and brokerage resources allocated to small- and micro-cap companies and their investors.


We believe that small- and micro-cap companies now receive less consistent attention from consolidated investment banking firms, which pursue larger clients and transactions. Due to our nearly exclusive small- and micro-cap company focus, we believe that our extensive relationships and expertise in covering these companies provide us with a distinct competitive advantage.
As such, we may provide our research for third-party repackaging for use by private capital investors, retail investors and their advisors and investment banks, which represent potential new markets for our research. We may also partner directly with investment banks that can use our small- and micro-cap research and expertise as a value-add to their investment banking deals.
Furthermore, we believe opportunities exist to expand into the asset management business, where we can leverage our small-company research expertise to enter a market where, according to Barron’s, the exchange-traded funds (ETFs”) model of investing in micro-cap stocks, in particular, has not been nearly as successful as micro-cap mutual funds, both in terms of performance and attracting assets.
Competitive Strengths
We believe our distinctive business model, experience and established institutional investor relationships position us well to benefit from a range of opportunities in the financial services industry. Our competitive strengths include the following:
  • Industry-leading research.   We believe that we have established the Wall Street standard for dedicated, independent small- and micro-cap equity research. Our analysts evaluate numerous industries in an effort to provide unbiased, institutional-quality research focused on the investment merits of profitable companies. The numerous small- and micro-cap companies we cover have been traditionally overlooked by investors, and, we believe they generally represent compelling investment opportunities with favorable valuation metrics, such as attractive multiples of earnings and cash flows and low debt ratios, which is consistent with our core principles for small-cap research coverage. For example, as of September 30, 2014 the price-to-book ratio of the Russell 2000® Index was 2.09 as compared to 2.70 for the S&P 500® Index. Although a lower price-to-book ratio may reflect that a company’s stock price is discounted due to the company’s high risk profile or the fact that the company’s securities have a low trading volume, it may also indicate that a company is undervalued.
  • Exclusivity and reach.   Our research is available exclusively to our institutional clients. Our experienced sales force and trading desk serve nearly 500 institutional clients in the United States, Canada and the United Kingdom, including many leading managers of portfolios with $200 million to $2 billion of assets. We believe that these asset managers are generally underserved by other larger brokerage firms that typically target larger managers. Our investor conferences are for the exclusive benefit of our clients.
  • Experienced senior management.   Our experienced and highly skilled management team is led by our CEO and founder, Peter Sidoti, who has worked for over 35 years on Wall Street. As a leading healthcare analyst during the 1990s, Mr. Sidoti was directly involved in nearly 100 transactions in the nursing home, assisted-living and healthcare REIT sectors, including initial public offerings, secondary offerings and mergers. Our president, Marie Conway, who has overseen our research effort since 2000, has decades of experience as an equity analyst and portfolio manager. Our director of trading, Gary Jacobs, who joined us in 2004, has 33 years of trading and 18 years of trading desk management experience on Wall Street.
  • Aftermarket support.   We believe that we create more opportunities for our covered companies to meet with institutional investors than most other financial services firms do, primarily through our extensive calendar of conferences and non-deal road shows. Our annual New York small-cap investor forum attracts an average of approximately 175 companies from our coverage universe and nearly 500 institutional investor representative attendees. Our annual micro-cap conference is similarly well-attended. In 2013, we arranged over 1,000 non-deal road shows for our covered companies and over 6,000 one-on-one meetings.


  • Broker-dealer.   We are a broker-dealer registered with the SEC and a FINRA member firm. We provide a broad range of securities-related services. In addition to our high-quality research, we provide sales and trading services that are distinguished by prompt execution, a competitive commission structure and access to smart order routing, through our license with FlexTrade Technologies, LLC (“FlexTrade”), that utilizes all available sources of liquidity. From time to time, we are invited to participate as an underwriter, dealer, placement agent or initial purchaser in securities offerings for issuers for which we provide research coverage. Given our knowledge of the companies we cover, we believe that we are able to contribute to these capital-raising transactions. In addition, we also assist our issuers with stock repurchase programs, block trades and organized (Rule 10b5-1) trading plans.
Why We Are Going Public
We expect that our transition to a public company will enhance our ability to execute our growth strategies and meet our clients’ needs. As a public company, we expect to have greater visibility with clients, increased access to capital, and additional currency to explore strategic opportunities. Operating as a public company should also enhance our ability to attract and retain high-quality professionals by expanding our effort to offer equity-based incentives linked directly to the success of the business.
Growth Strategy
We intend to grow our business by leveraging our competitive strengths. We will maintain our commitment to providing research for small- and micro-cap companies while expanding our presence with new and existing institutional clients. We expect to increase the level of our business with existing investment management clients and to establish new relationships with investment management entities seeking small- and micro-cap research, including international buy-side firms in Canada and Europe. We will seek to continue to develop our research products using our existing capacity and will add new analysts and sectors when appropriate. To meet the demand for our product outside of the institutional money management industry, we intend to provide our research for third-party repackaging. Private capital investors, retail investors and their advisors and investment banks represent potential new markets for our product. We may also partner directly with investment banks that can use our small- and micro-cap research and expertise as a value-add to their investment banking deals.
We intend to leverage our established small- and micro-cap research brand to expand into the asset management business. We believe a unique opportunity exists to establish an asset management platform focused on the small- and micro-cap segments. We believe these segments are underserved by existing asset managers and that significant capacity exists to create such a platform. As we establish a track record of performance in this business, we intend to expand our reach and seek to attract assets from other institutions, high-net-worth individuals and other sources.
Our History
Sidoti & Company, LLC was founded as an independent research firm in 1999 by Mr. Sidoti, our Chief Executive Officer, to publish high-quality research on small-cap companies for institutional investors. Mr. Sidoti has over 35 years of research industry experience and was a leading healthcare analyst for over 20 years at Wall Street firms, including Value Line, Drexel Burnham Lambert, NatWest Markets and Wertheim Schroders. Sidoti & Company, LLC received its broker-dealer license from FINRA in May 2000, thereby enabling the firm to receive commissions from institutional clients as consideration for its services. The company’s trading operations were established in April 2004, and are led by a seasoned head sales trader with more than 30 years of trading experience. Today, the Company provides research coverage for nearly 500 small- and micro-cap companies and serves nearly 500 institutional clients.
Prior to the date of this prospectus, we operated as a limited liability company organized in the State of Delaware under the name Sidoti Holding Company, LLC. Prior to the completion of this offering, we will complete a number of reorganization transactions in order to have Sidoti & Company, Inc. succeed to the business of Sidoti Holding Company, LLC and will become the owner of its consolidated subsidiaries and to have the members of Sidoti Holding Company, LLC become stockholders of Sidoti & Company, Inc.


This prospectus assumes the corporate reorganization has taken effect prior to this offering, unless otherwise indicated. The purpose of this reorganization is to allow our company to become a corporation rather than a limited liability company following this offering, and so that our existing investors would own our common stock rather than equity interests in a limited liability company. For further details on these transactions, see “Business — Reorganization Transactions and Corporate Structure” in this prospectus.
Summary of Risk Factors
Investing in our common stock involves risks. You should carefully consider the risks described in “Risk Factors” beginning on page 10 before making a decision to invest in our common stock. If any of the events or circumstances described in these risk factors actually occurs, our business, financial condition or results of operations could be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks we face:
  • Difficult market conditions could adversely affect our business in many ways;
  • We focus principally on small- and micro-cap company stocks, which are inherently speculative, and a decline in the market for securities of these companies could harm our business;
  • We generate limited revenues, have not derived significant revenue from investment banking or financial advisory activities and cannot assure you that we will be able to significantly increase our revenues. Many of the companies we compete against, or may compete against in the future, have established investment banking and financial advisory practices that provide them with revenue and capital with which to expand their businesses and compete for customers and clients;
  • Our ability to retain our senior professionals and recruit additional professionals is critical to the success of our business, and our failure to do so, the likelihood of which may be higher than for our competitors, may adversely affect our reputation, business, results of operations and financial condition;
  • As we enter the asset management area, we are becoming subject to risks in a market in which we have limited experience; and
  • Extensive and evolving regulation of our business and the business of our clients exposes us to the potential for significant penalties and fines due to compliance failures, increases our costs and may result in limitations on the manner in which our business is conducted.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as we are an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding advisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation.
Under the JOBS Act, we will remain an “emerging growth company” until the earliest of:
  • the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more;
  • the last day of the fiscal year following the fifth anniversary of the completion of this offering;
  • the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt; and


  • the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (we will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months; the value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter).
The JOBS Act also provides that an “emerging growth company” can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for companies that are not “emerging growth companies.” Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Corporate Information
Sidoti & Company, Inc. was incorporated in Delaware on June 18, 2014 in contemplation of this offering. Our principal executive offices are located at 122 East 42nd Street, 4th Floor, New York, New York 10168. Our telephone number is (212) 297-0001. Our website address is www.sidoti.com. The reference to our website is an inactive textual reference only, the information that can be accessed through our website is not part of this prospectus, and investors should not rely on any such information in deciding whether to purchase shares of our common stock.


The Offering
Common stock we are offering
     shares of common stock
Common stock to be outstanding after this offering
     shares of common stock
Use of proceeds
We intend to use the net proceeds from this offering primarily in order to support our nascent asset management business platform that is focused on investing in small- and micro-cap stocks. We will need to invest in recruiting talented professionals with relevant experience and will incur start-up, marketing and other related expenses. See “Use of Proceeds.”
Risk factors
See “Risk Factors” and the other information included in this prospectus for a discussion of the factors you should consider carefully before deciding to invest in our common stock.
Proposed NYSE MKT symbol
SDTI
Conflicts of Interest
Sidoti & Company, Inc. controls Sidoti & Company, LLC, a participating underwriter in this offering. Therefore, Sidoti & Company, LLC is deemed to have a “conflict of interest” within the meaning of FINRA Rule 5121(f)(5)(B). In addition, Sidoti & Company, Inc. and other affiliates of Sidoti & Company, LLC will be deemed to receive more than 5% of net offering proceeds and will have a “conflict of interest” pursuant to FINRA Rule 5121(f)(5)(C)(ii). This offering is being made in compliance with the requirements of FINRA Rule 5121. Since Sidoti & Company, LLC is not primarily responsible for managing this offering, a qualified independent underwriter is not required. Sidoti & Company, LLC will not confirm sales to discretionary accounts without the prior written approval of the customer. See “Underwriting.”
The number of shares of our common stock to be outstanding after this offering is based on      shares of common stock outstanding as of            , 2014, and excludes      shares of common stock that will be available for future grant under our 2014 Stock Incentive Plan (the “2014 Plan”), which will become effective on the date of the completion of this offering, and      additional shares of common stock that will be available for future grant under the automatic increase provisions of our 2014 Plan (see “Executive Compensation — 2014 Stock Incentive Plan”).
Unless otherwise indicated, the number of shares of common stock described above gives effect to the issuance of      shares of common stock to existing owners of capital member interests and employee interests in our predecessor entity in connection with our reorganization from an LLC into a Delaware corporation in connection with this offering.


Summary consolidated financial data
The following tables summarize the historical financial data for our operating subsidiary, Sidoti & Company, LLC. Following the reorganization transactions, we will be a holding corporation whose only asset is its interest in its subsidiaries, Sidoti & Company, LLC, Sidoti Capital Management, LLC and Sidoti Micro Cap GP, LLC. For further details on these transactions, see “Business — Reorganization Transactions and Corporate Structure” in this prospectus. You should read this summary financial data in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, all included elsewhere in this prospectus.
We have derived the statement of operations data for the fiscal years ended December 31, 2012 and 2013 and our balance sheet data as of December 31, 2012 and 2013 from our audited financial statements and related notes included elsewhere in this prospectus. The unaudited statement of operations data for the six months ended June 30, 2013 and 2014 are derived from our unaudited financial statements included elsewhere in this prospectus. The balance sheet data as of June 30, 2013 and 2014 are derived from our unaudited financial statements included elsewhere in this prospectus. We have prepared the unaudited financial information on the same basis as the audited financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, we consider necessary for a fair statement of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that may be expected in the future.
 
For the Year Ended
December 31,
For the Six Months Ended
June 30,
(unaudited)
2012
2013
2013
2014
Statement of Operations Data:
Revenues:
Commissions
$
19,216,613
$
19,467,968
$
9,652,084
$
9,258,689
Research income
8,568,574
8,070,258
3,606,980
3,528,870
Investment banking income
730,518
1,654,058
1,175,599
551,977
Seminar and conference fee income
947,242
882,960
882,960
640,077
Other income
296,774
211,464
87,969
83,175
Total revenues
$
29,759,721
$
30,286,708
$
15,405,592
$
14,062,788
Expenses:
Employee compensation and benefits
$
21,596,246
$
22,578,681
$
10,987,438
$
9,116,927
Floor brokerage, exchange and clearance fees
1,660,173
1,467,156
710,050
788,915
Occupancy
1,675,623
1,455,454
753,104
717,781
Seminar and conferences
1,107,823
1,034,623
1,033,267
1,114,626
Travel and entertainment
1,110,280
1,179,410
611,295
630,215
Quotes and research
521,985
484,684
252,996
253,696
Communications and data processing
135,411
184,010
75,307
74,963
Other expenses
1,065,507
1,024,445
488,745
1,029,521
Total expenses
$
28,873,048
$
29,408,463
$
14,912,202
$
13,726,644
Income before local income taxes
$
886,673
$
878,245
$
493,390
$
336,144
Local income taxes
57,864
52,563
29,617
21,078
Net income
$
828,809
$
825,682
$
463,773
$
315,066


 
Balance Sheet Data:
December 31,
June 30,
(unaudited)
2012
2013
2013
2014
Assets:
Cash and cash equivalents
$
7,182,818
$
7,362,636
$
6,892,840
$
4,892,820
Receivables from clearing brokers
1,984,727
2,015,739
1,965,018
1,762,679
Investment banking fees receivable
79,497
418,887
297,097
210,917
Research fees receivable
362,900
398,391
383,472
565,939
Prepaid expenses and other assets
309,694
285,841
262,264
480,631
Total current assets
$
9,919,636
$
10,481,494
$
9,800,691
$
7,912,986
Non-current assets:
Property and equipment, net
$
155,166
$
121,618
$
154,976
$
96,644
Security deposits
137,365
137,365
137,365
137,365
Total non-current assets
292,531
258,983
292,341
234,009
Total assets
$
10,212,167
$
10,740,477
$
10,093,032
$
8,146,995
Liabilities:
Current liabilities:
Bonuses payable
$
2,276,000
$
3,150,000
$
2,500,000
$
529,000
Commissions payable
436,405
541,336
479,579
360,926
Payables to clearing brokers
11,160
1,692
1,350
4,035
Accounts payable and accrued expenses
1,295,326
829,449
859,856
1,303,596
Total liabilities
$
4,018,891
$
4,522,477
$
3,840,785
$
2,197,557
Total Members Equity:
6,193,276
6,218,000
6,252,247
5,949,438
Total liabilities and members equity
$
10,212,167
$
10,740,477
$
10,093,032
$
8,146,995

RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as other information in this prospectus, before deciding whether to invest in our common stock. The occurrence of any of the events or circumstances described below could harm our business, financial condition, results of operations or growth prospects. In such an event, the trading price of our common stock may decline and you may lose all or part of your investment.
Risks Relating to Our Business and Strategy
Difficult market conditions could adversely affect our business in many ways.
Difficult market and economic conditions and geopolitical uncertainties have in the past adversely affected and may in the future adversely affect our business and profitability in many ways. Weakness in equity markets and diminished trading volume of securities could adversely impact our sales and trading business, from which we have historically generated a material portion of our revenues. In a downturn, institutional investors may have less interest in small- and micro-cap stocks, which tend to be more volatile. To a potentially lesser extent, industry-wide declines in the size and number of underwriting transactions also would have an adverse effect on our revenues. In addition, in the event of a market or general economic downturn, our planned asset management business would be expected to generate lower revenue because investment advisory fees that we expect to receive typically are, in part, based on the market value of underlying publicly traded securities under management. In addition, to the extent we deploy our own money into our proposed asset management investment funds we will be exposed to direct market risk and may experience principal losses during adverse market conditions.
The financial services industry and the markets in which we operate are subject to systemic risk that could adversely affect our business and results.
Participants in the financial services industry and markets increasingly are closely interrelated as a result of credit, trading, clearing, technology and other relationships between them. A significant adverse development with one participant (such as a bankruptcy or default) may spread to others and lead to significant concentrated or market-wide problems (such as defaults, liquidity problems or losses) for other participants, including us. The control and risk management infrastructure of the markets in which we operate often is outpaced by financial innovation and growth in new types of securities, transactions and markets. Systemic risk is inherently difficult to assess and quantify, and its form and magnitude can remain unknown for significant periods of time.
We focus exclusively on small- and micro-cap company stocks, which are inherently more volatile than large-cap stocks, and a decline in the market for securities of these companies could harm our business.
Our research and sales and trading efforts focus exclusively on small- and micro-cap stocks. Any reduction in trading activity in these securities could significantly and adversely affect our revenues and, consequently, the market value of our common stock.
Small- and micro-cap stocks have traditionally been subject to substantial price volatility when compared to larger capitalization stocks, because, in part, they have lower trading volumes. These stocks are often covered by fewer research analysts, which generally results in fewer investors, limited exposure and less liquidity. As such, the trading of relatively small quantities of shares may disproportionately influence the price of those stocks, without regard to any underlying change in an issuer’s financial performance. For example, the price of a small- or micro-cap stock could decline precipitously if a number of its common shares are sold on the market without commensurate demand.
The combination of these risks historically has limited institutional investor interest in small- and micro-cap stocks. This limited interest could pose a direct challenge to our business model. In addition, if we are unable to generate sufficient institutional investor interest or if micro- or macro-economic events curb institutional investor risk appetite, we would be unable to successfully market our research and sales and trading services and our financial results most likely would suffer. Similarly, we intend to use the proceeds of this offering to help support our nascent small- and micro-cap focused asset management business. The asset management business will be directly affected by the market for and developments related to small- and micro-cap stocks.

We generate limited revenues and we cannot assure you that we will be able to significantly increase our revenues.
Our revenues for 2012 and 2013 were $29.8 million and $30.3 million, respectively. We may not be able to generate significant revenues in the future. We conduct an agency focused business and are not as actively engaged as our competitors in the investment banking business, which may yield higher revenues. In addition, we expect to continue to incur substantial operating expenses, including personnel expenses, especially in connection with establishing our asset management business. As a result, we may experience negative cash flows in the foreseeable future. Our limited revenues may also make it more difficult to execute our plan to expand into the asset management business, which will require significant investment. If we are unable to execute our plan, our financial results may suffer.
Historically, we have not derived significant revenue from investment banking or financial advisory activities. Many of the companies we compete against, or may compete against in the future, have established investment banking and financial advisory practices that provide them with revenue and capital with which to expand their businesses and compete for customers and clients.
Historically, our business has focused on providing sales and trading services and research focused on small- and micro-cap companies to our institutional customers. Because of this, we generate less revenue, and are less profitable, than many of our competitors who focus principally on proprietary trading and investment banking. As a result, we may not have the resources to compete as effectively for talent or the resources to invest in our growth.
Our ability to retain our professionals and recruit additional professionals is critical to the success of our business, and our failure to do so, the likelihood of which may be higher than for our competitors, may adversely affect our reputation, business, results of operations and financial condition.
We consider our people to be our most valuable resource. Our ability to retain customers, deliver high-quality research and successfully execute transactions depends upon the reputation, judgment and capabilities of our senior professionals. The reputations and relationships of our professionals with our clients are critical to our reputation. Turnover in the brokerage and investment banking industries is high and we encounter intense competition for qualified employees from other companies in the brokerage and investment banking industries as well as from businesses outside those industries. Since we have fewer resources than our competitors with which to recruit and retain key employees, we may not be able to attract and keep the best talent.
If we were to lose the services of any of our senior equity research, sales and trading professionals, or executive officers to a new or existing competitor or otherwise, or fail to attract additional talented professionals, we may not be able to retain valuable relationships and some of our clients could choose to use the services of a competitor instead of our services.
Our plan to enter the asset management business will require us to attract additional professionals with expertise in that area. If we fail to attract qualified individuals for this effort, we may not be successful in launching this new business, and our financial results will suffer as a result.
We face strong competition, including from entities with significantly more financial and other resources.
The brokerage and investment banking industries are intensely competitive, and we expect them to remain so. We compete on the basis of a number of factors, including our small- and micro-cap focus, the ability of our professionals, our industry expertise, customer relationships and business reputation, and the quality of our services. We believe we may experience competitive pressures in these and other areas in the future.
The scale of our competitors has increased as a result of substantial consolidation among companies in the brokerage and investment banking industries. Additionally, a number of large commercial banks, insurance companies and other broad-based financial services firms have established or acquired underwriting or financial advisory practices and broker-dealers or have merged with other financial institutions. Also, many funds and other institutional investors have their own internal research capabilities. We are a relatively small firm, and many of our competitors offer a broader range of products and services,

have greater financial and marketing resources, larger customer bases, better name recognition, larger numbers of senior professionals to serve their clients’ needs and more expansive global coverage than we have. In particular, the ability to provide financing has become an important advantage for some of our larger competitors and, because we do not provide such financing, we may be unable to compete as effectively for clients in a significant part of the brokerage and investment banking market. If we are unable to compete effectively with our competitors, our business, financial condition and results of operations will be adversely affected.
We are establishing an asset management business, which will be subject to intense competition. We have limited capital relative to our larger asset management competitors and we will have a limited ability to compete for asset management business as a result. If we continue to expend financial and other resources to grow our asset management offerings and that expenditure does not result in significant increased revenues, it would have an adverse effect on our business and results of operations.
Our exposure to legal liability is significant, and damages that we may be required to pay and the reputational harm that could result from legal action against us could materially adversely affect our businesses.
We face significant legal risks in our businesses and, in recent years, the volume of claims and amount of damages sought in litigation and regulatory proceedings against financial institutions have been increasing. These risks include potential liability under securities or other laws for materially false or misleading statements made in connection with securities offerings and other transactions. We focus principally on small- and micro-cap companies, which may be more susceptible to stock price volatility, earnings restatements, unpredictable financial results, and other developments that may result in stockholder litigation. Our activities may subject us to the risk of significant legal liabilities to our clients and aggrieved third parties, including stockholders of our clients who could bring securities class actions against us. As a result, we may incur significant legal and other expenses in defending against litigation and may be required to pay substantial damages for settlements and adverse judgments. We are also potentially subject to claims arising from disputes with employees. These risks often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time.
Legal or regulatory matters involving our directors, officers or employees in their individual capacities also may create exposure for us because we may be obligated or may choose to indemnify the affected individuals against liabilities and expenses they incur in connection with such matters to the extent permitted under applicable law.
Substantial legal liability or significant regulatory action against us could have a material adverse effect on our results of operations or cause significant reputational harm to us, which could seriously harm our business and prospects.
We depend on Mr. Sidoti and the loss of his services would have a material adverse effect on us.
We depend on the efforts and reputation of Peter Sidoti, our founder, Chairman and Chief Executive Officer. Mr. Sidoti’s reputation and relationships with clients and potential clients are critical elements in expanding and maintaining our businesses. The loss of his services would have a material adverse effect on our operations, including our ability to attract and retain clients and raise additional funds. In addition, Mr. Sidoti will be leading our asset management business and spending less time than in the past on other parts of our business. This may result in a decline in our existing revenue or net income.
Our failure to deal appropriately with actual, potential or perceived conflicts of interest could damage our reputation and materially adversely affect our business.
We may confront actual, potential or perceived conflicts of interest in our business. We face the risk that our current policies, controls and procedures may not timely identify or appropriately manage such conflicts of interest.
It is possible that actual, potential or perceived conflicts could give rise to client dissatisfaction, litigation or regulatory enforcement actions. Appropriately identifying and managing actual or perceived conflicts of interest is complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Regulatory scrutiny of,

or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation which could materially adversely affect our business in a number of ways, including a reluctance of some potential clients and counterparties to do business with us.
As we begin to enter the asset management area, we will compete with some of our clients in our traditional research and sales and trading businesses, and those clients could reduce the amount of business they do with us as a result. If this were to occur, it could cause our financial results to suffer.
Misconduct by our employees or by the employees of our business partners could harm us and is difficult to detect and prevent.
There have been a number of highly publicized cases involving fraud or other misconduct by employees in the financial services industry in recent years, and we run the risk that employee misconduct could occur at our firm. For example, misconduct could involve the improper use or disclosure of confidential information, which could result in regulatory sanctions and serious reputational or financial harm. It is not always possible to deter misconduct and the precautions we take to detect and prevent this activity may not be effective in all cases. Our ability to detect and prevent misconduct by entities with which we do business may be even more limited. We may suffer reputational harm for any misconduct by our employees or those entities with which we do business.
Extensive and evolving regulation of our business and the business of our clients exposes us to the potential for significant penalties and fines due to compliance failures, increases our costs and may result in limitations on the manner in which our business is conducted.
As a participant in the financial services industry, we are subject to extensive regulation in the United States and internationally. We are subject to regulation by government and self-regulatory organizations in the jurisdictions in which we operate. As a result of market volatility and disruption in recent years, the United States and other governments have taken unprecedented steps to try to stabilize the financial system, including providing assistance to financial institutions and taking certain regulatory actions. The full extent of the effects of these actions and of legislative and regulatory initiatives (including the Dodd-Frank Wall Street Reform and Consumer Protection Act) effected in connection with, and as a result of, such extraordinary disruption and volatility is uncertain, both as to the financial markets and participants in general, and as to us in particular.
Our ability to conduct business and our operating results, including compliance costs and capital retention requirements, may be adversely affected as a result of any new requirements imposed by the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”) or other U.S. or foreign governmental regulatory authorities or self-regulatory organizations that regulate financial services firms or supervise financial markets and may require substantial attention by senior management. We may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these government authorities and self-regulatory organizations. In addition, some of our clients or prospective clients may adopt policies that exceed regulatory requirements and impose additional restrictions affecting their dealings with us. Accordingly, we may incur significant costs to comply with U.S. and international regulation. In addition, new laws or regulations or changes in enforcement of existing laws or regulations applicable to our clients may adversely affect our business.
Our business is subject to periodic examination by various regulatory authorities, and we cannot predict the outcome of any such examinations. Our failure to comply with applicable laws or regulations could result in adverse publicity and reputational harm as well as fines, civil penalties, the issuance of cease and desist orders, suspensions or disqualification of personnel or other sanctions, including revocation or suspension of the registration of us or any of our subsidiaries as a broker-dealer or investment advisor and could impair executive retention or recruitment.
Entry into new businesses and joint ventures may result in additional risks and uncertainties in our business.
We intend to grow our core businesses primarily through internal expansion. We may also seek to grow through strategic investments, acquisitions, entry into new businesses or joint ventures. To the extent we make strategic investments or acquisitions, or enter into new businesses or joint ventures, we would face

numerous risks and uncertainties combining or integrating the relevant businesses and systems, including the need to combine accounting and data processing systems and management controls and to integrate relationships with customers and business partners. Also, our share price could decline after we announce or complete a transaction if investors view the transaction as too costly or unlikely to improve our competitive position. In the case of joint ventures, we would be subject to additional risks and uncertainties in that we could be dependent upon, and subject to liability, losses or reputational damage relating to, systems, controls and personnel that are not under our control. In addition, conflicts or disagreements between us and any joint venture partners could negatively impact our businesses.
To the extent we enter into new business activities in the future, such as our entry into the asset management business, these activities will involve significant start-up costs and operational and staffing challenges, including attracting and retaining qualified personnel. In addition, these activities may use a portion of the time of members of our management that would then be unavailable for the management of our existing businesses. Certain possible future business activities may require us to raise significant amounts of capital which efforts may be subject to market conditions at the time. To the extent we undertake new activities, they may not be successful and any investments we make in these new activities may not retain their value or achieve positive returns.
Pricing and other competitive pressures may impair the revenues and profitability of our sales and trading business.
We derive a significant portion of our revenues from our sales and trading business; commissions accounted for approximately 65%, 64% and 66%, respectively, of our revenues in 2012, 2013 and the six months ended June 30, 2014. Along with other securities firms, we have experienced price competition in this business in recent years. Electronic trading platforms and algorithmic trading programs have increased the pressure on trading commissions and spreads. We expect this trend toward alternative trading systems and pricing pressures in this business to continue. We believe we may experience competitive pressures in these and other areas in the future as some of our competitors seek to obtain market share by competing on the basis of price. In addition, we face pressure from our larger competitors, which may be better able to offer a broader range of complementary products and services to customers in order to win their trading business. If we are unable to compete effectively with our competitors in these areas, the revenues and profitability of our sales and trading business may decline and our business, financial condition and results of operations may be adversely affected.
Some of our clients compensate us through brokerage commissions for the value of research and other value-added services we deliver to our clients. We also depend upon arrangements, which have been adopted by some large institutional investors with third-party brokers. In these arrangements, these institutional investors concentrate their trading with fewer “execution” brokers and pay a fixed amount for execution with an additional amount set aside for payments to other firms for research or other brokerage services. Accordingly, we may experience reduced (or no) trading volume with such investors but may be compensated for our research and sales efforts through allocations of the designated amounts. Depending on the extent to which we adopt this practice and depending on our ability to reach arrangements on terms acceptable to us, this trend would likely impair the revenues and profitability of our sales and trading business by negatively affecting both volumes and trading commissions.
As we are committed to maintaining and improving our comprehensive research coverage of small- and micro capitalization stocks to meet customer needs and to support our sales and trading business, we may be required to make additional substantial investments in our research capabilities.
Limitations on our access to capital could impair our liquidity and our ability to conduct our businesses.
Liquidity, or ready access to funds, is essential to financial services firms, including ours. Failures of financial institutions have often been attributable in large part to insufficient liquidity. Liquidity is of particular importance to our sales and trading business, and perceived liquidity issues may affect the willingness of our clients and counterparties to engage in sales and trading transactions with us. Our liquidity could be impaired due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects our sales and trading clients, third parties or us. Investment in new businesses, such as the asset management business, could put additional strain on our liquidity. Further, our ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time.

Sidoti & Company, LLC, our broker-dealer subsidiary, is subject to the net capital requirements of the SEC, FINRA and various self-regulatory organizations of which it is a member. These requirements typically specify the minimum level of net capital a broker-dealer must maintain and also mandate that a significant part of its assets be kept in relatively liquid form. Any failure to comply with these net capital requirements could impair our ability to conduct our business. Furthermore, Sidoti & Company, LLC is subject to laws that authorize regulatory bodies to block or reduce the flow of funds from it to the holding company. As a holding company, we depend on dividends, distributions and other payments from our subsidiaries to fund all payments on our obligations. In addition, because Sidoti & Company, Inc. holds equity interests in the firm’s subsidiaries, its rights as an equity holder to the assets of these subsidiaries may not materialize, if at all, until the claims of the creditors of these subsidiaries are first satisfied.
Our risk management policies and procedures may leave us exposed to unidentified or unanticipated risks.
Our risk management strategies and techniques may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. We are exposed to the risk that third parties that owe us money, securities or other assets will not perform their obligations. These parties may default on their obligations to us due to bankruptcy, lack of liquidity, operational failure, breach of contract or other reasons. We are also subject to the risk that our rights against third parties may not be enforceable in all circumstances. In addition, concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions, which in turn could adversely affect us.
We base some methods of risk management on the use of observed historical market behavior. As a result, these methods may not predict future risk exposures, which could be significantly greater than historical measures indicate. Other risk management methods depend on evaluation of information regarding markets, clients or other matters that are publicly available or otherwise accessible by the Company. This information may not be accurate, complete, up-to-date or properly evaluated. Management of operational, legal and regulatory risk requires, among other things, policies and procedures to properly record and verify a large number of transactions and events. The Company cannot give assurances that its policies and procedures will effectively and accurately record and verify this information. If any of the processes and strategies we utilize to manage our exposure to various types of risk are not effective, we may incur losses.
Our operations and infrastructure and those of the service providers upon which we rely may malfunction, fail or require upgrades.
Our business depends on our ability to process, on a daily basis, a large number of transactions across diverse markets. The inability of our systems to accommodate an increasing volume of transactions could also constrain our ability to expand our businesses. If any of these systems do not operate properly or are disabled, or if there are other shortcomings or failures in our internal processes, people or systems, we could suffer impairments, financial loss, a disruption of our businesses, liability to clients, regulatory intervention or reputational damage.
We have outsourced certain aspects of our technology infrastructure, including data centers, disaster recovery systems and wide area networks, as well as some trading applications. For example, we rely on FlexTrade for our order routing system. We depend on our technology providers to manage and monitor those functions. A disruption of any of the outsourced services would be out of our control and could negatively impact our business. We have experienced disruptions on occasion, none of which has been material to our operations or financial results. However, there can be no guarantee that future disruptions with these providers will not occur or that any such disruption will not have a material effect on our operations or financial results.
We also face the risk of operational failure or termination of relations with our clearing firm, Convergex Execution Solutions LLC (“ConvergEx”), or other financial intermediaries we use to facilitate our securities transactions. Any such failure or termination could adversely affect our ability to effect transactions and to manage our exposure to risk.
Adapting or developing our technology systems to meet new regulatory requirements, client needs, geographic expansion and industry demands is also critical for our business. The introduction of new technologies presents new challenges on a regular basis. We have an ongoing need to upgrade and improve

our various technology systems, including our data and transaction processing, financial, accounting, risk management and trading systems. This need could present operational issues or require significant capital spending. It also may require us to make additional investments in technology systems and may require us to reevaluate the current value or expected useful lives of our technology systems, which could negatively impact our results of operations.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
Our operations also rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. In the ordinary course of business, we collect and store sensitive data, including our proprietary business information and that of our customers, and personally identifiable information of our customers and employees, in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breach due to employee error, malfeasance or other disruptions. The recent increase in the number of security breaches at large retailers, credit card companies and others reflect the increased risk for all companies handling sensitive client data. If one or more of such events occurs, it could jeopardize our or our clients’ or counterparties’ confidential and other information that is processed and stored in, or transmitted through, our computer systems and networks or otherwise cause disruptions in our, our clients’, our counterparties’ or third parties’ operations. We may be required to expend significant additional resources to modify our protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications, and we may be subject to litigation and financial losses that are either not covered or are only partially covered by any insurance policies maintained by us.
Our operations could be adversely affected by events that impact our principal office.
Because our operations are based in a single location that is adjacent to Grand Central Station in New York City, the risk of interruption due to a terrorist attack, or the security response to the perceived threat of such an attack, is heightened. In addition, our operations may be interrupted by disruptions involving electrical, communications, transportation or other services used by us or third parties with which we conduct business, whether due to fire, earthquakes or other natural disasters, power or communications failure, acts of war or terrorism or otherwise.
Our management has no experience running a public company, and the demands of running a public company could require our management to devote more time to regulatory and other requirements, resulting in additional costs.
Our management team has historically operated our business as a privately owned company. The individuals who now constitute our management have not previously managed a publicly traded company.
Following our initial public offering, we will be subject to significant additional regulatory and reporting requirements, including under the Exchange Act, as amended, the Sarbanes-Oxley Act and the NYSE MKT listed company rules. We will incur additional costs on an ongoing basis in order to comply with these additional requirements. These costs include those related to expanding our internal control and compliance functions, and recruiting and retaining additional staff. The historical consolidated financial information in this prospectus does not reflect the added costs that we expect to incur as a public company or the resulting changes that will have occurred in our capital structure and operations. For more information, see our historical consolidated financial statements and accompanying notes included elsewhere in this prospectus.
In addition, our senior management may be required to devote more of their time to meeting these additional requirements. Since inception, our senior management has been actively involved in the revenue-generating activities of our operations. If our senior management is required to devote more time to the additional requirements of managing a public company, and we are unable to successfully transition some or all of the direct revenue generating responsibilities of our senior management to other suitable professionals, our reputation, business, results of operations and financial condition may be harmed.

As we enter in the asset management area, we will become subject to risks in a market in which we have limited experience.
Historically, we have generated the majority of our revenues from our research and sales and trading businesses. As we enter the asset management industry, an area in which we have never participated, our existing business model will change and we will become subject to risks in a market in which we have limited experience. The asset management business is extremely competitive and the size and number of asset management funds, including hedge funds and private equity funds, has continued to increase. Some of these funds have operated asset management businesses for a number of years and have substantial experience and a recognized track record. If investors choose to invest with other participants in the asset management business that have, or are perceived to have, greater expertise, it would have an adverse effect on our business.
Our asset management strategy is focused on small- and micro-cap stocks and may be subject to distinct risks.
There are relatively few fund management complexes that focus on strategies involving small- and micro-cap stocks. In part, this is due to the fact that there may be limited institutional interest in small- and micro-cap stocks. In addition, there may be significant operating and other costs associated with managing a fund that invests in small- and micro-cap stocks as compared to a similarly sized fund that invests in large-cap stocks, given that a small- and micro-cap focused fund will be required to hold positions in many more stocks, each of which may have a limited trading volume. Monitoring, trading and transaction costs may be higher for small- and micro-cap focused funds than for similarly sized funds that invest in public companies with larger capitalizations. We have no asset management track record and cannot assure you that our asset management strategy will prove successful.
Risks Related to this Offering and Ownership of our Common Stock
There has been no trading market for our common stock, an active market may not be developed or maintained, and the market price of our common stock may be volatile, thereby potentially preventing you from reselling shares of our common stock at or above the price you paid.
Before this offering, there has been no public market for our common stock. Although we have applied for listing of our common stock on the NYSE MKT, an active trading market for our common stock may never develop or be sustained. In addition, you will pay a price for our common stock in this offering that was not established in a competitive market. Instead, you will pay a price that we negotiated with the underwriters. See “Underwriting” for factors considered in determining the initial public offering price. The initial public offering price does not necessarily bear any relationship to our book value or the fair market value of our assets and may be higher than the market price of our common stock after this offering. In addition, the underwriters do not make markets in securities, and will not make a market in our common stock after the offering, which may limit the liquidity of any market for our common stock. In particular, we cannot assure you as to:
  • the likelihood that an active public trading market for our common stock will develop after this offering or, if developed, that a public trading market can be sustained;
  • the liquidity of any such market;
  • the ability of our stockholders to sell their common stock; or
  • the price that our stockholders may obtain for their common stock.

If no public market develops, it may be difficult or impossible to resell shares of our common stock if you should desire to do so. Even if an active trading market develops, the market price for our common stock may be highly volatile and could be subject to wide fluctuations after this offering. We cannot predict how our common stock will trade in the future. Some of the factors that could negatively affect our stock price include:
  • actual or anticipated variations in our quarterly operating results;
  • our ability to convince research analysts to follow and produce research reports on us;
  • changes in revenue or financial estimates or publication of research reports and recommendations by financial analysts;
  • fluctuations in the stock price and operating results of our competitors;
  • our ability to execute our business plan;
  • additions or departures of key management personnel;
  • proposed or adopted regulatory changes or developments;
  • speculation in the press or investment community;
  • legal or regulatory actions against us;
  • issuances of new equity pursuant to future offerings;
  • general and industry-specific market and economic conditions; and
  • announcements concerning our competitors or the financial services industry in general.
In the past, securities class action litigation has often been brought against companies that experience volatility in the market price of their securities. Whether or not meritorious, litigation brought against us could result in substantial costs, divert management’s attention and resources and harm our business.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately after this offering. Therefore, investors purchasing shares of common stock in this offering will contribute     % of the total amount invested to date to fund us, but will own only       % of the common stock outstanding, based on the assumed initial public offering price of $       per share, which is the mid-point of the range listed on the cover of this prospectus. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”
If securities or industry analysts do not publish research reports about our business or our industry, or publish negative reports about our business or our industry, our share price and trading volume could decline.
The trading market for our common stock will be influenced by the research reports that securities or industry analysts publish about us, our business, our industry or our competitors. If we are unable to convince research analysts to publish research reports about us, there could be less investor interest and therefore lower volume and more volatility in our stock price. Also, if one or more of the analysts who does cover us changes his or her recommendation regarding our stock adversely, changes his or her opinion of the prospects for our company in a negative manner or provides more favorable relative recommendations about our competitors, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering,

we will have      shares of common stock outstanding. The shares of common stock offered in this offering will be freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Prior to the consummation of the offering, we will enter into a registration rights agreement with certain of our executives, which will allow these parties, after a certain period of time and subject to customary conditions and restrictions, to cause us to file a registration statement with respect to their shares. If our existing stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, there could be an adverse impact on the market price of our common stock, even if there is no relationship between such sales and the performance of our business.
We, our executive officers and directors and our other existing security holders have agreed, subject to certain exceptions, not to sell or transfer any common stock, or securities convertible into, exchangeable for, exercisable for, or repayable with common stock, for 180 days after the date of this prospectus, without first obtaining written consent of WR Hambrecht + Co, LLC, as representative of the underwriters. See “Underwriting.”
All of our shares of common stock outstanding as of the date of this prospectus may be sold in the public market by existing stockholders 180 days after the date of this prospectus, subject to applicable limitations imposed under federal securities laws. See “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling shares of our common stock after this offering.
 
Number of Shares of Common Stock and % of Total Outstanding
Date Available for Sale into Public Market
     or     %
Immediately after completion of this offering
     or     %
180 days after the date of this prospectus
     or     %
From time to time after the date 180 days after the date of this prospectus
In the future, we may also issue our securities in connection with a capital raise or acquisition. The amount of shares of our common stock issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of common stock, which would result in dilution.
The future issuance of additional common stock in connection with our 2014 Plan, acquisitions or otherwise will dilute all other stockholdings.
After this offering, we will have an aggregate of      shares of common stock authorized but unissued and not reserved for issuance under our 2014 Plan. We may issue all of these shares of common stock without any action or approval by our stockholders, subject to certain exceptions. We also intend to continue to evaluate acquisition opportunities and may issue common stock in connection with these acquisitions. Any common stock issued in connection with our 2014 Plan, acquisitions or otherwise would dilute the percentage ownership held by the investors who purchase common stock in this offering.
We will have broad discretion in how we use the net proceeds from this offering.
We currently intend to use the net proceeds from this offering to help support our nascent asset management platform as described in the “Use of Proceeds” section of this prospectus. However, we do not have more specific plans for the net proceeds from this offering and will have broad discretion in how we use the net proceeds of this offering. These proceeds could be applied in ways that do not improve our operating results or increase the value of your investment. You may not have the opportunity to influence our decisions on how to use the net proceeds from this offering.
Because we have no plans to pay dividends on our common stock, investors must look solely to stock appreciation for a return on their investment in us.
We have never declared or paid any cash dividends on our capital stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all

future earnings to fund the development and growth of our business. Any future payment of dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the board of directors deems relevant. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company we may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging public companies, which includes, among other things:
  • exemption from the auditor attestation requirements under Section 404 of the Sarbanes-Oxley Act;
  • reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements;
  • exemption from the requirements of holding non-binding stockholder votes on executive compensation arrangements; and
  • exemption from any rules requiring mandatory audit firm rotation and auditor discussion and analysis and, unless the SEC otherwise determines, any future audit rules that may be adopted by the Public Company Accounting Oversight Board.
We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary after our initial public offering, or until the earliest of (i) the last day of the fiscal year in which we have annual gross revenue of $1 billion or more, (ii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iii) the date on which we are deemed to be a large accelerated filer under the federal securities laws. We will qualify as a large accelerated filer as of the first day of the first fiscal year after we have (i) more than $700 million in outstanding common equity held by our non-affiliates and (ii) been public for at least 12 months. The value of our outstanding common equity will be measured each year on the last day of our second fiscal quarter.
Under the JOBS Act, emerging growth companies are also permitted to elect to delay adoption of new or revised accounting standards until companies that are not subject to periodic reporting obligations are required to comply, if such accounting standards apply with non-reporting companies. We have made an irrevocable decision to opt out of this extended transition period for complying with new or revised accounting standards.
We cannot predict if investors will find our common stock less attractive if we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.
Provisions in our charter, as in effect immediately after this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:
  • the right of our board of directors to elect directors to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;
  • the establishment of a classified board of directors requiring that only a subset of the members of our board of directors be elected at each annual meeting of stockholders;

  • the prohibition of cumulative voting in our election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates;
  • the requirement that stockholders provide advance notice to nominate individuals for election to our board of directors or to propose matters that can be acted upon at a stockholders’ meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers’ own slate of directors or otherwise attempting to obtain control of our company;
  • the ability of our board of directors to issue, without stockholder approval, shares of undesignated preferred stock with terms set by the board of directors, which rights could be senior to those of our common stock. The ability to authorize shares of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us;
  • the ability of our board of directors to alter our charter without obtaining stockholder approval;
  • the inability of our stockholders to call a special meeting of stockholders and to take action by written consent in lieu of a meeting;
  • the required approval of the holders of at least two-thirds of the stock entitled to vote at an election of directors to adopt, amend, or repeal our charter;
  • the required approval of the holders of at least two-thirds of the stock entitled to vote at an election of directors to repeal or adopt any provision of our charter regarding the election of directors;
  • the required approval of the holders of at least 80% of such shares to amend or repeal the provisions of our charter regarding the election and classification of directors; and
  • the required approval of the holders of at least a majority of the shares entitled to vote at an election of directors to remove directors without cause.
We are electing to be subject to certain Delaware anti-takeover provisions and we may not engage in a business combination with any holder of 15% or more of our outstanding common stock unless the holder has held the shares for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us. For a description of our common stock, see “Description of Capital Stock.”

Special Note Regarding Forward-Looking Statements
This prospectus, particularly in the sections titled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “think,” “could,” “will,” “see,” “would,” “predict,” “potential,” or the negative of these terms or other similar expressions. Such statements are based on currently available operating, financial and competitive information and are subject to various risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by our forward-looking statements. The statements we make regarding the following subject matters are forward-looking by their nature:
  • the effect of difficult market conditions on our business;
  • the consequences of a decline in small- and micro-cap company stocks on our business;
  • our future revenues;
  • any success or failure in retaining and attracting employees;
  • the effects of losing Mr. Sidoti’s services;
  • whether we will have and be able to manage any conflicts of interest;
  • any future misconduct by our employees or business partners;
  • the effects of entering the asset management business;
  • the effects of regulations on our business and any potential penalties or fines related to compliance failures;
  • continued pricing and other competitive pressures and their effects on our profitability;
  • our future access to capital;
  • whether our risk management policies will leave us exposed to unidentified and unanticipated risks;
  • the potential failure or malfunctioning of our operations and infrastructure or those of our service providers;
  • any potential litigation;
  • the potential risks associated with investments, acquisitions and entry into new business ventures;
  • the high concentration in the ownership of shares of our common stock;
  • whether an active market for our common stock will be developed or maintained;
  • the potential for extreme price and volume fluctuations of our common stock;
  • immediate and substantial dilution of the shares purchased in this offering;
  • the effects of published research and reports on the price and trading volume of our common stock;
  • the impact of a substantial future sale or issuance of our common stock or perceptions in the public markets on our share price;
  • our broad discretion in the use of proceeds from this offering;
  • our status as an “emerging growth company” under the JOBS Act; and
  • the additional costs and requirements we will incur as a result of operating as a public company.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the information currently available to us. These statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Other sections of this prospectus may include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Before investing in our common stock, investors should be aware that the occurrence of the events described under the caption “Risk Factors” and elsewhere in this prospectus could have a material adverse effect on our business, results of operations and financial condition.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assume responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.
You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

Use of Proceeds
We estimate that the net proceeds we will receive from this offering will be $     million, at an assumed initial public offering price of $     per share, which is the mid-point of the range listed on the cover of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
A $1.00 increase or decrease in the assumed initial public offering price of $     per share, which is the midpoint of the range reflected on the cover of this prospectus, would increase or decrease the net proceeds from this offering by approximately $     million, assuming that the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We estimate that our net proceeds will be approximately $     million, assuming an initial public offering price of $     per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 100,000 shares in the number of shares sold in this offering by us would increase or decrease the net proceeds to us from this offering, after deducting assumed underwriting discounts and commissions, by $    , assuming an initial public offering price of $     per share, which is the midpoint of the range reflected on the cover of this prospectus.
We intend to use a significant portion of the net proceeds from this offering to help support our nascent asset management platform that is focused on investing in small- and micro-cap stocks. We will need to invest in recruiting talented professionals with relevant experience and will incur start-up, marketing and other related expenses.
Some of the other principal purposes of this offering are to create a public market for our common stock and increase our visibility in the marketplace. Creating a public market for our common stock will facilitate our ability to raise additional equity in the future and to use our common stock as a means of attracting and retaining key employees and as consideration for acquisitions. Another principal purpose of this offering is to provide liquidity to existing stockholders.
We will have broad discretion in the way that we use the net proceeds of this offering. The amounts that we actually spend for the purposes described above may vary significantly and will depend, in part, on the timing and amount of our future revenues, our future expenses and any potential acquisitions that we may propose. Until we use the net proceeds of this offering, we intend to invest the funds in short-term, investment grade, interest-bearing securities, U.S. government securities and other marketable securities. We cannot predict whether the net proceeds invested will yield a favorable return.

DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We currently anticipate that we will retain all of our future earnings for use in the expansion and operation of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable law and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2014:
  • on an actual basis; and
  • on a pro forma as adjusted basis, giving effect to the reorganization prior to the consummation of this offering, and the sale by us of      shares of common stock in this offering at an assumed initial public offering price of $     per share, the mid-point of the range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
You should read this table together with “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.
 
As of June 30, 2014
Actual
Pro Forma as Adjusted for Reorganization
Pro Forma as Adjusted for
the Offering(1)
(in thousands, except share and per share data)
Capital member interests
$
    
$
    
     
Minority interest
    
    
     
Member’s equity and stockholders’ equity
Capital member interests
Employee interests
Common stock, $0.001 par value per share;      shares authorized;      shares issued and outstanding on a pro forma basis, and      shares issued and outstanding on a pro forma basis adjusted for this offering
Additional paid-in capital
Retained earnings
    
    
     
Total member’s equity
5,949,438
    
     
Total capitalization
$
5,949,438
$
    
     
 
(1)
  • A $1.00 increase or decrease in the assumed initial public offering price of $     per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, member’s equity and stockholders’ equity by $     , assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us. An increase or decrease of 100,000 shares in the number of shares sold in this offering by us would increase or decrease, as applicable, member’s equity and stockholders’ equity from this offering by $     , assuming an initial public offering price of $     per share, the midpoint of the price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us.
The number of shares of our common stock to be outstanding after this offering is based on      shares of common stock outstanding as of June 30, 2014 on an as converted basis, and excludes shares of common stock that will be available for future grant under our 2014 Plan, which will become effective on the date of the completion of this offering, and additional shares of common stock that will be available for future grant under the automatic increase provisions of our 2014 Plan (see “Executive Compensation — 2014 Stock Incentive Plan”).
Unless otherwise provided, the number of shares of common stock described above gives effect to the issuance of     shares of common stock to existing owners of capital member interests and employee interests in our predecessor entity in connection with our reorganization from an LLC into a Delaware corporation in connection with this offering.

DILUTION
If you invest in our common stock, your interest will be diluted to the extent of the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the pro forma as adjusted net tangible book value per shares of our common stock immediately after completion of this offering.
As of June 30, 2014, our net tangible book value was approximately $     million, or $     per share of common stock. The net tangible book value per share represents the amount of our tangible assets less our liabilities, divided by the shares of common stock outstanding as of June 30, 2014 after giving effect to the pro forma adjustments described under “Unaudited Pro Forma Condensed Consolidated Financial Information.” Our as adjusted net tangible book value includes the impact of our sale of      shares of common stock in this offering at an assumed initial public offering price of $     per share, the mid-point of the price range set forth on the front cover of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Our pro forma as adjusted net tangible book value at June 30, 2014 would have been $     million, or $     per share of common stock. This represents an immediate increase in pro forma net tangible book value of $     per share to existing stockholders and an immediate dilution of $     per share to new investors (in millions, except per share amounts).
The following table illustrates this dilution:
 
Assumed initial public offering price per share of common stock
       
$
      
Net tangible book value per share as of June 30, 2014, before giving effect to this offering
$
      
Increase in net tangible book value per share attributable to investors purchasing shares in this offering
$
      
Pro forma as adjusted net tangible book value per share after giving effect to this offering
     
$
      
Dilution in pro forma net tangible book value per share to investors purchasing common stock in this offering
     
$
      
A $1.00 increase in the initial public offering price of $     per share, the midpoint of the price range set forth on the cover of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $     and would increase dilution per share to new investors by approximately $     , assuming that the number of shares of common stock offered by us, as set forth on the cover of this prospectus, remains the same.
A $1.00 decrease in the initial public offering price of $     per share, the midpoint of the price range set forth on the cover of this prospectus, would decrease our pro forma as adjusted net tangible book value per share after this offering by approximately $     and would decrease dilution per share to new investors by approximately $     , assuming that the number of shares of common stock offered by us, as set forth on the cover of this prospectus, remains the same.
A $2.00 increase in the initial public offering price of $     per share, the midpoint of the price range set forth on the cover of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $     and would increase dilution per share to new investors by approximately $     , assuming that the number of shares of common stock offered by us, as set forth on the cover of this prospectus, remains the same.
A $2.00 decrease in the initial public offering price of $     per share, the midpoint of the price range set forth on the cover of this prospectus, would decrease our pro forma as adjusted net tangible book value per share after this offering by approximately $     and would decrease dilution per share to new investors by approximately $     , assuming that the number common stock offered by us, as set forth on the cover of this prospectus, remains the same.
The pro forma as adjusted net tangible book value per share after giving effect to this offering would be $     per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be $     per share.

The following table summarizes on a pro forma as adjusted basis as of June 30, 2014:
  • the total number of shares of common stock purchased from us by our existing stockholders and by new investors purchasing shares in this offering;
  • the total consideration paid to us by our existing stockholders and by new investors purchasing shares in this offering, assuming an initial public offering price of $     per share (before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us in connection with this offering); and
  • the average price per share paid by existing stockholders and by new investors purchasing shares in this offering.
 
Shares Purchased
Total Consideration
Average Price Per Share
Number
Percent
Amount
Percent
Existing stockholders
%