A company typically engages lawyers and accountants as advisors on the IPO process and to perform the legal and accounting function. After corporate housekeeping, audits, and an underwriter's package is prepared, these advisors will assist the company in seeking an underwriter. If an underwriter takes on the project, the IPO process continues. A registration statement prepared and filed with federal and state regulators after which the company goes through an extensive review process. Following the review process, the company goes on a road show and is presented to brokers and investors. The underwriter seeks subscriptions to purchase the company's shares. If the subscriptions are sufficient, the underwriting becomes "firm". The IPO is then closed, the company is public. If an underwriter does not take on the project, or the underwriter is unable to sell the shares, the money spent on the IPO is lost.

The overall time to complete an underwritten IPO is 12-18 months. The parties involved in the process are corporate lawyers, securities lawyers, auditors, underwriters, underwriters counsel, the SEC, NASDAQ, state regulators of Blue Sky statutes, financial printers, road show organizers, and the company's CFO and CEO. The firms involved in an IPO that get paid by the hour are; the company's corporate lawyers, the auditor, the underwriter's lawyers, and the company's securities lawyers.

An underwritten IPO involves risk. The first money at risk is the cost of corporate housekeeping, professionally prepared business plan, audits, and seeking an underwriter. These items represent the minimum needed to solicit an underwriter. The next money at risk is the underwriter's commitment fee, cost to prepare and process a registration statement, state blue-sky filings, prospectus printing, and road show costs. Its important to note that a firm underwriting is not "firm" until after investors have fully subscribed to purchase shares. Until the IPO is fully subscribed, the company is at risk.

Companies need to know that there is no such thing as a "firm underwriting" until after the underwriter receives commitments from investors after delivering investors a prospectus (registration statement). What a company receives from an underwriter, in consideration for the payment of a fee, is a "letter of intent" which outlines the duties of each party but does not obligate the underwriter to complete the IPO. Some letters of intent are titled "firm underwriting" but the agreement does not become "firm" unless and until the underwriter has the offering fully subscribed by investors. If an IPO fails, the offering company will loose a minimum of $500,000.

Typical IPO costs are as follows:

• Legal fees for corporate and underwriter's council, including blue-sky approvals, costs between $100-200,000.
• Audit work, with historical years, preformed to SX requirements costs $75-125,000.
• Transfer Agent and Filing Fees cost about $50,000.
• Printing and Road Show costs $50-100,000.
• Sales commissions are 7-10% of proceeds.
• Underwriting expenses are 4% of the offering proceeds, plus free stock options.
• In addition to third party costs, the company's CEO and CFO will each spend 700-1,000 hours on the project.