-------------------- BEGINNING OF PAGE #1 -------------------
SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-6949; 34-30968; 39-2287; FR-39]
17 CFR Parts 200, 228, 229, 230, 239, 240, 249 and 260
RIN: 3235-AD88
Small Business Initiatives
AGENCY: Securities and Exchange Commission.
ACTION: Final Rules.
SUMMARY: The Securities and Exchange Commission ("Commission")
today adopted rules and forms under the Securities Act of 1933
("Securities Act"), the Securities Exchange Act of 1934
("Exchange Act") and the Trust Indenture Act of 1939 ("Trust
Indenture Act") to facilitate capital raising by small businesses
and reduce the costs of compliance with the federal securities
laws. Specifically, the Commission has revised its general small
issues exemption from the Securities Act registration
requirements, Regulation A, as well as the Rule 504 exemption,
and has adopted simplified registration and reporting disclosure
requirements for "small business issuers," as defined. The
Commission also is soliciting further public comment on Rule 504
with respect to excluding blank check companies from the
exemption as adopted.
EFFECTIVE DATE: August 13, 1992. Although Form S-18 is hereby
rescinded, filings on that form will be accepted for filing
through December 31, 1992. Amendments to pending registration
statements on Form S-18 or S-1 may be made on Form SB-2 by small
business issuers eligible to use that Form.
FOR FURTHER INFORMATION CONTACT: The Division of Corporation
Finance, Securities and Exchange Commission, 450 Fifth Street, N.
W., Washington, D.C. 20549: (1) Regulation A and Rule 504,
Richard K. Wulff (202-272-2644); (2) Regulation S-B, Securities
Act Rules and Forms, Exchange Act Rules and Forms and Trust
Indenture Act Rules, Amy S. Bowerman and Martin P. Dunn
(202-272-2573); and (3) Financial statement requirements, Teresa
E. Iannaconi (202-272-2553).
SUPPLEMENTARY INFORMATION: The Commission today adopted revisions
to the Regulation A-[1]- exemption from the registration
requirements of the Securities Act-[2]- and Forms 1-A-[3]- and
--------- FOOTNOTES ---------
-[1]- 17 CFR 230.251-230.262.
-[2]- 15 U.S.C. Section 77a et seq.
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2-A-[4]- used for such offerings and repealed Forms 3-A,-[5]-
4-A,-[6]- 5-A,-[7]- 6-A-[8]- and 7-A.-[9]- Form F-X-[10]- has
been amended to permit its use by Canadian issuers engaged in a
Regulation A offering or a registered offering on Form SB-2. In
connection with these revisions to Regulation A, Securities Act
Rule 175-[11]- and Exchange Act Rule 3b-6,-[12]- the Commission's
"safe harbor" provisions for forward looking statements, have
been revised to apply to statements made in a Regulation A
offering statement and any written material submitted to the
Commission pursuant to new Securities Act Rule 254. Proposed
revisions to Rule 504-[13]- of Regulation D have been adopted
with an exclusion for offerings by "blank check" companies.
The Commission today also adopted an integrated disclosure
system for "small business issuers." The simplified disclosure
requirements for small business issuers are contained in
Regulation S-B.-[14]- Amendments to Rules 405-[15]- and 481-
[16]- under the Securities Act and Rule 12b-2-[17]- under the
Exchange Act-[18]- define the small business issuers that are
eligible to use the simplified disclosure forms. Form S-18-
[19]- has been repealed and replaced with Form SB-2.-[20]- Forms
S-2,-[21]-S-3,-[22]- S-8-[23]- and S-4-[24]- have been amended to
reflect
--------- FOOTNOTES ---------
-[3]-(...continued)
-[3]- 17 CFR 239.90.
-[4]- 17 CFR 239.91.
-[5]- 17 CFR 239.92.
-[6]- 17 CFR 239.93.
-[7]- 17 CFR 239.94.
-[8]- 17 CFR 239.95.
-[9]- 17 CFR 239.96.
-[10]- 17 CFR 239.42.
-[11]- 17 CFR 230.175.
-[12]- 17 CFR 240.3b-6.
-[13]- 17 CFR 230.504.
-[14]- 17 CFR 228.10-228.702.
-[15]- 17 CFR 230.405.
-[16]- 17 CFR 230.481.
-[17]- 17 CFR 240.12b-2.
-[18]- 15 U.S.C. Section 78a et seq.
-[19]- 17 CFR 239.28.
-[20]- 17 CFR 239.10.
-[21]- 17 CFR 239.12.
-[22]- 17 CFR 239.13.
-------------------- BEGINNING OF PAGE #3 -------------------
the new disclosure requirements of Regulation S-B. New Forms
10-SB-[25]-, 10-KSB-[26]- and 10-QSB-[27]- have been created to
satisfy registration, annual and quarterly reporting obligations
under the Exchange Act. Further, Item 7 of Form 8-K-[28]- has
been amended to provide consistent financial statement
instructions regarding small business acquisitions. Parallel
changes have been made to Schedule 14A,-[29]- Schedule 14C,-
[30]- and Rule 14a-3-[31]- under the Exchange Act.
Rule 4a-1-[32]- under the Trust Indenture Act,-[33]- which
provides an exemption from the requirement to issue securities
pursuant to an indenture, has been revised to increase the dollar
ceiling of that exemption. Trust Indenture Act Rule 4a-2-[34]-
has been redesignated Rule 4a-3-[35]- and amended to increase the
dollar ceiling included in the exemption from the requirement
that the securities be issued pursuant to a qualified indenture.
The Commission also adopted new Rule 4a-2-[36]- which permits an
exemption from the Trust Indenture Act for issuances of
securities under Regulation A. Finally, the Commission amended
Rule 4d-9-[37]- and Rule 10a-5-[38]- under the Trust Indenture
Act to reflect the availability of Form SB-2 to Canadian issuers.
I. EXECUTIVE SUMMARY
Today, with the adoption of major revisions to Securities
Act registration exemptions under Rule 504 and Regulation A and
the inauguration of an integrated registration and reporting
system for small business issuers, the Commission has completed
the first of its Small Business Initiatives announced in March of
this year.-[39]- The remaining regulatory initiatives have been
--------- FOOTNOTES ---------
-[23]-(...continued)
-[23]- 17 CFR 239.16b.
-[24]- 17 CFR 239.25.
-[25]- 17 CFR 249.210b.
-[26]- 17 CFR 249.310b.
-[27]- 17 CFR 249.308b.
-[28]- 17 CFR 249.308.
-[29]- 17 CFR 240.14a-101.
-[30]- 17 CFR 240.14c-101.
-[31]- 17 CFR 240.14a-3.
-[32]- 17 CFR 20.4a-1.
-[33]- 15 U.S.C. Section 77aaa et seq.
-[34]- 17 CFR 260.4a-2.
-[35]- 17 CFR 260.4a-3.
-[36]- 17 CFR 260.4a-2.
-[37]- 17 CFR 260.4d-9.
-[38]- 17 CFR 260.10a-5.
-[39]- See Securities Act Release No. 6924 (March 11,
1992)("March Release").
-------------------- BEGINNING OF PAGE #4 -------------------
proposed for public comment,-[40]- and the Commission's proposed
Small Business Incentive Act of 1992 has been introduced in both
the House of Representatives-[41]- and Senate of the U.S.
Congress.-[42]-
The March proposals were enthusiastically received by the
small business commenters as a significant step to facilitating
access to the public market for start-up and developing
companies, and reducing the costs for small businesses to
undertake to have their securities traded in the public markets.
The exemptions and small business integrated registration and
reporting system adopted today are substantially in the form
proposed in the March Release. Regulation A has been revised to
exempt public offerings of non-reporting companies of up to $5
million in a 12-month period and to permit the use of a
simplified question-and-answer disclosure document. Companies
conducting a Regulation A offering will be able to "test the
waters" for potential interest in the company before having to
prepare the mandated offering circular. In response to comment,
Regulation A will continue to be available to qualifying Canadian
issuers.
The revisions to Rule 504 are adopted with one change --
Rule 504 will not be available to "blank check" companies. Under
New Rule 504, as adopted, non-reporting companies will be
permitted to sell up to $1 million of securities in a 12-month
period, subject to anti-fraud prohibitions. No specific
disclosure document is prescribed, and there is no proscription
on general solicitation. Investors purchasing Rule 504
securities will receive freely transferable securities.
The small business integrated registration and reporting
system, modeled after Form S-18, is adopted with some refinements
in response to public comment. The definition of small business
issuer has been revised to include companies with annual revenues
of less than $25 million whose voting stock does not have a
public float of $25 million or more. As with Regulation A,
Canadian issuers will be eligible to use the small business
registration and reporting forms. Form numbers and other rules
have been changed in anticipation of adoption of additional small
business registration and reporting forms, as set forth in the
accompanying release proposing further regulatory simplification
for small business issuers.-[43]-
Finally, the proposed changes to the rules under the Trust
Indenture Act to increase the levels of debt that may be offered
without full compliance with that Act are adopted as proposed.
II. SMALL BUSINESS INITIATIVES
A. Regulation A
As adopted, the dollar ceiling for a Regulation A offering
is now $5 million in any 12-month period,-[44]- including no more
--------- FOOTNOTES ---------
-[40]- See Securities Act Release No. 6943 (July 16, 1992) and
Investment Company Act Release No. 18736 (June 5, 1992).
-[41]- H.R. 4938, 102d Cong. 2d Sess. (April 9, 1992).
-[42]- S. 2518, 102d Cong., 2d Sess. (April 2, 1992).
-[43]- See Securities Act Release No. 6950 (hereinafter
referred to as the "Proposing Release".)
-[44]- Regulation A has been adopted pursuant to the authority
granted to the Commission under section 3(b) of the Securities
Act [15 U.S.C. Section 77c(b)] to provide exemptions from the
registration requirements for issues of
(continued...)
-------------------- BEGINNING OF PAGE #5 -------------------
than $1.5 million in non-issuer resales.-[45]- In response to
comment, the rule has been revised to make clear that the dollar
amount is determined with reference to the dollar amount sold in
the 12 months preceding the offering. Use of other "small
issues" exemptions do not reduce the Regulation A dollar
ceiling.-[46]-
1. Scope of the Exemption
The categories of companies eligible to use the Regulation A
exemption has been expanded from that proposed to include
qualifying Canadian issuers as well as those non-operating
entities proposed to be excluded for the first time (other than
blank check offerings). Although, as noted in the Proposing
Release, in recent years Canadians have not relied on the
exemption, the changes in Regulation A may make the exemption
more attractive not only to domestic but also Canadian
companies.-[47]- Partnerships or certain other entities organized
primarily for the purpose of investing in properties, commodities
or other investment vehicles have long been eligible to use
Regulation A, and their proposed exclusion has not been adopted.
After consideration of public comment, the Commission believes it
appropriate to reduce the costs for these small non-reporting
issuers, particularly in view of the direct oversight by the
Commission of the disclosures made under Regulation A.
The current exclusions of issuers of fractional undivided
interests in certain oil, gas or mineral rights-[48]-, and
investment companies-[49]- are continued and the exclusion for
"blank check" companies-[50]- is adopted. As under current
--------- FOOTNOTES ---------
-[44]-(...continued)
securities which do not exceed $5 million under conditions
which further the public interest and protection of investors.
-[45]- Secondary offerings by affiliates are ineligible for a
Regulation A exemption where the issuer has had no net income for
each of the two most recent fiscal years. The escrow rule, as
well as the recommended format for escrow (Form 7-A), and the
companion ceiling reduction provisions in old Rule 253 have been
eliminated, just as proposed.
-[46]- E.g., Securities Act Rules 236, 504, and 505 [17 CFR
230.236, 504 and 505] and Regulations B [17 CFR 230.300-230.346],
E [17 CFR 230.601-230.610a] and F [17 CFR 230.651-230.656].
-[47]- Canadian persons had been required to consent to
service of process on forms established by the Commission
(Forms 3-A, 4-A, 5-A and 6-A), which are now rescinded. Form
F-X has been amended to permit its use for this purpose by
Canadian issuers engaged in a Regulation A offering.
-[48]- Regulation B provides exemptive relief for such
issuers.
-[49]- These include companies registered or required to be
registered under the Investment Company Act of 1940, 15 U.S.C.
Section 80a-1 et seq.
-[50]- A "blank check" company is one that has no specific
business or plan except to locate and acquire a presently
unknown business or opportunity. In response to public
comment, the Commission has determined to use a definition
(continued...)
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Regulation A, an issuer's securities may not be sold in reliance
on the exemption if the company or a controlling person or
underwriter, is subject to one of a series of enumerated legal
remedies and sanctions.-[51]-
Although several commenters suggested the inclusion of
reporting small business issuers in the list of eligible
companies, the Commission is of the view that particularly in
view of the small business integrated registration and reporting
system adopted today the availability of Regulation A for
reporting companies is not necessary.
A number of commenters addressed the Commission inquiry as
to whether offerings of "penny stocks" should be prohibited under
the Regulation A exemption. Most were of the view that lower
priced offerings by legitimate small business issuers would be
the main beneficiaries of the revised exemption and that there
are now adequate safeguards governing the penny stock market to
counter marketing abuses which have arisen in this market in the
past. The Commission is persuaded that exclusion of legitimate
small business operating companies from the exemption because of
the trading price of their securities is not necessary for
investor protection and would foreclose significant financing
options to small developing companies.
2. Disclosure and Procedure Requirements
Regulation A requires the qualification of a prescribed
offering statement which has been filed with the Commission, and
delivery of a required offering circular, the form and content of
which has been adopted as proposed. Corporate issuers now have
the option to use a question-and-answer format, in addition to
the more traditional disclosure formats.-[52]-
The Commission's safe harbor provisions relating to forward
looking information have been specifically made applicable to
Regulation A. Therefore, good faith projections, with a
reasonable basis, of revenues, income, earnings per share,
capital expenditures, dividends, capital structure and other
financial items may be made in Regulation A filings and the "test
the water" submissions and fall within the protection of the
--------- FOOTNOTES ---------
-[50]-(...continued)
which precludes the use of Regulation A by any blank check
issuer regardless of whether or not it is issuing a penny
stock. See Section 7(b) of the Securities Act, 15 U.S.C.
Section 77g(b).
-[51]- The disqualification provisions describe specific
sanctions against the issuer, its controlling persons and
any underwriter in its employ which preclude reliance upon
Regulation A. The Commission may, in appropriate circumstances,
waive such disqualifications upon a showing of good cause.
Because of the renumbering of the rules in Regulation A, a
technical revision to the reference in Rule 505 of Regulation D,
17 CFR 230.505 which picks up the same disqualification
provisions has been made.
-[52]- The reintroduction of Canadian issuers into the list of
Regulation A eligible companies necessitates a change to the
instructions in Part F/S of the Form 1-A Offering Statement to
require that Canadian financial statements be reconciled to U. S.
generally accepted accounting principles. This position is
consistent with a long-standing requirement in Regulation A.
-------------------- BEGINNING OF PAGE #7 -------------------
Commission's safe harbor rules, under the same conditions as for
other Commission filings.-[53]-
Procedural and timing requirements for commencement of a
Regulation A offering have been revised as proposed to conform to
those used for registered offerings. Requirements as to form,
legibility and signatures for the required offering statement
have been adopted as proposed. The Commission has delegated to
the staff the authority to grant requests to qualify offering
statements under Regulation A.-[54]- The Commission retains the
authority to deny such requests. The authority to act with
respect to requests for withdrawals and abandonments of offering
statements continues to be delegated to the staff.-[55]-
As in the registration context, issuers may begin to offer
the securities to be sold in a Regulation A offering as soon as
the offering statement is filed. Once an offering statement is
filed, a written offer can be made only through the use of a
preliminary or final offering circular. As under the current
Regulation, advertisements and radio and television broadcasts
containing information specified by rule concerning the issuer
and the securities being offered may be used, so long as they
indicate from whom an offering circular may be obtained.-[56]-
Sales may not be made under Regulation A until the
offering statement is qualified. The timing of qualification of
the offering statement has been conformed to that in registered
offerings. Absent the use of a delaying notation procedure, an
offering statement would be deemed qualified 20 calendar days
after being first filed with the Commission.-[57]-
The cover page of Form 1-A now contains the legend available
under Rule 252(g)(2) which would have to be deliberately omitted
by an issuer that wishes to be qualified 20 days after filing.
Other Commission forms utilize this technique, which avoids
unnecessary expense for issuers that inadvertently omit the
legend.
Delivery of a preliminary or final offering circular at
least 48 hours prior to the confirmation of sale is
required.-[58]- Offering circulars must be updated annually
during the term of a continuous offering, as well as revised
--------- FOOTNOTES ---------
-[53]- In addition, the type of information called for by
Items 4, 47, 48 and 49, relating to milestones and other forward
looking information in the question-and-answer format would also
be covered.
-[54]- The authority has been delegated to the Director of the
Division of Corporation Finance and the Regional Administrators.
17 CFR 200.30-1(c)(2); 17 CFR 200.30-6(b).
-[55]- 17 CFR 200.30-1(c)(3); 17 CFR 200.30-6(b).
-[56]- A note has been added to Rule 256 [17 CFR 230.256] to
make clear that additional advertisements and scripts do not
have to be filed if they are substantially the same as that
previously filed.
-[57]- Interim amendments to the offering statement would
restart the 20 calendar day period.
-[58]- This process is the same as that available with
registered offerings. The preliminary offering circular must
be substantially complete in order to satisfy this 48 hour rule.
Pricing information, as defined in Rule 430A, 17 CFR2 30.430A, is
not required to be included.
-------------------- BEGINNING OF PAGE #8 -------------------
whenever the information presented has become false and
misleading, material developments have occurred, or there has
been a fundamental change in the information initially presented.
Periodic information regarding the course of the
distribution, as well as information about the application of the
proceeds from the offering, must be filed with the Commission.
Form 2-A has been amended to require data similar to that sought
in connection with registered offerings.
In response to comment, the provisions governing the filing
of the Form 2-A to report sales and the use of proceeds, have
been amended to clarify that the failure to file the Form 2-A
does not cause the exemption to be lost. The failure continues
to be a ground for suspension of the exemption by the
Commission. A similar change has been made to the provisions
regarding the filing of additional sales material.
The bases for administratively suspending a Regulation A
exemption have been adopted as proposed. Questions have been
raised with respect to the impact of an administrative suspension
upon prior offers and sales made in reliance upon Regulation A.
The entry of a suspension in and of itself does not affect the
exempt status of prior offers and sales under Regulation A. Of
course, where the suspension is based on action or inaction that
rendered the exemption unavailable, unregistered offers and sales
would have to qualify for another exemption or would violate
section 5 of the Securities Act.
3. Substantial and Good Faith Compliance
The Commission has adopted the rule governing substantial
and good faith compliance with the terms, conditions and
requirements of Regulation A. Under this provision, an issuer
will not necessarily lose the exemption with respect to a
particular investor if the issuer failed to comply with a
requirement under Regulation A, provided that the failure did not
pertain to a provision of the rule directly intended to
protect that person. The failure would, however, violate a
Commission rule. Thus, for example, failure to deliver the
mandated offering circular to a single investor, would preclude
reliance on the exemption for that particular sale as a violation
of Rule 251(d)(2), but would not, in and of itself, preclude
reliance on the exemption for other offers and sales made in
compliance with the Regulation.
The exemption will not be lost if the issuer shows that the
requirement was not intended to protect the particular investor,
the violation was not material to the offering as a whole and the
issuer had made a good faith attempt to comply with all of the
requirements of Regulation A. The provisions regarding issuer
qualification, as well as the requirements to file an offering
statement and to stay within specified dollar limitations, are
not subject to the substantial good faith compliance standard.
B. "Testing the Waters"
As discussed in the March Release, one of the major
impediments to a Regulation A financing for a small start-up or
developing company with no established market for its securities,
is the cost of preparing the mandated offering statement. The
full costs of compliance would be incurred without knowing
whether there will be any investor interest in the company.
To remedy this situation, the Commission proposed for the
first time to permit companies relying on the Regulation A
exemption to "test the waters" for potential interest in the
company prior to filing and delivery of the mandated offering
statement. All test the water documents are required to be
-------------------- BEGINNING OF PAGE #9 -------------------
submitted to the Commission at the time of first use.-[59]- The
proposal was enthusiastically endorsed by private sector
commenters as a necessary and appropriate solution to a
significant regulatory impediment to small business financing,
and, as drafted, is consistent with investor protection
interests.
A number of refinements have been included in the test the
water provisions in response to public comment. First, while the
Regulation continues to require that the "testing of the waters"
begin with a written solicitation of interest submitted to the
Commission at the time of first use, the rules have been revised
to make clear that submission of the document is not a condition
to the exemption. Failure to comply with the requirement is a
grounds for Commission suspension of the exemption.
As proposed, the written test the water document was a free
writing subject to the inclusion of two mandated statements -
first, that no funds were being solicited or would be accepted,
and secondly that a detailed offering document would follow.
Some commenters suggested that even these few items should be
deleted, while others suggested additional requirements or
specific prescription of the content.
The rule as adopted continues to provide for free writing
with the inclusion of the following items:
1. a statement that no money is being solicited, or will be
accepted; that no sales can be made until delivery and
qualification of the offering circular, and that indications of
interest involve no obligation or commitment of any kind; and
2. a brief, general identification of the company's
business, products and chief executive officer.
The rule has been revised to make clear that inclusion of
these statements in the soliciting document is not a condition to
the exemption, but failure to include the statements is a basis
for Commission suspension of the exemption.
An issuer may deliver the solicitation material to
prospective investors, or publish it in a newspaper or other
print media. In a change from the proposal and in response to
public comments, the use of broadcast media for this purpose,
whether on radio or television, is also permitted.
At the time of submission to the Commission, the issuer must
provide the name and telephone number of a person who can respond
to questions regarding the document. The submission should be
made at the Commission office (whether a Regional Office or
Headquarters) where the issuer intends to file its Regulation A
offering statement. In the case of a broadcast, any script
should be submitted. Oral communications between the issuer and
prospective investors are permitted but only after a solicitation
of interest document has been submitted to the Commission.
Once the offering statement required by Regulation A is
filed with the Commission, the issuer may not continue to use its
written "test the waters" solicitation materials. The rule
requires that at least 20 calendar days elapse between the last
use of the solicitation of interest document or broadcast and any
sale of securities in the Regulation A offering. Compliance with
the rules limiting the use of the test the water documents after
filing of the offering statement is not a condition to the
--------- FOOTNOTES ---------
-[59]- The test the waters material submitted to the
Commission will be a public document, placed in the
Commission's files and subject to public inspection. The
submission of subsequent soliciting material which is
substantially the same as that already submitted to the
Commission is not required.
-------------------- BEGINNING OF PAGE #10 -------------------
exemption, but is a violation of the rule and is a basis for
Commission suspension of the exemption.
Questions have been raised as to the application of the
Commission's integration doctrine to the situation where an
issuer relies upon the test the water process, determines not to
go forward with a Regulation A offering, but later decides to
offer and sell securities either on some exempt basis or through
registration under the Securities Act. The Commission does not
believe it to be in either the investors' or the issuer's
interest to deter resort to a registered offering because of a
good faith change of plans. Thus, where an issuer decides to
forego the Regulation A exempt offering and does not file a
Regulation A offering statement with the Commission, but instead
proceeds with a registered offering after testing the waters, the
rules would treat the solicitations of interest made in reliance
upon Rule 254 as exempt, provided that at least 30 days had
elapsed between the issuer's last use of a written testing of the
waters document and the filing of the registration statement, and
that all written solicitation material had been submitted to the
Commission. If the offering statement is filed, Rule 251(c)
would apply. With respect to all other offerings, the provisions
of Rule 251(c) would govern, whether or not test the water
materials have been used pursuant to Rule 254.
C. Rule 504 under Regulation D
A significant number of commenters, particularly small
businesses, favored the Commission's proposal to eliminate all
restrictions on the Rule 504 exemption, and the revisions to Rule
504 are adopted as proposed, with one exception. Based upon its
own experience and the views of certain commenters, the
Commission has excluded blank check companies from Rule 504.
While former Rule 504 now Rule 504a is still available to blank
check companies,-[60]- The Commission is issuing a proposal that
would revoke entirely their eligibility to conduct such
offerings.
Under new Rule 504, a public offering of up to $1 million in
a 12-month period by a non-Exchange Act reporting company-[61]-
is subject only to the anti-fraud and other civil liability
provisions of the federal securities laws. While the filing of a
Form D with the Commission continues to be required, the
availability of the exemption is not contingent on that
filing.-[62]-
In light of the revisions to Rule 504, the special $100,000
exemption under Regulation A,-[63]- which permits offerings of
that size to be made without the use of an offering
--------- FOOTNOTES ---------
-[60]- Rule 504a [17 CFR 230.504a] is a redesignated Rule 504.
New Rule 504 reflects the changes made hereby.
-[61]- Rule 504 is not available to investment companies.
-[62]- See Securities Act Rules 504(b)(1), 505(a)(1) and
506(a)(1) [17 CFR 230.504(b)(1), 17 CFR 230.505(a)(1) and 17
CFR 230.506(a)(1)].
-[63]- In the past three years, only 6 of the 177 Regulation A
filings made with the Commission were pursuant to the terms of
Rule 257.
-------------------- BEGINNING OF PAGE #11 -------------------
circular-[64]- is being eliminated. Commenters generally agreed
that the changes to Rule 504 made Rule 257 unnecessary.
D. Integrated Disclosure System for Registration and
Reporting for Small Business Issuers
1. Introduction.
The Commission is adopting an integrated registration,
reporting and qualification system for small business issuers
under the Securities Act, Exchange Act and Trust Indenture Act.
Issuers that meet the definition of a small business issuer, are
eligible to use this new small business integrated disclosure
system. The system consists of specialized forms under the
Securities Act and the Exchange Act that reference disclosure
requirements located in one central depository - Regulation S-B.
In addition, rules have been adopted to permit offerings of debt
securities up to $10 million without full compliance with the
Trust Indenture Act.
The disclosure system adopted today is part of a two tiered
system for small business issuers. In the Proposing Release, the
Commission is proposing entry level, transitional disclosure for
small business issuers entering the disclosure system and
undertaking small offerings of securities.
2. Definition of Small Business Issuer
As proposed, the Commission is adopting a revenue-based
definition of small business issuer. This definition was favored
by a majority of commenters. Generally, those that favored a
revenue-based definition of small business issuer requested that
the threshold be higher than the proposed $15 million. Others
favored a market capitalization-based definition. Several
commenters suggested that a combination of tests be used.
In response to these comments, a small business issuer is
defined as a company with revenues of less than $25 million.
However, if the aggregate market value of the issuer's voting
stock held by non-affiliates (referred to as the "public float")
equals or exceeds $25 million, the issuer does not qualify as a
small business issuer. An estimated 3,000 reporting public
companies fall within the definition of small business
issuer.-[65]-
The definition of small business issuer has been revised to
include Canadian issuers. This revision was made in response to
comment that Canadian issuers are eligible to use Form S-18 and
should therefore be eligible to use Form SB-2. Accordingly, the
definition of small business issuer was revised to include
Canadian registrants that otherwise meet the definition of small
business issuer. A general instruction has been added to
Regulation S-B directing Canadian small business issuers to the
applicable foreign issuer disclosure requirements of Regulation
S-K. Technical amendments have been made to rules under the
Trust Indenture Act so as to permit the use of a Canadian trustee
--------- FOOTNOTES ---------
-[64]- Current Rule 257 is not available for issues of
assessable stock or by those within the descriptions of Rule
253(a), i.e., an entity incorporated or organized within one
year prior to filing without a net income from operations,
or if a longer existence but no net income from operations in
at least one of the prior two fiscal years.
-[65]- This figure is derived from publicly available data
sources which do not include all reporting companies in their
databases. Accordingly, the actual number of publicly held
companies that meet definitional tests may be higher.
-------------------- BEGINNING OF PAGE #12 -------------------
in connection with the offering of debt securities on Form
SB-2.-[66]-
Accordingly, as adopted, a small business issuer is defined
as a U.S. or Canadian entity with revenues of less than
$25,000,000 unless the issuer's public float (the aggregate
market value of voting stock held by non-affiliates) is $25
million or more. Investment companies are excluded from the
definition. Further, if the small business issuer is a majority
owned subsidiary of another company, its parent must also meet
the definition of small business issuer.
3. Registration Requirements of the Securities Act
Form SB-2-[67]- is the designated Securities Act
registration form for small business issuers. As proposed, there
is no dollar limit for offerings on Form SB-2 and the Form may be
used for both initial and repeat offerings, and for both primary
and secondary offerings. Small business issuers may file initial
public offerings on Form SB-2 with the regional office closest to
the issuer's principal place of business or at the Commission's
headquarters.-[68]- All subsequent filings will be made at the
Commission's headquarters.
4. Registration and Reporting under the Exchange Act
The Commission has adopted a new series of forms and
amendments to forms under the Exchange Act for small business
issuers. Specifically, the Commission has adopted an Exchange
Act registration statement form for small business issuers --
Form 10-SB. Form 10-KSB and Form 10-QSB are the designated
annual and quarterly reports for small business issuers. An
instruction was added to Item 7 of Form 8-K relating to small
business acquisitions and general instructions were added to
Schedules 14A and 14C, and Rule 14a-3, relating to their use by
small business issuers.
a. Financial Information Required by Regulation S-B
The financial information required by Regulation S-B is
substantially the same as the financial statement requirements of
Form S-18 but has a component to address interim financial
statement requirements. Item 310 of Regulation S-B is being
adopted with several modifications. First, additional
requirement are added as necessary in order to accommodate the
inclusion of Canadian issuers in the SB series. Second, at the
suggestion of several commenters, the definition of a significant
business found in Rule 405 of Regulation C is being incorporated
into Item 310 of Regulation S-B in lieu of cross-referencing.
Finally, the ability to use pro forma financial statements filed
on Form 8-K as the basis for testing significance of acquired
businesses is imported from Regulation S-X.
One commenter requested clarification of whether filings by
a registrant which no longer qualifies as a small business issuer
would be required to contain all information and schedules
required by Regulation S-X for those periods during which the
--------- FOOTNOTES ---------
-[66]- Revisions were made to Rules 4d-9 and 10a-5 under the
Trust Indenture Act. 17 CFR 260.4d-9, 17 CFR 260.10a-5.
-[67]- As proposed, this registration statement form was
designated Form SB-1. It has been redesignated Form SB-2 in
light of the Commission's concurrent proposal of new Form SB-1,
as a transitional Securities Act registration form for small
business issuers registering small offerings.
-[68]- Post-effective amendments to initial public offerings
on Form SB-2 would be filed with the Commission office in which
the initial registration statement was filed.
-------------------- BEGINNING OF PAGE #13 -------------------
issuer qualified and reported as a small business. Consistent
with the approach for annual reports following a Form S-18, if a
registrant was permitted to and filed financial statements which
did not comply with Regulation S-X and the issuer later elects or
is required to provide financial statements on forms which
require compliance with Regulation S-X, such compliance will not
apply to periods in which the registrant was not required to and
did not present such information.
A further clarification in response to a comment letter
involves interim financial information of development stage
companies. Consistent with staff administrative policy, if a
development stage company is not readily able to provide
financial information for comparative interim periods before
filing its initial public offering, the requirement to provide
such information is waived.
In a separate release, the Commission is proposing two
revisions to these financial statement requirements for small
business issuers. First, the Commission is proposing an
automatic waiver of financial statement requirements relating to
specified significant acquisitions when audited financial
statements are not readily available. Second, the Commission is
proposing to extend to initial public offerings of small business
issuers the ability to conduct a registered offering within 90
days of year end without audited financial statements for the
latest fiscal year.
b. Narrative Disclosure in SB Series of Forms
The narrative disclosure requirements in Regulation S-B are
applicable to all registration and reporting obligations of small
business issuers. The disclosure requirements in Regulation S-B
generally parallel those of Regulation S-K. However, where such
requirements were simplified or not required by Form S-18,
Regulation S-B generally tracks the substantive disclosure
requirements of Form S-18.
Regulation S-B is adopted in substantially the same form as
proposed. The significant changes between Regulation S-B as
adopted and as proposed are outlined below.-[69]-
--------- FOOTNOTES ---------
-[69]- In response to comments, the following revisions were
also made to Regulation S-B:
* "Common stock" in Item 10(c)(2) was replaced with the term
"common equity";
* "Market value" in Item 10(c)(3) was replaced with the term
"public market" and the definition thereof has been
expanded;
* "Small business issuer" was revised to state simply that
the term refers to the issuer and its consolidated
subsidiaries;
* The last sentence of Item 10(d)(1) requiring disclosure of
only material information was deleted;
* Item 101(a)(4) (number of employees) was redesignated as
Item 101(b)(12) so as not to require three years of
employment disclosure;
* Item 101(b) was revised so as not to require disclosure of
backlog data or disclosure of the names of material
customers;
(continued...)
-------------------- BEGINNING OF PAGE #14 -------------------
Item 10(b) was added to specify the circumstances under
which issuers may enter and exit from the small business
registration and reporting system.
Item 101(a) was revised is response to comment to reduce
from five to three years the period for which disclosure of the
small business issuer's business development is required. This
marks a departure from Regulation S-K which requires disclosure
of an issuer's business development over the course of the past
five years.
Item 102 was revised to specifically include, rather than
cross reference, the Items of Form S-11 to which issuers that are
engaged in real estate activity are required to respond.
In response to comment, Item 201(a)(2) was revised to
require disclosure of the amount of securities that may be resold
pursuant to Rule 144. As adopted, Item 201(a)(2) conforms to the
disclosure requirement of Form S-18. Item 201(b) was revised in
response to comment and requires disclosure only of record
holders.
Item 303 has been revised to require Management's Discussion
and Analysis ("MD&A"), rather than business plan disclosure,
where the issuer has had revenues in each of the last two years
--------- FOOTNOTES ---------
-[69]-(...continued)
* Item 101(b)(11) was revised in order to distinguish
between company sponsored and customer sponsored research
and development expenses to parallel Regulation S-K;
* Item 103(a)(5) of Regulation S-B was revised so as to not
mandate disclosure of the amount of damages;
* Instruction 2 to Item 103 was revised so as to require
disclosure of bankruptcy and receivership proceedings only
with respect to the registrant;
* "Disclose" was added to instruction 4 to Item 103;
* "Material" was added to Item 202(b);
* The parenthetical in Item 401(a)(1) was deleted;
* Item 401(a)(5) was revised so as to only require
disclosure of directorships in other publicly held
companies;
* Item 501(a)(8) was revised to not require red-ink;
* "More" replaced the word "less" in Item 506(a);
* Item 506(b) was revised to add the phrase "or since its
inception, whichever period is shorter";
* An instruction was added to Item 507 to state that selling
securityholder information may be combined with disclosure
under Item 403;
* Item 510 was revised to delete the undertaking therein and
to cross reference the identical undertaking in Item 512;
* Item 511 was revised to specifically reference listing
fees; and
* Item 601(b)(13) was revised to reference the SB forms.
-------------------- BEGINNING OF PAGE #15 -------------------
(or the last full year and latest interim period). In addition,
amendments were made to MD&A in response to comments that
proposed Item 303 of Regulation S-B could have been interpreted
to require more disclosure than its Regulation S-K counterpart.
Specifically, the proposed instruction to proposed Item 303,
restating language from the Commission's interpretive release on
MD&A, was deleted in response to the comment that incorporating
the release into the text of the Item raised questions about the
scope of the Item. As the interpretive guidance in the MD&A
release applies equally to both small and large issuers, the SB
Item was revised to avoid suggesting otherwise. In addition,
language from Item 303 of Regulation S-K was added to clarify
that the discussion and analysis shall focus specifically on
material events, trends and uncertainties known to management
that could cause reported financial information not to be
necessarily indicative of future operating results or financial
condition. The statement from Regulation S-K Item 303 that
issuers are encouraged but not required to discuss forward
looking information has also been included in response to
comment.
As proposed, Item 402 of Regulation S-B, which calls for
disclosure of executive compensation, was modeled after Form
S-18, rather than Item 402 of Regulation S-K. After the small
business initiatives were issued in the March Release, the
Commission issued proposals to amend executive compensation
disclosure requirements, to require a clear and concise tabular
presentation of compensation paid or awarded to executive
officers, and the directors' bases for making their compensation
decisions.-[70]- The Commission proposed to exclude small
business issuers from certain of the proposed executive
compensation amendments -- those requiring additional information
concerning the relationships between compensation committee or
board members and the registrant where the company either does
not have a compensation committee composed entirely of outside
directors or has cross-compensation committee memberships with
another registrant.-[71]- Comment was requested as to whether the
exclusion for small business issuers was appropriate-[72]- and
whether small business issuers should also be excluded from the
proposed table providing disclosure about option value under
various rates of stock appreciation.-[73]-
The Commission will consider comment on, and reach a
determination concerning, the scope of small business issuer
executive compensation disclosure in connection with its
compensation initiative.-[74]- In that connection, commenters may
wish to address whether small business issuers should be excluded
from additional aspects of the proposed executive compensation
proposals, including the proposed performance chart-[75]- and
--------- FOOTNOTES ---------
-[70]- See Securities Act Release No. 6940 (June 23, 1992).
-[71]- Proposed Item 402(j) (2) (i) (A), (B); see Securities
Act Release No. 6940, 57 FR at 29596, 29605.
-[72]- Id. at 29597.
-[73]- Id. at 29588; see proposed Item 402(c), 57 FR at 29600.
-[74]- Comment letters should refer to File No. S7-16-92.
-[75]- Proposed Item 402(k), 57 FR at 29607.
-------------------- BEGINNING OF PAGE #16 -------------------
compensation committee report.-[76]- Should small business
compensation disclosure be limited to the proposed summary
table?-[77]-
Item 501 was revised in response to comment that inclusion
of a separate column in the offering proceeds table is more
burdensome on small business issuers. Accordingly, footnote
disclosure of offering expenses, now required under Item 501, has
been continued.
As suggested by one commenter, the exhibits required by
Items 601(b)(20) and (23) of Regulation S-K will also be required
under Regulation S-B. These exhibits are required to be filed
only if a small business issuer incorporates into its annual
report on Form 10-KSB or quarterly report on Form 10-QSB a report
submitted to shareholders.
The Commission also adopted the redesignation of Item 17A of
Form S-18 as Guide 7 under the Securities Act and Exchange Act.
Accordingly, all issuers engaged in mining operations, including
small business issuers, should refer to Guide 7 for industry
specific disclosure requirements.-[78]- Small business issuers
engaged in real estate operations, banking activities and oil and
gas should also refer to the applicable industry guide.
c. Operation of SB Reporting System
For a company entering the Commission's disclosure system,
either through a Securities Act or an Exchange Act registration
statement, its eligibility to use the optional SB system will
depend on the level of its revenues in its last full fiscal year,
and its capitalization as of a date within 60 days prior to the
offering in a Securities Act registration statement or the filing
of the registration statement under the Exchange Act. Continued
eligibility to use the system will be made at the commencement of
each fiscal year.
Once reporting, a company may continue to report under the
small business integrated disclosure system until it exceeds the
$25 million revenues for two consecutive years or public float
test for two consecutive years, based on its annual report on
Form 10-KSB. The two-year test is adopted to avoid the
possibility that temporary changes in the level of revenues or
public float, may force a small business to exit prematurely the
small business disclosure system. Accordingly, a small business
issuer must exceed one of the two tests, for two consecutive
years, in order to become eligible for the small business
disclosure system.
In order for a reporting company to enter the small business
disclosure system, it must meet the definition of small business
issuer for two consecutive years. In entering the disclosure
system, the issuer must meet both prongs of the test, revenues
and public float, for two consecutive years.
d. Use of Forms S-2, S-3, S-4 and S-8 by Small Business
Issuers
The Commission's proposal to add instructions to Forms S-2,
S-3 and S-8 to enable small business issuers to use those forms
while maintaining the SB level of disclosure has been adopted.
Under these amendments, small business issuers are permitted to
register securities on Forms S-2, S-3 and S-8 if the otherwise
--------- FOOTNOTES ---------
-[76]- Proposed Item 402(j)(1), 57 FR at 29605.
-[77]- See proposed Item 402(b), 57 FR at 29599-600.
-[78]- See proposed Items 801(g) and 802(g) of Regulation S-K
[17 CFR 229.801(g) and 802(g)].
-------------------- BEGINNING OF PAGE #17 -------------------
meet the eligibility requirements for use of those forms.-[79]-
References in those forms to the disclosure requirements of
Regulation S-K will be deemed to be references to Regulation S-B
for small business issuers. With respect to the continuous
reporting eligibility requirements of Forms S-2 and S-3, the SB
series of periodic reports filed by small business issuers are
deemed to satisfy those requirements.
Form S-4, the Securities Act registration form for business
combinations, has been amended as proposed to permit its use by
small business issuers through satisfaction of the Regulation S-B
requirements.-[80]- Form S-4 is available to Form S-2 eligible
small business issuers which are registering securities or are
being acquired in the business combination transaction.
e. Form 8-K Revisions.
As proposed, an instruction has been added to Item 7 of Form
8-K, which requires the filing of historical and pro forma
financial statements for significant business acquisitions. Item
7 refers to Regulation S-X for the determination of the periods
for which the financial statements are required. A parallel
instruction is included in Form SB-2 but the criteria for
significance and the periods for which financial statements are
required differ from Regulation S-X. The amendments incorporate
an instruction in Form 8-K cross referencing financial statement
requirements in Regulation S-B, which track the standard of
significance which is found in Form SB-2, and derived from Form
S-18.
E. Amendments to Rules Under Trust Indenture Act.
The Commission has adopted the proposed amendments to rules
under the Trust Indenture Act that parallel the limited offering
exemptions discussed above. Specifically, Rule 4a-1 has been
amended to increase to $5 million the aggregate principal amount
of securities that may be issued without an indenture.-[81]- The
--------- FOOTNOTES ---------
-[79]- The proposed inclusion of a small business issuer in
Form S-3 is intended to recognize the potential use of that
Form by small business issuers for offerings which do not
require the non-affiliated public float specified in General
Instruction B.1. to Form S-3; primary offerings of debt and
on-convertible preferred securities, secondary offerings,
rights offerings, dividend or interest reinvestment plans,
and conversions or warrants.
-[80]- Form SB-2 will be available only in "for cash"
offerings of securities. Accordingly, small business issuers
wishing to enter business combination transactions which
involve the offer and sale of securities will continue to be
required to register those transactions on Form S-4 or Form
S-1. Small business issuers using Form S-1 are subject to the
disclosure requirements of Regulation S-K. Small business
issuers engaged in roll-up transactions on Form S-4 are also
required to furnish the disclosure required by Item 901 et
seq. of Regulation S-K. See Securities Act Release No.
6922, n.15 (October 30, 1991).
-[81]- See Rule 4a-1 [17 CFR 260.4a-1] promulgated under
Section 304(a)(8) of the Trust Indenture Act. Section
304(a)(8) exempts from the provisions of the Trust Indenture
Act any security issued otherwise than under an indenture.
This exemption is limited within a 12-month period to the $5
million amount of securities specified in Section 3(b) of the
Securities Act, or such lesser amount as the Commission shall
establish by rule. Rule 4a-1 currently limits the
(continued...)
-------------------- BEGINNING OF PAGE #18 -------------------
Commission also has adopted new Rule 4a-2 to exempt from
compliance with the Trust Indenture Act any offering of debt
securities that is exempt from registration under Regulation A.
Former Rule 4a-2 has been redesignated as Rule 4a-3 and amended
to increase to $10 million the aggregate principal amount of debt
securities that may be issued under an indenture which need not
be qualified under the Act.-[82]- Technical amendments also were
made in order to permit Canadian issuers of debt securities to
use a Canadian trustee in connection with a qualified
indenture.-[83]- Small business issuers are reminded that an
indenture, pursuant to which registered debt securities are
offered, should be filed as an exhibit to the registration
statement.-[84]-
F. Other Amendments
The Commission has adopted an amendment to Rule 481(b)(2)
which requires a red-inked legend to be placed on a preliminary
prospectus and a prospectus used in connection with Rule 430A to
delete the reference to red ink. Thus the information required
by Rule 481(b)(2) may be in any color ink.
G. Availability of the Final Regulatory Flexibility
Analysis
The Commission has prepared a Final Regulatory Flexibility
Analysis, pursuant to the requirements of the Regulatory
Flexibility Act,-[85]- regarding the rules adopted today. This
analysis indicates that the revisions should aid small businesses
in their effors to raise capital while being consonant with the
--------- FOOTNOTES ---------
-[81]-(...continued)
Section 304(a)(8) exemption to $2,000,000.
-[82]- See Rule 4a-2 [17 CFR 260.4a-2] promulgated under
Section 304(a)(9) of the Trust Indenture Act. The rights of
the holders of the securities issued would be evidenced by the
instrument sold to the holder and contract (indenture) under
which that instrument was issued. See Division of
Corporation Finance interpretive letter to Allied-Carson
Corporation (February 12, 1976) with respect to debt
securities issued without qualification of an indenture in
reliance upon Section 304(a)(9) of the Trust Indenture Act:
Among the provisions which we believe should be included in
the indenture are the usual covenants, events of default,
and the procedures by which the collective rights of
security holders may be enforced. Although it is possible
that a provision for the enforcement of collective rights
might be effected without providing an indenture trustee, as
a practical matter such collective rights are best enforced
by a trustee who is accorded specific powers for this
purpose. Such trustee need not meet the qualification and
conflict requirements of Section 310 of the 1939 Act.
-[83]- Specifically, Trust Indenture Act Rules 4d-9 and 10a-5
were amended to add Form SB-2 to the list of forms pursuant
to which offerings of debt securities with a Canadian trustee may
be made.
-[84]- The indenture, which is an "[i]nstrument affecting the
rights of security holders," is required to be filed as an
exhibit to the registration statement by Item 601(b)(4) of
Regulation S-K [17 CFR 229.601(b)(4)].
-[85]- 5 U.S.C. Section 604.
-------------------- BEGINNING OF PAGE #19 -------------------
needs of and the protection of investors. The amendments are
designed to minimize costs but do not sacrifice the important
concerns of investors. A copy of the Final Regulatory
Flexibility Analysis may be obtained from Twanna M. Young, Office
of Small Business Policy, Division of Corporation Finance,
Securities and Exchange Commission, 450 Fifth Street, N.W., Stop
7-8, Washington, D.C. 20549, (202) 272-2644.
H. Cost-Benefit Analysis
No specific empirical data was submitted in response to the
Commission's invitation to provide information on the costs and
benefits of the proposed revisions. However, the vast majority
of the public commenters were of the view that the proposals if
adopted would work some cost savings to issuers that chose to use
the new procedures; further that investors would have adequate
safeguards in the new system.
I. Certain Other Findings
As required by section 23(a) of the Exchange Act, the
Commission has specifically considered the impact that these
rulemaking actions would have on competition and has concluded
that they would not impose a significant burden on competition
not necessary or appropriate in furtherance of the purposes of
the Exchange Act.
The Commission finds, in accordance with section 553(b) of
the Administrative Procedure Act-[86]- that the action taken with
respect to certain delegations of authority to the Director of
the Division of Corporation Finance and the Regional
Administrators relate solely to agency organization, procedure or
practice, and that such section makes unnecessary the notice and
prior publication ordinarily required by the Act.-[87]-
J. Effective Date
The rules and forms relating to the integrated registration
and reporting system for small business issuers as well as the
revisions to Rule 504 of Regulation D and Regulation A are
effective August 13, 1992. Pursuant to 5 U.S.C. 553(d) (1),
immediate effectiveness is appropriate because the rules being
adopted grant new exemptions and relieve restrictions for small
business issuers and certain securities offerings. The benefits
of this system to both persons subject to the federal securities
laws as well as potential investors should be available at the
earliest possible time.
III. STATUTORY BASIS, TEXT OF PROPOSALS AND AUTHORITY
The amendments to the Commission's rules and forms are being
adopted pursuant to sections 3(b), 6, 7, 8, 10, and 19(a) of the
Securities Act, Sections 12, 13, 15(d) and 23(a) of the Exchange
Act, and Sections 304(a) (8), 304(a) (9), 304(d) and 319 of the
Trust Indenture Act. List of Subjects 17 CFR Parts 200, 228,
229, 230, 239, 240 and 249
Organization and program management, Reporting and
recordkeeping requirements, Securities.
17 CFR Parts 260
Trusts and trustees.
For the reasons set out in the preamble, title 17, chapter
II of the Code of Federal Regulations is amended as follows:
--------- FOOTNOTES ---------
-[86]- 5 U.S.C. Section 553(b).
-[87]- 5 U.S.C. Section 553.
-------------------- BEGINNING OF PAGE #20 -------------------
PART 200 - ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND
REQUESTS
1. The authority citation for part 200 continues to read as
follows:
Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 79t, 77sss,
80a-37, 80b-11, unless otherwise noted.
2. By revising paragraph (c) of Section 200.30-1 to read as
follows:
Section 200-30-1 Delegation of authority to Director of Division
of Corporation Finance.
* * * * *
(c) With respect to the Securities Act of 1933 (15 U.S.C.
77a, et seq.) and Regulation A thereunder (Section 230.251, et
seq. of this chapter):
(1) to authorize the granting of applications under Rule 262
(Section 230.262 of this chapter) upon a showing of good cause
that it is not necessary under the circumstances that an
exemption under Regulation A be denied;
(2) to authorize the issuance of orders qualifying offering
statements pursuant to Rule 252(g) (Section 230.252(g) of this
chapter); and
(3) to issue orders declaring offering statements withdrawn
or abandoned pursuant to Rule 259 (Section 230.259 of this
chapter).
* * * * *
3. By revising paragraph (b) of Section 200.30-6 to read as
follows:
Section 200.30-6 Delegation of authority to Regional
Administrators.
* * * * *
(b) With respect to the Securities Act of 1933, 15 U.S.C.
77a et seq. and Regulation A thereunder, Section 230.251 et seq.
of this chapter, the same authority as that delegated to the
Director of the Division of Corporation Finance in paragraphs
(c)(2) and (c)(3) of Section 200.30-1.
* * * * *
4. Part 228 is added to read as follows:
PART 228 - INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS
ISSUERS
Subpart A - Regulation S-B
Section 228.10 (Item 10) General.
Section 228.101 (Item 101) Description of Business.
-------------------- BEGINNING OF PAGE #21 -------------------
Section 228.102 (Item 102) Description of Property.
Section 228.103 (Item 103) Legal Proceedings.
Section 228.201 (Item 201) Market for Common Stock and
Related Stockholder Matters.
Section 228.202 (Item 202) Description of Securities.
Section 228.303 (Item 303) Management's Discussion and
Analysis or Plan of Operation.
Section 228.304 (Item 304) Changes In and Disagreements With
Accountants on Accounting and
Financial Disclosure.
Section 228.310 (Item 310) Financial Statements.
Section 228.401 (Item 401) Directors, Executive Officers,
Promoters and Control Persons.
Section 228.402 (Item 402) Executive Compensation.
Section 228.403 (Item 403) Security Ownership of Certain
Beneficial Owners and Management.
Section 228.404 (Item 404) Certain Relationships and Related
Transactions.
Section 228.405 (Item 405) Compliance With Section 16(a) of
the Exchange Act.
Section 228.501 (Item 501) Front of Registration Statement
and Outside Front Cover of
Prospectus.
Section 228.502 (Item 502) Inside Front and Outside Back
Cover Pages of Prospectus.
Section 228.503 (Item 503) Summary Information and Risk
Factors.
Section 228.504 (Item 504) Use of Proceeds.
Section 228.505 (Item 505) Determination of Offering Price.
Section 228.506 (Item 506) Dilution.
Section 228.507 (Item 507) Selling Security Holders.
Section 228.508 (Item 508) Plan of Distribution.
Section 228.509 (Item 509) Interest of Named Experts and
Counsel.
Section 228.510 (Item 510) Disclosure of Commission Position
on Indemnification for Securities
ActLiabilities.
-------------------- BEGINNING OF PAGE #22 -------------------
Section 228.511 (Item 511) Other Expenses of Issuance and
Distribution.
Section 228.512 (Item 512) Undertakings.
Section 228.601 (Item 601) Exhibits.
Section 228.701 (Item 701) Recent Sales of Unregistered
Securities.
Section 228.702 (Item 702) Indemnification of Directors and
Officers.
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa[25], 77aa[26], 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn,
77sss, 781, 78m, 78n, 78o, 78w, 80a-8, 80a-29, 80a-30, 80a-37,
80b-11, unless otherwise noted.
Section 228.10 (Item 10) General.
(a) Application of Regulation S-B. Regulation S-B is the
source of disclosure requirements for "small business issuer"
filings under the Securities Act of 1933 (the "Securities Act")
and the Securities Exchange Act of 1934 (the "Exchange Act").
(1) Definition of small business issuer. A small business
issuer is defined as a company that meets all of the following
criteria:
(i) has revenues of less than $25,000,000;
(ii) is a U.S. or Canadian issuer;
(iii) is not an investment company; and
(iv) if a majority owned subsidiary, the parent corporation
is also a small business issuer.
Provided however, that an entity is not a small business
issuer if it has a public float (the aggregate market value of
the issuer's outstanding securities held by non-affiliates) of
$25,000,000 or more.
NOTE: The public float of a reporting company shall be
computed by use of the price at which the stock was last sold, or
the average of the bid and asked prices of such stock, on a date
within 60 days prior to the end of its most recent fiscal year.
The public float of a company filing an initial registration
statement under the Exchange Act shall be determined as of a date
within 60 days of the date the registration statement is filed.
In the case of an initial public offering of securities, public
float shall be computed on the basis of the number of shares
outstanding prior to the offering and the estimated public
offering price of the securities.
(2) Entering and Exiting the Small Business Disclosure
System.
(i) A company that meets the definition of small business
issuer may use Form SB-2 for registration of its securities under
the Securities Act; Form 10-SB for registration of its securities
under the Exchange Act; and Forms 10-KSB and 10-QSB for its
annual and quarterly reports.
-------------------- BEGINNING OF PAGE #23 -------------------
(ii) For a non-reporting company entering the disclosure
system for the first time either by filing a registration
statement under the Securities Act on Form SB-2 or a registration
statement under the Exchange Act on Form 10-SB, the determination
as to whether a company is a small business issuer is made with
reference to its revenues during its last fiscal year and public
float as of a date within 60 days of the date the registration
statement is filed. See Note to paragraph (a) of this Item.
(iii) Once a small business issuer becomes a reporting
company it will remain a small business issuer until it exceeds
the revenue limit or the public float limit at the end of two
consecutive years. For example, if a company exceeds the revenue
limit for two consecutive years, it will no longer be considered
a small business. However, if it exceeds the revenue limit in
one year and the next year exceeds the public float limit, but
not the revenue limit, it will still be considered a small
business. See Note to paragraph (a) of this Item.
(iv) A reporting company that is not a small business
company must meet the definition of a small business issuer at
the end of two consecutive fiscal years before it will be
considered a small business issuer for purposes of using Form
SB-2, Form 10-SB, Form 10-KSB and Form 10-QSB. See Note to
paragraph (a) of this Item.
(v) The determination as to the reporting category (small
business issuer or other issuer) made for a non-reporting company
at the time it enters the disclosure system governs all reports
relating to the remainder of the fiscal year. The determination
made for a reporting company at the end of its fiscal year
governs all reports relating to the next fiscal year. An issuer
may not change from one category to another with respect to its
reports under the Exchange Act for a single fiscal year. A
company may, however, choose not to use a Form SB-2 for a
registration under the Securities Act.
(b) Definitions of terms.
(1) Common Equity - means the small business issuer's common
stock. If the small business issuer is a limited partnership,
the term refers to the equity interests in the partnership.
(2) Public market - no public market shall be deemed to
exist unless, within the past 60 business days, both bid and
asked quotations at fixed prices (excluding "bid wanted" or
"offer wanted" quotations) have appeared regularly in any
established quotation system on at least half of such business
days. Transactions arranged without the participation of a broker
or dealer functioning as such are not indicative of a "public
market."
(3) Reporting company - means a company that is obligated to
file periodic reports with the Securities and Exchange Commission
under section 15(d) or 13(a) of the Exchange Act.
(4) Small business issuer - refers to the issuer and all of
its consolidated subsidiaries.
(c) Preparing the disclosure document.
(1) The purpose of a disclosure document is to inform
investors. Hence, information should be presented in a clear,
concise and understandable fashion. Avoid unnecessary details,
-------------------- BEGINNING OF PAGE #24 -------------------
repetition or the use of technical language. The responses to
the items of this Regulation should be brief and to the point.
(2) Small business issuers should consult the General Rules
and Regulations under the Securities Act and Exchange Act for
requirements concerning the preparation and filing of documents.
Small business issuers should be aware that there are special
rules concerning such matters as the kind and size of paper that
is allowed and how filings should be bound. These special rules
are located in Regulation C of the Securities Act (17 CFR 230.400
et seq.) and in Regulation 12B of the Exchange Act (17 CFR
240.12b-1 et seq.).
(d) Commission policy on projections. The Commission
encourages the use of management's projections of future economic
performance that have a reasonable basis and are presented in an
appropriate format. The guidelines below set forth the
Commission's views on important factors to be considered in
preparing and disclosing such projections. (See also 17 CFR
230.175 and 240.3b-6).
(1) Basis for projections. Management has the option to
present in Commission filings its good faith assessment of a
small business issuer's future performance. Management, however,
must have a reasonable basis for such an assessment. An outside
review of management's projections may furnish additional support
in this regard. If management decides to include a report of
such a review in a Commission filing, it should also disclose the
qualifications of the reviewer, the extent of the review, the
relationship between the reviewer and the registrant, and other
material factors concerning the process by which any outside
review was sought or obtained. Moreover, in the case of a
registration statement under the Securities Act, the reviewer
would be deemed an expert and an appropriate consent must be
filed with the registration statement.
(2) Format for projections. Traditionally, projections have
been given for three financial items generally considered to be
of primary importance to investors (revenues, net income (loss)
and earnings (loss) per share), projection information need not
necessarily be limited to these three items. However, management
should take care to assure that the choice of items projected is
not susceptible to misleading inferences through selective
projection of only favorable items. It generally would be
misleading to present sales or revenue projections without one of
the foregoing measures of income. The period that appropriately
may be covered by a projection depends to a large extent on the
particular circumstances of the company involved. For certain
companies in certain industries, a projection covering a two or
three year period may be entirely reasonable. Other companies
may not have a reasonable basis for projections beyond the
current year.
(3) Investor understanding. Disclosures accompanying the
projections should facilitate investor understanding of the basis
for and limitations of projections. The Commission believes that
investor understanding would be enhanced by disclosure of the
assumptions which in management's opinion are most significant to
the projections or are the key factors upon which the financial
results of the enterprise depend and encourages disclosure of
assumptions in a manner that will provide a frame-work for
analysis of the projection. Management also should consider
whether disclosure of the accuracy or inaccuracy of previous
-------------------- BEGINNING OF PAGE #25 -------------------
projections would provide investors with important insights into
the limitations of projections.
(e) Commission policy on security ratings. In view of the
importance of security ratings ("ratings") to investors and the
marketplace, the Commission permits small business issuers to
disclose ratings assigned by rating organizations to classes of
debt securities, convertible debt securities and preferred stock
in registration statements and periodic reports. In addition,
the Commission permits, disclosure of ratings assigned by any
nationally recognized statistical rating organizations ("NRSROs")
in certain communications deemed not to be a prospectus
("tombstone advertisements"). Below are the Commission's views
on important matters to be considered in disclosing security
ratings.
(1)(i) If a small business issuer includes in a filing any
rating(s) assigned to a class of securities, it should consider
including any other rating assigned by a different NRSRO that is
materially different. A statement that a security rating is not
a recommendation to buy, sell or hold securities and that it may
be subject to revision or withdrawal at any time by the assigning
rating organization should also be included.
(ii)(A) If the rating is included in a filing under the
Securities Act, the written consent of any rating organization
that is not a NRSRO whose rating is included should be filed.
The consent of any NRSRO is not required. (See Rule 436(g) under
the Securities Act (Section 230.436(g) of this chapter.)
(B) If a change in a rating already included is available
before effectiveness of the registration statement, the small
business issuer should consider including such rating change in
the prospectus. If the rating change is material, consideration
should be given to recirculating the preliminary prospectus.
(C) If a materially different additional NRSRO rating or a
material change in a rating already included becomes available
during any period in which offers or sales are being made, the
small business issuer should consider disclosing this information
in a sticker to the prospectus.
(iii) If there is a material change in the rating(s)
assigned by any NRSRO(s) to any outstanding class(es) of
securities of a reporting company, the registrant should consider
filing a report on Form 8-K (Section 249.308 of this chapter) or
other appropriate report under the Exchange Act disclosing such
rating change.
Section 228.101 (Item 101) Description of Business.
(a) Business Development. Describe the development of the
small business issuer during the last three years. If the small
business issuer has not been in business for three years, give
the same information for predecessor(s) of the small business
issuer if there are any. This business development description
should include:
(1) Form and year of organization;
(2) Any bankruptcy, receivership or similar proceeding; and
-------------------- BEGINNING OF PAGE #26 -------------------
(3) Any material reclassification, merger, consolidation, or
purchase or sale of a significant amount of assets not in the
ordinary course of business.
(b) Business of Issuer. Briefly describe the business and
include, to the extent material to an understanding of the
issuer:
(1) Principal products or services and their markets;
(2) Distribution methods of the products or services;
(3) Status of any publicly announced new product or service;
(4) Competitive business conditions and the small business
issuer's competitive position in the industry and methods of
competition;
(5) Sources and availability of raw materials and the names
of principal suppliers;
(6) Dependence on one or a few major customers;
(7) Patents, trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts, including duration;
(8) Need for any government approval of principal products
or services. If government approval is necessary and the small
business issuer has not yet received that approval, discuss the
status of the approval within the government approval process;
(9) Effect of existing or probable governmental regulations
on the business;
(10) Estimate of the amount spent during each of the last
two fiscal years on research and development activities, and if
applicable the extent to which the cost of such activities are
borne directly by customers;
(11) Costs and effects of compliance with environmental laws
(federal, state and local); and
(12) Number of total employees and number of full time
employees.
Section 228.102 (Item 102) Description of Property.
(a) Give the location of the principal plants and other
property of the small business issuer and describe the condition
of the property. If the small business issuer does not have
complete ownership of the property, for example, others also own
the property or there is a mortgage or lien on the property,
describe the limitations on the ownership.
Instructions to Item 102(a).
1. Small business issuers engaged in significant mining
operations also should provide the information in Guide 7
(Section 229.801(g) and Section 229.802(g) of this chapter).
2. Small business issuers engaged in oil and gas producing
activities also should provide the information in Guide 2
(Section 229.801(b) and Section 229.802(b) of this chapter).
-------------------- BEGINNING OF PAGE #27 -------------------
3. Small business issuers engaged in real estate activities
should, in addition to Guide 5 (Section 229.801(e) of this
chapter) provide responses to the following Items:
(b) Investment Policies
Describe the policy of the small business issuer with
respect to each of the following types of investments. State
whether there are any limitations on the percentage of assets
which may be invested in any one investment, or type of
investment, and indicate whether such policy may be changed
without a vote of security holders. State whether it is the
small business issuer's policy to acquire assets primarily for
possible capital gain or primarily for income.
(1) Investments in real estate or interests in real estate.
Indicate the types of real estate in which the small
business issuer may invest, for example, office or apartment
buildings, shopping centers, industrial or commercial properties,
special purpose buildings and undeveloped acreage, and the
geographic area(s) of these properties. Briefly describe the
method, or proposed method, of operating and financing these
properties. Indicate any limitations on the number or amount of
mortgages which may be placed on any one piece of property.
(2) Investments in real estate mortgages.
Indicate the types of mortgages, for example, first or
second mortgages, and the types of properties subject to
mortgages in which the small business issuer intends to invest,
for example, single family dwellings, apartment buildings, office
buildings, unimproved land, and the nature of any guarantees or
insurance. Describe each type of mortgage activity in which the
small business issuer intends to engage such as originating,
servicing and warehousing, and the portfolio turnover policy.
(3) Securities of or interests in persons primarily engaged
in real estate activities.
Indicate the types of securities in which the small business
issuer may invest, for example, common stock, interest in real
estate investment trusts, partnership interests. Indicate the
primary activities of persons in which the small business issuer
will invest, such as mortgage sales, investments in developed or
undeveloped properties and state the investment policies of such
persons.
(c) Description of Real Estate and Operating Data.
This information shall be furnished separately for each
property the book value of which amounts to ten percent or more
of the total assets of the small business issuer and its
consolidated subsidiaries for the last fiscal year. With respect
to other properties, the information shall be given by such
classes or groups and in such detail as will reasonably convey
the information required.
(1) Describe the general character and location of all
materially important properties held or intended to be acquired
by or leased to the small business issuer and describe the
present or proposed use of such properties and their suitability
and adequacy for such use. Properties not yet acquired shall be
identified as such.
-------------------- BEGINNING OF PAGE #28 -------------------
(2) State the nature of the small business issuer's title
to, or other interest in such properties and the nature and
amount of all material mortgages, liens or encumbrances against
such properties. Disclose the current principal amount of each
material encumbrance, interest and amortization provisions,
prepayment provisions, maturity date and the balance due at
maturity assuming no prepayments.
(3) Outline briefly the principal terms of any lease of any
of such properties or any option or contract to purchase or sell
any of such properties.
(4) Outline briefly any proposed program for the renovation,
improvement or development of such properties, including the
estimated cost thereof and the method of financing to be used.
If there are no present plans for the improvement or development
of any unimproved or undeveloped property, so state and indicate
the purpose for which the property is to be held or acquired.
(5) Describe the general competitive conditions to which the
properties are or may be subject.
(6) Include a statement as to whether, in the opinion of the
management of the small business issuer, the properties are
adequately covered by insurance.
(7) With respect to each improved property which is
separately described, provide the following in addition to the
above:
(i) Occupancy rate;
(ii) Number of tenants occupying ten percent or more of the
rentable square footage and principal nature of business of each
such tenant and the principal provisions of each of their leases;
(iii) Principal business, occupations and professions
carried on in, or from the building;
(iv) The average effective annual rental per square foot or
unit;
(v) Schedule of the lease expirations for each of the ten
years starting with the year in which the registration statement
is filed, stating:
(A) the number of tenants whose leases will expire,
(B) the total area in square feet covered by such leases,
(C) the annual rental represented by such leases, and
(D) the percentage of gross annual rental represented by
such leases;
(vi) Each of the properties and components thereof upon
which depreciation is taken, setting forth the:
(A) federal tax basis,
(B) rate,
(C) method, and
-------------------- BEGINNING OF PAGE #29 -------------------
(D) life claimed with respect to such property or component
thereof for purposes of depreciation;
(vii) The realty tax rate, annual realty taxes and estimated
taxes on any proposed improvements.
Instruction
If the small business issuer has a number of properties, the
information may be given in tabular form.
Section 228.103 (Item 103) Legal Proceedings.
(a) If a small business issuer is a party to any pending
legal proceeding (or its property is the subject of a pending
legal proceeding), give the following information (no information
is necessary as to routine litigation that is incidental to the
business):
(1) name of court or agency where proceeding is pending;
(2) date proceeding began;
(3) principal parties;
(4) description of facts underlying the proceedings; and
(5) relief sought.
(b) Include the information called for by paragraphs (a)(1)
through (5) of this Item for any proceeding that a governmental
authority is contemplating (if the small business issuer is aware
of the proceeding).
Instructions to Item 103.
1. A proceeding that primarily involves a claim for damages
does not need to be described if the amount involved, exclusive
of interest and costs, does not exceed 10% of the current assets
of the small business issuer. If any proceeding presents the
same legal and factual issues as other proceedings pending or
known to be contemplated, the amount involved in such other
proceedings shall be included in computing such percentage.
2. The following types of proceedings with respect to the
registrant are not "routine litigation incidental to the
business" and, notwithstanding instruction 1 of this Item, must
be described: bankruptcy, receivership, or similar proceeding.
3. Any proceeding that involves federal, state or local
environmental laws must be described if it is material; involves
a damages claim for more than 10% of the current assets of the
issuer; or potentially involves more than $100,000 in sanctions
and a governmental authority is a party.
4. Disclose any material proceeding to which any director,
officer or affiliate of the issuer, any owner of record or
beneficially of more than 5% of any class of voting securities of
the small business issuer, or security holder is a party adverse
to the small business issuer or has a material interest adverse
to the small business issuer.
-------------------- BEGINNING OF PAGE #30 -------------------
Section 228.201 (Item 201) Market for Common Equity and Related
Stockholder Matters.
(a) Market information. (1) Identify the principal market or
markets where the small business issuer's common equity is
traded. If there is no public trading market, so state.
(i) If the principal market for the small business issuer's
common equity is an exchange, give the high and low sales prices
for each quarter within the last two fiscal years and any
subsequent interim period for which financial statements are
required by Item 310(b).
(ii) If the principal market is not an exchange, give the
range of high and low bid information for the small business
issuer's common equity for each quarter within the last two
fiscal years and any subsequent interim period for which
financial statements are required by Item 310(b). Show the
source of the high and low bid information. If over-the-counter
market quotations are provided, also state that the quotations
reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
(2) If the information called for by paragraph (a) of this
Item is being presented in a registration statement relating to a
class of common equity for which at the time of filing there is
no established public trading market, indicate the amount(s) of
common equity:
(i) that is subject to outstanding options or warrants to
purchase, or securities convertible into, common equity of the
registrant;
(ii) that could be sold pursuant to Rule 144 under the
Securities Act or that the registrant has agreed to register
under the Securities Act for sale by security holders; or
(iii) that is being or has been proposed to be, publicly
offered by the registrant unless such common equity is being
offered pursuant to an employee benefit plan or dividend
reinvestment plan), the offering of which could have a material
effect on the market price of the registrant's common equity.
(b) Holders. Give the approximate number of holders of
record of each class of common equity.
(c) Dividends. (1) Discuss any cash dividends declared on
each class of common equity for the last two fiscal years and in
any subsequent period for which financial information is
required.
(2) Describe any restrictions that limit the ability to pay
dividends on common equity or that are likely to do so in the
future.
Instruction
Canadian issuers should, in addition to the information
called for by this Item, provide the information in Item
201(a)(1)(iv) of Regulation S-K and Instruction 4 thereto.
Section 228.202 (Item 202) Description of Securities.
(a) Common or Preferred Stock.
-------------------- BEGINNING OF PAGE #31 -------------------
(1) If the small business issuer is offering common equity,
describe any dividend, voting and preemption rights.
(2) If the small business issuer is offering preferred
stock, describe the dividend, voting, conversion and liquidation
rights as well as redemption or sinking fund provisions.
(3) Describe any other material rights of common or
preferred stockholders.
(4) Describe any provision in the charter or by-laws that
would delay, defer or prevent a change in control of the small
business issuer.
(b) Debt Securities.
(1) If the small business issuer is offering debt
securities, describe the maturity date, interest rate, conversion
or redemption features and sinking fund requirements.
(2) Describe all other material provisions giving or
limiting the rights of debtholders. For example, describe
subordination provisions, limitations on the declaration of
dividends, restrictions on the issuance of additional debt,
maintenance of asset ratios, etc.
(3) Give the name of any trustee(s) designated by the
indenture and describe the circumstances under which the trustee
must act on behalf of the debtholders.
(4) Discuss the tax effects of any securities offered at an
"original issue discount."
(c) Other Securities To Be Registered. If the small business
issuer is registering other securities, provide similar
information concerning the material provisions of those
securities.
Section 228.303 (Item 303) Management's Discussion and Analysis
or Plan of Operation.
Small business issuers that have not had revenues from
operations in each of the last two fiscal years, or the last
fiscal year and any interim period in the current fiscal year for
which financial statements are furnished in the disclosure
document, shall provide the information in paragraph (a) of this
Item. All other issuers shall provide the information in
paragraph (b) of this Item.
(a) Plan of operation.
(1) Describe the small business issuer's plan of operation
for the next twelve months. This description should include such
matters as:
(i) a discussion of how long the small business issuer can
satisfy its cash requirements and whether it will have to raise
additional funds in the next twelve months;
(ii) a summary of any product research and development that
the small business issuer will perform for the term of the plan;
-------------------- BEGINNING OF PAGE #32 -------------------
(iii) any expected purchase or sale of plant and significant
equipment; and
(iv) any expected significant changes in the number of
employees.
(b) Management's Discussion and Analysis of Financial
Condition and Results of Operations.
(1) Full fiscal years. Discuss the small business issuer's
financial condition, changes in financial condition and results
of operations for each of the last two fiscal years. This
discussion should address the past and future financial condition
and results of operation of the small business issuer, with
particular emphasis on the prospects for the future. The
discussion should also address those key variable and other
qualitative and quantitative factors which are necessary to an
understanding and evaluation of the small business issuer. If
material, the small business issuer should disclose the
following:
(i) Any known trends, events or uncertainties that have or
are reasonably likely to have a material impact on the small
business issuer's short-term or long-term liquidity;
(ii) Internal and external sources of liquidity;
(iii) Any material commitments for capital expenditures and
the expected sources of funds for such expenditures;
(iv) Any known trends, events or uncertainties that have had
or that are reasonably expected to have a material impact on the
net sales or revenues or income from continuing operations;
(v) Any significant elements of income or loss that do not
arise from the small business issuer's continuing operations;
(vi) The causes for any material changes from period to
period in one or more line items of the small business issuer's
financial statements; and
(vii) Any seasonal aspects that had a material effect on the
financial condition or results of operation.
(2) Interim Periods. If the small business issuer must
include interim financial statements in the registration
statement or report, provide a comparable discussion that will
enable the reader to assess material changes in financial
condition and results of operations since the end of the last
fiscal year and for the comparable interim period in the
preceding year.
Instructions to Item 303
1. The discussion and analysis shall focus specifically on
material events and uncertainties known to management that would
cause reported financial information not to be necessarily
indicative of future operating results or of future financial
condition.
2. Small business issuers are encouraged, but not required,
to supply forward looking information. This is distinguished
from presently known data which will impact upon future operating
-------------------- BEGINNING OF PAGE #33 -------------------
results, such as known future increases in costs of labor or
materials. This latter data may be required to be disclosed.
Section 228.304 (Item 304) Changes In and Disagreements With
Accountants on Accounting and Financial Disclosure.
(a)(1) If, during the small business issuer's two most
recent fiscal years or any later interim period, the principal
independent accountant or a significant subsidiary's independent
accountant on whom the principal accountant expressed reliance in
its report, resigned (or declined to stand for re-election) or
was dismissed, then the small business issuer shall state:
(i) Whether the former accountant resigned, declined to
stand for re-election or was dismissed and the date;
(ii) Whether the principal accountant's report on the
financial statements for either of the past two years contained
an adverse opinion or disclaimer of opinion, or was modified as
to uncertainty, audit scope, or accounting principles, and also
describe the nature of each such adverse opinion, disclaimer of
opinion or modification;
(iii) Whether the decision to change accountants was
recommended or approved by the board of directors or an audit or
similar committee of the board of directors; and
(iv)(A) Whether there were any disagreements with the former
accountant, whether or not resolved, on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved to the former
accountant's satisfaction, would have caused it to make reference
to the subject matter of the disagreement(s) in connection with
its report; or
(B) The following information only if applicable. Indicate
whether the former accountant advised the small business issuer
that:
(1) internal controls necessary to develop reliable
financial statements did not exist; or
(2) information has come to the attention of the former
accountant which made the accountant unwilling to rely on
management's representations, or unwilling to be associated with
the financial statements prepared by management; or
(3) the scope of the audit should be expanded significantly,
or information has come to the accountant's attention that the
accountant has concluded will, or if further investigated might,
materially impact the fairness or reliability of a previously
issued audit report or the underlying financial statements, or
the financial statements issued or to be issued covering the
fiscal period(s) subsequent to the date of the most recent
audited financial statements (including information that might
preclude the issuance of an unqualified audit report), and the
issue was not resolved to the accountant's satisfaction prior to
its resignation or dismissal; and
(C) The subject matter of each such disagreement or event
identified in response to paragraph (a) (1) (iv) of this Item;
-------------------- BEGINNING OF PAGE #34 -------------------
(D) Whether any committee of the board of directors, or the
board of directors, discussed the subject matter of the
disagreement with the former accountant; and
(E) Whether the small business issuer has authorized the
former accountant to respond fully to the inquiries of the
successor accountant concerning the subject matter of each of
such disagreements or events and, if not, describe the nature of
and reason for any limitation.
(2) If during the period specified in paragraph (a) (1) of
this Item, a new accountant has been engaged as either the
principal accountant to audit the issuer's financial statements
or as the auditor of a significant subsidiary and on whom the
principal accountant is expected to express reliance in its
report, identify the new accountant and the engagement date.
Additionally, if the issuer (or someone on its behalf) consulted
the new accountant regarding:
(i) The application of accounting principles to a specific
completed or contemplated transaction, or the type of audit
opinion that might be rendered on the small business issuer's
financial statements and either written or oral advice was
provided that was an important factor considered by the small
business issuer in reaching a decision as to the accounting,
auditing or financial reporting issue; or
(ii) Any matter that was the subject of a disagreement or
event identified in response to paragraph (a) (1) (iv) of this
Item, then the small business issuer shall:
(A) Identify the issues that were the subjects of those
consultations;
(B) Briefly describe the views of the new accountant given
to the small business issuer and, if written views were received
by the small business issuer, file them as an exhibit to the
report or registration statement;
(C) State whether the former accountant was consulted by the
small business issuer regarding any such issues, and if so,
describe the former accountant's views; and
(D) Request the new accountant to review the disclosure
required by this Item before it is filed with the Commission and
provide the new accountant the opportunity to furnish the small
business issuer with a letter addressed to the Commission
containing any new information, clarification of the small
business issuer's expression of its views, or the respects in
which it does not agree with the statements made in response to
this Item. Any such letter shall be filed as an exhibit to the
report or registration statement containing the disclosure
required by this Item.
(3) The small business issuer shall provide the former
accountant with a copy of the disclosures it is making in
response to this Item no later than the day that the disclosures
are filed with the Commission. The small business issuer shall
request the former accountant to furnish a letter addressed to
the Commission stating whether it agrees with the statements made
by the issuer and, if not, stating the respects in which it does
not agree. The small business issuer shall file the letter as an
exhibit to the report or registration statement containing this
disclosure. If the letter is unavailable at the time of filing,
-------------------- BEGINNING OF PAGE #35 -------------------
the small business issuer shall request the former accountant to
provide the letter so that it can be filed with the Commission
within ten business days after the filing of the report or
registration statement. Notwithstanding the ten business day
period, the letter shall be filed within two business days of
receipt. The former accountant may provide an interim letter
highlighting specific areas of concern and indicating that a more
detailed letter will be forthcoming within the ten business day
period noted above. The interim letter, if any, shall be filed
with the report or registration statement or by amendment within
two business days of receipt.
(b) If the conditions in paragraphs (b)(1) through (b)(3) of
this Item exist, the small business issuer shall describe the
nature of the disagreement or event and the effect on the
financial statements if the method had been followed which the
former accountants apparently would have concluded was required
(unless that method ceases to be generally accepted because of
authoritative standards or interpretations issued after the
disagreement or event):
(1) In connection with a change in accountants subject to
paragraph (a) of this Item, there was any disagreement or event
as described in paragraph (a)(1)(iv) of this Item;
(2) During the fiscal year in which the change in
accountants took place or during the later fiscal year, there
have been any transactions or events similar to those involved in
such disagreement or event; and
(3) Such transactions or events were material and were
accounted for or disclosed in a manner different from that which
the former accountants apparently would have concluded was
required.
Instructions to Item 304.
1. The disclosure called for by paragraph (a) of this Item
need not be provided if it has been previously reported as that
term is defined in Rule 12b-2 under the Exchange Act (Section
240.12b-2); the disclosure called for by paragraph (a) of this
Item must be provided, however, notwithstanding prior disclosure,
if required pursuant to Item 9 of Schedule 14A (Section
249.14a-101 et seq.). The disclosure called for by paragraph (b)
of this Item must be furnished, where required, notwithstanding
any prior disclosure about accountant changes or disagreements.
2. When disclosure is required by paragraph (a) of this
Item in an annual report to security holders pursuant to Rule
14a-3 or Rule 14c-3 (Section 240.14a-3 or 240.14c-3 of this
chapter), or in a proxy or information statement filed pursuant
to the requirements of Schedule 14A (Section 240.14a-101 et seq.)
or 14C (Section 240.14c-101 et seq.), in lieu of a letter
pursuant to paragraph (a)(2)(ii)(D) or (a)(3) of this Item,
before filing such materials with or furnishing such materials to
the Commission, the small business issuer shall furnish the
disclosure required by paragraph (a) of this Item to each
accountant who was engaged during the period set forth in
paragraph (a) of this Item. If any such accountant believes that
the statements made in response to paragraph (a) of this Item are
incorrect or incomplete, it may present its views in a brief
statement, ordinarily expected not to exceed 200 words, to be
included in the annual report or proxy or information statement.
-------------------- BEGINNING OF PAGE #36 -------------------
This statement shall be submitted to the small business issuer
within ten business days of the date the accountant receives the
small business issuer's disclosure. Further, unless the written
views of the newly engaged accountant required to be filed as an
exhibit by paragraph (a)(2)(ii)(D) of this Item have been
previously filed with the Commission, the small business issuer
shall file a Form 8-K (17 CFR 249.308 of this chapter) along with
the annual report or proxy or information statement for the
purpose of filing the written views as exhibits.
3. The information required by this Item need not be
provided for a company being acquired by the small business
issuer if such acquiree has not been subject to the filing
requirements of either section 13(a) or 15(d) of the Exchange
Act, or, because of section 12(i) of the Exchange Act, has not
furnished an annual report to security holders pursuant to Rule
14a-3 or Rule 14c-3 (Section 240.14a-3 or 240.14c-3 of this
chapter) for its latest fiscal year.
4. In determining whether any disagreement or reportable
event has occurred, an oral communication from the engagement
partner or another person responsible for rendering the
accounting firm's opinion (or their designee) will generally
suffice as the accountant advising the small business issuer of a
reportable event or as a statement of a disagreement at the
"decision-making level" within the accounting firm and require
disclosure under this Item.
Section 228.310 (Item 310) Financial Statements.
NOTES- 1. Financial statements of a small business issuer,
its predecessors or any businesses to which the small business
issuer is a successor shall be prepared in accordance with
generally accepted accounting principles in the United States.
2. Regulation S-X [17 CFR 210.1 - 210.12] Form and Content
of and Requirements for Financial Statements shall not apply to
the preparation of such financial statements, except that the
report and qualifications of the independent accountant shall
comply with the requirements of Article 2 of Regulation S-X [17
CFR 210.2], Articles 3-19 and 3-20 shall apply to financial
statements of foreign private issuers and small business issuers
engaged in oil and gas producing activities shall follow the
financial accounting and reporting standards specified in Article
4-10 of Regulation S-X [17 CFR 210.4-10] with respect to such
activities. To the extent that Article 11-01 [17 CFR 210.11-01]
(Pro Forma Presentation Requirements) offers enhanced guidelines
for the preparation, presentation and disclosure of pro forma
financial information, small business issuers may wish to
consider these items. Financial statements of foreign private
issuers shall be prepared and presented in accordance with the
requirements of Item 18 of Form 20-F except that Item 17 may be
followed for financial statements included in filings other than
registration statements for offerings of securities unless the
only securities being offered are: (a) upon the exercise of
outstanding rights granted by the issuer of the securities to be
offered, if such rights are granted by the issuer of the
securities to be offered, if such rights are granted on a pro
rata basis to all existing securities holders of the class of
securities to which the rights attach and there is no standby
underwriting in the United States or similar arrangement; or (b)
pursuant to a dividend or interest reinvestment plan; or (c) upon
the conversion of outstanding convertible securities or upon the
exercise of outstanding transferrable warrants issued by the
-------------------- BEGINNING OF PAGE #37 -------------------
issuer of the securities being offered, or by an affiliate of
such issuer.
3. The Commission, where consistent with the protection of
investors, may permit the omission of one or more of the
financial statements or the substitution of appropriate
statements of comparable character. The Commission by informal
written notice may require the filing of other financial
statements where necessary or appropriate.
(a) Annual Financial Statements. Small business issuers
shall file an audited balance sheet as of the end of the most
recent fiscal year, or as of a date within 135 days if the
issuers existed for a period less than one fiscal year, and
audited statements of income, cash flows and changes in
stockholders' equity for each of the two fiscal years preceding
the date of such audited balance sheet (or such shorter period as
the registrant has been in business).
(b) Interim Financial Statements. Interim financial
statements, which may be unaudited, shall include a balance sheet
as of the end of the issuer's most recent fiscal quarter and
income statements and statements of cash flows for the interim
period up to the date of such balance sheet and the comparable
period of the preceding fiscal year.
Instructions to Item 310(b)
1. Where Item 310 is applicable to a Form 10-QSB (Section
249.308b) and the interim period is more than one quarter, income
statements must also be provided for the most recent interim
quarter and the comparable quarter of the preceding fiscal year.
2. Interim financial statements must include all
adjustments which in the opinion of management are necessary in
order to make the financial statements not misleading. An
affirmative statement that the financial statements have been so
adjusted must be included with the interim financial statements.
(1) Condensed Format. Interim financial statements may be
condensed as follows:
(i) Balance sheets should include separate captions for each
balance sheet component presented in the annual financial
statements which represents 10% or more of total assets. Cash
and retained earnings should be presented regardless of relative
significance to total assets. Registrants which present a
classified balance sheet in their annual financial statements
should present totals for current assets and current liabilities.
(ii) Income statements should include net sales or gross
revenue, each cost and expense category presented in the annual
financial statements which exceeds 20% of sales or gross
revenues, provision for income taxes, discontinued operations,
extraordinary items and cumulative effects of changes in
accounting principles or practices. (Financial institutions
should substitute net interest income for sales for purposes of
determining items to be disclosed.) Dividends per share should be
presented.
(iii) Cash flow statements should include cash flows from
operating, investing and financing activities as well as cash at
the beginning and end of each period and the increase or decrease
in such balance.
-------------------- BEGINNING OF PAGE #38 -------------------
(iv) Additional line items may be presented to facilitate
the usefulness of the interim financial statements including
their comparability with annual financial statements.
(2) Disclosure required and additional instructions as to
Content. (i) Footnotes. Footnote and other disclosures should be
provided as needed for fair presentation and to ensure that the
financial statements are not misleading.
(ii) Material Subsequent Events and Contingencies.
Disclosure must be provided of material subsequent events and
material contingencies notwithstanding disclosure in the annual
financial statements.
(iii) Significant Equity Investees. Sales, gross profit, net
income (loss) from continuing operations and net income must be
disclosed for equity investees which constitute 20% or more of a
registrant's consolidated assets, equity or income from
continuing operations.
(iv) Significant Dispositions and Purchase Business
Combinations. If a significant disposition or purchase business
combination has occurred during the most recent interim period
and the transaction required the filing of a Form 8-K (Section
249.308 of this chapter), pro forma data must be presented which
reflects revenue, income from continuing operations, net income
and income per share for the current interim period and the
corresponding interim period of the preceding fiscal year as
though the transaction occurred at the beginning of the periods.
(v) Material Accounting Changes. Disclosure must be provided
of the date and reasons for any material accounting change. The
registrant's independent accountant must provide a letter in the
first Form 10-QSB (Section 249.308b of this chapter) filed
subsequent to the change indicating whether or not the change is
to a preferable method. Disclosure must be provided of any
retroactive change to prior period financial statements,
including the effect of any such change on income and income per
share.
(vi) Development Stage Companies. A registrant in the
development stage must provide cumulative from inception
financial information.
(c) Financial Statements of Businesses Acquired or to be
Acquired.
(1) Financial statements for the periods specified in
paragraph (c)(3) of this Item should be furnished if any of the
following conditions exist:
(i) Consummation of a significant business combination
accounted for as a purchase has occurred or is probable (the term
"purchase" encompasses the purchase of an interest in a business
accounted for by the equity method); or
(ii) Consummation of a significant business combination to
be accounted for as a pooling is probable.
(2) A business combination is considered significant if a
comparison of the most recent annual financial statements of the
business acquired or to be acquired and the small business
-------------------- BEGINNING OF PAGE #39 -------------------
issuer's most recent annual financial statements filed at or
prior to the date of acquisition indicates that the business
acquired or to be acquired meets any of the following conditions:
(i) The small business issuer's and its other subsidiaries'
investments in and advances to the acquiree exceeds 10 percent of
the total assets of the small business issuer and its
subsidiaries consolidated as of the end of the most recently
completed fiscal year (for a proposed business combination to be
accounted for as a pooling of interests, this condition is also
met when the number of common shares exchanged or to be exchanged
by the small business issuer exceeds 10 percent of its total
common shares outstanding at the date the combination is
initiated) or
(ii) The small business issuer's and its other subsidiaries'
proportionate share of the total assets (after intercompany
eliminations) of the acquiree exceeds 10 percent of the total
assets of the registrants and its subsidiaries consolidated as of
the end of the most recently completed fiscal year, or
(iii) The small business issuer's equity in the income from
continuing operations before income taxes, extraordinary items
and cumulative effect of a change in accounting principles of the
acquiree exceeds 10 percent of such income of the small business
issuer and its subsidiaries consolidated for the most recently
completed fiscal year.
Computational note: For purposes of making the prescribed
income test the following guidance should be applied: If income
of the small business issuer and its subsidiaries consolidated
for the most recent fiscal year is at least 10 percent lower than
the average of the income for the last five fiscal years, such
average income should be substituted for purposes of the
computation. Any loss years should be omitted for purposes of
computing average income.
(3)(i) Financial statements shall be furnished for the
periods prior to the date of acquisition, for those periods for
which the small business issuer is required to furnish financial
statements.
(ii) The financial statements covering fiscal years shall be
audited.
(iii) The separate audited balance sheet of the acquired
business is not required when the small business issuer's most
recent audited balance sheet filed is for a date after the
acquisition was consummated.
(iv) If none of the conditions in the definitions of
significant subsidiary in paragraph (c)(2) of this Item exceeds
20%, income statements of the acquired business for only the most
recent fiscal year and any interim period need be filed.
(4) If consummation of more than one transaction has
occurred or is probable, the significance tests shall be made
using the aggregate impact of the businesses and the financial
statements may be presented on a combined basis, if appropriate.
(5) If the small business issuer made a significant business
acquisition subsequent to the latest fiscal year end and filed a
report on Form 8-K which included audited financial statements of
such acquired business for the periods required by paragraph
-------------------- BEGINNING OF PAGE #40 -------------------
(c)(3) and the pro forma financial information required by
paragraph (d) of this Item, the determination of significance may
be made by using the pro forma amounts for the latest fiscal year
in the report on Form 8-K rather than by using the historical
amounts for the latest fiscal year of the registrant. The tests
may not be made by "annualizing" data.
(d) Pro Forma Financial Information.
(1) Pro forma information shall be furnished if any of the
following conditions exist (for purposes of this Item, the term
"purchase" encompasses the purchase of an interest in a business
accounted for by the equity method):
(i) During the most recent fiscal year or subsequent interim
period for which a balance sheet is required by paragraph (b) of
this Item, a significant business combination accounted for as a
purchase has occurred;
(ii) After the date of the most recent balance sheet filed
pursuant to paragraph (a) or (b) of this Item, consummation of a
significant business combination accounted for as a purchase or a
pooling has occurred or is probable.
(2) The provisions of paragraphs (c)(2) and (4) of this Item
apply to paragraph (d) of this Item.
(3) Pro forma statements should be condensed, in columnar
form showing pro forma adjustments and results and should include
the following:
(i) If the transaction was consummated during the most
recent fiscal year or subsequent interim period, pro forma
statements of income reflecting the combined operations of the
entities for the latest fiscal year and interim period, if any,
or;
(ii) If consummation of the transaction has occurred or is
probable after the date of the most recent balance sheet required
by paragraph (a) or (b) of this Item, a pro forma balance sheet
giving effect to the combination as of the date of the most
recent balance sheet. For a purchase, pro forma statements of
income reflecting the combined operations of the entities for the
latest fiscal year and interim period, if any, and for a pooling
of interests, pro forma statements of income for all periods for
which income statements of the small business issuer are
required.
(e) Real Estate Operations Acquired or to be Acquired.
If, during the period for which income statements are
required, the small business issuer has acquired one or more
properties which in the aggregate are significant, or since the
date of the latest balance sheet required by paragraph (a) or (b)
of this Item, has acquired or proposes to acquire one or more
properties which in the aggregate are significant, the following
shall be furnished with respect to such properties:
(1) Audited income statements (not including earnings per
unit) for the two most recent years, which shall exclude items
not comparable to the proposed future operations of the property
such as mortgage interest, leasehold rental, depreciation,
corporate expenses and federal and state income taxes; Provided,
-------------------- BEGINNING OF PAGE #41 -------------------
however, That such audited statements need be presented for only
the most recent fiscal year if:
(i) the property is not acquired from a related party;
(ii) material factors considered by the small business
issuer in assessing the property are described with specificity
in the registration statement with regard to the property,
including source of revenue (including, but not limited to,
competition in the rental market, comparative rents, occupancy
rates) and expenses (including but not limited to, utilities, ad
valorem tax rates, maintenance expenses, capital improvements
anticipated); and
(iii) the small business issuer indicates that, after
reasonable inquiry, it is not aware of any material factors
relating to the specific property other than those discussed in
response to paragraph (e)(1)(ii) of this Item that would cause
the reported financial information not to be necessarily
indicative of future operating results.
(2) If the property will be operated by the small business
issuer, a statement shall be furnished showing the estimated
taxable operating results of the small business issuer based on
the most recent twelve month period including such adjustments as
can be factually supported. If the property will be acquired
subject to a net lease, the estimated taxable operating results
shall be based on the rent to be paid for the first year of the
lease. In either case, the estimated amount of cash to be made
available by operations shall be shown. Disclosure must be
provided of the principal assumptions which have been made in
preparing the statements of estimated taxable operating results
and cash to be made available by operations.
(3) If appropriate under the circumstances, a table should
be provided which shows, for a limited number of years, the
estimated cash distribution per unit indicating the portion
reportable as taxable income and the portion representing a
return of capital with an explanation of annual variations, if
any. If taxable net income per unit will be greater than the
cash available for distribution per unit, that fact and
approximate year of occurrence shall be stated, if significant.
(f) Limited Partnerships.
(1) Small business issuers which are limited partnerships
must provide the balance sheets of the general partners as
described in paragraphs (f)(2) through (f)(4) of this Item.
(2) Where a general partner is a corporation, the audited
balance sheet of the corporation as of the end of its most
recently completed fiscal year must be filed. Receivables, other
than trade receivables, from affiliates of the general partner
should be deducted from shareholders' equity of the general
partner. Where an affiliate has committed itself to increase or
maintain the general partner's capital, the audited balance sheet
of such affiliate must also be presented.
(3) Where a general partner is a partnership, there shall be
filed an audited balance sheet of such partnership as of the end
of its most recently completed fiscal year.
(4) Where the general partner is a natural person, there
shall be filed, as supplemental information, a balance sheet of
-------------------- BEGINNING OF PAGE #42 -------------------
such natural person as of a recent date. Such balance sheet need
not be audited. The assets and liabilities should be carried at
estimated fair market value, with provisions for estimated income
taxes on unrealized gains. The net worth of such general
partner(s), based on such balance sheet(s), singly or in the
aggregate, shall be disclosed in the registration statement.
(g) Age of Financial Statements.
At the date of filing, financial statements included in
filings other than filings on Form 10-KSB must be not less
current than financial statements which would be required in
Forms 10-KSB and 10-QSB if such reports were required to be
filed. If required financial statements are as of a date 135
days or more prior to the date a registration statement becomes
effective or proxy material is expected to be mailed, the
financial statements shall be updated to include financial
statements for an interim period ending within 135 days of the
effective or expected mailing date. Interim financial statements
should be prepared and presented in accordance with paragraph (b)
of this Item:
(1) When the anticipated effective or mailing date falls
within 45 days after the end of the fiscal year, the filing may
include financial statements only as current as the end of the
third fiscal quarter; Provided, however, That if the audited
financial statements for the recently completed fiscal year are
available or become available prior to effectiveness or mailing,
they must be included in the filing;
(2) If the effective date or anticipated mailing date falls
after 45 days but within 90 days of the end of the small business
issuer's fiscal year, the small business issuer is not required
to provide the audited financial statements for such year end
provided that the following conditions are met:
(i) The small business issuer is a reporting company and all
reports due have been filed;
(ii) For the most recent fiscal year for which audited
financial statements are not yet available, the small business
issuer reasonably and in good faith expects to report income from
continuing operations before taxes; and
(iii) For at least one of the two fiscal years immediately
preceding the most recent fiscal year the small business issuer
reported income from continuing operations before taxes.
Section 228.401 (Item 401) Directors, Executive Officers,
Promoters and Control Persons.
(a) Identify directors and executive officers.
(1) List the names and ages of all directors and executive
officers and all persons nominated or chosen to become such;
(2) List the positions and offices that each such person
held with the small business issuer;
(3) Give the person's term of office as a director and the
period during which the person has served;
(4) Briefly describe the person's business experience during
the past five years; and
-------------------- BEGINNING OF PAGE #43 -------------------
(5) If a director, identify other directorships held in
reporting companies naming each company.
(b) Identify Significant Employees. Give the information
specified in paragraph (a) of this Item for each person who is
not an executive officer but who is expected by the small
business issuer to make a significant contribution to the
business.
(c) Family relationships. Describe any family relationships
among directors, executive officers, or persons nominated or
chosen by the small business issuer to become directors or
executive officers.
(d) Involvement in certain legal proceedings. Describe any
of the following events that occurred during the past five years
that are material to an evaluation of the ability or integrity of
any director, person nominated to become a director, executive
officer, promoter or control person of the small business issuer:
(1) Any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to
that time;
(2) Any conviction in a criminal proceeding or being subject
to a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) Being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any
type of business, securities or banking activities; and
(4) Being found by a court of competent jurisdiction (in a
civil action), the Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed,
suspended, or vacated.
Section 228.402 (Item 402) Executive Compensation.
(a) Cash compensation. Complete the following table and
include all cash compensation paid or to be paid to the following
persons for services rendered in all capacities to the small
business issuer during the last fiscal year:
(1) each of the small business issuer's five most highly
paid executive officers whose cash compensation exceeds $ 60,000,
giving their names; and
(2) All executive officers as a group, stating the number of
persons in the group without naming them.
Cash Compensation Table
---------------------------------------------------------------
A B C
Name of individual Capacities in Cash
or number in group which served Compensation
----------------------------------------------------------------
-------------------- BEGINNING OF PAGE #44 -------------------
Instructions to Item 402(a).
1. This table shall include:
(a) all cash bonuses paid or to be paid for all services
rendered during the last fiscal year unless the amounts have not
been allocated at the time of filing the registration statement
or report and
(b) all compensation that would have been paid in cash but
was deferred.
2. Paragraph (a) of this Item applies to any person who was
an executive officer at any time in the most recent fiscal year.
However, information need not be given for any part of that year
during which a person was not an executive officer of the small
business issuer, if it so states.
(b)(1) Compensation under plans. Describe briefly all plans
under which the small business issuer paid or distributed cash or
non-cash compensation during the most recent fiscal year and all
plans under which the small business issuer proposes to pay or
distribute cash or non-cash compensation in the future to the
individuals and group named in paragraph (a) of this Item. State
the amounts provided. No information need be given for:
(i) Any plans that do not discriminate in favor of officers
or directors and that are available to all salaried employees; or
(ii) Any pension or retirement benefits where amounts to be
paid are computed on an actuarial basis under any plan that
provides for fixed benefits for retirement at a specified age or
after a specified number of years of service.
(2) Stock option plans. (i) For stock options granted during
the last fiscal year, indicate:
(A) the title and amount of securities subject to options;
(B) the average per share exercise price; and
(C) if the exercise price was less than 100 percent of the
market value of the security on the date of grant, so state and
give the market price on such date.
(ii) For stock options exercised during the last fiscal
year, regardless of the year that the small business issuer
granted the options, give the net value realized upon the
exercise, calculated by subtracting the exercise price from the
market value.
(c) Other compensation. Give the amount and a description of
any other compensation paid or distributed during the last fiscal
year to the named individuals and group specified in paragraph
(a) of this Item. The compensation shall be valued on the basis
of the issuers' aggregate incremental cost. No information need
be provided if:
(1) For any individual, the total amount of such other
compensation is less than $25,000 or 10% of the compensation
reported in the Cash Compensation Table for that person; or
(2) For the group, the total amount of such other
compensation is the lessor of $25,000 times the number of persons
-------------------- BEGINNING OF PAGE #45 -------------------
in the group or 10% of the compensation reported in the Cash
Compensation Table for the group under paragraph (a) of this Item
and a statement to that effect is made.
(d) Compensation of directors. Describe and give the amounts
of all compensation received by directors of the small business
issuer for all services as a director.
Section 228.403 (Item 403) Security Ownership of Certain
Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
Complete the table below for any person (including any "group")
who is known to the small business issuer to be the beneficial
owner of more than five percent of any class of the small
business issuer's voting securities.
----------------------------------------------------------
(1) (2) (3) (4)
Title of Class Name and Amount and Percent of Class
Address of Nature of
Beneficial Beneficial
Owner Owner
----------------------------------------------------------
(b) Security ownership of management. Complete the following
table for each class of equity securities of the small business
issuer or its parent beneficially owned by all directors and
nominees naming them, and directors and officers of the small
business issuer as a group, without naming them.
---------------------------------------------------------
(1) (2) (3) (4)
Title of Class Name and Amount and Percent of Class
Address of Nature of
Beneficial Beneficial
Owner Owner
---------------------------------------------------------
(c) Changes in control. Describe any arrangements which may
result in a change in control of the small business issuer.
Instructions to Item 403.
1. Of the number of shares shown in column (3) of
paragraphs (a) and (b) of this Item, state in a footnote the
amount which the listed beneficial owner has the right to acquire
within sixty days, from options, warrants, rights, conversion
privilege or similar obligations.
2. Where persons hold more than 5% of a class under a
voting trust or similar agreement, provide the following:
(a) the title of such securities;
(b) the amount that they hold under the trust or agreement
(if not clear from the table);
(c) the duration of the agreement;
(d) the names and addresses of the voting trustees; and
(e) a brief outline of the voting rights and other powers of
the voting trustees under the trust or agreement.
-------------------- BEGINNING OF PAGE #46 -------------------
3. Calculate the percentages on the basis of the amount of
outstanding securities plus, for each person or group, any
securities that person or group has the right to acquire within
60 days pursuant to options, warrants, conversion privileges or
other rights.
4. In this Item, a beneficial owner of a security means:
(a) Any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise
has or shares:
(1) Voting power, which includes the power to vote, or to
direct the voting of, such security; or
(2) Investment power, which includes the power to dispose,
or to direct the disposition of, such security.
(b) Any person who, directly or indirectly, creates or uses
a trust, proxy, power of attorney, pooling arrangement or any
other contract, arrangement or device with the purpose or effect
of divesting such person of beneficial ownership of a security or
preventing the vesting of such beneficial ownership.
5. All securities of the same class beneficially owned by a
person, regardless of the form that such beneficial ownership
takes, shall be totaled in calculating the number of shares
beneficially owned by such person.
6. The small business issuer is responsible for knowing the
contents of any statements filed with the Commission under
section 13(d) or 13(g) of the Exchange Act concerning the
beneficial ownership of securities and may rely upon the
information in such statements unless it knows or has reason to
believe that the information is not complete or accurate.
7. The term "group" means two or more persons acting as a
partnership, syndicate, or other group for the purpose of
acquiring, holding or disposing of securities of an issuer.
8. Where the small business issuer lists more than one
beneficial owner for the same securities, adequate disclosure
should be included to avoid confusion.
Section 228.404 (Item 404) Certain Relationships and Related
Transactions.
(a) Describe any transaction during the last two years, or
proposed transactions, to which the small business issuer was or
is to be a party, in which any of the following persons had or is
to have a direct or indirect material interest. Give the name of
the person, the relationship to the issuer, nature of the
person's interest in the transaction and, the amount of such
interest:
(1) Any director or executive officer of the small business
issuer;
(2) Any nominee for election as a director;
(3) Any security holder named in response to Item 403
(Section 228.403); and
-------------------- BEGINNING OF PAGE #47 -------------------
(4) Any member of the immediate family (including spouse,
parents, children, siblings, and in-laws) of any of the persons
in paragraphs (a)(1), (2) or (3) of this Item.
(b) No information need be included for any transaction
where:
(1) Competitive bids determine the rates or charges involved
in the transaction;
(2) The transaction involves services at rates or charges
fixed by law or governmental authority;
(3) The transaction involves services as a bank depositary
of funds, transfer agent, registrar, trustee under a trust
indenture, or similar services;
(4) The amount involved in the transaction or a series of
similar transactions does not exceed $60,000; or
(5) The interest of the person arises solely from the
ownership of securities of the small business issuer and the
person receives no extra or special benefit that was not shared
equally (pro rata) by all holders of securities of the class.
(c) List all parents of the small business issuer showing
the basis of control and as to each parent, the percentage of
voting securities owned or other basis of control by its
immediate parent if any.
(d) Transactions with promoters. Issuers organized within
the past five years shall:
(1) State the names of the promoters, the nature and amount
of anything of value (including money, property, contracts,
options or rights of any kind) received or to be received by each
promoter, directly or indirectly, from the issuer and the nature
and amount of any assets, services or other consideration
therefore received or to be received by the registrant; and
(2) As to any assets acquired or to be acquired from a
promoter, state the amount at which the assets were acquired or
are to be acquired and the principle followed or to be followed
in determining such amount and identify the persons making the
determination and their relationship, if any, with the registrant
or any promoter. If the assets were acquired by the promoter
within two years prior to their transfer to the issuer, also
state the cost thereof to the promoter.
Instructions to Item 404.
1. A person does not have a material indirect interest in a
transaction within the meaning of this Item where:
(a) The interest arises only:
(1) from such person's position as a director of another
corporation or organization (other than a partnership) which is a
party to the transaction and/or
(2) from the total ownership (direct or indirect) by all
specified persons of less than a 10% equity interest in another
person (other than a partnership) which is a party to the
transaction;
-------------------- BEGINNING OF PAGE #48 -------------------
(b) The interest arises only from such person's position as
a limited partner in a partnership in which he and all other
specified persons had an interest of less than 10 percent; or
(c) The interest of such person arises solely from holding
an equity interest (but not a general partnership interest) or a
creditor interest in another person that is a party to the
transaction and the transaction is not material to such other
person.
2. Include information for any material underwriting
discounts and commissions upon the sale of securities by the
small business issuer where any of the specified persons was or
is to be a principal underwriter or is a controlling person or
member of a firm that was or is to be a principle underwriter.
3. As to any transaction involving the purchase or sale of
assets by or to the small business issuer otherwise than in the
ordinary course of business, state the cost of the assets to the
purchase and if acquired by the seller within two years before
the transaction, the cost thereof to the seller.
Section 228.405 (Item 405) Compliance With Section 16(a) of the
Exchange Act.
Every small business issuer that has a class of equity
securities registered pursuant to Section 12 of the Exchange Act
(15 U.S.C. 78l) shall:
(a) Based solely upon a review of Forms 3 and 4 (17 CFR
249.103 and 249.104 of this chapter) and amendments thereto
furnished to the registrant under Rule 16a-3(d) (17 CFR
240.16a-3(e) of this chapter) during its most recent fiscal year
and Forms 5 and amendments thereto (Section 249.105 of this
chapter) furnished to the registrant with respect to its most
recent fiscal year, and any written representation referred to in
paragraph (b)(2)(i) of this Item:
(1) Identify each person who, at any time during the fiscal
year, was a director, officer, beneficial owner of more than ten
percent of any class of equity securities of the registrant
registered pursuant to Section 12 ("reporting person") that
failed to file on a timely basis, as disclosed in the above
Forms, reports required by Section 16(a) during the most recent
fiscal year or prior years.
(2) For each such person, set forth the number of late
reports, the number of transactions that were not reported on a
timely basis, and any known failure to file a required Form.
NOTE: The disclosure requirement is based on a review of the
forms submitted to the registrant during and with respect to its
most recent fiscal year, as specified above. Accordingly, a
failure to file timely need only be disclosed once. For example,
if in the most recently concluded fiscal year a reporting person
filed a Form 4 disclosing a transaction that took place in the
prior fiscal year, and should have been reported in that year,
the registrant should disclose that late filing and transaction
pursuant to this Item for the most recent fiscal year, but not in
material filed with respect to subsequent years.
(b) With respect to the disclosure required by paragraph (a)
of this Item:
-------------------- BEGINNING OF PAGE #49 -------------------
(1) A form received by the registrant within three calendar
days of the required filing date may be presumed to have been
filed with the Commission by the required filing date.
(2) If the registrant:
(i) receives a written representation from the reporting
person that no Form 5 is required; and
(ii) maintains the representation for two years, making a
copy available to the Commission or its staff upon request, the
registrant need not identify such reporting person pursuant to
paragraph (a) of this Item as having failed to file a Form 5 with
respect to that fiscal year.
Section 228.501 (Item 501) Front of Registration Statement and
Outside Front Cover of Prospectus.
On the outside front cover page of the prospectus, give the
following information:
(1) Name of the small business issuer;
(2) Title, amount and description of securities offered;
(3) If there are selling security holders, a statement to
that effect;
(4) Cross reference to the risk factors section of the
prospectus;
(5) The following statement in capital letters:
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(6) If the small business issuer is not a reporting company
and a preliminary prospectus will be circulated, a bona fide
estimate of the range of the maximum offering price and maximum
number of shares or other units of securities to be offered, or a
bona fide estimate of the principal amount of debt securities to
be offered;
(7) The following table as to all securities to be
registered (estimated, if necessary):
--------------------------------------------------------------
Per unit total, Price to public Underwriting Proceeds to
Total minimum, discounts and issuer or other
Total maximum commissions persons
--------------------------------------------------------------
The "total minimum" and "total maximum" items are required
(in lieu of the "Total" item) only if the offering is made on a
best efforts basis. If so, disclose in the summary section (or on
the cover page if material): the date the offering will end; any
minimum purchase requirement and any arrangements to place funds
in an escrow, trust, or similar account. If there is an
over-allotment option, the maximum-minimum information must be
-------------------- BEGINNING OF PAGE #50 -------------------
based on the purchase of all or none of the shares subject to
that option in addition to any other minimum/maximum information;
(8) If a prospectus will be used before the effective date
of the registration statement (or, prior to the determination of
the initial public offering price in the case of a prospectus
that omits information as permitted by Rule 430A under the
Securities Act [Section 230.430A of this chapter]), include the
caption "Subject to Completion," the date of its issuance, and
the following statement printed in type as large as that
generally used in the body of the prospectus:
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
(9) Any legend or information required by the law of any
State in which the securities are to be offered;
(10) The date of the prospectus; and
(11) In a footnote to the table, disclose the other expenses
of the offering specified in Item 511 of this Regulation S-B.
Section 228.502 (Item 502) Inside Front and Outside Back Cover
Pages of Prospectus.
On the inside front cover page of the prospectus (or on the
outside back cover page for paragraphs (e) and (f) of this Item)
disclose the following:
(a)(1) Available information. State whether or not the small
business issuer is a reporting company.
(2) If the small business issuer is a reporting company,
state that the reports and other information filed by the small
business issuer may be inspected and copied at the public
reference facilities of the Commission in Washington, D.C., and
at some of its Regional Offices, (include addresses), and that
copies of such material can be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549 at prescribed
rates; and
(3) Name any national securities exchange on which the small
business issuer's securities are listed and state that reports
and other information concerning the small business issuer can be
inspected at such exchanges.
(b) Reports to security holders. Where a small business
issuer is not required to deliver an annual report to security
holders, indicate whether voluntary reports will be sent and, if
so, the frequency of such reports and whether they will include
audited financial statements.
(c) Incorporation by reference. State that small business
issuer will provide without charge to each person who receives a
prospectus, upon written or oral request of such person, a copy
-------------------- BEGINNING OF PAGE #51 -------------------
of any of the information that was incorporated by reference in
the prospectus (not including exhibits to the information that is
incorporated by reference unless the exhibits are themselves
specifically incorporated by reference) and the address
(including title or department) and telephone number to which
such a request is to be directed.
(d) Stabilization. (1) Include the following statement, if
true:
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF (IDENTIFY EACH CLASS OF
SECURITIES IN WHICH SUCH TRANSACTIONS MAY BE EFFECTED) AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON (IDENTIFY EACH
EXCHANGE ON WHICH STABILIZING TRANSACTIONS MAY BE EFFECTED;
IF NONE, OMIT THIS SENTENCE.) SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
(2) If the stabilizing began before the effective date of
the registration statement, state the amount of securities
bought, the prices at which they were bought and the period
within which they were bought. In the event that Rule 430A under
the Securities Act [Section 230.430A of this chapter] is used,
the final prospectus must include information as to stabilizing
transactions before the public offering price was set.
(3) If the securities are to be offered to existing security
holders pursuant to warrants or rights and any securities not
taken by security holders are to be reoffered to the public after
the expiration of the rights offering period, state in the
prospectus used to reoffer the securities:
(i) the amount of securities bought in stabilization
activities during the rights offering period and the price or
range of prices at which such securities were bought;
(ii) the amount of the offered securities subscribed for
during such period;
(iii) the amount of the offered securities subscribed for by
the underwriters during such period;
(iv) the amount of the offered securities sold during such
period by the underwriters and the price, or range of prices, at
which such securities were sold; and
(v) the amount of the offered securities to be reoffered to
the public and the public offering price.
(e) Delivery of prospectuses by dealers. The following
legend shall be printed in bold-face or italic type:
Until (insert date) all dealers effecting transactions in
the registered securities, whether or not participating in this
distribution, may be required to deliver a prospectus. This is
in addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold
allotments or subscriptions.
The date to be inserted should be determined by reference to
Section 4(3) of the Securities Act and Rule 174 (Section 230.174
of this chapter).
-------------------- BEGINNING OF PAGE #52 -------------------
(f) Table of contents. Include a detailed table of contents
showing the various sections or subdivisions of the prospectus
and the page number on which each such section or subdivision
begins.
Instruction
Canadian issuers should, in addition to the disclosure
required by this Item, provide the information required by Item
502(f) of Regulation S-K.
Section 228.503 (Item 503) Summary Information and Risk Factors.
(a) Summary. A summary of the information contained in the
prospectus where the length and complexity of the prospectus make
a summary useful.
(b) Address and telephone number. In the beginning of the
prospectus the complete mailing address and the telephone number
of their principal executive offices.
(c) Risk factors. Immediately following the cover page of
the prospectus or the summary section, discuss any factors that
make the offering speculative or risky. These factors may
include no operating history, no recent profit from operations,
poor financial position, the kind of business in which the small
business issuer is engaged or proposes to engage, or no market
for the small business issuer's securities.
Section 228.504 (Item 504) Use of Proceeds.
State how the net proceeds of the offering will be used,
indicating the amount to be used for each purpose and the
priority of each purpose, if all of the securities are not sold.
If all or a substantial part of the proceeds are not allocated
for a specific purpose, so state and discuss the principal
reasons for the offering.
Instructions to Item 504.
1. If a material amount of proceeds will discharge debt,
state the interest rate and maturity. If that debt was incurred
within one year, describe the use of the proceeds of that debt
other than short-term borrowings used for working capital.
2. If any material amount of the proceeds is to be used to
acquire assets or finance the acquisitions of other businesses,
describe the assets or businesses and identify the persons from
whom they will be bought. State the cost of the assets and,
where such assets are to be acquired from affiliates of the small
business issuer or their associates, give the names of the
persons from whom they are to be acquired and set forth the
principle followed in determining the cost to the small
business issuer.
Section 228.505 (Item 505) Determination of Offering Price.
(a) If there is no established public market for the common
equity being registered or if there is a significant difference
between the offering price and the market price of the stock,
give the factors that were considered in determining the offering
price.
-------------------- BEGINNING OF PAGE #53 -------------------
(b) If warrants, rights and convertible securities are being
registered and there is no public market for the underlying
securities, describe the factors considered in determining the
exercise or conversion price.
Section 228.506 (Item 506) Dilution.
(a) If the small business issuer is not a reporting company
and is selling common equity at a price significantly more than
the price paid by officers, directors, promoters and affiliated
persons for common equity purchased by them during the past five
years (or which they have rights to purchase), compare these
prices.
(b) If paragraph (a) of this Item applies and the issuer had
losses in each of its last three fiscal years, or since its
inception, whichever period is shorter, and there is a material
dilution of the purchasers' equity interest, disclose the
following:
(1) The net tangible book value per share before and after
the distribution;
(2) The amount of the increase in such net tangible book
value per share attributable to the cash payments made by
purchasers of the shares being offered; and
(3) The amount of the immediate dilution from the public
offering price which will be absorbed by such purchasers.
Section 228.507 (Item 507) Selling Security Holders.
If security holders of a small business issuer is offering
securities, name each selling security holder, state any
position, office, or other material relationship which the
selling security holder has had within the past three years with
the small business issuer or any of its predecessors or
affiliates, and state the amount of securities of the class owned
by such security holder before the offering, the amount to be
offered for the security holder's account, the amount and (if one
percent or more) the percentage of the class to be owned by such
security holder after the offering is complete.
Instruction
Responses to this item may be combined with disclosure in
response to Item 403.
Section 228.508 (Item 508) Plan of Distribution.
(a) Underwriters and underwriting obligation. If the
securities are to be offered through underwriters, name the
principal underwriters, and state the respective amounts
underwritten. Identify each such underwriter having a material
relationship with the small business issuer and state the nature
of the relationship. State the nature of the obligation of the
underwriter(s) to take the securities, i.e., firm commitment,
best efforts.
(b) New underwriters. Describe the business experience of
managing or principal underwriters that have been in business
less than three years, state their principal business function
and identify any material relationships between the promoters of
-------------------- BEGINNING OF PAGE #54 -------------------
the issuer and the underwriter(s). This information need not be
given if:
(1) the issuer is a reporting company; and
(2) an offering has no material risks.
(c) Other distributions. Outline briefly the plan of
distribution of any securities to be registered that are to be
offered otherwise than through underwriters.
(d) Underwriter's representative on the board of directors.
Describe any arrangement whereby the underwriter has the right to
designate or nominate a member or members of the board of
directors of the small business issuer. Identify any director so
designated or nominated and indicate any relationship with the
small business issuer.
(e) Indemnification of underwriters. If the underwriting
agreement provides for indemnification by the small business
issuer of the underwriters or their controlling persons against
any liability arising under the Securities Act, furnish a brief
description of such indemnification provisions.
(f) Dealers' compensation. State briefly the discounts and
commissions to be allowed or paid to dealers, including all cash,
securities, contracts or other considerations to be received by
any dealer in connection with the sale of the securities.
(g) Finders. Identify any finder and describe the nature of
any material relationship between such finder and the small
business issuer or associates or affiliates of the small business
issuer.
(h) Discretionary accounts. If the small business issuer is
not a reporting company, identify any principal underwriter that
intends to sell to any discretionary accounts and include an
estimate of the amount of securities so intended to be sold. The
response to this paragraph shall be contained in a pre-effective
amendment which shall be circulated if the information is not
available when the registration statement is filed.
Section 228.509 (Item 509) Interest of Named Experts and Counsel.
If an "expert" or "counsel" was hired on a contingent basis,
will receive a direct or indirect interest in the small business
issuer or was a promoter, underwriter, voting trustee, director,
officer, or employee, of the small business issuer, describe the
contingent basis, interest, or connection.
(a) Expert - is a person who is named as preparing or
certifying all or part of the small business issuer's
registration statement or a report or valuation for use in
connection with the registration statement.
(b) Counsel - is counsel named in the prospectus as having
given an opinion on the validity of the securities being
registered or upon other legal matters concerning the
registration or offering of the securities.
Instruction to Item 509.
-------------------- BEGINNING OF PAGE #55 -------------------
1. The small business issuer does not need to disclose the
interest of an expert (other than an accountant) or counsel if
their interest (including the fair market value of all securities
of the small business issuer received and to be received, or
subject to options, warrants or rights received or to be
received) does not exceed $50,000.
Section 228.510 (Item 510) Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.
Describe the indemnification provisions for directors,
officers and controlling persons of the small business issuer
against liability under the Securities Act. This includes any
provision in the underwriting agreement which indemnifies the
underwriter or its controlling persons against such liabilities
where a director, officer or controlling person of the small
business issuer is such an underwriter or controlling person or a
member of any firm which is such an underwriter. In addition,
provide the undertaking in the first sentence of Item 512(e).
Section 228.511 (Item 511) Other Expenses of Issuance and
Distribution.
(a) Give an itemized statement of all expenses of the
offering, other than underwriting discounts and commissions. If
any of the securities are registered for sale by security
holders, state how much of the expenses the security holders will
pay.
(1) The itemized list should generally include registration
fees, federal taxes, state taxes and fees, trustees' and transfer
agents' fees, costs of printing and engraving, legal, accounting,
and engineering fees and any listing fees.
(2) Include as a separate item any premium paid by the small
business issuer or any selling security holder on any policy to
insure or indemnify directors or officers against any liabilities
they may incur in the registration, offering, or sale of these
securities.
(b) [Reserved]
Instruction to Item 511.
1. If the amounts of any items are not known, give
estimates but identify them as such.
Section 228.512 (Item 512) Undertakings.
Include each of the following undertakings that apply to the
offering.
(a) Rule 415 Offering. If the small business issuer is
registering securities under Rule 415 of the Securities Act
(Section 230.415 of this chapter), that the small business issuer
will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by section 10 (a)(3) of
the Securities Act;
-------------------- BEGINNING OF PAGE #56 -------------------
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
NOTE: Small business issuers do not need to give the
statements in paragraphs (a)(1)(i) and (a)(1)(ii) of this Item if
the registration statement is on Form S-3 or S-8 (Sections 239.13
or 239.16b of this chapter), and the information required in a
post-effective amendment is incorporated by reference from
periodic reports filed by the small business issuer under the
Exchange Act.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering.
(b) Warrants and rights offerings. If the small business
issuer will offer the securities to existing security holders
under warrants or rights and the small business issuer will
reoffer to the public any securities not taken by security
holders, with any modifications that suit the particular case --
The small business issuer will supplement the prospectus, after
the end of the subscription period, to include the results of the
subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities
that the underwriters will purchase and the terms of any later
reoffering. If the underwriters make any public offering of the
securities on terms different from those on the cover page of the
prospectus, the small business issuer will file a post-effective
amendment to state the terms of such offering.
(c) Competitive bids. If the small business issuer is
offering securities at competitive bidding, with modifications to
suit the particular case, the small business issuer will:
(1) use its best efforts to distribute before the opening of
bids, to prospective bidders, underwriters, and dealers, a
reasonable number of copies of a prospectus that meet the
requirements of section 10(a) of the Securities Act, and relating
to the securities offered at competitive bidding, as contained in
the registration statement, together with any supplements; and
(2) file an amendment to the registration statement
reflecting the results of bidding, the terms of the reoffering
and related matters where required by the applicable form, not
later than the first use, authorized by the issuer after the
opening of bids, of a prospectus relating to the securities
offered at competitive bidding, unless the issuer proposes no
further public offering of such securities by the issuer or by
the purchasers.
(d) Equity offerings of nonreporting small business issuers.
If a small business issuer that before the offering had no duty
to file reports with the Commission under section 13(a) or 15(d)
of the Exchange Act is registering equity securities for sale in
an underwritten offering -- The small business issuer will
-------------------- BEGINNING OF PAGE #57 -------------------
provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
(e) Request for acceleration of effective date. If the small
business issuer will request acceleration of the effective date
of the registration statement under Rule 461 under the Securities
Act, include the following:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer
of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(f) If the issuer relies on Rule 430A under the Securities
Act [Section 230.430A of this chapter], that the small business
issuer will:
(1) For determining any liability under the Securities Act,
treat the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the small business
issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act (Sections 230.424(b) (1), (4) or 230.497(h) as
part of this registration statement as of the time the Commission
declared it effective.
(2) For determining any liability under the Securities Act,
treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of the
securities at that time as the initial bona fide offering of
those securities.
Section 228.601 (Item 601) Exhibits.
(a) Exhibits and index of exhibits.
(1) The exhibits required by the exhibit table must be filed
or incorporated by reference.
(2) Each filing must have an index of exhibits. The exhibit
index must list exhibits in the same order as the exhibit table.
If the exhibits are incorporated by reference, this fact should
be noted in the exhibit index. In the manually signed
-------------------- BEGINNING OF PAGE #58 -------------------
registration statement or report, the exhibit index should give
the page number of each exhibit.
Instructions to Item 601(a).
1. If an exhibit (other than an opinion or consent) is
filed in preliminary form and is later changed to include only
interest, dividend or conversion rates, redemption or conversion
prices, purchase or offering prices, underwriters' or dealers'
commissions, names, addresses or participation of underwriters or
similar matters and the information appears elsewhere in the
registration statement or a prospectus, no amendment need be
filed.
2. Small business issuers may file copies of each exhibit,
rather than originals, except as otherwise specifically noted.
EXHIBIT TABLE
Securities Act forms Exchange Act forms
SB-2 S-2 S-3 S-4 *** S-8 10SB 8-K 10-QSB 10-KSB
(1) Underwriting
agreement X X X X X
(2) Plan of
acquisition,
reorg.,
arrgmnt,
liquid., or
succession. X X X X X X X
(3) Articles of
Incorporation and
by-laws X X X X
(4) Instruments
defining the
rights of
holders,
incl.
indentures X X X X X X X X X
(5) Opinion
re: legality X X X X X
(6) No
exhibit
required N/A N/A N/A N/A N/A N/A N/A N/A N/A
(7) Opinion
re:
liquidation
preference X X X X
(8) Opinion
re:
tax matters X X X X
(9) Voting
trust
agreement X X X X
-------------------- BEGINNING OF PAGE #59 -------------------
(10) Material
contracts X X X X X
(11) Statement
re: computation
of per share
earnings X X X X X X
(12) No
exhibit
required N/A N/A N/A N/A N/A N/A N/A N/A N/A
(13)
Annual or
quarterly
reports,
Form 10-Q * X X X X
(14) Material
foreign
patents X X X
(15)
Letter on
unaudited
Interim
financial
Information X X X X X X
(16)
Letter on
change in
certifying
accountant
**** X X X X X X
(17)
Letter on
director
resignation X
(18) Letter
on change
in accounting
principles X X
(19) Previously
unfiled
documents X X
(20) Reports furnished
to security holders X
(21) Other documents or
statements to
security holders X
(22)
Subsidiaries
of the
registrant X X X X
-------------------- BEGINNING OF PAGE #60 -------------------
(23) Published report
regarding matters
submitted to vote X X
(24) Consent
of experts and
counsel X X X X X X** X** X**
(25) Power of
attorney X X X X X X X X X
(26) Statement of
eligibility of
trustee X X X X
(27) Invitations
for competitive
bids X X X X
(28) Additional
exhibits X X X X X X X X X
(29) Info. from
reports furnished
to State Insurance
authorities X X X X X X X
* Only if incorporated by reference into a prospectus and
delivered to holders along with the prospectus as permitted by
the registration statement; or in the case of a Form 10-KSB,
where the annual report is incorporated by reference into the
text of the Form 10-KSB.
** Where the opinion of the expert or counsel has been
incorporated by reference into a previously filed Securities Act
registration statement.
*** An issuer need not provide on exhibit if: (1) an election
was made under Form S-4 to provide S-2 or S-3 disclosure; and (2)
the form selected (S-2 or S-6) would not require the company to
provide the exhibit.
**** If required under Item 3O4 of Regulation S-B.
(b) Description of exhibits. Below is a description of each
document listed in the exhibit table.
(1) Underwriting agreement. Each agreement with a principal
underwriter for the distribution of the securities. If the terms
have been determined and the securities are to be registered on
Form S-3 (Section 239.13), the agreement may be filed on Form 8-K
(Section 249.308) after the effectiveness of the registration
statement.
(2) Plan of purchase, sale, reorganization, arrangement,
liquidation or succession. Any such plan described in the filing.
Schedules or attachments may be omitted if they are listed in the
index and provided to the Commission upon request.
(3) Articles of incorporation and by-laws. The complete
copies of articles of incorporation and by-laws or comparable
instruments, as amended.
-------------------- BEGINNING OF PAGE #61 -------------------
(4) Instruments defining the rights of security holders,
including indentures. (i) All instruments that define the rights
of holders of the equity or debt securities that the issuer is
registering, including the pages from the articles of
incorporation or by-laws that define those rights.
(ii) All instruments defining the rights of holders of long
term debt unless the total amount of debt covered by the
instrument does not exceed 10% of the total assets of the small
business issuer.
(iii) Copies of indentures to be qualified under the Trust
Indenture Act of 1939 shall include an itemized table of contents
and a cross reference sheet showing the location of the
provisions inserted in accordance with Sections 310 through
318(a) of that Act.
(5) Opinion on legality. (i) An opinion of counsel on the
legality of the securities being registered stating whether they
will, when sold, be legally issued, fully paid and
non-assessable, and, if debt securities, whether they will be
binding obligations of the small business issuer.
(ii) If the securities being registered are issued under a
plan that is subject to the requirements of ERISA furnish either:
(A) An opinion of counsel which confirms compliance with
ERISA; or
(B) A copy of the Internal Revenue Service determination
letter that the plan is qualified under section 401 of the
Internal Revenue Code.
If the plan is later amended, the small business issuer must
have the opinion of counsel and the IRS determination letter
updated to confirm compliance and qualification.
(6) No Exhibit Required.
(7) Opinion on liquidation preference. If the liquidation
preference of shares exceeds their par or stated value, an
opinion of counsel as to whether there are any resulting
restrictions on surplus. The opinion should also state any
remedies available to security holders before or after payment of
any dividend that would reduce surplus to an amount less than the
amount of such excess. The opinion shall cite to applicable
constitutional and statutory provisions and controlling case law.
(8) Opinion on tax matters. If tax consequences of the
transaction are material to an investor, an opinion of counsel,
an independent public or certified public accountant or, a
revenue ruling from the Internal Revenue Service, supporting the
tax matters and consequences to the shareholders. The exhibit is
required for filings to which Securities Act Industry Guide 5
applies.
(9) Voting trust agreement and amendments.
(10) Material contracts. (i) Every material contract, not
made in the ordinary course of business, that will be performed
after the filing of the registration statement or report or was
entered into not more than two years before such filing. Also
include the following contracts:
-------------------- BEGINNING OF PAGE #62 -------------------
(A) Any contract to which directors, officers, promoters,
voting trustees, security holders named in the registration
statement or report, or underwriters are parties other than
contracts involving only the purchase or sale of current assets
having a determinable market price, at such market price;
(B) Any contract upon which the small business issuer's
business is substantially dependent, such as contracts with
principal customers, principal suppliers, franchise agreements,
etc.;
(C) Any contract for the purchase or sale of any property,
plant or equipment for a consideration exceeding 15 percent of
such assets of the small business issuer; or
(D) Any material lease under which a part of the property
described in the registration statement or report is held by the
small business issuer.
(ii)(A) Any management contract or any compensatory plan,
contract or arrangement in which any director or any of the five
most highly compensated executive officers of the small business
issuer participates and any other management contract or any
compensatory plan in which any other executive officer of the
small business issuer participates shall be filed unless
immaterial in amount or significance.
(B) The following management contracts or compensatory plans
need not be filed:
(1) Ordinary purchase and sales agency agreements;
(2) Agreements with managers of stores in a chain
organization or similar organization;
(3) Contracts providing for labor or salesmen's bonuses or
payments to a class of security holders, as such;
(4) Any compensatory plan which is available to employees,
officers or directors generally and provides for the same method
of allocation of benefits between management and nonmanagement
participants; and
(5) Any compensatory plan if the issuer is a wholly owned
subsidiary of a reporting company and is filing a report on Form
10-KSB (Section 249.310b), or registering debt or non-voting
preferred stock on Form S-2 (Section 239.12).
Instruction to Item 601(b)(10)
1. Only copies of the various remunerative plans need be
filed. Each individual director's or executive officer's
personal agreement under the plans need not be filed, unless they
contain material provisions.
(11) Statement re computation of per share earnings. An
explanation of the computation of per share earnings on both a
primary and fully diluted basis unless the computation can be
clearly determined from the registration statement or report.
(12) No exhibit required.
(13) Annual report to security holders for the last fiscal
year, Form 10-Q or 10-QSB or quarterly report to security
-------------------- BEGINNING OF PAGE #63 -------------------
holders, if incorporated by reference in the filing. Such
reports, except for the parts which are expressly incorporated by
reference in the filing are not deemed "filed" as part of the
filing. If the financial statements in the report have been
incorporated by reference in the filing, the accountant's
certificate shall be manually signed in one copy. See Rule
411(b) (Section 230.411(b) of this chapter).
(14) Material foreign patents. Each material foreign patent
for an invention not covered by a United States patent.
(15) Letter on unaudited interim financial information. A
letter, where applicable, from the independent accountant which
acknowledges awareness of the use in a registration statement of
a report on unaudited interim financial information. The letter
is not considered a part of a registration statement prepared or
certified by an accountant or a report prepared or certified by
an accountant within the meaning of sections 7 and 11 of the
Securities Act. Such letter may be filed with the registration
statement, an amendment thereto, or a report on Form 10-QSB
(Section 249.308b) which is incorporated by reference into the
registration statement.
(16) Letter on change in certifying accountant. File the
letter required by Item 304(a)(3).
(17) Letter on director resignation. Any letter from a
former director which describes a disagreement with the small
business issuer that led to the director's resignation or refusal
to stand for re-election and which requests that the matter be
disclosed.
(18) Letter on change in accounting principles. Unless
previously filed, a letter from the issuer's accountant stating
whether any change in accounting principles or practices followed
by the issuer, or any change in the method of applying any such
accounting principles or practices, which affected the financial
statements being filed with the Commission in the report or which
is expected to affect the financial statements of future fiscal
years is to an alternative principle which in his judgment is
preferable under the circumstances. No such letter need be filed
when such change is made in response to a standard adopted by the
Financial Accounting Standards Board that creates a new
accounting principle, that expresses a preference for an
accounting principle, or that rejects a specific accounting
principle.
(19) Previously unfiled documents. (i) Any unfiled document,
which was executed or in effect during the reporting period, if
such document would have been required to be filed as an exhibit
to a registration statement on Form 10-SB (Section 249.210b).
(ii) Any amendment or change to a document which was
previously filed.
(20) Report furnished to security holders. If the issuer
makes available to its stockholders or otherwise publishes,
within the period prescribed for filing the report, a document or
statement containing information meeting some or all of the
requirements of Part I of Form 10-Q or 10-QSB, the information
called for may be incorporated by reference to such published
document or statement provided copies thereof are included as an
exhibit to the registration statement or to Part I of the Form
10-Q or 10-QSB report.
-------------------- BEGINNING OF PAGE #64 -------------------
(21) Other documents or statements to security holders or
any document incorporated by reference.
(22) Subsidiaries of the small business issuer. A list of
all subsidiaries, the state or other jurisdiction of
incorporation or organization of each, and the names under which
such subsidiaries do business.
(23) Published report regarding matters submitted to vote of
security holders. Published reports containing all of the
information called for by Item 4 of Part II of Form 10-Q (or
10-QSB) or Item 4 of Part I of Form 10-K or 10-KSB which is
referred to therein in lieu of providing disclosure in Form 10-Q
(10-QSB) or 10-K (10-KSB), which are required to be filed as
exhibits by Rule 12b-23(a)(3) under the Exchange Act.
(24) Consents of experts and counsel. (i) Securities Act
filings -- Dated and manually signed written consents or a
reference in the index to the location of the consent.
(ii) Exchange Act reports. If required to file a consent
for material incorporated by reference in a previously filed
registration statement under the Securities Act, the dated and
manually signed consent to the material incorporated by
reference. The consents shall be dated and manually signed.
(25) Power of attorney. If a person signs a registration
statement or report under a power of attorney, a manually signed
copy of such power of attorney or if located elsewhere in the
registration statement, a reference in the index to where it is
located. In addition, if an officer signs a registration
statement for the small business issuer by a power of attorney, a
certified copy of a resolution of the board of directors
authorizing such signature.
(26) Statement of eligibility of trustee. Form T-1 (Section
269.1 of this chapter) if an indenture is being qualified under
the Trust Indenture Act, bound separately from the other
exhibits.
(27) Invitations for competitive bids. If the registration
statement covers securities that the small business issuer is
offering at competitive bidding, any invitation for competitive
bid that the small business issuer will send or give to any
person shall be filed.
(28) Additional exhibits. Any additional exhibits if listed
and described in the exhibit index.
(29) Information from reports furnished to state insurance
regulatory authorities. (i) If reserves for unpaid
property-casualty ("P/C" claims and claim adjustment expenses of
the small business issuer, its unconsolidated subsidiaries and
the proportionate share of the small business issuer and the
other subsidiaries in the unpaid P/C claims and claim adjustment
expenses of its 50%-or-less-owned equity investees, taken in the
aggregate after small business issuer eliminations, exceed
one-half of the common stockholders' equity of the small business
issuer as of the beginning of the latest fiscal year the
following information should be supplied.
(ii) the information included in Schedules O and P of Annual
Statements provided to state regulatory authorities by the small
-------------------- BEGINNING OF PAGE #65 -------------------
business issuer or its P/C insurance small business issuer
affiliates for the latest year on a combined or consolidated
basis as appropriate, separately for each of the following:
(A) the small business issuer;
(B) its unconsolidated subsidiaries; and
(C) fifty percent-or-less-owned equity investees of the
small business issuer and its subsidiaries.
(iii) Small business issuers may omit the combined or
consolidated Schedules O and P of fifty percent-or-less-owned
equity investees, if they file the same information with the
Commission as companies in their own right, and if they state
that fact and the name and ownership percentage of such
companies.
(iv) If ending reserves in paragraphs (b)(29)(ii)(A) and
(b)(29)(ii)(B) of this Item or the proportionate share of the
small business issuer and its other subsidiaries in paragraph
(b)(29)(ii)(C) of this Item are less than 5% of the total ending
reserves in paragraphs (b)(29)(ii)(A) and (b)(29)(ii)(B) of this
Item, and the proportionate share of (b)(29)(ii)(C) of this Item,
small business issuers may omit that category and note that fact.
If the amount of the reserves attributable to fifty
percent-or-less-owned equity investees that file this information
as companies in their own right exceeds 95% of the total
paragraph (b)(29)(ii)(C) of this Item small business issuers do
not need to provide reserves, information for the other fifty
percent-or-less-owned equity investees.
(v) Small business issuers do not need to include Schedules
O and P information if they are not required to file Schedules O
and P with insurance regulatory authorities. However, clearly
note the nature and extent of any such exclusions in the Exhibit.
(vi) Companies whose fiscal year differs from the calendar
year should present Schedules O and P as of the end of the
calendar year that falls within their fiscal year.
(vii) The nature and amount of the difference between
reserves for claims and claim adjustment expenses reflected on
Schedules O and P and the total P/C statutory reserves for claims
and disclose claim adjustment expenses as of the latest calendar
year in a note to those Schedules.
Section 228.701 (Item 701) Recent Sales of Unregistered
Securities.
Give the following information for all securities that the
small business issuer sold within the past three years without
registering the securities under the Securities Act.
(a) The date, title and amount of securities sold.
(b) Give the names of the principal underwriters, if any.
If the small business issuer did not publicly offer any
securities, identify the persons or class of persons to whom the
small business issuer sold the securities.
(c) For securities sold for cash, the total offering price
and the total underwriting discounts or commissions. For
securities sold other than for cash, describe the transaction and
-------------------- BEGINNING OF PAGE #66 -------------------
the type and amount of consideration received by the small
business issuer.
(d) The section of the Securities Act or the rule of the
Commission under which the small business issuer claimed
exemption from registration and the facts relied upon to make the
exemption available.
Section 228.702 (Item 702) Indemnification of Directors and
Officers.
State whether any statute, charter provisions, by-laws,
contract or other arrangements that insures or indemnifies a
controlling person, director or officer of the small business
issuer affects his or her liability in that capacity.
PART 229 - STANDARD INSTRUCTIONS FOR FILING FORMS UNDER
SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND
ENERGY POLICY AND CONSERVATION ACT OF 1975 - REGULATION S-K
5. The authority citation for part 229 continues to read as
follows:
Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s,
77aa[25], 77aa[26], 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn,
77sss, 781, 78m, 78n, 78o, 78w, 80a-8, 80a-29, 80a-30, 80a-37,
80b-11, unless otherwise noted.
6. In Section 229.801, paragraph (g) is added to read as
follows:
Section 229.801 Securities Act industry guides.
* * * * *
(g) Guide 7. Description of Property by Issuers Engaged or
To Be Engaged in Significant Mining Operations.
NOTE: The text of Guide 7 will not appear in the CFR.
GUIDE 7
Description of Property by Issuers Engaged or to be Engaged in
Significant Mining Operations
(a) Definitions. The following definitions apply to
registrants engaged or to be engaged in significant mining
operations:
(1) Reserve. That part of a mineral deposit which could be
economically and legally extracted or produced at the time of the
reserve determination. Note. Reserves are customarily stated in
terms of "ore" when dealing with metalliferous minerals; when
other materials such as coal, oil, shale, tar, sands, limestone,
etc. are involved, an appropriate term such as "recoverable coal"
may be substituted.
(2) Proven (Measured) Reserves. Reserves for which (a)
quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; grade and/or quality are
computed from the results of detailed sampling and (b) the sites
for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape,
depth and mineral content of reserves are well-established.
-------------------- BEGINNING OF PAGE #67 -------------------
(3) Probable (Indicated) Reserves. Reserves for which
quantity and grade and/or quality are computed from information
similar to that used for proven (measure) reserves, but the sites
for inspection, sampling, and measurement are farther apart or
are otherwise less adequately spaced. The degree of assurance,
although lower than that for proven (measured) reserves, is high
enough to assume continuity between points of observation.
(4)(i) Exploration Stage - includes all issuers engaged in
the search for mineral deposits (reserves) which are not in
either the development or production stage.
(ii) Development Stage - includes all issuers engaged in the
preparation of an established commercially minable deposit
(reserves) for its extraction which are not in the production
stage.
(iii) Production Stage - includes all issuers engaged in the
exploitation of a mineral deposit (reserve).
Instruction to paragraph (a).
1. Mining companies in the exploration stage should not
refer to themselves as development stage companies in the
financial statements, even though such companies should comply
with FASB Statement No. 7, if applicable.
(b) Mining Operations Disclosure. Furnish the following
information as to each of the mines, plants and other significant
properties owned or operated, or presently intended to be owned
or operated, by the registrant:
(1) The location and means of access to the property;
(2) A brief description of the title, claim, lease or option
under which the registrant and its subsidiaries have or will have
the right to hold or operate the property, indicating any
conditions which the registrant must meet in order to obtain or
retain the property. If held by leases or options, the
expiration dates of such leases or options should be stated.
Appropriate maps may be used to portray the locations of
significant properties;
(3) A brief history of previous operations, including the
names of previous operators, insofar as known;
(4)(i) A brief description of the present condition of the
property, the work completed by the registrant on the property,
the registrant's proposed program of exploration and development,
and the current state of exploration and/or development of the
property. Mines should be identified as either open-pit or
underground. If the property is without known reserves and the
proposed program is exploratory in nature, a statement to that
effect shall be made;
(ii) The age, details as to modernization and physical
condition of the plant and equipment, including subsurface
improvements and equipment. Further, the total cost for each
property and its associated plant and equipment should be stated.
The source of power utilized with respect to each property should
also be disclosed.
(5) A brief description of the rock formations and
mineralization of existing or potential economic significance on
-------------------- BEGINNING OF PAGE #68 -------------------
the property, including the identity of the principal metallic or
other constituents insofar as known. If proven (measured) or
probable (indicated) reserves have been established, state (i)
the estimated tonnages and grades (or quality, where appropriate)
of such classes of reserves, and (ii) the name of the person
making the estimates and the nature of his relationship to the
registrant.
Instructions to paragraph (b)(5).
1. It should be stated whether the reserve estimate is of
in-place material or of recoverable material. Any in-place
estimate should be qualified to show the anticipated losses
resulting from mining methods and beneficiation or preparation.
2. The summation of proven (measured) and probable
(indicated) ore reserves is acceptable if the difference in
degree of assurance between the two classes of reserves cannot be
readily defined.
3. Estimates other than proved (measured) or probable
(indicated) reserves, and any estimated values of such reserves
shall not be disclosed unless such information is required to be
disclosed by foreign or state law; provided, however, that where
such estimates previously have been provided to a person (or any
of its affiliates) that is offering to acquire, merge, or
consolidate with, the registrant or otherwise to acquire the
registrant's securities, such estimates may be included.
(6) If technical terms relating to geology, mining or
related matters whose definition cannot readily be found in
conventional dictionaries (as opposed to technical dictionaries
or glossaries) are used, an appropriate glossary should be
included in this report.
(7) Detailed geographic maps and reports, feasibility
studies and other highly technical data should not be included in
the report but should be, to the degree appropriate and necessary
for the Commission's understanding of the registrant's
presentation of business and property matters, furnished as
supplemental information.
(c) Supplemental Information.
(1) If an estimate of proven (measured) or probable
(indicated) reserves is set forth in the report, furnish:
(i) maps drawn to scale showing any mine workings and the
outlines of the reserve blocks involved together with the
pertinent sample-assay thereon.
(ii) all pertinent drill data and related maps.
(iii) the calculations whereby the basic sample-assay or
drill data were translated into the estimates made of the grade
and tonnage of reserves in each block and in the complete reserve
estimate.
Instructions to paragraph (c)(1).
1. Maps and drawings submitted to the staff should include:
(a) A legend or explanation showing, by means of pattern or
symbol, every pattern or symbol used on the map or drawing; the
-------------------- BEGINNING OF PAGE #69 -------------------
use of the symbols used by the U.S. Geological Survey is
encouraged;
(b) A graphical bar scale should be included; additional
representations of scale such as "one inch equals one mile" may
be utilized provided the original scale of the map has not been
altered;
(c) A north arrow on the maps;
(d) An index map showing where the property is situated in
relationship to the state or province, etc., in which it was
located;
(e) A title of the map or drawing and the date on which it
was drawn;
(f) In the event interpretive data is submitted in
conjunction with any map, the identity of the geologist or
engineer that prepared such data; and
(g) Any drawing should be simple enough or of sufficiently
large scale to clearly show all features on the drawing.
(2) Furnish a complete copy of every material engineering,
geological or metallurgical report concerning the registrant's
property, including governmental reports, which are known and
available to the registrant. Every such report should include
the name of its author and the date of its preparation, if known
to the registrant.
Instruction to paragraph (c)(2).
1. Any of the above-required reports as to which the staff
has access need not be submitted. In this regard, issuers should
consult with the staff prior to filing the report. Any reports
not submitted should be identified in a list furnished to the
staff. This list should also identify any known governmental
reports concerning the registrant's property.
(3) Furnish copies of all documents such as title documents,
operating permits and easements needed to support representations
made in the report.
7. In Section 229.802, paragraphs (e) and (f) are reserved
and paragraph (g) is added to read as follows:
Section 229.802 Exchange Act industry guides.
* * * * *
(e) [Reserved].
(f) [Reserved].
(g) Guide 7. Description of Property by Issuers Engaged or
To Be Engaged in Significant Mining Operations.
Note: The text of Guide 7 will not appear in the CFR.
The text of Guide 7 is identical to Section 229.801(g) of
this chapter and is not reprinted here.
-------------------- BEGINNING OF PAGE #70 -------------------
PART 230 - GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933
8. The authority citation for part 230 continues to read as
follows:
Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss,
78c, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29,
80a-30, and 80a-37, unless otherwise noted.
9. By amending paragraph (b)(1)(i) of Section 230.175 after
the words "Securities Act of 1933" add the words", offering
statement of solicitation of interest written document or
broadcast script under Regulation A" and in paragraph (b)(2)(i)
after the parenthetical "(Section 229.303 of this chapter)" add
the words "or Regulation S-B (Section 228.303 of this chapter)".
10. By revising Regulation A-Conditional Small Issues
Exemption, Sections 230.251 - 230.262, to read as follows:
Sec.
230.251 Scope of Exemption.
230.252 Offering Statement.
230.253 Offering Circular.
230.254 Solicitation of Interest Document for Use Prior to an
Offering Statement.
230.255 Preliminary Offering Circulars.
230.256 Filing of Sales Material.
230.257 Reports of Sales and Use of Proceeds.
230.258 Suspension of the Exemption.
230.259 Withdrawal or Abandonment of Offering Statements.
230.260 Insignificant Deviations from a Term, Condition or
Requirement of Regulation A.
230.261 Definitions.
230.262 Disqualification Provisions.
230.263 Consent to Service of Process
REGULATION A - CONDITIONAL SMALL ISSUES EXEMPTION
Authority: Secs. 230.251 to 230.262 issued under 15 U.S.C.
77c, 77s.
Section 230.251 Scope of exemption.
A public offer or sale of securities that meets the
following terms and conditions shall be exempt under section 3(b)
from the registration requirements of the Securities Act of 1933
(the "Securities Act"):
(a) Issuer. The issuer of the securities:
-------------------- BEGINNING OF PAGE #71 -------------------
(1) is an entity organized under the laws of the United
States or Canada, or any State, Province, Territory or possession
thereof, or the District of Columbia, with its principal place of
business in the United States or Canada;
(2) is not subject to section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") (15 U.S.C. 78a et seq.)
immediately before the offering;
(3) is not a development stage company that either has no
specific business plan or purpose, or has indicated that its
business plan is to merge with an unidentified company or
companies;
(4) is not an investment company registered or required to
be registered under the Investment Company Act of 1940 [15 U.S.C.
80a-1 et seq.];
(5) is not issuing fractional undivided interests in oil or
gas rights as defined in Section 230.300, or a similar interest
in other mineral rights; and
(6) is not disqualified because of Section 230.262.
(b) Aggregate Offering Price. The sum of all cash and other
consideration to be received for the securities ("aggregate
offering price") shall not exceed $5,000,000, including no more
than $1,500,000 offered by all selling security holders, less the
aggregate offering price for all securities sold within the
twelve months before the start of and during the offering of
securities in reliance upon Regulation A. No affiliate resales
are permitted if the issuer has not had net income from
continuing operations in at least one of its last two fiscal
years.
NOTE: Where a mixture of cash and non-cash consideration is
to be received, the aggregate offering price shall be based on
the price at which the securities are offered for cash. Any
portion of the aggregate offering price attributable to cash
received in a foreign currency shall be translated into United
States currency at a currency exchange rate in effect on or at a
reasonable time prior to the date of the sale of the securities.
If securities are not offered for cash, the aggregate offering
price shall be based on the value of the consideration as
established by bona fide sales of that consideration made within
a reasonable time, or, in the absence of sales, on the fair value
as determined by an accepted standard. Valuations of non-cash
consideration must be reasonable at the time made.
(c) Integration with Other Offerings. Offers and sales made
in reliance on this Regulation A will not be integrated with:
(1) prior offers or sales of securities; or
(2) subsequent offers or sales of securities that are:
(i) registered under the Securities Act, except as provided
in Section 230.254(d);
(ii) made in reliance on Section 230.701;
(iii) made pursuant to an employee benefit plan;
-------------------- BEGINNING OF PAGE #72 -------------------
(iv) made in reliance on Regulation S [Sections
230.901-904]; or
(v) made more than six months after the completion of the
Regulation A offering.
NOTE: If the issuer offers or sells securities for which the
safe harbor rules are unavailable, such offers and sales still
may not be integrated with the Regulation A offering, depending
on the particular facts and circumstances. See Securities Act
Release No. 4552 (November 6, 1962) [27 FR 11316].
(d) Offering Conditions.
(1) Offers.
(i) Except as allowed by Section 230.254, no offer of
securities shall be made unless a Form 1-A offering statement has
been filed with the Commission.
(ii) After the Form 1-A offering statement has been filed:
(A) oral offers may be made;
(B) written offers under Section 230.255 may be made;
(C) printed advertisements may be published or radio or
television broadcasts made, if they state from whom a Preliminary
Offering Circular or Final Offering Circular may be obtained, and
contain no more than the following information:
(1) the name of the issuer of the security;
(2) the title of the security, the amount being offered and
the per unit offering price to the public;
(3) the general type of the issuer's business; and
(4) a brief statement as to the general character and
location of its property.
(iii) after the Form 1-A offering statement has been
qualified, other written offers may be made, but only if
accompanied with or preceded by a Final Offering Circular.
(2) Sales.
(i) No sale of securities shall be made until:
(A) the Form 1-A offering statement has been qualified;
(B) a Preliminary Offering Circular or Final Offering
Circular is furnished to the prospective purchaser at least 48
hours prior to the mailing of the confirmation of sale to that
person; and
(C) a Final Offering Circular is delivered to the purchaser
with the confirmation of sale, unless it has been delivered to
that person at an earlier time.
(ii) Sales by a dealer (including an underwriter no longer
acting in that capacity for the security involved in such
transaction) that take place within 90 days after the
qualification of the Regulation A offering statement may be made
-------------------- BEGINNING OF PAGE #73 -------------------
only if the dealer delivers a copy of the current offering
circular to the purchaser before or with the confirmation of
sale. The issuer or underwriter of the offering shall provide
requesting dealers with reasonable quantities of the offering
circular for this purpose.
(3) Continuous or delayed offerings. Continuous or delayed
offerings may be made under this Regulation A if permitted by
Section 230.415.
Section 230.252 Offering Statement.
(a) Documents to be Included. The offering statement
consists of the facing sheet of Form 1-A [Section 239.90 of this
chapter], the contents required by the form and any other
material information necessary to make the required statements,
in the light of the circumstances under which they are made, not
misleading.
(b) Paper, printing, language and pagination. The
requirements for offering statements are the same as those
specified in Section 230.403 for registration statements under
the Act.
(c) Confidential treatment. A request for confidential
treatment may be made under Section 230.406 for information
required to be filed, and Section 200.83 of this chapter for
information not required to be filed.
(d) Signatures. The issuer, its Chief Executive Officer,
Chief Financial Officer, a majority of the members of its board
of directors or other governing body, and each selling security
holder shall sign the offering statement. If a signature is by a
person on behalf of any other person, evidence of authority to
sign shall be filed, except where an executive officer signs for
the issuer. If the issuer is Canadian, its authorized
representative in the United States shall sign. If the issuer is
a limited partnership, a majority of the board of directors of
any corporate general partner also shall sign.
(e) Number of copies and where to file. Seven copies of the
offering statement, at least one of which is manually signed,
shall be filed either with the Commission's Office for the region
in which the issuer's principal business operations are conducted
or are proposed to be conducted or with the Commission's main
office in Washington, D.C. An issuer which has or proposes to
have its principal business operations in Canada shall file with
the Regional Office nearest the place where the issuer's
principal business operations are conducted or proposed to be
conducted or with the Commission's main office in Washington,
D.C., unless the offering is to be made through a principal
underwriter located in the United States, in which case the
appropriate Regional Office is the office for the region in which
such underwriter has its principal office. Since no filing may
be made with the Philadelphia Regional Office, filings within the
jurisdiction of that office may be made either at the Atlanta or
New York Regional Office or in Washington, D.C.
(f) Fee. There is a filing fee of $500 which shall
accompany the initial filing of the offering statement. There is
no fee for amendments.
(g) Qualification. (1) If there is no delaying notation as
permitted by paragraph (g)(2) of this section or suspension
proceeding under Section 230.258, an offering statement is
-------------------- BEGINNING OF PAGE #74 -------------------
qualified without Commission action on the 20th calendar day
after its filing.
(2) An offering statement containing the following notation
can be qualified only by order of the Commission, unless such
notation is removed prior to Commission action as described in
paragraph (g)(3) of this section:
This offering statement shall only be qualified upon order
of the Commission, unless a subsequent amendment is filed
indicating the intention to become qualified by operation of the
terms of Regulation A.
(3) The delaying notation specified in paragraph (g)(2) of
this section can be removed only by an amendment to the offering
statement that contains the following language:
This offering statement shall become qualified on the 20th
calendar day following the filing of this amendment.
(h) Amendments.
(1) If any information in the offering statement is amended,
an amendment, signed in the same manner as the initial filing,
shall be filed. Seven copies of every amendment shall be filed
with the Commission's Office that accepted the initial filing.
Subsequent amendments to an offering shall recommence the time
period for qualification.
(2) An amendment to include a delaying notation pursuant to
paragraph (g)(2) or to remove one pursuant to paragraph (g)(3) of
this section after the initial filing of an offering statement
may be made by telegram or letter. Each such telegraphic
amendment shall be confirmed in writing within a reasonable time
by filing a signed copy. Such confirmation shall not be deemed
an amendment.
Section 230.253 Offering Circular.
(a) Contents. An offering circular shall include the
narrative and financial information required by Form 1-A.
(b) Presentation of Information. Information in the
offering circular shall be presented in a clear, concise and
understandable manner and in a type size that is easily readable.
Repetition of information should be avoided; cross-referencing of
information within the document is permitted.
(c) Date. An offering circular shall be dated approximately
as of the date of the qualification of the offering statement of
which it is a part.
(d) Cover page legend. The cover page of every offering
circular shall display the following statement in capital letters
printed in boldfaced type at least as large as that used
generally in the body of such offering circular:
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES
NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY
SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT
PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING
CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE
OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE
COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN
-------------------- BEGINNING OF PAGE #75 -------------------
INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED
HEREUNDER ARE EXEMPT FROM REGISTRATION.
(e) Revisions. (1) An offering circular shall be revised
during the course of an offering whenever the information it
contains has become false or misleading in light of existing
circumstances, material developments have occurred, or there has
been a fundamental change in the information initially presented.
(2) An offering circular for a continuous offering shall be
updated to include, among other things, updated financial
statements, 12 months after the date the offering statement was
qualified.
(3) Every revised or updated offering circular shall be
filed as an amendment to the offering statement and requalified
in accordance with Section 230.252.
Section 230.254 Solicitation of Interest Document for Use Prior
to an Offering Statement.
(a) An issuer may publish or deliver to prospective
purchasers a written document or make scripted radio or
television broadcasts to determine whether there is any interest
in a contemplated securities offering. Following submission of
the written document or script of the broadcast to the
Commission, as required by paragraph (b) of this section, oral
communications with prospective investors and other broadcasts
are permitted. The written documents, broadcasts and oral
communications are each subject to the antifraud provisions of
the federal securities laws. No solicitation or acceptance of
money or other consideration, nor of any commitment, binding or
otherwise, from any prospective investor is permitted. No sale
may be made until qualification of the offering statement.
(b) While not a condition to any exemption pursuant to this
section:
(1) On or before the date of its first use, the issuer shall
submit a copy of any written document or the script of any
broadcast with the Commission's Regional Office for the region in
which the issuer's principal business operations are conducted or
are proposed to be conducted (Attention: Small Issues Branch) or
with the Commission's main office in Washington, D.C. (Attention:
Office of Small Business Policy). The document or broadcast
script shall either contain or be accompanied by the name and
telephone number of a person able to answer questions about the
document or the broadcast.
NOTE: Only solicitation of interest material that contains
substantive changes from or additions to previously submitted
material needs to be submitted.
(2) The written document or script of the broadcast shall:
(i) state that no money or other consideration is being
solicited, and if sent in response, will not be accepted;
(ii) state that no sales of the securities will be made or
commitment to purchase accepted until delivery of an offering
circular that includes complete information about the issuer and
the offering;
-------------------- BEGINNING OF PAGE #76 -------------------
(iii) state that an indication of interest made by a
prospective investor involves no obligation or commitment of any
kind; and
(iv) identify the chief executive officer of the issuer and
briefly and in general its business and products.
(3) Solicitations of interest pursuant to this provision may
not be made after the filing of an offering statement.
(4) Sales may not be made until 20 calendar days after the
last publication or delivery of the document or radio or
television broadcast.
(c) Any written document under this section may include a
coupon, returnable to the issuer indicating interest in a
potential offering, revealing the name, address and telephone
number of the prospective investor.
(d) Where an issuer has a bona fide change of intention and
decides to register an offering after using the process permitted
by this section without having filed the offering statement
prescribed by Section 230.252, the Regulation A exemption for
offers made in reliance upon this section will not be subject to
integration with the registered offering, if at least 30 calendar
days have elapsed between the last solicitation of interest and
the filing of the registration statement with the Commission, and
all solicitation of interest documents have been submitted to the
Commission. With respect to integration with other offerings,
see Section 230.251(c).
Section 230.255 Preliminary Offering Circulars.
(a) Prior to qualification of the required offering
statement, but after its filing, a written offer of securities
may be made if it meets the following requirements:
(1) The outside front cover page of the material bears the
caption "Preliminary Offering Circular," the date of issuance,
and the following statement, which shall run along the left hand
margin of the page and be printed perpendicular to the text, in
boldfaced type at least as large as that used generally in the
body of such offering circular:
An offering statement pursuant to Regulation A relating to
these securities has been filed with the Office of the
Securities and Exchange Commission.
Information contained in this Preliminary Offering Circular
is subject to completion or amendment. These securities may not
be sold nor may offers to buy be accepted prior to the time an
offering circular which is not designated as a Preliminary
Offering Circular is delivered and the offering statement filed
with the Commission becomes qualified. This Preliminary Offering
Circular shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sales of
these securities in any state in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the laws of any such state.
(2) The Preliminary Offering Circular contains substantially
the information required in an offering circular by Form 1-A
(Section 239.90 of this chapter), except that information with
respect to offering price, underwriting discounts or commissions,
-------------------- BEGINNING OF PAGE #77 -------------------
discounts or commissions to dealers, amount of proceeds,
conversion rates, call prices, or other matters dependent upon
the offering price may be omitted. The outside front cover page
of the Preliminary Offering Circular shall include a bona fide
estimate of the range of the maximum offering and maximum number
of shares or other units of securities to be offered or a bona
fide estimate of the principle amount of debt securities to be
offered.
(3) The material is filed as part of the offering statement.
(b) If a Preliminary Offering Circular is inacccurate in any
material respect, a revised Preliminary Offering Circular or a
complete Offering Circular shall be furnished to all persons to
whom securities are to be sold at least 48 hours prior to the
mailing of any confirmation to sale to such persons,or shall be
sent to such persons under such circumstances that it would
normally be received by them 48 hours prior to receipt to
confirmation to the sale.
Section 230.256 Filing of Sales Material.
While not a condition to an exemption pursuant to this
provision, seven copies of any advertisement or written
communication, ot the script of any radio or television
broadcast, shall be filed with the Office of the Commission where
the offering statement was qualified when the material is first
published or delivered.
Note: Only sales material that contains substantive changes
from to additions from previously filed statement needs to be
filed.
Section 230.257 Reports of Sales and Use of Proceeds.
While not a condition to an exemption pursuant to this
provision, the issuer and/or selling security holder shall file
seven copies of a report concerning sales and use of proceeds of
Form 2-A (Section 239.91 of this chapter), or other form
prescribed by the Commission, with the Office of the Commission
where the offering statement was qualified. This report shall be
filed at the following times:
(a) Every six months after the qualification of the offering
statement or any amendment until substantially all the proceeds
have been applied; and
(b) within 30 calendar days after the termination,
completion or final sale of securities in the offering, or the
application of the proceeds from the offering, whichever is the
latest event. This report should be labelled the final report.
For purposes of this section, the temporary investment of
proceeds pending final application shall not constitute
application of the proceeds.
Section 230.258 Suspension of the Exemption.
(a) The Commission may at any time enter an order
temporarily suspending a Regulation A exemption if it has reason
to believe that:
(1) no exemption is available or any of the terms,
conditions or requirements of the Regulation have not been
complied with, including failures to provide the Commission a
-------------------- BEGINNING OF PAGE #78 -------------------
copy of the document or broadcast script under Section 230.254,
to file any sales material as required by Section 230.256 or
report as required by Section 230.257;
(2) the offering statement, any sales or solicitation of
interest material contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements made, in light of the circumstances under which
they are made, not misleading;
(3) the offering is being made or would be made in violation
of section 17 of the Securities Act;
(4) an event has occurred after the filing of the offering
statement which would have rendered the exemption hereunder
unavailable if it had occurred prior to such filing;
(5) any person specified in paragraph (a) of Section 230.262
has been indicted for any crime or offense of the character
specified in paragraph (a)(3) of 230.262, or any proceeding has
been initiated for the purpose of enjoining any such person from
engaging in or continuing any conduct or practice of the
character specified in paragraph (a)(4) of Section 230.262;
(6) any person specified in paragraph (b) of Section 230.262
has been indicted for any crime or offense of the character
specified in paragraph (b)(1) of Section 230.262, or any
proceeding has been initiated for the purpose of enjoining any
such person from engaging in or continuing any conduct or
practice of the character specified in paragraph (b)(2) of
Section 230.262; or
(7) the issuer or any promoter, officer, director or
underwriter has failed to cooperate, or has obstructed or refused
to permit the making of an investigation by the Commission in
connection with any offering made or proposed to be made in
reliance on Regulation A.
(b) Upon the entry of an order under paragraph (a) of this
section, the Commission will promptly give notice to the issuer,
any underwriter and any selling security holder:
(1) that such order has been entered, together with a brief
statement of the reasons for the entry of the order; and
(2) that the Commission, upon receipt of a written request
within 30 calendar days after the entry of the order, will within
20 calendar days after receiving the request, order a hearing at
a place to be designated by the Commission.
(c) If no hearing is requested and none is ordered by the
Commission, an order entered under paragraph (a) of this section
shall become permanent on the 30th calendar day after its entry
and shall remain in effect unless or until it is modified or
vacated by the Commission. Where a hearing is requested or is
ordered by the Commission, the Commission will, after notice of
and opportunity for such hearing, either vacate the order or
enter an order permanently suspending the exemption.
(d) The Commission may, at any time after notice of and
opportunity for hearing, enter an order permanently suspending
the exemption for any reason upon which it could have entered a
temporary suspension order under paragraph (a) of this section.
-------------------- BEGINNING OF PAGE #79 -------------------
Any such order shall remain in effect until vacated by the
Commission.
(e) All notices required by this section shall be given by
personal service, registered or certified mail to the addresses
given by the issuer, any underwriter and any selling security
holder in the offering statement.
Section 230.259 Withdrawal or Abandonment of Offering Statements.
(a) If none of the securities which are the subject of an
offering statement have been sold and such offering statement is
not the subject of a proceeding under Section 230.258, the
offering statement may be withdrawn with the Commission's
consent. The application for withdrawal shall state the reason
the offering statement is to be withdrawn, shall be signed by an
authorized representative of the issuer and shall be directed to
the Commission's Office where the offering statement was filed.
(b) When an offering statement has been on file with the
Commission for nine months without amendment and has not become
qualified, the Commission may, in its discretion, proceed in the
following manner to determine whether such offering statement has
been abandoned by the issuer. If the offering statement has been
amended, the 9-month period shall be computed from the date of
the latest amendment.
(1) Notice will be sent to the issuer, and to any counsel
for the issuer named in the offering statement, by registered or
certified mail, return receipt requested, addressed to the most
recent addresses for the issuer and issuer's counsel as reflected
in the offering statement. Such notice will inform the issuer
and issuer's counsel that the offering statement or amendments
thereto is out of date and must be either amended to comply with
applicable requirements of Regulation A or be withdrawn within 30
calendar days after the notice.
(2) If the issuer or issuer's counsel fail to respond to
such notice by filing a substantive amendment or withdrawing the
offering statement or does not furnish a satisfactory explanation
as to why the issuer has not done so within 30 calendar days, the
Commission may declare the offering statement abandoned.
Section 230.260 Insignificant Deviations from a Term, Condition
or Requirement of Regulation A.
(a) A failure to comply with a term, condition or
requirement of Regulation A will not result in the loss of the
exemption from the requirements of section 5 of the Securities
Act for any offer or sale to a particular individual or entity,
if the person relying on the exemption establishes:
(1) the failure to comply did not pertain to a term,
condition or requirement directly intended to protect that
particular individual or entity;
(2) the failure to comply was insignificant with respect to
the offering as a whole, provided that any failure to comply with
paragraphs (a), (b), (d)(1) and (3) of Section 230.251 shall be
deemed to be significant to the offering as a whole; and
-------------------- BEGINNING OF PAGE #80 -------------------
(3) a good faith and reasonable attempt was made to comply
with all applicable terms, conditions and requirements of
Regulation A.
(b) A transaction made in reliance upon Regulation A shall
comply with all applicable terms, conditions and requirements of
the regulation. Where an exemption is established only through
reliance upon paragraph (a) of this section, the failure to
comply shall nonetheless be actionable by the Commission under
section 20 of the Act.
(c) This provision provides no relief or protection from a
proceeding under Section 230.258.
Section 230.261 Definitions.
As used in this Regulation A, all terms have the same
meanings as in Section 230.405, except that all references to
"registrant" in those definitions shall refer to the issuer of
the securities to be offered and sold under Regulation A. In
addition, these terms have the following meanings:
(a) Final Offering Circular- The current offering circular
contained in a qualified offering statement;
(b) Preliminary Offering Circular- The offering circular
described in Section 230.255(a).
Section 230.262 Disqualification Provisions.
Unless, upon a showing of good cause and without prejudice
to any other action by the Commission, the Commission determines
that it is not necessary under the circumstances that the
exemption provided by this Regulation A be denied, the exemption
shall not be available for the offer or sale of securities, if:
(a) the issuer, any of its predecessors or any affiliated
issuer:
(1) has filed a registration statement which is the subject
of any pending proceeding or examination under section 8 of the
Act, or has been the subject of any refusal order or stop order
thereunder within 5 years prior to the filing of the offering
statement required by Section 230.252;
(2) is subject to any pending proceeding under Section
230.258 or any similar section adopted under section 3(b) of the
Securities Act, or to an order entered thereunder within 5 years
prior to the filing of such offering statement;
(3) has been convicted within 5 years prior to the filing of
such offering statement of any felony or misdemeanor in
connection with the purchase or sale of any security or involving
the making of any false filing with the Commission;
(4) is subject to any order, judgment, or decree of any
court of competent jurisdiction temporarily or preliminary
restraining or enjoining, or is subject to any order, judgment or
decree of any court of competent jurisdiction, entered within 5
years prior to the filing of such offering statement, permanently
restraining or enjoining, such person from engaging in or
continuing any conduct or practice in connection with the
purchase or sale of any security or involving the making of any
false filing with the Commission; or
-------------------- BEGINNING OF PAGE #81 -------------------
(5) is subject to a United States Postal Service false
representation order entered under 39 U.S.C. Section 3005 within
5 years prior to the filing of the offering statement, or is
subject to a temporary restraining order or preliminary
injunction entered under 39 U.S.C. Section 3007 with respect to
conduct alleged to have violated 39 U.S.C. Section 3005. The
entry of an order, judgment or decree against any affiliated
entity before the affiliation with the issuer arose, if the
affiliated entity is not in control of the issuer and if the
affiliated entity and the issuer are not under the common control
of a third party who was in control of the affiliated entity at
the time of such entry does not come within the purview of this
paragraph (a) of this section.
(b) any director, officer or general partner of the issuer,
beneficial owner of 10 percent or more of any class of its equity
securities, any promoter of the issuer presently connected with
it in any capacity, any underwriter of the securities to be
offered, or any partner, director or officer of any such
underwriter:
(1) has been convicted within 10 years prior to the filing
of the offering statement required by Section 230.252 of any
felony or misdemeanor in connection with the purchase or sale of
any security, involving the making of a false filing with the
Commission, or arising out of the conduct of the business of an
underwriter, broker, dealer, municipal securities dealer, or
investment adviser;
(2) is subject to any order, judgment, or decree of any
court of competent jurisdiction temporarily or preliminarily
enjoining or restraining, or is subject to any order, judgment,
or decree of any court of competent jurisdiction, entered within
5 years prior to the filing of such offering statement,
permanently enjoining or restraining such person from engaging in
or continuing any conduct or practice in connection with the
purchase or sale of any security, involving the making of a false
filing with the Commission, or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities
dealer, or investment adviser;
(3) is subject to an order of the Commission entered
pursuant to section 15(b), 15B(a), or 15B(c) of the Exchange Act,
or section 203(e) or (f) of the Investment Advisers Act of 1940
[15 U.S.C. 80b-1 et seq.];
(4) is suspended or expelled from membership in, or
suspended or barred from association with a member of, a national
securities exchange registered under section 6 of the Exchange
Act or a national securities association registered under section
15A of the Exchange Act for any act or omission to act
constituting conduct inconsistent with just and equitable
principles of trade; or
(5) is subject to a United States Postal Service false
representation order entered under 39 U.S.C. Section 3005 within
5 years prior to the filing of the offering statement required by
Section 230.252, or is subject to a restraining order or
preliminary injunction entered under 39 U.S.C. Section 3007 with
respect to conduct alleged to have violated 39 U.S.C. Section
3005.
-------------------- BEGINNING OF PAGE #82 -------------------
(c) any underwriter of such securities was an underwriter or
was named as an underwriter of any securities:
(1) covered by any registration statement which is the
subject of any pending proceeding or examination under section 8
of the Act, or is the subject of any refusal order or stop order
entered thereunder within 5 years prior to the filing of the
offering statement required by Section 230.252; or
(2) covered by any filing which is subject to any pending
proceeding under Section 230.258 or any similar rule adopted
under section 3(b) of the Securities Act, or to an order entered
thereunder within 5 years prior to the filing of such offering
statement.
Section 230.263 Consent to Service of Process.
(a) If the issuer is not organized under the laws of any of
the states of or the United States of America, it shall at the
time of filing the offering statement required by Section
230.252, furnish to the Commission a written irrevocable consent
and power of attorney on Form F-X [Section 239.42 of this
chapter].
(b) Any change to the name or address of the agent for
service of the issuer shall be communicated promptly to the
Commission through amendment of the requisite form and
referencing the file number of the relevant offering statement.
11. Section 230.405 is amended by adding the following
definition of "small business issuer" in the appropriate
alphabetical order to read as follows:
Section 230.405 Definitions of terms.
* * * * *
Small Business Issuer. The term "small business issuer"
means an entity that meets the following criteria:
(1) has revenues of less than $25,000,000;
(2) is a U.S. or Canadian issuer;
(3) is not an investment company; and
(4) if a majority owned subsidiary, the parent corporation
is also a small business issuer.
Provided however, that an entity is not a small business
issuer if it has a public float (the aggregate market value of
the outstanding securities held by non-affiliates) of $25,000,000
or more.
NOTE: The public float of a reporting company shall be
computed by use of the price at which the stock was last sold, or
the average of the bid and asked prices of such stock, on a date
within 60 days prior to the end of its most recent fiscal year.
The public float of a company filing an initial registration
statement under the Exchange Act shall be determined as of a date
within 60 days of the date the registration statement is filed.
In the case of an initial public offering of securities, public
float shall be computed on the basis of the number of shares
-------------------- BEGINNING OF PAGE #83 -------------------
outstanding prior to the offering and the estimated public
offering price of the securities.
* * * * *
Section 230.481 [Amended]
12. By removing the words "in red ink," from paragraph
(b)(2) of Section 230.481.
Section 230.502 [Amended]
13. In Section 230.502 by amending paragraph (b)(1) by
removing the words "Section 230.504" and adding "Section
230.504a" and in the note to paragraph (b) by removing the words
"Section 230.504(b)(2)(ii)" and adding the word "Section
230.504a(b)(2)(ii)" and in paragraph (c) by removing the words
"Section 230.504(b)(1) and adding the words "Section
230.504a(b)(1)" and in paragraph (d) by removing the words
"Section 230.504(b)(1)" and adding the words "Section
230.504a(b)(1)" and in the flush-text of paragraph (d) by
removing the words "Section 230.504(b)(2)(ii)" and adding the
words "Section 230.504a(b)(2)(ii)".
Section 230.504a [Redesignated from Section 230.504]
14. By redesignating Section 230.504 as Section 230.504a
and in newly redesignated Section 230.504a revise the section
heading to read as follows:
Section 230.504 Exemption for Limited Offerings and Sales of
Securities by Blank Check Companies Not Exceeding $1,000,000.
15. By adding Section 230.504 to read as follows:
Section 230.504 Exemption for limited offerings and sales of
securities not exceeding $1,000,000.
(a) Exemption. Offers and sales of securities that satisfy
the conditions in paragraph (b) of this Section 230.504 by an
issuer that is not:
(1) subject to the reporting requirements of section 13 or
15(d) of the Exchange Act,;
(2) an investment company; or
(3) a development stage company that either has no specific
business plan or purpose or has indicated that its business plan
is to engage in a merger or acquisition with an unidentified
company or companies, or other entity or person, shall be exempt
from the provision of section 5 of the Act under section 3(b) of
the Act.
(b) Conditions to be met -- (1) To qualify for exemption
under this Section 230.504, offers and sales must satisfy the
terms and conditions of Sections 230.501 and 230.502, except that
the provisions of Section 230.502(c) and (d) shall not apply to
offers and sales made under this Section 230.504.
(2) The aggregate offering price for an offering of
securities under this Section 230.504, as defined in Section
230.501(c), shall not exceed $1,000,000, less the aggregate
offering price for all securities sold within the twelve months
before the start of and during the offering of securities under
-------------------- BEGINNING OF PAGE #84 -------------------
this Section 230.504, in reliance on any exemption under section
3(b), or in violation of section 5(a) of the Securities Act.
NOTE 1: The calculation of the aggregate offering price is
illustrated as follows:
If an issuer sold $900,000 on June 1, 1987 under this
Section 230.504 and an additional $4,100,000 on December 1, 1987
under Section 230.505, the issuer could not sell any of its
securities under this Section 230.504 until December 1, 1988.
Until then the issuer must count the December 1, 1987 sale
towards the $1,000,000 limit within the preceding twelve months.
NOTE 2: If a transaction under Section 230.504 fails to meet
the limitation on the aggregate offering price, it does not
affect the availability of this Section 230.504 for the other
transactions considered in applying such limitation. For
example, if an issuer sold $1,000,000 worth of its securities on
January 1, 1988 under this Section 230.504 and an additional
$500,000 worth on July 1, 1988, this Section 230.504 would not be
available for the later sale, but would still be applicable to
the January 1, 1988 sale.
16. By revising paragraph (b)(2)(iii)(A) and (B) of Section
230.505 to read as follows:
Section 230.505 Exemption for limited offers and sales of
securities not exceeding $5,000,000.
* * * * *
(b)(2) * * *
(iii) Disqualifications. No exemption under this section
shall be available for the securities of any issuer described in
Section 230.262 of Regulation A, exept that for purposes of this
section only:
(A) The term "filing of the offering statement required by
Section 230.252" as used in Section 230.262(a), (b) and (c) shall
mean the first sale of securities under this section;
(B) The term "underwriter" as used in Section 230.262 (b)
and (c) shall mean a person that has been or will be paid
directly or indirectly remuneration for solicitation of
purchasers in connection with sales of securities under this
section; and
* * * * *
17. By revising paragraph (a)(2) of Section 230.508 to read
as follows:
Section 230.508. Insignificant deviations from a term, condition
or requirement of Regulation D.
(a) * * *
(2) The failure to comply was insignificant with respect to
the offering as a whole, provided that any failure to comply with
paragraph (c) of Section 230.502, paragraph (b)(2) of Section
230.504, paragraphs (b)(2)(i) and (ii) of Section 230.505 and
-------------------- BEGINNING OF PAGE #85 -------------------
paragraph (b)(2)(i) of Section 230.506 shall be deemed to be
significant to the offering as a whole; and
* * * * *
PART 239 - FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933
18. The authority citation for Part 239 continues to read
as follows:
Authority: 15 U.S.C. 77a, et seq., unless otherwise noted.
19. By removing Sections 239.28, 239.92, 239.93, 239.94,
239.95, and 239.96.
20. Section 239.10 is added to read as follows:
Section 239.10 Form SB-2, optional form for the registration of
securities to be sold to the public by small business issuers.
Small business issuers defined in Rule 405 (17 CFR 230.405
of this chapter) may use this form to register securities to be
sold for cash. For further information concerning eligibility
toward this form see Item 10(a) of Regulation S-B (17 CFR 228.10
et seq.)
Note: The Text and Instructions of Form SB-2 will not appear
in the Code of Federal Regulations.
Form SB-2
U.S. Securities and Exchange Commission,
Washington, D.C. 20549
OMB Approval
OMB Number: xxxx-xxxx
Expires: Approval Pending Estimated average burden hours per
response. -- 1.0
Registration Statement Under the Securities Act of 1933
(Amendment No. ____ )
__________________________________________________________
(Name of small business issuer in its charter)
__________________________________________________________
(State or jurisdiction of incorporation or organization)
___________
(Primary Standard Industrial Classification Code Number)
___________
(I.R.S. Employer Identification No.)
____________________________________________________________
(Address and telephone number of principal executive offices)
____________________________________________________________
(Address of principal place of business or intended principal
place of business)
-------------------- BEGINNING OF PAGE #86 -------------------
__________________________________________________________
(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public
_________________________________
Calculation of Registration Fee
Title of each class of securities to be registered
Dollar Amount to be registered
Proposed maximum offering price per unit
Proposed maximum aggregate offering price
Amount of registration fee
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.
General Instructions
A. Use of Form and Place of Filing
1. A "small business issuer," defined in Rule 405 of the
Securities Act of 1933 (the "Securities Act") may use this form
to register securities to be sold for cash. See also Item 10(a)
of Regulation S-B (17 CFR 228.10 et seq.)
2. Initial public offerings on Form SB-2 should be filed in
the regional office that is closest to its principal place of
business or the Washington, D.C. office. However, no filing may
be made in the Philadelphia regional office; small business
issuers in that region should file in the Atlanta, New York or
Washington, D.C. offices. The Commission may refer the filing to
another office for processing.
3. If the small business issuer is a reporting company or a
holding company of a bank (see the definition of "bank" in
section 12(i) of the Exchange Act), it should file the
registration statement in the Commission's Washington, D.C.
headquarters.
4. Post-effective amendments should be filed with the office
that declare the registration statement effective.
B. General Requirements
1. Issuers registering securities for the first time should
be aware of Form SR and Rule 463 under the Securities Act
concerning sales of registered securities and the use of
proceeds. First time issuers also should be aware of Exchange Act
Rule 15c2-8 (Section 240.15c2-8) which requires broker dealers to
-------------------- BEGINNING OF PAGE #87 -------------------
deliver a prospectus 48 hours before a sale of securities can be
confirmed.
2. Issuers engaged in real estate, oil and gas or mining
activities should consult the Industry Guides in Item 801 of
Regulation S-K (17 CFR 229.801). Real estate companies also
should refer to Item 13 [Investment Policies of Registrant], Item
14 [Description of Real Estate], and Item 15 [Operating Data] of
Form S-11 (17 CFR 239.18).
3. If the issuer is not organized under the laws of any of
the states of or the United States of America, it shall at the
time of filing this registration statement, file with the
Commission a written irrevocable consent and power of attorney on
Form F-X [Section 239.42]. Any change to the name or address of
the agent for service of the issuer shall be communicated
promptly to the Commission through amendment of the requisite
form and referencing the file number of the registration
statement.
Part I -- Information Required in Prospectus
Item 1. Front of Registration Statement and Outside Front
Cover of Prospectus
Furnish the information required by Item 501 of Regulation
S-B.
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus
Furnish the information required by Item 502 of Regulation
S-B.
Item 3. Summary Information and Risk Factors
Furnish the information required by Item 503 of Regulation
S-B.
Item 4. Use of Proceeds
Furnish the information required by Item 504 of Regulation
S-B.
Item 5. Determination of Offering Price
Furnish the information required by Item 505 of Regulation
S-B.
Item 6. Dilution
Furnish the information required by Item 506 of Regulation
S-B.
Item 7. Selling Security Holders
Furnish the information required by Item 507 of Regulation
S-B.
Item 8. Plan of Distribution
Furnish the information required by Item 508 of Regulation
S-B.
-------------------- BEGINNING OF PAGE #88 -------------------
Item 9. Legal Proceedings
Furnish the information required by Item 103 of Regulation
S-B.
Item 10. Directors, Executive Officers, Promoters and
Control Persons
Furnish the information required by Item 401 of Regulation
S-B.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Furnish the information required by Item 403 of Regulation
S-B.
Item 12. Description of Securities
Furnish the information required by Item 202 of Regulation
S-B.
Item 13. Interest of Named Experts and Counsel
Furnish the information required by Item 509 of Regulation
S-B.
Item 14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities
Furnish the information required by Item 510 of Regulation
S-B.
Item 15. Organization Within Last Five Years
Furnish the information required by Item 404 of Regulation
S-B.
Item 16. Description of Business
Furnish the information required by Item 101 of Regulation
S-B.
Item 17. Management's Discussion and Analysis or Plan of
Operation
Furnish the information required by Item 303 of Regulation
S-B.
Item 18. Description of Property
Furnish the information required by Item 102 of Regulation
S-B.
Item 19. Certain Relationships and Related Transactions
Furnish the information required by Item 404 of Regulation
S-B.
Item 20. Market for Common Equity and Related Stockholder
Matters
Furnish the information required by Item 201 of Regulation
S-B.
-------------------- BEGINNING OF PAGE #89 -------------------
Item 21. Executive Compensation
Furnish the information required by Item 402 of Regulation
S-B.
Item 22. Financial Statements
Furnish the information required by Item 310 of Regulation
S-B.
Item 23. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
Furnish the information required by Item 304 of Regulation
S-B.
Part II -- Information Not Required in Prospectus
Item 24. Indemnification of Directors and Officers
Furnish the information required by Item 702 of Regulation
S-B.
Item 25. Other Expenses of Issuance and Distribution
Furnish the information required by Item 511 of Regulation
S-B.
Item 26. Recent Sales of Unregistered Securities
Furnish the information required by Item 701 of Regulation
S-B.
Item 27. Exhibits
Furnish the exhibits required by Item 601 of Regulation S-B.
Item 28. Undertakings
Furnish the undertakings required by Item 512 of Regulation
S-B.
Signatures
In accordance with the requirements of the Securities Act of
1933, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on Form
SB-2 and authorized this registration statement to be signed on
its behalf by the undersigned, in the City of _____ , State of
_____ , on ____ , 19___
(Registrant) __________________________________
By (Signature and Title)_______________________
In accordance with the requirements of the Securities Act of
1933, this registration statement was signed by the following
persons in the capacities and on the dates stated.
(Signature)____________________________
(Title) ____________________________
-------------------- BEGINNING OF PAGE #90 -------------------
(Date) ___________
Instructions for Signatures
(1) Who must sign: the small business issuer, its principal
executive officer or officers, its principal financial officer,
its controller or principal accounting officer and at least the
majority of the board of directors or persons performing similar
functions. If the issuer is a limited partnership then the
general partner and a majority of its board of directors if a
corporation.
(2) Beneath each signature, type or print the name of each
signatory. Any person who occupies more than one of the
specified positions shall indicate each capacity in which he or
she signs the registration statement. See Rule 402 of Regulation
C concerning manual signatures and Item 601 of Regulation S-B
concerning signatures by powers of attorney.
21. Form S-2 (Section 239.12) is amended by adding
paragraph C to General Instruction II to read as follows:
Note: The text of Form S-2 does not appear in the Code of
Federal Regulations.
Form S-2
* * * * *
General Instruction
* * * * *
II. Application of General Rules and Regulations
* * * * *
C. A "small business issuer," defined in Rule 405 (17 CFR
230.405), that is eligible to use Form S-2, shall refer to the
disclosure items in Regulation S-B (17 CFR 228.10 et seq.) and
not Regulation S-K. For example, while Item 1 of Form S-2
requires the information required by Item 501 of Regulation S-K,
a small business issuer shall provide the information in Item 501
of Regulation S-B. Where Regulation S-B does not contain a
comparable Item, for example there is no Item "301" in Regulation
S-B, then a small business issuer may omit the Item. A small
business issuer shall provide the financial information in Item
310 of Regulation S-B in lieu of the financial information called
for by Item 11 of Form S-2.
* * * * *
22. Form S-3 (Section 239.13) is amended by adding
paragraph C to General Instruction II to read as follows:
Note: The text of Form S-3 does not appear in the Code of
Federal Regulations.
Form S-3
* * * * *
General Instruction
-------------------- BEGINNING OF PAGE #91 -------------------
* * * * *
II. Application of General Rules and Regulations
* * * * *
C. A "small business issuer," defined in Rule 405 (17 CFR
230.405), that is eligible to use Form S-3 shall refer to the
disclosure items in Regulation S-B (17 CFR 228.10 et seq.) and
not Regulation S-K. For example, while Item 1 of Form S-3
requires the information required by Item 501 of Regulation S-K,
small business issuers shall provide the information in Item 501
of Regulation S-B. Where Regulation S-B does not contain a
comparable Item, for example there is no Item "301" in Regulation
S-B, then small business issuers may omit the Item. Small
business issuers shall provide the financial information called
for by Item 310 of Regulation S-B in lieu of the financial
information called for by Item 11.
* * * * *
23. Form S-8 (Section 239.16b) is amended by adding
instruction 3 to General Instruction B to read as follows
Note: The text of Form S-8 does not appear in the Code of
Federal Regulations,
Form S-8
* * * * *
General Instruction
* * * * *
B. Application of General Rules and Regulations
* * * * *
3. A "small business issuer," defined in Section 230.405,
shall refer to the disclosure items in Regulation S-B (17 CFR
228.10 et seq.) and not Regulation S-K (17 CFR 229.10 et seq.).
* * * * *
24. Form S-4 (Section 239.25) is amended by adding
paragraph 3 to General Instruction D to read as follows:
Note: The text of Form S-4 will not appear in the Code of
Federal Regulations.
Form S-4
* * * * *
General Instructions
* * * * *
D. Application of General Rules and Regulations
* * * * *
-------------------- BEGINNING OF PAGE #92 -------------------
3. A small business issuer, defined in Section 230.405,
shall refer to the disclosure items in Regulation S-B (17 CFR
228.10 et seq.) and not Regulation S-K except with respect to
disclosure called for by subpart 900 of Regulation S-K. Small
business issuers shall provide or incorporate by reference the
information called for by Item 310 of Regulation S-B.
* * * * *
25. By amending Section 239.42 by revising the section
heading and paragraph (a), removing the word "and" at the end of
paragraph (d), removing the "period" at the end of paragraph (e)
and adding to the end of paragraph (e) a "semi-colon" and the
word "and" and adding a new paragrpah (f) to read as Follows:
Section 239.42. Form F-X, for appointment of agent for service of
process and undertaking for issuers registering securities on
Form F-8, F-9, F-10 or F-80 (Sections 239.38, 239.39, 239.40, or
239.41 of this chapter) or registering securities or filing
periodic reports on Form 40-F (Section 249.240f of this chapter),
or by any issuer or other non-U.S. person filing tender offer
documents on Schedule 13E-4F, 14D-1F or 14D-9F (Sections 240.13e-
102, 240.14d-102 or 240.14d-103 of this chapter), by any non-
U.S. person acting as trustee with respect to securities
registered on Form F-7 (Section 239.37 of this chapter), F-8, F-
9, F-10, F-80 or SB-2 (Section 239.10 of this chapter), or by a
Canadian issuer qualifying an offering statement pursuant to
Regulation A (Section 230.251 et seq.) on Form 1-A (Section
239.90 of this chapter), or registering securities on Form SB-2.
* * * * *
(a) By any issuer registering securities on Form F-8, F-9,
F-10, F-80 or SB-2 under the Securities Act of 1933;
* * * * *
(f) By a Canadian issuer qualifying an offering statement
pursuant to the provisions of Regulation A, or registering
securities on Form SB-2.
26. By amending Form F-X (Section 239.42) to revise the
title of the form, to remove the word "and" at the end of General
Instruction I(d), to revise General Instruction I(e), to add
General Instruction I(f), to revise General Instruction IIE(b)(i)
and F and add General Instruction G and to revise Instructions 2
to read as follows.
Note: Form F-X does not appear in the Code of Federal
Regulations.
U.S. Securities and Exchange Commission,
Washington, DC 20549
Form F-X -- Appointment of Agent for Service of Process and
Undertaking, General Instructions
I. Form F-X shall be filed with the Commission:
* * * * *
-------------------- BEGINNING OF PAGE #93 -------------------
(e) by any non-U.S. person acting as trustee with respect to
securities registered on Form F-7, F-8, F-9, F-10, F-80, or SB-2;
and
(f) by a Canadian issuer qualifying an offering statement
pursuant to the provisions of Regulation A, or registering
securities on Form SB-2.
* * * * *
II. * * *
E. * * *
(a) * * *
(b) any civil suit or action brought against the Filer or to
which the Filer has been joined as defendant or respondent, in
any appropriate court in any place subject to the jurisdiction of
any state or of the United States or of any of its territories or
possessions or of the District of Columbia, where the
investigation, proceeding or cause of action arises out of or
relates to or concerns (i) any offering made or purported to be
made in connection with the securities registered or qualified by
the Filer on Form (Name of form) ____ on (Date) _______ or any
purchases or sales of any security in connection therewith; * * *
F. Each person filing this Form in connection with:
(a) the use of Form F-9, F-10, 40-F, or SB-2 or Schedule
13E-4F, 14D-1F or 14D-9F stipulates and agrees to appoint a
successor agent for service of process and file an amended Form
F-X if the Filer discharges the Agent or the Agent is unwilling
or unable to accept service on behalf of the Filer at any time
until six years have elapsed from the date the issuer of the
securities to which such Forms and Schedules relate has ceased
reporting under the Exchange Act;
(b) the use of Form F-8 or Form F-80 stipulates and agrees
to appoint a successor agent for service of process and file an
amended Form F-X if the Filer discharges the Agent or the Agent
is unwilling or unable to accept service on behalf of the Filer
at any time until six years have elapsed following the effective
date of the latest amendment to such Form F-8 or Form F-80;
(c) its status as trustee with respect to securities
registered on Form F-7, F-8, F-9, F-10, F-80, or SB-2 stipulates
and agrees to appoint a successor agent for service of process
and file an amended Form F-X if the Filer discharges the Agent or
the Agent is unwilling or unable to accept service on behalf of
the Filer at any time during which any of the securities subject
to the indenture remain outstanding; and
(d) the use of Form 1-A or other Commission form for an
offering pursuant to Regulation A stipulates and agrees to
appoint a successor agent for service of process and file an
amended Form F-X if the Filer discharges the Agent or the Agent
is unwilling or unable to accept service on behalf of the Filer
at any time until six years have elapsed from the date of the
last sale of securities in reliance upon the Regulation A
exemption.
Each Filer further undertakes to advise the Commission
promptly of any change to the Agent's name or address during the
-------------------- BEGINNING OF PAGE #94 -------------------
applicable period by amendment of this Form, referencing the file
number of the relevant form in conjunction with which the
amendment is being filed.
G. Each person filing this Form, other than a trustee filing
in accordance with General Instruction I.(e) of this Form,
undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission
staff, and to furnish promptly, when requested to do so by the
Commission staff, information relating to: the Forms, Schedules
and offering statements described in General Instructions I.(a),
I.(b), I.(c), I.(d) and I.(f) of this Form, as applicable; the
securities to which such Forms, Schedules and offering statements
relate; and the transactions in such securities.
* * * * *
Instructions
1. * * *
2. The name of each person who signs Form F-X shall be typed
or printed beneath such person's signature. Any person who
occupies more than one of the specified positions shall indicate
each capacity in which such person signs Form F-X. If any name is
signed pursuant to a board resolution, a copy of the resolution
shall be filed with each copy of Form F-X. A certified copy of
such resolution shall be filed with the manually signed copy of
Form F-X. If any name is signed pursuant to a power of attorney,
a copy of the power of attorney shall be filed with each copy of
Form F-X. A manually signed copy of such power of attorney shall
be filed with the manually signed copy of Form F-X.
27. By revising Sections 239.90 and 239.91 to read as
follows:
Section 239.90 Form 1-A, offering statement under Regulation A.
This form shall be used for filing under Regulation A
(Sections 230.251-230.263 of this chapter).
Section 239.91 Form 2-A, report pursuant to Rule 257 of
Regulation A.
This form shall be used for reports of sales and use of
proceeds pursuant to Rule 257 of Regulation A (Section 230.257 of
this chapter).
28. By revising Form 1-A (Section 239.90) and Form 2-A
(Section 239.91) to read as follows:
Note: Forms 1-A and 2-A do not appear in the Code of Federal
Regulations.
Securities and Exchange Commission
Form 1-A -- Regulation A Offering Statement Under the Securities
Act of 1933
_________________________________________________
(Exact name of issuer as specified in its charter)
____________________________________________
(State or other jurisdiction of incorporation or organization)
-------------------- BEGINNING OF PAGE #95 -------------------
___________________________________________________
(Address, including zip code, and telephone number, including
area code of issuer's principal executive offices)
___________________________________________________
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_____________
(Primary Standard Industrial Classification Code Number)
_____________
(I.R.S. Employer Identification Number)
The following delaying notation is optional, but see Rule
252(g) before omitting it:
This offering statement shall only be qualified upon order of
the Commission, unless a subsequent amendment is filed indicating
the intention to become qualified by operation of the terms of
Regulation A.
General Instructions
I. Eligibility Requirements for Use of Form 1-A
This form is to be used for securities offerings made
pursuant to Regulation A, 17 CFR 230.251 et seq. Careful
attention should be directed to the terms, conditions and
requirements of the regulation, especially Rule 251, inasmuch as
the exemption is not available to all issuers or to every type of
securities transaction. Further, the aggregate offering amount of
securities which may be sold in any 12 month period is strictly
limited to $5 million.
II. Preparation and Filing of the Offering Statement
An offering statement shall be prepared by all persons
seeking exemption pursuant to the provisions of Regulation A.
Parts I, II and III shall be addressed by all issuers. Part II of
the form which relates to the content of the required offering
circular provides several alternate formats depending upon the
nature and/or business of the issuer; only one format needs to be
followed and provided in the offering statement. General
information regarding the preparation, format, content of, and
where to file the offering statement is contained in Rule 252.
Requirements relating to the offering circular are contained in
Rules 253 and 255. The offering statement may be printed,
mimeographed, lithographed, or typewritten or prepared by any
similar process which will result in clearly legible copies. The
Commission will attempt to process the offering statement at the
place of filing. However, the Commission may refer processing to
a different office.
III. Supplemental Information
The following information shall be furnished to the
Commission as supplemental information:
(1) A statement as to whether or not the amount of
compensation to be allowed or paid to the underwriter has been
cleared with the NASD.
-------------------- BEGINNING OF PAGE #96 -------------------
(2) Any engineering, management or similar report referenced
in the offering circular.
(3) Such other information as requested by the staff in
support of statements, representations and other assertions
contained in the offering statement.
Part I -- Notification
The information requested shall be provided in the order
which follows specifying each item number; the text of each item
as presented in this form may be omitted. All items shall be
addressed and negative responses should be included.
Item 1. Significant Parties
List the full names and business and residential addresses,
as applicable, for the following persons:
(a) the issuer's directors;
(b) the issuer's officers;
(c) the issuer's general partners;
(d) record owners of 5 percent or more of any class of the
issuer's equity securities;
(e) beneficial owners of 5 percent or more of any class of
the issuer's equity securities;
(f) promoters of the issuer;
(g) affiliates of the issuer;
(h) counsel to the issuer with respect to the proposed
offering;
(i) each underwriter with respect to the proposed offering;
(j) the underwriter's directors;
(k) the underwriter's officers;
(l) the underwriter's general partners; and
(m) counsel to the underwriter.
Item 2. Application of Rule 262
(a) State whether any of the persons identified in response
to Item 1 are subject to any of the disqualification provisions
set forth in Rule 262.
(b) If any such person is subject to these provisions,
provide a full description including pertinent names, dates and
other details, as well as whether or not an application has been
made pursuant to Rule 262 for a waiver of such disqualification
and whether or not such application has been granted or denied.
Item 3. Affiliate Sales
-------------------- BEGINNING OF PAGE #97 -------------------
If any part of the proposed offering involves the resale of
securities by affiliates of the issuer, confirm that the
following description does not apply to the issuer.
The issuer has not had a net income from operations of the
character in which the issuer intends to engage for at least one
of its last two fiscal years.
Item 4. Jurisdictions in Which Securities Are to be Offered
(a) List the jurisdiction in which the securities are to be
offered by underwriters, dealers or salespersons.
(b) List the jurisdictions in which the securities are to be
offered other than by underwriters, dealers or salesmen and state
the method by which such securities are to be offered.
Item 5. Unregistered Securities Issued or Sold Within One Year
(a) As to any unregistered securities issued by the issuer
or any of its predecessors or affiliated issuers within one year
prior to the filing of this Form 1-A, state:
(1) the name of such issuer;
(2) the title and amount of securities issued;
(3) the aggregate offering price or other consideration for
which they were issued and the basis for computing the amount
thereof;
(4) the names and identities of the persons to whom the
securities were issued.
(b) As to any unregistered securities of the issuer or any
of its predecessors or affiliated issuers which were sold within
one year prior to the filing of this Form 1-A by or for the
account of any person who at the time was a director, officer,
promoter or principal security holder of the issuer of such
securities, or was an underwriter of any securities of such
issuer, furnish the information specified in subsections (1)
through (4) of paragraph (a).
(c) Indicate the section of the Securities Act or Commission
rule or regulation relied upon for exemption from the
registration requirements of such Act and state briefly the facts
relied upon for such exemption.
Item 6. Other Present or Proposed Offerings
State whether or not the issuer or any of its affiliates is
currently offering or contemplating the offering of any
securities in addition to those covered by this Form 1-A. If so,
describe fully the present or proposed offering.
Item 7. Marketing Arrangements
(a) Briefly describe any arrangement known to the issuer or
to any person named in response to Item 1 above or to any selling
securityholder in the offering covered by this Form 1-A for any
of the following purposes:
-------------------- BEGINNING OF PAGE #98 -------------------
(1) To limit or restrict the sale of other securities of the
same class as those to be offered for the period of distribution;
(2) To stabilize the market for any of the securities to be
offered;
(3) For withholding commissions, or otherwise to hold each
underwriter or dealer responsible for the distribution of its
participation.
(b) Identify any underwriter that intends to confirm sales
to any accounts over which it exercises discretionary authority
and include an estimate of the amount of securities so intended
to be confirmed.
Item 8. Relationship with Issuer of Experts Named in Offering
Statement
If any expert named in the offering statement as having
prepared or certified any part thereof was employed for such
purpose on a contingent basis or, at the time of such preparation
or certification or at any time thereafter, had a material
interest in the issuer or any of its parents or subsidiaries or
was connected with the issuer or any of its subsidiaries as a
promoter, underwriter, voting trustee, director, officer or
employee furnish a brief statement of the nature of such
contingent basis, interest or connection.
Item 9. Use of a Solicitation of Interest Document
Indicate whether or not a written document or broadcast
script authorized by Rule 254 was used prior to the filing of
this notification. If so, indicate the date(s) of such use.
Part II -- Offering Circular
Financial Statement requirements, regardless of the
applicable disclosure model, are specified in Part F/S of this
Form 1-A.
The Commission encourages the use of management's
projections of future economic performance that have a reasonable
basis and are presented in an appropriate format. See 17 CFR
228.10(e), 17 CFR 229.10. The Commission's safe harbor provision
relative to projections is contained in Rule 175, 17 CFR 230.175.
The narrative disclosure contents of offering circulars are
specified as follows:
A: For all corporate issuers -- the information required by Model
A of this Part II of Form 1-A.
B: For all other issuers and for any issuer that so chooses --
the information required by either Part I of Form SB-2, 17 CFR
239.10, except for the financial statements called for there, or
Model B of this Part II of Form 1-A. Offering circulars prepared
pursuant to this instruction need not follow the order of the
items or other requirements of the disclosure form. Such
information shall not, however, be set forth in such a fashion as
to obscure any of the required information or any information
necessary to keep the required information from being incomplete
or misleading. Information requested to be presented in a
specified tabular format shall be given in substantially the
tabular form specified in the item.
-------------------- BEGINNING OF PAGE #99 -------------------
Offering Circular Model A.
General Instructions:
Each question in each paragraph of this part shall be
responded to; and each question and any notes, but not any
instructions thereto, shall be restated in its entirety. If the
question or series of questions is inapplicable, so state. If the
space provided in the format is insufficient, additional space
should be created by cutting and pasting the format to add more
lines.
Be very careful and precise in answering all questions. Give
full and complete answers so that they are not misleading under
the circumstances involved. Do not discuss any future performance
or other anticipated event unless you have a reasonable basis to
believe that it will actually occur within the foreseeable
future. If any answer requiring significant information is
materially inaccurate, incomplete or misleading, the Company, its
management and principal shareholders may have liability to
investors. The selling agents should exercise appropriate
diligence to determine that no such inaccuracy or incompleteness
has occurred, or they may be liable.
Cover Page
_______________________________________________
(Exact name of Company as set forth in Charter)
Type of securities offered:____________________
Maximum number of securities offered:__________
Minimum number of securities offered:__________
Price per security: $_______
Total proceeds: If maximum sold: $ ______ If minimum sold:
$ _____
(See Questions 9 and 10)
Is a commissioned selling agent selling the securities in
this offering?
[ ] Yes [ ] No
If yes, what percent is commission of price to public?___%.
Is there other compensation to selling agent(s)?
[ ] Yes [ ] No
Is there a finder's fee or similar payment to any person?
[ ] Yes [ ] No (See Question No. 22)
Is there an escrow of proceeds until minimum is obtained?
[ ] Yes [ ] No (See Question No. 26)
Is this offering limited to members of a special group, such
as employees of the Company or individuals? [ ] Yes [ ] No (See
Question No. 25)
Is transfer of the securities restricted? [ ] Yes [ ] No
(See Question No. 25)
Investment in small businesses involves a high degree of
risk, and investors should not invest any funds in this offering
unless they can afford to lose their entire investment. See
Question No. 2 for the risk factors that management believes
present the most substantial risks to an investor in this
offering.
In making an investment decision investors must rely on
their own examination of the issuer and the terms of the
offering, including the merits and risks involved. These
securities have not been recommended or approved by any federal
or state securities commission or regulatory authority.
-------------------- BEGINNING OF PAGE #100 -------------------
Furthermore, these authorities have not passed upon the accuracy
or adequacy of this document. Any representation to the contrary
is a criminal offense.
The U.S. Securities and Exchange Commission does not pass
upon the merits of any securities offered or the terms of the
offering, nor does it pass upon the accuracy or completeness of
any offering circular or selling literature. These securities are
offered under an exemption from registration; however, the
commission has not made an independent determination that these
securities are exempt from registration.
This Company:
[ ] Has never conducted operations.
[ ] Is in the development stage.
[ ] Is currently conducting operations.
[ ] Has shown a profit in the last fiscal year.
[ ] Other (Specify):__________
(Check at least one, as appropriate)
This offering has been registered for offer and sale in the
following states:
__________________________________________________________
State State Effective
file No. date
__________________________________________________________
__________________________________________________________
__________________________________________________________
----------------------------------------------------------
__________________________________________________________
Instruction: The Cover Page of the Offering Circular is a
summary of certain essential information and should be kept on
one page if at all possible. For purposes of characterizing the
Company on the cover page, the term "development stage" has the
same meaning as that set forth in Statement of Financial
Accounting Standards No. 7 (June 1, 1975).
Table of Contents
_____________________________________________________Page
The Company_______________________________________________
Risk Factors _____________________________________________
Business and Properties __________________________________
Offering Price Factors ___________________________________
Use of Proceeds __________________________________________
Capitalization ___________________________________________
Description of Securities ________________________________
Plan of Distribution _____________________________________
Dividends, Distributions and Redemptions _________________
Officers and Key Personnel of the Company ________________
Directors of the Company _________________________________
Principal Stockholders ___________________________________
Management Relationships, Transactions
and Remuneration ______________________________________
Litigation _______________________________________________
Federal Tax Aspects ______________________________________
Miscellaneous Factors ____________________________________
Financial Statements _____________________________________
Managements Discussion and Analysis
of Certain Relevant Factors ___________________________
______________________________________________________________
-------------------- BEGINNING OF PAGE #101 -------------------
This offering circular contains all of the representations
by the company concerning this offering, and no person shall make
different or broader statements than those contained herein.
Investors are cautioned not to rely upon any information not
expressly set forth in this offering circular.
This Offering Circular, together with Financial Statements
and other Attachments, consists of a total of ____ pages.
The Company
1. Exact corporate name:_________________________________
State and date of incorporation: ________________________
_________________________________________________________
Street address of principal office:______________________
_________________________________________________________
Company Telephone Number: (___) ___________
Fiscal year:
(month) _________
(day) _________
Person(s) to contact at Company with respect to offering:
________________________________________________________
Telephone Number (if different from above): (___)_______
RISK FACTORS
2. List in the order of importance the factors which the Company
considers to be the most substantial risks to an investor in this
offering in view of all facts and circumstances or which
otherwise make the offering one of high risk or speculative (i.
e., those factors which constitute the greatest threat that the
investment will be lost in whole or in part, or not provide an
adequate return).
(1) _______________________________________________________
_______________________________________________________
_______________________________________________________
(2) _______________________________________________________
_______________________________________________________
_______________________________________________________
(3) _______________________________________________________
_______________________________________________________
_______________________________________________________
(4) _______________________________________________________
_______________________________________________________
_______________________________________________________
(5) _______________________________________________________
_______________________________________________________
_______________________________________________________
(6) _______________________________________________________
_______________________________________________________
_______________________________________________________
(7) _______________________________________________________
_______________________________________________________
_______________________________________________________
(8) _______________________________________________________
_______________________________________________________
_______________________________________________________
(9) _______________________________________________________
_______________________________________________________
_______________________________________________________
(10) _______________________________________________________
-------------------- BEGINNING OF PAGE #102 -------------------
_______________________________________________________
_______________________________________________________
(11) _______________________________________________________
_______________________________________________________
_______________________________________________________
(12) _______________________________________________________
_______________________________________________________
_______________________________________________________
(13) _______________________________________________________
_______________________________________________________
_______________________________________________________
(14) _______________________________________________________
_______________________________________________________
_______________________________________________________
(15) _______________________________________________________
_______________________________________________________
(16) _______________________________________________________
_______________________________________________________
_______________________________________________________
Note: In addition to the above risks, businesses are often
subject to risks not foreseen or fully appreciated by management.
In reviewing this Offering Circular potential investors should
keep in mind other possible risks that could be important.
Instruction: The Company should avoid generalized statements
and include only those factors which are unique to the Company.
No specific number of risk factors is required to be identified.
If more than 16 significant risk factors exist, add additional
lines and number as appropriate. Risk factors may be due to such
matters as cash flow and liquidity problems, inexperience of
management in managing a business in the particular industry,
dependence of the Company on an unproven product, absence of an
existing market for the product (even though management may
believe a need exists), absence of an operating history of the
Company, absence of profitable operations in recent periods, an
erratic financial history, the financial position of the Company,
the nature of the business in which the Company is engaged or
proposes to engage, conflicts of interest with management,
arbitrary establishment of offering price, reliance on the
efforts of a single individual, or absence of a trading market if
a trading market is not expected to develop. Cross references
should be made to the Questions where details of the risks are
described.
Business and Properties
3. With respect to the business of the Company and its
properties:
(a) Describe in detail what business the Company does and
proposes to do, including what products or goods are or will be
produced or services that are or will be rendered.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) Describe how these products or services are to be
produced or rendered and how and when the Company intends to
carry out its activities. If the Company plans to offer a new
product(s), state the present stage of development, including
whether or not a working prototype(s) is in existence. Indicate
if completion of development of the product would require a
material amount of the resources of the Company, and the
-------------------- BEGINNING OF PAGE #103 -------------------
estimated amount. If the Company is or is expected to be
dependent upon one or a limited number of suppliers for essential
raw materials, energy or other items, describe. Describe any
major existing supply contracts.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(c) Describe the industry in which the Company is selling or
expects to sell its products or services and, where applicable,
any recognized trends within that industry. Describe that part of
the industry and the geographic area in which the business
competes or will compete.
Indicate whether competition is or is expected to be by
price, service, or other basis. Indicate (by attached table if
appropriate) the current or anticipated prices or price ranges
for the Company's products or services, or the formula for
determining prices, and how these prices compare with those of
competitors' products or services, including a description of any
variations in product or service features. Name the principal
competitors that the Company has or expects to have in its area
of competition. Indicate the relative size and financial and
market strengths of the Company's competitors in the area of
competition in which the Company is or will be operating. State
why the Company believes it can effectively compete with these
and other companies in its area of competition.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Note: Because this Offering Circular focuses primarily on
details concerning the Company rather than the industry in which
the Company operates or will operate, potential investors may
wish to conduct their own separate investigation of the Company's
industry to obtain broader insight in assessing the Company's
prospects.
(d) Describe specifically the marketing strategies the
Company is employing or will employ in penetrating its market or
in developing a new market. Set forth in response to Question 4
below the timing and size of the results of this effort which
will be necessary in order for the Company to be profitable.
Indicate how and by whom its products or services are or will be
marketed (such as by advertising, personal contact by sales
representatives, etc.), how its marketing structure operates or
will operate and the basis of its marketing approach, including
any market studies. Name any customers that account for, or based
upon existing orders will account for a major portion (20% or
more) of the Company's sales. Describe any major existing sales
contracts.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(e) State the backlog of written firm orders for products
and/or services as of a recent date (within the last 90 days) and
compare it with the backlog of a year ago from that date.
As of: __ /__ /__ (a recent date)
$ ______
As of: __ /__ /__ (one year earlier)
-------------------- BEGINNING OF PAGE #104 -------------------
$ ______
Explain the reason for significant variations between the
two figures, if any. Indicate what types and amounts of orders
are included in the backlog figures. State the size of typical
orders. If the Company's sales are seasonal or cyclical, explain.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(f) State the number of the Company's present employees and
the number of employees it anticipates it will have within the
next 12 months. Also, indicate the number by type of employee
(i.e., clerical, operations, administrative, etc.) the Company
will use, whether or not any of them are subject to collective
bargaining agreements, and the expiration date(s) of any
collective bargaining agreement(s). If the Company's employees
are on strike, or have been in the past three years, or are
threatening to strike, describe the dispute. Indicate any
supplemental benefits or incentive arrangements the Company has
or will have with its employees.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(g) Describe generally the principal properties (such as
real estate, plant and equipment, patents, etc.) that the Company
owns, indicating also what properties it leases and a summary of
the terms under those leases, including the amount of payments,
expiration dates and the terms of any renewal options. Indicate
what properties the Company intends to acquire in the immediate
future, the cost of such acquisitions and the sources of
financing it expects to use in obtaining these properties,
whether by purchase, lease or otherwise.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(h) Indicate the extent to which the Company's operations
depend or are expected to depend upon patents, copyrights, trade
secrets, know-how or other proprietary information and the steps
undertaken to secure and protect this intellectual property,
including any use of confidentiality agreements,
covenants-not-to-compete and the like. Summarize the principal
terms and expiration dates of any significant license agreements.
Indicate the amounts expended by the Company for research and
development during the last fiscal year, the amount expected to
be spent this year and what percentage of revenues research and
development expenditures were for the last fiscal year.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(i) If the Company's business, products, or properties are
subject to material regulation (including environmental
regulation) by federal, state, or local governmental agencies,
indicate the nature and extent of regulation and its effects or
potential effects upon the Company.
_________________________________________________________________
_________________________________________________________________
-------------------- BEGINNING OF PAGE #105 -------------------
_________________________________________________________________
_________________________________________________________________
(j) State the names of any subsidiaries of the Company,
their business purposes and ownership, and indicate which are
included in the Financial Statements attached hereto. If not
included, or if included but not consolidated, please explain.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(k) Summarize the material events in the development of the
Company (including any material mergers or acquisitions) during
the past five years, or for whatever lesser period the Company
has been in existence. Discuss any pending or anticipated
mergers, acquisitions, spin-offs or recapitalizations. If the
Company has recently undergone a stock split, stock dividend or
recapitalization in anticipation of this offering, describe (and
adjust historical per share figures elsewhere in this Offering
Circular accordingly).
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
4.(a) If the Company was not profitable during its last
fiscal year, list below in chronological order the events which
in management's opinion must or should occur or the milestones
which in management's opinion the Company must or should reach in
order for the Company to become profitable, and indicate the
expected manner of occurrence or the expected method by which the
Company will achieve the milestones.
-------------------------------------------------------------
Event or Expected Date or number
milestone manner of of months
occurrence or after receipt
method of of proceeds
achievement when should be
accomplished
-------------------------------------------------------------
(1) ______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
(2) ______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
(3) ______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
(4) ______________________________________________________
______________________________________________________
-------------------- BEGINNING OF PAGE #106 -------------------
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
(5) ______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
(b) State the probable consequences to the Company of delays
in achieving each of the events or milestones within the above
time schedule, and particularly the effect of any delays upon the
Company's liquidity in view of the Company's then anticipated
level of operating costs. (See Question Nos. 11 and 12)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Note: After reviewing the nature and timing of each event or
milestone, potential investors should reflect upon whether
achievement of each within the estimated time frame is realistic
and should assess the consequences of delays or failure of
achievement in making an investment decision.
Instruction: The inquiries under Business and Properties
elicit information concerning the nature of the business of the
Company and its properties. Make clear what aspects of the
business are presently in operation and what aspects are planned
to be in operation in the future. The description of principal
properties should provide information which will reasonably
inform investors as to the suitability, adequacy, productive
capacity and extent of utilization of the facilities used in the
enterprise. Detailed descriptions of the physical characteristics
of the individual properties or legal descriptions by metes and
bounds are not required and should not be given.
As to Question 4, if more than five events or milestones
exist, add additional lines as necessary. A "milestone" is a
significant point in the Company's development or an obstacle
which the Company must overcome in order to become profitable.
Offering Price Factors
If the securities offered are common stock, or are exercisable
for or convertible into common stock, the following factors may
be relevant to the price at which the securities are being
offered.
5. What were net, after-tax earnings for the last fiscal
year? (If losses, show in parenthesis.)
Total $ ____ ($ ____ per share)
6. If the Company had profits, show offering price as a
multiple of earnings. Adjust to reflect for any stock splits or
recapitalizations, and use conversion or exercise price in lieu
of offering price, if applicable.
Offering Price Per Share = ______________________
Net After-Tax Earnings Last Year (price/earnings multiple)
Per Share
7.(a) What is the net tangible book value of the Company?
(If deficit, show in parenthesis.) For this purpose, net tangible
book value means total assets (exclusive of copyrights, patents,
-------------------- BEGINNING OF PAGE #107 -------------------
goodwill, research and development costs and similar intangible
items) minus total liabilities.
$ ____ ($ ____ per share)
If the net tangible book value per share is substantially
less than this offering (or exercise or conversion) price per
share, explain the reasons for the variation.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) State the dates on which the Company sold or otherwise
issued securities during the last 12 months, the amount of such
securities sold, the number of persons to whom they were sold,
any relationship of such persons to the Company at the time of
sale, the price at which they were sold and, if not sold for
cash, a concise description of the consideration. (Exclude bank
debt.)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
8.(a) What percentage of the outstanding shares of the
Company will the investors in this offering have? Assume exercise
of outstanding options, warrants or rights and conversion of
convertible securities, if the respective exercise or conversion
prices are at or less than the offering price. Also assume
exercise of any options, warrants or rights and conversions of
any convertible securities offered in this offering.
If the maximum is sold: ___ %
If the minimum is sold: ___ %
(b) What post-offering value is management implicitly
attributing to the entire Company by establishing the price per
security set forth on the cover page (or exercise or conversion
price if common stock is not offered)? (Total outstanding shares
after offering times offering price, or exercise or conversion
price if common stock is not offered.)
If maximum is sold: $ ___ *
If minimum is sold: $ ___ *
(For above purposes, assume outstanding options are exercised in
determining "shares" if the exercise prices are at or less than
the offering price. All convertible securities, including
outstanding convertible securities, shall be assumed converted
and any options, warrants or rights in this offering shall be
assumed exercised.)
*These values assume that the Company's capital structure
would be changed to reflect any conversions of outstanding
convertible securities and any use of outstanding securities as
payment in the exercise of outstanding options, warrants or
rights included in the calculation. The type and amount of
convertible or other securities thus eliminated would be: _____ .
These values also assume an increase in cash in the Company by
the amount of any cash payments that would be made upon cash
exercise of options, warrants or rights included in the
calculations. The amount of such cash would be: $ ____ .
Note: After reviewing the above, potential investors should
consider whether or not the offering price (or exercise or
conversion price, if applicable) for the securities is
appropriate at the present stage of the Company's development.
Instruction: Financial information in response to Questions
5, 6 and 7 should be consistent with the Financial Statements.
Earnings per share for purposes of Question 5 should be
calculated by dividing earnings for the last fiscal year by the
-------------------- BEGINNING OF PAGE #108 -------------------
weighted average of outstanding shares during that year. No
calculations should be shown for periods of less than one year or
if earnings are negative or nominal. For purposes of Question 8,
the "offering price" of any options, warrants or rights or
convertible securities in the offering is the respective exercise
or conversion price.
Use of Proceeds
9.(a) The following table sets forth the use of the
proceeds from this offering:
-----------------------------------------------------
If minimum If maximum
sold sold
-----------------------------------------------------
Amount % Amount %
Total Proceeds $______ 100% $______ 100%
Less: Offering
Expenses
Commissions &
Finders Fees $______ __% $_____ __%
Legal & Accounting $_____ __% $_____ __%
Copying & Advertising $_____ __% $_____ __%
Other (Specify):
_________________ $_____ __% $_____ __%
Net Proceeds from
Offering $_____ __% $_____ __%
Use of Net Proceeds
__________________ $____ __% $____ __%
__________________ $____ __% $____ __%
__________________ $____ __% $____ __%
__________________ $____ __% $____ __%
Total Use of Net
Proceeds $____ 100% $____ 100%
(b) If there is no minimum amount of proceeds that must be
raised before the Company may use the proceeds of the offering,
describe the order of priority in which the proceeds set forth
above in the column "If Maximum Sold" will be used.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Note: After reviewing the portion of the offering allocated
to the payment of offering expenses, and to the immediate payment
to management and promoters of any fees, reimbursements, past
salaries or similar payments, a potential investor should
consider whether the remaining portion of his investment, which
would be that part available for future development of the
Company's business and operations, would be adequate.
10.(a) If material amounts of funds from sources other than
this offering are to be used in conjunction with the proceeds
from this offering, state the amounts and sources of such other
funds, and whether funds are firm or contingent. If contingent,
explain.
_________________________________________________________________
_________________________________________________________________
-------------------- BEGINNING OF PAGE #109 -------------------
_________________________________________________________________
_________________________________________________________________
(b) If any material part of the proceeds is to be used to
discharge indebtedness, describe the terms of such indebtedness,
including interest rates. If the indebtedness to be discharged
was incurred within the current or previous fiscal year, describe
the use of proceeds of such indebtedness.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(c) If any material amount of proceeds is to be used to
acquire assets, other than in the ordinary course of business,
briefly describe and state the cost of the assets and other
material terms of the acquisitions. If the assets are to be
acquired from officers, directors, employees or principal
stockholders of the Company or their associates, give the names
of the persons from whom the assets are to be acquired and set
forth the cost to the Company, the method followed in determining
the cost, and any profit to such persons.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(d) If any amount of the proceeds is to be used to reimburse
any officer, director, employee or stockholder for services
already rendered, assets previously transferred, or monies loaned
or advanced, or otherwise, explain:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
11. Indicate whether the Company is having or anticipates
having within the next 12 months any cash flow or liquidity
problems and whether or not it is in default or in breach of any
note, loan, lease or other indebtedness or financing arrangement
requiring the Company to make payments. Indicate if a significant
amount of the Company's tradepayables have not been paid within
the stated trade term. State whether the Company is subject to
any unsatisfied judgments, liens or settlement obligations and
the amounts thereof. Indicate the Company's plans to resolve any
such problems.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
12. Indicate whether proceeds from this offering will
satisfy the Company's cash requirements for the next 12 months,
and whether it will be necessary to raise additional funds. State
the source of additional funds, if known.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Instruction: Use of net proceeds should be stated with a
high degree of specificity. Suggested (but not mandatory)
categories are: leases, rent, utilities, payroll (by position or
type), purchase or lease of specific items of equipment or
-------------------- BEGINNING OF PAGE #110 -------------------
inventory, payment of notes, accounts payable, etc., marketing or
advertising costs, taxes, consulting fees, permits, professional
fees, insurance and supplies. Categories will vary depending on
the Company's plans. Use of footnotes or other explanation is
recommended where appropriate. Footnotes should be used to
indicate those items of offering expenses that are estimates. Set
forth in separate categories all payments which will be made
immediately to the Company's executive officers, directors and
promoters, indicating by footnote that these payments will be so
made to such persons. If a substantial amount is allocated to
working capital, set forth separate sub-categories for use of the
funds in the Company's business.
If any substantial portion of the proceeds has not been
allocated for particular purposes, a statement to that effect as
one of the Use of Net Proceeds categories should be included
together with a statement of the amount of proceeds not so
allocated and a footnote explaining how the Company expects to
employ such funds not so allocated.
Capitalization
13. Indicate the capitalization of the Company as of the
most recent balance sheet date (adjusted to reflect any
subsequent stock splits, stock dividends, recapitalizations or
refinancings) and as adjusted to reflect the sale of the minimum
and maximum amount of securities in this offering and the use of
the net proceeds therefrom:
Amount outstanding
As of: As adjusted
__/__/__(date) Minimum Maximum
Debt:
Short-term
debt
(average
interest rate __%) $____ $____ $____
Long-term debt
(average
interest rate __%) $____ $____ $____
Total debt $____ $____ $____
Stockholders equity
(deficit):
Preferred stock --
par or stated value
(by class of preferred in
order of preferences)
___________________ $____ $____ $____
___________________ $____ $____ $____
___________________ $____ $____ $____
Common stock -- par
or stated value $____ $____ $____
Additional paid
in capital $____ $____ $____
Retained earnings
-------------------- BEGINNING OF PAGE #111 -------------------
(deficit) $____ $____ $____
Total stockholders
equity (deficit) $____ $____ $____
Total Capitalization $____ $____ $____
Number of preferred shares
authorized to be outstanding:
Number of Par value
Class of preferred Shares Authorized per share
---------------------------------------------------------------
___________________ ________________ _______
___________________ ________________ _______
___________________ ________________ _______
___________________ ________________ _______
Number of common shares authorized: ____ shares. Par or
stated value per share, if any: $ ____
Number of common shares reserved to meet conversion
requirements or for the issuance upon exercise of options,
warrants or rights: ____ shares.
Instruction: Capitalization should be shown as of a date no
earlier than that of the most recent Financial Statements
provided pursuant to Question 46. If the Company has mandatory
redeemable preferred stock, include the amount thereof in "long
term debt" and so indicate by footnote to that category in the
capitalization table.
Description of Securities
14. The securities being offered hereby are:
[ ] Common Stock
[ ] Preferred or Preference Stock
[ ] Notes or Debentures
[ ] Units of two or more types of securities composed of:
________________________________________________________
[ ] Other:______________________________________________
_________________________________________________________________
_________________________________________________________________
15. These securities have:
Yes No
[ ] [ ] Cumulative voting rights
[ ] [ ] Other special voting rights
[ ] [ ] Preemptive rights to purchase in new issues of shares
[ ] [ ] Preference as to dividends or interest
[ ] [ ] Preference upon liquidation
[ ] [ ] Other special rights or preferences (specify):
_________________________________________________________________
Explain:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
16. Are the securities convertible? [ ] Yes [ ] No
If so, state conversion price or formula. _______
Date when conversion becomes effective:__/__ /__
Date when conversion expires:__/__/__
-------------------- BEGINNING OF PAGE #112 -------------------
17.(a) If securities are notes or other types of debt
securities:
(1) What is the interest rate? __ %
If interest rate is variable or multiple rates, describe:
_________________________________________________________________
_________________________________________________________________
(2) What is the maturity date?__/__/__
If serial maturity dates, describe:
_________________________________________________________________
_________________________________________________________________
(3) Is there a mandatory sinking fund? [ ] Yes [ ] No
Describe: __________________________________________________
----------------------------------------------------------------
-
(4) Is there a trust indenture? [ ] Yes [ ] No
Name, address and telephone number of Trustee
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(5) Are the securities callable or subject to redemption?
[ ] Yes [ ] No
Describe, including redemption prices:
_________________________________________________________________
_________________________________________________________________
(6) Are the securities collateralized by real or personal
property?
[ ] Yes [ ] No Describe:
_________________________________________________________________
_________________________________________________________________
(7) If these securities are subordinated in right of payment
of interest or principal, explain the terms of such
subordination.
_________________________________________________________________
_________________________________________________________________
How much currently outstanding indebtedness of the Company
is senior to the securities in right of payment of interest or
principal? $ ____
How much indebtedness shares in right of payment on an
equivalent (pari passu) basis? $ ____
How much indebtedness is junior (subordinated) to the
securities? $ ____
(b) If notes or other types of debt securities are being
offered and the Company had earnings during its last fiscal year,
show the ratio of earnings to fixed charges on an actual and pro
forma basis for that fiscal year. "Earnings" means pretax income
from continuing operations plus fixed charges and capitalized
interest. "Fixed charges" means interest (including capitalized
interest), amortization of debt discount, premium and expense,
preferred stock dividend requirements of majority owned
subsidiary, and such portion of rental expense as can be
demonstrated to be representative of the interest factor in the
particular case. The pro forma ratio of earnings to fixed charges
should include incremental interest expense as a result of the
offering of the notes or other debt securities.
-------------------- BEGINNING OF PAGE #113 -------------------
Last fiscal year
Actual Pro forma
Minimum Maximum
"Earnings" = ____ ____ ____
"Fixed Charges"
If no earnings show "Fixed
Charges" only ____ ____ ____
Note: Care should be exercised in interpreting the
significance of the ratio of earnings to fixed charges as a
measure of the "coverage" of debt service, as the existence of
earnings does not necessarily mean that the Company's liquidity
at any given time will permit payment of debt service
requirements to be timely made. See Question Nos. 11 and 12. See
also the Financial Statements and especially the Statement of
Cash Flows.
18. If securities are Preference or Preferred stock: Are
unpaid dividends cumulative? [ ] Yes [ ] No
Are securities callable? [ ] Yes [ ] No
Explain:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Note: Attach to this Offering Circular copies or a summary
of the charter, bylaw or contractual provision or document that
gives rise to the rights of holders of Preferred or Preference
Stock, notes or other securities being offered.
19. If securities are capital stock of any type, indicate
restrictions on dividends under loan or other financing
arrangements or otherwise:
_________________________________________________________________
_________________________________________________________________
20. Current amount of assets available for payment of
dividends (if deficit must be first made up, show deficit in
parenthesis): $ ____ .
PLAN OF DISTRIBUTION
21. The selling agents (that is, the persons selling the
securities as agent for the Company for a commission or other
compensation) in this offering are:
Name:____________________________________________________________
Address:_________________________________________________________
_________________________________________________________________
Telephone No. ( )___-____
Name:____________________________________________________________
Address:_________________________________________________________
_________________________________________________________________
Telephone No. ( )___-____
22. Describe any compensation to selling agents or finders,
including cash, securities, contracts or other consideration, in
addition to the cash commission set forth as a percent of the
offering price on the cover page of this Offering Circular. Also
-------------------- BEGINNING OF PAGE #114 -------------------
indicate whether the Company will indemnify the selling agents or
finders against liabilities under the securities laws. ("Finders"
are persons who for compensation act as intermediaries in
obtaining selling agents or other-wise making introductions in
furtherance of this offering.)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
23. Describe any material relationships between any of the
selling agents or finders and the Company or its management.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Note: After reviewing the amount of compensation to the
selling agents or finders for selling the securities, and the
nature of any relationship between the selling agents or finders
and the Company, a potential investor should assess the extent to
which it may be inappropriate to rely upon any recommendation by
the selling agents or finders to buy the securities.
24. If this offering is not being made through selling
agents, the names of persons at the Company through which this
offering is being made:
Name:____________________________________________________________
Address:_________________________________________________________
_________________________________________________________________
Telephone No. ( )___-____
Name: ___________________________________________________________
Address:_________________________________________________________
_________________________________________________________________
Telephone No. ( )___-____
25. If this offering is limited to a special group, such as
employees of the Company, or is limited to a certain number of
individuals (as required to qualify under Subchapter S of the
Internal Revenue Code) or is subject to any other limitations,
describe the limitations and any restrictions on resale that
apply:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Will the certificates bear a legend notifying holders of
such restrictions?
[ ] Yes [ ] No
26. (a) Name, address and telephone number of independent
bank or savings and loan association or other similar depository
institution acting as escrow agent if proceeds are escrowed until
minimum proceeds are raised:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) Date at which funds will be returned by escrow agent if
minimum proceeds are not raised:
_________________________________________________________________
Will interest on proceeds during escrow period be paid to
investors? [ ] Yes [ ] No
-------------------- BEGINNING OF PAGE #115 -------------------
27. Explain the nature of any resale restrictions on
presently outstanding shares, and when those restrictions will
terminate, if this can be determined:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Note: Equity investors should be aware that unless the
Company is able to complete a further public offering or the
Company is able to be sold for cash or merged with a public
company that their investment in the Company may be illiquid
indefinitely.
Dividends, Distributions and Redemptions
28. If the Company has within the last five years paid
dividends, made distributions upon its stock or redeemed any
securities, explain how much and when:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Officers and Key Personnel of the Company
29. Chief Executive Officer:
Title:_____________________________
Name:______________________________
Age: ______
Office Street Address:
___________________________________
___________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
Also a Director of the Company [ ] Yes [ ] No
Indicate amount of time to be spent on Company matters if
less than full time:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
30. Chief Operating Officer:
Title:_____________________________
Name:______________________________
Age: ______
Office Street Address:
___________________________________
___________________________________
Telephone No.: ( )___-____
-------------------- BEGINNING OF PAGE #116 -------------------
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
Also a Director of the Company [ ] Yes [ ] No
Indicate amount of time to be spent on Company matters if
less than full time:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
31. Chief Financial Officer:
Title:_____________________________
Name:______________________________
Age: ______
Office Street Address:
___________________________________
___________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
Also a Director of the Company [ ] Yes [ ] No
Indicate amount of time to be spent on Company matters if
less than full time:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
32. Other Key Personnel:
(A) Name:______________________________
Age: ______
Title:_____________________________
Office Street Address:
___________________________________
___________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
-------------------- BEGINNING OF PAGE #117 -------------------
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
Also a Director of the Company [ ] Yes [ ] No
Indicate amount of time to be spent on Company matters if
less than full time:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(B) Name:______________________________
Age: ______
Title:_____________________________
Office Street Address:
___________________________________
___________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
Also a Director of the Company [ ] Yes [ ] No
Indicate amount of time to be spent on Company matters if
less than full time:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Instruction: The term "Chief Executive Officer" means the
officer of the Company who has been delegated final authority by
the board of directors to direct all aspects of the Company's
affairs. The term "Chief Operating Officer" means the officer in
charge of the actual day-to-day operations of the Company's
business. The term "Chief Financial Officer" means the officer
having accounting skills who is primarily in charge of assuring
that the Company's financial books and records are properly kept
and maintained and financial statements prepared.
The term "key personnel" means persons such as vice
presidents, production managers, sales managers, or research
scientists and similar persons, who are not included above, but
who make or are expected to make significant contributions to the
business of the Company, whether as employees, independent
contractors, consultants or otherwise.
Directors of the Company
33. Number of Directors: ___ . If Directors are not elected
annually, or are elected under a voting trust or other
arrangement, explain:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
-------------------- BEGINNING OF PAGE #118 -------------------
_________________________________________________________________
34. Information concerning outside or other Directors (i.e.
those not described above):
(A) Name:____________________________
Age: _________
Office Street Address:
_____________________________________
_____________________________________
_____________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
(B) Name:____________________________
Age: _________
Office Street Address:
_____________________________________
_____________________________________
_____________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
(C) Name:____________________________
Age: _________
Office Street Address:
_____________________________________
_____________________________________
_____________________________________
Telephone No.: ( )___-____
Names of employers, titles and dates of positions held
during past five years with an indication of job
responsibilities.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Education (degrees, schools, and dates):
_________________________________________________________________
_________________________________________________________________
35. (a) Have any of the Officers or Directors ever worked
for or managed a company (including a separate subsidiary or
-------------------- BEGINNING OF PAGE #119 -------------------
division of a larger enterprise) in the same business as the
Company? [ ] Yes [ ] No
Explain:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) If any of the Officers, Directors or other key personnel
have ever worked for or managed a company in the same business or
industry as the Company or in a related business or industry,
describe what precautions, if any (including the obtaining of
releases or consents from prior employers), have been taken to
preclude claims by prior employers for conversion or theft of
trade secrets, know-how or other proprietary information.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(c) If the Company has never conducted operations or is
otherwise in the development stage, indicate whether any of the
Officers or Directors has ever managed any other company in the
start-up or development stage and describe the circumstances,
including relevant dates.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(d) If any of the Company's key personnel are not employees
but are consultants or other independent contractors, state the
details of their engagement by the Company.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(e) If the Company has key man life insurance policies on
any of its Officers, Directors or key personnel, explain,
including the names of the persons insured, the amount of
insurance, whether the insurance proceeds are payable to the
Company and whether there are arrangements that require the
proceeds to be used to redeem securities or pay benefits to the
estate of the insured person or a surviving spouse.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
36. If a petition under the Bankruptcy Act or any State
insolvency law was filed by or against the Company or its
Officers, Directors or other key personnel, or a receiver, fiscal
agent or similar officer was appointed by a court for the
business or property of any such persons, or any partnership in
which any of such persons was a general partner at or within the
past five years, or any corporation or business association of
which any such person was an executive officer at or within the
past five years, set forth below the name of such persons, and
the nature and date of such actions.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
-------------------- BEGINNING OF PAGE #120 -------------------
_________________________________________________________________
Note: After reviewing the information concerning the
background of the Company's Officers, Directors and other key
personnel, potential investors should consider whether or not
these persons have adequate background and experience to develop
and operate this Company and to make it successful. In this
regard, the experience and ability of management are often
considered the most significant factors in the success of a
business.
Principal Stockholders
37. Principal owners of the Company (those who beneficially
own directly or indirectly 10% or more of the common and
preferred stock presently outstanding) starting with the largest
common stockholder. Include separately all common stock issuable
upon conversion of convertible securities (identifying them by
asterisk) and show average price per share as if conversion has
occurred. Indicate by footnote if the price paid was for a
consideration other than cash and the nature of any such
consideration.
Class Average Number Percent Number Percent
of shares price of shares of total of shares of total
per share now held held
after
offering
if all
securities
sold
_________ _________ ________ ______ _______ _______
Name:____________________
Office Street Address: _________________
________________________________________
Telephone No. ( ) ___ -____
Principal occupation:___________________
Name: ___________________
Office Street Address: _________________
________________________________________
Telephone No. ( ) ___-____
Principal occupation: __________________
Name: ___________________
Office Street Address: _________________
________________________________________
Telephone No. ( ) ___-____
Principal occupation: __________________
Name: ___________________
Office Street Address: _________________
________________________________________
Telephone No. ( ) ___ -____
Principal occupation: __________________
38. Number of shares beneficially owned by Officers and
Directors as a group:
Before offering: ____ shares ( __ % of total outstanding)
After offering:
(a) Assuming minimum securities sold: ____ shares ( __ % of
total outstanding)
(b) Assuming maximum securities sold: ____ shares ( __ % of
total outstanding)
-------------------- BEGINNING OF PAGE #121 -------------------
(Assume all options exercised and all convertible securities
converted.)
Instruction: If shares are held by family members, through
corporations or partnerships, or otherwise in a manner that would
allow a person to direct or control the voting of the shares (or
share in such direction or control -- as, for example, a
co-trustee) they should be included as being "beneficially
owned." An explanation of these circumstances should be set forth
in a footnote to the "Number of Shares Now Held."
Management Relationships, Transactions and Remuneration
39.(a) If any of the Officers, Directors, key personnel or
principal stockholders are related by blood or marriage, please
describe.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) If the Company has made loans to or is doing business
with any of its Officers, Directors, key personnel or 10%
stockholders, or any of their relatives (or any entity controlled
directly or indirectly by any such persons) within the last two
years, or proposes to do so within the future, explain. (This
includes sales or lease of goods, property or services to or from
the Company, employment or stock purchase contracts, etc.) State
the principal terms of any significant loans, agreements, leases,
financing or other arrangements.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(c) If any of the Company's Officers, Directors, key
personnel or 10% stockholders has guaranteed or co-signed any of
the Company's bank debt or other obligations, including any
indebtedness to be retired from the proceeds of this offering,
explain and state the amounts involved.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
40.(a) List all remuneration by the Company to Officers,
Directors and key personnel for the last fiscal year:
Cash Other
Chief Executive Officer $____ $____
Chief Operating Officer $____ $____
Chief Accounting Officer $____ $____
Key Personnel:
__________________________ $____ $____
__________________________ $____ $____
__________________________ $____ $____
Others:
__________________________ $____ $____
__________________________ $____ $____
__________________________ $____ $____
-------------------- BEGINNING OF PAGE #122 -------------------
Total: $____ $____
Directors as a group
(number of persons___) $____ $____
(b) If remuneration is expected to change or has been unpaid
in prior years, explain:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(c) If any employment agreements exist or are contemplated,
describe:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
41.(a) Number of shares subject to issuance under presently
outstanding stock purchase agreements, stock options, warrants or
rights: ____ shares ( __ % of total shares to be outstanding
after the completion of the offering if all securities sold,
assuming exercise of options and conversion of convertible
securities). Indicate which have been approved by shareholders.
State the expiration dates, exercise prices and other basic terms
for these securities:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(b) Number of common shares subject to issuance under
existing stock purchase or option plans but not yet covered by
outstanding purchase agreements, options or warrants: ___ shares.
(c) Describe the extent to which future stock purchase
agreements, stock options, warrants or rights must be approved by
shareholders.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
42. If the business is highly dependent on the services of
certain key personnel, describe any arrangements to assure that
these persons will remain with the Company and not compete upon
any termination:
Note: After reviewing the above, potential investors should
consider whether or not the compensation to management and other
key personnel directly or indirectly, is reasonable in view of
the present stage of the Company's development.
Instruction: For purposes of Question 39(b), a person
directly or indirectly controls an entity if he is part of the
group that directs or is able to direct the entity's activities
or affairs. A person is typically a member of a control group if
he is an officer, director, general partner, trustee or
beneficial owner of a 10% or greater interest in the entity. In
Question 40, the term "Cash" should indicate salary, bonus,
consulting fees, non-accountable expense accounts and the like.
The column captioned "Other" should include the value of any
options or securities given, any annuity, pension or retirement
benefits, bonus or profit-sharing plans, and personal benefits
(club memberships, company cars, insurance benefits not generally
available to employees, etc.). The nature of these benefits
should be explained in a footnote to this column.
-------------------- BEGINNING OF PAGE #123 -------------------
Litigation
43. Describe any past, pending or threatened litigation or
administrative action which has had or may have a material effect
upon the Company's business, financial condition, or operations,
including any litigation or action involving the Company's
Officers, Directors or other key personnel. State the names of
the principal parties, the nature and current status of the
matters, and amounts involved. Give an evaluation by management
or counsel, to the extent feasible, of the merits of the
proceedings or litigation and the potential impact on the
Company's business, financial condition, or operations.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Federal Tax Aspects
44. If the Company is an S corporation under the Internal
Revenue Code of 1986, and it is anticipated that any significant
tax benefits will be available to investors in this offering,
indicate the nature and amount of such anticipated tax benefits
and the material risks of their disallowance. Also, state the
name, address and telephone number of any tax advisor that has
passed upon these tax benefits. Attach any opinion or description
of the tax consequences of an investment in the securities by the
tax advisor.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Name of Tax Advisor:________________________
Address: ________________________
_________________________________
Telephone No. (___) ___-____
Note: Potential investors are encouraged to have their own
personal tax consultant contact the tax advisor to review details
of the tax benefits and the extent that the benefits would be
available and advantageous to the particular investor.
Miscellaneous Factors
45. Describe any other material factors, either adverse or
favorable, that will or could affect the Company or its business
(for example, discuss any defaults under major contracts, any
breach of bylaw provisions, etc.) or which are necessary to make
any other information in this Offering Circular not misleading or
incomplete.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Financial Statements
46. Provide the financial statements required by Part F/S of
this Offering Circular section of Form 1-A.
Management's Discussion and Analysis of Certain Relevant Factors
-------------------- BEGINNING OF PAGE #124 -------------------
47. If the Company's financial statements show losses from
operations, explain the causes underlying these losses and what
steps the Company has taken or is taking to address these causes.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
48. Describe any trends in the Company's historical
operating results. Indicate any changes now occurring in the
underlying economics of the industry or the Company's business
which, in the opinion of Management, will have a significant
impact (either favorable or adverse) upon the Company's results
of operations within the next 12 months, and give a rough
estimate of the probable extent of the impact, if possible.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
49. If the Company sells a product or products and has had
significant sales during its last fiscal year, state the existing
gross margin (net sales less cost of such sales as presented in
accordance with generally accepted accounting principles) as a
percentage of sales for the last fiscal year: __ %. What is the
anticipated gross margin for next year of operations?
Approximately __ %. If this is expected to change, explain. Also,
if reasonably current gross margin figures are available for the
industry, indicate these figures and the source or sources from
which they are obtained.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
50. Foreign sales as a percent of total sales for last
fiscal year: __ %. Domestic government sales as a percent of
total domestic sales for last fiscal year: __ %. Explain the
nature of these sales, including any anticipated changes:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Offering Circular Model B.
Item 1. Cover Page
The cover page of the offering circular shall include the
following information:
(a) Name of the issuer;
(b) The mailing address of the issuer's principal executive
offices including the zip code and the issuer's telephone number;
(c) Date of the offering circular;
(d) Description and amount of securities offered (Note: this
description should include, for example, appropriate disclosure
of redemption and conversion features of debt securities);
(e) The statement required by Rule 253;
(f) The table(s) required by Item 2;
(g) The name of the underwriter or underwriters;
(h) Any materials required by the law of any state in which
the securities are to be offered;
(i) If applicable, identify material risks in connection
with the purchase of the securities; and
-------------------- BEGINNING OF PAGE #125 -------------------
(j) Approximate date of commencement of proposed sale to the
public.
Instruction: Where the name of the issuer is the same as
the name of another well-known company or indicates a line of
business in which the issuer is not engaged or is engaged to only
a limited extent, a statement should be furnished to that effect.
In some circumstances, however, disclosure may not be sufficient,
and a change of name may be the only way to cure its misleading
character.
Item 2. Distribution Spread
(a) The information called for by the following table shall
be given, in substantially the tabular form indicated, on the
outside front cover page of the offering circular as to all
securities being offered (estimate, if necessary).
Underwriting Proceeds
Price discount and to issuer or
to public commissions other persons
Per unit __________ ____________ ____________
Total __________ ____________ ____________
If the securities are to be offered on a best efforts basis,
the cover page should set forth the termination date, if any, of
the offering, any minimum required sale and any arrangements to
place the funds received in an escrow, trust, or similar
arrangement. The following tabular presentation of the total
maximum and minimum securities to be offered should be combined
with the table required above.
Underwriting Proceeds
Price discount and to issuer or
to public commissions other persons
Total Minimum __________ ____________ ____________
Total Maximum __________ ____________ ____________
Instructions
1. The term "commissions" shall include all cash,
securities, contracts, or anything else of value, paid, to be set
aside, disposed of, or understandings with or for the benefit of
any other persons in which any underwriter is interested, made in
connection with the sale of such security.
2. Only commissions paid by the issuer in cash are to be
indicated in the table. Commissions paid by other persons or any
form of non-cash compensation shall be briefly identified in a
note to the table with a cross-reference to a more complete
description elsewhere in the offering circular.
3. Prior to the commencement of sales pursuant to Regulation
A, the issuer shall inform the Commission whether or not the
amount of compensation to be allowed or paid to the underwriters,
as described in the offering statement, has been cleared with the
National Association of Securities Dealers, Inc.
4. If the securities are not to be offered for cash, state
the basis upon which the offering is to be made.
5. If it is impracticable to state the price to the public,
the method by which it is to be determined shall be explained.
-------------------- BEGINNING OF PAGE #126 -------------------
(b) Any finder's fees or similar payments shall be disclosed
on the cover page with a reference to a more complete discussion
in the offering circular. Such disclosure should identify the
finder, the nature of the services rendered and the nature of any
relationship between the finder and the issuer, its officers,
directors, promoters, principal stockholders and underwriters
(including any affiliates thereof).
(c) The amount of the expenses of the offering borne by the
issuer, including underwriting expenses to be borne by the
issuer, should be disclosed in a footnote to the table.
Item 3. Summary Information, Risk Factors and Dilution
(a) Where appropriate to a clear understanding by investors,
there should be set forth in the forepart of the offering
circular, under an appropriate caption, a carefully organized
series of short, concise paragraphs, summarizing the principal
factors which make the offering one of high risk or speculative.
Note: These factors may be due to such matters as an absence of
an operating history of the issuer, an absence of profitable
operations in recent periods, an erratic financial history, the
financial position of the issuer, the nature of the business in
which the issuer is engaged or proposes to engage, conflicts of
interest with management, reliance on the efforts of a single
individual, or the method of determining the market price where
no market currently exists. Issuers should avoid generalized
statements and include only those factors which are unique to the
issuer.
(b) Where there is a material disparity between the public
offering price and the effective cash cost to officers,
directors, promoters and affiliated persons for shares acquired
by them in a transaction during the past three years, or which
they have a right to acquire, there should be included a
comparison of the public contribution under the proposed public
offering and the effective cash contribution of such persons. In
such cases, and in other instances where the extent of the
dilution makes it appropriate, the following shall be given: (1)
the net tangible book value per share before and after the
distribution; (2) the amount of the increase in such net tangible
book value per share attributable to the cash payment made by
purchasers of the shares being offered; and (3) the amount of the
immediate dilution from the public offering price which will be
absorbed by such purchasers.
Item 4. Plan of Distribution
(a) If the securities are to be offered through
underwriters, give the names of the principal underwriters, and
state the respective amounts underwritten. Identify each such
underwriter having a material relationship to the issuer and
state the nature of the relationship. State briefly the nature of
the underwriters' obligation to take the securities.
(b) State briefly the discounts and commissions to be
allowed or paid to dealers, including all cash, securities,
contracts or other consideration to be received by any dealer in
connection with the sale of the securities.
(c) Outline briefly the plan of distribution of any securities
being issued which are to be offered through the selling efforts
of brokers or dealers or otherwise than through underwriters.
(d) If any of the securities are to be offered for the account
of security holders, indicate on the cover page the total amount
to be offered for their account and include a cross-reference to
a fuller discussion elsewhere in the offering circular. Such
discussion should identify each selling security holder, state
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the amount owned by him, the amount offered for his account and
the amount to be owned after the offering.
(e)(1) Describe any arrangements for the return of funds to
subscribers if all of the securities to be offered are not sold;
if there are no such arrangements, so state.
(2) If there will be a material delay in the payment of the
proceeds of the offering by the underwriter to the issuer, the
salient provisions in this regard and the effects on the issuer
should be stated.
Instruction
Attention is directed to the provisions of Rules 10b-9 [17
CFR Section 240.10b-9] and 15c2-4 [17 CFR Section 240.15c2-4]
under the Securities Exchange Act of 1934. These rules outline,
among other things, antifraud provisions concerning the return of
funds to subscribers and the transmission of proceeds of an
offering to a seller.
Item 5. Use of Proceeds to Issuer
State the principal purposes for which the net proceeds to
the issuer from the securities to be offered are intended to be
used, and the approximate amount intended to be used for each
such purpose.
Instructions
1. If any substantial portion of the proceeds has not been
allocated for particular purposes, a statement to that effect
shall be made together with a statement of the amount of proceeds
not so allocated and how the registrant expects to employ such
funds not so allocated.
2. Include a statement as to the use of the actual proceeds
if they are not sufficient to accomplish the purpose set forth
and the order of priority in which they will be applied. However,
such statement need not be made if the underwriting arrangements
are such that, if any securities are sold to the public, it can
be reasonably expected that the actual proceeds of the issue will
not be substantially less than the estimated aggregate proceeds
to the issuer as shown under Item 2.
3. If any material amounts of other funds are to be used in
conjunction with the proceeds, state the amounts and sources of
such other funds.
4. If any material part of the proceeds is to be used to
discharge indebtedness, describe the terms of such indebtedness.
If the indebtedness to be discharged was incurred within one
year, describe the use of the proceeds of such indebtedness.
5. If any material amount of the proceeds is to be used to
acquire assets, otherwise than in the ordinary course of
business, briefly describe and state the cost of the assets. If
the assets are to be acquired from affiliates of the issuer or
their associates, give the names of the persons from whom they
are to be acquired and set forth the principle followed in
determining the cost to the issuer.
6. The issuer may reserve the right to change the use of
proceeds provided that such reservation is due to certain
contingencies which are adequately disclosed.
Item 6. Description of Business
(a) Narrative description of business.
(1) Describe the business done and intended to be done by
the issuer and its subsidiaries and the general development of
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the business during the past five years or such shorter period as
the issuer may have been in business. Such description should
include, but not be limited to, a discussion of the following
factors if such factors are material to an understanding of the
issuer's business:
(i) The principal products produced and services rendered
and the principal markets for and method of distribution of such
products and services.
(ii) The status of a product or service if the issuer has
made public information about a new product or service which
would require the investment of a material amount of the assets
of the issuer or is otherwise material.
(iii) The estimated amount spent during each of the last two
fiscal years on company-sponsored research and development
activities determined in accordance with generally accepted
accounting principles. In addition, state the estimated dollar
amount spent during each of such years on material
customer-sponsored research activities relating to the
development of new products, services or techniques or the
improvement of existing products, services or techniques.
(iv) The number of persons employed by the issuer,
indicating the number employed full time.
(v) The material effects that compliance with Federal, State
and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment, may
have upon the capital expenditures, earnings and competitive
position of the issuer and its subsidiaries. The issuer shall
disclose any material estimated capital expenditures for
environmental control facilities for the remainder of its current
fiscal year and for such further periods as the issuer may deem
material.
(2) The issuer should also describe those distinctive or
special characteristics of the issuer's operation or industry
which may have a material impact upon the issuer's future
financial performance. Examples of factors which might be
discussed include dependence on one or a few major customers or
suppliers (including suppliers of raw materials or financing),
existing or probable governmental regulation, material terms of
and/or expiration of material labor contracts or patents,
trademarks, licenses, franchises, concessions or royalty
agreements, unusual competitive conditions in the industry,
cyclicality of the industry and anticipated raw material or
energy shortages to the extent management may not be able to
secure a continuing source of supply.
(3) The following requirement in subparagraph (i) applies
only to issuers (including predecessors) which have not received
revenue from operations during each of the three fiscal years
immediately prior to the filing of the offering statement.
(i) Describe, if formulated, the issuer's plan of operation
for the twelve months following the commencement of the proposed
offering. If such information is not available, the reasons for
its unavailability shall be stated. Disclosure relating to any
plan should include, among other things, a statement indicating
whether, in the issuer's opinion, the proceeds from the offering
will satisfy its cash requirements and whether, in the next six
months, it will be necessary to raise additional funds.
(ii) Any engineering, management or similar reports which
have been prepared or provided for external use by the issuer or
by a principal underwriter in connection with the proposed
offering should be furnished to the Commission at the time of
filing the offering statement or as soon as practicable
thereafter. There should also be furnished at the same time a
statement as to the actual or proposed use and distribution of
such report or memorandum. Such statement should identify each
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class of persons who have received or will receive the report or
memorandum, and state the number of copies distributed to each
such class. If no such report or memorandum has been prepared,
the Commission should be so informed in writing at the time the
report or memorandum would otherwise have been submitted.
(b) Segment Data. If the issuer is required to include
segment information in its financial statements, an appropriate
cross-reference shall be included in the description of business.
Item 7. Description of Property
State briefly the location and general character of the
principal plants, and other materially important physical
properties of the issuer and its subsidiaries. If any such
property is not held in fee or is held subject to any major
encumbrance, so state and briefly describe how held.
Instruction
What is required is information essential to an investor's
appraisal of the securities being offered. Such information
should be furnished as will reasonably inform investors as to the
suitability, adequacy, productive capacity and extent of
utilization of the facilities used in the enterprise. Detailed
descriptions of the physical characteristics of individual
properties or legal descriptions by metes and bounds are not
required and should not be given.
Item 8. Directors, Executive Officers and Significant Employees
(a) List the names and ages of each of the following persons
stating his term of office and any periods during which he has
served as such and briefly describe any arrangement or
understanding between him and any other person(s) (naming such
person(s)) pursuant to which he was or is to be selected to his
office or position:
(1) directors;
(2) persons nominated to become directors;
(3) executive officers;
(4) persons chosen to become executive officers;
(5) significant employees.
Instructions
1. No nominee or person chosen to become a director or
person chosen to be an executive officer who has not consented to
act as such should be named in response to this item.
2. The term "executive officer" means the president,
secretary, treasurer, any vice president in charge of a principal
business function (such as sales, administration, or finance) and
any other person who performs similar policy making functions for
the issuer.
3. The term "significant employee" means persons such as
production managers, sales managers, or research scientists, who
are not executive officers, but who make or are expected to make
significant contributions to the business of the issuer.
(b) Family relationships. State the nature of any family
relationship between any director, executive officer, person
nominated or chosen by the issuer to become a director or
executive officer or any significant employee.
Instruction
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The term "family relationship" means any relationship by
blood, marriage, or adoption, not more remote than first cousin.
(c) Business experience. Give a brief account of the business
experience during the past five years of each director, person
nominated or chosen to become a director or executive officer,
and each significant employee, including his principal
occupations and employment during that period and the name and
principal business of any corporation or other organization in
which such occupations and employment were carried on. When an
executive officer or significant employee has been employed by
the issuer for less than five years, a brief explanation should
be included as to the nature of the responsibilities undertaken
by the individual in prior positions to provide adequate
disclosure of this prior business experience. What is required is
information relating to the level of his professional competence
which may include, depending upon the circumstances, such
specific information as the size of the operation supervised.
(d) Involvement in certain legal proceedings. Describe any
of the following events which occurred during the past five years
and which are material to an evaluation of the ability or
integrity of any director, person nominated to become a director
or executive officer of the issuer.
(1) A petition under the Bankruptcy Act or any State
insolvency law was filed by or against, or a receiver, fiscal
agent or similar officer was appointed by a court for the
business or property of such person, or any partnership in which
he was general partner at or within 2 years before the time of
such filing, or any corporation or business association of which
he was an executive officer at or within two years before the
time of such filing;
(2) Such person was convicted in a criminal proceeding
(excluding traffic violations and other minor offenses).
Item 9. Remuneration of Directors and Officers
(a) Furnish, in substantially the tabular form indicated, the
aggregate annual remuneration of each of the three highest paid
persons who are officers or directors as a group during the
issuer's last fiscal year. State the number of persons in the
group referred to above without naming them.
Name of individual Capacities in which Aggregate
or identity of group remuneration was received remuneration
____________________ ________________________ ____________
Instructions
1. In case of remuneration paid or to be paid otherwise than
in cash, if it is impracticable to determine the cash value
thereof, state in a note to the table the nature and amount
thereof.
2. This item is to be answered on an accrual basis if
practicable; if not so answered, state the basis used.
(b) Briefly describe all remuneration payments proposed to
be made in the future pursuant to any ongoing plan or arrangement
to the individuals and group specified in Item 9(a). The
description should include a summary of how each plan operates,
any performance formula or measure in effect (or the criteria
used to determine payment amounts), the time periods over which
the measurements of benefits will be determined, payment
schedules, and any recent material amendments to the plan.
Information need not be furnished with respect to any group life,
health, hospitalization, or medical reimbursement plans which do
not discriminate in scope, terms or operation in favor of
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officers or directors of the registrant and which are available
generally to all salaried employees.
Item 10. Security Ownership of Management and Certain
Securityholders
(a) Voting securities and principal holders thereof. Furnish
the following information, in substantially the tabular form
indicated, with respect to voting securities held of record by:
(1) each of the three highest paid persons who are officers
and directors of the issuer; Note -- In the event none of the
issuer's officers or directors have received a salary in the past
twelve months, this item should be responded to for every officer
and director;
(2) all officers and directors as a group;
(3) each shareholder who owns more than 10% of any class of
the issuer's securities, including those shares subject to
outstanding options.
(1) (2) (3) (4) (5)
Title of Name and Amount owned Amount owned Percent of
class address before the after the class
of owner offering offering
_______ _________ _____________ ___________ __________
Instruction
Column (4) need not be responded to if the information would
be the same as that appearing under column (3).
(b) If, to the knowledge of the issuer, any other person
holds or shares the power to vote or direct the voting of
securities described pursuant to subsection (a) above,
appropriate disclosure should be made. In addition, if any person
other than those named pursuant to subsection (a) holds or shares
the power to vote 10% or more of the issuer's voting securities,
the information required by the table should be provided with
respect to such person.
(c) Non-voting securities and principal holders thereof.
Furnish the same information as required in subsection (a) above
with respect to securities that are not entitled to vote.
(d) Options, warrants, and rights. Furnish the information
required by the table as to options, warrants or rights to
purchase securities from the issuer or any of its subsidiaries
held by each of the individuals and referred to in subsection (a)
above:
Name of holder Title and amount of Exercise Date of
securities called price exercise
for by options,
_____________ warrants or rights _________ _______
Instruction
Where the total market value of securities called for by all
outstanding options, warrants or rights does not exceed $10,000
for any officer, director, or principal shareholder named in
answer to this item, or $50,000 for all officers and directors as
a group, this item need not be answered with respect to options,
warrants or rights held by such person or group. If the issuer
cannot ascertain the market value of its securities, the offering
-------------------- BEGINNING OF PAGE #132 -------------------
price may be used for purposes of this subsection. If, as is the
case with offerings of debt securities, the offering price cannot
be determined at the time of filing the offering statement, the
issuer may utilize any reasonable method of valuation.
(e) List all parents of the issuer, showing the basis of
control and as to each parent the percentage of voting securities
owned or other basis of control by its immediate parent, if any.
Item 11. Interest of Management and Others in Certain
Transactions
Describe briefly any transactions during the previous two
years or any presently proposed transactions, to which the issuer
or any of its subsidiaries was or is to be a party, in which any
of the following persons had or is to have a direct or indirect
material interest, naming such person and stating his
relationship to the issuer, the nature of his interest in the
transaction and, where practicable, the amount of such interest:
(1) Any director or officer of the issuer;
(2) Any nominee for election as a director;
(3) Any principal securityholder named in answer to Item
10(a);
(4) If the issuer was incorporated or organized within the
past three years, any promoter of the issuer;
(5) Any relative or spouse of any of the foregoing persons,
or any relative of such spouse, who has the same house as such
person or who is a director or officer of any parent or
subsidiary of the issuer.
Instructions
1. No information need be given in answer to this item as to
any transaction where:
(a) The rates of charges involved in the transaction are
determined by competitive bids, or the transaction involves the
rendering of services as a common or contract carrier fixed in
conformity with law or governmental authority;
(b) The transaction involves services as a bank depositary
of funds, transfer agent, registrar, trustee under a trust
indenture, or similar services;
(c) The amount involved in the transaction or a series of
similar transactions, including all periodic installments in the
case of any lease or other agreement providing for periodic
payments or installments does not exceed $50,000; or
(d) The interest of the specified person arises solely from
the ownership of securities of the issuer and the specified
person receives no extra or special benefit not shared on a
pro-rata basis by all of the holders of securities of the class.
2. It should be noted that this Item calls for disclosure of
indirect as well as direct material interests in transactions. A
person who has a position or relationship with a firm,
corporation, or other entity which engages in a transaction with
the issuer or its subsidiaries may have an indirect interest in
such transaction by reason of such position or relationship.
However, a person shall be deemed not to have a material indirect
interest in a transaction within the meaning of this Item where:
(a) the interest arises only (i) from such person's position
as a director of another corporation or organization (other than
a partnership) which is a party to the transaction, or (ii) from
the direct or indirect ownership by such person and all other
persons specified in subparagraphs (1) through (5) above, in the
aggregate, of less than a 10 percent equity interest in another
person (other than a partnership) which is a party to the
transaction, or (iii) from both such position and ownership;
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(b) the interest arises only from such person's position as
a limited partner in a partnership in which he and all other
persons specified in (1) through (5) above had an interest of
less than 10 percent; or
(c) the interest of such person arises solely from the
holding of an equity interest (including a limited partnership
interest but excluding a general partnership interest) or a
creditor interest in another person which is a party to the
transaction with the issuer or any of its subsidiaries and the
transaction is not material to such other person.
3. Include the name of each person whose interest in any
transaction is described and the nature of the relationships by
reason of which such interest is required to be described. The
amount of the interest of any specified person shall be computed
without regard to the amount of the profit or loss involved in
the transaction. Where it is not practicable to state the
approximate amount of the interest, the approximate amount
involved in the transaction shall be disclosed.
4. Information should be included as to any material
underwriting discounts and commissions upon the sale of
securities by the issuer where any of the specified persons was
or is to be a principal underwriter or is a controlling person,
or member, of a firm which was or is to be a principal
underwriter. Information need not be given concerning ordinary
management fees paid by underwriters to a managing underwriter
pursuant to an agreement among underwriters the parties to which
do not include the issuer or its subsidiaries.
5. As to any transaction involving the purchase or sale of
assets by or to any issuer or any subsidiary, otherwise than in
the ordinary course of business, state the cost of the assets to
the purchaser and, if acquired by the seller within two years
prior to the transaction, the cost thereof to the seller.
6. Information shall be furnished in answer to this Item
with respect to transactions not excluded above which involve
remuneration from the issuer or its subsidiaries, directly or
indirectly, to any of the specified persons for services in any
capacity unless the interest of such persons arises solely from
the ownership individually and in the aggregate of less than 10
percent of any class of equity securities of another corporation
furnishing the services to the issuer or its subsidiaries.
Item 12. Securities Being Offered
(a) If capital stock is being offered, state the title of
the class and furnish the following information:
(1) Outline briefly: (i) dividend rights; (ii) voting
rights; (iii) liquidation rights; (iv) preemptive rights; (v)
conversion rights; (vi) redemption provisions; (vii) sinking fund
provisions; and (viii) liability to further calls or to
assessment by the issuer.
(2) Briefly describe potential liabilities imposed on
shareholders under state statutes or foreign law, e.g., to
laborers, servants or employees of the registrant, unless such
disclosure would be immaterial because the financial resources of
the registrant are such as to make it unlikely that the liability
will ever be imposed.
(b) If debt securities are being offered, outline briefly
the following:
(1) Provisions with respect to interest, conversion,
maturity, redemption, amortization, sinking fund or retirement.
(2) Provisions with respect to the kind and priority of any
lien securing the issue, together with a brief identification of
the principal properties subject to such lien.
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(3) Provisions restricting the declaration of dividends or
requiring the maintenance of any ratio of assets, the creation or
maintenance of reserves or the maintenance of properties.
(4) Provisions permitting or restricting the issuance of
additional securities, the withdrawal of cash deposited against
such issuance, the incurring of additional debt, the release or
substitution of assets securing the issue, the modification of
the terms of the security, and similar provisions.
Instruction
In the case of secured debt there should be stated (i) the
approximate amount of unbonded property available for use against
the issuance of bonds, as of the most recent practicable date,
and (ii) whether the securities being issued are to be issued
against such property, against the deposit of cash, or otherwise.
(c) If securities described are to be offered pursuant to
warrants, rights, or convertible securities, state briefly:
(1) the amount of securities called for by such warrants,
convertible securities or rights;
(2) the period during which and the price at which the
warrants, convertible securities or rights are exercisable;
(3) the amounts of warrants, convertible securities or
rights outstanding; and
(4) any other material terms of such securities.
(d) In the case of any other kind of securities, appropriate
information of a comparable character.
Part F/S
The following financial statements of the issuer, or the
issuer and its predecessors or any businesses to which the issuer
is a successor shall be filed as part of the offering statement
and included in the offering circular which is distributed to
investors.
Such financial statements shall be prepared in accordance
with generally accepted accounting principles (GAAP) in the
United States. If the issuer is a Canadian company, a
reconciliation to GAAP in the United States shall be filed as
part of the financial statements.
Issuers which have audited financial statements because they
prepare them for other purposes, shall provide them.
The Commission's Regulation S-X, 17 CFR 210.1 et seq.
relating to the form, content of and requirements for financial
statements shall not apply to the financial statements required
by this part, except that if audited financial statements are
filed, the qualifications and reports of an independent auditor
shall comply with the requirements of Article 2 of Regulation
S-X.
Issuers which are limited partnerships are required to also
file the balance sheets of general partners: (1) if such general
partner is a corporation, the balance sheet shall be as of the
end of its most recently completed fiscal year; receivables from
a parent or affiliate of such general partner (including notes
receivable, but excluding trade receivables) should be deductions
from shareholders equity of the general partner; where a parent
or affiliate has committed to increase or maintain the general
partner's capital, there shall also be filed the balance sheet of
such parent or affiliate as of the end of its most recently
completed fiscal year; (2) if such general partner is a
partnership, its balance sheet as of the end of its most recently
completed fiscal year; (3) if such general partner is a natural
person, the net worth of such general partner(s) based on the
estimated fair market value of their assets and liabilities,
-------------------- BEGINNING OF PAGE #135 -------------------
singly or in the aggregate shall be disclosed in the offering
circular, and balance sheets of each of the individual general
partners supporting such net worth shall be provided as
supplemental information.
(1) Balance Sheet -- as of a date within 90 days prior to
filing the offering statement or such longer time, not exceeding
6 months, as the Commission may permit at the written request of
the issuer upon a showing of good cause; for filings made after
90 days subsequent to the issuer's most recent fiscal year, the
balance sheet shall be dated as of the end of the most recent
fiscal year.
(2) Statements of income, cash flows, and other stockholders
equity -- for each of the 2 fiscal years preceding the date of
the most recent balance sheet being filed, and for any interim
period between the end of the most recent of such fiscal years
and the date of the most recent balance sheet being filed, or for
the period of the issuer's existence if less than the period
above.
Income statements shall be accompanied by a statement that
in the opinion of management all adjustments necessary for a fair
statement of results for the interim period have been included.
If all such adjustments are of a normal recurring nature, a
statement to that effect shall be made. If otherwise, there shall
be furnished as supplemental information and not as part of the
offering statement, a letter describing in detail the nature and
amount of any adjustments other than normal recurring adjustments
entering into the determination of results shown.
(3) Financial Statements of Businesses Acquired or to be
Acquired.
(a) Financial statements for the periods specified in (c)
below should be furnished if any of the following conditions
exist:
(i) Consummation of a significant business combination
accounted for as a purchase has occurred or is probable (for
purposes of this rule, the term "purchase" encompasses the
purchase of an interest in a business accounted for by the equity
method); or
(ii) Consummation of a significant business combination to
be accounted for as a pooling is probable.
(b) A business combination shall be considered significant
if a comparison of the most recent annual financial statements of
the business acquired or to be acquired and the registrant's most
recent annual consolidated financial statements filed at or prior
to the date of acquisition indicates that the business would be a
significant subsidiary pursuant to the conditions specified in
Rule 405 of Regulation C, 17 CFR Section 230.405.
(c)(i) The financial statements shall be furnished for the
periods up to the date of acquisition, for those periods for
which the registrant is required to furnish financial statements.
(ii) These financial statements need not be audited.
(iii) The separate balance sheet of the acquired business is
not required when the registrant's most recent balance sheet
filed is for a date after the acquisition was consummated.
(iv) If none of the conditions in the definitions of
significant subsidiary in Rule 405 exceeds 20%, income statements
of the acquired business for only the most recent fiscal year and
any interim period need be filed.
(d) If consummation of more than one transaction has
occurred or is probable, the tests of significance shall be made
using the aggregate impact of the businesses and the required
financial statements may be presented on a combined basis, if
appropriate.
-------------------- BEGINNING OF PAGE #136 -------------------
(e) This paragraph (3) shall not apply to a business which
is totally held by the registrant prior to consummation of the
transaction.
(4) Pro Forma Financial Information.
(a) Pro forma information shall be furnished if any of the
following conditions exist (for purposes of this rule, the term
"purchase" encompasses the purchase of an interest in a business
accounted for by the equity method);
(i) During the most recent fiscal year or subsequent interim
period for which a balance sheet of the registrant is required, a
significant business combination accounted for as a purchase has
occurred;
(ii) After the date of the registrant's most recent balance
sheet, consummation of a significant business combination to be
accounted for by either the purchase method or pooling of
interests method of accounting has occurred or is probable.
(b) The provisions of paragraph (3)(b), (d) and (e) apply to
this paragraph (4).
(c) Pro forma statements shall ordinarily be in columnar
form showing condensed historical statements, pro forma
adjustments, and the pro forma results and should include the
following:
(i) If the transaction was consummated during the most
recent fiscal year or in the subsequent interim period, pro forma
statements of income reflecting the combined operations of the
entities for the latest fiscal year and interim period, if any,
or
(ii) If consummation of the transaction has occurred or is
probable after the date of the most recent balance sheet, a pro
forma balance sheet giving effect to the combination as of the
date of the most recent balance sheet required by paragraph (b).
For a purchase, pro forma statements of income reflecting the
combined operations of the entities for the latest fiscal year
and interim period, if any, and for a pooling of interests, pro
forma statements of income for all periods for which income
statements of the registrant are required.
PART III -- EXHIBITS
Item 1. Index to Exhibits
(a) An index to the exhibits filed should be presented
immediately following the cover page to Part III.
(b) Each exhibit should be listed in the exhibit index
according to the number assigned to it under Item 2 below.
(c) The index to exhibits should identify the location of
the exhibit under the sequential page numbering system for this
Form 1-A.
(d) Where exhibits are incorporated by reference, the
reference shall be made in the index of exhibits.
Instructions:
1. Any document or part thereof filed with the Commission
pursuant to any Act administered by the Commission may, subject
to the limitations of Rule 24 of the Commission's Rules of
Practice, be incorporated by reference as an exhibit to any
offering statement.
2. If any modification has occurred in the text of any
document incorporated by reference since the filing thereof, the
issuer shall file with the reference a statement containing the
text of such modification and the date thereof.
3. Procedurally, the techniques specified in Rule 411(d) of
Regulation C shall be followed.
-------------------- BEGINNING OF PAGE #137 -------------------
Item 2. Description of Exhibits
As appropriate, the following documents should be filed as
exhibits to the offering statement.
(1) Underwriting Agreement -- Each underwriting contract or
agreement with a principal underwriter or letter pursuant to
which the securities are to be distributed; where the terms have
yet to be finalized, proposed formats may be provided.
(2) Charter and by-laws -- The charter and by-laws of the
issuer or instruments corresponding thereto as presently in
effect and any amendments thereto.
(3) Instruments defining the rights of security holders --
(a) All instruments defining the rights of any holder of the
issuer's securities, including but not limited to:
(i) Holders of equity or debt securities being issued;
(ii) holders of long-term debt of the issuer, and of all
subsidiaries for which consolidated or unconsolidated financial
statements are required to be filed.
(b) The following instruments need not be filed if the
issuer agrees to provide them to the Commission upon request:
(i) Instruments defining the rights of holders of long-term
debt of the issuer and all of its subsidiaries for which
consolidated financial statements are required to be filed if
such debt is not being issued pursuant to this Regulation A
offering and the total amount of such authorized issuance does
not exceed 5% of the total assets of the issuer and its
subsidiaries on a consolidated basis;
(ii) any instrument with respect to a class of securities
which is to be retired or redeemed prior to the issuance or upon
delivery of the securities being issued pursuant to this
Regulation A offering and appropriate steps have been taken to
assure such retirement or redemption; and
(iii) copies of instruments evidencing scrip certificates or
fractions of shares.
(4) Subscription agreement -- The form of any subscription
agreement to be used in connection with the purchase of
securities in this offering.
(5) Voting trust agreement -- Any voting trust agreements
and amendments thereto.
(6) Material contracts --
(a) Every contract not made in the ordinary course of
business which is material to the issuer and is to be performed
in whole or in part at or after the filing of the offering
statement or was entered into not more than 2 years before such
filing. Only contracts need be filed as to which the issuer or
subsidiary of the issuer is a party or has succeeded to a party
by assumption or assignment or in which the issuer or such
subsidiary has a beneficial interest.
(b) If the contract is such as ordinarily accompanies the
kind of business conducted by the issuer and its subsidiaries, it
is made in the ordinary course of business and need not be filed
unless it falls within one or more of the following categories,
in which case it should be filed except where immaterial in
amount or significance:
(i) any contract to which directors, officers, promoters,
voting trustees, security holders named in the offering
statement, or underwriters are parties except where the contract
merely involves the purchase or sale of current assets having a
determinable market price, at such market price;
(ii) any contract upon which the issuer's business is
substantially dependent, as in the case of continuing contracts
to sell the major part of the issuer's products or services or to
-------------------- BEGINNING OF PAGE #138 -------------------
purchase the major part of the issuer's requirements of goods,
services or raw materials or any franchise or license or other
agreement to use a patent, formula, trade secret, process or
trade name upon which the issuer's business depends to a material
extent;
(iii) any contract calling for the acquisition or sale of
any property, plant or equipment for a consideration exceeding
15% of such fixed assets of the issuer on a consolidated basis;
or
(iv) any material lease under which a part of the property
described in the offering statement is held by the issuer.
(c) Any management contract or any compensatory plan,
contract or arrangement including but not limited to plans
relating to options, warrants or rights, pension, retirement or
deferred compensation or bonus, incentive or profit sharing (or
if not set forth in any formal document, a written description
thereof) shall be deemed material and shall be filed except for
the following:
(i) ordinary purchase and sales agency agreements;
(ii) agreements with managers of stores in a chain
organization or similar organization;
(iii) contracts providing for labor or salesmen's bonuses or
payments to a class of security holders, as such;
(iv) any compensatory plan, contract or arrangement which
pursuant to its terms is available to employees generally and
which in operation provides for the same method of allocation of
benefits between management and non-management participants.
(7) Material foreign patents -- Each material foreign patent
for an invention not covered by a United States patent. If a
substantial part of the securities to be offered or if the
proceeds therefrom have been or are to be used for the particular
purposes of acquiring, developing or exploiting one or more
material foreign patents or patent rights, furnish a list showing
the number and a brief identification of each such patent or
patent right.
(8) Plan of acquisition, reorganization, arrangement,
liquidation, or succession -- Any material plan of acquisition,
disposition, reorganization, readjustment, succession,
liquidation or arrangement and any amendments thereto described
in the offering statement. Schedules (or similar attachments) to
these exhibits shall not be filed unless such schedules contain
information which is material to an investment decision and which
is not otherwise disclosed in the agreement or the offering
statement. The plan filed shall contain a list briefly
identifying the contents of all omitted schedules, together with
an agreement to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
(9) Escrow agreements -- Any escrow agreement or similar
arrangement which has been executed in connection with the
Regulation A offering.
(10) Consents --
(a) Experts: The written consent of
(i) any accountant, engineer, geologist, appraiser or any
person whose profession gives authority to a statement made by
them and who is named in the offering statement as having
prepared or certified any part of the document or is named as
having prepared or certified a report or evaluation whether or
not for use in connection with the offering statement;
(ii) the expert that authored any portion of a report quoted
or summarized as such in the offering statement, expressly
stating their consent to the use of such quotation or summary;
(iii) any persons who are referenced as having reviewed or
passed upon any information in the offering statement, and that
-------------------- BEGINNING OF PAGE #139 -------------------
such information is being included on the basis of their
authority or in reliance upon their status as experts.
(b) Underwriters: A written consent and certification in the
form which follows signed by each underwriter of the securities
proposed to be offered. All underwriters may, with appropriate
modifications, sign the same consent and certification or
separate consents and certifications may be signed by any
underwriter or group of underwriters.
Consent and Certification by Underwriter
1. The undersigned hereby consents to being named as
underwriter in an offering statement filed with the Securities
and Exchange Commission by [insert name of issuer] pursuant to
Regulation A in connection with a proposed offering of [insert
title of securities] to the public.
2. The undersigned hereby certifies that it furnished the
statements and information set forth in the offering statement
with respect to the undersigned, its directors and officers or
partners, that such statements and information are accurate,
complete and fully responsive to the requirements of Parts I, II
and III of the Offering Statement thereto, and do not omit any
information required to be stated therein with respect of any
such persons, or necessary to make the statements and information
therein with respect to any of them not misleading.
3. If Preliminary Offering Circulars are distributed, the
undersigned hereby undertakes to keep an accurate and complete
record of the name and address of each person furnished a
Preliminary Offering Circular and, if such Preliminary Offering
Circular is inaccurate or inadequate in any material respect, to
furnish a revised Preliminary Offering Circular or a Final
Offering Circular to all persons to whom the securities are to be
sold at least 48 hours prior to the mailing of any confirmation
of sale to such persons, or to send such a circular to such
persons under circumstances that it would normally be received by
them 48 hours prior to their receipt of confirmation of the sale.
_________________________________
(Underwriter)
By_________________________
Date __/__/__
(c) All written consents shall be dated and manually signed.
(11) Opinion re legality -- An opinion of counsel as to the
legality of the securities covered by the Offering Statement,
indicating whether they will, when sold, be legally issued, fully
paid and nonassessable, and if debt securities, whether they will
be binding obligations of the issuer.
(12) Sales Material -- Any material required to be filed by
virtue of Rule 256.
(13) "Test the Water" Material -- Any written document or
broadcast script used under the authorization of Rule 254.
(14) Appointment of Agent for Service of Process -- A
Canadian issuer shall provide Form F-X.
(15) Additional exhibits -- Any additional exhibits which
the issuer may wish to file, which shall be so marked as to
indicate clearly the subject matters to which they refer.
Signatures
The issuer has duly caused this offering statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of _______ , State of _______ , on _____
__, 19___.
(Issuer)_______________________
-------------------- BEGINNING OF PAGE #140 -------------------
By (Signature and Title)_____________________
_____________________
This offering statement has been signed by the following
persons in the capacities and on the dates indicated.
(Signature)____________________
(Title)________________________
(Selling security holder)_____________________
(Date) __/__/__
Instructions
1. The offering statement shall be signed by the issuer, its
Chief Executive Officer, Chief Financial Officer, a majority of
the members of its board of directors or other governing
instrumentality, and each person, other than the issuer, for
whose account any of the securities are to be offered. If a
signature is by a person on behalf of any other person, evidence
of authority to sign shall be filed with the offering statement,
except where an executive officer signs on behalf of the issuer.
If the issuer is Canadian, its authorized representative in the
United States also shall sign. Where the issuer is a limited
partnership, the offering statement shall also be signed by a
majority of the board of directors of any corporate general
partner.
2. The name of each person signing the offering statement
shall be typed or printed beneath the signature.
Securities and Exchange Commission
FORM 2-A -- Report of Sales and Uses of Proceeds Pursuant to Rule
257 of Regulation A File No. 24-_______
For period ending __/__/__
Indicate whether the report is an:
initial report [ ]
amendment [ ]
or final report [ ]
If the report is an amendment, indicate the number of such
amendment. ____
If the offering has terminated, indicate the date of
termination __/__/__
General Instructions
The report shall be filed in accordance with the provisions
of Rule 257 of Regulation A.
Answer each item in the box(es) or spaces provided. If
additional space is required for any response, continue the
response on an attached sheet.
If the issuer is required to file any report(s) on this form
subsequent to its initial filing, each subsequent filing shall be
deemed to be an amendment to the initial filing. Do not report in
any amendment responses to Items 3-11 unless the information has
changed.
No fee is required to accompany this filing.
Seven copies of the form shall be filed with the Commission
Office where the Regulation A Offering Statement was qualified.
At least one copy of the form shall be manually signed; other
copies may bear typed or printed signatures.
1._________________________________________________
Exact name of issuer as specified in its charter.
-------------------- BEGINNING OF PAGE #141 -------------------
2. Date of qualification of the offering statement: __/__/__
3. Has the offering commenced? [ ] Yes [ ] No.
If yes, date of commencement: __/__/__
If no, explain briefly:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
4. Did the offering terminate before any securities were
sold? [ ] Yes [ ] No.
If yes, explain briefly:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
If "yes", do not answer Items 5-11.
5. Did the offering terminate prior to the sale of all the
securities qualified under Regulation A? [ ] Yes [ ] No.
If yes, explain briefly:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
6. Indicate the total number of shares or other units
offered and sold to date: _____ (issuer's account) _____ (selling
securityholders)
Indicate the number of shares or other units still being
offered: ______ (issuer's account) _____ (selling
securityholders)
7. Total amount of dollars received from the public to date.
$ ____
Total amount allocable to selling securityholders: $ ____
Underwriting discount or commission allowed $ ____
Underwriting expenses paid $ ____
Finders' Fees $ ____
Other expenses paid to date by or
for issuer:
Legal (including organization) $ ____
Accounting $ ____
Engineering $ ____
Printing and Advertising $ ____
Other (specify) ______________________ $ ____
______________________________________ $ ____
______________________________________ $ ____
______________________________________ $ ____
Total costs and expenses $ ____
Total net proceeds remaining. $ ____
8. Uses of net proceeds to date.
Instructions
1. Do not include any amount in "working capital" to which a
more specific category is applicable.
2. Round all amounts to the nearest dollar.
3. Specify under "other purposes" any purpose for which at
least 5% of the issuer's proceeds or $50,000, whichever is less,
has been used.
-------------------- BEGINNING OF PAGE #142 -------------------
Salaries and fees $ ____
Construction of plant, building
and facilities $ ____
Purchases and installation of machinery
and equipment $ ____
Purchase of real estate $ ____
Acquisition of other business(es) $ ____
Repayment of indebtedness $ ____
Working capital $ ____
Development expense (product development,
research, patent costs, etc.) $ ____
Temporary investment (specify)______________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
Other purposes (specify):___________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
____________________________________________ $ ____
9. Do the use(s) of proceeds in Item 8 represent a material
change in the use(s) of proceeds described in the offering
circular? [ ] Yes [ ] No.
If yes, explain briefly:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
10. State the number of shares held by each promoter,
director, officer or controlling person of the issuer, if
different from the amount stated in the offering circular.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
11. List the names and addresses of all brokers and dealers
who have, to the knowledge of the issuer or underwriters,
participated in the distribution of the securities during the
period covered by this report.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Signature
Pursuant to the requirements of Rule 257 and Regulation A,
_______ (duly authorized) has caused this report to be signed on
its behalf by the undersigned thereunto.
____________________________
Issuer
By _________________________
Signature
Date __/__/__
Instruction:
-------------------- BEGINNING OF PAGE #143 -------------------
The report shall be signed by an executive officer, general
partner or counsel of the issuer or by any other duly authorized
person. The name and any title of the person who signs the report
shall be typed or printed beneath the signature.
PART 240 - GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT
OF 1934
29. The authority citation for Part 240 continues to read
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg,
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 781, 78m, 78n, 78o, 78p,
78s, 78w, 78x, 7811(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37,
80b-3, 80b-4, and 80b-11, unless otherwise noted.
Section 240.3b-6 [Amended]
30. By amending Section 240.3b-6 paragraph (b)(1)(i) after
the words "Securities Act of 1933" add the words", offering
statement or solicitation of interest written document or
broadcast script under Regulation A" and in paragraph (b)(2)(i)
after the parenthetical "(Section 229.303 of this chapter)" add
the words "or Regulation S-B (Section 228.303 of this chapter)"
and after the words "Rule 3-20(c)" add the words "of Regulation
S-X (Section 210.3-20(c)".
31. Section 240.12b-2 is amended by adding the definition
of "small business issuer" in the appropriate alphabetical order
to read as follows:
Section 240.12b-2 Definitions.
* * * * *
Small Business Issuer. The term "small business issuer"
means an entity that meets the following criteria:
(1) has revenues of less than $25,000,000;
(2) is a U.S. or Canadian issuer;
(3) is not an investment company; and
(4) if a majority owned subsidiary, the parent corporation
is also a small business issuer.
Provided however, that an entity is not a small business
issuer if it has a public float (the aggregate market value of
the issuer's outstanding securities held by non-affiliates) of
$25,000,000 or more.
NOTE: The public float of a reporting company shall be
computed by use of the price at which the stock was last sold, or
the average of the bid and asked prices of such stock, on a date
within 60 days prior to the end of its most recent fiscal year.
The public float of a company filing an initial registration
statement under the Exchange Act shall be determined as of a date
within 60 days of the date the registration statement is filed.
In the case of an initial public offering of securities, public
float shall be computed on the basis of the number of shares
outstanding prior to the offering and the estimated public
offering price of the securities.
-------------------- BEGINNING OF PAGE #144 -------------------
* * * * *
32. By amending paragraph (b)(5)(ii) of Section 240.14a-3
to add the words "or, if applicable, a plan of operation required
by Item 303(a) of Regulation S-B (Section 228.303(a) of this
chapter)" after the words "(Section 229.303 of this chapter)" and
to add the following Note after the introductory text of
paragraph (b) to read as follows:
Section 240.14a-3 Information to be furnished to security
holders.
* * * * *
(b) * * *
Note to Small Business Issuers - A "small business issuer,"
defined under Rule 12b-2 of the Exchange Act (Section 240.12b-2),
shall refer to the disclosure items in Regulation S-B (Section
228.10 et seq. of this chapter) rather than Regulation S-K
(Section 229.10 et seq.). If there is no comparable disclosure
item in Regulation S-B, a small business issuer need not provide
the information requested. A small business issuers shall
provide the information in Item 310(a) of Regulation S-B in lieu
of the financial information required by Rule 14a-3(b)(1)
(Section 240.14a-3(b)(1)).
* * * * *
33. By adding Note F to Section 240.14a-101 to read as
follows:
Section 240.14a-101 Schedule 14A. Information required in proxy
statement.
NOTES:
* * * * *
F. Note to Small Business Issuers - Registrants and
acquirees that meet the definition of "small business issuer"
under Rule 12b-2 of the Exchange Act (Section 240.12b-2) shall
refer to the disclosure items in Regulation S-B (Section 228.10
et seq. of this chapter) and not Regulation S-K (Section 229.10
et seq. of this chapter). If there is no comparable disclosure
item in Regulation S-B, small business issuers need not provide
the information requested. Small business issuers shall provide
the financial information in Item 310 of Regulation S-B in lieu
of the financial statements required in Schedule 14A.
* * * * *
34. By adding the following text to the end of the
introductory Note to Section 240.14c-101 to read as follows:
Section 240.14c-101 Schedule 14C. Information Required in
Information Statement
NOTE. * * * Registrants and acquirees that meet the
definition of "small business issuer" under Rule 12b-2 of the
Exchange Act (Section 240.12b-2) shall refer to the disclosure
items in Regulation S-B (Section 228.10 et seq. of this chapter)
and not Regulation S-K (Section 229.10 et seq. of this chapter).
If there is no comparable disclosure item in Regulation S-B,
small business issuers need not provide the information
-------------------- BEGINNING OF PAGE #145 -------------------
requested. Small business issuers shall provide the financial
information in Item 310 of Regulation S-B in lieu of any
financial statements required by Item 1 of Section 240.14c-101.
* * * * *
PART 249 - FORMS, SECURITIES EXCHANGE ACT OF 1934
35. The authority for Part 249 continues to read as
follows:
Authority: 15 U.S.C. 78a, et seq., unless otherwise noted.
36. By adding Section 249.210b to read as follows:
Section 249.210b Form 10-SB, optional form for the registration
of securities of a small business issuer.
A "small business issuer," defined in Rule 12b-2 (Section
240.12b-2 of this chapter) may use Form 10-SB to register a class
of its securities under Section 12(b) or (g) of the Exchange Act.
For further information concerning eligibility to use this form
see Item 10(a) of Regulation S-B (17 CFR 228.10 et seq.).
Note: The text and instructions of Form 10-SB will not
appear in the Code of Federal Regulations.
Form 10-SB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
OMB Approval
OMB Number: xxxx-xxxx
Expires: Approval Pending
Estimated average burden hours per response: 1.0
General Form for Registration of Securities of Small Business
Issuers Under Section 12(b) or (g) of the Securities Exchange Act
of 1934
_________________________________________________________________
(Name of Small Business Issuer in its charter)
_________________________________________________________________
(State or other jurisdiction of incorporation or organization)
_________________
(I.R.S. Employer Identification No.)
_________________________________________________________________
(Address of principal executive offices)
__________
(ZIP Code)
Issuer's telephone number, ( )___-____.
Securities to be registered under Section 12(b) of the Act:
Title of each class
to be so registered
-------------------- BEGINNING OF PAGE #146 -------------------
____________________________________
____________________________________
Name of each exchange on which
each class is to be registered
____________________________________
____________________________________
Securities to be registered under Section 12(g) of the Act:
____________________________________
(Title of class)
____________________________________
(Title of class)
General Instructions
A. Use of Form 10-SB
1. This Form may be used by a "small business issuer,"
defined in Rule 12b-2 (Section 240.12b-2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), to register a class of
securities under Section 12(b) or (g) of the Exchange Act. For
further information as to eligibility to use this form see Item
10(a) of Regulation S-B (17 CFR 228.10 et seq.).
2. If the small business issuer is not organized under the
laws of any of the states of or the United States of America, it
shall at the time of filing this registration statement, file
with the Commission a written irrevocable consent and power of
attorney on Form F-X [Section 239.42]. Any change to the name or
address of the agent for service of the issuer shall be
communicated promptly to the Commission through amendment of the
requisite form and referencing the file number of the
registration statement.
B. Signature and Filing of Registration Statement
1. File three "complete" copies and five "additional" copies
of the registration statement with the Commission and file at
least one complete copy with each exchange on which the
securities will be registered. A "complete" copy includes
financial statements, exhibits and all other papers and
documents. An "additional" copy excludes exhibits.
2. Manually sign at least one copy of the report filed with
the Commission and each exchange; other copies should have typed
or printed signatures.
C. Information To Be Incorporated by Reference
Refer to Rule 12b-23 (Section 240.12b-23 of this chapter) if
information will be incorporated by reference from other
documents in answer or partial answer to any item of this Form.
Information Required in Registration Statement
Item 1. Description of Business
Furnish the information required by Item 101 of Regulation
S-B.
Item 2. Management's Discussion and Analysis or Plan of Operation
Furnish the information required by Item 303 of Regulation
S-B.
-------------------- BEGINNING OF PAGE #147 -------------------
Item 3. Description of Property
Furnish the information required by Item 102 of Regulation
S-B.
Item 4. Security Ownership of Certain Beneficial Owners and
Management
Furnish the information required by Item 403 of Regulation
S-B.
Item 5. Directors, Executive Officers, Promoters and Control
Persons
Furnish the information required by Item 401 of Regulation
S-B.
Item 6. Executive Compensation
Furnish the information required by Item 402 of Regulation
S-B.
Item 7. Certain Relationships and Related Transactions
Furnish the information required by Item 404 of Regulation
S-B.
Item 8. Legal Proceedings
Furnish the information required by Item 103 of Regulation
S-B.
Item 9. Market for Common Equity and Related Stockholder Matters
Furnish the information required by Item 201 of Regulation
S-B.
Item 10. Recent Sales of Unregistered Securities
Furnish the information required by Item 701 of Regulation
S-B.
Item 11. Description of Securities
Furnish the information required by Item 202 of Regulation
S-B.
Item 12. Indemnification of Directors and Officers
Furnish the information required by Item 702 of Regulation
S-B.
Item 13. Financial Statements
Furnish the information required by Item 310 of Regulation
S-B.
Item 14. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
Furnish the information required by Item 304 of Regulation
S-B.
-------------------- BEGINNING OF PAGE #148 -------------------
Item 15. Financial Statements and Exhibits
(a) List separately all financial statements filed as part
of the registration statement.
(b) Furnish the exhibits required by Item 601 of Regulation
S-B.
Signatures
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized.
________________________
(Registrant)
Date __/__/__
By ___________________
(Signature) *
* Print the name and title of each signing officer under his
or her signature.
37. By adding Section 249.310b to read as follows:
Section 249.310b Form 10-KSB, Optional Form for Annual and
Transition Reports of Small Business Issuers Under Sections 13 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act").
A small business issuer defined in Rule 12b-2 of the
Exchange Act (Section 240.12b-2 of this chapter), may use this
form for its annual and transitional reports under section 13 or
15(d) of the Exchange Act. Annual reports on this form shall be
filed within 90 days after the end of the fiscal year covered by
the report and transition reports shall be filed after an issuer
changes its fiscal year end in accordance with Rule 13a-10 or
Rule 15d-10 (Sections 240.13a-10 or 240.15d-10 of this chapter).
Note: The text and instructions of Form 10-KSB will not
appear in the Code of Federal Regulations.
Form 10-KSB
U.S. Securities and Exchange Commission,
Washington, DC 20549
OMB Approval
OMB Number: xxxx-xxxx
Expires: Approval Pending
Estimated average burden hours per response -- 1.0
(Mark One)
[ ] Annual Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended ____________
[ ] Transition Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ______ to ______
Commission file number_______________
______________________________________________
-------------------- BEGINNING OF PAGE #149 -------------------
(Name of small business issuer in its charter)
_______________________________________________
(State or other jurisdiction of incorporation or organization)
___________________
(I.R.S. Employer Identification No.)
______________________________________________________________
(Address of principal executive offices)
_________________
(ZIP Code)
Issuer's telephone number ( )___-____
Securities registered under Section 12(b) of the Exchange Act:
Title of each class
____________________________
____________________________
Name of each exchange on which registered
_____________________________
_____________________________
Securities registered under Section 12(g) of the Exchange Act:
__________________
(Title of class)
__________________
(Title of class)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ____ No ____
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year.
______ .
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the
stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days. (See
definition of affiliate in Rule 12b-2 of the Exchange Act).
Note: If determining whether a person is an affiliate will
involve an unreasonable effort and expense, the issuer may
calculate the aggregate market value of the common equity held by
non-affiliates on the basis of reasonable assumptions, if the
assumptions are stated.
(Issuers Involved in Bankruptcy Proceedings During the Past
Five Years)
-------------------- BEGINNING OF PAGE #150 -------------------
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court. Yes ____ No ____
(Applicable Only to Corporate Registrants)
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date. ______
Documents Incorporated by Reference
If the following documents are incorporated by reference,
briefly describe them and identify the part of the Form 10-KSB
(e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424 (b) or (c) of the Securities Act of 1933
("Securities Act"). The listed documents should be clearly
described for identification purposes (e.g., annual report to
security holders for fiscal year ended December 24, 1990).
General Instructions
A. Use of Form 10-KSB
This Form may be used by a "small business issuer," defined
in Rule 12b-2 of the Exchange Act, for its annual and
transitional reports under section 13 or 15(d) of that Act. For
further information as to eligibility to use this Form see Item
10(a) of Regulation S-B (17 CFR 228.10 et seq.). Annual reports
on this form shall be filed within 90 days after the end of the
fiscal year covered by the report. Transition reports shall be
filed within the time period specified in Rules 13a-10 or 15d-10
of the Exchange Act (Sections 240.13a-10 or 240.15d-10 of this
chapter).
B. Application of General Rules and Regulations
The General Rules and Regulations under the Exchange Act
(Section 240.0-1 et seq.), particularly Regulation 12B (Section
240.12b-1 et seq.) contain certain general requirements for
reports on any form which should be carefully read and observed
in the preparation and filing of reports on this Form.
C. Signature and Filing of Report
1. File three "complete" copies and five "additional" copies
of the registration statement with the Commission and file at
least one complete copy with each exchange on which the
securities will be registered. A "complete" copy includes
financial statements, exhibits and all other papers and
documents. An "additional" copy excludes exhibits. One of the
copies filed with the Commission and each exchange should be
manually signed; all other copies should have typed or printed
signatures.
2. Who must sign: the small business issuer, its principal
executive officer or officers, its principal financial officer,
its controller or principal accounting officer and at least the
majority of the board of directors or persons performing similar
functions. If the issuer is a limited partnership then the
general partner and a majority of its board of directors if a
corporation. Any person who occupies more than one of the
specified positions shall indicate each capacity in which he
signs the report. See Rule 12b-11 concerning manual signatures
under powers of attorney.
-------------------- BEGINNING OF PAGE #151 -------------------
D. Information as to Employee Stock Purchase, Savings and Similar
Plans
Separate annual and other reports need not be filed under
Section 15(d) of the Exchange Act for any employee stock
purchase, savings or similar plan if the issuer of the securities
offered under the plan furnishes to the Commission the
information and documents specified in the Rule 15d-21 of the
Exchange Act.
E. Information to be Incorporated by Reference
1. Refer to Rule 12b-23 (Section 240.12b-23 of this chapter)
if information will be incorporated by reference from other
documents in answer or partial answer to any item of this Form.
2. The Information called for in Parts I and II of this
Form, Items 1-9, may be incorporated by reference from:
(a) the registrant's annual report to security holders
furnished to the Commission under Rule 14a-3(b) or Rule 14c-3(a)
of the Exchange Act (Sections 240.14a-3(b), 240.14c-3(a) of this
chapter); or
(b) the registrant's annual report to shareholders if it
contains the information required by Rule 14a-3 (Section 240.14-3
of this chapter).
3. The information required by Part III may be incorporated
by reference from the registrant's definitive proxy statement
(filed or to be filed in accordance with Section 240.14a-101,
Schedule 14A) or definitive information statement (filed or to be
filed pursuant to Section 240.14c-101, Schedule 14C) which
involves the election of directors, if such definitive proxy or
information statement is filed with the Commission not later than
120 days after the end of the fiscal year covered by this Form.
If the definitive proxy or information statement is not filed
within the 120-day period, the information called for in Part III
information must be filed as part of the Form 10-KSB, or as an
amendment to the Form 10-KSB under cover of Form 8 (Section
249.460 of this chapter), not later than the end of the 120-day
period.
4. No item numbers of captions or items need be contained in
the material incorporated by reference into the report. However,
the registrant's attention is directed to Rule 12b-23(b) of the
Exchange Act (Section 240.12b-23(b)) regarding the specific
disclosure required in the report concerning information
incorporated by reference. When the registrant combines all of
the information in Parts I and II of this Form by incorporation
by reference from the registrant's annual report to security
holders and all of the information in Part III of this Form by
incorporating by reference from a definitive proxy statement or
information statement involving the election of directors, then
this Form shall consist of the facing or cover page, those
sections incorporated from the annual report to security holders,
the proxy or information statement, and the information, if any,
required by Part IV of this Form, signatures and a
cross-reference sheet setting forth the item numbers and captions
in Parts I, II and III of this Form and page and/or pages in the
referenced materials where the corresponding information appears.
F. Integrated Reports to Security Holders
Annual reports to security holders may be combined with the
required information of this Form and will be suitable for filing
with the Commission if the following conditions are satisfied:
1. The combined report contains complete answers to all
items required by Form 10-KSB. When responses to a certain item
of required disclosure are separated within the combined report,
an appropriate cross-reference should be made. If the information
required by Part III of Form 10-KSB is omitted by virtue of
-------------------- BEGINNING OF PAGE #152 -------------------
General Instruction E, a definitive proxy or information
statement shall be filed.
2. The cover page and required signatures are included. A
cross-reference sheet should be filed indicating the location of
information required by items of the Form.
G. Omission of Information by Certain Wholly-Owned Subsidiaries
If, on the date of the filing of its report on Form 10-KSB,
the registrant meets the conditions specified in paragraph (1)
below, then it may furnish the abbreviated narrative disclosure
specified in paragraph (2) below.
1. Conditions for availability of relief specified in
paragraph (2) below.
(a) All of the registrant's equity securities are owned,
either directly or indirectly, by a single person which is a
reporting company and which has filed all the material required
to be filed under sections 13, 14 or 15(d), as applicable, and
which is named in conjunction with the registrant's description
of its business;
(b) During the past thirty-six months and any subsequent
period of days, there has not been any material default in the
payment of principal, interest, a sinking or purchase fund
installment, or any other material default not cured within
thirty days, with respect to any indebtedness of the registrant
or it subsidiaries, and there has not been any material default
in the payment of rental under material long-term leases; and
(c) There is prominently set forth on the cover page of the
Form 10-KSB, a statement that the registrant meets the conditions
set forth in General Instruction G(1) (a) and (b) of Form 10-KSB
and therefore filing this Form with the reduced disclosure
format.
2. Registrants meeting the conditions specified in paragraph
1 above are entitled to the following relief:
(a) Such registrants may omit the information called for by
Item 303(b), Management's Discussion and Analysis, if required by
the Instruction to that Item, provided that the registrant
includes in the Form 10-KSB a narrative analysis of the results
of operations explaining the reasons for material changes in the
amount of revenue and expense items between the most recent
fiscal year presented and the fiscal year immediately preceding
it. Explanations of material changes should include, but not be
limited to, changes in the various elements which determine
revenue and expense levels, such as unit sales volume, prices
charged and paid, production levels, production cost variances,
labor costs and discretionary spending programs. In addition,
the analysis should include an explanation of the effect of any
changes in accounting principles and practices or method of
application that have a material effect on net income as
reported.
(b) Such registrants may omit the list of subsidiaries
exhibit required by Item 601 of Regulation S-B.
(c) Such registrants may omit the information called for by
the following Items: Item 4, Submission of Matters to a Vote of
Security Holders; Item 10 Directors and Executive Officers, etc.;
Item 11, Executive Compensation; Item 12, Security Ownership of
Certain Beneficial Owners, etc.; Item 13, Certain Relationships
and Related Transactions.
Part I
Item 1. Description of Business
Furnish the information required by Item 101 of Regulation
S-B.
-------------------- BEGINNING OF PAGE #153 -------------------
Item 2. Description of Property
Furnish the information required by Item 102 of Regulation
S-B.
Item 3. Legal Proceedings
Furnish the information required by Item 103 of Regulation
S-B.
Item 4. Submission of Matters to a Vote of Security Holders
If any matter was submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders,
through the solicitation of proxies or otherwise, furnish the
following information:
(a) The date of the meeting and whether it was an annual or
special meeting.
(b) If the meeting involved the election of directors, the
name of each director elected at the meeting and the name of each
other director whose term of office as a director continued after
the meeting.
(c) A brief description of each other matter voted upon at
the meeting and the number of affirmative votes and the number of
negative votes cast with respect to each such matter.
(d) A description of the terms of any settlement between the
registrant and any other participant (as defined in Rule 14a-11
of Regulation A under the Act) terminating any solicitation
subject to Rule 14a-11, including the cost or anticipated cost to
the registrant.
Instructions to Item 4
1. If any matter has been submitted to a vote of security
holders otherwise than at a meeting of such security holders,
corresponding information with respect to such submission should
be furnished. The solicitation of any authorization or consent
(other than a proxy to vote at a shareholders' meeting) with
respect to any matter shall be deemed a submission of such matter
to a vote of security holders within the meaning of this item.
2. Paragraph (a) need be answered only if paragraph (b) or
(c) is required to be answered.
3. Paragraph (b) need not be answered if (i) proxies for the
meeting were solicited pursuant to Regulation 14A under the Act,
(ii) there was no solicitation in opposition to the management's
nominees as listed in the proxy statement, and (iii) all of such
nominees were elected. If the registrant did not solicit proxies
and the board of directors as previously reported to the
Commission was re-elected in its entirety, a statement to that
effect in answer to paragraph (b) will suffice as an answer
thereto.
4. Paragraph (c) need not be answered as to procedural
matters or as to the selection or approval of auditors.
5. If the registrant has furnished to its security holders
proxy soliciting material containing the information called for
by paragraph (d), the paragraph may be answered by reference to
the information contained in such material.
6. If the registrant published a report containing all of
the information called for by this item, the item may be answered
by reference to the information in that report.
Part II
-------------------- BEGINNING OF PAGE #154 -------------------
Item 5. Market for Common Equity and Related Stockholder Matters
Furnish the information required by Item 201 of Regulation
S-B.
Item 6. Management's Discussion and Analysis or Plan of Operation
Furnish the information required by Item 303 of Regulation
S-B.
Item 7. Financial Statements
Furnish the information required by Item 310(a) of
Regulation S-B.
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
Furnish the information required by Item 304 of Regulation
S-B.
Part III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act
Furnish the information required by Items 401 and 405 of
Regulation S-B.
Instruction to Item 9
Checking the box provided on the cover page of this Form to
indicate that Item 405 disclosure of delinquent Form 3, 4, or 5
filers is not contained herein is intended to facilitate Form
processing and review. Failure to provide such indication will
not create liability for violation of the federal securities
laws. The space should be checked only if there is no disclosure
in this Form of reporting person delinquencies in response to
Item 405 of Regulation S-B (Section 228.405 of this chapter) and
the registrant, at the time of filing of the Form 10-KSB, has
reviewed the information necessary to ascertain, and has
determined that, Item 405 disclosure is not expected to be
contained in Part III of the Form 10-KSB or incorporated by
reference.
Item 10. Executive Compensation
Furnish the information required by Item 402 of Regulation
S-B.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Furnish the information required by Item 403 of Regulation
S-B.
Item 12. Certain Relationships and Related Transactions
Furnish the information required by Item 404 of Regulation
S-B.
Item 13. Exhibits and Reports on Form 8-K
(a) Furnish the exhibits required by Item 601 of Regulation
S-B. Where any financial statement or exhibit is incorporated by
-------------------- BEGINNING OF PAGE #155 -------------------
reference, the incorporation by reference shall be set forth in
the list required by this item. See Exchange Act Rule 12b-23
(Section 240.12b-23 of this chapter).
(b) Reports on Form 8-K. State whether any reports on Form
8-K were filed during the last quarter of the period covered by
this report, listing the items reported, any financial statements
filed and the dates of such reports.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
______________________
(Registrant)
By (Signature and Title)* ________________________________
Date __/__/__
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By (Signature and Title)*________________________________
Date __/__/__
By (Signature and Title)*_________________________________
Date __/__/__
* Print the name and title of each signing officer under his
signature.
Supplemental information to be Furnished With Reports Filed
Pursuant to Section 15(d) of the Exchange Act By Non-reporting
Issuers
(a) Except to the extent that the materials enumerated in
(1) and/or (2) below are specifically incorporated into this Form
by reference (in which case, see rule 12b-23(b)), every issuer
which files an annual report on this Form under Section 15(d) of
the Exchange Act shall furnish the Commission for its
information, at the time of filing its report on this Form, four
copies of the following:
(1) Any annual report to security holders covering the
registrant's last fiscal year; and
(2) Every proxy statement, form of proxy or other proxy
soliciting material sent to more than ten of the registrant's
security holders with respect to any annual or other meeting of
security holders.
(b) The Commission will not consider the material to be
"filed" or subject to the liabilities of Section 18 of the
Exchange Act, except if the issuer specifically incorporates it
in its annual report on this Form by reference.
(c) If no such annual report or proxy material has been sent
to security holders, a statement to that effect shall be included
under this caption. If such report or proxy material is to be
furnished to security holders subsequent to the filing of the
annual report on this Form, the registrant shall so state under
this caption and shall furnish copies of such material to the
Commission when it is sent to security holders.
38. Section 249.308b is added to read as follows:
-------------------- BEGINNING OF PAGE #156 -------------------
Section 249.308b Form 10-QSB, optional form for quarterly and
transition reports of small business issuers under Sections 13 or
15(d) of the Securities Exchange Act of 1934 ("Exchange Act").
A small business issuer, defined in Rule 12b-2, may use this
Form for its transition and quarterly reports under section 13 or
15(d) of the Exchange Act and Rules 13a-13 and 15d-13 (Sections
240.13a-13 or 240.15d-13 of this chapter). For further
information as to eligibility to use this Form see Item 10(a) of
Regulation S-B (17 CFR 228.10 et seg.). A small business issuer
shall file a quarterly report on this form within 45 days after
the end of the each of the first three fiscal quarters of each
fiscal year. No report need be filed for the fourth quarter of
any fiscal year. Transition reports shall be filed in accordance
with the requirements set forth in Rule 13a-10 or Rule 15d-10.
Note: The text and instructions of Form 10-QSB will not
appear in the Code of Federal Regulations.
Form 10-QSB
U.S. Securities and Exchange Commission,
Washington, DC 20549
OMB approval
OMB Number: XXXX-XXXX
Expires: Approval Pending
Estimated average burden hours per response -- 1.0
(Mark One)
[ ] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended ________
[ ] Transition Report Under Section 13 or 15(d) of the Exchange
Act.
For the transition period from ______ to ______
Commission file number________________
_______________________________________________________
(Exact name of small business issuer as specified in its charter)
__________________________________
(State or other jurisdiction of incorporation or organization)
__________________
(IRS Employer Identification No.)
______________________________________________________________
(Address of principal executive offices)
( )___ -____
(Issuer's telephone number)
_______________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
-------------------- BEGINNING OF PAGE #157 -------------------
such filing requirements for the past 90 days. Yes ____ No ____
Applicable Only to Issuers Involved in Bankruptcy Proceedings
During the Preceding Five Years
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court. Yes ____ No ____
Applicable Only To Corporate Issuers
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: ________
General Instructions
A. Use of Form 10-QSB
1. A "small business issuer," defined in Rule 12b-2, may use
this Form for its transition and quarterly reports under section
13 or 15(d) of the Exchange Act and Rules 13a-13 and 15d-13
(Sections 240.13a-13 and 240.15d-13 of this chapter). For further
information as to eligibility to use of this Form see Item 10(a)
of Regulation S-B (17 CFR 228.10 et seq.). A small business
issuer shall file a quarterly report on this form within 45 days
after the end of the first three fiscal quarters of each fiscal
year. No report need be filed for the fourth quarter of any
fiscal year. Transition reports shall be filed in accordance with
the requirements set forth in Rule 13a-10 or Rule 15d-10.
B. Application of General Rules and Regulations
1. The General Rules and Regulations under the Exchange Act
(Section 240.0-1 et seq.), particularly Regulation 12B (Section
240.12b-1 et seq.) contain certain general requirements for
reports on any form which should be carefully read and observed
in the preparation and filing of reports on this Form.
C. Incorporation by Reference
1. If the registrant makes available to its stockholders or
otherwise publishes, within the period prescribed for filing the
report, a document or statement containing information meeting
some or all of the requirements of Part I of this form, the
information may be incorporated by reference from such published
document or statement, in answer or partial answer to any item or
items of Part I of this form provided copies of the document or
statement are filed as an exhibit to Part I of the report on this
form.
2. Other information may be incorporated by reference in
answer or partial answer to any item or items of Part II of this
form in accordance with the provisions of Rule 12b-23 of the
Exchange Act.
D. Integrated Reports to Security Holders
Quarterly reports to security holders may be combined with
the required information of Form 10-QSB and will be suitable for
filing with the Commission if the following conditions are
satisfied:
1. The combined report contains full and complete answers to
all items required by Part I of this form. When responses to a
certain item of required disclosure are separated within the
combined report, an appropriate cross-reference should be made.
2. If not included in the combined report, the cover page,
appropriate responses to Part II and the required signatures
shall be included in the Form 10-QSB. Additionally, as
-------------------- BEGINNING OF PAGE #158 -------------------
appropriate, a cross-reference sheet should be filed indicating
the location of information required by items of the form.
E. Filed Status of Information Presented
1. Under Rule 13a-13(d) and 15d-13(d) of the Exchange Act
(Sections 240.13a-13(d), 240.15d-13(d) of this chapter), the
information presented in satisfaction of the requirements of
Items 1 and 2 of Part I of this form, whether included directly
in a report on this form, incorporated therein by reference from
a report, document or statement filed as an exhibit to Part I of
this form pursuant to Instruction D(1) above, included in an
integrated report pursuant to Instruction D above, or contained
in a statement regarding computation of per share earnings or a
letter regarding a change in accounting principles filed as an
exhibit to Part I under Item 601 of Regulation S-B (Section
228.601 of this chapter) shall not be deemed filed for the
purpose of Section 18 of the Exchange Act or otherwise subject to
the liabilities of that section of the Act but shall be subject
to the other provisions of the Act.
2. Information presented in satisfaction of the requirements
of this form other than those of Items 1 and 2 or Part I shall be
deemed filed for the purpose of Section 18 of the Exchange Act;
except that, where information presented in response to Item 1 or
2 of Part I (or an exhibit thereto) is also used to satisfy Part
II requirements through incorporation by reference, only that
portion of Part I (or exhibit thereto) consisting of the
information required by Part II shall be deemed so filed.
F. Signature and Filing of Report
1. File three "complete" copies and five "additional" copies
of the registration statement with the Commission and file at
least one complete copy with each exchange on which the
securities will be registered. A "complete" copy includes
financial statements, exhibits and all other papers and
documents. An "additional" copy excludes exhibits.
2. Manually sign at least one copy of the report filed with
the Commission and each exchange; other copies should have typed
or printed signatures. In the case where the principal financial
or chief accounting officer is also authorized to sign on behalf
of the registrant, one signature is acceptable provided that the
registrant clearly indicates the dual responsibilities of the
signatory.
G. Omission of Information by Certain Wholly-Owned Subsidiaries
If, on the date of the filing of its Form 10-QSB, the
registrant meets the conditions in paragraph (1) below, then it
may omit the information in paragraph (2) below.
1. Conditions for availability of relief specified in
paragraph (2) below:
(a) All of the registrant's equity securities are owned,
either directly or indirectly, by a single person which is a
reporting company and which has filed all the material required
to be filed pursuant to section 13, 14 or 15(d) of the Exchange
Act.
(b) During the past thirty-six calendar months and any later
period, there has not been any material default in the payment of
principal, interest, a sinking or purchase fund installment, or
any other material default not cured within thirty days, with
respect to any indebtedness of the small business issuer, and
there has not been any material default in the payment of rentals
under material long-term leases; and
(c) There is prominently set forth, on the cover page of the
Form 10-QSB, a statement that the registrant meets the conditions
-------------------- BEGINNING OF PAGE #159 -------------------
set forth in this instruction and is therefore filing this form
with the reduced disclosure format.
2. Registrants meeting the conditions in paragraph (1) above
are entitled to:
(a) Omit the information called for by Item 303 of
Regulation S-B (Section 228.303 of this chapter), Management's
Discussion and Analysis provided that the issuer includes in the
Form 10-QSB a management's narrative analysis of the results of
operations explaining the reasons for material changes in the
amount of revenue and expense items between the most recent
fiscal year-to-date period presented and the corresponding
year-to-date period in the preceding fiscal year. Explanations of
material changes should include, but not be limited to, changes
in the various elements which determine revenue and expense
levels such as unit sales volume, prices charged and paid,
production levels, production cost variances, labor costs and
discretionary spending programs. In addition, the analysis should
include an explanation of the effect of any changes in accounting
principles and practices or method of application that have a
material effect on net income as reported.
(b) Such registrants may omit the information called for by
the following Items in Part II: Item 2, 3 and 4.
Part I -- Financial Information
Item 1. Financial Statements
Furnish the information required by Item 310(b) of
Regulation S-B.
Item 2. Management's Discussion and Analysis or Plan of Operation
Furnish the information required by Item 303 of Regulation
S-B.
Part II -- Other Information
Instruction to Part II
Any item which is inapplicable or to which the answer is
negative may be omitted and no reference thereto need be made in
the report. If substantially the same information has been
previously reported by the registrant, an additional report of
the information on this form need not be made. The term
"previously reported" is defined in Rule 12b-2 of the Exchange
Act. A separate response need not be presented in Part II where
information called for is already disclosed in the financial
information in Part I and is incorporated by reference into Part
II of the report by means of a statement to that effect in Part
II which specifically identifies the incorporated information.
Item 1. Legal Proceedings
Furnish the information required by Item 103 of Regulation
S-B. As to proceedings that terminated during the period covered
by this report, furnish information similar to that required by
Item 103 of Regulation S-B.
Instruction to Item 1
A legal proceeding need only be reported in the Form 10-QSB
filed for the quarter in which it first became a reportable event
and in subsequent quarters in which there have been material
developments. Subsequent Form 10-QSB filings in the same fiscal
-------------------- BEGINNING OF PAGE #160 -------------------
year in which a legal proceeding or a material development is
reported should reference any previous reports in that year.
Item 2. Changes in Securities
(a) If the instruments defining the rights of the holders of
any class of registered securities have been materially modified,
give the title of the class of securities involved and state
briefly the general effect of such modification upon the rights
of holders of such securities.
(b) If the rights evidenced by any class of registered
securities have been materially limited or qualified by the
issuance or modification of any other class of securities, state
briefly the general effect of the issuance or modification of
such other class of securities upon the rights of the holders of
the registered securities.
Instruction to Item 2
1. Working capital restrictions and other limitations upon
the payment of dividends are to be reported.
Item 3. Defaults Upon Senior Securities
(a) If there has been any material default in the payment of
principal, interest, a sinking or purchase fund installment, or
any other material default not cured within 30 days, with respect
to any indebtedness of the small business issuer exceeding 5
percent of the total assets of the issuer identify the
indebtedness and state the nature of the default. In the case of
such a default in the payment of principal, interest, or a
sinking or purchase fund installment, state the amount of the
default and the total arrearage on the date of filing this
report.
Instruction to Item 3(a)
1. This paragraph refers only to events which have become
defaults under the governing instruments, i.e., after the
expiration of any period of grace and compliance with any notice
requirements.
(b) If any material arrearage in the payment of dividends has
occurred or if there has been any other material delinquency not
cured within 30 days, with respect to any class of preferred
stock of the registrant which is registered or which ranks prior
to any class of registered securities, or with respect to any
class of preferred stock of any significant subsidiary of the
registrant, give the title of the class and state the nature of
the arrearage or delinquency. In the case of such a default in
the payment of dividends, state the amount and the total
arrearage on the date of filing this report.
Instruction to Item 3
Item 3 need not be answered as to any default or arrearage
with respect to any class of securities all of which is held by,
or for the account of, the registrant or its totally held
subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
If any matter was submitted to a vote of security holders,
through the solicitation of proxies or otherwise, furnish the
following information:
(a) The date of the meeting and whether it was an annual or
special meeting.
-------------------- BEGINNING OF PAGE #161 -------------------
(b) If the meeting involved the election of directors, the
name of each director elected at the meeting and the name of each
other director whose term of office as a director continued after
the meeting.
(c) A brief description of each matter voted upon at the
meeting and the number of affirmative votes and the number of
negative votes cast with respect to each such matter.
(d) A description of the terms of any settlement between the
registrant and any other participant (as defined in Rule 14a-11
of Regulation 14A under the Exchange Act) terminating any
solicitation subject to Rule 14a-11, including the cost or
anticipated cost to the registrant.
Instructions to Item 4
1. If any matter has been submitted to a vote of security
holders otherwise than at a meeting of such security holders,
corresponding information with respect to such submission should
be furnished. The solicitation of any authorization or consent
(other than a proxy to vote at a shareholders' meeting) with
respect to any matter shall be deemed a submission of such matter
to a vote of security holders within the meaning of this item.
2. Paragraph (a) need be answered only if paragraph (b) or
(c) is required to be answered.
3. Paragraph (b) need not be answered if (i) proxies for
the meeting were solicited pursuant to Regulation 14A under the
Exchange Act, (ii) there was no solicitation in opposition to the
management's nominees as listed in the proxy statement, and (iii)
all of such nominees were elected. If the registrant did not
solicit proxies and the board of directors as previously reported
to the Commission was re-elected in its entirety, a statement to
that effect in answer to paragraph (b) will suffice as an answer
thereto.
4. Paragraph (c) need not be answered as to procedural
matters or as to the selection or approval of auditors.
5. If the registrant has furnished to its security holders
proxy soliciting material containing the information called for
by paragraph (d), the paragraph may be answered by reference to
the information contained in such material.
6. If the registrant has published a report containing all
of the information called for by this item, the item may be
answered by reference to the information in that report.
Item 5. Other Information
(a) The registrant may, at its option, report under this
item any information, not previously reported in a report on Form
8-K, with respect to which information is not otherwise called
for by this form. If disclosure of such other information is made
under this item, it need not be repeated in a Form 8-K which
would otherwise be required to be filed with respect to such
information or in a subsequent report on Form 10-QSB.
Item 6. Exhibits and Reports on Form 8-K
(a) Furnish the exhibits required by Item 601 of Regulation
S-B.
(b) Reports on Form 8-K. State whether any reports on Form
8-K were filed during the quarter for which this report is filed,
listing the items reported, any financial statements filed and
the dates of such reports.
Signatures
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
-------------------- BEGINNING OF PAGE #162 -------------------
______________________________
(Registrant)
Date__/__/__
(Signature)*1 _________________________
Date__/__/__
______________________
(Signature) *1
*1 -- Print the name and title of each signing officer under
his signature.
Section 249.308 [Amended]
39. Form 8-K (Section 249.308) is amended by adding
paragraph 3 to General Instruction C to read as follows:
Note: The text and instructions of Form 8-K does not appear
in the Code of Federal Regulations.
Form 8-K
* * * * *
General Instructions
* * * * *
C. Application of General Rules and Regulations.
* * * * *
3. A small business issuer, defined under Rule 12b-2 of the
Exchange Act (Section 240.12b-2 of this chapter), shall refer to
the disclosure items in Regulation S-B (17 CFR 228.10 et seq.)
and not Regulation S-K. If there is no comparable disclosure
item in Regulation S-B, a small business issuer need not provide
the information requested. A small business issuer shall provide
the information required by Item 310(a) of Regulation S-B in lieu
of the financial information required by Item 7 of this Form.
* * * * *
PART 260 -- GENERAL RULES AND REGULATIONS, TRUST INDENTURE ACT OF
1939
40. The authority citation for Part 260 continues to read
as follows:
Authority: 15 U.S.C. 77eee, 77ggg, 77nnn, 77sss, 78ll(d),
80b-3, 80b-4, and 80b-11.
41. By revising Section 260.4a-1 as to read as follows:
Section 260.4a-1 Exempted Securities Under Section 304(a)(8).
The provisions of the Trust Indenture Act of 1939 shall not
apply to any security that has been or will be issued otherwise
than under an indenture. The same issuer may not claim this
exemption within a period of twelve consecutive months for more
than $5,000,000 aggregate principal amount of any securities.
Section 260.4a-3 [Redesignated from Section 260.4a-2 and
Amended]
-------------------- BEGINNING OF PAGE #163 -------------------
42. Section 260.4a-2 is redesignated as Section 260.4a-3,
in newly redesignated Section 260.4a-3 remove both cites to
"$5,000,000" and add in their place the words "$10,000,000", and
add new Section 260.4a-2 to read as follows:
Section 260.4a-2 Exempted Securities Under Section 304(d).
The provisions of the Trust Indenture Act of 1939 shall not
apply to any security that has been issued or will be issued in
accordance with the provisions of Regulation A (17 CFR 230.251 et
seq.) under the Securities Act of 1933.
Section 260.4d-9 [Amended]
43. Amend the introductory text of paragraph (a) of Section
260.4d-9 by replacing "on Form F-7, F-8, F-9, F-10 or F-80
[Sections 239.37 through 239.41 of this chapter]" with "on Form
SB-2, [Section 239.10 of this chapter] F-7, F-8, F-9, F-10 or
F-80 [Sections 239.37 through 239.41 of this chapter]".
Section 260.10a-5 [Amended]
44. Amend paragraph (a) of Section 260.10a-5 by replacing
"on Form F-7, F-8, F-9, F-10 or F-80 [Sections 239.37 through
239.41 of this chapter]" with "on Form SB-2, [Section 239.10 of
this chapter] F-7, F-8, F-9, F-10 or F-80 [Sections 239.37
through 239.41 of this chapter]".
PARTS 210, 229, 230, 239, 240, 249, and 260--[AMENDED]
45. In addition to the amendments set forth above, in 17
CFR parts 210, 229, 230, 239, 240, 249, and 260 all references
to: a. "Form 10-Q" are revised to read "Form 10-Q and Form
10-QSB"; b. "Form 10-K" are revised to read "Form 10-K and Form
10-KSB"; c. "Form 10" are revised to read "Form 10 and Form
10-SB";
46. In addition to the amendments set forth above, in 17
CFR parts 210, 229, 230, 239, 240, 249, and 260 all references
to: "Form S-18" are revised to read "Form SB-2."
47. In addition to the amendment set forth above, in 17 CFR
parts 210, 229, 230, 240, 249, and 260 all references to "Rule
504" are revised to read "Rule 504 and 504a";
By the Commission.
Dated July 30, 1992.
Margaret H. McFarland,
Deputy Secretary.