Securities and Exchange Commission Forms List

GOING PUBLIC

You may be surprised to find out that there are a number of ways that a company can "go public", some of which do not require SEC registration. The following factors will be used to help you determine the right vehicle for your company:

• In what time frame

• How much money you have available to spend in raising the needed capital

• How much money you need to raise

• What type of investors are you seeking

This handbook focuses on Reg. D, Rule 504. It is important that you understand the basics of other offering types to make sure that Rule 504 is the right offering type for your company.

How much money do you need?

This is the starting point in determining which offering type is right for your company. Before you seriously evaluate offering vehicles complete your business plan and determine how much money will be needed to carry out the plan.  It is OK to have a minimum and maximum amount of money needed, and have two plans, but be prepared to explain in your prospectus how the company will adjust to various amounts of money raised.

Options and Comparisons of Offering Types

The following provides general information about each type of offering, with thorough explanations in the sections below. The maximum dollar amount that can be raised, refers to the amount that can be raised in a 12 month period. When the review agency is "States", that means that you must file your prospectus in each state that you wish to sell securities. An "accredited" investor is basically a sophisticated investor with substantial net worth as defined in the securities regulations.

SCOR

SCOR stands for Small Corporate Offering Registration and is available to companies that are exempt from SEC registration under Reg. D Rule 504. 

• The firm must have at least 10% equity equal to the amount of capital being raised

• Any stock issued must be priced at a minimum of $5.00 per share for both investors and insiders

REGULATION D

Regulation D was adopted by the SEC in March of 1982 to streamline the requirements applicable to private offers and sales of securities. All Regulation D offerings are exempt from SEC registration. There are three types of Reg. D exemptions, Rules 504, 505 and 506. If you wish to read the Reg. D guidelines for yourself, refer to the University of Cincinnati College of Law or other law libraries.

Please note the following about Reg. D (taken from Univ. of Cincinnati above):

• Such transactions are not exempt from the anti-fraud, civil liability, or other provisions of the federal securities laws. Issuers are reminded of their obligation to provide such further material information, if any, as may be necessary to make the information required under this regulation, in light of the circumstances under which it is furnished, not misleading.

• Nothing in these rules obviates the need to comply with any applicable state law relating to the offer and sale of securities.

In other words, you still can't lie or omit material information in your prospectus.  You also must comply with any state securities laws in each state in which you wish to sell securities.

"Aggregate offering price" is a term that is commonly used in Regulation D. When it is stated that you can only sell a certain amount of securities during a 12-month period, it is using the aggregate offering price of the stock.

"Aggregate offering price" shall mean the sum of all cash, services, property, notes, cancellation of debt, or other consideration to be received by an issuer for issuance of its securities. Where securities are being offered for both cash and non-cash consideration, the aggregate offering price shall be based on the price at which the securities are offered for cash.

RULE 504 (The "504Exemption")

Creates an exemption for certain securities sales for companies that are non-reporting, in that they are not currently required to file quarterly and annual reports with the SEC. Rule 504 stipulates that:

• The sale of up to $1,000,000 of securities in a 12-month period (aggregate offering price less than $1,000,000)

• registered under state law requiring public filing and delivery of a disclosure document to investors before sale, and

• exempted under state law permitting general solicitation and advertising so long as sales are made only to accredited investors.

• A Form D notice should be filed with the SEC.

A company claiming the 504 exemption cannot be:

• an investment company; or

• 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.

The main advantages of Rule 504 is that it allows general solicitation, and you can sell securities to any investor. In addition, your prospectus can be written in just about any style you like, as opposed to Small Corporate Offering Registration (SCOR). The U-7, with its Q & A format, is easy for the entrepreneur to write, but not easy for an investor to read. By using Rule 504, but not using form U-7, you have more flexibility in writing the prospectus and thereby can make it a more effective sales tool.

RULE 505

Rule 505 is similar to Rule 504, but with three very important differences:

• Maximum of $5,000,000 in a 12 month period

• No general solicitation, which prohibits advertising in magazines and newspapers.

• You can only sell to accredited investors. You can sell up to 35 non-accredited investors, but the rest have to be accredited.

If you intend to go to the general public, Rule 505 is a difficult way to go. You cannot advertise, so you are limited to accredited investors that you know, or can locate without having to advertise.

Here is a summary from the Regulation D statues of the definition of an "Accredited investor":

a) "Accredited investor" shall mean any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

(1) Any bank or any savings and loan association or other institution.

(2) Any private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940;

(3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

(4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;(5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds $1,000,000;

(6) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

(7) Any trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); and

(8) Any entity in which all of the equity owners are accredited investors.

RULE 506

Rule 506 is basically the same as 505, but there is no maximum placed on the money raised.

REGULATION A

Section 3(b) of the Securities Act gives the SEC authority to exempt from registration certain offerings where the securities to be offered involve relatively small dollar amounts. Under this provision, the SEC has adopted Regulation A, a conditional exemption for certain public offerings not exceeding $5 million in any 12-month period. An offering statement (consisting of a notification, offering circular, and exhibits) must be filed with the SEC Regional Office in the region where the company's principle business activities are conducted (the Atlanta District Office for issuers located in the Southeast Region). Although Regulation A is technically an exemption from the registration requirements of the Securities Act, it is often referred to as a "short form" of registration since the offering circular (similar in content to a prospectus) must be supplied to each purchaser and the securities issued are freely tradable in an aftermarket. The principal advantages of Regulations A offerings, as opposed to full registration on either Form S-1, SB-1 or SB-2, are:

• Required financial statements are simpler and need not be audited; and

• There are no periodic SEC reporting requirements (other than sales reports following the sale of the securities) unless the issuer has more than $5 million in total assets and more than 500 shareholders.

• There are three permitted offering circular formats under Regulation A, one of which is simplified question-and-answer document. This style of disclosure is useful to potential investors and may offer significant benefits to the issuer in the time expended and the costs of preparation.

All types of companies which are not reporting under the Exchange Act may use Regulation A, except "blank check" companies (i.e., those with the business of seeking and unspecified business) and investment companies registered or required to be registered or registered under the Investment Company Act of 1940. In most cases, Regulation A may also be used by shareholders for the resale of up to $1.5 million of securities.

Regulation A includes a provision which allows an issuer to "Test The Water" to determine whether or not there is any investor interest in its securities before the filling of a complete offering document. Thus, an issuer may publish factual information about it's business or proposed business before incurring a full range of legal, accounting and other costs, in order to gauge potential investor interest in a possible securities offering; however, the provision specifically provides that no money may be formally solicited until an offering statement has been qualified by the Commission, and prescribed offering materials have been delivered to potential investors.

LARGER STOCK OFFERINGS SB-1, SB-2

All offerings in this category are registered with the SEC and do not qualify for any exemption. S-1 offerings are full offerings that are typically done by large underwriters using the traditional methods that have been in place for some time. To our knowledge, an S-1 Internet IPO has not yet been done.

SB-1 and SB-2 offerings are open to companies which had less than $25 million in revenues in its last fiscal year, provided that the value of its outstanding securities in the hands of the public is no more than $25 million. SB-1 offerings are limited to $10 million per year, where SB-2 has no limit on amount of money raised.

A detailed discussion of these offerings is also beyond the scope of this website.