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Form 1-A Regulation Offering Statement Under The Securities Act Of 1933 (SEC486) Form. This is a Official Federal Forms form and can be use in Securities And Exchange Commission.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-A
OMB APPROVAL
OMB Number:
3235-0286
Expires:
September 30, 2013
Estimated average burden
hours per response. . .
608.00
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)
_________________________________________________________________________________________________________________________________
(Address, including zip code, and telephone number,
including area code of issuer’s principal executive office)
_________________________________________________________________________________________________________________________________
(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.
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.
(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.
Persons who are to respond to the collection of information contained in this form are not
required to respond unless the form displays a currently valid OMB control number.
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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
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:
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(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 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 forexemption 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 ofany 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:
(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 publication authorized by Rule 254 was used prior to the filing of this notification. If so,
indicate the date(s) of publication and of the last communication with prospective purchasers.
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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 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 S1, 17 CFR
239.11, 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.
********************
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.
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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. 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 File No.
_________________
_________________
_________________
Effective Date
_________________
_________________
_________________
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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 .......................................................................................
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): (
)_______________________________________________________
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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) _____________________________________________________________________________________________________
(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 wheredetails 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 product 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,
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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 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)
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.
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(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.
(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
Milestone
Expected manner of
occurrence or method of
achievement
Date or number of months
after receipt of proceeds
when should be accomplished
(1)
(2)
(3)
(4)
(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.
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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 Per Share
=
(price/earnings multiple)
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, 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, and 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 the maximum is sold: ______ *
If the minimum is sold: ______ *
* 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: $_______ .
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(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.)
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 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 Sold
Amount
%
If Maximum Sold
Amount
%
Total Proceeds
$___________________
Less: Offering Expenses
100%
Commissions & Finders Fees
Legal & Accounting
___________________
Copying & Advertising
___________________
Other (Specify):
___________________
___________________
___________________
___________________
___________________
Net Proceeds from Offering ___________________
Use of Net Proceeds
___________________
___________________
___________________
___________________
___________________
$___________________
$100%
___________________
___________________
___________________
$___________________
___________________
___________________
$ ___________________
___________________
___________________
___________________
$___________________
___________________
___________________
___________________
___________________
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.
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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.
(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 trade
payables 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
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.
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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 (deficit)
Total stockholders equity (deficit)
Total Capitalization
________________________________________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
$__________
Number of preferred shares authorized to be outstanding:
Number of
Class of Preferred
_______________
_______________
_______________
Par Value
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.
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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?
If so, state conversion price or formula.
Date when conversion becomes effective:
Date when conversion expires:
[ ] Yes [ ] No
____ /____ /____
____ /____ /____
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?
Name, address and telephone number of Trustee
[ ] Yes [ ] No
(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.
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Last Fiscal Year
Actual
“Earnings”
“Fixed Charges”
=
If no earnings
show “Fixed Charges” only
Note:
Pro Forma
Minimum
Maximum
____________
____________
____________
____________
____________
____________
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 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 otherwise
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.:
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_______________________
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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
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.: (
_____________________________________________________________
) ________________
Name 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.: (
_____________________________________________________________
) ________________
Name 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:
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31. Chief Financial Officer:
Title: ___________________________________________________________________________
Name: ________________________________________________________________________ Age: ___________________________
Office Street Address:
Telephone No.: (
_____________________________________________________________
)________________
Name 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.: (
) ________________
Name 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:
(B) Name: _______________________________________________________________________ Age: ______________________
Title: _______________________________________________________________________
Office Street Address:
______________________________________________________________
Telephone No.: (
) ________________
Name 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.
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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:
34. Information concerning outside or other Directors (i.e. those not described above):
(A) Name: _______________________________________________________________________ Age: ______________________
Title: _______________________________________________________________________
Office Street Address:
______________________________________________________________
Telephone No.: (
) ________________
Name 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: ______________________
Title: _______________________________________________________________________
Office Street Address:
______________________________________________________________
Telephone No.: (
) ________________
Name 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: ______________________
Title: _______________________________________________________________________
Office Street Address:
______________________________________________________________
Telephone No.: (
) ________________
Name 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
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.
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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.
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 of Shares
Average
No. of Shares
Price Per Share Now Held
Name: ____________
_________________ _____________
_________________ _____________
_____________
_____________
% of Total
No. of Shares
After Offering if
All Securities Sold
% of Total
_____________
_____________
_____________
_____________
_________
_________
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)
(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.
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40. (a) List all remuneration by the Company to Officers, Directors and key personnel for the last fiscal year:
Cash
Chief Executive Officer
Chief Operating Officer
Chief Accounting Officer
Key Personnel:
____________________________
____________________________
____________________________
Other
$_____________ $_____________
______________ ______________
______________ ______________
______________ ______________
______________ ______________
______________ ______________
Others:
____________________________
____________________________
____________________________
______________ ______________
______________ ______________
______________ ______________
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
