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GENERAL OVERVIEW
SMALL CORPORATE OFFERING REGISTRATION (SCOR)
STATE REGISTRATION BY QUALIFICATION
THE PROCESS EXPLAINED
GETTING STARTED
WHAT EXEMPT OFFERING CHOICES ARE AVAILABLE?
HOW DOES THE WALL STREET ORGANIZATION DIFFER FROM COMPETITORS?
REQUEST MORE INFORMATION
GENERAL OVERVIEW
Raising capital through a direct public offering (debt or equity) is a great way for a company to finance the launch of a new business or product line or take the company "public". Our firm can provide a mechanism for your Company to raise equity (or debt) capital by selling its shares of common stock (or notes) directly to the public in the state your company would like to publicly offer its securities into. We can also provide your Company all of the necessary corporate support before and after successful completion of the offering. The benefit of this type of public offering is that it allows your Company to approach prospective investors (including customers) through cold calling, newspaper advertisement, direct mail, radio, or seminars.
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SMALL CORPORATE OFFERING REGISTRATION (SCOR)
The Small Corporate Offering Registration (SCOR) was designed with the small business securities issuer in mind. It allows small companies to raise equity or debt capital publicly without having to register with the Federal Securities and Exchange Commission. It is designed to streamline the state public securities review process by using standardized forms and review. Audited financial statements are required. Each state separately reviews the company's filings and issues a permit allowing general solicitation to the public in that state; permits are usually issued within 30 days (in the case of Nevada) or may take up to 6 months (in the case of California), depending on each state's regulatory standards. This form of registration is available to small securities issuers pursuant to Regulation D, Rule 504, of the Securities Act of 1933, as amended, and allows small companies to raise up to one million dollars in an equity offering with certain limitations and guidelines. This program was developed by the North American Securities Administrators Association and was designed to be used in conjunction with each state's registration by qualification blue sky law. This program has been adopted by almost every state.
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STATE REGISTRATION BY QUALIFICATION
This method of registration allows companies to raise monies publicly through an equity or debt Offering and is usually used in small securities Offerings that receive exemptions from federal review. Each state administrator will review the Offering based upon the merits of the Offering and the guidelines set forth by the Blue Sky law and rules promulgated thereunder. This method of registration of a security Offering allows the maximum freedom to small issuers and does not have the added rules that are a part of the SCOR program.
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THE PROCESS EXPLAINED
The end result of a Direct Public Offering process is that you and/or your employees will be able to solicit customers and the general public to invest in the securities of your company. In addition, these securities (normally common stock), once purchased, are considered to be "free trading" which allows a company that has successfully conducted a direct public offering to apply for listing on a public securities exchange. Below is a short synopsis of the process of positioning a company to conduct a Public Offering. The Wall Street Organization prides itself in providing a high level of professional securities guidance for a much lower cost than a securities law firm.
- Initial Corporate Preparation -- Our firm will assist the Company in developing and maintaining an accurate Corporate Minutes book. This is required for the Company to apply for a Public Offering permit. During this process, our firm (with your help) will formulate a corporate plan designed to familiarize you with the intricacies of running a corporation and going Public.
- Pre-Filing Preparation -- During this phase, our firm will develop the Offering Circular, i.e. Prospectus; Form U-1 -Uniform Application to Register Securities; Form U-2 - Uniform Consent to Service of Process; and other miscellaneous required documents to publicly register your Company to sell its securities. During this period, our firm will also provide the necessary study materials for you or any of your employees to pass the Series 63 Securities Examination, which is required to solicit moneys from the public in certain states.
- Post-Permit Issuance Assistance -- Our firm will provide assistance to your company in the development of ancillary marketing materials designed to help your Company approach prospective investors. This will include sales approaches, advertising, etc.
- Post-Offering Assistance -- Our firm can also provide long range support for your Company once your Offering is completed. This will include Minute Book updates, legal referral advice, investor relations, and eventually providing the mechanism to have your Company listed on an organized exchange, which can give liquidity to your investors.
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GETTING STARTED
The Wall Street Organization will co-ordinate the drafting and filing of your company's Blue Sky securities Offering, normally within 30 days of contract and receipt of audited financial statements and other corporate documentation and information detailed in our "Client Checklist". (see "Exhibit A"). Once we receive the materials outlined in this checklist, The Wall Street Organization coordinates the preparation of the the following for its clients:
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Formation of a new Corporation ("Public Corporation" - if requested); |
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Development of the full Minute Book for such Public Corporation; |
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Offering Circular on Form-lA or other appropriate memorandum, developed pursuant to the Securities Act of 1933; |
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Uniform Application to Register Securities (Form U-1); |
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Uniform Consent to Service of Process (Form U-2 and U-2A); |
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The preparation and filing of all documents required under either Rule 504 of Regulation D or Regulation A of the Securities Act of 1933 (the "Act"), as amended; and |
Other required documents including attorney opinion letters and subscription agreements (not to include documents unrelated to (a) through (f) of this paragraph).
What Exempt Offerings Choices Are Available?
Regulation A Offerings:
Regulation A is an exempt offering for public securities not exceeding $5 million in any 12 month period. The company must file an offering statement consisting of a notification, offering circular (Prospectus) and numerous exhibits with the SEC for review.
These securities can be freely traded in the secondary market. Advantages of a Regulation A offering as opposed to a full registration include:
1) Simpler financial statements.
2) Generally no Exchange Act reporting obligations after the offering is made.
Regulation D Offerings:
Rule 504:
This rule is considered by many to be the perfect answer for the small company that needs to raise up to $1 million but can't afford the time or expense to go through the entire SEC registration process.
Under the Rule 504 exemption, a company can offer up to $1 million of securities in a 12 month period. Important characteristics are:
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Securities (both debt and equity) can be sold to an unlimited number of persons. |
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General solicitation or advertising can be used to market these securities. |
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These securities are freely traded and not "restricted." This means investors may sell their securities on the open market without registration or other sales limitations that are on privately placed securities. Because of the free tradability of stock and the fact that the minimum share price can be under $5, THE WALL STREET ORGANIZATION recommends use of the Regulation D Rule 504 offerings when appropriate. |
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Audited financials are not required. |
Rule 504 (MAIE) Model Accredited Investor Exemption
THE WALL STREET ORGANIZATION features the MAIE model accredited investor exemptions. Each offering may be capitalized at up to $1 million. The definition of an Accredited Investor is
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A natural person with a net worth of at least $1 million. |
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A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year. |
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A bank, insurance company, registered investment company, business; development company, or small business investment company. |
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An employee benefit plan, within the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million |
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A charitable organization, corporation or partnership with assets exceeding $5 million. |
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A business in which all the owners are accredited investors. |
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A trust with assets of at least $5 million, not formed to acquire the securities offered, and whose purchases are being directed by a sophisticated person. |
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SCOR: |
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Small Corporate Offering Registration falls under the 504-D exemption. The Form U-7 utilizes a format that standardizes the prospectus and reduces paperwork required in most offerings. |
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Under the SCOR program: companies can raise up to $1 million in a 12-month period, securities must be registered in the state(s) where they are to be sold, can be sold to an unlimited number of investors, general advertising or solicitation can be used to assist in marketing, and are freely traded (not restricted). The minimum share price is $5. |
Rule 505:
Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period, selling to an unlimited number of "accredited investors" and up to 35 other persons. The issued securities are "restricted" and may not be sold for at least a year without registering the transaction.
Rule 506:
Under this exemption, you can raise an unlimited amount of capital, cannot use general solicitation or advertising to market the securities, can sell securities to an unlimited number of accredited investors and up to 35 other "sophisticated" purchasers, financial statements must be certified, and purchasers receive "restricted" securities. Consequently, purchasers may not freely trade the securities in the secondary market immediately after the offering.
What's So Special About Exempt Direct Public Offerings (DPO's) Under Regulation A, Regulation D Rule 504?
As a matter of speed and practical economics, we recommend, wherever appropriate, Regulation A and Regulation D Rule 504 for DPOs:
Regulation A is used to raise from $1-$5 million (with free trading stock).
Unlike Rules 505 and 506 which have "restricted" stock, Regulation D Rule 504 has "free trading" stock, and unlike SCOR offerings, the 504 per share price can be under $5. These unique characteristics have much greater appeal to prospective investors, making the 504 DPO the offering of choice in raising up to $1 million in a 12-month period.
Note: Any information you provide to investors must be free from false or misleading statements. Similarly, you should not exclude any information if the omission makes what you do provide investors false or misleading information.
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HOW DOES THE WALL STREET ORGANIZATION DIFFER FROM COMPETITORS?
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Niche market services for DPO's include raising capital from $250,000 - $5,000,000 and utilizing Regulation A and Regulation D Rule 504 (when appropriate) for timely, cost effective offerings. |
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State of the art in-house internet technology group creates custom proprietary websites which have the capability of dominating the search engines. |
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Unlike on-line brokers, there are no brokerage commissions when stock is purchased directly from our client-issue on-line. |
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Our relatively smaller offerings with stock prices not above $5 per share. |
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Focusing on "angel," "accredited," and "affinity group" investors in a largely self-service automated on-line system. |
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We can handle the entire deal structure from conception to funding. Our experience and expertise literally creates a "funding roadmap" to shepherd client companies through early stage development, initial public offering and eventual secondary full NASDAQ offerings. |
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No offering share allocation restrictions. Investors gain the opportunities previously available only to institutional and wealthy investors. |
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More reasonable fees than traditional investment banking firms. |
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