The Regulation A+ Offering Process

On June 19, 2015, new rules expanding Regulation A became effective. The expandedrules are commonly known as Regulation A+. The new rules which were promulgatedunder the Jumpstart Our Business Startups Act (JOBS Act), create two Tiers of exemptofferings, both of which allow securities to be offered and sold to the general public.

Tier 1 offerings allow the issuer to offer and sell up to $20 million in a 12-month period.Tier 1 offerings do not preempt state Blue Sky laws. Tier 2 offerings allow the issuer toraise up to $50 million in a 12-month period. A notable advantage of Tier 2 over Tier 1offerings is preemption of state Blue Sky laws. As discussed below, Tier 2 offeringsrequire the issuer to provide audited financial statements and comply with ongoingreporting obligations.

What Is Testing The Waters?

Companies may solicit investor interest for a potential offering, both before or after thefiling of their Regulation A+ offering statement. Solicitation materials used after theoffering statement is publicly filed, must be accompanied by a preliminary offeringcircular or provide a URL where the preliminary offering statement can be obtained.Additionally, materials used to solicit investors must be filed as exhibits to the Form 1-Aoffering statement.

Confidential Submission Of The Form 1-A Offering Circular

A Company may submit its Form 1-A Offering Circular to the Securities and ExchangeCommission (SEC) on a confidential basis before it is filed publicly so long as thedocuments are publicly filed not later than 21 calendar days before qualification by theSEC.

What Disclosures Are Required In Form 1-A Offering Circular?

Companies conducting Regulation A+ offerings must file an offering statement on Form1-A with the Securities & Exchange Commission. The form must be filed through theSEC’s EDGAR system. Form 1-A Offering Circulars have three parts:

Part I (Notification), Part II (Offering Circular), and Part III (Exhibits).

The Offering Circular disclosure in Part II of Form 1-A is similar to what is required by aForm S-1 registration statement under the Securities Act. The disclosure requirementsfor Tier 1 and Tier 2 offerings vary slightly.

The following disclosures are required:

Basic information about the company, the offering and underwriters, if any, Underwriting discounts and commissions, Summary of risk factors, Material differences between the offering price and the amount paid for shares by

insiders during the past year, Plan of distribution, Selling security-holders, How offering proceeds will be spent, Business operations for the prior three fiscal years or since inception, if less than

three years, Physical property/real estate, Management’s discussion and analysis of the company’s liquidity and capital

resources and results of operations, Directors, executive officers and significant employees of the company, Executive compensation, Beneficial ownership by officers, directors and 10% owners, Transactions with related parties, promoters and certain control persons, and Material terms of the shares being offered.

What Are The Financial Statement Requirements For Regulation A+?

Tier 1 and Tier 2 offerings require the company to provide financial statements for thetwo most recent fiscal years. An important distinction between Tier 1 and Tier 2offerings is that Tier 2 companies must provide audited financial statements, while Tier1 companies may provide unaudited financial statements.

U.S. based companies must prepare their financial statements in accordance with U.S.Generally Accepted Accounting Procedures (GAAP), while Canadian companies mayprepare their financial statements in accordance with either US GAAP or InternationalFinancial Reporting Standards of the International Accounting Standards Board (IASBIFRS).

When Is Delivery Of The Offering Circular Required?

During the pre-qualification period of Regulation A+ offerings, companies must providea preliminary offering circular to prospective investors at least 48 hours before the sale.When a company is subject to ongoing Tier 2 reporting obligations and current in itsobligations, delivery of a preliminary offering circular is not required. Under thesecircumstances, the company and any intermediaries are subject to the general offeringcircular delivery requirements.

Within two business days after each sale, companies and intermediaries must provideinvestors with a copy of the final offering circular or provide a notice identifying whereinvestors may obtain the final offering circular on EDGAR and contact information forthe company or intermediary.

How Is The Regulation A+ Offering Statement Qualified?

Offering statements must be qualified by the SEC before sales can occur. Once the SECis satisfied with the disclosures that comply with Regulation A+,it will issue a notice ofqualification. The notice of qualification is similar to the notice of effectiveness issued bythe SEC for Form S-1 registration statements.

What Continuous Or Delayed Offerings Are Allowed by Regulation A?

Regulation A+ permits continuous or delayed offerings. Companies conductingcontinuous or delayed Tier 2 offerings must be current in their annual and semi-annualreporting obligations. A company can add additional securities to their Form 1-AOffering Statement by submitting a post-qualified amendment to its previously qualifiedoffering statement.

Regulation A+ allows continuous or delayed offerings as follows:

Securities offered or sold by or on behalf of a person other than the company, itssubsidiary or a person of which the company is a subsidiary,

Securities offered and sold pursuant to a dividend or interest reinvestment planor employee benefit plan,

Securities issued upon the exercise of outstanding options, warrants or rights, Securities issued upon the conversion of outstanding securities, Securities pledged as collateral for a loan or other obligation, Securities that are part of an offering that begins within two days after the

offering’s qualification date, will be offered on a continuous basis, may continueto be offered for a period in excess of 30 days after initial qualification, and willbe offered in an amount that, at the time the offering statement is qualified, isreasonably expected to be offered and sold within two years after the initialoffering qualification.

For further information Regulation A+, please contact Brenda Hamilton, SecuritiesAttorney at 101 Plaza Real South, Suite 202 North, Boca Raton, FL, (561) 416-8956, or byemail at info@securitieslawyer101.com. This securities law Q & A is provided as a generalor informational service to clients and friends of Hamilton & Associates Law Group,

P.A. and should not be construed as, and does not constitute legal advice on any specificmatter, nor does this message create an attorney-client relationship. Please note thatprior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities LawyersBrenda Hamilton, Going Public Attorney101 Plaza Real South, Suite 202 NorthBoca Raton, Florida 33432Telephone: (561) 416-8956Facsimile: (561) 416-2855www.SecuritiesLawyer101.com