Regulation A+ Compliance Procedures

Last month Regulation A+ became effective. The new rule creates two Tiers of exempt
offerings, both of which allow securities to be offered and sold to the general public, if
certain conditions are met.
Tier 1 & Tier 2 of Regulation A+
Using Tier 1 of Regulation A+, issuers may offer and sell up to $20 million of securities
in a 12-month period. The biggest drawback to Tier 1 offerings is that state Blue Sky laws
are not preempted. Tier 2 offerings do preempt state Blue Sky laws and permit the
issuer to raise up to $50 million in a 12-month period. As discussed below, Tier 2
offerings require the issuer to provide audited financial statements and comply with
ongoing SEC reporting obligations.
Confidential Submission Of The Form 1-A Offering Statement
A Company may submit its Form 1-A Offering Statement to the Securities and Exchange
Commission (SEC) on a confidential basis before it is filed publicly so long as the
documents are publicly filed not later than 21 calendar days before qualification by the
SEC.
What Is Testing The Waters In a Regulation A+ Offering?
Companies can solicit investor interest for a potential Regulation A+ offering, both
before and after the filing of their Form 1-A offering statement with the SEC. The
issuers solicitation materials used after the Form 1-A offering statement is publicly
filed, must be accompanied by a preliminary offering circular 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-A offering statement.
What Disclosures Are Required In Form 1-A Offering Circular?
Companies conducting Regulation A+ offerings must file an offering statement on Form
1-A with the Securities & Exchange Commission. The form must be filed through the
SECs EDGAR system. Form 1-A Offering Circulars include Part I (Notification), Part II
(Offering Circular), and Part III (Exhibits).
The disclosures required in Regulation A+ Offering Circulars are similar to those found
in a Form S-1 registration statement under the Securities Act. The disclosure
requirements for 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,
Managements discussion and analysis of the companys 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 the
two most recent fiscal years. An important distinction between Tier 1 and Tier 2
offerings is that Tier 2 companies must provide audited financial statements, while Tier
1 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 may
prepare their financial statements in accordance with either US GAAP or International
Financial Reporting Standards of the International Accounting Standards Board (IASB
IFRS).
Delivery Of The Offering Circular To Investors
During the pre-qualification period of Regulation A+ offerings, companies must provide
a 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 its
obligations, delivery of a preliminary offering circular is not required. Under these
circumstances, the company and any intermediaries are subject to the general offering
circular delivery requirements.
Within two business days after each sale, companies and intermediaries must provide
investors with a copy of the final offering circular or provide a notice identifying where
investors may obtain the final offering circular on EDGAR and contact information for
the company or intermediary.
Qualification Of The Offering Statement

Offering statements must be qualified by the SEC before sales can occur. Once the SEC
is satisfied with the disclosures that comply with Regulation A+, it will issue a notice of
qualification. The notice of qualification is similar to the notice of effectiveness issued by
the SEC for Form S-1 registration statements.
Continuous & Delayed Offerings
Regulation A+ permits continuous or delayed offerings. Companies conducting
continuous or delayed Tier 2 offerings must be current in their annual and semi-annual
reporting obligations. A company can add additional securities to their Form 1-A
Offering Statement by submitting a post-qualified amendment to its previously qualified
offering 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, its
subsidiary or a person of which the company is a subsidiary,
Securities offered and sold pursuant to a dividend or interest reinvestment plan
or 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
offerings qualification date, will be offered on a continuous basis, may continue
to be offered for a period in excess of 30 days after initial qualification, and will
be offered in an amount that, at the time the offering statement is qualified, is
reasonably expected to be offered and sold within two years after the initial
offering qualification.

For further information Regulation A+, please contact Brenda Hamilton, Securities
Attorney at 101 Plaza Real South, Suite 202 North, Boca Raton, FL, (561) 416-8956, or
by email at info@securitieslawyer101.com. This securities law Q & A is provided as a
general or 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
specific matter, nor does this message create an attorney-client relationship. Please
note that prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com