• SEC approval of the offering circular is required. The issuer must file a disclosure document and financials with the SEC. This must be approved by the SEC prior to any sales. For Tier 1 offerings reviewed financials are sufficient but for Tier 2 offerings audited financials are required. • Ongoing disclosure requirements. There are no ongoing disclosure requirements for Tier 1 offerings. Tier 2 issuers must provide an annual disclosure, a semi-annual report, and current reports which will be equivalent to, but less expensive than, current Form 10-K, Form 10-Q, and Form 8-K. • Securities offered will be unrestricted and transferable assuming a secondary market for these securities develops. Federal Private Placement Exemption Under Regulation D The Regulation D exemptions authorize the offer and sale of securities through certain private placement transactions. There are restrictions on the number and amount of sales, and on advertising or solicitation, and resale. Notice of Regulation D offerings must be filed with the Securities and Exchange Commission, but the full registration and disclosure requirements of a public offering need not be met. Regulation D includes four exemptions: • Rule 504 provides an exemption for offerings up to $10 million during the twelve months before the start of and until the completion of the offering. Purchasers need not meet any suitability test and there is no limit on the number of purchasers to whom the offeror can sell. No general solicitation or advertising. • Rule 505 provides an exemption for offerings up to $5 million during the twelve months before the start of and until the completion of the offering. Sales may be made to an unlimited number of accredited investors (defined below), but may not be made to more than 35 non- accredited investors. • Rule 506(b) permits a company to sell an unlimited dollar amount of securities. Sales may be made to an unlimited number of accredited investors, but may not be made to more than 35 non-accredited investors, each of whom must be a “sophisticated investor.” No general solicitation or advertising permitted. "Testing the Waters'" activities permitted. • Rule 506(c) added by the Jobs Act of 2012 allows for general solicitation and advertising in Rule 506 private placements where all purchasers are accredited investors and the issuer has taken reasonable steps to verify that the purchasers are accredited investors. The term “accredited investor” as applied to natural persons means any individual natural person whose net worth (alone or jointly with spouse) exceeds $1 million not including the value of the person’s primary residence; or, a natural person whose income exceeded $200,000 ($300,000 with spouse) in each of the two most recent years with a reasonable expectation of the same level of income in the current year. A rule adopted by the Securities and Exchange Commission on August 26, 2020, adds to that definition individuals holding Series 7, Series 65, and Series 82 securities licenses.
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