Regulation "A+"

Under the amended Regulation A, certain public securities offerings are exempt from SEC registration. The amended exemption is informally known as Regulation "A+".

The amended Regulation A+ allows certain offerings of up to $50 million. Under the JOBS Act of 2012, the former Regulation A allowed for an exemption of up to $5 million in any 12 month period. New Regulation A+ includes public offerings that can be made using general solicitation and advertising. An issuer my file an offering statement on Form 1-A with the SEC, as well as an offering circular (OC) for distribution to investors. While the Form 1-A must be qualified by the SEC, certain preliminary or "testing the waters" communication is permissible even before the form filing.

The securities sold under "A+" are not restricted, and can be freely resold by non-affiliates of the issuer. There are two tiers of offerings:

• Tier 1 – an exemption for offerings up to $20 million in a 12 month period, including up to $6 million of secondary sales by the issuer's affiliates. These offerings are usually subject to state blue sky registration and continual reporting requirements for the issuer.
• Tier 2 – an exemption for up to $50 million (plus $15 million of secondary sales). Investors not accredited are limited in the amount they can acquire. These offerings are exempt from state and SEC qualification requirements. Issuers can take advantage of a simplified process for entering Exchange Act reporting when Tier 2 is complete.

No asset-backed securities may be sold under Regulation "A+". However, a shell company is not disqualified.

Rule 251 includes special guidance for calculating the size of an offering of convertible securities or warrants. For these derivatives, the underlying security must be qualified at the time of the offering; also, the calculation of the aggregate offering price must include the maximum estimated conversion, exercise or exchange price of the underlying. These provisions apply to derivatives which many take affect within one year of the offering.

We foresee many more offerings or private placements under amended Regulation A. Our senior professionals are available for these capital raises, as well as the estimate of derivative values required under Rule 251 described above.