The Value of an Offering Document
Although Rule 504 has no prescribed disclosure requirements, you should always prepare and use an offering document for YOUR PROTECTION. The exemptions from registration provided by Regulation D do not include exemptions from the anti-fraud or civil liability provisions of any of the federal or state securities laws. These provisions are broad and include civil and criminal penalties for the misstatement or omission of facts that are relevant to making a fully informed investment decision.
If your company makes a Rule 504 offering without providing investors with an offering document, your company, its board, and its principals will be at an extreme disadvantage in defending themselves if your business is confronted with a securities fraud action.
A Rule 504 offering document does not require the detailed disclosure of a Rule 505 or 506 offering, but it should include the following information:
A description of the business being conducted and/or intended to be conducted along with the general development of the business during the preceding five years or as long as it has been operating, if the business is less than five years old.
A description of the principal products or services, their principal markets, and the methods of distribution.
A description and cost summary of any research and development activities during each of the last two fiscal years.
The number of full and part-time employees and their special qualifications.
A description of any special characteristics of the company's business or industry which may have a material impact on future financial performance. These may include existing or probable governmental regulations, dependence on one or a few major suppliers, unusual competitive industry conditions, etc.
Summaries of the principal factors that make the investment risky. These factors might include:
An absence of an operating history.
Lack of profitable operations in recent periods.
The company's general financial condition.
Lack of a trading market for the securities or restrictions against transfer.
Conflicts of interest between the company and its management.
Reliance on the efforts of a single individual.
If there is a material disparity between the offering price of the securities and the effective cash cost to officers, directors, promoters and affiliates for shares acquired during the preceding three years, there should be a comparison of such prices.
The uses and allocation of the proceeds.
A brief description, including the location and character of the company's principal facilities and other important physical properties. If any are leased, include the basic lease terms such as length of lease, rent, renewal options, etc.
Relevant information regarding directors, officers and significant employees. (Include information such as ages, educational backgrounds and business experience, as well as any special information such as criminal convictions, bankruptcies, etc.)
The aggregate annual compensation of the three highest paid officers and directors, and the total for all officers and directors.
The security ownership of each officer and director, and the identity of each person owning 10 percent or more of the company's shares. (Include the ownership of outstanding warrants or options to purchase additional securities by any of these individuals.)
All significant transactions between the issuing company and any of its officers, directors or principal security holders within the previous two years or those presently contemplated.
A detailed description of the securities being offered. Include such matters as dividend rights, voting rights, liquidation rights, preemptive rights, conversion rights, redemption provisions, sinking fund provisions, liability for further calls or assessments, restrictions against sale or transfer of the securities, etc.
A description of how the securities are being sold, the purchase price commissions percentage, if any, the minimum number of securities that must be sold for the placement to be effective, etc.
Financial statements that conform to Generally Accepted Accounting Principals.
It is necessary to provide accurate and complete information to prospective investors in order to eliminate potential liability. The exact scope of these disclosures will vary depending on your business and the transaction.
WHY WOULD ANY COMPANY WITH ONLY A FLOAT OF 18MIL AGREE TO SELL 200MIL SHARES FOR $10K?
If you look at the 504 filing for ONMC Jesse took a salary of $5k and allocated $4k for something else. ONLY $10K WENT TO THE COMPANY FOR GENERAL EXPENSES.
People sell Shell Company's with more shares outstanding for $300-$500k and usually @.25 cents per share. Get real people
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