Offering Statement Requirements For Regulation A+

Today I am continuing my discussion on offering statement requirements for a Reg A+ offering. The rules require use of new modified Form 1-A. Form 1-A consists of three parts: Part I – Notification, Part II – Offering Circular and Part III – Exhibits. Part I calls for certain basic information about the issuer and the offering, and is primarily designed to confirm and determine eligibility for the use of the Form and a Regulation A offering in general. Part I will include issuer name and identifying information; issuer eligibility; application of the bad actor disqualification and disclosure; jurisdictions in which securities are to be offered; and unregistered securities issued or sold within one year.

Part I also includes pricing information. All Regulation A+ offerings must be at a fixed price. That is, no offerings may be made “at the market” or for other than a fixed price.

Part II is the offering circular and is similar to the prospectus in a registration statement. Part II requires disclosure of information about the issuer and the offering such as; material risks; dilution; plan of distribution; use of proceeds; description of the business operations; description of physical properties; discussion of financial condition and results of operations (MD&A); identification of and disclosure about directors, executives and key employees; executive compensation; beneficial security ownership information; related party transactions; description of offered securities; and two years of financial information.

The required information in Part 2 of Form 1-A is scaled down from the requirements in Regulation S-K applicable to Form S-1. Issuers can complete Part 2 by either following the Form 1-A disclosure format or by including the information required by Part I of Form S-1. Only issuers that elect to use the S-1 format will be able to subsequently file short form 8-A to register and become subject to the Exchange Act reporting requirements.

Form 1-A requires two years of financial information. All financial statements for Regulation A offerings must be prepared in accordance with GAAP. Financial statements of a Tier I issuer are not required to be audited however, as noted Tier 1 does not preempt state law and most if not all states require audited financial statements. Audited financial statements are required for Tier 2 issuers. Audit firms for Tier 2 issuers must be independent and PCAOB-registered.

Part III requires an exhibits index and a description of exhibits required to be filed as part of the offering statement.