Cal. Code Regs. Tit. 10, § 260.113.1 - Form U-7 Disclosure Document

Current through Register 2022 Notice Reg. No. 16, April 25, 2022

(a) General. For the purpose of Section 25113(b)(2)(E) of the Code, the offering shall be made pursuant to a Small Corporate Offering Registration Form (Form U-7), as adopted by the North American Securities Administrators Association, Inc. (NASAA) on April 29, 1989, and pursuant to the additional instructions of this rule.
(b) Additional Instructions. Notwithstanding any NASAA instruction to the contrary, additional instructions for use of Form U-7 are as follows:
1.The applicant must be a California Corporation or a foreign corporation, which at the time of filing the application is subject to Corporations Code Section 2115 irrespective of the notice filing requirement under Section 2108. In addition: (1) the applicant shall not be a "blind pool company," which is defined as a development stage company that either (i) has no specific business plan or purpose or (ii) has indicated that its business plan is to engage in mergers or acquisitions with unidentified companies or other entities; (2) the applicant shall not be engaged in oil and gas exploration or production, or mining or other extractive industries; (3) the applicant shall not be an investment company subject to the Investment Company Act of 1940; and (4) the applicant shall not be subject to the reporting requirements of Sections 13 or 15(d) of the Securities and Exchange Act of 1934.
2.Use of the Form U-7 is available only in an offering by the applicant of one-class of voting common stock, and immediately after the proposed sale and issuance there must be only one class of voting common stock outstanding. The total offering of voting common stock by the applicant to be sold in a 12-month period, within or outside of this state, shall be limited to not more than one million dollars ($1,000,000), less the aggregate offering price for all securities sold (within the 12 months before the start, and during the offering, of the voting common stock) under Rule 504 of the Securities and Exchange Commission, in reliance on any exemption under subdivision (b) of Section 3 of the Securities Act of 1933, or in violation of subdivision (a) of Section 5 of that Act.
3.The minimum offering price of the voting common stock to be sold shall be at least five dollars ($5.00) per share. The applicant shall undertake that there will be no stock splits, stock dividends, spinoffs, or mergers for a period of two years from the close of the offering. (See Item 23 in the Application for Qualification by Permit in Section 260.113 of these rules.)
4.The net proceeds from the offering shall be expended in the operations of the business. Operations of the business does not include servicing or retiring any indebtedness where any part of the proceeds of the offering, directly or indirectly, is used to service or repay any debt or make any payment (other than reasonable salaries) to any officer, director or 10% shareholder of the applicant, or any affiliate of the applicant.
5.Each answer in the Form U-7 shall be thoroughly stated notwithstanding the various Notes and lined spaces set forth in that form.
6.The Form U-7 shall be reviewed and signed by each member of the board of directors of the applicant. In this regard, the board of directors may wish to seek the advice of an attorney at law experienced in securities matters with respect to the adequacy of the disclosure and the potential liability associated with inaccurate or incomplete disclosure.
7.Financial Statements required by the Form U-7 shall comply with Section 260.613 of these Rules.
8.Exhibits required with the Form U-7 shall be filed to the extent applicable pursuant to Item 21 of the Application for Qualification by Permit under Section 260.113 of these Rules.
9.Copies of annual financial reports provided to investors in accordance with Question 46 of the Form U-7 shall be filed with the Commissioner of Corporations. Those financial reports filed with the Commissioner shall include a separate written addendum describing the total number of the applicant's present employees, the total number of employees that applicant anticipates it will have within the next 12 months, and a breakdown of the numbers and corresponding classifications of employees (e.g., 20 clerks, 15 analysts, 10 managers, etc.) for each of those totals.

Notes

Cal. Code Regs. Tit. 10, § 260.113.1

Note: Authority cited: Section 25113(b), 25610 and 25612, Corporations Code. Reference: Sections 25110, 25113, and 25160, Corporations Code.

1. New section filed 7-1-93; operative 7-1-93 (Register 93, No. 27).
2. Amendment of subsections (b)1., (b)4. and (b)6. filed 2-22-96; operative 2-22-96 pursuant to Government Code section 11343.4(d) (Register 96, No. 8).

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