Item 4. Recent Sales of Unregistered Securities
The Company relied upon Section 4(2) of the Act and Rule 506 for several transactions regarding the issuance of its unregistered securities. In each instance, such reliance was based upon the fact that (i) the issuance of the shares did not involve a public offering, (ii) there were no more than 35 investors (excluding "accredited investors"), (iii) each investor who was not an accredited investor either alone or with his purchaser representative(s) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, or the issuer reasonably believes immediately prior to making any sale that such purchaser comes within this description, (iv) the offers and sales were made in compliance with Rules 501 and 502, (v) the securities were subject to Rule 144 limitation on resale and (vi) each of the parties is a sophisticated purchaser and had full access to the information on the Company necessary to make an informed investment decision by virtue of the due diligence conducted by the purchaser or available to the purchaser prior to the transaction.
The Company relied upon Section 3(b) of the Act and Rule 504 for several transactions regarding the issuance of its unregistered securities. In each instance, such reliance was based on the following: (i) the aggregate offering price of the offering of the shares of Common Stock and warrants did not exceed $1,000,000, less the aggregate offering price for all securities sold with the twelve months before the start of and during the offering of shares in reliance on any exemption under Section 3(b) of, or in violation of Section 5(a) of the Act; (ii) no general solicitation or advertising was conducted by the Company in connection with the offering of any of the shares; (iii) the fact the Company has not been since its inception (a) subject to the reporting requirements of Section 13 or 15(d) of the Securities Act of 1934, as amended, (b) and "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (c) a development stage company that either has no specific business plan or purpose or has indicated that its business plan is to engage in a merger or acquisition with an unidentified company or companies or other entity or person.
The Company relied upon Florida Code Section 517.061(11) for several transactions. In each instance, such reliance is based on the following: (i) sales of the shares of Common Stock were not made to more than 35 persons; (ii) neither the offer nor the sale of any of the shares was accomplished by the publication of any advertisement; (iii) all purchasers either had a preexisting personal or business relationship with one or more of the executive officers of the Company or, by reason of their business or financial experience, could be reasonably assumed to have the capacity to protect their own interests in connection with the transaction; (iv) each purchaser represented that he was purchasing for his own account and not with a view to or for sale in connection with any distribution of the shares; and (v) prior to sale, each purchaser had reasonable access to or was furnished all material books and records of the Company, all material contracts and documents relating to the proposed transaction, and had an opportunity to question the executive officers of the Company. Pursuant to Rule 3E-500.005, in offerings made under Section 517.061(11) of the Florida Statutes, an offering memorandum is not required; however each purchaser (or his representative) must be provided with or given reasonable access to full and fair disclosure of material information. An issuer is deemed to be satisfied if such purchaser or his representative has been given access to all material books and records of the issuer; all material contracts and documents relating to the proposed transaction; and an opportunity to question the appropriate executive officer. In the regard, the Company supplied such information and was available for such questioning (the "Florida Exemption").
The Company relied upon Massachusetts Code Section 402(b)(9) for several transactions. In each instance, such reliance is based on the following: any transaction pursuant to an offer directed by the offeror to not more than twenty-five persons other than those designated in paragraph (8) in the commonwealth during any period of twelve consecutive months, whether or not the offeror or any of the offerees is then present in the commonwealth, if (A) the seller reasonably believes that all the buyers in the commonwealth (other than those designated in paragraph (8)) are purchasing for investment, and (B) insofar as an offer involves the payment directly or indirectly of any commission or other remuneration for soliciting any prospective buyer in the commonwealth (other than those designated in paragraph (8)) a notice is filed with the secretary at least five full business days before the offer, and the secretary does not by order disallow the exemption within the next five full business days; but, in any event, the secretary may by rule or order, as to any security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in clauses (A) and (B) with or without the substitution of a limitation on remuneration (the "MA exemption").
The Company relied upon Nevada Code Section 90.530(11) for several transactions. In each instance, such reliance is based on the following: the following transactions are exempt from NRS 90.460 and 90.560, except as otherwise provided in this subsection, a transaction pursuant to an offer to sell securities of an issuer if: (a) the transaction is part of an issue in which there are no more than 25 purchasers in this state, other than those designated in subsection 10, during any 12 consecutive months; (b) no general solicitation or general advertising is used in connection with the offer to sell or sale of the securities; (c) no commission or other similar compensation is paid or given, directly or indirectly, to a person, other than a broker-dealer licensed or not required to be licensed under this chapter, for soliciting a prospective purchaser in this state; and (d) one of the following conditions is satisfi(1) the seller reasonably believes that all the purchasers in this state, other than those designated in subsection 10, are purchasing for investment; or (2) immediately before and immediately after the transaction, the issuer reasonably believes that the securities of the issuer are held by 50 or fewer beneficial owners, other than those designated in subsection 10, and the transaction is part of an aggregate offering that does not exceed $500,000 during any 12 consecutive months. The administrator may by rule or order as to a security or transaction or a type of security or transaction, may withdraw or further condition the exemption set forth in this subsection or waive one or more of the conditions of the exemption. (the "Nevada Exemption").
In each of the following transactions, the Company relied upon one or more state exemptions from registration. The following is a summary of all state requirements from the various states. The paragraph which follows indicates the Company's noncompliance (if applicable) with regard to these individual state requirements. 1) no general advertising or solicitation; 2) no commissions or remuneration; 3) the investor purchased for investment purposes (and not with a view toward distribution; 4) a filing with the state securities division; 5)a consent to service of process; 6) a fee; 7) the investment was suitable for the investor (did not exceed 10% of his net worth); 8) the investor had knowledge and experience in these types of transactions; 9) a legend was placed in the offering documents; 10) bad boy provisions; 11) preserve the books and records of the Company; 12) written agreement not to sell for 12 months received from purchaser; 13) written notice of the right to rescind; 14) stop transfer instructions given to the transfer agent; 15) a legend was placed on the certificates (restricted); 16) $500,000 maximum offering; 17) sales made only to accredited investors; 18) the investor was able to bear the risk of the investment; 19) an offering memorandum was given the purchasers; financial statements given to the investor; 20) escrow portion of proceeds; 21) corporate documents either supplied to or available for inspection by investor and 22) between 10 and 40 purchasers/investors.
In Alabama, the Company failed to file notice, consent to service of process and pay the fee within 15 days of the first sale in Alabama. In Arizona, the Company failed to file notice and pay the fee and also failed to place the Arizona legend on the offering documents. In California, the Company failed to file notice, pay the fee and consent to service of process. In Delaware, the Company failed to file notice and consent to service of process. In Georgia, the Company failed to place the Georgia specific legend on the certificates. In Illinois, the Company failed to file notice and to pay a fee. In Indiana, the Company failed to file notice, consent to service of process. In Louisiana, the Company failed to file notice and service of process and to pay a fee. In Maryland, the Company failed to place a Maryland specific legend on the certificates, failed to file notice and to pay a fee. In Michigan the Company failed to place a Michigan specific legend on the certificates and failed to give stop transfer instructions to the Company's transfer agent. In Minnesota, the Company failed to file notice. In New Hampshire, the Company failed to file notice, failed to consent to service of process and failed to pay a fee. In New York the Company failed to file notice, failed to pay a fee and failed to consent to service of process. In North Carolina, the Company failed to place a North Carolina specific legend in the offering documents. In Ohio, the Company failed to file notice. In Pennsylvania, the Company failed to receive written agreements from investors agreeing not to sell for a period of 12 months and failed to file notice or pay a fee. In Texas, the Company failed to place a Texas specific legend on the certificates and failed to place stop transfer instructions with the Company's transfer agent. In Utah, the Company exceeded the $500,000 maximum offering limitation. In Washington, the Company failed to place a Washington specific legend on the certificates and to file notice and consent to service of process. |
