As I recall, all consulting agreements require issuance of a related Form S-8 filing. But, according to recent changes made to Form S-8s, the following consulting arrangement is not legal:
The services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the registrant's securities. sec.gov
The purpose for this rule change/clarification is explained in an SEC publication on Microcap Fraud:
...In 1990,the Commission expanded the employee concept to permit Form S-8 to be used for offers and sales to consultants or advisors who provide legitimate services to the issuer that do not involve the offer or sale of securities in a capital-raising transaction.
Since adoption of the 1990 revisions, some companies have used Form S-8 improperly to compensate consultants whose service to the company is promotion of the company's securities. This practice has been used in fraudulent promotions of microcap securities. In other cases, Form S-8 has been used to distribute securities to public investors through so-called "consultants" whose service to the issuer is selling the securities. This practice, which deprives public investors of the benefits of Securities Act registration, has been the subject of several Commission enforcement actions. The Commission will consider adopting amendments to Form S-8 and related rules designed to deter these abuses. These amendments would:
* amend Form S-8 and related rules to make the form unavailable for sales to consultants and advisors who directly or indirectly promote or maintain a market for the company's securities; and...
sec.gov
Entire document available at: sec.gov
So, pray tell, what explanation does CYPT have for this consulting agreement?
- Jeff |
