By Marlon Aldridge, Sr.

Regulation D (Used to Clarify Section 4(2) of the Securities Act, referred to as Safe Harbor) Used for Private Placement Offerings Rule 504Rule 505Rule 506 (probably best choice) Sometimes referred to asSeed capital exemption Issuer Eligibility 1.Must be corporation, business trust, limited partnership, or limited liability company 2.Must not be black check company and not subject to Exchange Act reporting requirements 3.See Section 501 and 502 Same as 504 SEC filing requirementForm D Sale to type of purchaser or investor: accredited, non- accredited, or both | Number of purchasers Both Unlimited accredited investors and up to 35 non-accredited investors Allows general solicitation or advertising No 1 Restricted security provisions Cannot resell securities within a year of purchase Disclosure requirementsYes Disqualifying events Issuers and specific parties thereto convicted of felony or misdemeanor involving sale of securities. See Section 506 (d) Maximum aggregate offeringNot to exceed $1 millionNot to exceed $5 millionNo limit COMPARISON OF REGULATION D SECTIONS

Source: Electronic Code of Federal Regulations, bin/text- idx?SID=8e0ed509ccc65e983f9eca72ceb26753&node=17: &rgn=div5#se _1135http:// bin/text- idx?SID=8e0ed509ccc65e983f9eca72ceb26753&node=17: &rgn=div5#se _1135 Notes: Your company may, however, use the Rule 504 exemption for a public offering of its securities with general solicitation and advertising, and investors will receive non-restricted securities, under one of the following circumstances: (a) It sells in accordance with a state law that requires the public filing and delivery to investors of a substantive disclosure document; (b) It sells in accordance with a state law that requires registration and disclosure document delivery and also sells in a state without those requirements, so long as your company delivers to all purchasers the disclosure documents mandated by a state in which it registered; or (c) It sells exclusively according to state law exemptions that permit general solicitation and advertising, so long as sales are made only to accredited investors. COMPARISON…CONT’D

1.Transactions are not exempt from the antifraud, civil liability, or other provisions of the federal securities laws. Information given to potential purchasers of securities should not be misleading, 2.Nothing in Regulation D obviates the need to comply with any applicable state law relating to the offer and sale of securities. Filing notices may be required by the state. Some issuers may be barred due to state law such as felons and other “bad actors”. 3.Section 4(a)(2) of the Act (15 U.S.C. 77d(2)) may help issuers to comply with exemption provisions if all provisions of Regulation D are not satisfied. 4.Regulation D provisions cannot be claimed by affiliates of the company issuing the securities or by any persons holding them. Only the transactions are exempt and not the securities themselves. GENERAL PROVISIONS REGULATION D

5.Regulation D is not available to any issuer for any transaction or chain of transactions that, although in technical compliance with Regulation D, is part of a plan or scheme to evade the registration provisions of the Act. In such cases, registration under the Act is required. 6.Issuers within a reasonable time must furnish to non-accredited investors an Offering Circular, See Form 1-A (Model A or Model B and General Instructions) GENERAL PROVISIONS REGULATION D CONT’D

7.The issuer shall exercise reasonable care to assure that the purchasers of the securities are not underwriters within the meaning of section 2(a)(11) of the Act, which reasonable care may be demonstrated by the following: 1)Reasonable inquiry to determine if the purchaser is acquiring the securities for himself or for other persons; 2)Written disclosure to each purchaser prior to sale that the securities have not been registered under the Act and, therefore, cannot be resold unless they are registered under the Act or unless an exemption from registration is available; and 3)Placement of a legend on the certificate or other document that evidences the securities stating that the securities have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale of the securities. GENERAL PROVISIONS REGULATION D CONT’D

To implement Section 201(a) of the JOBS Act, the SEC promulgated Rule 506(c) to eliminate the prohibition on using general solicitation under Rule 506 where all purchasers of the securities are accredited investors and the issuer takes reasonable steps to verify that the purchasers are accredited investors. Under Rule 506(c), issuers may offer securities through means of general solicitation, provided that: all purchasers in the offering are accredited investors, the issuer takes reasonable steps to verify their accredited investor status, and certain other conditions in Regulation D are satisfied. PROVISION FOR JOBS ACT

An "accredited investor" is:accredited investor a bank, insurance company, registered investment company, business development company, or small business investment company; an employee benefit plan (within the meaning of the Employee Retirement Income Security Act) if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million; a tax exempt charitable organization, corporation or partnership with assets in excess of $5 million; a director, executive officer, or general partner of the company selling the securities; an enterprise in which all the equity owners are accredited investors; PROVISION FOR JOBS ACT CONT’D

an individual with a net worth of at least $1 million, not including the value of his or her primary residence; an individual with income exceeding $200,000 in each of the two most recent calendar years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or a trust with assets of at least $5 million, not formed only to acquire the securities offered, and whose purchases are directed by a person who meets the legal standard of having sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of the prospective investment. PROVISION FOR JOBS ACT CONT’D

Purchasers receive “restricted securities” in a Rule 506 offering. Therefore, they may not freely trade the securities after the offering, as explained below under the heading “Resales of restricted securities.”Resales of restricted securities Section 18Section 18 of the Securities Act provides a federal preemption or exemption from state registration and review of private offerings that are exempt under Rule 506. The states still have authority, however, to investigate and bring enforcement actions for fraud, impose state notice filing requirements and collect state fees. PROVISION FOR JOBS ACT CONT’D