1. PRIVATE PLACEMENTS Larry C. Tomlin, Krieg DeVault LLP Jarod Brown, Attorney at Law

2. Introduction  Three truths about every offering:  the offering is registered;  the offering, the security or the issuer is exempt from registration; or  the offering is illegal.

3. Introduction, cont’d  Overview of Common Exemptions  Section 4(2) of the Securities Act of 1933 Rule 506 (Safe Harbor)  Section 3(b) of the Securities Act of 1933 Rule 504 Rule 505 Regulation A Rule 701  Section 4(5) of the Securities Act of 1933  Section 3(a)(11) of the Securities Act of 1933 Rule 147 (Safe Harbor)

4. Introduction, cont’d  Considerations for choosing an appropriate exemption  Threshold question – Public or Private  Amount to be raised  Nature of offerees Accredited Resident in one state Existing shareholders Employees of issuer  Nature of Issuer Development stage company Serial issuer

5. Regulation D – Brief Overview  Exemptions  Rule 504 Up to $1,000,000 No “Blank Check” Companies Generally Restricted Securities, unless: Registered State Exemptions General Solicitations Permitted to Accredited Investors  Rule 505 Up to $5,000,000 Unlimited accredited, up to 35 non-accredited Restricted Securities, must inform (6 months) No General Solicitation Differing Disclosure Standards

6. Regulation D – Brief Overview, cont’d  Exemptions  Rule 506 “Safe Harbor” Unlimited Amount Unlimited accredited, up to 35 non-accredited Non-accredited must be “sophisticated” Differing Disclosure Standards Company must be available to answer questions Financial Statements Restricted Securities, 1 year  Practice Point – Small Business Startups

7. Early Offering Issues  Finders  Don’t use them  Engagement Letters with Placement Agent  Best Efforts  Fees  Services  Due Diligence  Blue Sky  To file, or not to file

8. Mid Offering Issues  Structuring the offering  All accredited vs. non-accredited  Min/Max Rule 15c2-4 Rule 10b-9

9. Mid Offering Issues, cont’d  Use of a private placement memorandum  Accredited vs. non-accredited  Anti-fraud  Contents of a private placement memorandum  Accredited vs. non-accredited Rule 502

10. Mid Offering Issues, cont’d  Issues for consideration A securities disclosure document, not a sales document Risk factors Bespeaks Caution Doctrine A judicially created doctrine that renders forward-looking statements non- actionable under the securities laws if such statements are accompanied by sufficient cautionary language Private Securities Litigation Reform Act of 1995 an issuer that, at the time that the statement is made, is subject to the reporting requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; a person acting on behalf of such issuer; an outside reviewer retained by such issuer making a statement on behalf of such issuer; o an underwriter, with respect to information provided by such issuer or information derived from information provided by the issuer.

11. Post Offering Issues  Form D  EDGAR Access Codes  Rule 503 No later than 15 calendar days after the first sale of securities in the offering  State Requirements  Resale Restrictions  Rule 144  Rule 4(1-1/2)

12. Regulatory Updates  JOBS Act  Regulation A Increased from $5 Million to $50 Million  General Solicitation Mandates SEC revise Rule 506 to permit general solicitation for “accredited only” private offerings  Crowdfunding Many restrictions No regulations yet, stay tuned…