Legal Question in Business Law in Mississippi

Re: How to Offer a Company as a Pink Sheet Stock

I would strongly recommend that your Company do a "private placement" offering of securities instead of a public offering. A public offering of securities can cost at least $500,000 in attorneys fees if not much more. Also, you will have to pay very large accounting fees to include your Company's financial information in any registration statement with the Securities and Exchange Commission. In addition, you will need to pay underwriter's fees which can come to $1 million or more. In contrast, if you have a private placement of securities, the legal fees are much less expensive. I have done private placements for around $14,000. The accounting fees are far less expensive as well. Many private placements are issuer offered, meaning there is no underwriter and no underwriter's comissions.

I. How to Do A Private Placement

A. Your offering of stock can be exempt from both federal and state laws and regulations governing public offerings pursuant to 17 C.F.R. 230.505 (Rule 505). Rule 505 is your best alternative. Your offering would be limited to $5,000,000 or less, and you could not have more than 35 non accredited investors.

B. Your offering of stock can be exempt from both federal and state laws and regulations governing public offerings pursuant to 17 C.F.R. 230.506 (Rule 506). Rule 506 is your second alternative. The dollar amount of your offering is unlimited. You could not have more than 35 non accredited investors, but all of your non accredited investors would have to be sophisticated in financial matters. This is a tough condition to meet. It could make it hard for you to offer the stock to friends and family.

C. Your offering of stock may be exempt from federal laws and regulations governing public offerings pursuant to 17 C.F.R. 230.504 (Rule 504), but not state laws and regulations. Also Rule 504 imposes a $1,000,000 limit on the offering. This could impede your growth. In addition, if your company offers the stock to anyone other than an accredited investor, then it must comply with state laws and regulations concerning public offerings. Therefore, I do not recommend using Rule 504.

D. Your offering of stock may be exempt from federal laws and regulations governing public offerings pursuant to 17 C.F.R. 230.251 (Regulation A), but not state laws and regulations. I do not recommend this option either.

II. Documents To Be Drafted

A. Form 1-A. This is your private placement memorandum. Form 1-A is specifically designed for small businesses raising money.

B. Form D. This must be filed with the Securities and Exchange Commission, and each state�s securities regulatory agency.

C. The Business Plan.

I would be happy to talk to you more about alternatives to public offerings. If you have any questions please contact me.

Sincerely,

Steve Rinaldi

Re: How to Offer a Company as a Pink Sheet Stock

You are correct about the expense. Additionally, once you take a company public, you have to be prepared for a complete change of mindset.

Feel free to call my firm if you would like to discuss further.