This article is from the Investing Articles: Public Offerings: IPO and DPO series.
A. The Form U-7 when properly filled in, signed and submitted, together with the exhibits scheduled below and a Form U-1 Uniform Application to Register Securities, constitutes an application for registration for the states listed at the bottom of the cover page of the Form. There should be filed with each state there listed a signed original of the Form, together with an executed Form U-1 and a signed original of the consent to service of process constituting Exhibit 7. Any references in the Form U-1 to SEC registration and effectiveness should be disregarded and Questions 6 and 8(a) of the Form U-1 are inapplicable. The Form U-1 should set forth the amount of securities being registered in that state and the method of calculating the filing fee, and there should be enclosed a check for the amount of the filing fee. Each state must separately declare the registration effective by an order to that effect unless that state has some other procedure applicable to registration on Form U-7. Once registration is effective as to a given state, the effective date should be noted at the bottom of the cover page of the Form. Any changed or revised Disclosure Document must also be signed.
B. Each question in each paragraph of the Form should be responded to. If the question or series of questions is inapplicable, so indicate. Each answer should be clearly and concisely stated and in the space provided; however, notwithstanding the specificity of the questions, responses should not involve nominal, immaterial or insignificant information.
C. If the provided space is insufficient, additional space should be created by cutting and pasting the Form to add more lines or by putting the Form on a word processor and adding more lines in this or a similar manner. Irrespective of which method is used, care should be taken to assure that the Form is accurately and completely reproduced. Smaller type size should not be used, and script or italic type styles should be avoided.
D. There must be submitted to the administrator an opinion of an attorney licensed to practice in a state or territory of the United States that the securities to be sold in the offering have been duly authorized and when issued upon payment of the offering price will be legally and validly issued, fully paid and nonassessable and binding on the Company in accordance with their terms.
E. The Disclosure Document on Form U-7 constitutes the offering circular or prospectus and the Form once filled out, filed and declared effective may be reproduced by the Company by copy machine or otherwise for dissemination to potential investors. (The Company is cautioned to control the copying and distribution to preclude inaccurate or unreadable copies from being used and to prevent other unauthorized uses for which the Company may nevertheless be deemed responsible.) These Instructions are not part of the Disclosure Document and should not be included. Reproduced copies should be on white paper and should be stapled or secured in the left margin without a cover of any type.
F. The Company should expect that the office of the administrator may have comments and questions concerning the answers set forth on the Form and that changes may be required to be made to the answers before the registration is declared effective. Comments and questions may either be included in a letter or made by telephone communication initiated by the office of the administrator in response to the filing.
G. No offers or sales may be made in this state until the registration has been declared effective by the administrator. To make offers or sales before the registration is effective could lead to a stop order or other proceeding which would preclude use of the Form in this or any other state and could give rise to a right of rescission by investors enforceable against management, principal stockholders and the selling agents as well as the Company. When the registration has been declared effective in this state, offers and sales may be made in this state even though registration in other states has not been declared effective. This Disclosure Document must be delivered to each investor before the sale is made, e.g. (a) before any order is entered; (b) any subscription agreement is signed; or (c) any part of the purchase price is received. The registration statement will be effective only for the same time period specified in the order of the administrator, which may be different for different states; however, no registration statement shall remain effective in a particular state for a period greater than one year.
H. After the registration has been declared effective, and while the offering is still in progress, if any portion of the Form should need to be changed or revised because of a material event concerning the Company or the offering to make it accurate and complete, it shall be so changed, revised, or supplemented. If changed, revised or supplemented, (including an addition on the cover page of another state in which the offering has been registered) the Form as so changed, revised or supplemented, clearly marked to show changes from the previously filed version, should be filed and cleared with the administrator of this state before use. If any of the changes or revisions are of such significance that they are material to the making of an investment decision by an investor, and if the minimum proceeds have not been raised, after filing with and clearance by the administrator, the Disclosure Document on this Form as so changed, revised or supplemented should be recirculated to persons in this state that have previously subscribed, and they should be given the opportunity to rescind or reconfirm their investment.
I. Options, warrants and similar rights to purchase securities constitute a continuous offering of the underlying securities during the exercise period and require the securities to be registered and the Disclosure Document to be kept continuously current throughout the exercise period through the use of the above amendment procedure or by means of a supplement, as appropriate. Upon any change, revision or supplement to the Disclosure Document, a copy must be promptly furnished to the holders of options, warrants and similar rights.
J. Any and all supplemental selling literature or advertisements announcing the offering should be filed by the Company and cleared with the securities administrator of each state prior to publication or circulation within that state. An announcement should not be a sales motivation device and should normally contain no more than the following: (1) the name of the Company, (2) characterization of the Company as indicated on the Cover Page of the Disclosure Document, (3) address and telephone number of the Company, (4) a brief indication in ten words or less of the Company's business or proposed business, (5) the number and type of securities offered and the offering price per security, (6) the name, address and telephone number of any selling agent authorized to sell the securities, (7) a statement that the announcement does not constitute an offer to sell or solicitation of an offer to purchase and that any such offer must be made by official Disclosure Document, (8) how a copy of the Disclosure Document may be obtained, and (9) the Company's corporate logo. Clip and return coupons requesting a copy of the Disclosure Document are permitted in printed announcements. (For example, an announcement in "tombstone" format with a black-lined border and using the following language would ordinarily be acceptable: "50,000 shares, common stock; $5 per share; (Logo) XYZ Corporation, a development stage database computer software company now conducting operations; Midtown, Ohio; Selling agent: ABC Securities, 1234 Main Street, Midtown, Ohio, (321) 123-4567; This announcement does not constitute an offer to sell or the solicitation of an offer to buy the securities, which offer may be made only by means of an official Disclosure Document; A copy of the Disclosure Document may be obtained by contacting the selling agent at the above address and telephone number." Similarly, a classified advertisement using the following language would ordinarily be acceptable: "Common stock of XYZ Corporation, a development stage database computer software company now conducting operations, Midtown, Ohio. Price $5 per share. Total offering 50,000 shares. This announcement does not constitute an offer to sell or the solicitation of an offer to buy the securities, which offer may be made only by means of an official Disclosure Document. A copy of the Disclosure Document may be obtained by contacting the Company, Industrial Park, Suite 12B, 456 Mill Road, Midtown, Ohio, (321) 321-4321.")
The issuance of any but routine press releases or the granting of interviews to news media during, or at about the same time of, an offering could constitute indirect advertising, which if not precleared with the securities administrator would be prohibited. Any unusual news article or news program featuring the Company during this period, particularly if present or future earnings, or the pending offering, are mentioned, could delay or cause suspension of the effectiveness of the registration and disrupt the offering. Consequently any such news article or news program, no matter by whom it may be initiated, should generally be discouraged during this period.