1998 Minnesota Statutes

     80A.115 Small corporate offering registration. 

    Subdivision 1.    Filing requirements.  A security 
 meeting the conditions set forth in this section may be 
 registered by filing a small corporate offering registration 
 form otherwise known as a form U-7 adopted by the North American 
 Securities Administrators Association as a uniform state 
 securities registration form. 

    Subd. 2.    Availability.  Registration under this 
 section is available only to the issuer of the securities and 
 not to an affiliate of that issuer or to any other person for 
 resale of the issuer's securities.  The issuer must be a 
 corporation organized under the laws of one of the states or 
 possessions of the United States.  Registration under this 
 section is not available to any of the following issuers: 

    (1) an issuer that engages in or proposes to engage in the 
 business of petroleum exploration or production or mining or 
 other extractive industries; 

    (2) an investment company, including a mutual fund; 

    (3) an issuer subject to the reporting requirements of 
 section 13 or 15(d) of the Securities Exchange Act of 1934; 

    (4) a direct participation program; 

    (5) a development stage company that either has no specific 
 business plan or purpose or has indicated that its business plan 
 is to engage in a merger or acquisition with an unidentified 
 company or companies or other entity or person; and 

    (6) an issuer seeking to register a debt offering unless 
 the commissioner finds that the issuer has demonstrated a 
 reasonable ability to service the debt. 

    Subd. 3.    Disqualification.  (a) An issuer is 
 disqualified from registration under this section if the issuer 
 or any of its officers, directors, ten-percent stockholders, 
 promoters, or any selling agents of the securities to be 
 offered, or any officer, director, or partner of the selling 
 agent: 

    (1) has filed a registration statement that is the subject 
 of a currently effective registration stop order entered under a 
 federal or state securities law within five years before the 
 filing of the small corporate offering registration application; 

    (2) has been convicted within five years before the filing 
 of the small corporate offering registration application of a 
 felony or misdemeanor in connection with the offer, purchase, or 
 sale of a security or a felony involving fraud or deceit, 
 including, but not limited to, forgery, embezzlement, obtaining 
 money under false pretenses, larceny, or conspiracy to defraud; 

    (3) is currently subject to a state administrative 
 enforcement order or judgment entered by a state securities 
 administrator or the securities and exchange commission within 
 five years before the filing of the small corporate offering 
 registration application, or is subject to a federal or state 
 administrative enforcement order or judgment in which fraud or 
 deceit, including, but not limited to, making untrue statements 
 of material facts or omitting to state material facts, was found 
 and the order or judgment was entered within five years before 
 the filing of the small corporate offering registration 
 application; 

    (4) is currently subject to an order, judgment, or decree 
 of a court of competent jurisdiction temporarily restraining or 
 enjoining, or is subject to an order, judgment, or decree of a 
 court of competent jurisdiction, permanently restraining or 
 enjoining the party from engaging in or continuing any conduct 
 or practice in connection with the purchase or sale of any 
 security or involving the making of a false filing with a state 
 or with the securities and exchange commission entered within 
 five years before the filing of the small corporate offering 
 registration application; or 

    (5) is subject to a state's administrative enforcement 
 order, or judgment that prohibits, denies, or revokes the use of 
 an exemption for registration in connection with this offer, 
 purchase, or sale of securities. 

    Clauses (1) to (4) do not apply if the person subject to 
 the disqualification is duly licensed or registered to conduct 
 securities-related business in the state in which the 
 administrative order or judgment was entered against the person 
 or if the dealer employing the party is licensed or registered 
 in this state and the form BD filed in this state discloses the 
 order, conviction, judgment, or decree relating to the person.  

    (b) No person disqualified under this subdivision may act 
 in any capacity other than that for which the person is licensed 
 or registered.  A disqualification under this subdivision is 
 automatically waived if the state securities administrator or 
 federal agency that created the basis for disqualification 
 determines upon a showing of good cause that it is not necessary 
 under the circumstances to deny the registration. 

    Subd. 4.    Conditions.  In order to register under this 
 section, all of the following conditions must be satisfied: 

    (1) the offering price for common stock and the exercise 
 price, if the securities offered are options, warrants, or 
 rights for common stock, and the conversion price if the 
 securities are convertible into common stock must be equal to or 
 greater than $5 per share; and 

    (2) the aggregate offering price of the securities offered, 
 within or outside this state, may not exceed $1,000,000 less the 
 aggregate offering price of all securities sold within the 12 
 months before the start of and during the offering of the 
 securities under securities and exchange commission Rule 504 in 
 reliance on an exemption under section 3(b) of the Securities 
 Act of 1933.  The issuer may not split its common stock, or 
 declare a stock dividend for two years after effectiveness of 
 the registration, except that in connection with a subsequent 
 public offering, the issuer may upon application and consent of 
 the commissioner take this action. 

    Subd. 5.    Contents of registration form.  The small 
 corporate offering registration form (form U-7) must comply with 
 and contain all exhibits required by the Instructions for Use of 
 Form U-7 as adopted by the North American Securities 
 Administrators Association.  The registration must include 
 financial statements prepared in accordance with generally 
 accepted accounting principles.  An issuer that has not 
 conducted significant operations shall provide statements of 
 receipts and disbursements in lieu of statements of income. 
 Interim financial statements may be unaudited.  All other 
 financial statements shall be audited by independent certified 
 public accountants.  Financial statements may be unaudited if 
 reviewed by independent certified public accountants in 
 accordance with the accounting and review service standards 
 promulgated by the American Institute of Certified Public 
 Accountants and: 

    (1) the issuer has not previously sold securities through 
 an offering involving the general solicitation of prospective 
 investors by means of advertising, mass mailings, public 
 meetings, cold call telephone solicitation, or any other method 
 directed toward the public; 

    (2) the issuer has not been previously required under 
 federal or state securities laws to provide audited financial 
 statements in connection with any sale of its securities; and 

    (3) the aggregate amount of all previous sales of 
 securities by the issuer, exclusive of debt financing with banks 
 and similar commercial lenders does not exceed $1,000,000. 

    Subd. 6.    Stop orders.  The commissioner may in the 
 commissioner's discretion issue a stop order for any of the 
 following additional reasons: 

    (1) the issuer's principal place of business is not in this 
 state or in North Dakota, South Dakota, Iowa, or Wisconsin; 

    (2) at least 50 percent of the issuer's full-time employees 
 are not located in this state or in North Dakota, South Dakota, 
 Iowa, or Wisconsin; or 

    (3) at least 80 percent of the net proceeds of the offering 
 are not going to be used in connection with the operations of 
 the issuer in this state or in North Dakota, South Dakota, Iowa, 
 or Wisconsin.  

    Subd. 7.    Suitability.  The commissioner may, in the 
 commissioner's discretion, require investors in a particular 
 offering to meet suitability standards relating to annual gross 
 income, net worth, or other factors to determine the suitability 
 of the investment for the investor. 

    Subd. 8.    Financial reporting requirements.  The 
 issuer shall deliver to investors on an annual basis financial 
 statements prepared in accordance with generally accepted 
 accounting principles. 

    Subd. 9.    Effective date.  A registration statement 
 under this section becomes effective when the commissioner so 
 orders. 

    HIST: 1997 c 197 s 1