Private Placements

Corporate Financial Services

Your company may not choose to go public for its own reasons but may still require new capital to finance it's business plan. This can come in the form of senior and subordinated debt, preferred and common equity, lease and mortgage financing Amerigo Corporate Finance Partners, LLC can assist you with the arrangement of a Private Placement by providing you with the documentation and legal work along with referrals to the capital markets. With respect to private placements, it is important to stay within the guidelines of the SEC with regards to certain exemptions.

Section 4(2) of the Securities Act exempts from registration "transactions by an issuer not involving any public offering." To qualify for this exemption, the purchasers of the securities must:

have enough knowledge and experience in finance and business matters to evaluate the risks and merits of the investment (the "sophisticated investor"), or be able to bear the investment's economic risk;
have access to the type of information normally provided in a prospectus; and
agree not to resell or distribute the securities to the public.

In addition, you may not use any form of public solicitation or general advertising in connection with the offering.

Regulation A

Section 3(b) of the Securities Act authorizes the SEC to exempt from registration small securities offerings. By this authority, Regulation A was created to provide an exemption for public offerings not exceeding $5 million in any 12-month period. If you choose to rely on this exemption, your company must file an offering statement, consisting of a notification, offering circular, and exhibits, with the SEC for review.

Regulation A offerings share many characteristics with registered offerings. For example, you must provide purchasers with an offering circular that is similar in content to a prospectus. Like registered offerings, the securities can be offered publicly and are not "restricted," meaning they are freely tradable in the secondary market after the offering. The principal advantages of Regulation A offerings, as opposed to full registration, are:

The financial statements are simpler and don't need to be audited;
There are no Exchange Act reporting obligations after the offering unless the company has more than $10 million in total assets and more than 500 shareholders;
Companies may choose among three formats to prepare the offering circular, one of which is a simplified question-and-answer document; and
You may "test the waters" to determine if there is adequate interest in your securities before going through the expense of filing with the SEC.

Regulation D

Regulation D establishes three exemptions from Securities Act registration. Let's address each one separately.

Rule 504

Rule 504 provides an exemption for the offer and sale of up to $1,000,000 of securities in a 12-month period. Your company may use this exemption so long as it is not a blank check company and is not subject to Exchange Act reporting requirements. Like the other Regulation D exemptions, in general you may not use public solicitation or advertising to market the securities and purchasers receive "restricted" securities, meaning that they may not sell the securities without registration or an applicable exemption. However, you can use this exemption for a public offering of your securities and investors will receive freely tradable securities under the following circumstances:

You register the offering exclusively in one or more states that require a publicly filed registration statement and delivery of a substantive disclosure document to investors;
You register and sell in a state that requires registration and disclosure delivery and also sell in a state without those requirements, so long as you deliver the disclosure documents mandated by the state in which you registered to all purchasers; or,
You sell exclusively according to state law exemptions that permit general solicitation and advertising, so long as you sell only to "accredited investors," a term we describe in more detail below in connection with Rule 505 and Rule 506 offerings.

Even if you make a private sale where there are no specific disclosure delivery requirements, you should take care to provide sufficient information to investors to avoid violating the antifraud provisions of the securities laws. This means that any information you provide to investors must be free from false or misleading statements. Similarly, you should not exclude any information if the omission makes what you do provide investors false or misleading.

Rule 505

Rule 505 provides an exemption for offers and sales of securities totaling up to $5 million in any 12-month period. Under this exemption, you may sell to an unlimited number of "accredited investors" and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions. Purchasers must buy for investment only, and not for resale. The issued securities are "restricted." Consequently, you must inform investors that they may not sell for at least a year without registering the transaction. You may not use general solicitation or advertising to sell the securities.

It is up to you to decide what information you give to accredited investors, so long as it does not violate the antifraud prohibitions. Nevertheless, you must give non-accredited investors disclosure documents that generally are the same as those used in registered offerings. If you provide information to accredited investors, you must make this information available to the non-accredited investors as well. You must also be available to answer questions by prospective purchasers.

Rule 506

Rule 506 is a "safe harbor" for the private offering exemption. If your company satisfies the following standards, you can be assured that you are within the Section 4(2) exemption:

You can raise an unlimited amount of capital;
You cannot use general solicitation or advertising to market the securities;
You can sell securities to an unlimited number of accredited investors (the same group we identified in the Rule 505 discussion) and up to 35 other purchasers. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticated - that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;
It is up to you to decide what information you give to accredited investors, so long as it does not violate the antifraud prohibitions. But you must give non-accredited investors disclosure documents that generally are the same as those accredited investors, you must make this information available to the non-accredited investors as well;
You must be available to answer questions by prospective purchasers;
Financial statement requirements are the same as for Rule 505; and
Purchasers receive "restricted" securities. Consequently, purchasers may not freely trade the securities in the secondary market after the offering.

Amerigo will assist you in developing your private placement plan that is within the "safe harbor" laws of the SEC Act and will be ready for you to approach your investors. For senior and subordinated debt, preferred stock, lease or mortgage financing, Amerigo will bring partners to the table to structure your private placement deal.

BUSINESS PLANS OR EXECUTIVE SUMMARIES

We are always looking for new investment prospects. If you feel you have an opportunity that would fit with Amerigo´s approach and strategy, please submit a business plan or executive summary to the above address or electronically to: mkudela@AmerigoPartners.com

AMERIGO CORPORATE FINANCE PARTNERS, LLC
"Sailing on New World Corporate Strategies."

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