Chapter 11 - EXHIBIT 11A • BLUE SKY MEMORANDUM
| Jurisdiction | Colorado |
TO: Need Money, Inc. (the "Company")
FROM: Do-We Law Firm, P.C.
DATE: ___,2016
SUBJECT: Compliance with state securities ("Blue Sky") laws for private placement
We are furnishing this Blue Sky Memorandum ("Memorandum") to the officers and directors of Need Money, Inc. (the "Company") to summarize certain information relating to the provisions of the securities or "blue sky" laws for the various states set forth below and with respect to the offer and sale of common shares in a private placement (the "Offering"), pursuant to Sections 4(a)(2) and 4(a)(5) of the Securities Act of 1933, as amended (the "1933 Act") and Rule 506(b) of the 1933 Act.
The Company is offering a maximum aggregate of 400 Units for sale in a private placement to accredited investors only pursuant to the plan of distribution as described in the confidential private placement memorandum dated ___, 2016 (the "PPM"). Each Unit consists of 10,000 shares of Common Stock of the Company and a warrant to purchase 10,000 shares of the Company's Common Stock at $2.50 per share for three years after the termination of the Offering. There is no placement agent or finder involved in the Offering.
We have based this Memorandum upon an examination of the federal securities laws and the blue sky statutes of each state and of the published rules and regulations, if any, of authorities administering such laws as reported by the Commerce Clearing House Blue Sky Law Reporter. You should note that we are only authorized to practice law in the state of ___. We have not sought opinions from local counsel in the other states included in this Memorandum.
The following discussion explains these conclusions, and the conclusions should be considered in conjunction with this discussion.
Regulation D, Rule 506(b) under the 1933 Act. Generally, § 5 of the 1933 Act requires the registration of securities before any offer or sale is made, unless the offer or sale is exempt from registration. The Company is claiming an exemption under:
• § 4(a)(2) of the 1933 Act, which provides an exemption for an issuer selling its securities in a transaction not involving a public offering; and
• Rule 506(b) of Regulation D promulgated thereunder, which provides a safe harbor under § 4(a)(2) and imposes additional conditions.
As we have discussed, an exemption from registration as provided in § 4(a)(2) and Rule 506 only exempts an issuer from the registration requirements of the 1933 Act, as amended. To comply with the information requirements of Rule 502(b) and to provide material disclosure to prospective investors, we have assisted you in drafting the PPM. You have reviewed the PPM and have concluded that it is accurate and complete in all material respects in its description of the Company, its business, management, prospects, and financial condition.
To meet the requirements of § 4(a)(2), the Company:
• Has not and will not offer or sell its securities through any form of general advertising or solicitation.1 This includes a prohibition against "cold calls," mass mailings, and other forms of general solicitation and includes actions by employees, officers, directors, members, and others acting on behalf of the Company. Generally, the fewer the number of offerees and the closer the pre-existing business or personal relationship between each offeree and the Company or an officer, director, or other member of the Company, the less likely it is that there will have occurred any form of general advertising or solicitation;
• Offers and sells to investors who either have enough knowledge and experience in finance and business matters to be "sophisticated investors" (able to evaluate the risks and merits of the investment), or be able to bear the investment's economic risk;
• Provides to the investor access to the type of information normally provided in a prospectus for a registered securities offering; and
• Requires that the investors agree not to resell or distribute the securities to the public.
To meet the requirements of Rule 506(b), the Company:
• Has not and will not offer or sell its securities through any form of general advertising or solicitation (same as above);
• Will limit the offering to "accredited investors" as that term is defined in Rule 501(a) and Rule 2(a)(15) of the 1933 Act;2
• Will provide to each purchaser certain financial and non-financial information as required by Rule 502 of the 1933 Act;
• Will file a Form D with the Securities and Exchange Commission as required by Rule 503;
• Has no "covered persons" who are subject to the "bad actor" disqualifying events under Rule 506(d).
° The following is a list of "covered persons":
■ The issuer and any predecessor of the issuer or affiliated issuer;
■ Any director, executive officer, or any officer that participates in the offering, or any general partner or managing member of the issuer;
■ Beneficial owners of 20% or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power;
■ Any investment manager to an issuer that is a pooled investment fund, and any director, executive officer, other officer participating in the offering, general partner or managing member of such investment manager; as well as any director, executive officer, or officer participating in the offering of any such general partner or managing member;
■ Any promoter connected with the issuer in any capacity at the time of the sale;
■ Any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with sales of securities in the offering; and
■ Any director, executive officer, or any officer that participates in the offering, or any general partner or managing member of any such compensated solicitor.
° The following is a list of "disqualifying events":
■ Criminal convictions (felony or misdemeanor), entered within the last five years in the case of issuers and 10 years in the case of other covered persons, in connection with the purchase or sale of any security; involving the making of a false filing with the SEC; or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, or paid solicitor of purchasers of securities;
■ Court injunctions and restraining orders, including any order, judgment or decree of any court of competent jurisdiction, entered within five years before such sale, that, at the time of such sale, restrains or enjoins such person from engaging or continuing to engage in any conduct or practice in connection with the purchase or sale of any security; involving the making of a false filing with the SEC; or arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser, or paid solicitor of purchasers of securities;
■ Final orders issued by state banking, credit union, and insurance regulators, federal banking regulators, and the National Credit Union Administration that either create a bar from association with any entity regulated by the regulator issuing the order, or from engaging in the business of securities, insurance, or banking or from savings association or credit union activities; or are based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct within the last 10 years;
■ Certain orders of the Commodity Futures Trading Commission and for SEC cease-and-desist orders arising out of scienter-based anti-fraud violations and violations of Section 5 of the 1933 Act;
■ SEC disciplinary orders entered pursuant to § 15(b) or 15(B)(c) of the Securities Exchange Act of 1934 or § 203(e) or (f) of the Investment Advisers Act of 1940 that, at time of the sale, suspend or revoke a person's registration as a broker, dealer, municipal securities dealer, or investment adviser; place limitations on the activities, functions, or operations of such person; or bar such person from being associated with any entity or from participating in the offering of any penny stock;
■ Suspension or expulsion from membership in, or suspension or a bar from association with a member of, a self-regulatory organization, i.e., a registered national securities exchange or a registered national or affiliated securities association;
■ Stop orders applicable to a registration statement and orders suspending the Regulation A exemption for an offering statement that an issuer filed or in which the person was named as an underwriter within the last five years and being the subject at the time of sale of a proceeding to determine whether such a stop or suspension order should be issued; and
■ U.S. Postal Service false representation orders including temporary or preliminary orders entered within the last five years.
Please let us know if any "covered person" has experienced a "disqualifying event." If not, we will file a Form D with the SEC no later than 15 days from the first date of sale in the Offering.
Rule 3a4-1. SEC Rule 3a4-l provides that persons associated with an issuer offering its own securities are not subject to the broker-dealer or sales agent registration requirements of the 1934 Act when the person associated with the issuer acting in such capacity (the "associated person"):
• Is not compensated in connection with his or her participation by the payment of any commission or other remuneration based either directly or indirectly on transactions in securities;...
• Is not at the time of his or her participation an associated person of a broker or a dealer;
• Is not subject to certain statutory disqualifications (relating to legal actions against such person, including being subject to an SEC or state administrative stop order, conviction in connection with the purchase or sale of securities or making a
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