Senate Bill No. 155–Senator Tiffany

 

February 18, 2003

____________

 

Referred to Committee on Judiciary

 

SUMMARY—Makes various changes to provisions governing registration of securities by development stage company. (BDR 7‑845)

 

FISCAL NOTE:    Effect on Local Government: No.

                             Effect on the State: No.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to securities; making various changes to the provisions governing the registration of securities by a development stage company; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1  Section 1. Chapter 90 of NRS is hereby amended by adding

1-2  thereto a new section to read as follows:

1-3  In the case of a registration under NRS 90.480 or 90.490 by an

1-4  issuer who has no public market for its shares and no significant

1-5  earnings from continuing operations during the last 5 years or any

1-6  shorter period of its existence:

1-7  1.  The registration statement required by NRS 90.480 or the

1-8  offering document required by subsection 11 of NRS 90.500 must

1-9  set forth with reasonable specificity:

1-10      (a) The intended use of the proceeds of the offering;

1-11      (b) The type of business in which the issuer is or will be

1-12  engaged;

1-13      (c) The product or service offered or to be offered by the

1-14  issuer; and

1-15      (d) The name of each principal manager of the business of the

1-16  issuer.

2-1  2.  If the information required by subsection 1 is not set forth

2-2  with the specificity required by that subsection, the Administrator

2-3  may deem the offering to be a blank check blind pool and may

2-4  deny, suspend or revoke the effectiveness of the registration

2-5  statement provided the registration statement of the blank check

2-6  company has not received a Notice of Effectiveness from the

2-7  United States Securities and Exchange Commission on Form

2-8  SB-2, pursuant to Rule 419, otherwise the registration statement is

2-9  subject to NRS 90.510 unless:

2-10      (a) The net offering proceeds to the issuer, after deducting

2-11  offering expenses and commissions, are not less than $25,000;

2-12      (b) The issuer has equity, contributed in cash, of not less than

2-13  5 percent of the aggregate offering price;

2-14      (c) Disclosure is made of any previous involvement of any

2-15  officer or director of the issuer in any similar offering, including:

2-16          (1) The nature of any transaction entered into by the issuer

2-17  in connection with that offering;

2-18          (2) The dilution experienced by public shareholders as a

2-19  result of that transaction; and

2-20          (3) The extent to which the criteria for selection set forth in

2-21  the original prospectus was followed in effecting the transaction;

2-22      (d) The issuer undertakes in the prospectus to obtain the

2-23  approval of a majority of disinterested shareholders if he proposes

2-24  to:

2-25          (1) Spend more than 50 percent of the net offering proceeds

2-26  in a transaction or series of related transactions;

2-27          (2) Issue new shares of stock equivalent, after completion

2-28  of the transaction or series of related transactions, to more than 50

2-29  percent of the issued and outstanding stock;

2-30          (3) Change, without a meeting of the shareholders and

2-31  within any 12-month period, more than one-half the members of

2-32  the board of directors; or

2-33          (4) Change the criteria for acquisitions set forth in the

2-34  prospectus; and

2-35      (e) The issuer undertakes in the prospectus to distribute an

2-36  informational statement, before any vote of the shareholders

2-37  conducted pursuant to paragraph (d), setting forth:

2-38          (1) All material facts regarding the proposal, including

2-39  specific disclosure of the manner in which the criteria for

2-40  selection set forth in the offering prospectus has been applied;

2-41          (2) A reasonably detailed description of any business or

2-42  asset to be acquired in the proposed transaction;

2-43          (3) A detailed disclosure of any related‑party transaction,

2-44  finders’ fee, consulting fee or agreement expected to be entered

2-45  into or paid within the 12 months following the proposed

3-1  transaction with or to any person who is an officer, director,

3-2  promoter or principal shareholder of the issuer; and

3-3       (4) A pro forma balance sheet, prepared in accordance with

3-4  generally accepted accounting principles, which gives effect to the

3-5  proposed transaction and discloses the dilution to shareholders

3-6  resulting from the transaction and the book value of the issuer

3-7  immediately before and immediately after the transaction.

3-8  3.  A registration statement of a blank check company that

3-9  has received a Notice of Effectiveness from the United States

3-10  Securities and Exchange Commission, as filed on Form SB-2

3-11  pursuant to Rule 419, is deemed to be effective immediately upon

3-12  registration by coordination with the Administrator pursuant to

3-13  NRS 90.480.

3-14      4.  Except as otherwise provided in this subsection, the

3-15  amount of dilution in an offering may not exceed 50 percent of the

3-16  aggregate offering price. There is no restriction on the amount of

3-17  dilution in an offering on registration statements which received a

3-18  Notice of Effectiveness from the United States Securities and

3-19  Exchange Commission. For any violation of this subsection, the

3-20  Administrator may deem the offering to be one which will be made

3-21  with unreasonable amounts of promoters’ profits or participation

3-22  and issue an order denying effectiveness to, or suspending or

3-23  revoking the effectiveness of, the registration statement filed in

3-24  connection with the offering.

3-25      Sec. 2.  NRS 90.500 is hereby amended to read as follows:

3-26      90.500  1.  A registration statement may be filed by the issuer,

3-27  any other person on whose behalf the offering is to be made, or a

3-28  broker-dealer licensed under this chapter.

3-29      2.  Except as provided in subsection 3, a person filing a

3-30  registration statement shall pay a filing fee of one-tenth of 1 percent

3-31  of the maximum aggregate offering price at which the registered

3-32  securities are to be offered in this state, but not less than $350 or

3-33  more than $2,500. If a registration statement is withdrawn before the

3-34  effective date or a pre-effective order is entered under NRS 90.510,

3-35  the Administrator shall retain the fee.

3-36      3.  An open-end management company, a face amount

3-37  certificate company or a unit investment trust, as defined in the

3-38  Investment Company Act of 1940, may register an indefinite

3-39  amount of securities under a registration statement. The registrant

3-40  shall pay:

3-41      (a) A fee of $500 at the time of filing; and

3-42      (b) Within 60 days after the registrant’s fiscal year during which

3-43  its statement is effective, a fee of $2,000, or file a report on a form

3-44  the Administrator adopts, specifying its sale of securities to persons

3-45  in this state during the fiscal year and pay a fee of one-tenth of 1

4-1  percent of the aggregate sales price of the securities sold to persons

4-2  in this state, but the latter fee must not be less than $350 or more

4-3  than $2,500.

4-4  4.  Except as otherwise permitted by subsection 3, a statement

4-5  must specify:

4-6  (a) The amount of securities to be offered in this state and the

4-7  states in which a statement or similar document in connection with

4-8  the offering has been or is to be filed; and

4-9  (b) Any adverse order, judgment or decree entered by a

4-10  securities agency or administrator in any state or by a court or the

4-11  Securities and Exchange Commission in connection with the

4-12  offering.

4-13      5.  A document filed under this chapter as now or previously in

4-14  effect, within 5 years before the filing of a registration statement,

4-15  may be incorporated by reference in the registration statement if the

4-16  document is currently accurate.

4-17      6.  The Administrator by regulation or order may permit the

4-18  omission of an item of information or document from a statement.

4-19      7.  In the case of a nonissuer offering, the Administrator may

4-20  not require information under NRS 90.510 or subsection 13 [of this

4-21  section] unless it is known to the person filing the registration

4-22  statement or to the person on whose behalf the offering is to be

4-23  made, or can be furnished by one of them without unreasonable

4-24  effort or expense.

4-25      8.  In the case of a registration under NRS 90.480 or 90.490 by

4-26  an issuer who has no public market for its shares and no significant

4-27  earnings from continuing operations during the last 5 years or any

4-28  shorter period of its existence, the Administrator by regulation or

4-29  order may require as a condition of registration that the following

4-30  securities be deposited in escrow for not more than 3 years:

4-31      (a) A security issued to a promoter within the 3 years

4-32  immediately before the offering or to be issued to a promoter for a

4-33  consideration substantially less than the offering price; and

4-34      (b) A security issued to a promoter for a consideration other

4-35  than cash, unless the registrant demonstrates that the value of the

4-36  noncash consideration received in exchange for the security is

4-37  substantially equal to the offering price for the security.

4-38  The Administrator by regulation may determine the conditions of an

4-39  escrow required under this subsection, but the Administrator may

4-40  not reject a depository solely because of location in another state.

4-41      9.  The Administrator by regulation may require as a condition

4-42  of registration under NRS 90.480 or 90.490 that the proceeds from

4-43  the sale of the registered security in this state be impounded until the

4-44  issuer receives a specified amount from the sale of the security. The

4-45  Administrator by regulation or order may determine the conditions

5-1  of an impounding arrangement required under this subsection, but

5-2  the Administrator may not reject a depository solely because of its

5-3  location in another state.

5-4  10.  If a security is registered pursuant to NRS 90.470 or

5-5  90.480, the prospectus filed under the Securities Act of 1933 must

5-6  be delivered to each purchaser in accordance with the requirements

5-7  of that act for the delivery of a prospectus.

5-8  11.  If a security is registered pursuant to NRS 90.490, an

5-9  offering document containing the information set forth in section 1

5-10  of this act, if applicable, or that the Administrator by regulation or

5-11  order designates , must be delivered to each purchaser with or

5-12  before the earliest of:

5-13      (a) The first written offer made to the purchaser by or for the

5-14  account of the issuer or another person on whose behalf the offering

5-15  is being made or by an underwriter or broker-dealer who is offering

5-16  part of an unsold allotment or subscription taken by it as a

5-17  participant in the distribution;

5-18      (b) Confirmation of a sale made by or for the account of a

5-19  person named in paragraph (a);

5-20      (c) Payment pursuant to a sale; or

5-21      (d) Delivery pursuant to a sale.

5-22      12.  Except for a registration statement under which an

5-23  indefinite amount of securities are registered as provided in

5-24  subsection 3, a statement remains effective for 1 year after its

5-25  effective date unless the Administrator by regulation extends the

5-26  period of effectiveness. A registration statement under which an

5-27  indefinite amount of securities are registered remains effective until

5-28  60 days after the beginning of the registrant’s next fiscal year

5-29  following the date the statement was filed. All outstanding securities

5-30  of the same class as a registered security are considered to be

5-31  registered for the purpose of a nonissuer transaction while the

5-32  registration statement is effective, unless the Administrator by

5-33  regulation or order provides otherwise. A registration statement may

5-34  not be withdrawn after its effective date if any of the securities

5-35  registered have been sold in this state, unless the Administrator by

5-36  regulation or order provides otherwise. No registration statement is

5-37  effective while an order is in effect under subsection 1 of

5-38  NRS 90.510.

5-39      13.  During the period that an offering is being made pursuant

5-40  to an effective registration statement, the Administrator by

5-41  regulation or order may require the person who filed the registration

5-42  statement to file reports, not more often than quarterly, to keep

5-43  reasonably current the information contained in the registration

5-44  statement and to disclose the progress of the offering.

6-1  14.  A registration statement filed under NRS 90.470 or 90.480

6-2  may be amended after its effective date to increase the securities

6-3  specified to be offered and sold. The amendment becomes effective

6-4  upon filing of the amendment and payment of an additional filing

6-5  fee of 3 times the fee otherwise payable, calculated in the manner

6-6  specified in subsection 2, with respect to the additional securities to

6-7  be offered and sold. The effectiveness of the amendment relates

6-8  back to the date or dates of sale of the additional securities being

6-9  registered.

6-10      15.  A registration statement filed under NRS 90.490 may be

6-11  amended after its effective date to increase the securities specified to

6-12  be offered and sold, if the public offering price and underwriters’

6-13  discounts and commissions are not changed from the respective

6-14  amounts which the Administrator was informed. The amendment

6-15  becomes effective when the Administrator so orders and relates

6-16  back to the date of sale of the additional securities being registered.

6-17  A person filing an amendment shall pay an additional filing fee of 3

6-18  times the fee otherwise payable, calculated in the manner specified

6-19  in subsection 2, with respect to the additional securities to be offered

6-20  and sold.

6-21      Sec. 3.  The administrative regulations adopted by the

6-22  Administrator of the Securities Division of the Office of the

6-23  Secretary of State which are codified as NAC 90.480 and 90.485 are

6-24  hereby declared void. In preparing the supplements to the Nevada

6-25  Administrative Code on or after October 1, 2003, the Legislative

6-26  Counsel shall remove NAC 90.480 and 90.485.

 

6-27  H