Is this a security?
This offer is not a security it is an offer to sell hydrogen gas made very cheaply from water and sunlight at a substantial discount when compared to hydrogen made from conventional sources such as hydrogen made from natural gas. This low cost gas once realized when sold at market rates is worth substantially more than the price it is offered at here. Users of hydrogen gas, users of natural gas are natural buyers for the product offered here and are natural buyers of carbon-free hydrogen at market rates. Half the gas we generate will be pre-sold here, the other half will be sold at market rates. We also have an option to repurchase hydrogen at today's rate and resell it at market rates to those buyers if prices rise substantially over the term of the contract.
While completing 15 years of R&D and while holding many patents, the company has not built or operated facilities on the scale and over the period described in this offer. The funds paid to secure low cost gas will be used to expand company operations to the scale described. Even so there is an execution risk in carrying out our plans since no one has done anything like this before. The substantial discounts offered on half the gas produced accounts for this risk to entice users of hydrogen gas into providing funds to develop this brand-new carbon-free source. The balance of hydrogen sales not encumbered by a forward contract are paid for at market rates as they are produced. The repurchase right is a means for us to participate in gas price rises if they should occur over the term of the contract while maintaining the benefits to our natural business buyers for helping develop this new source of hydrogen gas.
But isn't it really a security anyway?
Whenever something is offered at a substantial discount to account for execution risk of a new process or venture, there is a natural tendency to attract those who wish to speculate on the success of that process or venture to earn money by selling the thing offered at market rates once it is realised. This makes the contract, regardless of form, a security for those buyers. So, those seeking to speculate on this offer as an investment may make the offer for them a security as defined by the SEC despite our intent to sell hydrogen gas at a discount to users of hydrogen gas.
In that case, SEC rules MUST be complied with. This includes Federal law, and laws for their State. In that case, such buyers will have to comply with all the rules and limitations and will very likely not be able to resell or mortgage their contract in any way until production is underway, or not obtain any benefit until the hydrogen gas is repurchased by the gas unit operator.
In this case, to allow those speculators to engage in the speculative activity they wish, and you are a speculator if you do not use large quantities of hydrogen gas today, we will arrange the formation of a separate business entity to handle this transaction specifically for you so we may all comply with relevant laws in your case. This new business entity will have you as sole buyer of securities within that entity, and have us as managing partner, and we will register your stock in this entity as a Reg A exemption and any other exemptions or registrations that may apply to your specific case (described below).
This separate business entity then arranges to take funds from you as an exempt security or as a registered security. There is a separate management fee of $25,000 totally separate from any invested funds. This fee will not be returned and expended immediately to pay legal and managment fees. These funds are used to prepare file all the forms needed to comply with Regulation A exemption for the newly created entity and all other legal requirements associated with the proposed transaction. These funds are payable immediately along with funds for the number of units one wishes to buy. You can name this entity and it will be setup within one week of receipt of funds.
In this case, this advertisement is seen as 'testing the waters' for that entity under federal law.
Regulation A
Section 3(b) of the Securities Act authorizes the SEC to exempt from registration small securities offerings. By this authority, we created Regulation A, 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 tradeable 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.
All types of companies which do not report under the Exchange Act may use Regulation A, except "blank check" companies, those with an unspecified business, and investment companies registered or required to be registered under the Investment Company Act of 1940. In most cases, shareholders may use Regulation A to resell up to $1.5 million of securities.
If you "test the waters," you can use general solicitation and advertising prior to filing an offering statement with the SEC, giving you the advantage of determining whether there is enough market interest in your securities before you incur the full range of legal, accounting, and other costs associated with filing an offering statement. You may not, however, solicit or accept money until the SEC staff completes its review of the filed offering statement and you deliver prescribed offering materials to investors
Ohio Residents
Like other states, Ohio does not have an exemption that directly corresponds to the federal Regulation A exemptoin. As a result Regulation A offerings not otherwise exempted must be registered with the Divsion in Ohio.
Section 3(a)(11)/Rule 147
Section 1707.03(O) of the Act is the most commonly used exemption for small (ten or fewer purchasers) intra-state offerings exempt federally pursuant to section 3(a)(11) of the Securities Act of 1933 or Rule 147 promulgated thereunder. Intra-state offerings under Section 3(a)(11) or Rule 147 with more than ten purchasers generally must be registered with the Division.
That is, for those Ohio residents who wish to speculate in the future value of the hydrogen we produce, and for those who cannot demonstrate a present need or use for hydrogen gas, we must comply with all relevant laws. This means we will partner with you to create a separate legal entity to own and operate the gas producing units contracted for, for those who seek to purchase gas and intend to speculate that they will be successful and they will be able to sell that gas at a substantial profit within five years or less.
As mentioned previously, each situation is unique, and must be carefully reviewed by competent counsel. For this reason, we charge all such speculators a $25,000 fee to organize their specific transaction. This fee is added to the purchase price and paid by separate check.
Other States
Speculators from other States within the United States do not qualify as an intra-state transaction and may require registration of their transaction under the rules of their state and the State of Ohio.
Outside the United States
Speculators residing outside the United States must comply with all relevant laws within their country regarding securities. They will be sole investor in an Ohio company that will own and operate gas producing units in the State of Ohio. We will make sure all US law is complied with, and assist where possible to comply with all laws of their country of origin.