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TITLE 7BANKING AND SECURITIES
PART 7STATE SECURITIES BOARD
CHAPTER 113REGISTRATION OF SECURITIES
RULE §113.5Financial Statements

(a) Audited financial statements. Except as provided in subsection (b) of this section, all financial statements submitted to the Securities Commissioner pursuant to the Texas Securities Act, §7.A(1)(f) (including all financial statements of the issuer and any entity that is being taken over by an issuer which has not been operating) must be audited, and an opinion must be expressed by an independent certified public accountant or an independent public accountant. Such opinion shall be one acceptable to the Commissioner.

(b) Reviewed financial statements. Financial statements, prepared in accordance with generally accepted accounting principles, submitted by a small business issuer in connection with a small business offering may be reviewed by an independent certified public accountant in accordance with the standards for reviewed financial statements promulgated by the American Institute of Certified Public Accountants.

(c) Small business issuer. For purposes of subsection (b) of this section, the term "small business issuer" shall mean any corporation:

  (1) that has not previously sold securities by means of an offering involving public solicitation or advertising unless such offering was made in compliance with §139.16 of this title (relating to Sales to Individual Accredited Investors), §139.19 of this title (relating to Accredited Investor Exemption), §109.4 of this title (relating to Securities Registration Exemption for Sales to Financial Institutions and Certain Institutional Investors, or the Texas Securities Act, §5.H;

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

  (3) that is not an investment company (including any mutual fund);

  (4) that does not engage or propose to engage in petroleum exploration or production or other extractive industries;

  (5) that is not subject to the reporting requirements of the Securities Exchange Act of 1934, §13 or §15(d);

  (6) that has its principal place of business in Texas and employs at least 50% of its full-time employees in Texas; and

  (7) whose previous sales of securities (exclusive of debt financing with banks and similar commercial lenders) does not exceed $500,000.

(d) Parent corporations. If a corporation otherwise meeting the criteria specified in subsection (c) of this section is a majority-owned subsidiary of another corporation, the subsidiary shall not be considered a "small business issuer" for purposes of subsection (b) of this section unless its parent corporation also meets the criteria specified in subsection (c) of this section.

(e) Small business offering. For purposes of subsection (b) of this section, the term "small business offering" shall mean that the amount of the offering must not exceed $500,000.


Source Note: The provisions of this §113.5 adopted to be effective January 1, 1976; amended to be effective November 28, 1977, 2 TexReg 4414; amended to be effective September 22, 1995, 20 TexReg 7188; amended to be effective December 6, 1998, 23 TexReg 12293; amended to be effective January 8, 2006, 30 TexReg 8865

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