Assume your firm has been retained by Kinko Enterprises, Inc. to assist it in raising $5 to $8 million for oil exploration efforts at a yet-to-be-determined location in the United States through a public offering of Kinko common stock that will be made in California and Texas and traded on the OTC Bulletin Board. The senior partner has just learned that four months ago senior officers purchased Kinko common shares at $10 per share and that the broker-dealer that will assist Kinko in the offering has an option to acquire 10,000 common shares at $10 per share. Kinko proposes to offer the Kinko common shares to the public at around $14 per share.

What are the problems likely to be encountered in blue skying the Kinko offering?

Kinko is following "qualification" procedure under Registration Under State Blue Sky Laws. Qualification procedure applies to small companies that make public offerings of "non-covered securities," e.g., traded OTC, not on a major exchange. Registered in each state where marketed.