(a) Purpose.

1. (1) The purpose of the Seed Capital Investment Program (SCIP) is to foster the formation and development of innovative, technology-based enterprises that will:

   1. (A) Stimulate the economy of Arkansas by creating high-wage employment;
   2. (B) Leverage private investment;
   3. (C) Increase tax revenues; and
   4. (D) Advance the benefits and opportunities realized through advanced science and technology.
2. (2) SCIP funds may be used by the Arkansas Economic Development Commission to purchase qualified securities issued by Arkansas-based enterprises seeking initial capitalization of scientific and technological projects.

3. (3) SCIP investments shall be in the form of the following qualified securities including without limitation:

   1. (A) Debt financing;
   2. (B) Equity financing;
   3. (C) Royalty participation;
   4. (D) Stock appreciation; or
   5. (E) A combination of such financing arrangements.

(b) Eligibility requirements. Enterprise eligibility requirements include the following:

1. (1) The enterprise’s principal place of business is in Arkansas;

2. (2) The project of the enterprise shall:

   1. (A) Be scientific or technological, or both, in nature; and
   2. (B) Promote the purpose of the commission by providing scientific and technological benefits to Arkansas;
3. (3) The enterprise shall complete the application submittal process delineated in subsection (c) of this section; and
4. (4) Not more than five hundred thousand dollars ($500,000) shall be invested by the commission in the qualified securities of any one (1) enterprise.

(c) Application submittal process.

1. (1) Applicants for SCIP funds shall submit one (1) completed signed application, using forms provided by the commission, and may be subject to:

   1. (A) An interview;
   2. (B) A site visit; or
   3. (C) Both.

2. (2) Applications shall include:

   1. (A) The legal name, address, North American Industry Classification System classification, and business filing status of the enterprise;
   2. (B) The names and contact information of professional staff affiliated with the enterprise;
   3. (C) A list of key officers, owners, and personnel, including senior technical staff (attach resumes);
   4. (D) Source or sources, amount or amounts, and anticipated use or uses of commission and non-commission funds;
   5. (E) A brief description of the business enterprise;
   6. (F) A brief description of the project, including the technology involved, for which funds are requested;
   7. (G) An explanation of the enterprise’s stage of development in relation to the project;
   8. (H) A statement of anticipated economic impact including the number, location, occupational classification, and compensation of jobs to be created;
   9. (I) A business plan, including a description of the enterprise and its:

(i) Background;

1. (ii) Management;

   1. (iii) Product or products; and

      1. (iv) Market or markets; and

   2. (J) Other information as requested by the commission.

      1. (d) Application review and approval process. No financial commitment or approval shall be made by the Executive Director of the Arkansas Economic Development Commission to an applicant until the applicant has completed the following review and approval process:

2. (1)

   1. (A) All applications will be evaluated by Division of Science and Technology of the Arkansas Economic Development Commission staff for completeness and for the potential to effectuate the formation and development of innovative, science- or technology-based enterprises that will stimulate the economy of Arkansas through increased high-wage employment and leveraging of private investment.

   2. (B) Review criteria include, without limitation:

      1. (i) The application is signed and complete in accordance with subsection (c) of this section;
      2. (ii) Investment proceeds will be used to cover the initial capitalization needs of the enterprise;
      3. (iii) Evidence has been provided showing that the enterprise has a reasonable chance of success;
      4. (iv) The enterprise shall be able to demonstrate that it has been unable to secure sufficient capital from traditional sources on terms that would enhance the success of the enterprise;
      5. (v) The enterprise has the reasonable potential to create a substantial amount of primary employment within the state;
      6. (vi) The entrepreneur and other founders of the enterprise have already made or are contractually committed to make substantial financial and time commitments to the enterprise;
      7. (vii) The securities offered by the enterprise to the commission for purchase are qualified securities;
      8. (viii) There shall be evidence showing a reasonable possibility that the commission will recoup at least its initial investment;
      9. (ix)

(b) (b) Commitments shall include a requirement for an annual or other periodic audit of the books of the enterprise, and for such control on the part of the commission as the executive director shall consider prudent over the management of the enterprise, including, at the discretion of the executive director and without limitation, the right of access to financial and other records of the enterprise; and

1. (x) Other criteria as determined by the executive director;
2. (2) Applicants may be subject to an interview, a site visit, or both, during the application review process;
3. (3) Division staff shall prepare a project summary of each project reviewed in accordance with criteria listed in subdivision (d)(1) of this section;
4. (4) Optional step. The executive director may request an independent review of the application, including the technology employed by the applicant, by an external expert or external experts in accordance with 15 CAR § 147-301;

5. (5) Optional step.

   1. (A) The executive director may request division staff to submit project summaries to the Commercialization Committee of the Board of Directors of the Division of Science and Technology of the Arkansas Economic Development Commission (Commercialization Committee) for review.

   2. (B) If so requested:

      1. (i) The Commercialization Committee will review projects in accordance with program rules;
      2. (ii) Applicants may be invited to present their projects before the Commercialization Committee;
      3. (iii) The Commercialization Committee may ask applicants for additional information before recommending projects for funding;
      4. (iv) Projects receiving Commercialization Committee support will be forwarded to the Board of Directors of the Division of Science and Technology of the Arkansas Economic Development Commission for review; and
      5. (v) The board will vote, by simple majority, to determine whether or not to recommend project funding;
6. (6) Division staff will prepare a resolution for funding for each project recommended for funding and distribute for signatures;
7. (7) For projects recommended by the Commercialization Committee, the secretary of the board will sign the resolution for funding and forward to the executive director;

8. (8)

   1. (A) The executive director, or his or her designee, after reviewing all recommendations, will sign resolutions for funding for approved projects.
   2. (B) Unsuccessful applicants will be notified in writing by division staff.
   3. (C) Approved applicants will be required to execute a written investment agreement outlining the amount, terms, and conditions of the qualified security purchase prior to receiving funds; and
9. (9) Funds shall be disbursed to enterprises in accordance with terms and conditions of the investment agreement.