This appeal is decided under the Small Business Act of 1958, 15 U.S.C. Section 631 et seq., and 13 C.F.R. Parts 121 and 134.
Whether a firm that is otherwise eligible for an SBIR award is disqualified because it is less than 51 percent owned by natural persons.
The National Institutes of Health (NIH), National Institute of General Medical Sciences, issued this small business set-aside solicitation on a Phase II proposal for the Small Business Innovation Research (SBIR) program. The title of the Phase II project is "Alpha-Conopeptides: Novel Rapid-Acting Muscle Relaxants." The applicable size standard for the SBIR program, including affiliates, is 500 employees. 13 C.F.R. Section 121.702(b).
On March 5, 2003, the NIH's Contracting Officer (CO) requested a formal size determination from the Small Business Administration's (SBA) Office of Government Contracting, Area VI (Area Office) in San Francisco, California, on Cognetix, Inc. (Appellant), the SBIR awardee. The CO's request stated that Appellant was awarded a grant, but in the course of obtaining additional financial information, the applicant provided statements that raised concern on their organization's eligibility for SBIR funds. 
On April 7, 2003, the Area Office issued its size determination. Based on the documents Appellant submitted, the Area Office made the following factual findings. First, it noted Appellant's size status would be determined as of the date of the SBIR award for Phase II. 13 C.F.R. Section 121.704. The Phase II SBIR award was made on April 1, 2003 - thus, Appellant's size would be determined as of that date. 
Second, the Area Office noted Appellant's two largest stockholders are MDS Capital and AIG Global Investments. The documents submitted revealed no entities control or have the power to control Appellant. Appellant's number of employees do not exceed 500 employees. 13 C.F.R. Section 121.702(b).
Third, Appellant provided the Area Office with a stock ownership chart showing its diverse group of investors and the holdings of each investor after outstanding stock options are given present effect. 13 C.F.R. Section 121.103(d) (the present effect rule). Shares of Appellant's voting stock are owned by natural persons, corporations, and non-corporate institutional investors, including venture capital funds and pension funds.