Reg D/SCOR Offerings

Reg D (SCOR) Offerings
By William Cate
Published May 2000
[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]

I don't fund private companies! Without liquidity, professional
money isn't interested in your company. See my "Simple Secret" report for
a discussion of the need for liquidity.

Section 12 Para 504 Reg D of the 1934 Securities Act allows
entrepreneurs to raise up to one million U. S. Dollars from the public. You
don't need an audit. Your offering is exempt from a review by the U. S.
Securities and Exchange Commission (SEC). About 38 States, relying on this
provision, allow entrepreneurs access to investors under the SCOR (Small
Corporate Offering Registration). If you don't file with the SEC or your
State, you aren't protected from investor action, should anything go wrong
with your company. Since the odds of investment failure are over 95%, you
are inviting serious legal problems, if you don't do the simple Government
filing. Any book on "going public" will give more help on doing the proper
filing.

In January 1998, "Money" published an article on the success of
RegD/SCOR offerings. Then, the entrepreneur had one chance in four of
raising at least $200,000. This means that 75% of the entrepreneurs doing
REGD/SCOR offerings were wasting their time. Your odds of success are
probably worse today. Starting in June 1999, the National Association of
Securities Dealers (NASD) stopped the listing of RegD/SCOR offerings from
trading on the OTCBB. Without OTCBB liquidity, investor interest in
RegD/SCOR offers has declined.

Until 1984, there was strong interest among many American brokerage
firms to sell RegD/SCOR offerings. They were sold as Tax Shelters. The
1984 Tax Act ended the use of Tax Shelters. By 1987, most brokerage firms
were no longer interested in RegD/SCOR offerings. Today, I'm unaware of any
NASD member willing to sell a RegD/SCOR speculation to their clients.
Without a professional network to sell the RegD/SCOR package, the officers
and directors of the company are the only LEGAL sellers of these RegD/SCOR
packages.

I stress legal sellers, because there's no shortage of "Finders"
willing to hunt investors. The "Finders" should talk to their attorney.
They would learn that they can't act as a financial broker without being
licensed. Part of the license requirement is that you are a member of the
NASD. The reason that "Finders" rarely have a regulatory problem is they
rarely find a speculator to investor in a RegD/SCOR offering. Over the past
20 years, I've seen hundreds of "Finders" come and go. They try to raise
money for a year or two. They fail. They disappear. Someone else thinks
that they can make money as a "Finder." It's a procession that goes nowhere.

Raising risk capital is a dangerous business. If you don't do it
right, and something goes wrong, you may spend over one million dollars on
legal fees. If I were seeking money for a private company, I wouldn't waste
time and money on a RegD/SCOR offering.

My advice is create cashflow. Does your group have a limited
budget? Do a turnaround to have cashflow. Take your company public via a
spinoff. Strengthen your share price and use your strong share price to buy
cash-producing assets. In a few years, seek to sell your company at Market
Capitalization. It's the only formula that works well. It will work as long
as we have a Bull Stock Market. This Bull will pass. Start now or suffer
in the Bear Market that must follow. This is your golden opportunity for
success. If you don't grab your brass ring soon, you probably won't get
another chance in your lifetime.

To contact the author: Visit the Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website:
[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]