I also provide the client with the alternatives to Reverse Merger, such as Regulation D Offering, Direct Public Offering and private placement.
One way to ensure that the reverse merger is going to work to acquire one hundred percent of the shares owned by the shell owner, but this is not guaranteed and may be missing.
Proper due diligence is a must, and you must be immune to smooth talking salesmen.
Alternative to a reverse merger is a direct public offering, DPO.
Direct Public Offerings are increasing in popularity since the shell prices are skyrocketing and companies are becoming aware of the problems associated with Reverse mergers.
And when a company tries to get preferred financing solutions to public investment by venture capitalists are right, the demand for venture capital firms are a large part of society and not passive investors.
Venture capital investors will be very involved with the company and will make demands that can be detrimental to the company's success, they may not give you enough time to put your business plan in place.
An IPO is probably out of the question because you are an underwriter that your company is the next Microsoft must convince, or you will have a difficult time always someone to do the IPO for you.
An IPO is more expensive and time consuming and will take the decision making out of your hands place it in the underwriters hands.
The DSB is targeted at affinity groups such as employees, suppliers, distributors and customers.
These groups usually are familiar with the company and are loyal to it.
Dell DPO are security issues that allow the securities market directly to the public registers.
The Internet can be use to market the securities but if your website doesn't have a lot of traffic nobody will know about your stock offering.
So, affinity groups remain as the best source of funding if you are a google and you are looking for investors.
As the large corporations continue to reduce their work force and are leaving a lot of talented people with the option of an unemployment check or starting their on business, we find that a lot of the job creation is being left to small businesses.
Small businesses need to find capital to expand or fill in the order, have created small companies more than 20 million jobs in the past 15 years, while large companies have been cutting the.
If this creative force had the capital they could propel the economy to unheard of levels.
DPO covered by registration \"SCOR \" small businesses and for companies under $ 25 million in revenue and a market capitalization (value of market share) of less than $ 25 million U.S. dollars.
By doing a Direct Public Offering you are raising capital that will not be costing you monthly interest payment, and is a permanent source of funding.
You do not have to give a large part of the company to investors, a venture capitalist will require a disproportionate share.
Private funding is always more expensive in terms of equity and control.
As a public company can better negotiate future financing requirements, and use the company for acquisitions.
In a DPO filing you only need 2 years of audited financial as compare to 3 years for other filings.
All this sounds simple, but in reality it is you need someone with experience to take the hand and lead you through the process.
You must make sure that you are ready for the commitment and are prepare to devote the required time to this endeavor.
Talk with your affinity group is about the possibility of investing in your company, there is a potential investor an idea.
Keep updated records of your customers and friends in the community who may be contacted later on.
It may be necessary for the purchase of a mailing list if you have a medical product company or laboratory, you should know some of the doctors in your community, but not all.
Stay in the planning mode and take necessary step while you are preparing for your DPO, such as having one year of financials audited and having a business plan prepared and printed, so that you don't have to incur all the expenses at once.
Give us a call so we can begin to plan together, the more you should prepare yourself to run less later, all done to everyone yesterday, but the process takes time.
Regulation D Offerings: This rule provides an exemption from the registration requirements of section 5 of the Securities Act of 1933.
These transactions are not from civil liability for fraud or other provisions of U.S. securities laws.
(See my article on Regulation D (504) offering.
Nothing in these rules, eliminating the need to comply with the applicable national law on the offer and sale of securities.
Rule 506: Provides an exemption for limited offers and sales without regard to the dollar amount of the offering.
This offer does not apply, the number of accredited investors, but investors are limited to 35 nonaccredited.
for a description of accredited and nonaccredited investors see my article on Regulation D (504) offering.
Rule 505: Do not call more than $ 5,000.
000.
00 sold less than the total dollar amount of securities in the preceding period of 12 months is usually 504 or 505.
This exemption limits the number of nonaccredited investors to 35 but has no investor sophistication standards.
Rule 504: provides enables businesses to up to $ 1 million.
00 in a twelve month period, under Rule 504, Rule 505 or section 3 of the act a business can raise only $500,000.
00 from the sale of securities to persons residing in the states of Montana and Alaska that have no disclosure law.
In states that have disclosure laws companies can raise up to $1,000,000,.
Rule 504 has no prescribed disclosure requirements, no limit on the number of purchasers.
With under Article 504 are relatively easy to produce, reducing the costs and delays and does not require an underwriter.
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