3c hapter - Index of

184 Locavesting
The intrastate offering exemption (also known as
Rule 147) makes an allowance for securities offerings
limited to the state in which the firm is incorporated
and does the bulk of its business. An unlimited
amount of captial can be raised from in-state residents
within a 12-month period.
Regulation A allows firms to raise up to $5 million in
a 12-month period. While documents including an
offering circular must be filed with the SEC, simplified
forms may be used.
Under certain circumstances, Regulation D, Rule 504,
more commonly associated with private placements,
can be used for public offerings of up to $1 million in
a 12-month period. 2
In all of the cases above, there are no restictions on the number
of non-accredited investors, public advertising, or secondary
trading of securities. Relevant state regulations apply, but for offerings
under $1 million, the Small Company Offering Registration
(SCOR), a simplifi ed form in question and answer format, may be
used in many states. And, if the issuing company has less than $10
million in assets and 500 or fewer shareholders, there is no ongoing
public reporting requirement. These direct offerings can be
structured as equity, convertible debt, or other forms of fi nancing,
such as revenue sharing. Often, DPOs are part of a coordinated
capital- raising process that might start with a private placement,
proceed to a DPO, and ultimately, an IPO.
DPOs aren’t for everybody. But they tend to be a good match
for companies with strong affi nity groups—such as loyal customers,
employees, or the community at large—that may be receptive
to the offering. Many early DPOs were conducted by catalog
retailers and community banks that had a built- in communication
channel with customers and potential investors. Today, a healthy
online community or Facebook presence fi ts the bill. It also helps
if the company has an easily understood business—beer versus
polymer science, for example. Companies with enthusiastic followings
don’t necessarily need, or want, an investment banker’s