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 Capital Raising Alternative:
Consider State Registration of Securities
The Nevada IPO Alternative for SMEs
Have you ever wished there was a legal way to offer and sell shares of your
company to friends, family, and business associates - shares that are immediately
free trading? Good news: There is such an option for small business for companies operating in Nevada. Through a Nevada State Registered Offering,
you can raise up to $1 million. Also, the shares sold in this offering are unrestricted and can generally be sold to any Nevada resident (subject
to the approval of the Commissioner), and with no minimum investment. |
| Consider a Nevada State Registered Offering |
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Raise up to $1,000,000 |
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Sell to your family and friends |
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Shares become free trading (not restricted) |
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| Why Should I Consider a Nevada State Registered Offering? |
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Raising capital through a direct public offering is a great way for a company to finance the launch of a new business or product line or take the
company public. The benefit of this type of public offering is that it allows your company to approach prospective investors (including customers) through cold calling, newspaper advertisement, direct mail, radio, or seminars. Although most states allow state registered offerings, many of these states impose restrictions that make it impractical for small businesses to pursue. Nevada, however, provides a straightforward process known as "registration by qualification" that is very business-friendly. |
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| Some of the important characteristics of a registration by qualification offering: |
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You can sell securities to an unlimited number of both accredited and unaccredited investors. |
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You can use general solicitation or advertising to market the securities. |
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These securities (normally common stock), once they have come to rest in an investor's hands, are considered to be "free trading," which allows the company to apply for a quotation on a venue such as the Over the Counter Bulletin Board (OTCBB). |
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Once the company is listed and fully reporting, the securities purchased in the state registered offering may be sold in the open market without registration or other sales limits typically imposed on privately placed securities. |
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| How Does the Process Work? |
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Following are the basic steps involved in a Nevada registration by qualification, but it's best to enlist the help of qualified consultants or advisors to help walk you through the process. |
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1. Form a Nevada corporation. Offerings are subject not only to the laws in the state in which the offering is made, but also the state in which the organization is incorporated. So while firms incorporated in other states can also make a Nevada State Registered Offering, being a Nevada corporation makes the process cost-effective and business friendly because of its securities regulations and corporate law, since most states do not permit the two proposed advantages for state registered offerings: allowing general advertising and solic-itation and making all shares sold free trading. In fact, Nevada is one of the few states that meet the requirements to allow all companies to take advantage of these benefits without imposing other restrictions that make the placement impractical. PublicCompanyManagement.com |
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2. Prepare prospectus and audit. The prospectus is a full overview of the
company, its business model, competitors, management, history, and risks, along with a summary of the offering and the capitalization of the company following issuing of shares. Audited financial statements, along with a legal opinion, must also be submitted to the state. During its review process, the state will often provide comment letters, which ask questions or point out elements of the prospectus that need to be clarified or explained in more detail. |
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3. Conduct the offering. After the offering circular is cleared by the state, the
company may then go out to the general public and make its securities offering. Each company has a minimum and a maximum offering amounts. All funds are held in escrow until the minimum is reached; if the minimum is not reached, funds are returned to investors. Once the maximum is reached, there can be no additional security sales until the company has cleared for trading or for six months from the date of the close of the offering. Development-stage companies may be subject to additional restrictions. While there are restrictions on how the offering can be advertised, generally speaking any Nevada
resident can purchase shares. However, only an officer or director of thecompany, a Series 63 licensed agent of the issuer, or a NASD licensed broker/dealer can represent your offering. Licensed agents and broker/dealers may charge a commission, up to 10%; offcers and directors of the company may not receive a commission. |
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4. Complete paperwork. Once the offering is closed and funds are released to
the issuer, the issuer must promptly sign all executed subscription agreements and return a copy to the investor. A stock certificate, with a CUSIP number,
must also be provided. Be sure to find a reputable stock transfer agent with experience working with small, publicly traded companies. Nevada has some excellent transfer agents that are knowledgeable and experienced in this arena. Typically, some additional forms and paperwork must also be completed and filed. |
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5. Become a listed company. Upon completion of the offering and once the company has accepted the subscription agreements, you will want to
become a fully reporting company with the SEC under rule 504 and find a market maker to sponsor the company to trade on the OTCBB. Once your company has a ticker symbol and is quoted (and perhaps even trading) on this venue, your shareholders will have a market for the shares they purchased in the state registered direct public offering. Remember, once you are a fully reporting company, you are subject to all of the SEC filing requirements, including but not limited to: Annual report (Form 10-K) and audit by independent accounting firm; quarterly reports (Form 10-Q) and accounting reviews; disclosure of material events (Form 8-K); and section 16 filings for officers and directors disclosing stock ownership in the company (Forms 3, 4, 13D, 13G). Also you will need approximately 35 independent investors to satisfy the NASD's concentration test and we cannot predict the review time at the NASD, nor can you be assured that there will be sufficient liquidity for an active trading market. Furthermore there are significant regulatory requirements involved in becoming a public company. |
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The Nevada State Registered Offering fills the difficult gap in capital raising between a "friends and family" private offering and a lengthy and costly full national-level IPO. In fact, it is an attractive stepping stone to help small businesses get to
the national public capital markets, as it allows you to work through the issues on a smaller scale first and can provide the capital needed for the rest of the process. |
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Stephen Brock is president of Public Company Management Corporation (OTCBB:PUBC). PUBC's subsidiary, Pubco White Papers, Inc. (www.PubcoWhitePapers.com), offers numerous educational reports on securities and related topics. Receive a free copy of Pubco's white paper, "The Nevada IPO Alternative for SMEs" - a$129.99 value) - by visiting http://www.PubcoWhitePapers.com/NBJ. 702.222.9076 |
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| Stephen Brock (sbrock@publiccompanymanagement.com) is President of Public Company Management Corporation (PCMC). PCMC’s subsidiary, Pubco WhitePapers, Inc. (www.pubcowhitepapers.com), offers numerous educational reports on this and related topics. Receive a free copy of the white paper, “The Affordable IPO Alternative,” which retails for $129.99, by visiting http://www.pubcowhitepapers.com/nbj. 702.222.9076 |
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