A private placement, however, is EXEMPT from federal registration. Exemptions have always been available under the Securities Act of 1933 (the Act), but the original exemption provisions (contained in sections
3(b) and 4(2) of the Act) were vague and,
therefore, risky for business owners to invoke.

In 1982, the SEC adopted Regulation D, which set forth
objectives and quantifiable rules for exemptions from federal
registration. Offerings exempt under these rules 504,505 and
506 have become the most common cost and time saving
methods for small and growing businesses to raise capital from
private investors.

Rule 506 : Provides an exemption for limited offers and sales without regard to the dollar amount of the offering. This exemption does not limit the number of accredited investors, but the number of nonaccredited investors may not exceed 35 investors. (An accredited investor is any one investor with a certain net worth and or experience in the purchase of stocks.) All nonaccredited purchasers, either alone or together with a designated representative must be sophisticated enough (i.e., have the knowledge and experience necessary) to evaluate the merits and risks of the investment. (An offering company typically determines the sophistication of its investors with a questionnaire subscription agreement.) Rule 506 requires detailed disclosure of relevant information to potential investors; the extent of disclosure depends on the dollar size of the offering.

Rule 505 : Offerings may not exceed $5 million, less the total dollar amount of securities sold during the preceding 12 month period under Rule 504, Rule 505 or Section 3 of the act. This exemption limits the number of nonaccredited investors to 35 but has no investor sophistication standards. Rule 505 requires disclosure similar to that required for Rule 506 offerings, under $7.5 million.

Rule 504 : Offerings allow a business to raise a maximum of $1 million, less the total dollar amount of securities sold during the preceding 12 month period, under Rule 504, Rule 505 or Section 3 of the act. However, a business can raise only $500,000 by the sale of securities to persons residing in the states of Montana and Alaska, which have no disclosure laws applicable to the offering. For the states that do have disclosure laws, which are 48 out of the 50 states, a business can raise up to $1,000,000. Rule 504 has no prescribed disclosure requirements, no limit on the number of purchasers, and no investor sophistication standards.

Rule 504 is the most commonly used Regulation D exemption. Offerings that are exempt under Rule 504 are relatively simple to prepare, which reduces cost and delay and can generally be underwritten by the offering company (the securities being sold by the company's own officers, directors and employees).

Why Now?

The Value of an Offering Document

Although Rule 504 has no prescribed disclosure requirements, you should always prepare and use an offering document for YOUR PROTECTION. The exemptions from registration provided by Regulation D do not include exemptions from the anti-fraud or civil liability provisions of any of the federal or state securities laws. These provisions are broad and include civil and criminal penalties for the misstatement or omission of facts that are relevant to making a fully informed investment decision.

If your company makes a Rule 504 offering without providing investors with an offering document, your company, its board, and its principals will be at an extreme disadvantage in defending themselves if your business is confronted with a securities fraud action.

A Rule 504 offering document does not require the detailed disclosure of a Rule 505 or 506 offering, but it should include the following information:

1. A description of the business being conducted and/or intended to be conducted along with the general development of the business during the preceding five years or as long as it has been operating, if the business is less than five years old.
2. A description of the principal products or services, their principal markets, and the methods of distribution.
3. A description and cost summary of any research and development activities during each of the last two fiscal years.
4. The number of full and part-time employees and their special qualifications.
5. A description of any special characteristics of the company's business or industry which may have a material impact on future financial performance. These may include existing or probable governmental regulations, dependence on one or a few major suppliers, unusual competitive industry conditions, etc.
6. Summaries of the principal factors that make the investment risky. These factors might include:
   • An absence of an operating history.
   • Lack of profitable operations in recent periods.
   • The company's general financial condition.
   • Lack of a trading market for the securities or restrictions against transfer.
   • Conflicts of interest between the company and its management.
   • Reliance on the efforts of a single individual.
7. If there is a material disparity between the offering price of the securities and the effective cash cost to officers, directors, promoters and affiliates for shares acquired during the preceding three years, there should be a comparison of such prices.
8. The uses and allocation of the proceeds.
9. A brief description, including the location and character of the company's principal facilities and other important physical properties. If any are leased, include the basic lease terms such as length of lease, rent, renewal options, etc.
10. Relevant information regarding directors, officers and significant employees. (Include information such as ages, educational backgrounds and business experience, as well as any special information such as criminal convictions, bankruptcies, etc.)
11. The aggregate annual compensation of the three highest paid officers and directors, and the total for all officers and directors.
12. The security ownership of each officer and director, and the identity of each person owning 10 percent or more of the company's shares. (Include the ownership of outstanding warrants or options to purchase additional securities by any of these individuals.)
13. All significant transactions between the issuing company and any of its officers, directors or principal security holders within the previous two years or those presently contemplated.
14. A detailed description of the securities being offered. Include such matters as dividend rights, voting rights, liquidation rights, preemptive rights, conversion rights, redemption provisions, sinking fund provisions, liability for further calls or assessments, restrictions against sale or transfer of the securities, etc.
15. A description of how the securities are being sold, the purchase price commissions percentage, if any, the minimum number of securities that must be sold for the placement to be effective, etc.
16. Financial statements that conform to Generally Accepted Accounting Principals.

It is necessary to provide accurate and complete information to prospective investors in order to eliminate potential liability. The exact scope of these disclosures will vary depending on your business and the transaction.

In most cases, there is a market for your company's securities, and a Reg. D Series Offering, Limited Partnership Offering, or a U-7 Offering can make sense. Most security offerings will require costly preparation and involve financial risk for your business, but a Rule 504 Private Placement, Limited Partnership, or U-7 can reduce costs and risks while enabling your company to obtain the growth capital it needs.

The information obtained from these procedures will form the basis of the offering documents, Form D (a simple statement of the offering and the only document that your company must file with the SEC under Rule 504 and U-7).

Once the offering documents are complete and the applicable state filings, if any, have been made, use them in connection with all offers and sales. Do not make any oral representations to prospective investors or give any supplemental documents that have not been reviewed by securities counsel. Generally speaking, if you give supplemental information to one potential investor, you should give it to all. This is especially true if the information in question alters the decision of the potential investor. Under these circumstances, it is most likely material information which you should have included in the first place. Disclose any additional material developments or changes in the terms of the offering in amendments or supplements to the offering documents, and distribute them to all offerees.

The Use of Regulation D Stock Offerings Reach an All Time High!

There are more entrepreneurs then ever before using the Regulation D Stock Offering (also known as a Private Placement Memorandum) which is the best, quickest and least costly method for raising capital for start-up and expanding businesses. When using software available from Cambridge Financial Services & Software (CFSS.com) to prepare your stock offering the majority of the document is already prepared for you. For the Reg. D program, just add your business and financial information.

With the explosion of new business products and concepts, the need to get funding has brought out a vast number of so called venture firms and financing businesses. None of these fly by night businesses can compete or compare to using the Reg. D method for raising capital. The rules for Reg. D have been tried and tested and used countless times since it’s creation in the year 1933. Entrepreneurs looking for funding should seek out a reliable and truly tested method to raise capital. Why would any serious business owner go to one of the many fly by night firms now flooding the Internet that cannot provide a rock solid program that is the least costly and quickest way to get funded?

For any business owner that wants to raise capital from angle investors that do not get involved in the company’s operation and provide funds for 3-5 years before looking for their return on investment (ROI), Reg. D is the method to use. Business owners keep the majority of the company’s stock and voting rights so as not to give up control in their business. Business owners seeking loans to start their business put themselves in a position of having debt and monthly payments, to add to their monthly expenses, which in most cases becomes detrimental to the success of the business.

There are so many upcoming businesses and a huge increase of entrepreneurs looking to start or expand their business and get away from working for others. The software offered allows business owners to forgo spending time and money preparing a business plan that is not a legal document to solicit investors.

People in many corporations have lost their retirement plans due to companies not funding them properly. Therefore, people are now starting to see that working for large business corporations that do not have their employee’s best interest in mind is not the best thing for them.

With so much misinformation on the Internet and many fly by night venture firms now flooding the Internet, it has become difficult to find a reliable method for obtaining capital. Cambridge Financial Services & Software is a company that has over 30 years in preparing Regulation D Stock Offerings/Private Placement Memorandums the most reliable method for raising capital. Cambridge Financial Services & Software have the only Reg. D stock offering software program approved by the federal government containing all the required disclosures, forms and other related documents to prepare a top notch stock offering.

Cambridge Financial Services Software for Regulation D Offerings

Our Regulation D software package will help you prepare a complete, professional Private Placement Memorandum (P.P.M.) for all of the Reg. D offerings. Through a series of interactive questionaires and example paperwork, the package walks you step-by-step through the complete document preparation process. Included in the package is a list of 60 currently active, accredited investors and an introduction letter so you can quickly get your offering into the hands of potential investors.

A CD-ROM which contains the total program, instructions to prepare documents and print the complete disclosure documents and all other related documents.

136 page annotated manual with step by step instructions, example documents and much more.

• Offering Circular
• Tracking Spreadsheet
• Purchaser Questionnaire
• Subscription Agreement
• Subscription Application
• Sample Introduction Letter
• Subscription Financial Analysis
• Purchaser Representative questionnaire
• Power of Attorney to prospective Investors
• Corporate Buy / Sell Purchaser Representative agreement
• FREE list of 60 current, active and accredited investors.

  Cost of the software is $495.00
  Order now or get more software information.

  You may also want to check out:

  • Limited Liability Partnership Offers (L.P.O.)
  • Small Corporate Offering Registrations (SCOR)
  
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  Cambridge Financial Services
  Office hours 9-5 Monday - Friday eastern time
  Voice: (352) 754-2886
  8717-1 Little Rd. Suite 191
  New Port Richey, FL 34654-4949
  E-mail : info@cfss.com

  Regulation D Offerings - Reg D 504, 505, 506 Offerings - Entrepreneurs can raise business capital to start-up a new business or grow an existing business
  Acquire the business capital or venture capital you need to startup or expand through private stock offerings. Over 30 years experience in financial consulting services.

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