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From: John MacDougall
Securities and Exchange Commission Hello: Mine is one of the companies currently raising funds via the Rule 147 exemption via the Oregon Intrastate Offering rules. I am a manufacturer, which means sources of funds that are readily available to "tech" companies (read: Powerball ticket) are not available to us. America needs to put its money where its mouth is, so to speak. As a preface to my comments on the proposed changes I would like to point out a common error in the interpretation of a part of Rule 147 that even the Advisory Committee seems to have made. The following is from their "considerations" :
4. There are three identified areas that currently make it difficult for issuers to use Rule 147: • The rule requires three 80% tests for an issuer to be deemed “doing business” within a state: that the issuer generates at least 80% of its revenues in-state, holds at least 80% of its assets in-state, and uses at least 80% of the gross proceeds of the offering in-state. These tests are difficult to satisfy and render many contemporary small businesses seeking local financing ineligible to rely upon the rule. Please not the area I highlighted. The rule does not actually state this. It actually states that an issuer must receive 80% of its revenue from "its operations in the state". I have seen the above misinterpretation several times in different publications. I'm sure the reason for this is that the sentence that talks about this must be "built" from 3 different sections and sub paragraphs. I wrote a one page "argument" on this to our State of Oregon Regulators and they concurred. Now, the revisions:
1) Allowing offers made in reliance on Rule 147 to be viewed by out-of-state residents, but require that all sales be made only to residents of the state in which the issuer has its main offices; This one is obvious. Welcome to the 21st century and the internet age.
2) Removing the need to use percentage thresholds for any type of issuer eligibility requirement, and evaluating whether alternative criteria should be used for determining the necessary nexus between the issuer and the state where all sales occur; and I am not against the percentage threshold, per se. I do think there needs to be some thresholds which fulfill the need of a "local company" test. I would recommend the following: a) Require that at least 80% of the funds raised are used in state.
3) Eliminating the requirement that the issuer be incorporated or organized in the same state where all sales occur. While I am somewhat ambivalent on this one, I see no need for the small companies trying to utilize this law to try and avoid the taxes of their state by incorporating in another. I think this goes against the "spirit" of the law and sends the wrong message. I'm incorporated in the State of Oregon and I'm still alive. J Thank you for your consideration of the comments from a real American Entrepreneur and Inventor!
John MacDougall MacDougall & Sons Bat Co. Inc. |