Mark Lund founded his Worcester, Mass., publishing company, Paragraph Communications, in 1993 by charging about $10,000 to his personal credit cards. That enabled the former Time sales assistant to publish an eight-page newsletter, which led to a bimonthly magazine, International Figure Skating. Today the magazine has about 5,000 subscribers, each paying $20.

Now Lund needs more money, much more, in order to conduct a major mailing to potential subscribers. After raising funds from friends, relatives, and contacts within the professional-skating community, Lund recently decided to take his fledgling company public.

A traditional initial public offering would scarcely have been possible at this early stage. But Lund, who hopes one day to also produce major skating events, set his sights on a public stock offering known as a 504. Under Rule 504 of Regulation D, the Securities and Exchange Commission exempts companies that are raising up to $1 million from most of the SEC registration and reporting rules that govern larger stock sales. Because 504 offerings are fairly simple to carry out, there's no need, among other things, to hire an investment banker.

Lund launched his offering last September with an offer to sell $5 shares in blocks of 100 for a total of 30% of the company. (There's even a sweetener: investors receive a lifetime subscription to the magazine.) Lund is betting that his base of readers and investors will grow as figure-skating events proliferate in preparation for the 1998 Winter Olympics. "I think this kind of offering makes the best sense if you've got a built-in audience that you're trying to sell to," he says.

So far Lund has raised about $50,000, which the company has elected to hold in an escrow account until stock sales reach $100,000. At that point Lund will start using the funds to finance a full-scale subscription drive. "We can start attracting national advertisers only when we get our subscription base up to about 100,000," he says. "I need the capital from the stock sale to get us there." His ultimate goal is to raise from $300,000 to $500,000.

Although Rule 504 seems tailor-made for entrepreneurs like Lund, even simplified stock offerings carry a cost. Lund was spared from underwriting, accounting, and legal fees, but, he says, "we've spent about $30,000 to market the stock offering ourselves." He adds, "And since we're such a small company, handling the paperwork wound up making us three weeks late in putting out our issue. It took me about four months to answer all the questions I had to answer in order to prepare our federal filing document for the states where we're trying to sell large quantities of stock."

For more information on 504 offerings, see "504: Whom Is It For?" [Article link]. Also, call the SEC at 202-942-4046 and request the Small Business Offering Package. But remember, 504 offerings are not for every company. If you're growing quickly, you may be able to raise more capital by waiting for a traditional IPO.