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SCOR FAQ. Part 2


This article is from the Investing Articles: Public Offerings: IPO and DPO series.

SCOR FAQ. Part 2

1. What is a SCOR LPO (Small Corporate Offering Registration, Limited Public Offering)?

A SCOR LPO is a vehicle that permits companies to raise up to $1 million in equity funds directly
from the general public, e.g. , from their customer base or others with a keen interest in the product, services or management.

2. What type of company is suitable for a SCOR LPO?

A SCOR is suitable for companies that have a "growing" business, that have potential to be a profitable organization that sells a product or a service, and in which the shareholders will stand to make a return on their investment commensurate with the risk they are taking.

It is also possible to do a SCOR offering to fund an acquisition or a franchise operation.

3. What do the entrepreneur/ initial stockholders give up in return for the investors' money?

Investors receive common stock in the company. The value and percentage that they receive depends upon the value of the company at the time of the offering. More often than not, this will depend on the company's potential, its product line, investors' perception of the future, and management's ability to successfully lead the company to that future.

In most cases we expect the company will give up 35-55% of its stock. It is unlikely that your company is suitable for a SCOR offering if you will be required to give up in excess of 55% of the company's equity. The valuation is subject to "substantive fairness" review in many states and to negotiation with the Broker, if any, that will sell the security.

4. Does LPO mean the company is a publicly traded company?

No. It simply means that your stock is being offered directly to the public, however it is registered with the state or states that it is offered in and may be traded. If you wish to and you fit the requirements, you can have your company quoted on the SCOR Market Place of the Pacific Stock Exchange of on the NASDQ Electronic Bulletin Board. At DFS , we do not recommend listing too quickly, on the PSE, but the objective should be taken into account from an early stage in order to ensure that the company builds the correct profile.

5. Who can the stock be offered to?
The stock may be offered to anyone in those states in which the offering has been registered (permitted) and approved. SCOR offerings are permitted to residents of more than 41 states and most of those states require a merit review to test the offering's "fairness." You may find that one of your company partners, such as suppliers, distributors or customers will buy up all or a substantial part of the offering.

6. Who is authorized to sell the stock?
Licensed Broker/Dealers. However, few are able or willing to take any interest in issues of only $1 million. Licensed directors and officers of the company are permitted to sell in some states (Series 63 exam, Uniform Securities Act).

We have created an alliance with several Broker - Dealer Firms to handle the retail aspect of the SCOR offering. If Your Company qualifies we are able to provide you with a "Best Efforts" underwriting / sales agreement.


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