This article is from the Investing Articles: Public Offerings: IPO and DPO series.
10. Can the stock be sold to customers?
Certainly and in cases where the product is retailed, we recommend it. It can be a great marketing tool to sell more of your product or service. In some cases such as software companies, it can also be a great inducement to stop pirating. This is an excellent method of creating loyalty from your customers.
11. Does the offering have to be for $1 million? Can it be less
The SCOR offering can be for less than $1 million but it cannot be for more, in most states. It is possible to make a second SCOR offering after a twelve month period for a further million dollars. After a period of six months (safe harbor), it may be possible to make non-SCOR offerings under certain circumstances. Note the SCOR offering cannot exceed $500,000 without audited financial statements. Please note that DFS does not consider engagements for offerings of less than $ 600,000 and we do consider engagements for Reg. A offerings of up to $ 5,000,000.
12. When are the funds released to the company?
The funds are released to the company on breaking escrow if the company has established an escrow "minimum" level. Breaking escrow occurs when there are sufficient subscriptions paid in to have achieved the "minimum" amount of the offering that has been filed and approved by the various state merit reviews.
13. Whose and what laws govern SCOR offerings and who is exposed to liability?
Although the SEC (federal government) and most states made SCOR offerings more financially bearable on small companies, your directors, officers, and major shareholders could be open for civil or criminal penalties if the offering is carried out improperly. Even honest, accidental mistakes or omissions could require pay back of all moneys raised plus interest and attorneys' fees.
14. How much must the company invest in the offering before the proceeds are available?
This depends on the escrow level, if any, the speed of response of state administrators during the merit review period, and the time investors take to respond. As this number depends upon your company's product and the SCOR promotion, these costs will range between $25,000 and $50,000.