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SCOR: Registration Instructions. Part 2




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

SCOR: Registration Instructions. Part 2

Many companies try to raise the full $1,000,000 in their SCOR offering. However, they are unable to do so. The first thing the business owner should do is set their escrow level to the minimum amount needed for their plan. Otherwise, the company may be able to raise part of the money required but which doesn't meet the goals outlined in the filing.

The SEC will not require the SCOR offering applicant to file financial statements. However, each state will require the filing of financial statements. A few states will require audited financial statements. And all states reserve the right to require audited financials. Once each year the company will be required to produce a very short Annual Report. The financials for this Annual Report does not typically have to be audited. Of course, if the state finds any irregularity in the company's reporting, it may require an audit.

The company usually has up to 12 months to sell the offering. When the minimum level set for escrow is reached, the company can break escrow and receive the money from the initial public offering IPO.

Whether the initial public offering IPO or SCOR offering is successful or not, there are going to be costs involved. There are costs such as, legal, accounting, consulting, filing fees, phone, travel, postage, printing, etc. that are necessary to prepare the initial public offering IPO. These costs need to be paid for up front. Because of the speculative nature of the offering, these costs will almost certainly have to be paid for up front. The only real area in which the costs may be deferred are in selling commissions. If the initial public offering IPO or SCOR offering is not a success, there shouldn't be any commission. The costs for all these items will vary depending on the offer and the state(s) in which it is registered.

The offering can be sold in as many states in which the company feels that it can sell a reasonable amount of stock. Keep in mind that the securities have to comply with the Blue Sky laws in each state. In other words, the offering has to be registered in each state. And it costs money to register in each state. Therefore, it is generally better to register in the primary states only. Many states participate in regional offerings. This makes offering and registering the securities in each state easier and less complicated.

The company may sell the offer direct. Although, in some states the selling officer or director must be registered. Otherwise, a commissiond selling agent or broker/dealer may sell the offering. Mass solicitations may be used for selling purposes. Public meetings may be used. And advertising is permitted but may need to be pre-approved by state regulators.

Officers and directors of a company must be very careful when preparing the filing documents. Directors and officers of the company could be liable for civil or criminal penalties. Honest and accidental errors or ommissions can still require the company to pay back all the money received plus interest, penalties, attorney's fees, and sanctions.

As with any initial public offering IPO there are four very distinct phaes of the offering. Although, the specifics are a little different in a SCOR offering.

The first is to evaluate and prepare the company for the initial public offering IPO. This includes a review of all corporate documents, restructuring the capital structure of the company, and last, determining which states to file the offering in.

The second phase of the process is to actually prepare the U-7, U-1, U-2, U-2a, and any other documents which need to be filed. In doing this, it is usually preferable to also generate a business plan at the same time. It is not necessary. However, the company is preparing for the future and this plan is a very good first step in setting up the company's goals and objectives as well as the steps required to get there and the benchmark measurements. Also at this time the escrow arrangements need to be made. And finally, permission to actually sell the initial public offering IPO or SCOR offering needs to be obtained.

The third step in the process is to advertise the offering. Sufficient investor interest needs to be present for the company to break escrow. Designing, printing, and distributing the offering documents needs to be done at this time.

The last step is what every executive is looking for. Actually retailing or selling the offering to investors and closing on the sale of stock.

At Equity Analytics, Ltd., we develop an investment advisory relationship with our emerging clients. We provide a full service to them and help them through each phase. Most importantly, we can assist in locating broker/dealers who may be willing to sell the offering.

 

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