This article is from the Investing Articles: Public Offerings: IPO and DPO series.
The SCOR Program signals a notable breakthrough in small business financing. Many state securities divisions have adopted a question and answer registration to enable corporations to raise up to One Million ($ 1,000,000) Dollars each twelve (12) months through the sale of its securities to the public. The "Merit" Standards used by the securities division to review registration in some states have been relaxed.
This action significantly reduces the overall cost and simplifies the raising of "seed Capital" for business start-ups, expansions and other allowable small business financing. Companies may use commissioned selling agents or sell the registered securities themselves through advertising, seminars or other approved means of mass solicitation. Investors are not limited as to their number or type, nor is there any restriction on the amount that may be sold to any one Investor.
The Emphasis has been made on minimizing cost: For example; offerings of $ 500,000 or less require only reviewed financial statements in some states.
All U. S. corporations may use SCOR to register securities for sale to the public except such companies as petroleum exploration and / or petroleum production concerns, those engaged in mining or other extractive industries or blind pool offerings . Securities may not be sold on behalf of any entity other than the issuing corporation.
However If the company, or any of the company's management or 10% or greater stockholders, have past or current regulatory problems or the company's securities are subject to registration with any governmental agency other than the SEC or a state regulator, then in most cases may not use SCOR
The corporation may raise up to One Million ($ 1,000,000) each twelve (12) months. In calculating this limit, sales in all jurisdictions must be included together with any other securities sold under the SEC Rule 504 or section 3(b) of the Securities Act of 1933, or sold in violation of the registration provisions of federal securities law.
The offering price must be at least five ($ 5.00) dollars per share in most states, and the company may not split its stock or declare stock dividends for two (2) years following effectiveness of the registration, except with the permission of the Securities Administrator in connection with a subsequent registered public offering.
The securities registered and sold are "freely" transferable and tradable. You should note that because of the offering size and the five ($ 5.00) minimum price a public trading market is unlikely to arise.Note: The Pacific Stock Exchange received approval in May of 1995 from the SEC to list SCOR and Regulation. A securities, this should create a market for "Listed" SCOR and Regulation. A securities. Thus the SCOR offering is in nature an early stage venture financing, using public investors solicited by means of advertising and / or other general solicitation. If appropriate, the SCOR may be followed at some later stage by a "conventional" public offering that could result in the development of a publicly traded market.
Depending on the state, SCOR may be used to register common or preferred stock, including convertible preferred and options, warrants or rights. Upon a showing that the company will be able to meet debt service, SCOR may be used to register debt securities, including convertible debt.
The offering may be sold directly by the company ( in some states the selling officer or director must be registered) or by a commissioned selling agent or finders. Mass solicitations may be used, including public meetings and advertisements (may need to be pre-approved by regulators in some states). Any type of investor may purchase any amount in the offering.
Proceeds of the offering must be placed in an escrow account with an independent bank or similar institution until the minimum amount necessary for the company to achieve its stated objectives is raised .(This is the min/max provision required by most states).