Michigan Scor Instructions For Form U-7 - Small Company Offering Registration (Page 4 of 6) in pdf

IV. Instructions as to Specific Captions and Questions

BE VERY CAREFUL AND PRECISE IN ANSWERING ALL QUESTIONS. GIVE FULL AND COMPLETE ANSWERS SO THAT THEY ARE NOT

MISLEADING UNDER THE CIRCUMSTANCES INVOLVED. DO NOT DISCUSS ANY FUTURE PERFORMANCE OR OTHER ANTICIPATED

EVENT UNLESS YOU HAVE A REASONABLE BASIS TO BELIEVE THAT IT WILL ACTUALLY OCCUR WITHIN THE FORESEEABLE FUTURE.

IF ANY ANSWER REQUIRING SIGNIFICANT INFORMATION IS MATERIALLY INACCURATE, INCOMPLETE OR MISLEADING, THE COMPANY,

ITS MANAGEMENT AND PRINCIPAL STOCKHOLDERS MAY HAVE LIABILITY TO INVESTORS. THE SELLING AGENTS SHOULD EXERCISE

APPROPRIATE DILIGENCE TO DETERMINE THAT NO SUCH INACCURACY OR INCOMPLETENESS HAS OCCURRED, OR THEY ALSO MAY

BE LIABLE.

A. Cover Page. The Cover Page of the Disclosure Document is a summary of certain essential information and should be kept on one

page if at all possible. For purposes of characterizing the Company on the cover page, the term "development stage" has the same

meaning as that set forth in Statement of Financial Accounting Standards No. 7 (June 1, 1975).

B. Risk Factors. The Company should avoid generalized statements and include only those factors which are unique to the Company.

No specific number of risk factors is required to be identified. If more than 16 significant risk factors exist, add additional lines and

number as appropriate. Risk factors may be due to such matters as cash flow and liquidity problems, inexperience of management in

managing a business in the particular industry, dependence of the Company on an unproven product, absence of an existing market

for the product (even though management may believe a need exists), absence of an operating history of the Company, absence of

profitable operations in recent periods, an erratic financial history, the financial position of the Company, the nature of the business in

which the Company is engaged or proposes to engage, conflicts of interest with management, arbitrary establishment of offering

price, reliance on the efforts of a single individual, or absence of a trading market if a trading market is not expected to develop.

Cross-references should be made to the Questions where details of the risks are described.

C. Business and Properties. The inquiries under Business and Properties elicit information concerning the nature of the business of the

Company and its properties. Make clear what aspects of the business are presently in operation and what aspects are planned to be

in operation in the future. The description of principal properties should provide information, which will reasonably inform investors as

to the suitability, adequacy, productive capacity and extent of utilization of the facilities used in the enterprise. Detailed descriptions of

the physical characteristics of the individual properties or legal description by metes and bounds are not required and should not be

given.

As to Question 4, if more than five events or milestones exist, add additional lines as necessary. A "milestone" is a significant point in

the Company's development or an obstacle that the company must overcome in order to become profitable.

D. Offering Price Factors. Financial information in response to Questions 5, 6 and 7 should be consistent with the Financial Statements.

Earnings per share for purposes of Question 5 should be calculated by dividing earnings for the last fiscal year by the weighted

average of outstanding shares during that year. No calculations should be shown for periods of less than one year or if earnings are

negative or nominal. For purposes of Question 8, the "offering price" of any options, warrants or rights or convertible securities in the

offering is the respective exercise or conversion price.

E. Use of Proceeds. Use of net proceeds should be stated with a high degree of specificity. Suggested (but not mandatory) categories

are: leases, rent, utilities, payroll (by position or type), purchase or lease of specific items of equipment or inventory, payment of

notes, accounts payable, etc., marketing or advertising costs, taxes, consulting fees, permits, professional fees, insurance and

supplies. Categories will vary depending on the Company's plans. Us of footnotes or other explanation is recommended where

appropriate. Footnotes should be used to indicate those items of offering expenses that are estimates. Set forth in separate

categories all payments that will be made immediately to the Company's executive officers, directors, and promoters, indicating by

footnote that these payments will be so made to such persons. If a substantial amount is allocated to working capital, set forth

separate subcategories for use of the funds in the Company's business.

If any substantial portion of the proceeds has not been allocated for particular purposes, a statement to that effect as one of the Use

of Net Proceeds categories should be included together with a statement of the amount of proceeds not so allocated and a footnote

explaining how the Company expects to employ such funds not so allocated.

F. Plan of Distribution. In Question 26, if the proposed business of the Company requires a minimum amount of proceeds to commence,

or to proceed with, the business in the manner proposed, there shall be established an escrow with a bank or savings and loan

association or other similar depository institution acting as independent escrow agent with which shall be immediately deposited all

proceeds received from investors until the minimum amount of proceeds has been raised. Any failure to deposit funds promptly into

the escrow shall be grounds for enforcement proceedings against the persons involved. The date at which the funds will be returned

by the escrow agent if the minimum proceeds are not raised shall not be later than one year from the date of effectiveness of the

registration in this state. All interest generated from the escrow account shall be paid to investors.

Page 4 of 6

Michigan Scor Instructions For Form U-7 - Small Company Offering Registration Page 4

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