Crowdcheck Blog

We're 4 weeks out from Regulation CF (Title III of the JOBS Act) going live. This is exciting, right? Are you going to be one of the first companies filing a Form C? If you haven't got your financial statements sorted out yet, you probably aren't. Any company looking to raise more than $100,000 must have their financial statements reviewed by a CPA. You'll need a balance sheet, profit and loss statement and cashflow statement covering 2014 and 2015 (or a shorter period if you haven't existed that long) and they have to comply with Generally Accepted Accounting Principles (GAAP). GAAP requires that your financial statements be prepared on an accrual, not a cash…

Regulation Crowdfunding becomes effective on May 16 of this year. What can you say now about your crowdfunding campaign that you plan to launch on May 16? Nothing. Not a word. Otherwise, you blow your exemption from registration and may no longer be eligible to use Reg CF. Recall, Reg CF is an exemption from registration of securities. Any offer of securities must be registered or exempt. Reg CF is not effective until May 16. So any communication about your offering made before you file your Form C on May 16 is an offer of securities that does not meet the requirements for any available exemption. This could result in a violation of Section 5 of the Securities…

Sure, there has been a lot of talk of Regulation A. Under Tier 2 of Regulation A, you can raise up to $50 million from the crowd – everyday folks (under Regulation A, investors do not need to be accredited investors).  As a company you might be thinking, great, sign me up and how quickly can I get started?  While Regulation A is the right fit for some companies, it is not the right fit for all companies.  Below, we go through some threshold questions about eligibility to see if Regulation A is available to you. 1. Is your company organized in and with its principal place of business in the United States or Canada?  (If yes, skip to question 2) Regulation A is…

Innovation Needs Infrastructure Economic infrastructure is key to the success of ride-sharing apps and crowdfunding efforts. http://bit.ly/1Rxu1iV

In a rather innocuous requirement, the SEC requires that a company offering securities under Regulation Crowdfunding “describe [its] financial condition…” However, the short directive masks a rather tall order for companies. The discussion of the financial condition of the company will be one of the most analyzed parts of the Form C, both by prospective investors and by regulators. It is here that we are likely to see companies omitting material information in an effort to present an optimistic picture of the company, whether or not the intent was pernicious. The SEC does provide some guidance to companies making this disclosure. However, that guidance is…

Since the SEC’s adoption of its Regulation A+ rules, creating two tiers of Reg A offerings and two sets of procedures to follow, CrowdCheck has worked with a few companies seeking to qualify offering under Reg A. These companies have found themselves to be guinea pigs for state regulators. In the case of Tier 1, it was working through the coordinated review process. In the case of Tier 2, it has been working with states to figure out what notice needs to be filed and when. Fortunately, NASAA understands the challenges associated with the disparate filing requirements for Tier 2 offerings. On January 27, 2016, NASAA announced a request for comment regarding its…

Hey, remember when Oprah gave away all those cars and all the lucky recipients got a car with accompanying tax bill? We could have something like that in crowdfunding too. For companies seeking crowdfunding, it's natural that they will seek to market their offering to the people who love their product or service. And a company's crowd is going to be super-happy not just to get the shares, but also more of the company's product or service. A company producing zombie movies can give away tickets to the next premiere. A candy company can give away calorific goodies. And that's great, but in this regulated world we have to consider the tax and accounting…

Oh, companies seeking crowdfunding under Regulation CF, it's going to be so tempting to do this. There'll be a time when you have all the information required by Rule 201 loaded on SuperPortal's site. All except the financial statements, which the accountant has not finished reviewing. She says her review isn't going to result in any material changes. And it's May 16, and you really want to be the first to go live on SuperPortal. What if you filed the Form C without the accountant's review? No-one would notice (the SEC doesn't officially review Form C filings), would they? And you could update the financials when you got them finished. Don't do that. For a…

One seemingly critical difference between conducting a Regulation A offering under Tier 1 or Tier 2 at the federal level is the requirement to provide audited financial statements. The SEC does not require audited financial statements for Tier 1 offering, whereas audited financial statements are required for Tier 2. However, this difference is merely a red herring. Nearly every Tier 1 offering will require audited financial statements, because it is likely that at least one state in which the issuer intends to offer its securities requires audited financial statements. In our review of the statutory and administrative rulings of state securities regulators, 27…

View our comment letter: https://www.sec.gov/comments/s7-22-15/s72215-9.pdf View the proposals: http://www.sec.gov/rules/proposed/2015/33-9973.pdf