Crowdcheck Blog
Insights and information for online capital formation
Hi everyone; a reminder that we are just over a month away from the deadline to file Form C-AR by May 1.*
We wanted to flag some issues:
If you sold any securities under your Form C, even if you didn’t sell them until this year, and even if you didn’t sell them until April 30, a Form C-AR with 2022 financials is due by May 1.
Even if your current Form C already includes 2022 financial statements, a Form C-AR is due by May 1.
If you do not have an open offering or otherwise have audited or reviewed statements available, the financial statements do not have to be audited or reviewed, but they do need to be in US GAAP format. This means balance sheet (as at…
This entry is filed under Capital Raising, Crowdfunding, Crowdfunding Conditions, Disclosure, Federal Law, Financial Statements, SEC, Section 4(a)(6), Securities Law
That picture probably isn’t an emoji, because emojis aren’t detailed enough for a message of that size. But they do convey some information, which is why, we assume, people use them. And since emojis are capable of conveying information, they are also capable of conveying misinformation, even misleading information that violates the securities laws.
For some time, we’ve been discouraging our clients from using emojis or other images that could be misleading. Rocketships and unicorns have long been on our “bad words list”.
But a recent court case got the attention of some of our clients. It’s not a case about emojis, rather it’s a classic “are these things…
This entry is filed under Crowdfunding, Disclosure, Disclosure, Fraud, Investing, Liability, Regulation, Securities Law
We’ve been having a lot of “why can’t we do what they are doing?” conversations recently. Potential issuers have asked:
Why can’t they structure a Reg A real estate offering where the issuer invests in minority holdings in other real estate companies?
Why can’t they file a 1-Z to exit the Reg A reporting system without bringing their ongoing reporting into compliance?
Why can’t they file a new Reg A offering without bringing their ongoing reporting into compliance?
Why can’t they increase the size of their Reg A offering by filing a Supplement to the Offering Circular?
Why can’t they advertise without including a link to the Offering Circular?
In all these…
This entry is filed under Capital Raising, Crowdfunding, Crowdfunding Conditions, Regulation, Regulation A, SEC, Securities Law
We’ve heard from some of our clients that potential investors are getting spooked by the crypto winter and the FTX meltdown.
Yes, you can invest in crypto online, just like you can invest in online exempt public offerings under Regulations A, CF and D. But that’s pretty much where the similarity ends.
There are a number of differences between the crypto world and online exempt securities offerings.
These include the types of investments offered. Crypto comprises purely digital assets, which may be in various stages of development, may or may not work, may or may not have value and in some cases may vanish overnight if investors lose confidence in them.
The…
This entry is filed under Capital Raising, Crowdfunding, Disclosure, Disclosure, Due Diligence, Due Diligence Process, Failure, Regulation A, Section 4(a)(6), Types of Offerings
It’s 1-SA filing season again for Regulation A filers, and time to make some observations about the consequences of not filing.
We have encountered more than three companies in the last three months that have not filed all (or in one case, any) of their ongoing filings, and yet have requalified their offerings or qualified new offerings. This is a problem.
Let’s start with the ongoing reporting requirements. Assuming a Reg A filer has a December year-end, under Rule 257 it has to file its annual Form 1-K by April 30 and its semi-annual 1-SA by September 28 (subject to adjustments for leap years and weekends). It may also need to file “current” reports on Form 1…
This entry is filed under Crowdfunding Conditions, Due Diligence Process, Federal Law, Regulation, Regulation A, SEC, Securities Law
So May 2 marked the due date for most companies in the crowdfunding world to file their annual reports on Form 1-K or C-AR.
And many companies didn’t.
Do I need to remind you that in order to make an offering under either Reg A or Reg CF, if you have made offerings under that exemption before, you have to have made ALL ongoing reports required by the exemption in the previous two years before relying on that exemption again? Apparently I do.
Now for some companies, it’s possible to get back into compliance just by filing a compliant report (or reports plural, if you are missing more than one), even if it’s late. We’ve discussed in detail what companies are…
This entry is filed under Capital Raising, Crowdfunding, Crowdfunding Conditions, Federal Law, Regulation, Regulation A, Section 4(a)(6), Securities Law
Well, I thought I’d better blog something before people think we’ve vanished. We’ve just been too busy. But recently something happened that tied together two previous blog posts.
Trolls have become an increasing problem in the online space. The whole point of the crowdfunding regs is to give voice to the crowd, to enable retail investors to make informed investment decisions by learning from each other’s comments and questions and the issuers’ responses. They can’t do that when trolls interfere with the communication channels, posting the same content and saying the same things again and again, especially when they do so under several different identities. “…
This entry is filed under Fraud, SEC, Section 4(a)(6), Securities Law
Startup investors all hope for a great “exit.” Most startups, of course, will never get to that point, but for the successful ones, the principal ways that investors get repaid for their faith in a high-growth early stage company is an eventual IPO, hopefully at a price much higher than the price they paid, or through the acquisition of the startup by another company.
It can take a very, very long time for a startup to get to the point of an IPO. We aren’t aware of a company crowdfunded under Regulation CF having done an IPO yet. Mergers and acquisitions are a much more likely option for an exit for a company that raised funds in a Regulation CF offering.
We’ve…
This entry is filed under Capital Raising, Crowdfunding, Investing, Regulation, Regulation A, Section 4(a)(6), Securities Law
Reg A and Reg CF have been around for a few years now and we are finding that some of our clients, especially those that have made multiple offerings, are getting to the point where they need to consider the implications of Section 12(g) of the Securities Exchange Act, which requires companies to become registered with the SEC when they meet certain asset and investor number thresholds.
Let’s start with the requirements of Section 12(g). It says that if, on the last day of its fiscal year, an issuer has assets of $10 million and a class of equity securities held of record by either 2,000 persons or 500 persons who are not accredited investors, it has to…
This entry is filed under Capital Raising, Crowdfunding, Crowdfunding Conditions, Disclosure, Regulation A, Section 4(a)(6)
A while back, one of our favorite start-up clients called me and asked me to speak to a potential investor. Paul Efron, a resident of Arizona, wanted to invest in the company's Regulation A offering. However, when he went onto the company’s website to invest, his subscription was rejected. The company was accepting subscriptions from investors in every state but Arizona and Nebraska.
Why Arizona and Nebraska, asked Paul?
The reason was that while federal law and most states’ laws say that a company selling its own securities is exempt from broker-dealer registration, that’s not the case in a handful of states. These states say that if a company isn’t using a…
This entry is filed under Capital Raising, Crowdfunding, Regulation, Regulation A, Securities Law, State Law