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Insights and information for online capital formation

May 09, 2016 by Sara Hanks
With one week to go we are hearing that a number of companies are realizing their financial statements are not going to be reviewed in time by their accountants. But they really want to launch on May 16! So they are planning to file on Form C for amounts less than $100,000 and "certifying" the financials, with a view to filing an amendment later. Think about this carefully before you do it. The financial statements (for any level of raise) are required to be prepared in accordance with Generally Accepted Accounting Principles (GAAP), reflecting all the requirements of GAAP with respect to revenue recognition, capitalization or expensing, and all that other...
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April 29, 2016 by Andrew Stephenson
One of the best practices that has developed in the realm of donation/reward crowdfunding is to provide regular updates to campaign backers over email in addition to publishing them on the crowdfunding platform. These updates are important — they keep backers informed about the status of the campaign, and provide information about company events relevant to the success of the idea. When it comes to Regulation CF, however, this practice can’t be adopted for equity backers (otherwise known as investors) in exactly the same manner as for donation/reward crowdfunding. Title III of the JOBS Act is not very friendly to communications being made by individual issuers...
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April 21, 2016 by Andrew Hanks
With all the work that surrounds preparing to file with the SEC (whether you are making a Regulation A or a Regulation CF filing) it can be easy to overlook one of the simplest things you need in order to file. A CIK code is your company’s distinct fingerprint on the SEC’s filing site EDGAR, and it will be the public number used to track your filings. You or a filing agent will need to use your CIK code to log into the EDGAR system from your first to final filing and any amendments and correspondence that come in between. This is also where your company’s basic information that is presented to the public, such as your primary address, FEIN and telephone number...
This entry is filed under Crowdfunding, SEC, Blog
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April 18, 2016 by Sara Hanks
Four weeks out from Regulation CF's go-live date, and journalists, researchers, bloggers and anyone with access to the internet (including my cat) are asking small companies to comment on their plans to raise money under Regulation CF ("Title III"). Please quit. Y'all are getting CrowdCheck's clients into trouble. For the third time in the last couple of days, I've seen an article or blog post in which a company that we are working with is asked to comment about their plans to raise money under Reg CF. These companies, being (a) super-enthused about crowdfunding and the ability to give their friends and fans the ability to share in any future success and (b)...
This entry is filed under Crowdfunding, Failure, Section 4(a)(6), Securities Law, Blog
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April 17, 2016 by Sara Hanks
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...
This entry is filed under Crowdfunding, Disclosure, SEC, Section 4(a)(6), Blog
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April 11, 2016 by Andrew Stephenson
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...
This entry is filed under Crowdfunding, SEC, Securities Law, Blog
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April 07, 2016 by Jamie Ostrow
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...
This entry is filed under Bad Actor, Disclosure, Regulation A, Securities Law, Blog
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March 29, 2016 by Andrew Hanks
Innovation Needs Infrastructure Economic infrastructure is key to the success of ride-sharing apps and crowdfunding efforts.
This entry is filed under Crowdfunding, In The News, Section 4(a)(6), Blog
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March 16, 2016 by Andrew Stephenson
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...
This entry is filed under Crowdfunding, Disclosure, SEC, Blog
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March 09, 2016 by Andrew Stephenson
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...
This entry is filed under Regulation A, SEC, Securities Law, Blog
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