USING EQUITY INVESTORS TO FUND YOUR PURCHASE Securities Law in 30 Minutes or less... (Yeah, right)

SECURITIES OFFERINGS 101 Your Offering is either Registered Exempt Illegal Which is yours? Our focus will be Exempt Offerings Under Regulation D

REGULATION D Section 4 (a)(2) of the Securities Act of 1933 “...transactions by an issuer not involving a public offering.” Must be “restricted securities” Regulation D Rules 504, 505, and 506 Safe harbors from registration Non-Exclusive 2014: $1.35 Trillion raised using SEC Registered Offerings 2014: $1.33 Trillion raised using Reg. D.

RULES 504, 505, 506(b) AND 506(c) 99% of reported capital raised through Reg. D is in reliance of Rule 506 $1.31 Trillion of the $1.33 Trillion 1% between Rules 504 and 505 See Chart in Handout for Compliance Guide

“ACCREDITED INVESTORS” See Rule 501(a) of Regulation D Test for Individuals Income Test: $200K income for past two years and this year ($300K combined with Spouse) Net Worth Test: $1 Million in Net Worth Exclude Primary Residence (deduct Debt in excess of FMV) Use Investor Questionnaires

LIMITATION ON RESALE Restrictions on Transfer At least 12 month holding period Restrictions in accordance with Charter Agreement Re-Sales must comply with applicable securities law (e.g., Rule 144) Investment Intent No view to resell Buy for own account for investment purposes

GENERAL SOLICITATIONS AND ADVERTISEMENTS What is a General Solicitation Roadshows? Public websites (e.g., Facebook, Twitter)? Funding Platform (e.g., Angel List)? Pitch Events? Key Factors Pre-existing relationships Members are pre-screened Websites are password protected RULE 506(c) PERMITS GENERAL SOLICITATIONS

INFORMATION REQUIREMENTS Always subject to anti-fraud rules (Rule 10b-5) Private Placement Memorandums (PPMs) Compliance and Risk Mitigations Not Always required to comply with law Always a good idea to mitigate risk What to include in the PPM

FINDERS AND BROKERS See article in Materials “The Problem with Money/Investor ‘Finders’” Broker-Dealer Activity vs. Finder Activity Compensation Fixed Transaction Based = Broker Contingent upon closing = Broker

CROWD FUNDING Effective May 2016 Investment Limits: $1 Million in 12 months Investor limits Registered Broker Dealer or Portal required Bad Actor Disqualifications Offering Statements Required $100K or less – Tax Returns $100K - $500K – Reviewed Financial Statements $500K - $1M – Audited Financials!

QUESTIONS?