CROWDFUNDING William G. Strench Frost Brown Todd LLC Louisville, KY March 22, 2016

WHY IS CROWDFUNDING DIFFERENT FOR THE SALE OF SECURITIES?

GENERAL SOLICITATION

JOBS ACT  Adopted in 2012

TWO COMPONENTS  Accredited Investors  Non-accredited Investors (Crowdfunding)

SEC CROWDFUNDING RULES (Must be adopted within 270 days)

NOT ADOPTED UNTIL OCTOBER 30, 2016 (4 YEARS LATER)

STATE ADOPTION (as of August 2015)  29 Adopted (including Kentucky and Indiana but not Ohio)

KENTUCKY ACT

FEATURES  Can sell publicly to both accredited and unaccredited investors  Can raise up to $1 million ($2 million with audited financials)  No limit on amount from any accredited investors ($10,000 limit for unaccredited investors)

REQUIREMENTS  Must be a Kentucky based company selling to Kentucky investors

REQUIREMENTS  Must establish escrow account with a bank

REQUIREMENTS  Must obtain proof that investor is a Kentucky resident (e.g. driver’s license)

REQUIREMENTS  Must file Forms CF1 (10 days before) and CF2 (30 days after) with the Department of Financial Institutions, together with a filing fee

REQUIREMENTS  Must provide disclosure statement (with financials certified by CEO)

REQUIREMENTS  Offerings must be made through website  Registered with state  Unaffiliated with company  Fixed fee only

REQUIREMENTS  Quarterly reports to investors and state forever (including compensation to officers and directors)

CROWDFUNDING UNDER THE JOBS ACT EFFECTIVE May 16, 2016  Can offer in all 50 states  Limited to $1 million in funds raised  Each investor can invest up to 10% of their net worth or net income during any 12 month period in crowdfunding financings (5% if net income/net worth less than $100,000)  All offerings must be conducted through an independent portal (website) registered with SEC  Filings must be made with the SEC  Specified information must be provided to investors for one year  Must have audited financial statements if raising more than $500,000 (otherwise reviewed financing statements)

BEST CANDIDATES  Have available cash (upfront cost)  Visible consumer product or service (restaurant)  Access to free media

QUESTIONS?