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Pursuant to SEC Regulation Crowdfunding, Rule 302 (b)(1)and (b)(2) in connection with establishing an account for an investor, the RedCrow Platform must deliver educational materials to such investor that explain in plain language and are otherwise designed to communicate effectively and accurately the following information:
The RedCrow Platform must make the most current version of its educational material available on its platform at all times and, if at any time, the RedCrow Platform makes a material revision to its educational materials, it must make the revised educational materials available to all investors before accepting any additional investment commitments or effecting any further transactions in securities offered and sold in reliance on Regulation Crowdfunding.
Under recently adopted rules, companies can use crowdfunding to offer and sell securities to the investing public, and anyone can invest in a crowdfunding securities offering. Since May 16th, 2016, the general public has had the opportunity to participate in the early capital-raising activities of start-up and early-stage companies and businesses.
About RedCrow Securities
RedCrow Securities is a broker dealer and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
Please note - following the completion of an offering conducted through RedCrow Securities, there may or may not be an ongoing relationship between the Issuer and intermediary.
Prior to registering on RedCrow Securities and before making an investment commitment, you must consider the risks of investing in crowdfunded securities offerings and determine whether such an investment is appropriate for you. No SEC review is involved in Regulation Crowdfunding offerings.
This means the decision to invest must be based solely on your own individualized consideration and analysis of the risks involved in a particular investment opportunity posted on the RedCrow Securities.
Potential investors acknowledge and agree that they are solely responsible for determining their own suitability for an investment or strategy on RedCrow Securities and must accept the risks associated with such decisions, which include the risk of losing the entire amount of their principal. Investors must be able to afford to lose their entire investment.
RedCrow Securities has no special relationship with, or fiduciary duty to potential investors, and investors’ use of the platform does not create such a relationship. Potential investors agree and acknowledge that they are responsible for conducting their own legal, accounting, and other due diligence reviews of the investment opportunities posted on RedCrow Securities.
EACH INVESTOR IS STRONGLY ADVISED TO CONSULT LEGAL, TAX, INVESTMENT, ACCOUNTING AND/OR OTHER PROFESSIONALS BEFORE INVESTING, AND TO CAREFULLY REVIEW ALL THE SPECIFIC RISK DISCLOSURES PROVIDED AS PART OF ANY OFFERING MATERIALS, AND TO POST ANY QUESTIONS IN THE ISSUER'S COMMENT SECTION OF THEIR CAMPAIGN PAGE PRIOR TO MAKING AN INVESTMENT.
The risks highlighted above are non-exhaustive. Investors must carefully review each Issuer's offering materials for a more complete set of risk factors specific to the investment. You should only invest an amount of money you can afford to lose without impacting your lifestyle.
The most common forms of securities an Issuer can offer are equity or debt. The securities we offer include the following:
Common Stock: Conveys a portion of the ownership interest in the company to the holder of the security. Stockholders are usually entitled to receive dividends when and if declared, vote on corporate matters, and receive information about the company, including financial statements. This is the riskiest type of equity security since common stock is last in line to be paid if a company fails. You should read our discussion of the risks of early-stage investing here, and pay special attention to the fact that your investment will only make money if the company’s business succeeds. Common Stock is a long-term investment.
Preferred Stock: Stock that has priority over common stock as to dividend payments and/or the distribution of the assets of the company. Preferred stock can have the characteristics of either common stock or debt securities. While preferred stock gets paid ahead of common stock, it will still only be repaid on liquidation if there is money left over after the company’s debts are paid. In certain circumstances (such as an initial public offering or a corporate takeover) the preferred stock might be convertible into common stock (the riskiest class of equity). You should review the terms of the preferred stock to know when that might happen.
Debt / Revenue Share: Securities in which the seller must repay the investor’s original investment amount at maturity plus interest. Debt securities are essentially loans to the company and the major risk they bear is that the company does not repay them, in which case they are likely to become worthless.
Convertible Note: This form of investment is popular with technology startups because it allows investors to initially lend money to the company and later receive shares if new professional investors decide to invest. The sort of convertible note that is most often offered on RedCrow Securities may limit the circumstances in which any part of the loan is repaid, and the note may only convert when specified events (such as a preferred stock offering of a specific amount) happens in the future. You will not know how much your investment is “worth” until that time, which may never happen. You should treat this sort of convertible note as having the same risks as common stock.
Prior to launching a Title III equity crowdfunding campaign, the Issuer is required to complete and submit a Form C to the SEC together with the required attachments. Companies that file a Form C are required to disclose certain information to the public which can be used to understand an investment and helps determine whether a particular investment is appropriate for a specific person.
This includes general information about the Issuer, its officers and directors, a description of the business, the planned use for the money raised from the offering, often called the use of proceeds, the target offering amount, the deadline for the offering, related-party transactions, risks specific to the Issuer or its business, and financial information about the Issuer.
Each Issuer that successfully completes a Title III Regulation Crowdfunding securities offering is required to annually file with the SEC a Form C-AR and financial statements. This must be done no later than 120 days after the end of the Issuer’s fiscal year covered by such filing. Each Issuer must also post its Form C-AR and financial statements to its own website, and that link must be provided along with the date by which such report will be available on the Issuer’s website.
The Form C-AR contains updated disclosure substantially similar to that provided in the Issuer’s initial Form C, including information on the Issuer’s size, location, principals and employees, business, plan of operations and the risks of investment in the Issuer’s securities; however, offering-specific disclosure is not required to be disclosed in the Form C-AR.
Investors should be aware that an Issuer may no longer be required to continue its annual reporting obligations under any of the following circumstances:
In the event that an Issuer ceases to make annual flings, investors may no longer have current financial information about the Issuer available to them.
Because of the risks involved with this type of investing, you are limited in how much you can invest during any 12-month period in these transactions. The limitation on how much you can invest depends on your net worth and annual income. If either your annual income or your net worth is less than $124,000, then during any 12-month period, you can invest up to the greater of either $2,500 or 5% of the lesser of your annual income or net worth.
If both your annual income and your net worth are equal to or more than $124,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is less, but not to exceed $124,000 or all crowdfunding offerings in any 12 month period. The following table is an example provided in an SEC Bulletin about Regulation Crowdfunding.
|greater of $2,200 or 5% of $30,000 ($1,500)
|greater of $2,200 or 5% of $80,000 ($4,000)
|10% of $107,000 ($10,000)
|$10% of $200,000 ($20,000)
|10% of $1.2 million ($120,000), subject to cap
The required type of financial disclosure depends on how much an Issuer has already raised, and how much they intend to raise next.
$124,000 or less: If the current offer plus previous raises amounts to $124,000 or less, the Issuer provides information from its tax returns (but not the tax returns themselves) certified by the principal executive officer. If financial statements are available they must be provided, too, and again certified by the principal executive officer.
$124,000.01 to $618,000: If the current offering plus previous raises is between $100,000 and $618,000, financial statements are required and must be reviewed by a CPA. If audited financial statements are available, they must be provided.
$618,000.01 to $1.235 million: If current offer plus previous raises amounts to $618,000.01 or more, the required financial statements must be audited by a CPA. However, if the Issuer has not previously sold securities under Regulation Crowdfunding, the financial statements will only be required to be reviewed by a CPA.
Note: An audit provides a level of scrutiny by the accountant that is higher than a review.
The required information is filed with the SEC and posted at the start of the offering on RedCrow Securities and available to the public throughout the offering on the RedCrow Securities and SEC sites. It is available to the general public on both websites throughout the offering period – which must be a minimum of 21 days.
Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth. For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation.
The SEC’s Investor Bulletin Crowdfunding for Investors contains detailed and useful information about how to perform these calculations and examples here.
As an investor, you will have up to 48 hours prior to a rolling close, or 48 hours prior to the offering deadline to change your mind and cancel your investment commitment for any reason.
If you do not cancel an investment commitment 48 hours prior to the offering deadline or a rolling close, the funds will be released to the Issuer by the escrow agent. Following the close on funds, you will then receive securities in exchange for your investment.
If you do cancel an investment commitment before the 48 hour deadline, RedCrow Securities will direct the return of any funds that have been committed by you in the offering.However, once the offering period is within 48 hours of ending, you will not be able to cancel for any reason, even if you make your commitment during this period.
The issuer may cancel the investment commitment under the following circumstances:
The securities offered on RedCrow Securities are only suitable for potential investors who are familiar with and willing to accept the high risks associated with high-risk and illiquid private investments. Securities sold through RedCrow Securities are restricted and not publicly traded and, therefore, cannot be sold unless registered with the SEC or an exemption from registration is available.
You are generally restricted from reselling your shares for a one year period after they were issued, unless the shares are transferred:
If the Issuer makes a material change to the offering terms or other information disclosed to you, including a change to the offering deadline, you will be given five business days to reconfirm your investment commitment. If you don’t reconfirm, your investment will be canceled and your escrowed funds will be returned to you.
No. Companies may not offer crowdfunding investments to you directly. They must use a crowdfunding intermediary, such as a FINRA Broker-Dealer like RedCrow Securities or a funding portal. Each must be registered with the Securities Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA).Do investors pay any fees?
RedCrow does not charge any fees to investors.How Does RedCrow Securities Make Money?
RedCrow Securities makes money by charging a commission on the amount of investments raised by the Issuer. The amount is disclosed in the offering documents or Form C related to each raise.In What Ways Can I Invest
On RedCrow Securities you can invest in four ways: Individually; as a self-directed IRA; as a Trust, or as an entity like a corporation or Limited Liability Company.What Is My Proof of Ownership?
Electronic records will be held with the issuing company’s stock registrar and transfer agent or cap table management service. Once your purchase of stock is complete, you will receive a confirmation email with details of your investment which will include a countersigned Subscription Agreement. As the offering is "Book Entry" this will operate as your proof of purchase. You will also be able to see your investments on your RedCrow investor portal.What If The Issuing Company Reaches Its Target Investment Goal Early?
RedCrow Securities will notify investors by email when the target offering amount has been met. If the issuing company hits its goal early, it can create a new target deadline that is at least five business days later. Investors will be notified of the new target deadline via email and will then have the opportunity to cancel up to 48 hours before the new deadline. Campaigns must be live for a minimum of 21 days regardless of their progress in meeting their funding target.
To view the full RedCrow Securities Investing Process Document, click here.
RedCrow Securities is required by the SEC to post educational materials on our site. While those educational materials are a great start to educating yourself and understanding the risks of making crowdfunding investments, it is really only the beginning of your journey. Be sure to investigate the issuing company and to participate in our online forum where you can interact with other investors, weigh in on the pros and cons of an opportunity, and ask the issuing company questions.
If you or someone you know wants information about raising capital for a company, feel free to continue exploring our FAQ or reach out to a RedCrow Securities team member at firstname.lastname@example.org.
To learn more about crowdfunding, see the adopting release and complete text of Regulation Crowdfunding.
To read the May 10, 2017 SEC Investor Bulletin Crowdfunding for Investors, Click Here.
For additional investor educational information, see the SEC’s website for individual investors by clicking here.
To learn more about what happened during the first year of Regulation Crowdfunding, Click Here.