Educational Materials & Risks

Be sure that this type of investing is right for you. An investment in an early-stage company involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment.

Regulation A+ (“Reg A+”) Offerings

General Information

Regulation A+ (“Reg A+”) is an exemption from registration for companies seeking up to $20 million in a 12-month period (“Tier 1”); and companies seeking up to $75 million in a 12-month period (“Tier 2”).

Both accredited and non-accredited investors may participate in Reg A+ offerings, however, non-accredited investors may be limited on the amount of money they may invest.

It is important that you thoroughly review the offering documents, conduct due diligence on the company, and consider your own risk tolerance before participating in a Reg A+ offering. You might also consider consulting with a legal and/or financial advisor to better understand the specific risks associated with a particular offering.

Investment Limits

If you are an accredited investor, there are no investment limits for investing in Reg A+ offerings.

If you are a non-accredited natural person, you can invest up to 10% of your net worth or annual income per offering, whichever is greater.

If you are a non-accredited entity, you can invest up to 10% of the entity’s revenue or net assets (as of the entity’s most recent fiscal year end), whichever is greater.

Ongoing Reporting Requirements

The ongoing reporting requirements for Reg A+ offerings include the following:

Annual Reports (Form 1-K):

• Issuers who have conducted a Tier 2 Reg A+ offering must file annual reports on Form 1-K within 120 days of the end of the issuer's fiscal year.
• The annual report includes audited financial statements, management's discussion and analysis (MD&A), and other disclosures, similar to what is required in a traditional annual report.

Semiannual Reports (Form 1-SA):

• Issuers conducting Tier 2 offerings are required to file semiannual reports on Form 1-SA, providing unaudited financial statements and MD&A.
• These reports must be filed within 90 days of the end of the first six months of the issuer's fiscal year.

Current Event Updates (Form 1-U):

• Issuers must promptly report specific material events, such as fundamental changes in the nature of the business, bankruptcy, or other important developments. These reports are filed on Form 1-U.
• The issuer is generally required to file a Form 1-U within four business days of the event's occurrence.

Special Financial Reports (Form 1-K or Form 1-SA):

• If there is a material change in the issuer's business or operations, the issuer may be required to file a special financial report on either Form 1-K or Form 1-SA.

Exit Reports:

• For Reg A+ offerings conducted under Tier 2, issuers are required to file an exit report on Form 1-Z within 30 days of the offering's termination. This report includes information about the final offering results and the total number of securities sold.

Annual Update of Financial Statements:

• Issuers are required to provide updated financial statements in their annual reports and semiannual reports.

Risks

While Reg A+ offers certain advantages, such as expanding access to capital for small- and medium-sized companies, it also comes with various risks, including, but not limited to, the following:

Investment Risk: Investors may lose some or all of their investment. Startups and small companies can be especially risky, and there is no guarantee of returns.

Lack of Liquidity: Reg A+ securities may not be easily tradable on secondary markets. This lack of liquidity can make it difficult for investors to sell their securities if they need to.

Limited Information: Companies conducting Reg A+ offerings provide disclosure documents, but the information may be limited compared to what is required for public companies. Investors may have less information to make informed decisions.

No SEC Registration: Unlike fully registered securities, Reg A+ offerings are not subject to the same level of regulatory oversight and reporting requirements. This can lead to potential disclosure gaps and increased risks.

Dilution: Companies may issue additional securities in the future, which can dilute the ownership interests of existing shareholders. This is especially common for companies that continue to raise capital to fund their operations and growth.

Regulatory Changes: The regulatory landscape for securities offerings can change over time. New rules and regulations may affect the rights and obligations of both issuers and investors in Reg A+ offerings.

Business Risk: Many companies conducting Reg A+ offerings are early-stage or have limited operating histories. They may face challenges in terms of business viability, competition, and market acceptance.

Management Risk: The success of a company is often closely tied to its management team. If the leadership team is inexperienced or makes poor decisions, it can negatively impact the company's performance and the value of the securities.

Market Risk: The securities issued in Reg A+ offerings may be subject to market fluctuations. Changes in market conditions can affect the value of these securities.

Fraud and Misrepresentation: There is a risk of fraudulent or misleading statements in the offering documents. Investors should exercise due diligence to verify the accuracy of the information provided.

Regulation A+ (“Reg A+”) securities are offered through Netcapital Securities, Inc., a broker-dealer registered with the SEC and member of FINRA and SIPC.