How To Raise Capital For Your AI Or ChatGPT Based Company Using Reg A+ To Scale It Up; Interactive Clickable Video

Use the Chapters list below to select the part of the video you want to watch.

Chapters:

1. Introduction
2. Rod’s background
3. About Manhattan Street Capital
4. Disclaimer
5. Agenda of the Video
6. What is Regulation A+?
7. Advantages of using Reg A+ to raise up to $75 Mill per year of capital and provide liquidity
8. Why Reg A+ can be a great fit for AI and ChatGPT-based businesses
9. Reg A+ offering timeline
10. The nature of investors in Reg A+ offerings
11. Marketing your Reg A+
12. Costs of raising capital via Regulation A+
13. Liquidity for Insiders and early investors
14. IPO and Listing on various exchanges including the new Alternative Trading Systems
15. Direct Listing via Reg A+ to the NASDAQ and NYSE
16. Tips and techniques for raising via Regulation A+
17. Q&A – Does Reg A+ solve the problem of a company valued at 20 million going public?
18. Q&A - Can a new legal entity that has intellectual property and early-stage revenue as well as other assets use Reg A+?
19. Q&A - What is an alternative less expensive listing to the NASDAQ?
20. Wrap up

Disclaimer:

The content in this webinar is not and shall not be construed as investment advice. This information is meant to be informative and for general purposes only.

MSC is not a law firm, valuation service, underwriter, broker-dealer or Title III crowdfunding portal and we do not engage in any activities requiring any such registration. We do not provide advice on investments. MSC does not structure transactions. Do not interpret any advice from MSC staff as a replacement for advice from service providers in these professions.

Rod Turner

Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.

[email protected]

www.ManhattanStreetCapital.com

Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.

THIS TEXT TRANSCRIPT HAS ERRORS IN IT THAT WERE CAUSED BY THE SPEECH TO TEXT CONVERSION SOFTWARE WE USED. DO NOT DEPEND ON THE TEXT TO BE ACCURATE. WATCH THE RELEVANT PARTS OF THE VIDEO TO MAKE SURE YOU ARE PROPERLY INFORMED. DO NOT DEPEND ON THIS TEXT TRANSCRIPTION TO BE ACCURATE OR REFLECTIVE OF THE STATEMENTS OR INTENT OF THE PRESENTERS. 

So welcome again, thanks to Ákos and Peter. Our topic today is how to use Regulation A+ to raise capital and provide liquidity for companies in ai, machine learning chatGPT related space. But the purpose of this webinar is to focus in on your needs specifically and to explain, you know, why Regulation A+, et cetera, et cetera. I'll now give you a brief overview of my own, of myself and what my company and what we do. So I, I started my career as an engineer or an, an electrical engineer on a nuclear power station in the UK. And I moved then into mini computers and microcomputers, and then moved to the US and got into startup, computer startup computer software companies. And and more recently internet companies. And I, I, I launched a venture capital firm with a good friend of mine during the first internet bubble, which was, which was called Irvine Ventures.

I have been one of the senior, one of the top executives and or founders of six prior high tech startup companies, which we made successful to liquid outcomes for all involved. Two of those were IPOs to the NASDAQ. The first was Ashton Tate, which certainly dates me. Ashton Tate was the, we. We built Ashton Tate to be the leading microcomputer software database company in the early days of the PC industry. And I, my, my second IPO was Symantec, the northern 90 antivirus company where I was executive vice president and responsible for marketing, sales, product management and international. And in the case of Symantec, we significantly grew the company through acquisitions. And I ran the largest acquisitions integrations of the companies. The Peter Norton com computing company was an acquisition, and we had, we launched a Norton Antivirus and made it the market leading antivirus software back in the day.

And I've done, in addition to those two, four other successful startup high tech companies and, and the Venture fund and the incubator before doing Manhattan Street Capital. So I have a lot of relevant experience and, and I'm a tech entrepreneur. I'm not really a financier. I'm a tech entrepreneur that's applying my abilities to helping companies raise money using Regulation A+ particularly and Reg D and Rule 144A online offerings to assist companies with capital formation and, and liquidity. I launched Manhattan Street Capital eight years ago in 2015 because of Reg A+. We, when we launched, we were the first dedicated Reg a plus funding platform and advisory service. And that's what we do to this day. We focus on helping, helping companies decide if they should use an online fundraising method, particularly Regulation A+ that's our primary specialty, and then helping them succeed with it.

So we, we bring in, we're a boutique. We're not focused on huge quantities of offerings. We're focused on very good companies that we help, that we help to succeed in raising money and hope, hopefully for a long term success for their businesses. So we have a funding platform behind us, vertically integrated, which enables our companies to raise money easily, and it helps investors invest easily. And we provide advisory services to bring in all of the relevant service providers to help companies succeed at all levels with their capital raises, be that attorneys, broker dealers, underwriters, transfer agents and particularly marketing agencies and auditors of course, and then helping our clients project manage their entire journey to maximize efficiency in that respect as well. We're not, and I am not a securities attorney. I am not a, we are not a registered broker dealer or an underwriter.

And we're also not a investment advisory firm. So please bear that in mind in whatever you hear here. I'm attempting to help you guys without crossing any regulatory lines. Please look at the, the disclaimer that has been posted in the chat section for all to see. And we're gonna, Ákos will post that again later on if you didn't see it in, in the stream already. So don't consider me to be an attorney cuz I'm not, or you know, and it turns out, for example, that underwriters and valuation professionals are the only professionals that can tell you what the valuation of your company should be. So I don't tell you what the valuation of the company should be. Okay. So I recommend you use Speaker View as the setting for the Zoom meeting. If you have questions at any point, you're welcome to post them in the chat box and I will do my best to answer those questions at the end of the prepared speech, prepared speaking material and content. We will be making a recording of this webinar. We are making a recording of this webinar. It's recording right Ákos? I know I initiated that.

Yeah, it must still be, wouldn't have turned itself off. Yes, it's, yeah. Good. Yeah, so those are the logistics. Again, use the chat box to post questions and I'll answer them in the order received as well as also factoring in, you know, those questions that I can add value to. So the agenda is what is Regulation A+ what are the advantages of advantages of using Regulation A+ to capital raise capital? Why it can be good in an AI machine learning chatGPT type of business and the types of, of companies in that space that where Regulation A+ can be most likely to succeed. So be useful where it suits best. And then I'll get into an overview of the schedule and the costs and marketing methods and receptivity, the type of marketing involved in Regulation A+ offerings. And then also how Regulation A+ provides liquidity and what types of listing options you have for your company from having conducted a Regulation A+.

Then, depending on the amount of time I get into tips and techniques to leverage Regulation A+ optimally and answering questions obviously. So what is Regulation A+? Well, Regulation A+ was pre, was preceded by a thing called Regulation A+. Regulation A+ is far better than Regulation A. And this took place in June of 2015. It was announced, the change was announced in March of 2015 that I launched this company in at Street Capital. In, we went live in May of 2015, about six weeks prior to Regulation A+ going effective. And because of Regulation A+ it's a very well written regulatory regulation system in my view. And it addresses huge needs in my opinion too. So it's a, it's a public offering as far as the SEC is concerned. Every investor in a Regulation A+ is allowed by the regulator to be liquid. They, they're allowed to sell their stock to other members of the public.

They're not limited to selling their shares to accredited investors and investors can be of any wealth level. They don't have to be wealthy and they can be from any, anyone, any, any of the major countries in the world. You know, you, you can't raise money from Iran, Iraq, North Korea problem states. But as far as the SEC is concerned, the offering can raise money anywhere around on the globe. So if you have a strong audience and your, your product or service is getting great traction in, in England or Germany or France or Australia or in South Korea or in Hong Kong, you know, all of those are legitimate markets and other parts of Europe obviously, and many others are legitimate markets in which to raise money online. So we facilitate that. Most companies don't bother that much, but in some situations it can be marvelous to easily raise money internationally, not just in the US.

And the fact that anyone can invest and expands the envelope and makes attractive investment companies democratically available to people of all wealth level, they don't know. It's a fun thing and, and a good thing too. And it's also the case that because I, I'll get into the nature of online investors later. They're online investors tend to be more optimistic than typical online. Regulation A+ mainstream investors tend to be more optimistic than accredited investors and institutions, for example. But accredited investors and now institutions do play a role in reg a plus offerings. Companies that are conducting Regulation A+ must be they must be using an entity that is US or Canadian entity. And there must be some significant segment of the business that is operating in the us. It can't be just, you know, you are running everything in Australia and you set up a, a man and a dog operation, raise all the money in the US and send the money to Australia. There has to be some operating business that's legitimate in the US.

Advertising is okay. It's actually required. You have to market a Regulation A+ if you're gonna raise money online, which is what it's all about. So it's, it's very much the opposite of an S-1 IPO where you're not allowed to do any unusual marketing in the months leading up to and after the initial offering of your S-1 IPO. It's completely the opposite. That's, that's called a quiet period in an S-1 no Regulation A+. You have to market it and you can list the company on the major exchanges or on secondary exchange, which I'll get into later. One of the things which was a pleasant surprise to me is what was that is that companies having qualified their Reg A+ offering through the SEC process have increased credibility. So we see that differentiating them, they get more approaches from strategic partners.

We had one company that signed up to work with us announced to their partners that they were doing a Regulation A+ with us and probably got acquired by one of their partners cause that put them on the map enough that it nudged that partner into wanting to acquire them. It was launched in 2015 in the summer, approximately $2 billion a year. It's raised via Regulation A+ currently. That's about double the amount that is raised in private placements. Reg D private placements per year. We're seeing about 110 companies get qualified per quarter currently in Regulation A+ the activity level is lower this year, and it was lower in the latter parts of last year as well. Cause of the economic climate and the stock market climate. You, when you raise, when you use Regulation A+, you are automatically qualified for 12 months. Once you're qualified, you have a 12 month window of time in which to raise the money that you plan to raise.

You can, if you prepare your offering properly, you can have it last for three years. Of course you can finish it early. But having a three year runway without having to refile obviously you need to provide audited financials anyway to do a Regulation A+ up to two years. If the company's existed 12 months, then a 12 month audit. But if it's existed more than two years, then two years of US gap level audit must be provided to get in and to get to, to file with the SEC. And then annual US gap audits are required post Regulation A+. So there is a, that's a very modest reporting burden compared to being public on a NASDAQ or where you have a PCA or B audit requirement, which is more demanding every quarter. And you can use Regulation A+ to go public direct as a direct listing or as an IPO. But which I'll get into a little bit some extent later on. That is not a requirement.

Okay, moving on. Advantage is a Regulation A+. I'm gonna focus on the less obvious ones. Some of these are very obvious, you know, having liquidity, which I'll get into later is, is obviously a good thing. So it's very flexible compared to many other types of offerings because you can literally go live with your Regulation A+ and change the share price, change the valuation of your company as you go, and you within reason and obviously all of these things involve a process. But nevertheless, the ability to change the valuation as you go, it's very helpful. Cause many companies, the maximum for Regulation A+ is 75 million per year. But you might file for up to 75 million, but you might only want to raise or need to raise 15 million. That might be sufficient and you'd love to raise more if the, if the process of the raise is going, going well enough.

But you actually really, really doing this to raise 15 million. So if you establish a valuation that's consistent with that 15 million raise and then have a great, a great deal of success and want to raise more, you can raise the valuation to manage dilution as you go. That's helpful. And it also rewards the the earlier investors for taking what is a bigger risk. You know, somebody who invests in the first week that a Regulation A+ offering is live is taking a bigger risk than someone who waits until the last week when the companies raise a large amount of money it's less costly than an S-1 IPO than the conventional IPO and it's also less time consuming. So the, the amount of comments back from the SEC reduced the SEC seems to like Regulation A+, we've had I think four of our customers get qualified in about a week or 12 days, 12 business days from filing when the SEC actually ex states going in that you should expect two one month cycles where they'll have questions for you.

And the speed at which you respond to each of those questions will determine how quickly you can be qualified. So getting through the SEC process in about two months is quite reasonable for uncontroversial well-prepared offerings and much faster in some cases. And having the ability to use a US Gap audit instead of PCA or B is a nice advantage compared to a conventional IPO. And again, the SEC considers this a public offering and we'll get into the listing options later. Up to 30% of the raise in a Regulation A+ can be selling insiders, be that founder members or old investors or relatively recent investors if they've exceeded their rule 144A period, which is typically six months. I mentioned marketing is allowed, some companies lend themselves, and that's where I think AI machine learning chatGPTkind of businesses can really do well, which I'll get into in a moment.

But the fact that you are allowed to market and that you can include marketing in your business on a daily basis you can insert in invitations for customers and partners to invest in in the transactions that, that are occurring every day on your website. Very advantageous because it can really significantly reduce expense. The liquidity of options. I've mentioned that I'll get into that more. And the fact if you have customers, if you have fans, if you have transactions as I mentioned, being able to leverage that cost effectively, that drastically reduces the cost of marketing. And there are many new business types that can exist now that didn't exist before. I've done another webinar on the last prior webinar to this one, focused on series offerings for companies that are doing collectibles. For example, collectible cars, collectible jewelry, art, things of that type, unusual investment assets that regular folks haven't had access to before can be offered in a Regulation A+ series offering where you might have 50 or 60 or 70 different subclasses of stock within one reg A plus where the price is determined by the value of the asset and the asset trends according to the interest in it.

But for example, art, that's that category exists now and is doing very nicely and it just couldn't have come to pass without Regulation A+. So innovative new options that you didn't have before.

I mentioned the flexible raise amount that you can finish it early that you maintain control of your company when you are raising money from private equity or venture capital sources. Entrepreneurs do run the risk that they'll be booted or maneuvered out of their own company. So rate, having control over the raise is another advantage. And many people tend to think that if you are raising money that and you want to raise 40 million, for example, that you have to raise all 40 million before you can draw down from the proceeds that have been deposited into escrow. That is not the case. If you, if you, if you describe and position you are offering as, as to grow the company and you define the SEC, what the use of proceeds and to investors, what the use of proceeds will be in a smaller raise, then the SEC allows you to raise smaller amounts and to conduct escrow closes from the beginning so that that ability also to include in the filing that you will use proceeds from the raise to fund the ongoing marketing and other expenses of the raise is a big advantage.

So from a cash flow standpoint, that's a lot more attractive. If you are buying an asset and you're buying a business or a building and that's 20 million, well obviously you have to raise 20 million before you can sensibly deploy that money. In that case you start funding all the expenses. But that's the very, very few companies take that approach with Regulation A+. But that's obviously the case for an asset acquisition.

I mentioned 75 million a year. You can use Regulation A+ for a secondary offering less expensive than using S3 or public companies. Ok. All of the benefits will become clear further in. Why Regulation A+ is a good fit for AI machine learning chatGPT companies. Well, there, there's a number of different dynamics here. We don't usually see the rate of acceptance of a new category of business or investment that we've seen here with chatGPT. Obviously, I think all of you are very aware that chatGPT is, is experiencing and is is showing with open ai. Open AI is showing that they're developing and expanding the envelope of application for chatGPT extremely rapidly. And the field is expanding extremely rapidly. But perhaps most important when it comes to raising money, the awareness of people, even main street consumers who aren't particularly tech savvy, are hearing an awful lot about chatGPT.

So that cause of that level of interest and frankly, the number of people who missed out on buying Nvidia stock when it was at a lot lower price than it is now. Not to say that it's gonna keep on going up and up the way that it has, but there's a lot of people sitting on the sidelines wishing that they'd anticipated that trend and that they bought into, you know, to Nvidia earlier. So there's a lot of appetite at the moment in the market from investors for attractive companies that are doing neat things in this space. So whenever you see strong appetite on a large scale, which we certainly have at the moment, then the opportunity is much richer to, to raise money, obviously, obviously, and cause a lot of the things that one can do with ChatGPT based based businesses are understandable and explainable to Main Street investors, which is one of the key ingredients in successful online marketing of your race.

It has to be something attractive. You know, if somebody's in their social media feed and they see an advertisement that is appealing, it has to be understandable, it has to be clear, it has to be appealing, then we can draw them in and when they arrive on the offering page, it has to be clear cut and understandable and appealing. But when we have those things working, then if, if people consider it an attractive investment, then getting them to invest can work very well. And I'll get into the, the behavior style of, of Regulation A+ investors in a few minutes, but that awareness I've already said enough there, you get the, you get the gist of it. I'll talk in a bit about the kinds of companies doing the sorts of things that I think will be attractive to Main Street Regulation A+ investors, but again, many of the uses of Charge g bt, especially when you get into automated uses benefit, a lot of people can benefit an awful lot of people, you know, like finding the best investment options for you in the public markets.

That's something where chatGPT is already showing great strength. And I'm not limiting our universe of discussion too, to actually chatGPT there are other large language models that are useful and specialized and differentiated, but this category, so it's an attractive and huge new investment opportunity area and it's extremely unusual to get this rate of acceptance of that fact, that kind of fact, you know, the internet wasn't accepted as fast as this, the advent of mobile phones, smartphones, that wasn't as, as rapidly accepted. The advent of the PC also wasn't as rapidly accepted. This is really unusual stuff we're seeing that we're living. So types of companies, of course, you know, this is only limited to one's imagination, but biotech is a good example. Because we, we actually helped the company GATC Health conduct their Regulation A+ culminating it last year.

They are an AI machine learning company, not a large language model business, but they leverage the combination of the using the entire human genome, the entire dual strand, d n a in order to learn everyone's tendencies and predispositions by gathering data publicly available and through partners worldwide to learn the propensity of people to disease and which medicines work for them so forth as a fact basis fact. And they use that plus very sophisticated AI machine learning modeling of human being in order to, excuse me, in order to predict which medicines could be created in order to make medicines much faster and at much less expense than traditional methods with a higher success rate and a lower a, a lower clinical trial expense because of that, right? Higher effectiveness. So I believe they've introduced between four and eight new medicines in a very short space of time, and the rate at which they're creating new medicines is accelerating.

We own stock in GATC Health. So I have to obviously want you to know that I have a conflict of interest in that, but I think it's a marvelous company. The point is that it's explainable and understandable more so now than it was when we were marketing helping that company market itself because of the advent of chatGPT and it's rapid acceptance. So that's one category biotech can really benefit. There are so many other places to apply, but consumer facing applications are the ones that tend to be easiest to explain to a main street investor, which helps. So, you know, automating consumer tasks, oh, you want to figure out how to plan your world tour, you know, you're gonna travel around the globe in eight months and you'd like help doing so chatGPT and variants of it are really good at doing so.

Right? Picking venues, picking activities, picking the, the itinerary, saving an awful lot of time that can be done at the cons at the individual level and also obviously at the travel agent level. But that's clear. Travel, booking recipes, cooking security, using intelligence via large language models to protect people who need to be protected, whether it's children or older relatives or infirm family members or others. A a lot of opportunity to there's a lot of opportunity like that which appeals or opportunities like that which appeal to mainstream investors where they wanna help their family members or parents want to help their daughter stay safe. And you can bet that there's gonna be an awful lot of very useful applications of large language models and similar to help people stay safe apart from, you know, apart from the the new risks that come along with challenge e pt and similar, there are new risks of all sorts of things happening.

So there's opportunities for companies that will solve or reduce those risks, right? And people care about that too if we can make sure that people, you know, are protected, maximize their protection again a lot of opportunity there. So automation of things that people do by rot. A good friend of mine is an extremely savvy investor and he produces all these models and back testing models and he uses extremely stringent techniques. He's an Excel absolute expert, but he's now using chatGPT and apps that, that leverage it to automate a large portion of the manual labor stuff that he used to have to do. So it's really improving his business. So he's one guy, but there are a lot of people doing things that would like to benefit from the automation that we can, we can get here.

Researching things, researching medicine, researching solutions researching people's you know, we've got a, a family member with a health issue, being able to leverage AI through Chad G PT and similar to find solutions, you know, but there's a lot of leverage, there's a lot of legs in this technology which will appeal to consumer investors as well as more sophisticated investors doing good for the community, visually appealing activities. Yeah, those are the sorts of things that resonate in a mainstream investing context. So I'll touch briefly on the schedule for Regulation A+ and then I'll get back into marketing and appeal kind of characteristics. So typically it takes a couple of months to prepare the filing documents. The, the critical path item is the audit for companies that have existed and have complex financial statements. Getting the audit done is the most time consuming issue.

For new entities, probably the majority of charge e p T entities are pretty new. In that case, if you've only existed for six months, then an audit is gonna be simpler to produce, right? The, the audit only needs to go back as long as the company has existed. So two months to prepare is with diligent, with diligent approach and with relatively straightforward audit. Two months to prepare then far with the SEC two months to get through the SEC is, is reasonable well when it's well prepared. So four months to be qualified and then you have go, go live in with marketing in month five and you have 12 months or up to three years with which to, to market your rates. And again, you can tail it early, you can end it early at any time. Yeah.

Okay. I've touched, touched on the big picture items there from a schedule standpoint, I think perhaps the other most important thing from schedule perspective is that just because you went live, let's say, you know, this is Thursday, let's say you went live on Tuesday, the ads that you are running right now this week are test ads spending on a low budget with different test messaging and even potentially two or three different landing pages with different leading messages to see what, what is working best and with different target audiences involved. A lot of experimentation at the early stage. So you don't raise mega bucks in the first weeks and you don't spend mega bucks either. And you can with digital advertising, as you probably all fully aware, you can adjust it as you go on a rapid basis and you need to in order to tune it and make it work effectively.

So you don't, you don't benefit in a Regulation A+ context by getting impatient to try to raise all the money in three months. It costs an awful lot more to do that. So normally what you do is you maximize efficiency of marketing outreach and, and as you do so, you step up and spend so that the rate of of capital formation accelerates increases during the year or longer, whatever the period is. But if you wanna raise $40 million, don't expect to raise it in three months unless you've already got a humongous audience of people or a large member base. I was talking to a company two days ago that has is in the gaming business and they have a relatively new gaming platform with 5 million members. So obviously the ability to provide opportunities for those 5 million members to invest can accelerate their rate of for capital formation, can't it? The nature, something that's really important to know is the nature of mainstream Regulation A+ investors, accredited investors that is people that are, have a net worth of more than a million dollars and similar or income of more than 200,000 a year as an individual. They have so many more opportunities available to them to invest that they, and I'm seeing the messages coming in. Thank you. Then chat. So you're welcome to post messages in chat and I will do my best to answer those questions at the end of, of the session.

And there's a question mark from Andrew. I, I dunno what that means. I'm gonna look at the questions later, Andrew. Yeah, so accredited investors online, they have to be optimists to some level to invest online, don't they? But they are far less optimistic, far more skeptical, far more difficult to please than Main Street non-accredited investors because probably because they've been burned a lot or maybe they have more financial sophistication, so, okay. Thanks Andrew. Yeah. So the main Street investors tend to be optimistic in a larger level if they love what the company is doing, if they want to use it, or if they believe it's gonna improve their family or improve their community. And biotech offerings tend to be good examples of that. Obviously then, then they're gonna engage and it has to obviously be attractive, it has to be clear, clearly explained and the, it has to, to to, to appear to be, and to be an attractive investment.

But main street investors are more optimistic. And as an example of that, we've had days where the primary source of investors is us is outreach via advertising. Usually obviously emails and other posts to fans and customers and so forth. A different category. But in the case that we're, we're drawing people in someone's run, they're in social media typically. Facebook, Instagram, maybe TikTok, those are the most efficient outreach vehicles. You, somebody's doing something else and they see an ad and it appeals to them enough that they click through to the offering page. The offering page has to then, my point is this, if they like the offering, the offering enough that they click the Invest Now button, they're not necessarily intending to invest immediately. They're looking to see is this onerous? Does it feel trustworthy? And is it gonna take three hours of my life?

Cuz if it is, I'm gone. Right? If it looks friendly and well designed and trustworthy, and if the minimum is low enough for their casual interest at that point, like, you know, $400, 300, then they'll stay engaged enough that they'll learn more and they may actually invest. But we've had days where 70 plus percent of the people who came to the page and clicked and gave us their email address in order to see the investment process. Cause they can't see it without providing us information. So they become a lead for the customer to follow up on the company raising money over 70% invested on their first visit on their smartphone. So, you know, if somebody, if, if, if ever you have that occur, even if it only occurs for a week, when that occurs, you are dealing with optimists. You're dealing with an attractive offering that's well promoted and well described, but you are dealing with optimists who are not taking a month or three to do due diligence.

They like it enough that they're putting in a, an investment right now. So, so different than Reg D investors and institutions, obviously. Going more into marketing of a Regulation A+ offering. Obviously if you have members or if you have customers or if you have fans, then it's far easier to excuse me, my hands are moving, I'm inadvertently moving computer. Far easier to engage people that know you and like you and if they love you so much, the better, right? So when we have customers raising money that have a fan base, customer base and or a lot of transactions going on every day, that's so much easier to raise money where you don't have to spend so much money in advertising outreach. And the ability to engage them legitimately in a, in a relatively unrestricted way because the restrictions on Regulation A+ marketing are not unreasonable.

You, you cannot hype, you cannot exaggerate unreasonably. You can't say, you know, we are revolutionizing healthcare. That's too big. You, you, you can be spec. You have to be reasonably specific about what your claims are. So the restrictions that I think are quite reasonable in how, from the regulators, the SEC as to how you can market an offering. You can use influencers as long as the proper disclosures are followed. They have to disclose if they're being compensated how and what the extent of their compensation is. But influencers can endorse your offering again, when it's done properly. Influencers, these days, social media influencers especially have a lot of clouds. There are some research analysts type firms that are providing online recommendations with modest subscription fees. So there's another source of influence, not to say that it's easy to win their endorsement, but influencers can be very valuable, obviously.

And particularly if what's more relevant here with the chatGPT AI machine learning kind of context is once you are dealing with a lot of customers if they're enthused about what you're doing, many of them may be interested in investing. So presenting them with an opportunity to invest and even giving them a discount, oh, you just spent $200 on our services, you are now, you now qualified for a $50 discount. Should you choose to invest, click here to see more. Yeah, that kinda synergy where you have online transactions taking place every day being able to convert a significant percentage of those o those people over to investors is the most cost efficient way of raising money. And obviously you can do it the other way too, which is to say somebody has invested and has an incentive to invest, you can give them a discount on good products and services. So those are legitimate things that people do on a regular basis in regular plus offerings.

Now I'm gonna touch on costs. I'm not gonna give you a comprehensive analysis, we're doing pretty well on time here, but I I, I'll give you a summary. Front end expenses for your Regulation A+, which include, you know, things like marketing preparation and legal fees and audit costs. Big, you know, we have, I have to make some huge assumptions to give you any kind of cost when audits are involved. Cause some companies have very, very messy financials and, you know, having to audit them may be very time consuming and expensive. But for a company with a relatively simple audit situation, about 150 or $160,000 in total frontload expenses prior to qualification is reasonable. You never want to have no spare money, but that's to give you a sense of the upfront costs. You can save some money probably with some at lower costs, legal service providers for that.

But in that realm, and of course that's assuming a simple audit you know, I can't, I can't tell you what your audit costs will be sitting here on the other side of a computer, right? The ongoing expense depends hugely on whether you are totally dependent on our member base of investors or on, and particularly on advertising outreach to bring in new investors because the, the biggest expense is in marketing the raise, right? And the biggest expense in that is advertising outreach. And obviously it's beholden, it's incumbent on us to only do raises where we have high confidence that the company is appealing enough inherently in what it's doing and in how it can be described and made clear, and that the appeal will be there for people who are looking online and have a limited attention span, right? Cause somebody who saw that ad will only come if they like what they see.

And if they have to spend two hours reading the offering page to make sense of the company, they're not gonna do that. That just won't happen. If they can get it at a glance, you know, in 20 or 30 seconds, get a glance and understand and find it appealing, then they'll stay longer. And now we have a chance to get them to invest at a relatively low cost. So what does that mean? The, the least expensive Regulation A+ that we've seen one of our customers do where we have clear knowledge of their total cost was six and a half percent total cost for a biotech company. But, but you know, that was a special case with a non-opioid painkiller in this era of many addicted people with opioid based pain medicines and a lot of deaths and ruined lives as a result. And a lot of physicians and, and theses invested in that raise.

So they're offering the average offering investment amount was about $8,000 as a result. But you know, in in, if you're raising more than 10 or 12 million, then because the percentages are very meaningless when you, if you, you would never do a Regulation A+ for a million dollars, it would be silly. Too much expense and too much work. But once you're raising more than 4 million, then it comes into make more sense in my view. But if you're raising 10 or $12 million for a company, we should be doing then, you know, 10, 12, 14% cost of capital is reasonable and the larger the amount of raise, then when we get efficiencies going and we can engage institutional investors these days as well, that can further reduce the cost. So you may see lower cost and total and the involvement of broker dealers will influence that.

We are not a broker dealer. We don't charge broker dealer commissions as a result of that. Our fees are very low relative to other sources of other, of other platform sources. The most of the Regulation A+ platforms charge six or six and half percent commissions and they are not doing the marketing. You still have to do all of the marketing. So that jacks up the cost significantly. But given you a reasonable guide down, what costs are it, it, if you, if you enter into a Regulation A+ with the idea that you intend to go list on an NASDAQ, but without committing to that at the front end, which is to say without paying the attorney to do that work at the front end, they don't need to do the work at the front end. You can file your Regulation A+ and let's say six months in, you've got enough confidence, raised enough money from enough investors that you want to either do a direct listing or engage an underwriter and there's enough interest from them, then you can convert the Regulation A+ the format.

But almost none of the content changes, but the format is changed to conduct the audit, sorry, to conduct the listing or the NASDAQ or the NYSE. And when you do that, you have to have a pca A or B audit for the prior quarter to the listing date. And post listing, the securities attorney does other filings that adjust the content of the Regulation A+ IPO then to a complete S-1 level. So subsequent filings are made to bring it up and that increases the cost. So where you might spend 60,000, you know, 40 to $60,000 on a security attorney to do your plus if it's a, if, if you flip it into listing on one of the major exchanges, then that will go up to around a hundred thousand dollars numbers. But you don't commit to that and you don't spend that until you make that change in, in approach.

And the same way, you don't incur the PCA or B audit expense until you're ready to, okay? And if you do list on the major exchanges direct list or through an underwritten stage where you might add another 10 or 15 million to the raise with the underwriters to make it worth their while, then you are obligated thereafter to do quarterly PCA to be audits. Obviously if you're on the NASDAQ or on the nyc, but if you list on one of the minor exchanges like the otc, QV or qx, then a once a year gap audit is sufficient on the audit front. So that's pretty light burden compared to the companies that were demoted down to those exchanges from one of the major exchanges. So now I'm gonna touch on liquidity. Again, as far as the SCC is concerned, a Regulation A+ is a public offering and the investors are allowed to sell their shares right away.

Not to say that they will, but they're allowed to. You are not required to list your securities when you do a Regulation A+, but obviously listing them provides, or excuse me, stating your intention if and when the following circumstances occur to list on an exchange gives the investors higher comfort that they have a reasonable view to liquidity. So someone who's loving the company and will inve will invest, will invest more if they have a reasonable view towards future liquidity. Yeah. So, you know, it's worth, worth knowing that that helps make it easier for people to invest. Obviously you can provide direct liquidity in special circumstances if you prepare the offering for that to investors, but that's complicated enough that I don't generally recommend it. It's better to use a listing arrangement, the types of liquidity options. Excuse me, lemme see my notes here. Yeah, yeah, good.

So, and other issues around liquidity. I've said earlier, up to 30% of the capital raise can go to insider selling the offering. The completion of a Regulation A+ provides liquidity to all shareholders in the company as long as the company isn't locking them up. And as long as the owners of those securities have owned them to satisfy it long enough to satisfy their rule 1 44 holding period. So if you have six classes of preferred, cuz you, this is your seventh round, you've got six prior classes, all of those investors are technically made liquid and are allowed to sell their shares unless you lock them up. So everyone's liquid, right? Obviously many companies will restrict that liquidity and phase it in over time, but that can be lovely for companies that have made successive brands of investments over a long period of time. They wanna provide typically liquidity to their investors.

And Regulation A+ provides that liquidity. Once you, your offering is, is, you know, once you arrive with it, you are now a liquid company. And then it's a matter of what do you list which security you choose to list? Cause you're not gonna list six different classes of preferred. It would be too expensive. You're not required to list. You can do a direct listing or get into that. And I've mentioned that this is a public offering and that's why, you know, the audit requirements and the other risk factors and other completion, other items are needed in the reg a plus filing. So what are the listing options? You don't, you cannot list, you can list on a thing called an alternative trading system, which I like for many companies, ATSs, as they're called, have come about in recent years where the SEC allows for the formation.

Usually a broker dealer can add an ats. They, there are now about 16 or 20 of them that are available. None of them have enough liquidity yet, but they provide the ability for your investors once you list on a particular ats. They provide the liquidity for your investors to and shareholders to sell to other investors. And one of the lovely things is that there is no shorting and there is no naked shorting, unlike on the o TC markets or on the major exchanges where stock brokers can put shorts on even when there's no borrow. That is not the case with ATSs. So they're, you know, a legitimate place to list. You're not gonna get obscenely high valuations on an ats, but you're not gonna get slammed by naked shorts from unscrupulous stockbrokers. So I like ATSs. You know, enough said there's much more detail.

We have, if you go to the MSC website, top right, there's a search button icon. If you click on that search and type in ATS or what is an ats, then we have information on that, we have a webinar on that subject and you can email us, email me for info on it. Ákos, please put my email address in the chat for people to refer to. Yeah, OTC listing ats NASDAQ, NYSE. You can only list on NASDAQ or the NYSE if you have two years of operating ex history, actual operating history. But that, that isn't unreasonable. Direct listing is something that I think is phenomenal because people tend to say, oh, the IPO window is closed. And, and some people think that's because the SEC won't allow any IPOs, which is absolutely not the case.

The SCC doesn't assess the merits of your offering. They assess the legality of it, that your company is legitimate and you have all of the right i's dotted and t's crossed and it's all legal and above board. They are not gonna second guess the valuation share price things of that type. My point is they're not gonna say no to an IPO. The underwriters say no when it's a difficult market as we've been in of late. Underwriters aren't gonna take on the effort of doing an IPO when they find the investment climate very difficult. If, however, in this investment climate you are able to raise or we are able to raise money successfully via Regulation A+ from main street investors, from enough investors and raise enough capital, then you can complete a direct listing without using an, an underwriter without all of that expense.

One company has done that to date Atlas that particular as a mv I provided them some informal guidance before they conducted that direct listing. I chose not to work with them for, for, for reasons that they had a, a large convertible node planned. And there's high risk of a serious stock price depreciation when large convert notes are involved. And that's what's happened with that company. I haven't been studying them closely, but their share price has been drastically impacted. But the point isn't, to me, the point isn't that the point is that they have demonstrated one transaction where a company did a Regulation A+ online and then did a direct listing without using an underwriter without that expense. So doing it the right way is a, is a, is a great thing to do and you're not, you don't have to do it via under underwriting via an underwriter. Underwriters are great. We know the underwriters that are active in the Regulation A+ space or want to be active in it when the time's right. This isn't the right time, obviously. Okay, now we're doing on time. We're good. So I'm gonna hit on some tips here for success.

And I'll get to the questions later. Thank you for putting them in. You're welcome to put questions in and I'll get to them serially after this section. So tips for success, you can, I suggested to the SEC in the summer of 2012 that they include what I call crowd audition. A way for people to test market their company online. With, without having done all the filing, without all the audit audit expense and without raising money just to see if there was an enough interest. The SEC chose to adopt that suggestion and they called it test the waters. And then we trademarked a number of interesting treatments of that term cause we were paying attention. So test the waters. You can test market your offering legitimately and relatively inexpensively. So that's what I recommend when you know, it's am ambiguous.

I mean, some companies should absolutely not do a Regulation A+ online raise, others look phenomenally great. And when we're in the gray zone, you know, then I'll suggest doing test awards tier. There's two types of tier of Regulation A+ tier one and tier two. Tier one goes up to 20 million. Tier two starts at zero and goes up to 75 million. Probably 97 or 98% of capital raised in Regulation A+ is tier two. Very few companies can make make tier one work. Well, there's too many expenses dealing with the states getting blue sky permission, which you don't need in tier two. So don't do tier one in, in, unless in exceptional circumstances avoid depending on email lists we have ne never yet seen except for a customer base of active customers. Then of course that email list can be very useful. But buying renting lists and sending out emails, trying to raise money as we have never yet seen that, seen that succeed.

Not to say it cannot, but the, the odds are stacked against it include international, where what you are doing resonates with international folks. They don't get as many great choice opportunities and many people internationally would love to be invested in quality US companies avoid big name auditing firms. Typically companies doing Regulation A+ tend to be smaller. And we've had cases where two things have happened. One is where medium large auditors jacked up the price when it was too late to switch away from them, you have to start the audit process again. We've seen prices traveled or quadruple, so avoiding them avoiding that risk is important using known auditors that won't do that. And the big name auditors, they may engage willingly, but they tend to assign low quality small teams, low quality teams to the audit process. They charged too much. And, and we had one company that was never able to get their company that had an international operation and in the US they were never able to get their Deloitte audit done.

And they, the board ended up canceling their entire Regulation A+ IPO to the NYSE plans for that reason. So be careful with bad dose set, a low minimum raise amount if that's legitimate. So, you know, if you have to buy a big asset, it isn't legitimate, but otherwise setting it low so you can make escrow drawdowns starting early on in the life of the offering and that's commonly done. Setting a higher maximum than you need to give yourself flexibility to raise the amount you, you actually raise without having to requalify, without having to request a change from the SEC. And you can, I touched on this earlier, you can change the evaluation and the share price during your Regulation A+ up to 20% total without requesting permission of the SEC, but by notifying them, and as long as you conduct this change in the correct manner, which obviously we've helped companies do.

So the flexibility and the ability to do that when you do it properly can help market the raise and also reward the earlier risk takers and ha and allow you to change evaluation as you go. If you wanted to double the evaluation, then you would need to pause the offering file only the the share price change, the valuation change. And then typically the SEC will qualify that in a two or three week window because you didn't change anything else. And again, they're not gonna second guess the share price holder valuation. Okay, other things are obvious, marketing is key. You can do it for three years and evergreen strategy is a good thing. You build cumulative brand awareness, which makes ongoing marketing easier. So now I'm gonna refer to the questions that you guys guys have posted. You're welcome to add more while I do this. We're okay on time. Bear with me while I bring up the questions.

Yes. I think the question is do these offerings solve the problem of a company valued at 20 million, which is i e small cap going public? It doesn't automatically solve the problems, but being able to raise money online cost effectively for a company that's the right style of company and providing liquidity via an alternative trading system, then yeah, that's a viable solution. Because let's face it, you know, with a, if, if the market cap was 20 million, that would be a tiny raise anyway. But at that level, you know, the, the, the superstructure, the the management team are in place probably sufficiently to provide predictable results and manage the expectations of the market. So being on an ATS would be a much better option.

Looking at Colleen's message here. Very good. Thank you Colleen. She's given me a description of her business. So the maximum raise, this is Andrew is 2070 5 million. But a company could be, could be valued. It's up to you what the valuation is. It wouldn't be generally prudent to have a valuation in the billions, but I know one company that has, I forget the exact number, start Engine is a indirect competitor to us. They're more of a warehouse. They don't add value like we do, but they're bigger. And they're raising money right now with a market cap over a billion dollars I believe. And then it's a matter of the eyes of the beholder determining if it's fair be priced. Yes. And you could do 75 million each, each 12 month period.

Can a new legal entity that has intellectual property and early stage revenue as well as other assets use Regulation A+? Is there a minimum period for the audit requirement? So yes, that entity can use Regulation A+ and there is not a minimum. So if you have a hot enough idea and a strong enough team and strong enough marketing and money to spend to do this process, then your company kind of existed four weeks. And then you have an audit, which is of a statement and the company's financials that existed for four weeks. Obviously very simple. It isn't how many years of revenue and how big the numbers are. That matters. I mean, that matters of course, but it's, it's how appealing is the company? And let's face it, most chatGPT based startup companies will tend to be new because the whole whole area is so new.

But that's okay, as long as what's been done is attractive enough. A lot of the chatGPT add-ons and enhancements that we see, quite a few of those are very compelling and can go on to tremendous success. I remember I was an early adopter of smartphones in 2003 and it was obvious to me some of the companies were doing marvelous things. Some of those companies fell by the wayside, but many of them went on to be very, very successful businesses. They didn't have the acceptance that we're seeing right now and the excitement that we're seeing right now in had G P G though. What is an alternative less expensive listing to the NASDAQ? Well, a direct listing to the NASDAQ is less expensive cause you don't have to pay the underwriter fees. But you know, to go to the O T C QB or QX is less expensive.

They charge less and you don't have to have raised as much money. You still are subject to naked shorts by stockbrokers if you're on the TC QB or qx. And unlike companies that were demoted onto the, those markets from the major exchanges where they continue to have to provide quarterly PCA or b audits, companies that arrived on the QB or the QX via a, a new Regulation A+ for a new entity, an entity that is not already public, then they are only required to do an a u, an annual gap audit, US gap audit, which is far, far less onerous, obviously reporting of ongoing material changes in the business, and six monthly management financials is the other SEC requirements at the, those, those financials must be provided in US gap format. But you get the gist. This is this is a lot simpler if you're on the QBO or the qx if you're ready for that.

But then an ATS is another option, which is in many respects, more attractive because it's you know, you don't have shorting. There are so many public companies that have been decimated by the ability to stop brokers to put naked drawers on them. I, I don't understand why that is still allowed, but in any case, that's a fact, right? So an ATS is a, is a less expensive, less burdensome place to list if you just wanna provide liquidity and you're not expecting stupendously high valuations, you can get stu dependency high evaluations on you, on the NASDAQ and the NYSY to a lesser extent on the QX and, and further lesser extent on the qb. Okay? So if you have more questions, please add them. I've covered the ground that I wanted to cover here. I hope this has been useful for you.

And again, if you have questions, please add them. You're welcome to email me to ask about working with us to help you with your Regulation A+, and to ask for advice from me about how it can work and so forth and so on. And be happy to respond to the extent I I can. And please bear in mind the legal disclaimers that I gave earlier, and that Ákos has posted a couple times or more in the chat section. And, you know, I look forward to hearing from you and helping you if I can with the successful raise of capital and moving your, your company forward this is an exciting time from an AI machine learning large language model chatGPTworld, right? This is a, this is a really phenomenal time. It's been obvious to me for years that this would take place, not the exact way that it has, but that AI and machine learning would reach a stage where it can be very, very attractive.

I mentioned earlier GATC Health and I mentioned that we're a shareholder, so I, I have a bias on that in favor of them, but it, I, I mentioned that they have this massive database now of human beings, d n a without knowing, without needing to know the names and addresses of the people. But they have this massive database of human d n a, the ailments that they've experienced, the treatments that they've experienced, which ones succeeded, which ones failed. That massive database applied and combined with AI machine learning and their human model, which is able to emulate, emulate disease states and find more effective treatments for them. It's phenomenal, right? So they have to have a learning base, as is the case with chatGPT right? The first version of it that we saw was practicing on data on the internet prior to including 2021.

And, and prior to that, it's necessary for AI to learn to have data from which to learn, right? But that's what Gai Health has done and that's what any successful company is gonna have to do. And that's where things, that's where the smart people add the, add the value, right? I've been looking into this for years from a investment propensity standpoint, cuz there's an obvious opportunity there. And the challenge has been getting a database that I could use to have our AI learn from, right? You can imagine that, that those databases are not as easily available as one would like or tend to be a bit expensive. Okay? So I'm not seeing any more questions. Thank you Ákos. Thank you Peter, for setting up this webinar. Thank you all for attending. I hope you have found this to be very informative.

Again, if you go to the MSC website and click on the top right search icon, then you can search. We have the most comprehensive FAQ and blogs and webinar recordings, video recording with clickable indexes. So you can just watch the relevant parts you wanna see of, of any other source around Regulation A+ and online capital formation, but especially around Regulation A+. So Andrew's asking if I travel, I do travel, but yeah, we're not based in New York. I'm surprisingly, based on the name, I realize that the implication is we are in New York City. I chose the name Manhattan Street Capital to imply what we do have meaning for people, which it seems to work well at. We're based in San Diego. We have team members around the globe actually, but we're based in San Diego. Cause this is where I choose to live and I love the lifestyle here.

But I do travel a little bit, but mostly I'm very productive online and I, I I travel only more for pleasure. I don't travel as much speculatively because, you know, we have so many customers that need our help and I need to be available online via Zoom and other means in order to get things done. So again, thank you very much guys. I hope this has been really helpful to you and look forward to talking to you in the future and I wish you great success. Thank you. I'm gonna end the session now and we'll get started on making a recording and sending it out to you. Thanks. Have a great day.

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