The Differences Between Reg A+, Reg D & Rule 144A & How To Use Them For Your Capital Raise; Interactive Clickable Video

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

Please read the disclaimer below the index

Chapters:

1. Disclaimers
2. Rod's background
3. Manhattan Street Capital and Regulation A+
4. Topic introduction and Agenda
5. Forms of Regulation D
6. Discussing Regulating A+
7. What Rule 144A is, and what makes it attractive?
8. Liquidity in connection with the methods
9. Comparing the methods to raise capital
10. How these capital raising methods can be used?
11. Q&A – Regulation A+ risk relative to class action suits by investor
12. Q&A – Cost of Rule 144A
13. Q&A - Combination of Regulation CF & A+
14. Q&A - Regulation A+ alternatives to raise money (OTCQB / OTCQX, NASDAQ, NYSE)
15. Q&A - Selling debt using Regulation A+
16. Regulation S – Regulation D combination
17. Q&A - SPAC entity and Regulation A+
18. Q&A - Crowdfunding and donation with Regulation A+
19. Q&A - Cost of Regulation D
20. Q&A - MSC and multiple platforms offering
21. Q&A - Long term stock exchange, FCC license, ATS
22. Q&A - Percentage of deals that are done with the third party escrow agent
23. Q&A - Using two companies to reach goals
24. Q&A - Issuing a convertible for using Regulation A+
25. Q&A - Registration of underlying common
26. Q&A - Anti-dilution provisions in a Regulation A+
27. Q&A - Fees for Rule 144A
28. Q&A - Raise money to acquire distressed debt
29. Q&A - Additional limitations using Regulation A+ for security tokens
30. Q&A - Raise capital for an industrial real estate development
31. Conclusion

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MSC is not a law firm, valuation service, underwriter, broker-dealer, or a 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. When Rod Turner provides advice this advice is based upon his observations of what works and what does not from a marketing perspective in online offerings. Rod does not tell the audience what to do, or how to do it. He advises the audience what is most likely to be easier to market cost-effectively in the online context. The choices of all aspects of companies' offerings are made by the companies that make offerings.

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.

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Manhattan street capital and I, we're not underwriters. We're not broker-dealers. We're not attorneys. Um, what else is there? We're not, we're not, we're not valuation professionals. There's a lot of things that we're not. I don't want to, so I don't want to. You didn't take anything I'm saying as being pretending to be an advisor of those types. Cause I'm not, we're not.

Give me a couple of minutes of explanation here, so you know where I'm coming from. I started out my career as an engineer, I got into entrepreneurship. I've had the good fortune to play a key role in building six successful technology, startup companies, two liquid outcomes, two, those were IPOs to the NASDAQ. Uh, one of them was Ashton tape, which certainly ages me. That was an IPO in November of 1983. And, uh, slant tech is the second one, which is also pretty ancient at this stage. Um, I've done a venture capital firm called OVI ventures and an incubator along with that, which we did in the Safi question. You know, I did at the beginning of, uh, joining the first internet bubble. Oh, by the way, I suggest that you view, you use to zoom in this way that you selected to speak of you. Um, everyone's muted. So, we don't have too much background noise and we will take, uh, if you'd like to give us questions, give me questions, please. At any time, enter them in the chatbox. And then, uh, I'll be, I'll do my best to answer those later.

Just whenever you feel like it, go ahead and enter those questions. We'll start at the top of the list and work down it, uh, when we get into the Q and a section.

Yeah, so I launched this company Manhattan's fee capital, um, in May of 2015 because of Regulation A+. So, we've been involved in this space for a long time and have a lot of relevant experience. We are, uh, we help companies raise money. We consult with them. We advise them and we, uh, put them on all offering play huge. And we do a lot. We bring in all the various service providers to help make successful offerings. So, today's, webinar's about comparing Reg D, Regulation A+, and Rule 144A.

If it would be like lovely for me to hear from you guys, how many of you are already familiar with 144A I find it quite interesting, but I'll get into the why I find it interesting part in a minute, uh, as a part of the agenda, we'll talk about liquidity obviously, and I'm also going to talk a little bit about marketing and how things are shifting and changing because I'm seeing a lot of adjustments in the changes, evolutionary, insignificant, and significant changes in the online solicitation of, uh, of investment and engagement as well. So, um, without further ado, let me just sip some more tea here and launch into reg D. There really, there really are only two viable forms of reg D for solicitation online and of those 506B is the less viable and five or six days more viable in 500 in the case of 506 B uh, like in, in reg D you can raise unlimited amounts of money.

That's a lovely thing. Uh, it's limited to accredited investors in 506 B, you are allowed to bring on board up to 35 non-accredited investors. Um, the big limitation though, is that you may, you may only approach, uh, accredited investors that you have a relationship with. So, you can't run ads online and bring in people who were half or accredited. You can't buy a list of accredited investors and send out emails to them, inviting them to invest because you don't know them. Uh, so that's a serious restriction, uh, on, on 506 B, which is why we have never done a 506 B obviously when you're doing, uh, uh, when you are raising money. And, you know, the people experience is a very relevant way to go. Um, an advantage of 506B, which is great in that situation is that the investors can self-States.

They can state that they are accredited. They don't need to prove it. We don't need to verify it. So that's a big advantage. Um, and then as is the case with, uh, 506C or required or expected by the sec to file a Form D with them, um, within 30 days of receiving your first investment in the reg D but that's pretty easy, and it's not a request. Can we, can we please do this? It's a statement that you are doing it and what the terms are. And the 506C is a whole different case. So 506C a and B when effect in these forms, when effective in September of 2013, uh, as, as actually, the first online crowd investing methods permitted by the sec 506C is great because we can market it far and wide with a really very only very reasonable restriction.

Um, although the answer is zero non-accredited investors are allowed and, um, the issuer company must take reasonable steps to verify that those investors are actually accredited. So, they have to prove it. And that's a pain in the neck, right? So, and it's an ego thing too. So, some people just don't want to do it. Older investors get stuck. It, you know, I mean, just being, playing the skeptic side of that for a moment, that is the case, but 506C does work. And there are a lot of people out there who invest, who are accredited in 506C offerings every day. And we've been making great strides in figuring out how to effectively market to them. That's been something, and I'm very, very pleased about the progress that we've made in the last year. Okay. So, uh, in comparison, Regulation A+ is a different puppy.

Um, it has the ups. I'm going to talk about tier two because tier one is almost a waste of time, probably in the year 2020 2% of the capital that was raised by a Regulation A+ came in via tier one. So, I don't want to dwell on tier one, tier two starts at zero. Now it goes up to $75 million per year. So, it's a cap, but it's also a large number for many companies, uh, but he can do it and you could do it successive years, right? You can do it year after year. Investors, uh, have any wealth level, including accredited investors, accredited investors are not limited as to how much they can invest. Non-accredited investors are limited. It's all self-stated by the investor. We don't need to prove or verify it. A non-accredited investor can invest up to 10% of their net worth or their annual income her offering, um, which is really a very generous, very big number, right?

Somebody, somebody making 200 K a year say a hundred K at a non-accredited, they can invest $10,000 in your Regulation A+ that's a lot of money for that person, that income they will, especially because they can do the same thing in the next Regulation A+ they like, so it is really not very restrictive. Um, you are allowed by the sec to market the offering worldwide, which is not to say that the re the, the local regulators will approve of it. We haven't had any problems except in Canada. So far, uh, in Canada, the federal regulator just said, you got to go to the States. We got to get permission from the stakes. Fair enough. The States, you know, the other one I have forgotten for the regions of Canada, the restrictions in men promoting, describing, and marketing or Regulation A+ are more limited than they are tighter.

If you will. Then in reg D reg, D you can make some predictions about returns. You intend you can make predictions about accomplishments. You intend and your business in the case of Regulation A+ you have to be very careful because the sec does not want, they're protecting main street investors. You know, mama's a grant grandmother and, you know, people that could be fooled easily that therefore grandiose statements never lie. Anyway, you know, like we are, we are, we have the cure for cancer, you know, something extreme like that is obviously not going to be allowed, but you cannot say we're acquiring companies that we're going to acquire 50 companies in the next 12 months. That's not allowed. That's just too much of a predictive statement that it may not come true being as how we're all entrepreneurs here. And you've got to be an optimist.

It's almost certainly not going to come true if we face the reality of it. There are no blue-sky requirements for, for registration, uh, with some peculiar exceptions that I won't dwell on at great length here in you're in a Regulation A+ So in tier two right here, so essentially you can pretty simply raise money that it takes. If your company has existed for what, two years or longer, you need a us gap audit to do a Regulation A+ that's an expense and a hassle, and you have to file with the sec to file a form one an in order to get qualified by the sec to conduct real Regulation A+ So you're talking about a full month journey, two months of preparation, two months to get through the sec process and front-loaded expenses for the audit for the securities attorney and so forth.

Um, so reckon that is going to cost 150 K roughly speaking to be owed from we're starting this to, Oh, great. We're qualified. And now we can raise money month five, or thereabouts, assuming any efficient process. That's, you know, you can spend a lot more, you might be able to spend a bit less, but that's kind of a reason. That's a pretty reasonable number to consider at the low end of the reign, including everything, not excluding any things, including all expenses. Um, once you'll qualify, you got 12 months to raise the money, and it's a heck of a lot easier to raise money in a Regulation A+ if you are marketing an offering that is appealing to main street investors, uh, it's, there are so many more people is that they didn't have so many of them didn't have these opportunities before. And if they love your company or like what you're doing, or find it, that exciting investment, then, uh, it's very much easier to raise money from them.

Regulation A+ investors are ultimately the, you know, reg D investors generally pessimists. I'm a bloody pessimist. I've done so many deals where I've lost my shirt. I've learned the hard way that I need to be a pessimist as have many other accredited investors. Um, let's face it. When you're accredited, you have a bazillion opportunities of places to put your money. Um, we've had instances when people come food, uh, from, from advertising to an offering all Manhattan street capital, we, them too, uh, to see the investment process or to invest. We require them, they click a button and they have to give us their email at least. And so then they're a part of the engaged audience that we are companies market to where the marketing agencies market do. We build a bigger, bigger audience. So we've had days recently where out of 10 people who would give us their email from clicking on that button, seven of them would invest on their first visit.

So, you know, when that's happening, obviously this is an exciting offering, but you also know these are optimists and pessimists would look at it, click on it, check it out, come back later. I asked the wife, you know, do some research, probably not ask the wife because always going to tell them no, don't do it anyway. But you know what I mean, there are optimists who we're dealing with. So, we need to protect them and make sure that they're fully informed. And don't really expect them to read the offering. Circular 150 pages is a little bit heavy going. So, let's be real about that. But anyway, Regulation A+ you're dealing with optimists and if you're doing it right, and you've got a compelling offering, you know, 60% of the money is invested now via a smartphone. And it takes three to four minutes, five minutes. It says, so such a different situation than we used to have it sort of very nice dynamic.

Okay. So, I've given you a sort of a top-level summary thereof the differences, actually all five or six PNC and Regulation A+ I'm not going to talk. So, what rule 144A is some, probably a lot of you don't know about it. I didn't know about it myself some time ago. And then I learned it. We have a potential client that has a really sophisticated company, an investment company lending company that has an amazingly complex deal. It's very hard to understand, but he ends up with, these raw revenue percentage streams being paid out over time in a very secure manner. And he's able to pre to create triple well investment-grade securities, and then he needs to sell them. It turns out rule 144A's the best way to do that. His first deal is about $1.6 billion. So, we're not signed up to do that yet. It may never happen, but in the event it does, that will be rather cool. And the point is I had to learn about what a 144 is about. So why, what makes rule 144A currently attractive in my view is the combination of two new developments. So, I see it as a rather attractive opportunity to raise money where you are two ago. It wasn't.

So, I'll explain, I'll just state those two, those two changes, and then I'll get into explaining what it is. The two changes are these. We are seeing serious institutional engagement in Regulation A+ now, and that's a new thing, you know, a year ago, we almost never saw it six months ago is when it started. I don't have a graph to show you to prove it, but it's happening, it's happening and it's happening in a very rewarding way. So, I suppose you'd say that Regulation A+ has grown up and is being recognized as a marriage, as, um, as a respectable way of raising money, uh, on a selective basis. That's a huge change. Huge. Uh, and the other thing is that we're seeing the emergence of, because of regulatory reform, we're seeing the emergence of alternative trading systems ATS for short.

So, accompany, you can make a rule 144 offering 144A offering and effectively go public and list on an alternative trading system with very little overhead of very little up-front expense. The downside is that it can only raise money in the US from quips, being qualified investment companies, which essentially means companies that are smart enough to know what the hell they're doing. They have to have at least a hundred million dollars of other people's money that they're able to invest. So, this is an institutional offering, but then, this is where we get into how it works. And I don't want to get into too much detail, but I don't know how much, how many of you are interested in this, but I find it rather an effective method to go public within the sense that if the, if the securities are tradable, which they are instantly on an alternate, as soon as listed on an alternative trading system, and you did that, and you were able to do that with the other advantages of 144A, this is a new route, uh, to liquidity bats, uh, is worth, et cetera. So, these are the way it works. This is the way it works, the company, but he decides to take this approach. The filing requirements are nominal. Then, the offering documents are nominal and minimal. Uh, you aren't going to, you don't have to do a full one, a Regulation A+ file with the sec, you don't do a registration statement. There's an exemption for one 45 for an offering because it's assumed by the sec that these entities are smart enough to know what the hell they're doing. So that's, so the first step is the issuer sells the securities. This is, this is the sort of weird part.

To an accredited investor, um, via reg D. Okay. And then that investor is able to market them online. The marketing can go wherever it goes, but the only people that could invest all those that are, uh, quips quality, these, these qualified investments, uh, businesses quips. Yes. And, um, reasonable steps must be taken to make sure that they're the people that are investing. They are immediately liquid in the SCCs eyes. And once the securities are listed, then they are actually immediately liquid and can publicly trade the securities. So, especially essential when you have an offering when you have a company that is attractive to institutions, this is a very attractive way to raise money in my book. It's a simple way to get securities listed and then train them and raise money. So, um, um, I'll, I'll pause on that. Map that into other aspects of this somebody messaging thing. No, it is. Okay. So that is why I think 144 is, is now an interesting phenomenon, an interesting vehicle.

And so now I'll talk about liquidity and other aspects of these different methods. So, Regulation A+ liquidity is excellent. Um, but then, you have these options. You can go public on the NASDAQ. You can go to the OTC, QB, or QX if you do the QB or QX, then on the QB or reporting obligation is the same as having anyone having completed a Regulation A+ tier two, which is an annual gap audit. You ask Apple at six-monthly management financials. And of course, any material changes in the business, um, you can list on the alternative trading system, the beautiful advantage of doing so, the downside is they have less liquidity and they're new and they're emerging. The upside is that there are no shorts and there are no naked shorts. So unlike listing on the OTC markets or on a major exchange, many companies, which are not really ready for a management bandwidth, one review or stage of business, or predictability of returns and profits, many of those companies really aren't ready for the rigors of exposure to naked shorts, which stockbrokers are allowed to put on all day, any day they want. So, you know, unless you prepared to handle that, going out on those exchanges is a marginal, marginal blessing. Going on an ATS is a much better bet from that point of view. Okay. In other aspects of Regulation A+ liquidity, you can offer limited directs liquidity to your investors. It's limited by regulation and M for mother,

Uh, and the upside of what an upside or Regulation A+ that is not, I think generally understood is that completing the Regulation A+ makes all the insiders liquid, all of the older investors and the owners of the company, everyone is liquid. So, they're all obviously constraints on that light, the insiders and passive investors who own more than 10% of the company are restricted to only selling jewelry in a two-week window after the company has reported results or audit results for audit or management financials. So that's pretty restrictive. And during that window, they're restricted to 1% of the float. We float, you know, the volume trading each day, each day is that that limit applies to each day. That depends heavily on where you're listed, right? So, an ATS isn't going to give you a humongous amount of volume. And if you have four classes of securities, then to make it really easy for each group of people who own those securities to trade them on an ETS or anywhere else, they have to be listed actually, right?

So, you have the extra expense of that. It does make it, it encourages you to the variety of securities, you offer simpler, uh, and it encourages you. If you are nervous to lock some, lock up some of your people before you do, uh, your Regulation A+, as you would in, uh, an S one IPO. Anyway. So, there's a really, the cool thing is though, if you look at it on the positive side of this, uh, of this ledger, your long-term investors who don't own more than 10%, they're liquid immediately. And if they can find a buyer, they can sell it, sell to them, or when you list someplace, they're able to sell and they aren't restricted to when the most recent results were reported. So that liquidity is lovely for them because, you know, in some cases, they've been around a long time, these overnight success stories take a while to build in my experience. Um, okay. Reg D liquidity is better than it seems. Um, In general terms, typically one year holding period before any transactions, however, private sales of reg D securities to other accredited investors can be made immediately after purchase and a reg D I didn't know that until I studied it some time ago, similarly, under another exemption for a seven, same thing,

Privately securities can be sold. That means it can't be listed publicly. You can't be marketing that online. You can't be promoting it, but privately those transactions are aligned and obviously privately to more institutional investors, you know, like these quality qualified institutional buyers, which is the proper term for quips, uh, that would be under rule 144A, and that's allowed at any time. And then publicly after one year has passed. So that doesn't mean the shares are easily bought because the companies are probably not listed, but after a year, the rule 144Aholding period is passed. Then those, uh, accredited investors investments are actually publicly tradable. If they can find a buyer, that's pretty good. So, and, and the equivalent I mentioned already for 144Ais that the quips are liquid immediately. And by the way, when you do this offering reg S investors are allowed to their liquid immediately, as long as they don't sell to US investors. So international buyers of the 144A offering, uh, they're allowed to sell right away at side the U S as far as the sec is concerned. So again, you know, this is an interesting, interesting Avenue to get a company liquid and raise money. Okay. Reg D liquidity out of that. And he said that, all right, comparing these different methodologies of raising capital for companies, um, let's see how we're doing on time. Good. Um, okay.

So reg D and rule 144Adead simple to start, you don't have to go filing a lengthy report and asked permission from the sec and get qualified it, et cetera, et cetera. So, the upfront expense and time involved in getting started are minimal. It's going to be gated by how quickly you can put the marketing together really will be the long legs. So, I would say four weeks to six weeks is realistic to go live with a reg D online or a 144A. We will provide the service of buying the security in the first place, and then putting it on our, off on our platform to sell it to the aftermarket. Because if you, if you if you heard what I was saying earlier in the 144A, essentially, there's this two-step process where the issue ourselves to someone and that someone that is able to sell through the 144Apublicly through online marketing, and we'll provide that service to any company that wants any company within reason that one.

You don't have to have audits in place to do reg D offerings or 144A offerings. What do you do in a Regulation A+? It's entirely reasonable, but that's a difference, right? Um, there's no limit on how much you can raise in a reg D or a 144A offering. Whereas this, there is a limit of 75 mil per annum and Regulation A+, um, still the thing Regulation A+ on one, four a are different methods of getting your company public, obviously public with 144A is a constraint public in the US right? That's these quips only. And I inside the U S all the reg S investors are effectively liquid. Uh, but it's not the same as a Regulation A+ where it's a suite. It's a thing of beauty for bringing a company public in the normal sense of the word with reg D and 144A there are virtually no online reporting requirements. Obviously, businesses need to be above board and things, but there are no oldest’s requirements, and there's no ongoing big obligation of a, an ongoing reporting or of ongoing events in a reg D or a 144A. In the case of Regulation A+ a huge advantage, which we live and breathe every day is that you can market your frame to non-accredited investors. And as I said earlier, they're optimistic if it's the right offering if it's an offering as well-marketed, then, uh, you know, we can bring the cost of that advertising down the lowest we've been able to get it down to two to date was $3 and 50 cents. Now actually $3 and 30 cents spend on advertising per a hundred dollars raised in a Regulation A+, which is one of those things. We'll probably never repeat that for a long, long time if ever, but that is a really good indication of how, when it works, it works well, right? That's, that's the biggest expense in a Regulation A+ is the advertising

And their case in that pocket was biotech, their case, their total expense, including everything was about six and a half percent cost of capital. And that was a relatively small raise. So, the percentage would have been far better if they'd raised more money, which they chose not to do reg D and Regulation A+ and Rule 144A, it's not reg 144 rule 144 a are much less expensive to start, right. You don't have the securities attorney set up expenses so forth. It's a lot, a lot more straightforward. Okay. So, I'm going to give you a couple of examples of things that you can do with these different capital raising systems. Really only a couple, because, um, most of it's obvious, um, can you do a venture capital fund? Well, in the case of reg D if you raise money with less than a hundred investors, so 99 investors, or less than, yes, you can, you can raise money to be, to go out and do private equity investing to do venture capital investing, essentially as a blank check company, and any restrictions on how much equity of those companies you invest in that you will have, or that you lend to.

Okay. So that's a nice thing, except it's not a nice thing to have to cram it all into 99 seats, but you can do that. We did an offering with, uh, two bought, uh, we did an offering with a fund that was put together in this manner last year in the summer, in order to raise money in order to help buy securities from impossible foods, shareholders who wanted to diversify. And that's what we did. And we were remarkably successful with that race. It was difficult because, you know, you want it to raise larger amounts of money per seat that made it a bit more challenging, but we were still very successful with that. Raise only marketing it to our investor, this, which was a very pleasant surprise. Actually, I didn't think it would go as well as it did. So that's one example. Another example is in Regulation A+ where it's one hell of a lot more difficult, but essentially what it comes down to with Regulation A+ is that if you happen to be an early-stage venture, where you own large amounts of the companies because you're putting them together, then the majority of your investments will be for more, for controlling interest in companies. Then you can use Regulation A+ until the cows come home, as, as that, as an investment fund to do that, um, the constraint, the problem is that, you know, typically in a typical venture capital fund, you're not buying more than 51% of a company, or you normally you're getting less than that, in which case that really Regulation A+ doesn't work unless you combine the investing portion with the lending portion where the investing portion is essentially less than 40% of assets. And the, uh, the lending portion is more than 60, 60, or more. And the the nice thing here is that where the investing bit is in warrants, they don't count as assets. They don't have, they don't count as securities until you buy them. Right? So, you could have a situation where you are doing a lot of really interesting equity investing through Warrens through a Regulation A+ entity-funded entity. Um, and yet, you know, you're getting minority positions, but your actual exposure is better than it seems. If you see what I'm saying, because of the fact that a Warren's don't count until you exercise them.

Okay. Those are the main things that I wanted to hit on. So, I'm not going to go to look at the questions that you guys are posed, and there will be one. I do that. And if you'd like to add more questions here, I'll be happy to take them. I'm going to try and optimize the screen here so I can see the questions bear with me and mom and guys, while I do just what I said. Okay, good. I hope this has already been really informative. And I look forward to seeing more questions. You have disclosure. Yes.

Oh, somebody asked about recording. We are recording it. I would rather you didn't, but, um, it's I suppose it's okay. You know what, I don't really want you guys to record these sessions because what we'll do is we will convert this into a recording. And if it's, if there's something I said, that turns out to be factually incorrect or provocative of the sec, we'll delete that part before we publish it. And, uh, I don't want it to have me going, saying the wrong thing someplace, getting proliferating, but I didn't see a question. So my head, okay. Cam one 44, a go-on long-term stock exchange coming on. Don't know, I don't know what the long-term stock exchange is. If it's an ATS then yes. Regarding Regulation A+ products, can you define potential risk relative to class action suits by investors? Good question. So the primary thing with, with, uh, Regulation A+ to limit litigation exposure in the future is, is I, as I see there's two things, really good prep, three things, really good preparation of the documents.

So all the risk factors are clearly delineated. That reduces exposure. Obviously, secondly, make sure it's a really good company and there is good ethics everywhere. It's so bloody obvious. And thirdly, let's be a bit selective about who we bring on board as an investor, right? So, on that front, we do things on our platform that are above and beyond. Both of them are, do AML and be all that. We have an algorithm that monitors people's activity, you know, our website everyone's activity, actually. And we can, from that flag, I would say dangerous behavior that indicates a low-quality investor. So that plus the more in-depth work beyond the AML allows us to essentially overt some risks, you know, recommend to our client companies when they shouldn't accept that investor because you don't want the money. If it's going to be a risk down the road, somebody that has done has had four personal bankruptcies might not be the kind of risk you want to take on. Right. But then after that, I have not, I'm not aware of any posts offering litigation in Regulation A+ That doesn't mean there isn't any, but I'm not of any, uh, and there, I would probably be aware if there was, I think the bigger risk is that the sec will find something unacceptable about away, the way a Regulation A+ was promoted.

And there have been some instances of that. That's the bigger risk, I think. And that's where we play a big role is helping companies, uh, do it right. You know, okay. How much do a 144A costs to set up? I would say including the biggest expense is going to be in the marketing aspects of it. So probably about 35, 45 K right around there.

Including everything right upfront. And then it's all about doing it, marketing it, making it happen. That is not saying hope. Yeah. You just put it there and it'll happen on its own. No way. There's the ongoing expense of selling it, marketing it. That's where the B expense is, but once that's working well, then the, uh, uh, the expenditures are outweighed drastically by the Capitol, right?

Several companies thought engine being one, several recommended doing a CF raise and use those funds gained to fund doing a Regulation A+ makes sense. What's my opinion? I think that's a good approach personally. I do. We were not interested in CF initially, but that approach has come to appeal due to the costs associated with bragging plus. Fair enough.

Yeah. So, um, sod engine is a competitor sort of an indirect competitor because their approach is very different than ours, but they are, they do Regulation A+. So, you know, um, they're an okay company. You know, we have other companies we compete with. We're very different than them. I don't think you guys really want to hear me promoting my company at their expense here, but, um, we're more actively engaged in our companies. We're more selective than our competitors. We do fewer offerings, but we're heavily involved all because frankly, my intention is that we will become the leading Regulation A+ platform period. And to do that, we have to have great offerings with great success and happy investors later on. That's what that's, everything we do is aimed at that. But again, that's too much self-promotion here. So, I think reg CF is, is, is really good.

The fact that it's gone up to 5 million now we're going to add it to our mix of offerings. We don't do it currently, but you know, when it was a million dollars, it wasn't worth doing, uh, the thing, the only thing which complicates that with me is that we've been hitting, we've been sort of hitting stride with reg D getting it to resonate and it's, uh, it's really good, you know, and it's an easier compliment. It turns out that Reg CF is more restrictive from a marketing standpoint and Regulation A+ reg D is less restrictive. So, if you are doing a reg CF with overlap with your Regulation A+ the reg CF lowers the amount of marketing you can do, it restricts the types of marketing you can do in your Regulation A+ to the reg CF level, which is a problem.

So, you know, I wouldn't want to be doing them both at the same time, but doing them sequentially is okay. And then the only thing is to recognize that all these things take time. And if you're planning to do the CF in six weeks, so you can get on with it, we do go Regulation A+ or eight weeks or something that isn't good. That isn't real. That's not going to happen. It's going to take longer than that.

Yeah, it was good. We have CF halls, I would say, come to us for, you'll see. Yeah. And we'll do that as a preamble. That's why the Manhattan, the street fund, right? So, the Manhattan, the street farm we'll invest the land in companies to accelerate their Regulation A+ for that I'm having to go anywhere else, but it's got its own ownership and its own agenda. It's not going to just do whatever Manhattan street capital tells it. We want it to existing OTC, QB issuers, not success. Three self-eligible seem to be great candidates for Regulation A+ offerings. Yes, that's the case you can do a Regulation A+ is, can be used for secondary offerings for reporting companies, whether they're on the QB [inaudible] stack or the N Y S E Regulation A+ is allowed for them as a, as an S3 alternative to raising money. And in many cases, it's a really good way to go. And the happened some good success stories. Um, the challenge has been that in many cases, early-stage adopters of Regulation A+ for secondary offerings have been penny stock companies. So, then it's, you know, it's really challenging to sell the same security that is over there. Even if you'd done a reverse split and you brought the share price up, if it's still vulnerable, you know, you can't be playing around with the sheriff.

You can change the share price and valuation in a Regulation A+ as you go within reason. But if the, if there's a common stock that you're selling here and your Regulation A+, and this is this, can you see my, yeah, you can see, so imagine this situation, this is the common stock on the market right now, and that's its price and you price your Regulation A+ here. And then for some reason, somebody's nuking it over here and the publicly listed prices down here, how are you going to sell these? It's much more difficult to do the Regulation A+. So really having separate security that the company sells is what I've seen as being the best model then rather than trying to deal with this, because that fluctuation cannot be handled elegantly. Hopefully, that was clear.

Can you sell debt? Yes, you can Regulation A+ it's good for any legitimate security. And, um, I mentioned Regus earlier in the conjunct, in the context, you can use reg S to compliment reg D, right? Uh, we're finding it's very nice. The synergy there where you're marketing the reg D in the U S so prejudice and investors, the right gas is not restricted to accredited investors outside the U S and they are liquid. As I said earlier, as long as they don't sell to us investors, interestingly, they can sell to you as investors after a one-year holding period for equity or 40 days and a debt instrument. So, it's even, you know, that's an interesting little twist. Can of SPAC entity use Regulation A+ with, with, with restrictions, uh, we have a webinar we did on that, which she can look up on our websites.

It's one of them in the blog area. Uh, the restrictions are that you can't do it as a pure back. You can't do it as a pure blank check company. You have to have a business focus that is legitimate. Uh, and then you can buy companies’ law. That's no trouble, but you have to have a business focus. So, for example, you know, I'm a fan of AI machine learning. I think it's going to be incredible how much can be done with that. You could develop a company, a plan, and a team to build, or you could build technology for them to in machine AI, machine learning, and then essentially plan to apply that to a series of companies that you acquire. That is legitimate, uh, that's a SPAC by another name, right? It's a non-spouse back. Um, so you can raise the money and Regulation A+ for that business, which is then going to go ahead and buy a bunch of companies. It's just that, the functional focus of the business must be legitimate. So, you can't be a sham, obviously, right?

Can crack funding be part of Regulation A+, or donation crowdfunding. Isn't part of a Regulation A+, but it's, you can do it right. You can raise money by that Regulation A+ his crowd investing right as his online reg D with 506C and 144 eight priority investing. But if that question was about crowdfunding, donation-wise, you can do that with any company, any time, if you convince people that they should donate. And, you know, that's a permitted thing to do. Can a Canadian can Canada capital pool company Bo I don't know. I don't know. I would have to S I don't know what a Canada capital pool company is. So, I can't add value to that. An entity that is listed in Canada can raise money and Regulation A+ in the U S a Canadian entity can raise money, fire Regulation A+, but that particular entity type, may be a weird exception. I don't know. I can't look it up right now. I don't have time with everyone else here.

How much does it cost?

To do a reg D including marketing? Can you guarantee a capital raise no way and how we can guarantee it, but the upfront costs to do a rate D typically, you know, you've got very big numbers to vet variables? If you assume a prudent and modestly complex PPM, then it's mostly about marketing preparations. So, I would say 40 K-ish 50 K-ish to get ready. And then the real expense comes in when you're marketing it. Right? So, what you do though, is, you know, you are advertising an offering to potential investors, and he doesn't spend much money doing that. Maybe a hundred dollars a day. Initially, $200 a day is enough to adjust, adjust, adjust. And if it doesn't ever work, then you stop and you wasted some money,

Which is what we don't want to do.

But normally we're able to adjust and adjust, tweak, and adjust the target, take, adjust the messaging, maybe have different offering pages that we bring advertising traffic to define out which one works. Right? So, then we get to, when we get to a point where the efficiency of conversion is high enough, which is what we would be doing, this exact thing with our reg D offering for the Manhattan street fund, as we get more efficient, I'm stepping up the spend because it's working beautifully now. Um, but we've made a bunch of innovations around that, which I'm really jazzed by many of which are proprietary. We're not going to tell anyone about what the heck they are because they're working so well. We're spending similar money now to bring in reg D reg S investors, as we will normally see in a Regulation A+. And I could never have said that before. That's the that's the first, you know, the last two months is the first time I could ever say that it's a thing,

But no guarantees, no, we can't do that. And we'll be silly. You wouldn't, it would be silly for us. Um,

We have some plans to bring to you to do crowdfunding, offering Regulation A+ or CF. Can you talk about what MSC gets out of that and talk about whether a company can put their offering on multiple platforms simultaneously? Yeah. Okay. So, on time we're doing okay. It really is imprudent to put your company on multiple offerings. Logistically it's a nightmare, keeping everything current and updated, and you, you really kill the marketing efficiency. If you try and drive marketing to multiple places, it's a disaster you'll never, ever achieve efficiency. Um, and I'm not going to, I'm not going to do an offering in that way, because it's almost guaranteed to fail or at least fail to be efficient, right. So, we're not going to do that. Um, but the other question was, what are we get? Okay, so our fees are these, we charge, uh, on a Regulation A+, which are on a non, which are $10,000.

Each of these cash fees, we charge matching warrants for a, and it's complex. It's a bit different than a debt offering, but just talking equity for a minute. That is to say, the warrants have to be a little different and they need to have been offered for nine months. We charge consulting fees of $10,000 a month. Plus, warrants are the same face value while listed on our platform $5000 a month plus warrants at the same face value. And for each investment $25, regardless of the amount invested plus warrants of the same face value, those are all fees. It ends up adding up to not much money. It's a very low fee cost fee structure. Um, and reg D it's similar, but the, um, the listing fee is $10,000 a month, uh, because it's hard for us to make money on Reg D's and we charge $250 per investment. And that includes an AML and the accreditation verification process. Um, that's not a rich package for us either, but that's what we do. These end up being pretty low cost to the, to the issuer, especially given the advisory services that we're bringing to these offerings,

What's the optimum reg rule for issuing unrated bonds. I don't, well, I don't know. I think I don't, I can't really comment on that in an intelligent manner about unrated bonds. So, I, so I, I won't do that if you'd like to follow, it would be later, you know, I'd be happy to look into it, but I'm not qualified right now to give you a useful answer.

The long-term stock exchange got an FCC license. So, I'm assuming that's probably an ATS. ATS is great from Robert Kim or, Hey, Robert, I'm glad you're here. The typical profile of companies exercising, these routes, raising capital scientists, lots of things. So particularly for Regulation A+, so Regulation A+ work, it isn't so much about the stage of the company. It's about the appeal. So, um, I talked to a company recently where they take paper used. Paper and they recycle it by literally removing the ink. And they can do that more than 10 times. And the cost of the paper is less each, you know, to get them to buy the paper, if you will, is less, it costs less than the new paper in the first place. So, what do you got? You got an environmentally sensitive approach that will appeal to institutions that have that brief as well as to investors. And you have a way of saving trees. I mean, it's a very motivating thing and my God is a huge business. Their model of business, their revenue model is to license to people like Canon and Hewlett Packard that make cringes because they have patents up the wazoo for this company. It's really well put, you know, another overnight success. They launched it in 2014,

Um, that market in a license revenue model where they don't deal with the customers direct is because of the giant size of it, about $3 billion a year. Yes, you could do a Regulation A+ for that company. They have no revenues, uh, but they have prototypes working and they have all sorts of other greats indications of marvelous success. So, it's sort of a startup, but it's not because they've been building it for a long time and it's such an appealing business. Whereas, you know, we had a com a company that's stable and boring and not growing and not very profitable and hard to explain. We'll never raise money for it. How can you get it to resonate with people? You know, why would they buy shares in it? What's the ownership going to do for them unless they reconvert the business and come up with a strategy that is going to make it, uh, you know, a strategic business that makes it very, very attractive. So, it comes down to, it's got to be really appealing as a company because of the nature of what they do.

Treating curing Alzheimer's curing, okay. Treating Alzheimer's treating cancer, you know, biotech can be wonderful, um, solving problems that consumers care about, you know, electronic EVs, new battery technologies and things of that ilk, alternative energy things that people care about, where they're good investments, you know, where the prognosis is, is exciting. We have an issuer biotech company on our platform where they are making a, uh, COVID-19 test that, uh, isn't, uh, isn't finished yet. It's closed and it's not FDA approved yet, therefore, but it's going to sell for about $120 in your pharmacy. You add, you said a little device that works with your smartphone and gives you accurate results on COVID-19 and many, many other, uh, viruses, as well as bacteria in minutes, you know, five minutes to get a result, and it's going to cost about $20 per test. So yeah, that's relevant. Yeah. That's interesting. And they're doing incredibly well as a, uh, in that Regulation A+ so that no revenues and they're effectively pre-product right. Um, then we have another, we have another company that I'm not going to describe it too much detail, but they're in a business

They're, um, they're growing about a hundred percent a year producing, uh, bags 85% pre-tax profit. You don't really need to know too much more than that, as long as it's real. Right. And there are capital constraints. So that's an example of Whoa. Yeah. It doesn't have to have a cost of thousands and 65 employees, you know, so it's really about, can we explain it easily in online advertising? Is it appealing and is it either an amazing investment or is it doing something that people really want to see done? Okay, you have a treatment, but if you bring it up, if you working on preclinical, triple-negative breast cancer, chemotherapy, chemo, that's going to, you know, that looks promising and that's going to be easy to raise money for as an example. What percentage of deals are done with the third-party escrow agents, I went back to do you recommend one way or the other? So, you, the logistics of it say that if you're going to process payments in the backend, where are you going to put the money? Right. And you should use a transfer agent because there are serious reasons with the sec, why you must use a transfer agent. So, you end up having to have at least a segregated account, or even if it's not escrowed where the money goes, you have to do it logistically isn't expensive, but you do have to do that.

I would do it one time. Okay. For a moment here. So, your, question was percentage. I kind of made that too. Elaborate and answers a hundred percent of the deals that we do since you, since you all have different accredited investors in your Rolodex, could a company doing a raise, using two companies to reach their goals, setting a cap on each company. Yeah. We wouldn't do it because the marketing would be a nightmare, but theoretically, you could do that. Right. Um, the exception would be bringing in a broker-dealer, but the way it works with broker-dealers is that in an online raise, they're not going to take a risk and go to their clients until it's already successful. So, we have to make it successful upfront with the marketing. Once it's already a no-brainer success, then we can bring in a broker-dealer to add value, but they want to add value until then because the reps from the broker-dealer don't want to burn their client relationships. Imagine you're a rep, you got a trusted client who loved you.

You persuade them to invest in an offering, and then it falls on its face and never raises enough money. And there, you know, they're out there wishing they hadn't made the deal. So that's why they don't do it. Can you issue a convertible for using Regulation A+? Yes, you can. I wouldn't do it because you can't explain it. The investors are going to get confused and they're not going to buy it. You need to need it to be simple, to explain. Well, the underlying common get registered you Regulation A+ is an offering where you offer one thing. You don't offer two things because that makes it twice as complicated. You could do all sorts of things like that, but you wouldn't, you would, um, Regulation A+ that goes public is like an [inaudible] in the sense that normally if you go to the NASDAQ, all of the preferred converts over the common, et cetera, et cetera, just on the way older, the share classes were defined in the first place. But if you go list on a non, not on the NASDAQ, not on the NYC and your Regulation A+ then all the different classes stay as they are. Although they're all theoretically liquid. The only, one that you sold is really liquid because you probably listed it someplace. Should a company include anti-dilution provisions in Regulation A+?

You see different practices, but a lot of companies doing Regulation A+ we'll offer we'll sell preferred in which case they'll have weighted average anti-dilution protection typically, but not all companies do that. There are certainly some companies that do selfish. I say selfish do short-sighted offerings in my view, where they risk pissing off their investors later on where the investors, later on, discover that they shouldn't have made the deal. If they'd only known, you know, we've got to make sure that we protect them from that. So, we have happy investors later on.

Yeah. Thank you Ákos. You're welcome to email me and us to ask questions. You have fees for a 144A. I haven't figured it all out yet. You know, it'll end up being a fair deal. We will provide the, buying the security, offering the security from the issuer part, as well as the marketing its online part. We'll do both of those. And I think the fact that we're doing the buying part will allow us to have a, a nicer, uh, easier to implement fee structure than, um, than, uh, long we have for all other offerings where it'll end up being something it'll end up being low cost because it has to be right. And what's the point of doing this online stuff. If it gets to be silly, expensive, looking to raise dollars to acquire distressed debt with future operations to acquire operating company best, right. It was on the S all the different variables. You know, if then this is, should I do a spec or should I do a Regulation A+ question? If what you're doing fits what I said earlier, you got to make it usable, viable to use Regulation A+, but if the nature of your plan appeals to consumer main street investors, then it may be much easier to raise the money. That's really the thing, right? If you have, you know, uh, Tom Hanks out there pitching it, and you know, you've got a really remarkably credible team. You can do an ask one SPAC and just go ahead and raise the money in minutes, you know, not minutes, but you know what I mean? The problem with a SPAC now, the only problem with the SPAC now is you may find that the market's, by the time you get your Sone through the registration process and a Regulation A+, is much faster. You know, if you were a really, really crank and really were efficient and spend only 30 days preparing, and then 60 days getting through the FCC, which could even be faster in three months, you could be live in a Regulation A+ before the market crashed, destroys the demand therefor stuff. And the other thing about Regulation A+ is that there is demand even when the stock markets in a bad state of play. So, for example, last year, when COVID hit and the market got decimated, we were still raising money when the market was decimated, but it cost 25 to 30% more per dollar raise. So, it didn't, it wasn't like the lights went down, it just got more expensive. And that's a kind of interesting line that says that Regulation A+ online grad investing is appealing to a somewhat different audience.

Are there additional limitations using Regulation A+ full security tokens? You are not kidding. There are, yeah. The FCC is basically making it punitive to do blockchain security, token offerings. If you're selling a security token via Regulation A+ you've got to be a missionary that wants to spend megabucks and lots of times. So I wouldn't do that at this stage. The FCC will eventually make it easier, but we're talking years apparently based on the current state of play. Reg D and reg S are fine, but not Regulation A+ a 144A would probably work there too, but then it's does it appeal to those institutions, right? There'll be really nifty things done in the blockchain. Looking to raise capital for industrial real estate development, horizontal and vertical construction, real estate. I mean, Regulation A+ right over 65% of capital raised via Regulation A+ has gone into real estate deals.

It's really working really well. So, I recommend it. Um, it looks like, we have reached the end of the questions. Am I right? Or am I wrong? Looks like it is all right. And we've also, we've also taken, uh, take ourselves to the hour. So, if you have more questions, ask them now, otherwise, I'll start winding down here. One of the things I want to convey to you is, is this. I, I decided to do this company in April of 2015 because of Regulation A+ five weeks later, we went live in May of 2015, about a month before Regulation A+ went live. We were the first dedicated Regulation A+ platform. And, you know, it's taken a long time, but it feels to me like we're one of those overnight success stories, but it took six years in the making. That's the bottom line. It is standing how much better the climate is today for Regulation A+.

Plus, obviously, the bubbly stock market is helping, but it's not just that. It's the COVID thing. It's the online investing thing that has been accelerated by people being trapped at home for so long. I don't know exactly whatever, you know, I can't be precise. I'm giving you my interpretation of the why, but then, is it happening part it's standing the number? I would say that in the last four to six months, even over Christmas, the quality and quantity of companies that have been approaching us is just four X, what it was a year ago. Amazing. Really, really impressive. So that's why I'm so jazzed about things at the moment. And the other thing that I'm really jazzed about is that we found ways to reduce the cost of marketing that I would never have been able to hope for six months ago. So, you know, reg, D reg S where we're making amazing, amazing efficiency, you know, marketing. All right, I'll check for more questions. I don't think I'm seeing any here. So, I sincerely hope that this, um, do I think there's room to sell real estate-backed bonds at a 6% rate? I think 6% is too low for a Regulation A+ that's probably not going to be exciting enough. No, we're not at a capacity limit. We've actually been gradually building the scale of our team.

Well, did you understand me then? I said if you raise a fund and Regulation A+ that fund can't take controlling interest in the company and ambassador, no, I got it. I was saying the other way around Regulation A+ lends itself to a venture fund. If the venture fund buys a controlling interest or private equity fund, for that matter, when you buy a controlling interest in the target companies, it's set up well for that, essentially when you own less than a controlling interest, the sec is worried. They don't want you to do a mutual fund without the regulatory overhead, the overhead of being a mutual fund without that level of constraint. Right? So, if you own a bazillion, if you own equity positions in a bunch of companies, and they're all tiny positions, or less than 50, 51%, that's the 50.1 51, then, you know, you can't use Regulation A+ basically you're less, you fit with that. 60, 40 things. I mentioned earlier in some other caveats. So, it's, we're talking to a company now in biotech because a lot of Biotechs, the scientists don't know what the hell they're doing. They've got something amazing, but they don't know what they're doing. I know in 10, no insult man, 20 scientists that are on this call, but they need help. And so, this fund is bought in, they're putting together a venture fund and they loan it along the whole. At first, it'll set up companies for inventions, with scientists, and then it'll baby those companies through. So, it's a beautiful fit for Regulation A+ because they're going to own 80, 90% of the companies. So at least in the very beginning, I've changed in VC and P funding influence the growth of Regulation A+, well, yes, because somewhat so, so, so much of the VC is late-stage stuff. Uh, that's one, one factor and private equity hasn't really changed much, but private way, you know, even in private equities, because of the state, the state of the market, they want bigger deals. So, Regulation A+ is typically a Regulation A+ company that is too small for private equity to late-stage for a VC, or are in a business that isn't on the list for VCs to be interested in. There's a lot of businesses that are very attractive, that VCs don't like, um, those are the sorts of things. And then it's because the entrepreneurs are worried about losing control of their business.

The question is, do we have a list of recommended service providers? Absolutely. So that's a big part of the value add, right? Cause we brought people that work with us all the time and all the different roles that we know and trust, and that are cost-effective and efficient time-efficient and responsive because we bring them a lot of clients. So, you know, it's, it's a, what's the word, it's an honest broker thing. We don't charge fees for that. We're not getting paid backhanders and stuff that wouldn't be acceptable, obviously. Um, it's really about how great they are, right. And how you would be amazed at what we learned. Some of you guys know this, you bring in a big auditing firm, medium, big, big, they may, uh, quadruple their audit costs later in the game because there's some surprising development that, that arose. There are companies that do that as a regular matter of business. So, you know, avoiding those guys is, is a, is a big deal. We have a blacklist of such auditors', but it isn't really difficult to avoid them, but that matters. That sort of thing. Anyway. Yeah, we do. We have specialists, especially in marketing, that's the most difficult one, the big agencies with the big name and rapid pace and charge too much. They expect to charge too much. And guess what? That ends up costing too much. It has to be agencies that are small and fleet of feet and trying to prove themselves. It's like this conveyor belt, right. They get too good. They got too good. Then we don't use them anymore. They get too expensive, you know, they get too cocky. Now they get to, they get to the point where they don't think they, they need to charge a good price is space commercialization and post-COVID risks mediation interesting. Yes. In the right instances. Yes. So our company recently that's doing space commercialization. That's really good as a category to be in. Hey, Fernando. Yeah. Thank you. And of course, if you're companies outside the U.S., they can use Regulation A+ too with the hassle factor that they need to set up our entity in, in an appropriate manner.

So, I think I'm going to gradually wind us down here. Um, again, I hope this has been really helpful. Thank you. Ákos very much for setting this whole thing up and making it work. We will be sending out, uh, in about a week, 10 days. We'll send out an email inviting you to a blog post, which will have a clickable indexed version of this webinar with any screw-up. So, I might've made it, we raised, hopefully there aren't that many or Andy, uh, but we'll see. Um, and, uh, let me see. Yeah, that's the important stuff. Thank you very much for being here. I hope this has been helpful to you. I really hope that that the whole purpose of this is to, is to up the game, right. You know, to do a better job. And, uh, I look forward to working with those of you for whom some of this is appropriate. And I think that the 144A program will have great legs in the right instances. You know, to me, it's a, it's a very interesting instrument to, uh, to build upon.

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