Getting Started (Legals, Accounting, The requirements)


Oscar Jofre

CEO and Co-Founder


Oscar Jofre

CEO and Co-Founder

Oscar is currently one of the Top 10 Global Thought Leaders in Equity Crowdfunding, a Top 5 Fintech Influencer, Top 10 Blockchain and a Top 50 InsureTech. He has published an eBook that has been downloaded in over 20 countries, and been distributed by partners worldwide. Oscar is a featured speaker on Fintech, regulated, equity crowdfunding, compliance, shareholder management, investor relations, and transparency in the USA, Australia, UK, Germany, France, Netherlands, Canada, Singapore, Indonesia and China. He speaks to audiences covering alternative finance, RegTech, insurance, banking, legal, and crowdfunding. Oscar also advises the world’s leading research, accounting, law firms and insurance companies on the impact Fintech, RegTech, LegalTech, InsurTech and OrgTech is having in their business.

Shari Nooan

CEO and Co-Founder

Rialto Markets

Shari Nooan

CEO and Co-Founder

Shari Noonan is Rialto Markets CEO and has more than 20 years of experience in the financial services industry. Shari has extensive experience in building and scaling operations and products with Deutsche Bank, Goldman Sachs, and Instinet and was directly involved in the electronification of the Equities market. She worked to develop many of the initial products in equities electronic trading, including the first ATS’s, advanced algorithms, and electronic negotiations. She received a BS in Accounting from Marquette University and MBA from Columbia University and holds Series 3,7,24,55,63 registrations.

Douglas Ruark


Regulation D Resources

Douglas Ruark


Douglas Ruark is Senior Principal for the Denver, Colorado office of Regulation D Resources, Founder and President of Regulation D Resources Enterprises, Inc. Mr. Ruark began his career in corporate finance in 1992 with Heritage Financial, Inc. a company he co-founded that specialized in sourcing commercial real estate and corporate debt financing for commercial borrowers. In 1994 Heritage Financial was merged with InvestCap Partners, a Washington DC based corporate investment banking firm. Mr. Ruark assumed a partnership position in InvestCap Partners and was tasked with managing several areas of corporate finance for the company including real estate syndications, transactional risk assessment, Federal and State securities compliance, and investor relations. In 1999 Mr. Ruark served as a primary founder of Regulation D Resources. The Company was formed for the purpose of providing private placement offering advisory services to corporate clients. Regulation D Resources currently provides SEC Regulation D exempt and Regulation A+ exempt securities offering preparation and execution services. The Company also provides custom software solutions for management of investment compliance processes. Regulation D Resources has provided advisory services for over 5,000 securities offerings since 1999. In 2015 Mr. Ruark was instrumental in leading the team responsible for development of Regulation D Resources Investor Portal Compliance Management application. The web application provides for public promotion of Regulation D 506(c) and Regulation A+ exempt securities offerings and handles all compliance, subscription, and investor verification processes. The critically acclaimed software is now on build v2.3 and has been used to manage compliance processes for hundreds of private placement securities offerings. Mr. Ruark holds a degree in Economics from Elon University in North Carolina. He is regularly scheduled as an expert speaker at various venture capital, real estate and corporate finance conferences with regards to private placement offerings and the syndication of investment capital.

Nick Antaki

Corporate Counsel

Regulation D Resources

Nick Antaki

Corporate Counsel

Experienced Attorney with an entrepreneurial spirit and a keen sense of strategy. I take pride in helping companies take their businesses to the next level.

I am really pumped and I really believe that with this change is 75 million and I know if anybody watched any of our KoreSummits, one of the commissioners that we had, at our event, one of our speakers asked her, you know, what’s the intent to be 75. In fact, the SEC they were shooting for minimum 100 million, so you know, they’re thinking about you, they know that this sector needs more than 75. So, and the fact that they allow you to do it every 12 months, wow. So imagine if this gets increased to $100, $150 million per year, how much more impact we can do.  So now we’re going to bring in the real meat, now that you’ve heard Scott Pantel and Stephen speak about what the sector is, and the impact and all of that. Here is where the nitty-gritty begins. Now that you’ve gone through the session with Scott, you’ve gone through this session with Stephen. So now you need to make that decision of going through the process and getting it to the point where you can start utilizing this regulation. This next panel is a group of individuals I’ve been involved with many times. If you’ve seen why, because it’s an A-Team. Its people that have been there, done that and keep doing it day in and day out. They sacrifice the years of learning, and understanding the differences. There are some major differences when it comes to this regulation. So but before I get started with that, I would like if they could each take a moment. And please ladies first, Shari.

Shari Noonan  31:22

Thanks so much, Oscar. I didn’t want to join in early this time because I joined early and popped in, so wanted to make sure I didn’t repeat that mistake. So my name is Shari Noonan. I’m the CEO and co founder of Rialto Markets. Rialto Markets is a FINRA registered broker dealer. We also operate an SEC recognized alternative trading system, which transacts across all private markets, all private market securities in the US. So what we provide are really broker dealer services in private market primary issuances. And we also offer the ability for issuers to place their security on our ATS so that their investors can monetize their investment prior to some sort of corporate liquidity event. Really quickly, my background and also the background of the majority of my team is in traditional capital markets, specifically in building out the electronic trading infrastructure in public markets. And so what we saw at Rialto Markets when we started looking at the private space is that both there was a massive growth, as well as there was this shift to digitization. We’re very, very excited to participate in that shift and also to be part of this growth. So we’re really excited to get into the nitty gritty. I’m going to turn it over to Reg D Resources. Doug and Nick.

Douglas Ruark  32:45

Thank you, Shari. My name is Doug Ruark. I’m president of Regulation D Resources. And to my right here is our corporate counsel Nick Antaki. We are a 22 year old firm. We started in 1999. And our specialization in this process is the structuring of the securities offering, the drafting of the relevant offering documents, and then working to get the filings in place with the SEC. And specifically if we’re talking Reg A Plus, you know, we’re talking drafting of the form 1-A, assembling the exhibits, converting the file submittal to the SEC, and then working to respond to any comments from the SEC. So our team is here to get the offering prepared, get the filing in place, get that offering qualified, and, obviously working with the team. So we’re working with KoreConX, we’re working with Shari, to make sure that everything is being managed efficiently. That’s kind of the quarterback part of the process that we also take is making sure that timing is is being met. And so that’s our firm, and we’re located in Golden Colorado, and we’re excited to be part of the panel.

Oscar Jofre  34:02

Fantastic, Nick, please.

Nick Antaki  34:05

My name is Nicolas Antaki, I’m corporate counsel for Reg D resources. I have been working with medical device companies since the beginning of my career. My first job was working for a medical device company that went through not one, not two, but three Reg D raises one over 504, one over the long gone 505, and another in 506. Since coming to Reg D resources I’ve been helping companies get their form 1-As drafted. We will go into this later, but I’m just saying that it is a heavy lift and it’s a lot more significant lift than any sort of PPM or 506 offering. The SEC qualifies these form 1-A’s and qualifies the offering which demands a lot more minutia be disclosed. So I’m looking forward to talking about that.

Oscar Jofre  35:01

Well, that’s great. It’s, it’s gonna be a fun filled. You heard both Scott Pantel and Stephen speak of the sector in there. There’s some really big differences that we haven’t seen before. If you’ve been in our core summit, we’re usually just, “here’s a regulation, we jump people right in, and let’s get started”. But here, because it is a med tech, Life Sciences, pharma biotech companies, there’s some other minor nuances that need to be incorporated. But before we get into that, let’s get started ready to leave on this give the audience today, a legal overview of the regulations so they can understand it from the perspective of the company, and then of course, the investor. Then we can jump into the the the actual specifics that are related to that. Nick.

Nick Antaki  35:52

So before Regulation A plus was passed, I think it was 2017, when the regulation came out, you really had two real options. You had Regulation D 506(b) and Regulation D 506(c). Now both of those are limited to accredited investors, mostly. 506(b) allows for 35 non accredited investors, but those require pre existing relationships with those investors. What Regulation A did was it allowed for companies to offer to the general public to the Main Street investor equity and debt securities for their capital raise. Now the caveat to that is, as I said, it’s subject to qualification by the SEC. Now what that means is, it’s not the SEC isn’t passing upon the merits. This is one of the disclosures that you put on the front page, they don’t pass upon the merits of the offering, only that you’re disclosing everything that you need to disclose. Now, the way that that process works is you draft up well, the client comes in, you draft up your form 1-A, and then you submit it for qualification to the SEC. After submission, that form 1-A is subject to a comment period back from the SEC. So for example, if they say, you know, item six doesn’t have enough disclosure on it, they send you back a letter, you refund the form one a send them back. This process can go on three or four times. Presumptively, you’re going to be qualified by the SEC, after which it is sent to the broker dealer and you are able to market and sell the securities to the Main Street investor.

Oscar Jofre  37:39

So that’s from the regulation and the specifics related to this particular vertical that are different than others. There are, as you and I discussed, there’s some things that need to be considered when they’re putting their filings is based on your experience.

Nick Antaki  38:00

Sure. Okay. So I think the best way to go about this would be to go through what the disclosure entails initially. And this is just the basic details, you know, what is your minimum offering amount, your maximum offering amount, your minimum investment amount, and your price per equity unit. From now on, I’m just gonna say shares, it’s just an easier way to say it. Okay. What that entails is that you have a general idea of what your cap table looks like, you have that cleaned up, you have an idea of what your valuation is going to be, and you have an idea of how much you need to raise and what the presumptive use of those funds is going to be. We’ve seen clients that have run the gamut, with respect to how much they have in place before we start drafting the form 1-A. Sometimes they don’t have very much in place, and that, of course, delays the drafting of it. But usually what we recommend is that they have a very solid operating agreement or shareholders agreement or articles of incorporation in place where the rights of the securities are well defined, and they’re well defined in a way that is conducive to selling in a public offering. And I’ll give you an example. So one of the disclosures is item 14, securities being offered, where you have to describe things such as dividend rights, voting rights, liquidation rights, pre emptive rights, redemption rights, so on and so forth. Before a company comes in and starts this process, we always recommend that they have those well defined. For example, if you have an operating agreement for an LLC, where shares are absolutely restricted from transfer, and where a new shareholder or a new member has to be voted in, every time they come in, then that has to be amended. You’re not going to have a public offering, offering millions and millions of dollars to people where you have to vote every single member in. Stuff like that has to be amended. And that’s just in the general corporate cleanup. Another thing would be the bylaws and the rights and authorities granted to the board of directors of the manager, whoever it is. We find that often enough, the board will have very limited rights and they have to be delegated to the officers when in fact the board and the officers are the same people. That’s another thing that will have to be cleaned up. Another is a cap table. So if you have a lot of odd securities out there, such as convertible notes, or safes, or something to that effect, or if you have a lot of promissory notes and debt on your books, it would behoove you to clean those up before you start this Reg A process. The reason for that is twofold one it makes it a lot harder to be qualified by the SEC if you have these exotic securities out there that have weird trigger points. For example, if you have 30, convertible notes all with different discount rates and different cap rates it’s just very messy as a disclosure and you’re less likely to be qualified by the SEC. The second reason is is the cap table in general you need to know exactly where your securities live for the disclosure as well as what you you know what your valuation is how you how much you want to raise for the company. This was mentioned earlier, selling security holders or selling shareholders whether you want to clean it up through the offering by selling their securities. So generally speaking you want to come into this process knowing exactly how you want to use your proceeds, how much you want to raise and what your valuation is.

Oscar Jofre  42:13

Perfect, thank you. Obviously you know the legals play an important role as you heard earlier today when a company is going through the process when they’re undertaking the very first step which is working with Stephen and Scott which is unraveling a lot of these and as they quarterback the process this is an you know, there are many quarterbacks here because there’s so many different moving pieces in the next one, which is another critical element of this of this preparation is the FINRA broker dealer and Shari, you and I, we emphasize this a lot and we need to keep doing it because of of the importance of it please

Shari Noonan  42:57

We are so excited about Regulation A plus for a couple of reasons, I mean one, the cap was just raised to $75 million every 12 months. So every 12 months a company can actually go back and raise that capital which is quite significant. Two from my seat coming from capital markets, the securities are freely tradable, so you don’t have holding periods you don’t have other restrictions on the securities but they are freely tradable. So that’s quite important. Three, even though there’s a lot of review by the SEC, and the SEC does qualify them that will never endorse anything, but the SEC does qualify the offering, the company remains private. So, you know, it’s an interesting intersect, you’re doing this offering that is has has the infrastructure placed on it, almost as if, you know, much more rigorous infrastructure looking like a public offering, but you’re still remaining a private company. So that’s a really interesting intersect especially as retail investors come in and look to look to invest on it. Which leads me to the most important thing, which is non accredited investors can invest. As you then look at that, that opens up such a greater amount of investment dollars as well as a really interesting cycle in sort of the the macro evolution of people becoming, you know, more aligned to wanting to invest in things that they believe in, being more empowered with their financial future, wanting to invest in things themselves. And so there’s this interesting macro thesis. What we do is the broker dealer is you know, we provide the, the services with the primary issuance, and work very closely with both Oscar and Doug and Nick. There’s there’s a team that comes together to support the issuer through the process. And our specific role is we are the broker dealer. So, you know, there, there are 50 states, there are some states who require a broker dealer to be able to sell their securities in, in their state still. So we play that role, certainly, but I think more substantively, you know, we perform marketing reviews to make sure that, you know, they’re, they are all in compliance with the securities laws, no one wants to step, you know, anywhere near a line, and a lot of people, you know, need that extra review, because it may not be intuitive. So to have that compliance oversight from from a securities law perspective, even though Nick I’m sure appreciate this as well. And then we handle really, you can think of it as a back office. So as investors come in, as the site is put up, there is the ability for retail non accredited investors to come in, certainly accredited investors can come in as well, to place their investment, we handle all of the know your customer and anti laundering checks, reviews, all of the customer outreach around that, so that, you know, if there’s something wrong with the application, we can manage that. As well as if someone comes to the page and then leaves the page, we can handle that outreach as well. And then we can overlay the reconciliation of funds. So not that everyone on this panel, you know, needs to know the the nitty gritty, but there are different cycles aligned with the banking sector. So when you lift the hood, you know, funds come in at different times. And so we manage all of that reconciliation process, and then the escrow finalization, so that the issuer can receive their funds.

Oscar Jofre  47:00

That’s great. And obviously, Douglas, you and I talk about this a lot is that we’re just talking about doing the filing. I mean, I think we need to remind people, we’re just talking about all the different pieces that go into filing and you mentioned it from the get go your quarterbacking because in order to do the filing, there’s a number of agreements that are needed in order to be included there. Shair, you know, the the broker dealer agreement? Yes, please. Can you elaborate a little bit on that? 

Douglas Ruark  47:31

Was that a question to me or Shari?

Oscar Jofre  47:33

No for you my friend. I mean, okay. You’re the quarterback? I mean, it’s absolutely

Douglas Ruark  47:38

Well, one of the things I wanted to add to that Shari had had spoken about real quick. And I think it’s important to drive this point home for the audience. And that is, what a great middle ground Reg A plus is. Because not all companies are ready to go public, they’re not ready for the the compliance load that’s going to be placed upon them as a public company. And so what I think is really fantastic about Reg A plus, is it’s a great middle ground, yes, it’s more sophisticated than a Reg D in a good way. You know, you will have some reporting to the SEC, you have a form 1-SA, that’s a semi annual, you have a form 1-K. These are fairly straightforward filings to make. You will be required to run audited financials, most people will tell you if you have investor shareholders onboard your company, you should be running audited financials anyways, to protect yourself and protect their interests. But I think the big benefit of A plus is it gives you the capability to execute what amounts to a quasi IPO, you get the market reach of an IPO, meaning everyone can invest, you have the capability to promote it to the public. And yet you’re not being subjected to the same compliance overhead and costs that a true, you know, fully public company would would be subjected to so I think that what Shari had alluded to, and mentioned of the fact that it’s, it’s, you know, it gives you the capabilities of a public offering without kind of the downsides I think, is a really important point to drive, you know, to drive across it, you are still private at the end of this process. And I think that’s a benefit for most companies. Um, as far as the you know, getting that the overall package in place, I mean, obviously, you have the form 1-A that’s getting drafted, but you know, there is going to be exhibits in place, you’re going to have bylaws, you’re gonna have any important material agreements that investors need to read for disclosure, you’re going to have an attorney opinion letter, and you’re going to have the financials. So and then obviously, any other agreements like broker dealer agreements that are going to be in place and so I think part of the benefit of having a good team in place is that we’re all experts here. So we all know what these packages are supposed to look like. We all know what the filing is supposed to look like. And it makes it a much more efficient process because, again, it is a more sophisticated offering than something like a Reg D. But I think the benefit of that is that you have a much more controlled offering. There are there’s transfer agents on board, there’s broker dealers on board, it’s passed a qualification process with the SEC. So it’s just a much more sophisticated vehicle all around. And yes, it takes a little bit more time and money to put one in place. But you’re going to benefit by having a better vehicle, and you’re going to have something investors are going to have more confidence investing into because of the sophistication and the team that’s on board and the transfer agents and obviously, the technology that’s coming into play as well. I mean, as you know, Oscar, that’s something that’s really been worked on hard over the last five to seven years in our industry is make this an efficient process that if someone wants to purchase shares in a company, it should not be a 30 minute process. And that’s, you know, that’s something that obviously is huge.

Oscar Jofre  50:46

Yes, agreed, agreed. IThe technology and financial sector, we’re seeing that collusion, and to the benefit of the end user in many different areas. But one of the things that I did want to add here for this particular audience, because I think it’s important that we’ve spoken about the legals and the particulars and the broker dealer. And I’ll get Shari to explain what escrow really is. But there’s another element, which is we said financial statements. So we need to be very clear here is we’re talking about audited financial statements. So because the regulation allows both a US company so you would have to fall under GAP, or a Canadian company, which you can use IFRS. So the regulator’s have recognized both countries to allow you, so as you’re paying attention, what kind of financial statements will you need? Now you’ve got that answer right there, this is a clarity, this is part of all the preparation that you need, in order to follow what is called a form 1-A, in order to take advantage of this amazing regulation to help you raise up to $75 million every 12 months. Now one of the items in here, we kind of went through it really quickly, I want Shari to kind of mention it, which is escrow. So you know, we we know it inside out, but it’s amazing how many people don’t know what it is, why do we need it and what is it doing at this phase?

Shari Noonan  52:13

Of course, so escrow is really a type of an account with with a bank or Trust Company. And what it does is it allows as the funds are coming in and as funds are getting cleared and as the broker dealers matching up the funds with the cleared investors. So investors, obviously, there are two processes going on at the same time, there’s the process of making sure from an anti money laundering and know your customer perspective that we’re comfortable with the investor coming on to the cap table. From from the regulatory perspective, I want to be very clear about that it’s a regulatory review. And then secondly, from from a money perspective that the money’s flowing in So we’re doing the first process and then we’re matching it up with the second process when the funds come in. Once those two stage gates, as you will, are cleared, then that escrow account will you know have these cleared funds. At certain points in time the issuer and usually they’re decided prior to the raise beginning but the issuer can then take you know, sweep those funds, but it’s uh, you know, at the very beginning of the process, what we do is we set up what’s called a tri party escrow agreement, and all tri party means is it’s an account between the bank or Trust Company, Rialto Markets, because we’re monitoring the reconciliation of all of those funds, and to the issuer. And then, you know, as those funds come in, they’re cleared, then the issuer sweeps the funds for use in operations. Did I answer your question?

Oscar Jofre  53:50

It does actually, you know, it’s funny, I got asked that the other day, and I go, Well, why wouldn’t they know, but it’s amazing, we’ve taken it for granted all these little nuances. So you know, for those who are creating a checklist, right here, 75 million non accredited, you stay private, you’re obviously going to have your legal counsel, the Reg D resources, you’re going to have your FINRA broker dealer to help you sell all your securities in all 50 states, they’re going to help you bring in the escrow provider, so you don’t have to look for them, they’re going to assist you because there’s certain ones that know how to do this. And then there’s two other pieces to this, which is three, sorry, the audited financial statements, which is a GAP for the United States or IFRS, for Canada. And there is the fact that you need a registered transfer agent. What is the role of the transfer agent, this is the third party who is releasing the securities to your new found shareholders, the ambassadors to your brand, to your company, to your impact investment that they’re making. So this is where we, as a company, provide you that service. And then of course, they handle all the trades and transfers that your holders wish to make which, as you know, you’ve heard it’s a free trading security. So they’re allowed to do. And then of course, as Douglas alluded to, you need the technology, the technology is what glues all this together. This is the best harmony of old school with new school, you couldn’t change the regulation without actually bringing in technology that will actually, just for a moment think, that you will have a button on your website, where you bring in people who love what you do, they click the invest button, within less than two minutes, provide all the information you need in order for them to make that investment. But then Rialto, their Chief Compliance Officer, to view that information, approve that shareholder, move that information to your cap table, and all of this happens on your website. And that’s where technology has gotten us to, to be able to seamlessly do that. And it’s pretty exciting, because the journey at the beginning is a lot of legwork. And it’s gonna get as you hear the rest of the panels this afternoon, it’s going to become even more so. Now we often allow people who may have seen questions, I see one person’s got a question up there, I’m going to bring you in to ask that. But I do have one more question for our our panelists, in particular, Nick, because he mentioned something interesting. And in particular for all of us, because this is a brand new sector for Regulation A, and he’s been very specific about certain items, you know, based on your experience, because you’ve done the 506, which is the accredited investor, and now you’re dealing with a non accredited, based on your experience, is there additional disclosures that companies are going to need to make in the form 1-A,  standard disclosures or something else that they need to consider when they’re doing that?

Nick Antaki  56:58

When they’re with respect with respect to what

Oscar Jofre  57:02

They’re filing their form 1-A.

Nick Antaki  57:06

There’s significant disclosures and the one that I’d like to really talk about, which is, along with, there’s two in there that are the heaviest lift. That’s the use of proceeds, and description of the business for use of proceeds. That is really where you’re talking about how you are going to use your maximum raise. Okay, so for example, if I have a $30 million raise, I could say 15 million for r&d, 6 million for manufacturing facilities, scaling, 2 million for marketing, 4 million for employment, expansion, salaries, etc. 1 million for general administrative and 2 million for reserve. So that’s what generally speaking, what a use of proceeds would look like. Now part of that is that the company is going to have to come in and usually during the drafting process is when it happens, but they’re gonna have to come in with a very specific business plan as to how they’re going to use that $30 million, that $75 million. One of the reasons for that is because the form one a requires that you also do a partial proceeds. So for example, what happens if I get 75% of that $30 million 50% 20% 25%. So you’re going to have to make decisions at that point. And usually companies don’t know that until you ask them the question, that’s fine. But you have to have a pretty specific business plan in place. And that will change for medical medical companies specifically, that’s going to change based on the phase of, of which the company is in. For example, if the company has patented protectable, IP or protected IP. However, it hasn’t gone through clinical trials, it hasn’t gone through this the various phases of the clinical trials, whether it’s a medical device or pharmaceutical, the use of proceeds is going to look significantly different. for that company. Then if the company has gone through clinical trials, they are FDA approved, and all they’re using is for scaling, manufacturing, so on and so forth. Concurrently, the description of the business is also going to look different. So the description of the business is essentially what we’re describing the business as, for example, I have a prosthetics company we are we are manufacturing and designing prosthetics, okay. That’s where your business description will come in. You’d say we’re designing prosthetics we have gone through, we haven’t gone through any clinical trials, we haven’t done anything to that effect. Where are you going to use the proceeds to go through that in which you would describe who you anticipate is going to go going to conduct a clinical trials, so on and so forth. Another major part is the distribution Have the products to the public or to the customers to the market itself, you need to have a very clear, clearly defined plan with respect to that. I already talked about securities being offered. The other one, it’s more of a minor disclosure with respect to what I need information from the client. But that’s directors officers and significant employees, officers and directors are obvious significant employees is managers of your plants, Vice President level people, stuff like that. At that point, if they’ve been with a company for less than five years, you basically need a resume for what they’ve been doing for the past five years. Along with that, if they’ve been with a company at any point, you need to talk about what their experiences and how how it’s going to benefit the company as it stands today. So essentially, those are those four items that I mentioned are one or four of 14, okay? So you need to come into this process, knowing exactly what you want to do with a clear plan. And if you do that, then my job is to essentially guide you through through the process and get those disclosures from you. And it’s inevitable every single time, there’s going to be questions I asked that the client has never thought of which is fine. And what this goes to what Doug was saying it’s a it’s a much more intensive process, but that’s a good thing.

Douglas Ruark  1:01:31

Well, the other thing, too, this is going to be driven by operations of the business is risk factors. So the risk factor profile is obviously going to change based on where where is this company positioned, you know, if they still need to get FDA approval, and there’s a risk that they won’t get FDA approval, that’s an investment risk. So that’s, that’s part of what also is being analyzed as they come through this process is what are the investment risks? Because that obviously has to be articulated in the filing as well.

Oscar Jofre  1:01:58

Yeah, it’s rather interesting, you know, sometimes when we hear the word filing, or is it just a form, I put my name on it, and boom, it’s not it. And that’s why I wanted to dig into it, because it, you know, every company will have its own particular items. But because we’re dealing with impactful Life Sciences and all that, there’s going to be a little bit further analysis that’s going to be need to be reviewed, in order to make sure that it’s properly qualified and, and for you as a lawyer, you’re the counsel, so you’re submitting this on behalf of the client. So you also need to undertake that. So, you know, Shari, the broker dealer role in Reg A, it’s been said that the broker dealer is just back office, but we’re now seeing this new. You and I’ve talked about this a lot, where we’re now bringing in the existing private equity group who’s now saying, you know, what, it’s, it’s not so bad. So this is a role that the broker dealer plays as well, it’s not just playing the back office, it can also play be participant in also expanding the horizon of investor base to that opportunity, in particular, in this vertical that is well known to the private equity world.

Shari Noonan  1:03:14

Absolutely, absolutely. I just went, I’m so sorry, to, I will get to your question in a moment. But as you were mentioning, and actually, as Nick and Doug, were going through the specifics of the 1-A, it occurred to me, just because we see this sometimes, in our business, I just wanted to point out that, you know, Regulation A plus and the filings that are required are quite specific and so it would behoove issuers to go with firms and individuals that have done them before. Because we have often seen issuers come to us that have been working with, you know, a corporate lawyer or another type of lawyer, that just this is, you know, one of my favorite sayings, you know, all doctors are surgeons, but not all surgeons are doctors, no other way around. But you know what I’m getting at. You need to make sure that you’ve got the right expertise, even within the legal realm. And be aware that not every, not every person that you use from a legal perspective is going to be able to take this on. And so it’s gonna Yeah, exactly. So going to a Regulation D Resources going to a specialized firm is going to not only significantly decrease, you know, the costs associated with it, the time associated with it, the [uncertain] associated with it, and and your ability to get through this process because it is quite specific. And in there are things, I’m sure Nick knows, people that review these, and knows the questions and knows when there’s a form and what it looks like and what it’s not supposed to look like. And when an answer isn’t hitting the right point that the qualifiers looking for. So I just I wanted to drive that home because I think it is important and not a lot of, you know, I started Rialto Markets five or six years ago, and at the time, I had no idea how many lawyers I would employ across the specialties, right. But it really does require a certain specialization. So I just wanted to hit on that,

Nick Antaki  1:05:45

Can I make a point on that? I was actually meaning to talk about the audited financials. So for every form 1-A part Fs, which is the last part, requires two years of the previously completed fiscal years audited financials. Now, one little caveat to that is if you file after September 30, you also have to have interim balance sheets for the previous two years for q1 and q2. So that’s just one of those little caveats that you don’t know. Unless you’ve done a bunch of these.

Douglas Ruark  1:06:18

It’s funny you know, Oscar, when you and share when you hear stories about people that are, you know, filing a Reg A plus and they’re in this interminable back and forth at the SEC, they’re on like, their 12th comment period. They just didn’t get good assistance in putting their form 1-A in place, or maybe they try to do it themselves. But I mean, there’s their securities attorneys, examiners at the SEC, looking at this stuff. So you need to have the right team in place. And, you know, I mean, that that includes obviously, you know, transfer agent, broker dealers specialize in Reg A Plus, you know, I mean, again, our guidance to clients is always, always always have an administrative broker dealer on board. You know, Rialto, you know, leadin the industry there. I mean, you know, because there’s just massive benefits to that, and there’s no reason to not have them on board. And obviously, you’re required to have a transfer agent on board. So

Shari Noonan  1:07:15

Thank you. I want to dig into that point. Oscar, I’m sorry.

Oscar Jofre  1:07:20

No, it’s okay. I was just gonna say that’s why I said today, this is the a-Team. That’s the that was the the objective.You’re right. I mean, we’ve all seen it. We know the horrors. I know another one of our speakers today, Andrew, he has helped so many blinds, goes, Oh, my God, how many times you can’t, but you got to go talk to the right lawyer now. Because this thing should be already being qualified. So this is what happens when you work with people that know what they’re doing versus that don’t, they can go through it. So please, Shari, continue with it.

Shari Noonan  1:07:53

Yeah, and just to close out that comment, it’s not that the the other folks aren’t good. It’s just that this is a very specialized, you know, a specialized person. And you know, it’s there’s nothing more frustrating, I think, to all of us on this call, or more frustrating, I think it is from, you know, empathy with the issuer than an issuer coming to us. And having struggled through this. So it’s great to get it set up right from the beginning. So now, Oscar, on to your point around other areas that we work with issuers. So while Rialto Markets is not an investment bank, we do not, we’re not, you know, a firm that will take a position or invest in issuers. What we do have is we do have a network of partners, boutique investment banks. And so when issuers come to us, we work with them, and should they be interested in availing themselves of institutional capital, whether that be family offices, venture capital, you know, private equity, or even just accredited investors, we have a variety of different boutique investment banks that we work with, they can either do that in a more systematized way, meaning reach out to 60,000, and work it that way or on a more bespoke way, in terms of specific industries, where you have, you’re sitting down with a banker, and you’re actually working with a banker, through the process and through more of the digital pitch deck type of process. So we do offer that service as well. And that just expands the reach. And I do think, you know, if you are raising, you know, a quite large amount of money, it does make sense to try and bring some sort of institutional capital in under the Reg A plus regime as well. Oscar, did I touch on it?

Oscar Jofre  1:09:50

Yeah, that was perfect. That’s exactly I just, you know, when Scott and Stephen were speaking earlier, one of the things is that in the early days of when the JOBS Act was introduced, this is about, you know, venture capital will be here, this group will be here. And I believe that we need to bring them both together. Democratization doesn’t mean exclude that was the point that was created, was to include, and therefore, now that the general public is included, the private equity world should embrace it, because they bring value into an opportunity. I’ll repeat it again, there is a company right now, that has been properly legally set up specifically with venture capital money leading on the investment, and who have publicly published a paper, that they will treat every investor equally, their role is to help management grow the business, while maintaining the integrity of the business. They call it this new venture capital model. But I truly believe that model is not so much new as it is, every VC or private equity group wants to participate. If it’s a good opportunity, why not participate, the fact that the crowd is telling you that they’re going to this is a product that I need, it just validated even further. So I’m all for it, I just think this is the new frontier. So as part of working with broker dealers and lawyers, and auditors, everyone together, you need to have that discussion about where all the capital is going to come from the group you’re going to meet next, they the investor acquisition, the investor outreach, they’re going to do a lot of the legwork for the eyeballs. And they’re going to talk to you about all the different tactical elements to that, but you still need to have a strategy of how to include all the money in and that’s where the broker dealer plays a key role in that relationship as well. So I promised everyone we would give we got three people with questions. So you guys are ready. I snapped that on you guys. You didn’t know it’s gonna do that. So that’s it. All right, Lonnie, I’m gonna let you in. You have a question for the audience? You have to unmute yourself.

Attendee 1  1:12:04

Yes. Can you hear me okay? Partially answered this question. But how much operating history do you have to have? Can you can you take a fresh startup company? Or can you take a company that’s less than two years of operating history and ready to go into clinical trials? What’s the bookends of the startup position?

Nick Antaki  1:12:27

So to answer your question, Regulation A does not preclude anyone, any company from raising capital. Generally speaking, you see companies with a little more operating history, trying Regulation A, but there’s nothing from the legal point of view, which precludes companies from starting up, doing their Reg A filing. For example, real estate companies are a great example of this, you know, real estate blind pool funds. What will happen is they’ll start up a new subsidiary, you start up a new fund, and then they’ll immediately go out and try to raise capital. The operating history in general with respect to the financials, if you’ve, if you have been operating, you need financials for every completed fiscal year, for the as many years as you’ve been operating, going back two years. So if you’ve been up for two years, operating for two years, you need two years of financials. With respect to the disclosures for the description of the business, as long as you have a clear plan going forward, and you have an idea of what your company does, for example, we have a pill that makes your fingernails grow faster. I don’t know it’s a terrible example. But you know exactly what the pill does. You haven’t started trials, yet you have a formulation, and you have some sort of intellectual property that has inherent value, then I think you’re prepared to go form 1-A. If you have less than that. I would say that we could probably get you qualified, but you might have a problem getting investors.

Oscar Jofre  1:14:08

Thank you. Thank you. All right. Stephen Morris, you have a question for us, sir.

Attendee 2  1:14:13

I do. Can you hear me? Excellent. Thank you. It’s a very high level question. Um, you had mentioned that as you do your offering, that is still an opportunity to be a private company. So my question was this on the fact given the fact that we need to provide the SEC certain reporting and we have issued individuales stock. Even if we’re not on a public exchange, and it’s not publicly, you know, there’s not a public exchange for it. What are we still considered a private company, or because we’ve gone through this or in the process of going through this process. And there is publicly tradable stock even though it’s not on a public exchange, can we still consider ourselves private? Or, you know, or are we technically a public company at that point?

Douglas Ruark  1:15:12

You’re still private. I think the proper way to turn what you just said is the securities are freely trading is probably the better way to put that. No, your private still, you obviously have some responsibilities as far as update reports, the SEC, which by the way, if you do have under 300 shareholders, you have the ability to opt out after filing one annual 1-K. So it’s you do have some responsibilities as far as the reporting goes, but technically, you’re still a private company.

Oscar Jofre  1:15:44

Thank you, Danny, you have a question for us.

Attendee 3  1:15:48

Yeah, could you guys share what we should be budgeting for your services? How do you get paid? Is it by the hour? Is it a success fee? And what would it cost us to go through your process?

Oscar Jofre  1:16:00

It’s a great question. So we’ve undertaken the the the ability to allow people to know what they should be budgeting, we put it out there in a blog for everyone. You should be budgeting realistically between [uncertain] and $50,000 to start with, up to half a million, depending on your size of capital raise. So you got legals that is going to come in between 50 and 75 thousand. They’re all going to work audit well. You know, we can all go $3500 it’s a fresh new company, right up to who knows. Then the there are broker dealer fees, which sorry, Shari, I’m speaking on your behalf, but she has some filing she needs to do with the SEC and FINRA that needs to be paid. But then there’s a percentage fee and all the the only participant in this entire race this is a great question time for me to tell everyone because anybody approaches you with any other model other than what I’m about to tell you it’s noncompliant. The only participant that can take a percentage of commission from your capital race is Rialto. That’s it nobody else everyone else who even offers it or anything you are now walking into. Well, let’s just say a nice landmine with a current sec Commissioner.

Shari Noonan  1:17:15

A registered broker dealer I don’t [uncertain]

Oscar Jofre  1:17:22

Yes, because with the new Commissioner, you don’t want to be barking up that tree. Alright, we got another question there. Look at that, today,did we start something? Is that what happened? Okay, here we go. Adul. Hello.

Attendee 4  1:17:40

Okay. Yeah. This is somebody sitting next Abdul Qadir Robbo, this is Rich for SMS biotech question probably more directed towards Shari. There’s many things I like about the Reg A process in the potential of it. But one of the concerns I have is that hypothetically speaking, say we peel off 10% of the company and we go the Reg A plus route and into the marketplace is one of the concerns I have is losing pricing pressure or pricing control over my shares, right, because at this point, I’ve kind of built up a stable of current investors, and I’ve sold it at x. And presumably I lose control over that. And one outcome is maybe these shares are trading for x plus, but another outcome you have to consider as they start trading at x minus, right. And I’m also creating into, you know, most likely a thinly traded market, you know, which implies more volatility, right? And then also, you know, you know, some of the broker to broker kind of transactions over past history, maybe you’re more susceptible to medical manipulation, things like that. So, you know, how do you kind of alleviate those kind of concerns I have about that?

Shari Noonan  1:18:47

Absolutely. Thank you for your question. So first of all, there is a panel specifically on I believe secondary trading, right, Oscar? But I want to I want to address your question. So if you can tune back in when Lee Saba from Rialto Markets and I believe Kiran from CoreConX are going through the secondary market. And we’ll be able to discuss that in depth, but completely understand the concerns, very valid concerns. We have several different mechanisms that we we’ve worked through to assist investors with price discovery, as well as to give them more information on the company. Now, can we you know, stop an investor from putting in, you know, an order for, you know, a certain price we can have certain bands around different prices. And we can also have what could be akin to like a corporate buyback program, to to help alleviate some of those concerns. However, we are a highly highly regulated platform. So those are all under programs that are offered to all issuers. Under very systemic, meaning they work the same way all the time. And, and programatized functions. Did I answer that?

Oscar Jofre  1:20:14

I think you did well, look at the end of the day, this is new, it’s not about thing recreating, there’s no trading from that. I don’t want, all of us will say, we just unveiled secondary market just recently for the very first time, the regulation came in 2017, as Nick indicated, but only now 2021 Rialto is the first secondary ATS where an investor can go there directly, you know, the audience, what we’re hearing is, is their embrancing. And the reality is investors aren’t buying your shares to liquidate if they were, then you are going to be trading on an OTC or our TSX v kind of environment or CSC. That’s not what this is. That’s not what the JOBS Act was about. The JOBS Acts was about democratization of capital, allowing everyone to be able to participate. Number two, to keep the ownership with you, you heard Scott Pantel, speak about this today, he has seen two different scenarios where one companies don’t get funded. And that’s sad, because it could be a life saving drug or or item. Number two, where the company does get funded, and you lost your company, and that I’ve seen all too often, right? All too often we’ve seen that. So you you need to look at it a very different manner. Sorry, Shari.

Shari Noonan  1:21:29

Yeah, if I can just close out the comment. You know, you said something that just reminded me, you know, these markets are quite early. But we have structured them to be specifically investment markets, not trading markets, not speculative markets, so to be investment markets. So that’s really, you know, the way that we’re really trying to help with with setting up the proper incentives.

Nick Antaki  1:21:55

Perfect. But one thing I’d like to say about that, as well as when you come into this Regulation A plus process, and this is the corporate lawyer coming out and me, whenever you set up a company and you’re starting to raise capital, you need to really think about in a very deep sense, what your exit strategies are, whether you’re going to keep it in perpetuity, and just, you know, issue distributions to your investors, whether you’re going to have an asset sell or a merger, or an IPO. I mean, you have to really deeply think about these questions, because they generally come up in the disclosure, and it will really affect your strategy for the race itself.

Oscar Jofre  1:22:35

That’s a great point. Thank you, Nick. Francisco, you have a question for our time.

Attendee 5  1:22:41

Yeah. Hi, everybody. And thank you for for your time. It’s a really interesting panel. This is a I’m beginning in this  med tech fundraising since hadn’t always been an [uncertain]. And since I’m in Latin America, it’s Reg A plus and Reg CF. I don’t think I’ve ever said it correctly. Appliable for international company, let’s say Canadian, Mexican, Brazilian European, you say it, or is it just for US companies based only?

Oscar Jofre  1:23:16

Great question. So I’ll take that. So first of all, Regulation CF, was created for us based companies. So there have been a lot of companies from Latin America, that what they’ve done, they’ve created a company and put people on the floor in the US to be able to utilize that regulation, because it’s not just incorporate. And that’s. So that’s for Regulation CF, and you can raise up to $5 million every 12 months from the general public Regulation A is for a US or a Canadian domiciled company. Now, you can incorporate in either the two jurisdictions in the US or Canada, but you will need to have even a stronger foothold, making sure that you’re going to need to show and demonstrate to your lawyers, that you’re not just incorporating that in a body and your full operations are somewhere else. So many, many companies. In fact, here’s the interesting thing. The darling of Regulation A is not even a US based company. The darling is a UK based company. The second darling once again, was not a US based company. It was an Australian company. So what they did is they maintained their operations in the UK, they created a company in the United States with a team because they were expanding and then they use the US company to raise capital to further and expand their business. So there is a model for that Fransisco you reach out to us. We have your lawyer specifically. And providers that know how to structure it so you do it fully compliantly. All right, Bruno, you have a question for us. Hello, Bruno.

Attendee 6  1:25:09

I just need to unmute here I am. How you doing Oscar? Good webinar. Very informative, I have a couple of questions. One, I guess is a follow on from the other question regarding whether you’re a public company or not. And as you know, and I don’t know if your guests know, but you know, most Canadian companies, if they’re private, can access the scientific research and experimental development tax credits. And you have to be a private Canadian company. Do you know if that is retained once you raise money through this vehicle?

Nick Antaki  1:25:45

Well, I’d like to be clear, it’s a public offering of a private company of private securities, whether you are going to avail yourself of Canadian benefits, I can’t say especially when it’s so specialized.

Oscar Jofre  1:26:07

I’ll answer it, because we’re going through it. And the answers were private, Bruno, so the company maintains private as long as it’s less than its let you remember, it’s gotta be 51%. Right? So the Canadians need to own 51% in order for shred or any of those credit, but it’s a great question, because it’s one that I should have thought of. But you had a second question as well.

Attendee 6  1:26:31

I did. And I think you talked about it a little bit in terms of, you know, what is the cost? I mean, if you’re going to embark on this process, you know, how much money should you have in the bank? And I guess part of that is, how long is the process going to take? Let’s assume I have a lot of the documentation, but not all of it? How much money and how much time to to be able to push the button and start raising money?

Oscar Jofre  1:27:01

That’s how, yeah, that’s a, that’s a great question. So regardless of what we try to tell people is to plan for at least four to six months before you can even go live. Because when the lawyers file everything, it it will take the SEC 31 days before they respond, but to file that document, they need audited financial statements. So you try to plan that into that equation. So during that time, what do you need for capital. So that’s why we say around, and I’m talking US dollars now. S you need about 250,000. What a lot of companies are doing though, this is the wonderful thing about the JOBS Act is that while you’re doing your Reg A, nothing is stopping you from doing a reg D, which is an accredited investor, to kind of supplement the capital, you need to do your Reg A or you can do a Reg CF. And you can get those can get up and going very, very quickly. While you’re doing both, in fact, so here’s another question people are, can I do a Reg A, a reg CF and a reg D simultaneously? The answer is yes. There is nothing prohibiting you from doing that. So there’s a lot of flexibility. But you do need to budget for this properly. We do know success is based on understanding that you need to go through these processes, you need these things, because those are the measurements and you’re going to hear that in the next panel. They’re going to emphasize that if you’re not ready for this, and you didn’t budget for that, do not expect that you could have the most wonderful product in the world. But if nobody knows about it, nobody knows about it. Just because you’re on the internet. You’re a needle in a haystack. One more question here, Joseph. Hello, Joseph. We lost Joseph. Okay.

Attendee 7  1:28:50

No, you didn’t lose Joseph. Here I am. Consular. Consular, sir, what happens and you run into a problem with your Reg A offerings to the unaccredited non accredited folks? Are you running into problems with the 500 shareholder limit at all of the Exchange Act?

Nick Antaki  1:29:25

Well, yeah, let me just address that. So if you are required to be an investment company, you are precluded from using Regulation A now we’ve run into a few RIA’s under the Exchange Act, that you wish to use Regulation A to expand operations. Now that is a permissible use of the proceeds in a permissible company. So that’s, that’s available to RIAs. However, you can’t be an exchange company under Regulation A. I don’t know what you’re referring to with respect to the 500 investors a 500 person limit. I don’t know if it’s another exemption that you’re referring to. But generally speaking, you don’t use concurrent exemptions one from the 33 Act and one from the Exchange Act of 34. You wouldn’t use those concurrently.

Oscar Jofre  1:30:30

Perfect Douglas, Nick. Thank you. It was very informative. I think we dug into getting people to preparation Shari, as always, thank you so much. And by the way, we did get a picture of you sneaking in like this. So yeah, exactly like that. So great to have you all looking forward to seeing you again very soon as always. And now ladies and gentlemen, we are getting ready for our next group that is coming on board. 

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