How to structure your RegA+ offering


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.

James Row

Founder and Managing Partner

Entoro Capital

James Row

Founder and Managing Partner

James C. Row, CFA, is the Founder and Managing Partner of Entoro Capital, LLC, a middle-market investment bank based in Houston, TX. Mr. Row has over 25 years of experience in capital raising, deal structuring and energy finance, including project finance, equity and debt securities, risk management and digital securities. He has originated and arranged funding, in excess of $10 billion. Mr. Row is a Chartered Financial Analyst and maintains Series 7, 24, 28, 63, 79 and 99 FINRA securities licenses. He serves as a member of leading industry groups such as the Houston Society of Financial Analysts, Houston World Affairs Council, and Houston Producers Forum. Mr. Row is the author of several oil and gas issues and a featured speaker at global industry conferences.

Marty Tate


Carman Lehnhof Israelsen

Marty Tate


Marty is a nationally recognized securities, finance and fintech attorney and counsels clients throughout the U.S. and internationally on various forms of structured finance, private and public securities offerings, fintech, real estate financings, venture capital and angel financings, fund formation and compliance, business formation and corporate governance. Since 2009, Marty has been active in advising clients in the crowdfunding and peer-to-peer lending space, with a particular focus on the JOBS Act, Regulation D offerings, intrastate offerings and Regulation A. His clients in this space include nationally and internationally recognized platform operators, sponsors, issuers, REITS, funds and service providers. He has been recognized as one of the top crowdfunding attorneys in the United States and continues to provide expertise and play a leading role locally and nationally in this area of securities law.

Oscar Jofre  00:36

Okay, so it looks like you and I are here. Our guest, Mr. Row should be coming in here soon I see him getting set up. But in the meantime, I’m going to start the welcoming because it is 1230. And we like to start on time. Of course, right, at the very least what we could do is start with. Well, good afternoon, everyone, and welcome once again to the KoreSummit webinar series 2021. My name is Oscar Jofre, and we are so delighted once again to have you here today, we’re going to have another fun discussion in this whole realm of equity crowdfunding Reg A, Reg D, Reg CF. And this particular discussion we’re going to have this afternoon was inspired by one of the webinars that we did because of some of the questions that were coming from the audience afterward. Thank you very much. I’ve asked some of our panelists to come back in again. And to help us and to have this in-depth discussion about structuring your Reg A offering, which sometimes seems very simple, but as Mr. Row will tell you, it’s not always the case. And they’re using he’s going to put his cowboy hat on and put the gunslingers on. I’m here. Alright. So let’s get with the introductions first, Marty.


Marty Tate  02:00

Yeah. Hi. Marty Tate, I’m a securities lawyer, I focus most of my practice on private capital raising. Been involved in crowdfunding since the very beginning and have represented issuers, platforms, service providers, everybody in this crowdfunding space. Focus my work primarily on Reg CF Reg D, and Reg A offerings.


Oscar Jofre  02:39

Well, perfect. Sometimes you’re a little shy. I mean, you’ve been there from the beginning. And people don’t know when the beginning is. So I’ll just bring everybody back. It’s 11 years now or 12. So people think it just happened last week, but it didn’t. And another one of our fellow esteemed colleagues that’s been there right from the beginning. Mr. Row.


James Row  03:02

Well, you know, Marty, I love my friend Oscar, but he always mispronounces my name. It’s Row, it’s like rowdy, man, it’s Row. But anyway, come on.


Oscar Jofre  03:15

First, I had the first name wrong. I think I got that.


James Row  03:18

Yep. Jim. And then I’m gonna just change the title there anyway. Oscar, good to see you. Jim Row, with Entoro, investment bank broker-dealer, we have a valuation company, RIA, etc. So background, a lot of structure finance, and we’ll focus a lot on, not so much the legal side of the things, let Marty talk about most of that. I think it was a discussion you and I had, Oscar, that we talked about how to structure a transaction. And a lot of people don’t spend a lot of time and they think a lot of you know, they go through a lot of antics, and sometimes they just don’t think about actually structuring the transaction. So hopefully, we’ll have a pretty good dialogue here and look forward to the questions from the panel and also from any guest online.


Oscar Jofre  04:16

No, you know what, it’s true. That’s what I indicated in the beginning. This is a pure example of what we can learn. And we acted pretty quickly actually, there’s been a couple of things you brought out that we, hopefully, we’ll redo the research, but is that when you start having discussions like this, you start realizing you need to get into another area more in-depth. In fact, Marty and I yesterday, we were just talking before you came in, it just seems like yesterday. Yesterday he and I spoke about, obviously with reg CF, another regulation, there are changes broker-dealers are getting involved. And there’s a whole new way that can happen. It was really gratifying to know that he’s embracing it and we’re gonna have a panel on that because I think it’s good for BDs FINRA broker-dealers to understand they can use it. But there are some little intricacies. But today is about, as Jim alluded to, is how to structure your Reg A. And this is really interesting because we have a lawyer and a broker-dealer. And, from a company perspective, you need to follow and you need to be guided by these two professionals who are going to be instrumental in that. And so, and the reason we’re bringing that up is that everybody thinks Reg A is just simple, here it is, easy-going. But it’s not. Jim brought it up in one of the other discussions and we could have had another hour added on just as he was talking about that. So, let’s talk in general, I think it’s important, just to remind everyone why this is becoming critical, is because, on the 15th of March, you will now be able to raise up to $75 million. So this changes the way you approach the market. This will change everything that you do within your company. And it’s imperative that you plan for it. So let’s start with you, Jim. Because, from a broker-dealer point of view, you have a firm view that you’re now seeing enough  Reg As? So let’s talk about that. First of all, what do you mean by structuring? Because that can mean I just want to make sure this covered that phase first? And then we’ll move on to the next part?


James Row  06:36

Well, yeah, that’s it’s a great question, what does structuring mean. And that, to me, means everything from, you know, what types of equity are you putting into, what kind of optionality you’re putting into your agreements? I’m talking overall, let’s just talk overall, it could be Reg A, could be anything, but just the structuring of something, you have warrants, do you have options, you know what does the transaction look like from A to Z? And are you building in the types of things that you need to? Are you anticipating growth issues? Are you anticipating expansion issues beyond your borders? Are you anticipating all the kinds of things that you really need to? So, are you structuring it, not just for today, are you doing your deal just for today, and you’re handicapping yourself in the future. So, it’s really about thinking through the process as much as anything else. And a lot of people will just, you know, take the flavor of the day, and what have you now. I’m a firm believer also that you can get too cute. And a lot of people try to design things. And I’ll go back to an example. And a lot can be in the digital or crypto side of the equation, people spend too much time over-designing things like token mechanics, and they’ll spend way too much time thinking about that versus the core transaction of their deal, be it real estate or consumer products or what have you, and get back to the actual heart of the deal instead of some of the actual token mechanics. But if you look at what really structuring is, it could be, the type of equity is it, you know, and is it preferred? Is it you know, common is it? What are the features of each one of those classes? What type you know, I mean, there’s, it’s really what do you what are you going out to sell. Now, I’m always concerned from a sales perspective, that you have something that can be easily explained because if you make it too complicated, can’t sell it. So you need to have obviously, the proper structure, the proper overview, but if it gets too difficult, you won’t be able to sell something, and if you’re looking at it in an in a Reg A or a reg CF, you need to be even more pedantic in your structure. You can’t make it too complicated. And so you can get complicated in a reg D but in a Reg A and a reg CF, you need to be a little bit more plain vanilla.


Oscar Jofre  09:33

Okay, it could be a number of variables and that’s the way you’re looking from a broker-dealer point of view. Marty, anything outside of that that you’re coming at it from a legal when you hear the word structuring, and you’re guiding a client to a Reg A offer. And you’re on mute, we love that voice, harmonious.


Marty Tate  09:57

There we go. Structuring is really important and we spend a lot of time doing that. We have clients who come to us and say, you know, we want to do a Reg A. A lot of the Reg A is that I’ve worked on are not as much for operating companies. You know, operating companies, you have to look at and say, Okay, what are you going to do? You know, the simplest question is, okay, what do we offer? Are you offering common offering preferred are you doing debt? Is it warrants, as Jim said? So a lot of times, they haven’t even thought about that. And so you have to say, Okay, how does that, you know, if you offer common, how is that going to work? Or do some people want to offer it as a class of shares that don’t have voting rights? And so there are things to think through there, and how do you classify those, and a lot of times, that will require that we amend their organizational documents to provide the separate class or whatever is needed. Where I see structuring becoming really important is we have companies coming to us that are structured to be, you know, not investment companies as defined under the rules, but companies that are set up to go out and make investments in different types of assets, whether it’s real estate, oil, and gas, crypto, whatever, there’s a lot of different these types, and I don’t want to use the word funds, because SEC doesn’t like the word fund when you’re doing Reg A. But these types of funds and structuring those becomes key, or, for example, we’re doing you know, I’m working on a rewrite now. And that requiring all sorts of creative structuring, that’s not, I’m not trying to get over-complicated, but just by its nature becomes complicated. So structuring, this topic is great, because it’s we spend a lot of time talking about structuring,


Oscar Jofre  11:57

No agreed. And I have to admit, I’ve, I’m at fault probably myself by telling people it’s very simple, you know, it’s either debt or equity. But as Jim alluded to, even on the equity side, you could have a voting non-voting dividend with a revenue share with a mix with a warrant, and all these other elements to it that don’t overcomplicate it. But I think you touched on something there, Marty, that I, we don’t hear enough, and I’m just going to touch on it, that even after the structure becomes important, because you may need to amend your articles or your bylaws or your company in order to allow you to do that. Right. I did hear that correctly.


Marty Tate  12:37

Yeah, that’s correct. Because, you know, if you’re going out with a different class of, of equity, you know, a different class of share or limited liability company, interest or unit that doesn’t exist, particularly if there’s, you know, if it has a preference, or it has, you know, a non-preference, like non-voting or something, unless that already exists, a lot of times we have to create that, which, you know, is not a huge deal. But it’s just something to think through. From the beginning. I think that these aren’t the questions that people have top of mind when they’re starting the process.


Oscar Jofre  13:17

And so I’m going to come back, we’ll come back to the real estate because I think real estate really, is the, I’m not gonna say, the most complicated, but it’s the one that requires the most work because it’s got so many different variables involved with it. So we’re going to come back to that one later on. But, Jim, I want to touch upon a few points today. I’ve been calling it a journey. I don’t know what would you call it? But I thought it was a really great question. And I don’t think I agree with you. I don’t think a lot of entrepreneurs think this one through. I have certainly been testing it lately after our conversation, but which is okay, so you’re doing a Reg A. Great. What’s next? What do you mean? What, what’s next? So tell me what are some of the complications that could happen. Because forget about the size of shareholder base? I mean, I don’t think that’s really the issue. But the way you structured here could hinder your next step going forward, right, as you indicated, your expansion, but what is it that you want to do tomorrow? So how impactful could that be for a company?


James Row  14:20

Well, I think you have, there’s there actually becomes two things that can be a hindrance. It’s not only the structure, but it can also be valuation issues, right? I mean, those can be the same, or they can be very different to I mean, the valuation and you and I’ve talked about that before, over or undervalued to the extremes can be detrimental. So both sides of that equation can be very harmful to your case. But if you can get into a situation that you have, you could have disproportionate voting You can have non-dilution shares that may keep the next round or something there that may prevent shareholders from coming, there could be a number of things that could end up impacting the next round, positively or negatively. You could have super, super rights, there are so many things that could impact you on the next round that you need to think through. That could adversely affect I mean, there are all kinds of things. Marty is more of an expert in this than I am, I mean, just even where your domiciles, you know, I’m a big fan of keeping it simple. In Delaware, Wyoming, you know, locations, maybe Nevada, those types of things. And if you’re doing a Reg D Maryland, Marty, correct me if I’m wrong, I’m Maryland, pretty much kind of the relocation where most companies kind of get formed. And then, you know, voting can be a big issue, if you have too many classes, the webinar at a C Corp or an LLC, that can be a big, positive or negative, depending on what your next step can be. That’s not a deal killer, usually, because you can convert an LLC to see corporate can be a little bit of a pain in the backside, but you can, you can certainly do that. I mean, if you’re going to eventually go public, you know, if you think you’re going to go public, see corporate, probably a better way to go. You know, Marty can give you a little bit more, you know, and we talked about it a little bit rates are a totally different animal if you’re doing real estate, you know, in a reed structure versus another type of entity. That’s, that’s a big one. Another structure that can also be different is whether or not are you? Are you selling? equity? Are you selling cash flow? Right? So a lot of deals and maybe, you know, we can talk about that this is maybe just beyond the Reg A kind of concept, but are you selling? Are you selling equity? Are you actually selling the rights of ownership in a company? Or are you actually selling a cash flow stream? So that’s a different discussion as well. So we need to just, you need to always understand where that’s going. Because a lot of people get in, say, I’m just going to give you a certain percentage of the cash flow. Well, that’s, that can be totally different. That’s a totally different animal and totally different structuring. I mean, that’s a totally different investment vehicle at that point, and then an equity investment.


Oscar Jofre  17:31

But it would still have the same impact on the future because you’re giving away not giving away but it’s part of the funding.


James Row  17:40

While it has a cash difference. I mean, there’s it’s gonna impact your financials differently. But yeah, I mean, these are factors that you have to think through. It’s one of the reasons why we put together in our own shop, and we make available to people in, you know, an onboarding kit. So it kind of helps you think through, you know, not only when you’re doing your current transaction, but to try to help you for your growth up or your organization and how you’re going to grow yourself.


Oscar Jofre  18:12

I mean, we have to face the reality that we’re going to see a variance of audiences both in all the regulations, whether Reg A, reg D. And obviously, we’re talking about Reg A, but I see them Reg A where they don’t know yet. So how can what’s optimal? I’m not sure if there is because one of the things that I lightly heard from you, Jim, you start talking about the exit? How much of an impact can it have on the structure? If, again, if the individual doesn’t have it properly planned out? You know, it could end up costing twice as much to reverse it or to undo it or Marty, I mean, it’d be interesting to hear, I mean, do our companies coming? Or are you advising them to ask them that question? So what’s the end goal? You’re raising 75 million? What’s the exit? Are you asking that? Or is that just off the table at the moment?


Marty Tate  19:12

It’s not as much of a question as to the exit, for the most part, people are trying to raise capital now as you know, you can include essentially a third of the offering can be this what we call resell shares, basically, your including or qualifying or including in what you’re selling shares at the current shareholder. So sometimes they have that mind they say, okay, we want to, you know, allocate some portion of this 50 million are now seem to be up to 75 million. We want to include in those in the shares that we’re selling, some of the shares that are held by our early in Investors or founders or something, create some sort of liquidity there, it’s a little bit different than going public because you are limited on the amount that you can share, you know, beyond just your standard sort of lockups, the overall there’s an overall limit, but I don’t, you know, and I think one of the positives of potential benefits of Reg A is that you’re receiving unrestricted shares. So, there is that potential listing on the OTC or, you know, even potentially, on NASDAQ, or, you know, one of these alternative trading systems and creating liquidity. So, I think that you have that in mind when you’re doing a Reg A plus, but I don’t know, when you say exit? I’m not sure. I think everybody’s, you know, that investors are looking, there’s got to be some sort of exit, right?


Oscar Jofre  21:00

Oh, no, I agree. I agree. I’m just what I’m trying to. I mean, when Jim was gone through it, you know, we’re talking about the types of securities whether you when you’re going to offer you know, a share, what type is that, that can have an impact. As you dilute yourself, as you start looking at when you need to make a big decision on acquisition or to go public, you may need a certain voting component, or you may need to amend your bylaws, or your articles to do that. And then, of course, you need to take another impact, which is the future growth, somewhere in there, there has to be a button saying, okay, I would like to eventually potentially visit the most preferred exit that somebody acquires me, or I go public, you’re right, the actual shares. The security, sorry, it’s actually looking for the investor. But for the company itself, it needs to look at what its future goals are. Because I do agree with one thing I have seen, I’ve experienced it personally, because I didn’t get the proper guidance at the beginning, the cost associated with redoing a structure, later on, it’s not just twice as much. It’s, it can be daunting, how much more you need to do because it not only do you need to unwind that you need to take on whining, and everything else associated with this. So it’s important. So those are the three areas that you guys touched on. And then Jim, you brought in the issue domiciles. So meaning, where the company was created, meaning Nevada, Delaware, Wyoming, some of the states, that could also be a hint, not a hindrance, but it needs to be factored in, into the destruction of your offering. Because I think what we’re saying, what I’m hearing from everyone is that, here’s a checklist of items you need to consider, and you need to have that in the forefront over here. And then you need to make sure that you’re articulating that to your broker-dealer and your lawyer. And I’m going to come back to this because I’m really curious about this, the broker-dealer typically doesn’t come in during the structuring component. Right, I at least have not seen it yet. I’ve seen the broker-dealer button after the fact,


James Row  23:20

Less so on A, it’s on a D, it’s much more customary on an A. If you can call it traditional, traditionally has been more of an afterthought, because it’s been more of a broker-dealer record kind of concept versus a, you know, you know, co placement type of cognitive, you know, kind of activity. So you don’t see it as much,  I’d rather change the word to historically, then, historically, in the Reg A market, you haven’t seen that, because it’s been that that type of a structure in the market, that it’s been a broker, dealer record, people come in, they do their embed, you know, like your system, you have a button, you kind of do it yourself, and it’s been more of that kind of, of a business, and it’s been more of a relationship with counsel. You know, I, I would think it would be, you know, you should always discuss with, you know, finance and financial side to make sure you’re out there selling to what investors may want to see. So, I think you should always do that. But it historically hasn’t been the case.


Oscar Jofre  24:38

And how does that fit in with all the other Okay, so that’s true. Historically, we haven’t seen the broker-dealer print brought in, I don’t know, in your case money, but I haven’t I mean, I’ve often I’m bringing in a broker-dealer to our client. After they’ve engaged with a lawyer, they’re ready to get up to a point where they’re getting ready to file so that means they’ve got their story. Or at least sorry, that structure has been done. There is still another third party involved here, which is different than in BDs you see it, but they’re a fairly dominant voice in this discussion, and that is the investor acquisition firms. And there they’re the ones out there promoting the offering through their messaging and stuff like that. Does that account for any of it that that’s, there’s a balance here that there’s the broker-dealer who’s used to doing the traditional where that’s one view, versus one that’s trying to get the view of 1000s of users. It’s just curious how destructuring to see in RegA, we need to change it historically, it’s been this route, now we need to change it. So how do we go about that where we can see the company is going to spend a considerable amount of money and in this offering, so it’s imperative, Jim?


James Row  26:01

Marty, and I’ve been taking all of Marty’s time. So let’s turn it over our


Oscar Jofre  26:05

boy, he’s the leg saying that I really speak too much. That will sue them. Sorry.


Marty Tate  26:12

I know, you’re great. And I’d love to hear what Jim has to say on this. I was just going to say, you know, you brought up a good point, Oscar that a lot of times, they’re not thinking about broker-dealers initially, in fact, a lot of my clients will start and they’ll say, you know, we don’t need a broker-dealer. So we’re not going to do that. It’s then the issue of where you as the issuer have to register in certain states. And it’s at that point where they start late in the game, they’re like, oh, shoot, maybe we should get a broker-dealer on board. So, you know, I think that it’ll be interesting to see as it evolves if it takes on more of a public offering type approach, where you have the broker-dealer playing more of a role like an underwriter. And being involved from that, you know, from the very beginning. I haven’t seen that yet. But you know, I think if you’re doing offerings up to 75 million, I don’t know why wouldn’t.


James Row  27:10

So if I can jump in Marty, I think it has turned since literally, March one. And let me give you an example. Two examples. Already, I’ve had two law firms, since March one Monday, flip deals over and basically said, We need somebody to come in and because of the $75 million nature, and up and another one being, they want to use this tool now as a serial transaction. So starting a system where it’s used differently than it was before, okay, so it is going to start looking more like a different tool than it was before. So it’s going to take on a different, you’re going to see a different set of players starting to use now that the tool is different, you’re going to see a different set of players, and you’re going to see a little bit more not, not, not 100%, you know, kind of underwriting style, but you are going to see more people approach it that way, then, and have less of an adversarial type of, you know, thought process to it to a BD function.


Marty Tate  28:21

Yeah, one thing we’re seeing on that, too, Jim, just to add on is, you know, we’re being approached by public companies now 34 reporting companies that are saying, Hey, we want to do this too. And this was even before that 75 million, but I think you’ll see more companies entering that space because it’s, it is an option that’s going to be, you know, easier than maybe doing an s one or an s3 offering. So, it’ll be interesting to see how that expands?


James Row  28:52

Well, if they can carve it out, and do there may be with sorry. So there may be a recent, I hate it when everything’s all connected to your phone, everything’s connected. But the there, there may be areas to where, you know, you’re gonna see larger organization use these for, you know, just SPB purposes, right, that they’re gonna have a particular project of mine and boom, that’s how they’re going to, they’re going to use it to get funded versus kind of a, you know, versus another way to do it. So you’re gonna have a totally different way. And I think you’re also going to see, and it’s going to be I think you’re going to see some innovative things in the real estate world. And then you’re going to depend on the industry sector to I think you’re going to see some really neat things, be it consumer products versus some other, some other industries that are going to use, use the tool differently. So I think I think it’s a very now that it’s going to get a little bigger, you have more flexibility, you’re going to see a whole different set of interests.


Oscar Jofre  30:01

You know, I’m glad you guys got to that point. And because that that was one part of the structuring of the deal that nobody brought up, we talked about the lawyer, you were talking, but we actually, historically, the BD has been left out. And I’m a big advocate, as you know, we will not take on a client, we will not even let them use our technology unless they have a broker-dealer. We are that strong behind it. Because this is what I call the ripple effect of, you know, what happens when certain things are not there. One, it’s, as Jim and Mario alluding to is the structure of the deal. But it’s not just that it’s whether you transacted properly, it could be, you know, it could have an effect, on all of us because they’re using certain gateways that payment gateways that could affect us by getting cut off. So I’m a big advocate of this, I see the role of broker-dealer not just to be there, the video record that I’m now starting to change, I need to talk to our team to make sure that the onboarding begins a bit differently. We have been traditionally, sorry, historically sending the client directly to the lawyer to get that signed off and then to the BD. But we’re going to change that because I think it’s important because this could save a lot of time and money for both parties, making sure that not only are you’re both good at working with each other, but you got some good guidance and understanding what you’re about to offer to ask questions that you probably wouldn’t even think of that. Oh, shoot, you know what I didn’t, you know, I get on winded or I’m too far down the line. All right.


James Row  31:45

Well, look at you know, Aye. Aye, aye. I, I’m not gonna speak from already, but I can tell you, I want the good bouncing, you know, bounce off lawyers, all the dialogue of having good structure and good ideas for a client, you, you want that interaction for the benefit of the client, right? And it’s not that much of a lift if you do it right at the beginning. And I’ve always been a big advocate of bringing in counsel right at the beginning you do it. You said, knock it outright at the beginning, and you kind of you have a couple of good hours and you and you really get everything you throw it out on the table. And you do your best whiteboarding right at the beginning. It saves time, saves energy, prior planning prevents piss poor performance. Right. So you do it right at the beginning, and everybody’s onboard councils got it. They had their they know what can be sold in the market. They understand what tools are, you know, it’s I think it’s just good to have different viewpoints when you’re doing your structure. And counsel usually likes to have the thought process from the financial advisor side.


Oscar Jofre  32:58

Well, I hope they do. I’m not sure if Marty does I think he just likes kicking him out the door. Just get out. Get out. No, but I’m just joking. It’s, you know, he’s from Yeah, we,


Marty Tate  33:08

we love. I love it. Having a broker-dealer involved from the beginning. As I said, a lot of people will look at it from a strict dollars and cents perspective, like, I don’t know, you know, if we don’t need one, but I, it’s, I can’t tell you how many times we get off, we get asked, or I get asked, you know, do we need one? What are the benefits of having a broker-dealer? You know, and a lot of times, they’re just acting as a broker of record and, and that has its benefits, obviously, in enabling, you know, enabling the company to sell in various states. It also provides, you know, an extra layer of due diligence, and validation. But I, I think that the input that can come from a broker-dealer on, hey, this is a good way to structure this, this is something we might want to think about.


Oscar Jofre  34:05

Yeah, I’m the only other The only piece that I will add to this. Sorry, Marty, I think you cut out but the only thing that I would add to this that I think needs to be added. Because in Reg A, it’s a bit different, because they do play such an influential role. And I think it is not that they can provide legal advice or you know, broker-dealer, but they can provide sentiment information that will assist in that investor acquisition, I recently watched how a broker-dealer, a lawyer, and a client engaged in structuring an offering. And this I mean, this is the future this is now going forward. What do you need because here, you get the legal side immediately in providing the framework based on what they already know from the company what they can and cannot do? And if they, if they’re going to move this path. The lawyer immediately knows what action needs to be taken. So you end up saving time, money. Cost through there from a broker-dealer side, you’re getting the kind of offering you like. And now you know you got the support from the investor acquisition, who’s going to have to market this see it becomes a win-win for the issuer, the company itself, you by getting all these people in the room at the same time. This is this has been very informative for me right now, to be honest with you I’ve been, I thought it would be taken a different route. But what I got out of structuring that I didn’t expect is that he needs to be at the forefront of the onboarding or not forget our onboarding of the start point of an issuer, thinking of a Reg A, it cannot be just the money, I’m going to offer non-voting. Sorry, we just got started with step one. And putting them to the lawyer. You know, they’re just no fence, Marty, but it’s pretty really producing the documentation. But if you have all the other pieces there, wow. I mean, just as I was taking notes from all of you, discussing the different security types,


James Row  36:04

and all that sorry, gone, even I mean, if you think about two points, if you remember, what do they call lawyers, they call them counselors first. Right? What that’s, I mean, they call them counselors, right? That’s really their, their, their greatest, their greatest strength is to counsel you what to do. The production of the legal documents is just the fallout of the counseling. Okay, where a lot of the misunderstanding from an issuer is that they just think, you know, their lawyer is just a document jockey, right. But at the end of the day, it’s really the counseling, that’s the important part. Okay. The other difference, the other thing I was going to say, Oscar, is that broker-dealers also are different, right? And, you know, just like, just like lawyers, just like doctors, everybody’s got kind of their strengths and weaknesses, right. So, BD is different between whether or not they have more of an investment banking or financial advisory background. Some of them are some groups are very much just want to do X. And other groups can do X, Y, Z, ABC, right? If there are different groups, and then there’s some that specialize in certain industry categories, or some that specialize in certain segments that will do just reg A’s and reg CF. And then others will do reg Ds written? No, I mean, you can’t lump all lawyers in the same bucket, and you can’t lump all BDs in the same bucket. They’re probably they’re very different differentiated market.


Oscar Jofre  37:43

I have a question for you on that. And that’s good, you’re right. You’re 100% correct on that already. So let me ask you, so let’s say you, the BDs and RegA, the one that you like doesn’t do structural to them. They don’t, it’s diagnostic to it. So now, where would that advice come from? Obviously, there are bees or investment bankers that specialize in that. So is that a new role now that we’re thinking that? I mean, it already exists to your point in the D space? Right? It’s already there. Right?


James Row  38:16

Well, yeah, I mean, not a sales pitch, we do that full space, right? We, you know, for us, an issuer can shoot, you know, it’s kind of a cafeteria plan. You just want x you can have X, do you want X, Y, and Z, that’s fine. Do you want x and z? You know, it’s kind of what, what somebody wants? I’m just making a point. Right? I didn’t, I don’t want the listener to think that it’s just, you know, every BD is the same, the same thing. Same with, with, you know, a lawyer and or a law firm, right, and you pick the lawyer, not necessarily the law firm to and that’s a very different thing as well. Right? So I think you need to be aware of that. Now, some, if you have a very mechanical and a very, on the BD side, if all you have is somebody that does BD of record, and you can, you can also have a financial adviser, I mean, that’s somebody that’s just going to be somebody that’s going to do a monthly thing, and that that may or may not be somebody that is licensed, they should be but they don’t necessarily have to be to provide financial advisory. You don’t have to be technically licensed.


Oscar Jofre  39:30

Okay. And Marty, I mean, obviously, I know we’re both seeing the clients that don’t want to work with broker-dealers. So obviously, they’re going to be the, you know there’s always going to be those kinds of clients, what cutting guidance Can someone who is trying to do without a BD, I mean, clearly we were asserting that you need one. You should have one because we provided all the men And we can we have webinars to discuss that. But from your point of view, where does it become a barrier completely from a legal side? Or does it where you just continue knowing that this may not have legs to go on? Even though you’re proceeding with it? I’m putting you on the spot a bit. But


Marty Tate  40:20

no, that’s okay. That’s, that’s your job? I think it again, it depends on what the issuer is trying to do, right. So some people, some of the issuers think, Hey, we’re going to be able to go out and sell this completely on our own. We’re willing to go and get licensed in the states that we need to. I’ve had those issuers and they think that you know, they have whatever, the marketing ability and everything through the reference to go out and sell and, you know, I’m not going to dispute that with them. I’ll tell them the merits of why it’s good. I like what Jim had to say, and actually, we’re whether you realize it or not, but we’re working on it, offering with your group right now. And it and they’ve been involved from the beginning. And I think, I think if you have the ability, and everybody’s issuers are coming, they have different budgets and different plans and so forth, if you could put together a team and have somebody, you know, appropriately, I really liked that. Toro has that investment background, investment banking background, that’s really important. We’ve got my law practice with a lot of investment bankers on different financing and having that just that knowledge base and perspective, I think really helps. But, you know, again, it’s not always, it’s not that it just varies on what is needed. And I’m not really answering your questions. I’m just saying,


Oscar Jofre  42:08

No, no, no. It’s Look, it’s tough. I mean, we’re, we’re, we have great momentum, both of you alluded to at the beginning, we’ve changed the game, you know, the blueprint, we had 75 million bringing in a brand new type of entities. And you both alluded to real estate, I mean, real estate, I think it’s going to be one that we’re already seeing it we’re already seeing real estate platforms that in the past were stringent accredited investor only. And now they’re doing Reg As had clearly they’re seeing the value of it. But the those that know the market, can pivot to a Reg A and because they understand the structure, but that means it’s going to open it up to others to say, Oh, look, there’s regulation, I gotta go in. And it’s easy. Let me do it. So let’s talk about real estate. Now, because real estate, for every other type of company, everything we’ve said is somewhat structured, but real estate is different. And I’d love to get your take on the differentiations that need to be taken into consideration when structuring it. Given that real estate, you may not be selling equity, or maybe you are what I’ve seen so far, I don’t know if the proper word is cash flow. But dividend, they’re selling the dividend of that. So, Jim, I’d start with you on that one.


James Row  43:29

Well, sometimes you don’t want to call it a dividend. Sometimes it’s safer to call it a distribution. So if you’re not quite sure, call it a distribution. And then that kind of gives you a catch-all. A dividend would be literally from equity. But so you know, there are different rules for real estate and real estate as Comm. You know, there’s always, you know, you think you understand a lot of stuff. And then there’s a segment of the world that pops up in a different, you know, real estate’s one of those and sells insurance, right. So it’s always things that pop up on you that kind of change. And then there’s both the tax code and others, there are things that that are different, and I’m not the world’s expert, but even if you look at rates and the way rates are designed, and when they can, certain things happen both from the accounting side and the legal side. They’re, they’re different. And I’m not a real expert, Oscar, so I don’t want to go down a road that professors that I am, I just know that they are different. You need to you know, address those. When we’re looking at right now and we’re bringing in some real experts to help us on our we just got a new assignment on a Reg A opportunity. And that is bringing in a couple of people to help us on the structuring side of that because we’re going to see a serial, there’s a group that wants to do a serial Reg A structure. And that is properties that the equity would be, you know, you’d have kind of hold code kind of structure. And then you would have almost these SPV serials structures underneath, and how would that work? And what would be the design of all of that and just kind of bring up some very interesting things? But that’s why I’m saying you’re going to it’s somebody that you would have never thought before the $75 million number would have been a Reg A issuer, they would, you would have never thought this, this group would have been, you would have historically said, You’re way too big. And the way they look at things would have not been a Reg A way. And so you’re going to, if Reg A is going to blow out and I think that you’re going to start seeing the average ticket size differ, you’re going to see the use of BTS more, you’re going to see the use of structured finance, or you’re going to see, this isn’t, this is going to be a different tool. This can be a very different tool and six months.


Oscar Jofre  46:08

Back, Marty, you were indicating you’re working on a read already. I mean, I have a few real estate deals with myself, but I wasn’t involved in the structuring I get to see after Park.


James Row  46:20

Marty script, Marty’s gonna be able to add the most value to the question, because he’s working on one right now. I’m just starting to get into one.


Marty Tate  46:27

Yeah, we’ve got a few of them, actually, that we’re working on. And. And it’s interesting, Jim, that you said that because it, this is large. It’s a large player in this field. And so I think it’ll be interesting to see. And this is their first foray into Reg A. So but they’re encouraged by and enticed by the $75 million number. And then in the other case, one of the other cases we have it’s similar to these, it’s a series offering. And it’ll be structured as a rate but with the series offering in the whole triple net assets. So and that one’s actually really cool. And really, technically


Marty Tate  47:24

like, so retail, like, they’re going to go out and buy Starbucks and Chick Fil A’s and those buildings, you know, there that are leased to those types of tenants and allow kind


James Row  47:37

of big-box players.


Marty Tate  47:39

Yeah, that that allows people to come in and buy, you know, a share for 20 bucks, in, you know, own, you know, a $20 interest in one of these assets, which I think is cool. And yeah, so it’ll be interesting to see kind of like, they’re, they’re hoping to be kind of like a robin hood of real estate. So let’s see,


Oscar Jofre  48:03

it’s interesting. You mentioned that, because we did have a panel on real estate for reg CF, as you know, regulation CF is starting to even under a million dollars, they were filling a gap in the real estate market. Now it’s getting filled to five. And just yesterday, we had a client that owns Starbucks locations, but he’s only looking for like 1,000,060 and 2 million, that’s the max for each location. So it is, it is interesting that we’re talking about this, that we’re the landscape is changing to Jim’s point that we are now bringing the same in with that change. We all need to be more agile in working with our colleagues to ensure that the prospect or the client that we have, has the best way of achieving their goal because ultimately, they’re I mean, I’ve seen great companies that should have had a home run in their capital raising. And they underestimate Reg A. Like they, you said it earlier. Jim, you said these guys in tokenization, they’re spending so much time on the tokenomics and all that they put no time in in the structuring. I would argue that in the same context, I think my Roderick kept saying that, in our last panel, Marty, everybody needs to forget that you need to market this thing. So as you know, this is just another one of these. So people go so what’s the percentage of importance there all 100% How’s that? You need one that obviously you know, get an offering you need a good opportunity. So it’s this has been really insightful for me. I’ve taken it for granted, to be honest with you. I’ve been an advocate of broker-dealers involved in the Reg A rugby’s right from the beginning for different reasons, but now this is just once again a more important reason. And I think what we need to do as an industry is make sure that they understand, as we’re doing today, that it’s not so simple saying I want to raise 75 million, and I’m just going to offer common shares. You know, because it the ripple effect, it could be anything, right. And, and nobody guides them. Sometimes I have a client right now that went out and they’re regretting they get warrants on their Reg A. ‘Cause Reg A warrants are very different than on a Reg D offering. Very different. And unless you have gone through it. Yeah, I


James Row  50:44

think a lot of a lot of people did also want to try to, particularly entrepreneurs that have had 100% control for a long time. They also, you know, want to try to build in things that they can read trade, and it’s like, you know, can’t read trade once you’ve done certain things, right. So you need to be smart about what you do.


Oscar Jofre  51:08

This has been this has been great. Thank you. So closing remarks on structuring from you, Marty, on the legal side, clients coming to you, what do you want them? Now, you know, you’re going to be working along with colleagues, making sure that but what else? Could you add to that conversation? He says, We close off?


Marty Tate  51:26

Yeah, well, I like what Jim said about, you know, we are counselors, and we’re here to help. And I think one of the things that we find is, you know, the client doesn’t necessarily know, you know, the best way to do it anyway. So and a lot of times, we don’t fully know, all the issues, at least, this is the way I worked until I’m, I’m kind of putting pencil to paper and saying, Okay, how do we what’s the best way to make this work? And, you know, we have clients who will ask you that want to get this all worked out. And I think there’s a lot of legwork you can do at the beginning and say this is the best direction to go. But sometimes there are iterations along the way. But I think that structuring is going to be you know, that’s I think that’s where lawyers make their money is trying to come up with the best structure for what the objectives that the client has, you know, way back before all of these Otis wealth and companies came, you know, this was something that lawyers were talking about saying, I wonder if you could do a series, the series offering under a single Reg A, and it was something we were just sort of tossing around, you know, hypothesizing about and, you know, now, it’s something that’s fully accepted structure. And I think we’ll continue to see that evolution and the creativity of the parties involved in you know, it’s the clients that come in have this off the wall idea that that drives us learners to think outside the box and, and come up with, you know, the next structure that becomes standard. So, yeah, structuring is a really important part of the process for sure.


Oscar Jofre  53:15

Perfect. And Jim, in closing,


James Row  53:20

you don’t know what else to do keep it simple. But I would actually advocate structuring starts long before you pick the instrument. And I don’t, you know, when someone comes to me and wants to talk about raising capital like, and they’ll say, I want to do a Reg A or I want to do a D, or I want to do a token, I’m always like, Well, why do you want to do one of those? And, you know, if the answer is not real good, it’s probably just something they, you know, probably read about two hours beforehand. So, a lot of times somebody hasn’t thought it through. And I can give you song and verse about people that would, you know, think they want to do a Reg A and I talked him out of it, maybe I needed to do a D, and then I’ve seen people that want to do it. I’m like, you should really think about doing an A, right. So there’s a lot of people that just, you know, use you know, a screwdriver for a hammer. So there’s a lot of misusing of instruments and I think people need to kind of figure out what, what their, what their goal is and try to apply the best tool for it. And Reg A has a great instrument for the right project. Read D is a great instrument for the right project. cf can be a good way to get started. You know, they’re out there for a reason. There have purposes and sometimes people misuse them.


Oscar Jofre  54:48

That’s perfect. Thank you both for a great discussion. We now know the importance of structuring and I hope it doesn’t get caught up in my only concern of all this doesn’t become a barrier where we scare off the intrapreneur. Because it This is my only concern is that. So I speak to this client every once in a while because, for me, it’s curiosity, but I understand who they are. So they reached out to me about a year and a half ago, they were the 17th company to get approved for Reg A. You know, to me, I was applauding them $15 million. I thought they raised the money, they hadn’t. And I, I was curious why. And so I started asking, who’s your lawyer? No, no, no, we don’t use any lawyers. All they want to do is rip you off for something. This is a standard template. Okay. So I moved on to my next question. Okay. No problem. So who’s your broker? dealer? Oh, god, no, I’m not going to work with broker-dealers, because all they want to do is be paid for doing nothing. So and you know what the regulation says that I don’t need a lawyer. I don’t need a broker-dealer. I just needed to do the audited financial statement, which was done. And now I’m selling it on the web. And here I am. And great. How much have you raised 75,000? So I think there were about 125,000 now and weird enough, I don’t know how they. So my only concern is that why I bring this particular client in is that the whole notion of the JOBS Act was to democratize, to allow companies and entrepreneurs to use regulations in the easiest way possible. I’m using the word easy, maybe it’s a better word, but to use it and not be hindered by intermediaries who get in and based on opinion. And so you know, this is what we hear an investor acquisition often when they say, Would you rather have one investor, a venture capitalist? But would you rather have 10,000? Who supports your product? And this is a really interesting analogy. I say you need both. We’re lucky to have both, but most companies think they need to pick and choose. I don’t, I’m advocating that people shouldn’t, that means broker-dealers as well. And lawyers need to be agile in the discussion, with companies that where it may not be the ideal structure you may like, but it’s the structure they like. And this is something that David Weild often reminds me of why the JOBS Act was created, to put the driver, but the business owner drove, it comes with a responsibility. Don’t get me wrong, you were given a choice ABCD, you can pitch and complain later and say, Jim, you and your team did me wrong? No, you didn’t. We outlined it, you chose this path, it’s you? Okay, good. So I just want to put that out. That was my only it’s not too much cautionary. I agree with you. I love the fact, I want to make the structure and engage people in a win-win situation, not based on bias, but based on, you know, what’s happening in the market. And right now, where we are one of the most amazing times, truly, truly, because now in your structuring you have to factor in secondary market trading? Well,


James Row  58:12

I would, I would make one thing people serve grossly underestimate what it cost, how long it takes, how hard it is to raise money. Okay, it’s three times more expensive three times harder, three times longer. It’s, it is not. And people have, you know, most entrepreneurs, they love their baby. But you know, what, their baby isn’t pretty to everybody. And, you know, it’s it takes time. And yes, of course, it takes time to educate the public, it takes time to prepare, it takes time to do all the kinds of things that, you know, people grossly underestimate what that is, I mean, Mark, just the concept of marketing. Right. A lot of, you know, a lot of issuers think, you know, broker-dealers do all the marketing No, right, you should really have a separate marketing function. issuers think the lawyers do all the structuring, well, that’s not always true. Right. They think, you know, they think you do all of it, you know, that doesn’t work that way. Right. They, there’s a lot of misinformation and it’s always an education process to that. And it’s not easy. It’s, it’s not a fun business.


Oscar Jofre  59:31

I agree, Jim, I have no illusions of how long things take. I know my series went on forever. So I but I do. I do love this. I love it because of you. You can strategically plan out, feel a better sense of control. If not control from the ownership, no control of what’s happening around me. So, but thank you both, Marty. Jim, once again I’m looking forward to continuing these discussions and a Jim said it best at the end this is an ongoing education that we will continue because we have not reached we’re just scratching the surface with this that so please share all these videos are on or YouTube channel KoreConX. And if you want to reach Jim or Marty just send us but their contact details their LinkedIn profiles their email address, so you can reach out to them as you heard, they want to speak to you they want to help you. Thank you Have a great week, guys. I’ll be talking to you very soon. Have a great one.

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