Investor Education

REG-CF

CollectiveSun Marketplace is a funding portal that operates under Regulation CrowdFunding (Reg-CF), which is a new law that become effective on May 16th, 2016. Reg-CF allows companies to raise funds by offering securities to all investors (subject to dollar amount limitations). This is particularly exciting for social ventures and nonprofits as a tool to engage community members who are a part of their supporter network. Below you will find a section of information for investors, and a section of information below that for nonprofit issuers of securities. Please read all of the information carefully.

FOR INVESTORS

Pursuant to Rule 302(b) of Securities and Exchange Commission (“SEC”) Regulation Crowdfunding under the Securities Act of 1933 (Title III of the JOBS Act), as amended (the “Securities Act”), all potential investors who open an account on CollectiveSun.market and/or commit to purchasing securities are required to receive and acknowledge certain educational information from CollectiveSun Marketplace related to the posting of securities offerings on CollectiveSun Marketplace including:

  • (i) how securities on CollectiveSun Marketplace are offered and purchased

  • (ii) the types of securities offered and any resale restrictions on such securities

  • (iii) the risks of investing in such securities

  • (iv) investment limits for certain investors

  • (v) the disclosure generally required to be made available by issuers offering securities on CollectiveSun Marketplace and

  • (vi) the relationship between CollectiveSun Marketplace, posted Issuers and investors

Please review the important information below before you begin to register on CollectiveSun Marketplace and before you make any investment commitment.

As a registered funding portal, CollectiveSun Marketplace cannot and will not:

  • offer investment advice or make recommendations; solicit purchases, sales or offers to buy securities; compensate promoters and other persons for solicitations or based on the sale of securities; and hold, possess, or handle investor funds or securities.

  • allow companies to list securities on our platform that we have a reasonable basis for believing have the potential for fraud or raise other investor protection concerns.

  • have a financial interest in a company that is offering or selling securities on our platform under Regulation Crowdfunding outside of financial interest paid as compensation for the services.

  • compensate any person for providing us with personally identifiable information of any investor or potential investor.

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Pursuant to Rule 302(c), CollectiveSun Marketplace does not compensate any person who promotes an issuer’s offering. Any founder or employee of an issuer that engages in promotional activities on behalf of the issuer on the CollectiveSun Marketplace message boards will be clearly identified as a founder or employee of that particular issuer.

Types of Securities Offered

Debt Securities: Investment opportunities posted on CollectiveSun.market currently include debt securities that are fully amortized with annual principal and interest payments. The interest rate and duration (number of years) is determine by the individual nonprofit issuer. Please be sure to read the “Investment Considerations and Risks” section below very carefully. To understand the specific risks involved in making an investment in a particular Issuer’s offering, please be sure to carefully review each Issuer’s offering materials before making an investment.

Submission and Posting of Form C

Prior to launching a Title III equity crowdfunding campaign, the issuer is required to complete and submit Form C to the SEC together with required attachments. Companies that file a Form C are required to disclose certain information to the public which can be used to understand an investment and that help determine whether a particular investment is appropriate for a specific person. This includes general information about the issuer, its officers and directors, a description of the business, the planned use for the money raised from the offering, often called the use of proceeds, the target offering amount, the deadline for the offering, related-party transactions, risks specific to the issuer or its business, and financial information about the issuer.

Required Disclosures

The required type of financial disclosure depends on the amount of money that was raised by the issuer within the prior 12 months plus the target amount for the current crowdfunding offering (up to a maximum of $5,000,000 in any rolling 12 month period):

< $107,000: If current offer plus previous raises amounts to $107,000 or less, the issuer provides information from its tax returns (but not the tax returns themselves) certified by the principal executive officer. If financial statements are available they must be provided too, and again certified by the principal executive officer.

$107,000.01 to $535,000: If the current offering plus previous raises is between $107,000 and $535,000, financial statements are required and must be reviewed by a CPA. If audited financial statements are available, they must be provided.

$535,000.01 to $5,000,000: If current offer plus previous raises amounts to $535,000 or more, the required financial statements must be audited by a CPA. However, if the issuer has not previously sold securities under Regulation Crowdfunding, the financial statements will only be required to be reviewed by a CPA*.

* Note: An audit provides a level of scrutiny by the accountant that is higher than a review. The required information is filed with the SEC and posted at the start of the offering at CollectiveSun.market and available to the public throughout the offering on the CollectiveSun.market and SEC websites. It is available to the general public on both websites throughout the offering period.

Annual Filing Obligations of Issuers

Each Issuer that successfully completes a Title III Regulation Crowdfunding securities offering is required to annually file with the SEC a Form C-AR and financial statements. This must be done no later than 120 days after the end of the Issuer’s fiscal year covered by such filing. Each Issuer must also post its Form C-AR and financial statements to its own website; and that link must be provided along with the date by which such report will be available on the issuer’s website. The Form C-AR contains updated disclosure substantially similar to that provided in the Issuer’s initial Form C, including information on the Issuer’s size, location, principals and employees, business, plan of operations and the risks of investment in the Issuer’s securities; however, offering-specific disclosure is not required to be disclosed in the Form C-AR.

Investors should be aware that an Issuer may no longer be required to continue its annual reporting obligations under any of the following circumstances:

  • The Issuer is required to file reports under Section 13(a) or Section 15(d) of the Exchange Act

  • The issuer has filed at least one annual report pursuant to Regulation Crowdfunding and has fewer than 300 holders of record and has total assets that do not exceed $10,000,000

  • The issuer has filed at least three annual reports pursuant to Regulation Crowdfunding and has total assets that do not exceed $10,000,000

  • The issuer or another party repurchases all of the securities issued in reliance on Section 4(a) (6) of the Securities Act, including any payment in full of debt securities or any complete redemption of redeemable securities or

  • The issuer liquidates or dissolves its business in accordance with state law

In the event that an Issuer ceases to make annual filings, investors may no longer have current financial information about the Issuer available to them.

Investment Considerations & Risks

Prior to registering on CollectiveSun.market and again before making an investment commitment, you must consider the risks of investing in crowdfunded securities offerings and determine whether such an investment is appropriate for you. CollectiveSun Marketplace and its employees are prohibited from offering advice about any offering posted on CollectiveSun.market and from recommending any investment. This means the decision to invest must be based solely on your own individualized consideration and analysis of the risks involved in a particular investment opportunity posted on CollectiveSun.market, which is made at your own risk.

Potential investors acknowledge and agree that they are solely responsible for determining their own suitability for an investment or strategy on CollectiveSun.market and must accept the risks associated with such decisions, which include the risk of losing the entire amount of their principal. Investors must be able to afford to lose their entire investment. CollectiveSun Marketplace has no special relationship with or fiduciary duty to potential investors and investors’ use of the funding portal does not create such a relationship. Potential investors agree and acknowledge that they are responsible for conducting their own legal, accounting and other due diligence review of the investment opportunities posted on CollectiveSun.market.

Each investor is strongly advised to consult legal, tax, investment, accounting and/or other professionals before investing and to carefully review all the specific risk disclosures provided as part of any offering materials and to post any questions in the issuer’s comment section of their campaign page prior to making an investment.

Some things to keep in mind before making a crowdfunding investment:

  • Investment in small, especially start-up and early stage companies is speculative and involves a high degree of risk. While return objectives should reflect the perceived level of risk in the investment, returns may never be realized and/or may not be adequate to compensate an investor for risks taken. Loss of an Investor’s entire investment is very possible and can easily occur. Even the timing of any payment of a return on an investment is highly speculative.

  • A regulation crowdfunding debt investment will need to be held for the entire duration of the loan term. Except under limited circumstances as allowed by law (described below) and at the discretion of the nonprofit issuer, you should expect to hold the note until maturity. Unlike investing in companies listed on a stock exchange where you can quickly and easily trade securities on a market, you may have to locate an interested buyer privately when you seek to resell your crowdfunded investment even after the one-year restriction expires. There is no assurance these securities will ever be publicly tradable.

  • An early-stage company may be able to provide only limited information about their business plan and operations because they do not have fully developed operations or a long history to provide more disclosure.

  • Publicly listed companies generally are required to disclose information about their performance at least on a quarterly and annual basis and on a more frequent basis about material events that affect the issuer. In contrast, crowdfunding companies are only required to disclose their results of operations and financial statements annually. Therefore you may have only limited continuing disclosure about your crowdfunding investment.

  • Investment opportunities posted on CollectiveSun.market, the adequacy of the disclosures, or the Fairness of the terms of any such investment opportunity have not been reviewed or approved by a state or federal agency.

  • The Issuer in all likelihood will not have an internal control infrastructure and there can be no assurance of no significant deficiencies or material weaknesses in the quality of the Issuer’s financial and disclosure controls and procedures. Indeed, if it were necessary to implement such financial and disclosure controls and procedures, the cost to the Issuer might even have a material adverse effect on the Issuer’s results of operations.

  • The issuing company may have serious risks specific to its industry or its business model. Demand for a product or service may be seasonal or be impacted by the overall economy. Small businesses, in particular, often depend heavily upon a single customer, supplier, or upon one or a small number of employee(s). It may have difficulty competing against larger companies who can negotiate for better prices from suppliers, produce goods and services on a large scale more economically, or take advantage of bigger marketing budgets.

  • In light of the relative ease with which early-stage companies can raise funds through crowdfunding, it may be the case that certain opportunities turn out to be money- losing fraudulent schemes. As with other investments, there is no guarantee that crowdfunding investments will be immune from fraud.

  • Audited financial statements are not required for regulation crowdfunding offerings under $535,000.00. The issuer is not required to provide you with annual audited financial statements or quarterly unaudited financial statements, except as explained above. The Issuer may not even have its financial statements audited, or even reviewed by outside auditors. Your decision to make an investment in the Issuer will be based upon the information the Issuer provides in its offering materials, which may not completely or even accurately represent the financial condition of the issuer.

  • As explained above, an Investor may not be able to obtain the information it wants regarding a particular Issuer on a timely basis, or at all. It is possible that the investor may not be aware of material adverse changes that have occurred at the Issuer. An Investor may not be able to get accurate information about an Issuer’s current value at any given time.

  • Federal securities law requires securities sold in the United States to be registered with the U.S. Securities and Exchange Commission (“SEC”), unless the sale qualifies for an exemption. The securities offered on CollectiveSun.market have not been registered under the Securities Act, and are offered in reliance on the crowdfunding exempt provisions of Section 4(a) (6) of the Securities Act (and/or Regulation S promulgated thereunder). Securities sold on CollectiveSun.market are restricted and not publicly traded, and are therefore illiquid. No assurance can be given that any investment opportunity will continue to qualify under one or more of such exempt provisions of the Securities Act due to, among other things, the adequacy of disclosure and the manner of distribution, the existence of similar offerings in the past or in the future, or a change of any securities law or regulation that has retroactive effect.

  • The ability for any nonprofit to meet interest payment obligations or to repay debt may be limited by any number of business factors. Their promissory notes are not secured, and therefore, interest payments and principal repayment are not guaranteed.

The risks highlighted above are non-exhaustive and you should only invest an amount of money you can afford to lose without impacting your lifestyle.

Investment Limitations

Due to the risks involved with this type of investing, you are limited in how much you can invest during any 12-month period in these transactions. The limitation on how much you can invest depends on your net worth and annual income.

If either your annual income or your net worth is less than $107,000, then during any 12-month period, you can invest up to the greater of either $2,200 or 5% of the greater of your annual income or net worth. If both your annual income and your net worth are equal to or more than $107,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is greater, but not to exceed $107,000 or all crowdfunding offerings in any 12-month period.

Calculating Net Worth

Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth. For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation. The SEC’s Investor Bulletin Crowdfunding for Investors contains detailed and useful information about how to perform these calculations, click here.

Restrictions On Resale

The securities offered on CollectiveSun.market are only suitable for potential investors who are familiar with and willing to accept the high risks associated with high risk and illiquid private investments. Securities sold through CollectiveSun.market are restricted and not publicly traded and, therefore, cannot be sold unless registered with the SEC or an exemption from registration is available. You are generally restricted from reselling your shares for a one-year period after they were issued, unless the shares are transferred:

  • to the company that issued the securities

  • to an accredited investor

  • to a family member (defined as a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-inlaw, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships.)

  • in connection with your death or divorce or other similar circumstance

  • to a trust controlled by you or a trust created for the benefit of a family member

  • as part of an offering registered with the SEC

COLLECTIVESUN MARKETPLACE INVESTMENT PROCESS

In order to invest, to commit to an investment or to communicate on our platform, you must open an account which entails providing certain personal and non-personal information to CollectiveSun Marketplace and its affiliates and/or service providers, including information related to your income and net worth, and other investments. This information is used to verify you as a potential investor who is qualified to invest in investment opportunities posted on CollectiveSun.market. For further information on investment limitations, please see “Investment Limitations” above and for information on handling your personal information, please see our Privacy Policy.

You will be able to search for various investment opportunities and related information prior to
opening an account on CollectiveSun.market; review all campaign and investment materials; and communicate about a specific offering on the funding platform with the issuer and its agents, as well as with other investors.

To make an investment, click on the “Invest Now!” button on the project page. You will be asked for information needed to open your account including contact information, banking information, amount you wish to invest, and other details. Once the form is completed, you will be receive an e-mail confirming your investment commitment. If you selected mail by check or wire transfer, you will receive additional details on how to complete your transaction. If ACH was selected, the transfer will occur over the next 1-2 business days. You will receive an e-mail confirmation once the funds are received and the transaction is confirmed.

Note: All investor funds are held in escrow accounts and are maintained by a separate qualified escrow agent with a depository such as a bank. After completion of the campaign, the escrow agent will release the aggregate funds contributed from all investors and the issuer will issue securities to all investors through its transfer agent. If the offering is not successful, investors will receive a full refund of investments held in escrow. CollectiveSun Marketplace does not and cannot hold funds.

Investors that participate in an offering on CollectiveSun.market should be aware that once an offering has completed, and an investor has received securities from the Issuer, there may or may not be any ongoing relationship between the Issuer and the CollectiveSun.market. Any questions or concerns related to such Issuer’s securities and continued disclosure provided in such Issuer’s annual reports on Form C-AR must be forwarded directly to such Issuer once an offering on CollectiveSun.market is completed. CollectiveSun.market assumes no liability or responsibility, directly or indirectly, for any damage or loss caused or alleged to be caused by or related to the use of or reliance on any disclosures made or services provided by the Issuer. If you have any questions or concerns regarding the funding platform, please don’t hesitate to reach out to our client support team by emailing us at hello [at] CollectiveSun [dot] market.

FREQUENTLY ASKED QUESTIONS

Can I Buy Title III Regulation Crowdfunding Securities Directly From A Company?

No. Companies may not offer crowdfunding investments to you directly. They must use a crowdfunding intermediary, such as a funding portal like CollectiveSun.market or a broker-dealer. Each must be registered with the Securities Exchange Commission and a member of the Financial Industry Regulatory Authority (FINRA).

How Does CollectiveSun Marketplace Make Money?

CollectiveSun Marketplace makes money by charging the nonprofit issuer a small percentage of each investment (6%) to cover operational costs associated with the CollectiveSun Marketplace funding portal.

What Is My Proof of Ownership?

Electronic records will be held with the issuing company’s transfer agent. Once your purchase of stock is complete, you will receive a confirmation email with details of your investment. You will not receive a paper stock certificate.

Can I cancel my investment?

An investor may cancel an investment commitment through our Portal for any reason until 48 hours prior to the deadline identified in the issuer’s offering materials. During the 48 hours prior to such deadline, an investment commitment may not be cancelled. If there is a material change to the terms of an offering or to the information provided by the issuer, CollectiveSun Marketplace shall give or send to any investor who has made an investment commitment notice of the material change and that the investor’s investment commitment will be cancelled unless the investor reconfirms his or her investment commitment within five business days of receipt of the notice. The issuer may cancel an investment commitment through our Portal if the sum of the investment commitments does not equal or exceed the target offering amount at the offering deadline. In this case, no securities will be sold in the offering, investment commitments will be cancelled and committed funds will be returned.

FOR NONPROFIT ISSUERS

An “issuer” is the entity that is issuing the security (i.e. debt instrument). In a scenario where a nonprofit is borrowing funds from community members, the nonprofit is the “issuer”. Issuers on the CollectiveSun.market website can sell securities to investors who register on the site, and are able to create a campaign page viewable by the public that includes required material such as the Form C filed with the SEC (described below) and videos and communications among investors about the offering.

Submission and Posting of Form C

Prior to launching a Title III equity crowdfunding campaign, the issuer is required to complete and submit Form C to the SEC together with required attachments. Companies that file a Form C are required to disclose certain information to the public which can be used to understand an investment and that help determine whether a particular investment is appropriate for a specific person. This includes general information about the issuer, its officers and directors, a description of the business, the planned use for the money raised from the offering, often called the use of proceeds, the target offering amount, the deadline for the offering, related-party transactions, risks specific to the issuer or its business, and financial information about the issuer.

Required Disclosures

The required type of financial disclosure depends on the amount of money that was raised by the issuer within the prior 12 months plus the target amount for the current crowdfunding offering (up to a maximum of $5,000,000 in any rolling 12 month period):

< $107,000: If current offer plus previous raises amounts to $107,000 or less, the issuer provides information from its tax returns (but not the tax returns themselves) certified by the principal executive officer. If financial statements are available they must be provided too, and again certified by the principal executive officer.

$107,000.01 to $535,000: If the current offering plus previous raises is between $107,000 and $535,000, financial statements are required and must be reviewed by a CPA. If audited financial statements are available, they must be provided.

$535,000.01 to $5,000,000: If current offer plus previous raises amounts to $535,000 or more, the required financial statements must be audited by a CPA. However, if the issuer has not previously sold securities under Regulation Crowdfunding, the financial statements will only be required to be reviewed by a CPA*.

* Note: An audit provides a level of scrutiny by the accountant that is higher than a review. The required information is filed with the SEC and posted at the start of the offering at CollectiveSun.com and available to the public throughout the offering on the CollectiveSun.com and SEC websites. It is available to the general public on both websites throughout the offering period.

Annual Filing Obligations of Issuers

Each Issuer that successfully completes a Title III Regulation Crowdfunding securities offering is required to annually file with the SEC a Form C-AR and financial statements. This must be done no later than 120 days after the end of the Issuer’s fiscal year covered by such filing. Each Issuer must also post its Form C-AR and financial statements to its own website; and that link must be provided along with the date by which such report will be available on the issuer’s website. The Form C-AR contains updated disclosure substantially similar to that provided in the Issuer’s initial Form C, including information on the Issuer’s size, location, principals and employees, business, plan of operations and the risks of investment in the Issuer’s securities; however, offering-specific disclosure is not required to be disclosed in the Form C-AR.

Investors should be aware that an Issuer may no longer be required to continue its annual reporting obligations under any of the following circumstances:

  • The Issuer is required to file reports under Section 13(a) or Section 15(d) of the Exchange Act

  • The issuer has filed at least one annual report pursuant to Regulation Crowdfunding and has fewer than 300 holders of record and has total assets that do not exceed $10,000,000

  • The issuer has filed at least three annual reports pursuant to Regulation Crowdfunding

  • The issuer or another party repurchases all of the securities issued in reliance on Section 4(a) (6) of the Securities Act, including any payment in full of debt securities or any complete redemption of redeemable securities or

  • The issuer liquidates or dissolves its business in accordance with state law

In the event that an Issuer ceases to make annual filings, investors may no longer have current financial information about the Issuer available to them.