Investor Resources

Investment Offerings are speculative and involve significant risk. This information is intended to provide important details about investing through https://TheInvestorHQ.com platform (“Platform”), owned by Parinita Technologies and Consultancy LLC (“Parinita”), via our partners’ Offerings. Before investing, you should carefully review and understand this information. If you do not understand something or have questions regarding the operations and processes of our platform, please Contact Us

What We Do

Parinita provides its Platform as an online marketplace/community where investors and Issuers come together. Issuer Offerings are presented by broker-dealers or crowdfunding portals with whom we have partnered, who are registered with the SEC and with FINRA to act as intermediaries in securities offered and sold under Title III of the JOBS Act.

While similar, being an investment community/marketplace is not the same as being a FINRA-registered “crowdfunding portal” or “broker-dealer.” We are not a FINRA-registered “crowdfunding portal” or “broker-dealer.”

Think of our Platform as a marketplace which brings together companies and investors. When you invest, you are not investing in us or in any entity affiliated with us. You are investing in a third-party business that has chosen to raise money using our community of investors investing in Offerings presented by our partners.

We do not guarantee any particular outcome and are not responsible for what happens to your investment – all investments are undertaken at your own risk. We also do not guarantee the accuracy of the information you receive from Issuers.

In conjunction with our partners, we select which Issuer Opportunities can be presented by our partners on our Platform, by, among other things:

  • Conducting background checks on the Issuer and its principals;
  • Conducting due diligence to have a reasonable basis for believing the Issuer is complying with all of its obligations; and
  • Conducting due diligence to have a reasonable basis for believing the Issuer has established a means to keep accurate records of the holders of its securities.

We also:

  • Advise Issuers about their Offerings, and help prepare Offering documents;
  • Screen investors to ensure they satisfy applicable per-investor limits (discussed below);
  • Provide communication channels between you and the Issuer, and between you and other potential investors, where you can ask questions and exchange information;
  • Provide you with resource materials to help you assess the risks of investing (e.g., this section); and
  • Keep records of investor communications and materials.

WHAT WE DON’T DO

  • Offer investment advice or recommendations;
  • Guarantee any particular investment outcome; and/or
  • Speak to investors about the merits of any particular Issuer or Offering.

OUR RELATIONSHIP WITH ISSUERS

Issuers will pay us to use our Platform. They might pay us flat fees, and ongoing fees for marketing and Platform costs. They might also pay us for specified services we provide to them and reimburse us for expenses we incur on their behalf.

In some cases, an Issuer might pay us in whole or in part with its own Securities, e.g., with its own stock. This will always be the same class of Security that is being offered to investors on our Platform. For example, if the Issuer is Offering common stock to investors, only common stock could be used for our compensation.

After an Offering is complete, we might or might not have an ongoing relationship with the Issuer. The Issuer may decide to use our Platform to attract investors in the future, or use services provided by (and pay compensation to) us, or entities affiliated with us.

COMMUNICATIONS CHANNELS

We will maintain online communications channels – discussion forums, basically – where you can communicate with other investors and with the Issuer. All discussions on forums will be open to the community, but only investors who have registered with us are allowed to post. Representatives of the Issuer, and anyone engaged in promoting the Offering, must clearly identify themselves as such when posting in the forums. The forums are where you can ask questions about investment Offerings that interest you.

We generally do not participate in the forums, except to establish guidelines and remove potentially abusive or fraudulent content.

DEFINITIONS

These definitions apply throughout this Investor Resources page:

Site: Our Internet site located at https://TheInvestorHQ.com.

Platform: Another word we use to refer to our Site.

Investor Commitment: A pledge to invest $10,000 per year, if qualified; inactive accounts will be deleted from the Platform if the Investment Commitment is not met and the investor has no open investments.

Issuer or Company: A company trying to raise money from investors, via our Platform, by selling its Securities through an investment opportunity.

Offering: An Issuer’s investment opportunity, presented through our partners on our Platform.

Security: A share of stock, a promissory note, a bond, or any other instrument offered by an Issuer on our Site.

Title III: Title III of the JOBS Act of 2012, which allows “Regulation Crowdfunding.”

Funding Portal: A term used to describe Internet sites that are allowed to offer and sell Securities under Title III.

SEC: The U.S. Securities and Exchange Commission. The website is www.sec.gov.

FINRA: The Financial Industry Regulatory Authority. The website is www.finra.org.

We could offer any kind of Security through Offerings presented by our partners on the Platform, including, but not limited to:

Equity Securities: When you buy an “equity security,” like the common stock of a corporation, you become an owner of the company. The value of your interest fluctuates with the fortunes of the company; if the company does well the value of your interest goes up, while if it does poorly the value goes down, possibly all the way to zero. As an owner, you generally have the right to share in any profit distributions made by the company, and you also share in the appreciation in the value of the company. Owning an equity security in a company is like owning a house, both the good part and the bad part. When a company dissolves, the owners of the equity securities are paid last, after all the creditors.

“Preferred” Equity Securities: In some cases, a company will offer a “preferred equity security,” like the preferred stock of a corporation. Typically, the holders of the preferred equity security have a right to receive distributions before the holders of the regular equity securities. For example, the holders of a preferred stock might have the right to receive a 4% dividend before dividends are paid to the holders of common stock. But preferred equity is still equity. The holders of preferred equity are paid after creditors.

Debt Securities: When you buy a “debt security,” like a promissory note or bond, you do not become an owner of the company. You are, instead, a creditor. As long as the company has enough money to repay your loan, plus any interest you have been promised, the value of your security stays the same; the fluctuations of the fortunes of the company do not affect you, unless the fortunes go way down. On the other hand, you do not share in the appreciation if things go well. If the company increases in value 100-fold, you just have the right to get your money back, plus interest.

Hybrid Securities: Some securities, which we call “hybrid securities,” have characteristics of both equity securities and debt securities.

Revenue Participation Securities: Revenue participation securities offer investors a percentage of an Issuer’s future gross revenues. When you buy a revenue participation security, you are not an equity owner nor a creditor to the Issuer. The terms of each revenue participation security should be read carefully to understand how much of the Issuer’s future revenues you are entitled to and for how long in time the agreement lasts. For example, the purchaser of a revenue participation security might have the right to receive a 4% distribution of future gross revenues until the Issuer has paid the purchaser 3x the purchase price.

Revenue Sharing Securities: This is a type of security that uses revenue-based financing. The payback of the investment is tied to a percentage of the company’s revenue. Unlike traditional debt securities, payments are measured in a fixed interest percentage of the amount invested and the return amount is negotiated and that amount is paid through the agreed-upon percentage of revenue.

Convertible Securities: Some securities, which we call “convertible securities,” start out as one kind of security but can be changed – converted – into a different kind of security. For example, a company might issue a debt security that can be converted by the holder into common stock at some specified time. Sometimes the conversion is triggered at the option of the holder, sometimes at the option of the company, and other times upon the occurrence of a specified event.

Callable Securities: Any kind of security can also be a “callable security,” meaning it can be “called,” or redeemed (bought back) by the company.

Other Kinds of Securities: The possible kinds of securities are limited only by the imaginations of financial needs of companies, investors, and lawyers.

When you review the available Offerings at the Site, each opportunity will explain what kind of Security is being offered.

WHAT TO CONSIDER BEFORE INVESTING

Investing in the Offerings presented by our partners on our Platform is very different than investing in the public stock market. The Issuers on our Platform are somewhat likely to be small, with limited or no track records, unproven business models, little profits or even revenue, and some are managed by individuals with limited experience managing successful businesses.

The first thing for you to consider, before you go further, is whether it is appropriate for you to invest in any of these Issuers/Offerings based on your own personal circumstances.

Among the questions you should ask yourself are:

  • Can I afford to lose all the money I invest?
  • Do I understand the Offering I am thinking about investing in?
  • Do I understand the Issuer’s product or service?
  • Am I personally familiar with that market?
  • Do I understand the business the Issuer is conducting?
  • Do I understand how the Issuer can make money?
  • Do I understand the Security I’m buying?
  • Do I trust the Issuer’s owners and managers?
  • Do I understand the documents I’m being asked to sign?
  • Have I asked my advisors for help evaluating the investment?
  • If I lose all or part of my money, will I be okay psychologically?

Only if you can truthfully answer “Yes” to all those questions should you invest.

IMPORTANT ITEMS TO REVIEW BEFORE YOU INVEST

ISSUER FORM C

Before you invest, the Issuer must provide you with extensive information on a Form C, which will be available on the Platform. The information on a Form C includes:

  • The Issuer’s name, address, and website;
  • The Issuer’s directors and officers;
  • The principal occupation and employment for the last three years of each director and officer;
  • The names of each person owning 20% or more of the Issuer’s voting securities;
  • The risk factors associated with the investment;
  • The Issuer’s business and business plan;
  • How the proceeds of the Offering will be used;
  • The Issuer’s ownership and capital structure;
  • A description of how rights exercised by the principals of the Issuer could affect investors;
  • A description of previous Offerings by the Issuer;
  • Whether the Issuer has previously failed to file the reports required by law;
  • Transactions with officers, directors, and other “insiders”;
  • Whether the Issuer would be disqualified from Offering securities under Title III under the “bad actor” rules, if the effective date of those rules were different;
  • A discussion of the Issuer’s financial condition;
  • How the Issuer will deal with over-subscriptions;
  • Where on the Issuers website it will post annual reports, and when the annual reports will be available;
  • Financial information about the Issuer, as described below; and
  • Any other information necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading.

IF INFORMATION CHANGES BEFORE CLOSING

If you make an investment commitment and there are important changes between the date of your commitment and the date the investment is concluded, the Issuer must notify you of the changes. Unless you reconfirm your commitment, your investment commitment will be automatically canceled within five business days of receipt of the notice.

REGISTRATION

TheInvestorHQ is a by-invitation-only investor community. If you have received an invitation, you can register at the Platform. There, you will establish log-in credentials and provide us with some information about yourself. You will also be asked to review and confirm that you will comply with our Terms of Service and Privacy Policy, and consent to electronic delivery (i.e., email) of all documents. You will also be asked to confirm you are willing and able to invest at least $10,000 per year in Offerings you find acceptable, if you are qualified to do so, presented on the Platform.  We have the right to reject or revoke your registration to our Platform for any reason, including a violation of our Terms of Service and Privacy Policy, and failure to invest $10,000 annually when you have no active investments.

IT IS ALL ONLINE

Under Title III, the entire investment process happens online, through the Offerings presented by our partners on our Platform. We will never send you paper, call you on the phone (except in some emergencies), or ask to meet with you.

MAKING AN INVESTMENT

After you register, you can log in to the Platform to see investment Offerings. When you click on the “I Am Interested” button on an Offering page that interests you, you will be able to see all of the information available about the Offering. Once you decide to invest, click on the “Invest” button.

NOTICE OF INVESTMENT COMMITMENT

Once we receive your investment commitment, we will notify you of:

  • The dollar amount of your commitment;
  • The price of the Securities you committed to buy;
  • The name of the Issuer; and
  • The date and time by which you may cancel your commitment.

TARGET OFFERING AMOUNT AND OFFERING DEADLINE

For each Offering, the Issuer will disclose a “target Offering amount,” meaning the minimum amount the Issuer is trying to raise, and an “Offering deadline.” If the Issuer does not raise the target amount before the Offering deadline, then the Offering will be cancelled and any investors who have made investment commitments will receive their money back.

If the Issuer reaches the target Offering amount before the Offering deadline, it may close the Offering early, as long as: (1) the Offering has remained open for at least 21 days, and (2) the investors are notified. The notice must:

  • Specify the new deadline, which must be at least five days after the date of our notice;
  • Notify investors that they may cancel their investment commitment for any reason up until 48 hours before the new deadline; and
  • Notify investors whether the Issuer will continue to accept investment commitments during the 48 hour period before the new deadline.

If an Issuer intends to accept investments over and above the target Offering amount, it must disclose the maximum amount it will accept and how it will handle “over-subscriptions.” For example, the Issuer might allocate the securities on a first-come first-served basis, or pro-rata among all of the investors who make investment commitments, or in some other way.

After you invest, the Issuer is generally required to file annual reports with the SEC and post them on its own website within 120 days after the end of the fiscal year. The annual report will typically include:

  • The same types of information included on the Form C you saw when you invested;
  • Updated financial statements certified by the principal executive officer of the Issuer (the financial statements do not have to be reviewed or audited, but if the Issuer already has reviewed or audited financial statements, they must be provided); and
  • Updated disclosures about the Issuer’s financial condition.

Investment Commitment:

A pledge to invest $10,000 per year, if qualified; inactive accounts will be deleted from the platform if the Investment Commitment is not met.

Issuer:

The company fundraising (i.e., presenting an “Offering”) on TheInvestorHQ.com.

How We Screen and Don’t Screen Issuers

Under regulations issued by the SEC, our partners are required to:

  • Have a “reasonable basis” for believing that ever Issuer the partner presents on our Platform is eligible to offer its Securities and is complying with Title III. The partner might perform its own due diligence, but it is generally allowed to rely on the representations of the Issuer.
  • Have a “reasonable basis” for believing that every Issuer the partner presents has established means to accurately keep records of the holders (owners) of its Securities. Again, the partner might perform its own due diligence, but it is generally allowed to rely on the representations of the Issuer.

Our partners will not present an Issuer’s Offering if:

  • The partner has a “reasonable basis” for believing an Issuer or any of its officers, directors, or beneficial owner of 20% or more of its outstanding voting securities is subject to disqualification under the rules discussed under “Disqualification of Issuers” below. Our partners are not allowed to rely solely on the Issuer’s representations to form this “reasonable belief,” but must conduct background checks with third parties.
  • The partner has a “reasonable basis” for believing the Issuer or the Offering presents the potential for fraud or otherwise raises concerns about investor protection, or it cannot effectively assess the risk.

Nevertheless, neither we nor our partners can conclude Offerings on our Platform represent good investments for investors. You have to make those decisions on your own.

Disqualification of Issuers

Title III may not be used if the Issuer or certain other people have been the subject of certain disqualifying events during the last 10 years.

The “certain other people” are:

  • Any predecessor of the Issuer;
  • Any director, officer, general partner, or manager of the Issuer;
  • A person owning 20% or more of the Issuer’s voting power;
  • Any promoter associated with the Issuer;
  • Any person who will be paid for soliciting investors; and
  • Any general partner, director, officer, or manager of such a solicitor.

The “certain disqualifying events” include a long list of events, all involving improper actions in the securities business – for example, the conviction of a felony or misdemeanor in connection with the purchase or sale of any security, or the loss of license of a securities broker for misconduct. As explained above, we will conduct background checks before allowing an Issuer to list on our Platform.

Promoters Disclosure

An Issuer might hire a public relations firm or other third party to promote the Issuer’s Offering on the Platform – for example, by talking about the Offering in our discussion forums. Or an employee or founder of the Issuer might do the same thing.

In either case, the person doing the promoting must identify himself or herself on the Platform and disclose that he or she is engaged in promotional activity. In the case of a third party, the third party must also disclose it is being paid for its promotional activity.

Many of the Offerings presented by our partners on our Platform are speculative and involve significant risk, including the risk that you could lose some or all of your money. We will describe two of the factors that make these investments risky:

  1. Many Offerings are presented by startup or early-stage companies.
  2. There are risks associated with particular kinds of securities (e.g., debt securities or equity securities).

When you review a particular investment Offering, the Issuer will also provide a list of risks specific to that Offering.

GENERAL RISKS COMMON TO ISSUERS

Reliance on Management: Most of the time, the securities you buy through Offerings presented by our partners on our Platform will not give you the right to participate in the company’s management. Further, if the Issuer’s founders or other key personnel were to leave the company or become unable to work, the company (and your investment) could suffer substantially. Thus, you should not invest unless you are comfortable relying on the company’s management team. You will almost never have the right to oust management, no matter what you think of them.

Inability to Sell Your Investment: The law prohibits you from selling your securities (except in certain very limited circumstances) for one year after you acquire them. Even after that one-year period, a host of Federal and State securities laws may limit or restrict your ability to sell your securities. Even if you are permitted to sell, you will likely have difficulty finding a buyer because there will be no established market. Given these factors, you should be prepared to hold your investment for its full term (in the case of debt securities) or indefinitely (in the case of equity securities).

The Issuer Might Need More Capital: A company might need to raise more capital in the future to fund new product development, expand its operations, buy property and equipment, hire new team members, market its products and services, pay overhead and general administrative expenses, or a variety of other reasons. There is no assurance that additional capital will be available when needed, or that it will be available on terms that are not adverse to your interests as an investor. If the company is unable to obtain additional funding when needed, it could be forced to delay its business plan or even cease operations altogether.

Changes in Economic Conditions Could Hurt an Issuer’s Businesses: Factors like global or national economic recessions, changes in interest rates, changes in credit markets, changes in capital market conditions, declining employment, decreases in real estate values, changes in tax policy, changes in political conditions, pandemics, and wars and other crises, among other factors, hurt companies generally and start-up companies in particular. These events are generally unpredictable.

No Registration under Securities Laws: The securities sold through Offerings presented by our partners on our Platform will not be registered with the SEC or the securities regulator of any State. Hence, neither the companies nor their securities will be subject to the same degree of regulation and scrutiny as if they were registered.

Incomplete Offering Information: Title III does not require the Issuer to provide you with all the information that would be required in some other kinds of securities Offerings, such as a public Offering of shares (for example, publicly-traded firms must generally provide investors with quarterly and annual financial statements that have been audited by an independent accounting firm). Although Title III does require extensive information, as described above, it is possible that you would make a different decision if you had more information.

Lack of Ongoing Information: Companies that issue Securities using Title III are required to provide some information to investors for at least one year following the Offering. However, this information is far more limited than the information that would be required of a publicly-reporting company, and the company is allowed to stop providing annual information in certain circumstances.

Breaches of Security: It is possible that our systems would be “hacked,” leading to the theft or disclosure of confidential information you have provided to us. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our vendors may be unable to anticipate these techniques or to implement adequate preventative measures.

Uninsured Losses: A given company might not buy enough insurance to guard against the risks of its business, whether because it does not know enough about insurance, because it cannot afford adequate insurance, or some combination of the two. Also, there are some kinds of risks that are simply impossible to insure against, at least at a reasonable cost. Thus, any company could incur an uninsured loss that could damage its business.

The Owners Could Be Bad People or Do Bad Things: There is no way to know for certain that someone is honest, and even generally honest people sometimes do dishonest things in desperate situations – for example, when their company is on the line, or they are going through a divorce or other stressful life event. It is possible that the management of a company, or an employee, would steal from or otherwise cheat the company, and you.

Unreliable Financial Projections: Issuers might provide financial projections reflecting what they believe are reasonable assumptions concerning their businesses. However, the nature of business is that financial projections are rarely accurate, not because Issuers intend to mislead investors, but because so many things can change, and business is difficult to predict.

Limits on Liability of Company Management: Many companies limit the liability of management, making it difficult or impossible for investors to sue managers successfully if they make mistakes or conduct themselves improperly (not all liability can be waived, however). You should assume that you will never be able to sue the management of any company, even if they make decisions you believe are stupid or incompetent.

Changes in Laws: Changes in laws or regulations, including but not limited to zoning laws, environmental laws, tax laws, consumer protection laws, securities laws, antitrust laws, and health care laws, could adversely affect many companies.

Conflicts of Interest with Us: In most cases, we make money as soon as you invest. You, on the other hand, make money only if your investments turn out to be successful. Or to put it a different way, at least in the short term, it is in our interest to have you invest as much as possible in as many companies as possible, even if they all fail and you lose your money.

Conflict of Interest with Issuers and their Management: In many ways your interests and the interests of company management will coincide – you both want the company to be as successful as possible. However, your interests might be in conflict in other important areas, including these:

  • You might want the company to distribute money, while the company might prefer to reinvest it back into the business.
  • You might wish the company would be sold so you can realize a profit from your investment, while management might want to continue operating the business.
  • You would like to keep the compensation of managers low, while managers want to make as much as they can.

Lack of Professional Advice: Our Platform allows you to invest only $1,000 to $5,000 in any one Offering presented by one of our partners. At that level of investment, you may decide it is not worthwhile for you to hire lawyers and other advisors to evaluate the company. Yet, if you do not hire advisors, you are in many respects “flying blind” and more likely to make a poor decision.

Your Interests Are Not Represented by Our Lawyers: We have lawyers who represent us, and most of the Issuers on the Platform also have lawyers who represent them. These lawyers have drafted the Terms of Service and Privacy Policy on the Platform, and will draft all the documents you are required to sign. None of these lawyers represents you personally. If you want your interests to be represented, you will have to hire your own lawyer, at your own cost.

Our Issuers May Not Realize Traditional “Exit” Opportunities: Traditionally, one of the key means by which early-stage investors such as venture capital firms make money investing in startups is through an “exit,” such as an initial public Offering (IPO), a sale of the company to a larger competitor, or a subsequent financing round. Title III crowdfunding is a new paradigm and no one knows yet exactly what, if any, exit opportunities will be available to early investors.

Equity Comes Last in the Capital Stack: The holders of the equity interests stand to profit most if the company does well, but stand last in line to be paid when the company dissolves. Everyone – the bank, the holders of debt securities, even ordinary trade creditors – has the right to be paid first.

In Most Cases, You Will Be a Minority Investor: Investors will typically be “minority” owners of Issuers presented by our partners on our Platform, meaning that other parties will have complete voting and managerial control over the company. As a minority stockholder, you typically will not have the right or ability to influence the direction of the company. You will generally be a passive investor. In some cases, this may mean that your securities are treated less preferentially than those of larger security holders.

Possible Tax Cost: Many of the Issuers presented by our partners on the Platform will be limited liability companies. In almost every case, these limited liability companies will be taxed as partnerships, with the result that their taxable income will “flow through” and be reported on the tax returns of the equity owners. It is therefore possible that you would be required to report taxable income of a given company on your personal tax return, and pay tax on it, even if the company does not distribute any money to you. To put it differently, your taxable income from a limited liability company is not limited to the distributions you receive.

Your Interest Might Be Diluted: As an equity owner, your interest will be “diluted” immediately, in the sense that: (1) the “book value” of the company is very likely to be lower than the price you are paying, and (2) the founder of the company, and possibly others, bought their stock at a lower price than you are buying yours. Your interest could be further “diluted” in the future if the company sells stock at a lower price than you paid.

Future Investors Might Have Superior Rights: If the company needs more capital in the future and sells stock to raise that capital, the new investors might have rights superior to yours. For example, they might have the right to be paid before you are, to receive larger distributions, to have a greater voice in management, or otherwise.

Dilution of Voting Rights: Even if you were to have any voting rights to begin with (and many of the Offerings presented by our partners on our Platform will have no voting rights), these rights will be diluted if the company issues additional equity securities. The Issuers will not be subject to the corporate governance requirements of the national securities exchanges. Specifically, any company whose securities are listed on a national stock exchange (for example, the New York Stock Exchange) is subject to a number of rules about corporate governance that are intended to protect investors. For example, the major U.S. stock exchanges require listed companies to have an audit committee made up entirely of independent members of the board of directors (i.e., directors with no material outside relationships with the company or management), which is responsible for monitoring the company’s compliance with the law. Issuers presented by our partners on our Platform typically will not be required to implement these and other stockholder protections.

RISKS ASSOCIATED WITH EARLY STAGE COMPANIES

Early-Stage Companies Face Significant Challenges: Investing in early-stage companies is not like investing in mature, publicly-traded companies with professional management and predictable cash flows. Many of the Issuers presented by our partners on our Platform are still in the design stage and have not even finished creating their product or service. While these Issuers may have talented founders and innovative business plans, like any new business they will face significant challenges in turning those plans into profits, including:

  • Understanding the marketplace and accurately identifying opportunities for growth;
  • Developing new products and services;
  • Developing their brands;
  • Responding effectively to the Offerings of existing and future competitors;
  • Attracting, retaining, and motivating qualified executives and personnel;
  • Implementing business systems and processes, including technology systems;
  • Raising capital;
  • Controlling costs;
  • Managing growth and expansion;
  • Implementing adequate accounting and financial systems and controls; and
  • Dealing with adverse changes in economic conditions.

Unfortunately, the reality is that a significant number of early-stage companies simply never overcome these challenges.

Issuers Often Experience Years of Operating Losses: Most early-stage or start-up businesses can expect to incur substantial operating losses for the foreseeable future, as they develop their products and services and build out their operations. Even if a company is able to operate successfully, it may take several years before the company can generate any return for investors (if at all).

Accurately Assessing the Value of a Private Start-Up Company Is Difficult: Putting a value on a security issued by privately held startup or early-stage company is extremely difficult. In almost all instances, the Offering price and other terms of the Offering presented by our partners on our Platform were determined arbitrarily by company, and bear no relationship to established criteria of value such as the assets, earnings, or book value of the company.

Lack of Professional Management: Most early-stage companies are managed by their founders. Very often the founder of a company is very strong in one area – for example, she might be an extremely effective salesperson or a terrific software engineer – but lacks experience or skills in other critical areas. It might be a long time before (1) a startup can afford to hire professional management, and (2) the founder recognizes the need for professional management. In the meantime, the company and its investors could suffer.

Lack of Access to Capital: Small companies have very limited access to capital. Frequently, these companies cannot qualify for bank loans, leaving the company to live off the credit card debt incurred by the founder. Capital is the oxygen of any business, and without it a business will eventually suffocate and fail.

Limited Products and Services: An early-stage company typically starts off selling only one or two products or services, making it vulnerable to changes in technology and/or customer preferences.

Limited Distribution Channels: An early-stage company can find it very difficult to penetrate established distribution channels. For example, a small company with only one or two products will find it very difficult to get into large retailers like Walmart.

Lack of Accounting Controls: Larger companies typically have in place strict accounting controls to prevent theft and embezzlement. Early-stage companies typically lack these controls, exposing themselves to additional risk.

Unproven Business Models: By definition, many early-stage companies are trying to introduce new products or services, or providing existing products or services in new ways. If they are successful, the rewards can be enormous. But consumer behavior is very difficult to change, and successful business models are very difficult to build. Often, a business model that looks promising on paper does not work out in practice.

No Ongoing Distributions: Typically, early-stage companies do not pay dividends. Any money available is reinvested back into the business, rather than distributed to investors.

RISKS ASSOCIATED WITH REVENUE SHARING INVESTMENTS

Revenue-based financing is essentially a form of debt financing where repayment of the loan is tied to a percentage of the company’s revenue. Instead of repayment being measured in a fixed interest percentage of the loan amount, the return amount is negotiated and that amount is paid through the agreed-upon percentage of revenue. The risks associated with revenue sharing notes include the risk that the security will not produce the anticipated return, such that the Issuer will not receive enough revenue to make payments to investors. Other risks include the risk of loss of principal amount invested, interest rate risk as well as credit and default risk, which is detailed in the Risks Associated with Debt Securities subsection that follows.

RISKS ASSOCIATED WITH DEBT SECURITIES

You Have No Upside: As a creditor of the company, the most you can hope to receive is your money back plus interest. You cannot receive more than that even if the company turns into the next Facebook.

You Do Have a Downside: Conversely, if the company loses enough value, you could lose some or all of your money.

Subordination to Rights of Other Lenders: Typically, when you buy a debt security Offering presented by our partner on our Platform, while you will have a higher priority than holders of the equity securities in the company, you will have a lower priority than some other lenders, like banks or leasing companies. In the event of bankruptcy, they would have the right to be paid first, up to the value of the assets in which they have security interests, while you would only be paid from the excess, if any.

Lack of Security: Sometimes when you buy a debt security Offering presented by our partner on our Platform, it may be secured by property, like an interest in real estate or equity. Other times it will not. Issuers typically will not have third-party credit ratings: Credit rating agencies, notably Moody’s and Standard & Poor’s, assign credit ratings to debt issuers. These ratings are intended to help investors gauge the ability of the issuer to repay the loan. Companies on our Platform generally will not be rated by either Moody’s or Standard & Poor’s, leaving investors with no objective measure by which to judge the company’s creditworthiness.

Interest Rate Might Not Adequately Compensate You for Risk Level: Theoretically, the interest rate paid by a company should compensate the creditor for the level of risk the creditor is assuming. That is why consumers generally pay one interest rate, large corporations pay a lower interest rate, and the Federal government (which can print money if necessary) pays the lowest rate of all. However, the chances are very high that when you lend money to an Issuer presented by our partner on our Platform, the interest rate will not really compensate you for the level of risk.

Credit and Default Risk: These risks are associated with whether the Issuer of the security will continue to be able to pay its debt, including any stated interest rate or return the principal amount invested to the respective investor.

How much you can invest in any 12-month period depends on a combination of your annual income and net worth (not including the value of your primary residence if you own a home).

Each time you begin an Investment Commitment, you will be asked to confirm your annual income, your net worth, and the total Regulation Crowdfunding investments you have made in the previous 12-months. On the basis of that information, the platform automatically calculates your limit.

If either your annual income or your net worth is less than $124,000, then you can invest up to $2,500 or 5% of your annual income or net worth, whichever is greater, during any 12-month period.

If both your annual income and your net worth are equal to or more than $124,000, then you can invest up to 10% of annual income or net worth, whichever is greater up to a maximum of $124,000 during any 12-month period.

You and your spouse may combine your incomes and assets for purposes of determining how much you may invest; however, if you do so, you will be treated as a single investor for purposes of determining how much either of you may invest.

Remember, Title III limits how much you can invest every year – not only in any one company, but in all companies through all funding portals. These limits apply only to your investments under Title III, however.

EXAMPLE: Investor Smith earns $100,000 per year and has a net worth of $150,000. Investor Smith makes his first Title III investment on December 1, 2017, investing $7,500 in Company X. On November 27, 2018 Investor Smith would like to make his second Title III investment, investing $5,000 in Company Y. But he can’t; he can invest only $2,500 in Company Y. But he could invest $2,500 in Company Y on November 27, 2018 and another $2,500 (actually, up to another $10,000, if he wanted to) on December 1, 2017. You can more examples in the SEC Investor Bulletin.

These limits apply to everyone except “accredited investors.” For accredited investors, this limit has been removed.

The definition of an “accredited investor” can be found in Rule 215 and Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (Securities Act).

During the investment transaction process, investors will have the opportunity to request to invest as an accredited investor. Any investor who invests under the accreditation rules will be required to provide verification demonstrating qualifications prior to their investment commitment being accepted. An acceptable form of verification is written confirmation from an eligible third-party that reasonable steps have been taken to verify that the purchaser meets the definition of an Accredited Investor within the prior three months. A sample verification form and additional information will be provided to accredited investors during the transaction process.

YOUR RIGHT TO CANCEL YOUR INVESTMENT

You can cancel your Investment Commitment at any time up to 48 hours before the Offering deadline, for any reason. The Platform will explain how.

Also, if there is a material change to the terms of an Offering or to the information provided by the Issuer, the Issuer, our partner and/or we will 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.

HOW TO PAY FOR YOUR INVESTMENT

You will pay for your investment(s) using one of the options described on the Platform. Your payment options might include a direct transfer from your bank account, a wire transfer, or a credit card. You might be charged a convenience fee for using a credit card.

When you invest, your money will be held in an account administered by a qualified third-party financial institution until the Offering is completed. We will not holdyour money. If the Issuer is successful in raising the target Offering amount, the bank will release the investors’ money to the Company, less any pre-designated fees/costs.

NOTICE OF INVESTMENT TRANSACTION CONFIRMATION

Before your investment is final, we will send you a final notice disclosing, among other things:

  • The date of the transaction;
  • The type of Security you are buying;
  • The price and number of Securities you are buying;
  • The number of Securities sold by the Issuer in the entire transaction and the price(s) at which the Securities were sold;
  • If you are buying a debt security, the interest rate and the yield to maturity calculated from the price paid and the maturity date;
  • If you are buying a callable security, the first date that the security can be called by the Issuer; and
  • The source, form and amount of any compensation we and/or our partners expect to receive in the transaction.

Once you buy a Security (e.g., a share of stock), you aren’t allowed to sell or otherwise transfer the Security for one year, except for sales or transfers described below:

  • to the company that issued the securities;

  • to a nuclear family member: a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships;

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

  • to a trust controlled by you or a trust created for the benefit of a family member (defined as a child, sibling or parent of you or your spouse);

  • as part of a later Offering registered with the SEC; or,

  • to an accredited investor.

You should know that there may be no market for the securities after the initial 12 month restricted period. It is important that you only invest capital with the expectation of holding your investment for an indefinite period of time, and with the real risk of a total loss of your investment in mind. Only invest an amount you can afford to lose without changing your lifestyle.

TheInvestorHQ, through our partners, permits investors to invest from $1,000 to $5,000 per Offering, but it is up to each investor as to how much to invest anywhere between that amount.

Investment Offerings Are Speculative And Involve Significant Risk.

Investments in private companies are particularly risky, illiquid and you should only consider investing if you can afford to lose your entire investment. Additionally, these investments are subject to risks associated with the industries in which they operate, which includes changes in government policies, the economic environment, laws, regulations and more.

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