Information for Potential Investors

Date of Last Revision: January 7, 2022

Important Things to Know About Investing in a Regulation Crowdfunding Offering

It is important that before each investment in any investment opportunity, the investor understand and acknowledge that:

there are restrictions on the investor’s ability to cancel an investment commitment and obtain a return of investment;
it may be difficult for the investor to resell securities acquired in crowdfunding offerings, and
investing in crowdfunding securities involves risk. The investor should not invest any funds unless the investor can afford to lose the entire amount

Once an investor submits an investment commitment to the Portal, the Portal sends a notification through e-mail to the investor, including:

The date of the transaction;
The type of security the investor is purchasing;
The identity, price, and number of securities purchased by the investor, total number of securities sold by the issuer in the offering, and the sale price of the securities;
If callable security, the first date that the security can be called by the issuer;
Specified terms of the security; and
The source, form, and amount of any remuneration received or to be received by the intermediary in connection with the transaction, including any remuneration received or to be received by the intermediary from persons other than the issuer.

The Portal is unable to hold investor funds or securities; therefore, instead, a “qualified third-party” including a bank, escrow agent, or a registered transfer agent will handle the committed funds or securities issued in the offering. The escrow agent will transfer the investment funds to the issuer if the target offering amount is met or exceeded. If not, the funds are returned to investors if the target is not met.

The Portal complies with applicable regulations that require it to allow investors to cancel investment commitments, and therefore it provides investors with an unconditional right to cancel any investment commitment until 48 hours before the issuer’s deadline for closing the offering. Within the final 48 hours of the offering’s deadline, investors are allowed to cancel commitments only if there is a material change in the offering. Issuers may accelerate deadlines to offerings that reach or exceed the target before the initial deadline, but to do this, issuers must ensure all of the following (a) The offering has been open for at least 21 days; (b) the intermediary provides notice of the new deadline at least five business days before the new deadline; (c) investors may cancel their commitments up to 48 hours before the new deadline; and (d) at the new deadline, the issuer’s offering continues to meet or exceed the target.

If a material change occurs, the Portal alerts investors who have made commitments of the change and informs them that their commitments will be canceled if they do not reconfirm their commitments. The Portal must then cancel commitments and notify, through email or other electronic media, all investors who do not reconfirm their commitments and arrange for the return of the investors’ funds. Additionally, an offering may be terminated because the target was not met or the issuer chose to terminate for a different reason. In these instances, the Portal will notify the investors of the cancellation and return their funds, and prevent any further commitments on that offering.

Canceling Your Investment and When Cancellation is No Longer Available

You’re free to cancel an investment up to 48 hours before the end of the campaign deadline to get a full refund, just visit our contact page and submit your request to cancel. If you do not cancel 48 hours before the deadline, funds are released to the issuer in exchange for securities.

The Funding Portal will notify investors when the target raise amount is hit. The offering may close early if the issuer provides 5 days’ notice of the new deadline.

The issuer may cancel the investment commitment under the following circumstances:

For any offering that has not yet been completed or terminated, an issuer can file on Form C/A an amendment to its offering statement to disclose changes, additions, or updates to information. An amendment is required for changes, additions, or updates that are material, and in those required instances the issuer must reconfirm outstanding investment commitments within 5 business days, or the investor’s commitment will be considered canceled. If the Portal was required to cancel the investment commitment, it must then send a notice of the cancellation to the investor and direct refusal of the investor’s funds.
Offering fails to reach the target by the specified deadline. If an issuer does not raise the target funds by the deadline it established, the Portal has five days to provide investors with notice of the cancellation of the investment commitment, direct the refund of investor funds, and prevent investors from committing any additional funds to the offering.
The issuer may cancel the offering for another reason.

Commenting on Campaigns

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Acknowledgment of Risk

Regulation CF requires that the Portal receives a representation from the investor that the investor has reviewed the educational materials and understands that the entire amount of the investment is at risk and may be lost before the intermediary accepts any investor commitments for any particular offering. Additionally, the Platform requires the investor to complete a questionnaire that demonstrates his or her understanding that:

There are restrictions on the investor’s ability to cancel an investment commitment and obtain a return on the commitment.
It may be difficult to resell securities acquired in an offering under Section 4(a)(6).
Investing in securities sold under section 4(a)(6) involves risk, and the investor should not invest unless he or she can bear the loss of the entire investment.

The Portal has ensured that investors make these representations to the Portal each time they are required to do so and it retains an electronic copy in its database associated with each investor’s record.

Opening of Investor Accounts

The Portal will not accept any investment commitment from a prospective investor in a transaction under Regulation CF until that investor has opened an account with the intermediary and consented to electronic delivery of materials. The SEC does not specify the exact information that the intermediary must obtain from an investor; therefore, the Portal has been free to determine what it will require for business and compliance purposes.

Intermediaries and Investors

All investors interested in investing through the Portal must open an account with the Portal and consent to the delivery of educational materials and other communications via electronic means.

Educational material the Portal makes available to investors include:

The process for the offer, purchase, and issuance of securities and types of securities sold through the intermediary;
The risks and restrictions on the amount and resale of securities sold under Section 4(a)(6);
The types of information that an issuer is required to provide to investors;
The issuers and investor’s investment commitment-cancellation rights; and
The terms of the ongoing relationship between the issuer and intermediary beyond the offering.

The Portal ensures the educational materials are available to investors on the platform and provides current educational materials to investors before accepting any additional investment commitments or conducting any additional Section 4(a)(6) offerings. In addition to providing this information to investors, the Portal obtains from the investor confirmation that he or she: (1) has reviewed these educational materials, (2) understands that he or she may lose the entire investment and is in a financial condition to bear the loss, and (3) has completed a questionnaire showing that he or she understands the financial risks of the investment and other statutory aspects of Title III.

The Portal ensures that disclosure information related to compensation is accurately conveyed where applicable. Specifically, the Portal ensures that investors receive disclosures of compensation from any promoters receiving compensation from an issuer to promote their offering. The Portal also discloses to investors how the intermediary itself is compensated in connection with the Section 4(a)(6) offerings through its platform.

The Portal must provide potential investors and the SEC any information required to be provided by the issuer under Reg CF Rules 201 and 203(a). This information must be: (1) publicly available in a manner in which a person accessing the platform can save, download, or store the information; (2) made publicly available on the platform for 21 days before the sale of any securities in the offering; and (3) remain publicly available until the sale of securities is completed or canceled. The Portal will not require a potential investor to first establish an account with the intermediary to be able to view this information.

The Portal ensures that investors participating in offerings through its platform have not exceeded the statutory limits for aggregate purchases in Section 4(a)(6) offerings. Similar to the standard for ensuring issuer compliance with relevant statutes and regulations, the Portal holds itself to the standard that it must have a “reasonable basis” for believing each investor complies with all requirements and can rely on an investor’s representations regarding financial status and investment history. The Portal exercises its discretion in developing its methods for verifying investor compliance and requires each investor to receive educational materials, affirm they have been read and received, and then complete a financial quiz before being allowed to invest. Also, because of every investment, an investor is required to enter current information about his or her net worth, income, and amount of money invested in Regulation CF offerings in the trailing 12 months. The logic of the Platform’s website calculates the maximum amount of money the given investor may invest and the investor is informed that this is the maximum amount. Further, the investor is then limited by protocol to invest no more than the maximum amount in the offering that triggered the investor to make such disclosures about his or her net worth, etc. Given that the SEC provides potential options for investor compliance verification, the Portal’s website acts as a central depository for crowdfunding investments, requires the submission of investor financial information as discussed as well as the completion of a short questionnaire regarding financial understanding.

The Portal ensures each offering is open for public view for 21 days before accepting investment. Additionally, interested investors can add the offering to his or her “watch list” which allows him to keep abreast of offerings in which he is interested. However, he cannot invest until the offering has been available for public view for 21 days.

Securities issued under section 4(a)(6) are not freely transferrable by the purchaser for one year after the date of purchase. 15 U.S.C. § 77d-1(e) (2012). The statutory text outlines four situations in which a transfer may be made before the end of one year; the SEC did not significantly alter these provisions in its Rule 501. 17 C.F.R. § 227.501. Before the end of one year, transfers may be made, under 17 C.F.R. § 227.501:

to the issuer of the securities;
to an accredited investor;
as part of an offering registered with the SEC; or
to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser, or in connection with the death or divorce of the purchaser.

The SEC clarified that the transfer restrictions apply to all holders during the one year whether they purchased their securities from the issuer or in a secondary transaction.

Crowdfunding, Securities Act Release No. 9974, 80 Fed. Reg. 71387 (Oct. 30, 2015) at 71476. The SEC did not provide guidance or structure concerning subsequent trading of crowdfunding securities. However, the JOBS Act preemption of state regulation applies only to the initial offer and sale of securities by the issuer. After the end of the statutory restriction on transfer, investors will likely be able to transfer their securities to someone else without registration at the federal level, in reliance on section 4(a)(1) of the Securities Act. 15 U.S.C. § 77d(a)(1) (2012). However, subsequent trades must also be made under state law, and the law varies widely from state to state regarding how securities of nonpublic companies can be resold. Crowdfunding securities will thus be illiquid.

The educational materials for investors contain the following notable attributes:

The process for the offer, purchase, and issuance of securities using the intermediary.
The risks associated with investing in securities offered and sold under Section 4(a)(6).
The types of securities that may be offered on the intermediary’s platform and the risks associated with each type of security, including the risk of dilution.
The restrictions on the resale of securities offered and sold under Section 4(a)(6).
The types of information that an issuer must provide in annual reports, the frequency of the delivery of that information, and the possibility that the issuer’s obligation to file annual reports may terminate in the future (in which case, an investor may not continually have current financial information about the issuer).
The limitations on the amount’s investors may invest.
The circumstances in which the issuer may cancel an investment commitment.
The limitations on an investor’s right to cancel an investment commitment.
The need for the investor to consider whether investing in a security offered and sold under Section 4(a)(6) is appropriate for that investor.
That following completion of an offering, there may or may not be any ongoing relationship between the issuer and the intermediary.
That any person promoting an issuer’s offering for compensation, whether past or prospective, must disclose in all communications on the platform the receipt of the compensation and the fact that that person is engaging in promotional activities on behalf of the issuer.
How the intermediary is to be compensated in connection with offerings and sales of securities under Section 4(a)(6).

Compensation Disclosure

Secure Living charges fees in connection with the sale of securities on our platform. Secure Living will charge issuers who successfully complete their capital raise a range of compensation types (e.g., flat fee, platform fee, and/or equity fee in the form of commission). The flat and platform fee will be paid at the time the successfully funded campaign has ended. Any securities paid to Secure Living, if any, will be of the same class and have the same terms, conditions, and rights as the securities being offered and sold by the Issuer on our platform. All fees paid to Secure Living in connection with the offering and sale of securities are nonrefundable unless in its sole discretion determines that a refund is appropriate.

Restrictions on Promoter Compensation

Rule 205 prohibits the issuer from compensating or committing to compensate, directly or indirectly, any person to promote its Regulation Crowdfunding offerings through the intermediary’s platform unless the issuer takes reasonable steps to ensure the promoter discloses the past or prospective receipt of compensation with each promotional communication.

These restrictions apply to persons hired specifically to promote the offering and all issuer employees undertaking promotional activities on behalf of the issuer.

General Risks When Investing in a Company Through Regulation Crowdfunding

You should consult your legal, tax, and financial advisers regarding the suitability, desirability, and appropriateness of purchasing interests through Regulation Crowdfunding in an entity, including a startup or a company (hereinafter a “Company”.) You should also carefully consider the following risks before investing in a Company:

General

An investment in a Company involves significant risks, only some of which are described in this Agreement, and is suitable only for sophisticated investors who have limited need for liquidity in their investment, who can afford the potential loss of their investment, and who meet the conditions for eligibility outlined in this Agreement. An investment in a Company is not intended as a complete investment program.

No Guarantee of Investment Returns

No guarantee can be made of the future performance or financial results of any Company, and an investment in a Company may result in a gain or loss upon termination or liquidation of your investment.

Restrictions on Resale or Transfer

The Company Securities are issued in a transaction exempt from registration under the 1933 Act and are not registered thereunder or any other law of the United States, or under the securities laws of any state or other jurisdiction. Company Securities purchased through the Site in Reg Crowdfunding Offerings cannot be resold, pledged, assigned, or otherwise disposed of during the one year starting with the date of purchase, unless they are transferred: (1) to the Company itself; (2) to an “accredited investor” (as defined in Regulation D under the 1933 Act); (3) in connection with a registered offering of the Company Securities with the SEC; (4) to a family member of the Member, or a trust of the Member or one of its family members; or (5) in connection with the Member’s death or divorce.

However, even if you can sell or transfer your Company Securities, there is a limited market for the sale of Company Securities, and there is no guarantee that a market will develop in the future for the Company Securities you purchase. Therefore, if you require liquidity in your investment, you should not invest in a Company.

No Control Over Management of the Companies

You will not have any right to manage, influence, or control the management or operations of Companies. In particular, you will not have or will have only limited, voting rights associated with your Company Securities, but in any event, will not have voting powers to direct the management decisions of the Company. You must refer to the voting provisions in the relevant investment contract that controls your investment. The success of any Company investment depends on the ability and success of the management of the Company, in addition to economic and market factors.

No Control Over Company Future Valuation

Valuations may fluctuate considerably and the price paid for Company Securities by you may bear limited or no relationship to future valuations of the Company’s securities in any market that may develop for such securities, whether private or public.

Limited Information About Companies

Due to the nature of private companies, there may be limited information—financial, operating, or otherwise—regarding each Company. You should read and understand the risk factors contained in the Company Information, including Form C, before investing in Company Securities. Each Company is solely responsible for providing risk factors, conflicts of interest, and other disclosures that you should consider when investing in Company Securities.

No Assurance of Profit

An investment in Company Securities may not generate profits for you. A return on investment will depend upon the successful liquidity of a Company’s securities and thus, the ultimate value of any investment depends upon factors beyond your or EF Portal’s control. You will typically not receive returns, if any, until a Liquidity Event, which may not occur for many years. You must therefore bear the economic risk of an investment for an indefinite period.

Direct Investment in Companies in Reg Crowdfunding Offerings

In Reg Crowdfunding Offerings, Members will invest directly in the securities of Companies. The Company will not be managed by EF Portal or any of its affiliates in any respect. The terms of any investment in a Company effected through a Reg Crowdfunding Offering will be set by the Company, and to the extent any negotiation occurs, it will be solely between a Member and the Company.

Lack of Regulatory Oversight of Reg Crowdfunding Offerings and Offering Materials

Secure Living Portal and the Third-Party Funding Portals are registered as funding portals with the SEC and are members of the Financial Industry Regulatory Authority (“FINRA”). As such, EF Portal and Third-Party Funding Portals must submit certain information and materials to FINRA and the SEC and are subject to examination by FINRA and the SEC. In addition, Companies must file with the SEC a disclosure document called a Form C and updates and amendments to the Form C. However, the funding portal regulatory regime and the Form C are not as comprehensive as the regulatory regime and disclosure documents that apply to offerings registered under the Securities Act of 1933, and, as a result, you may not receive the same level of disclosure and oversight that is available in registered offerings.

Review of Reg Crowdfunding Offering Documents by SEC and EF Portal and/or a Third-Party Funding Portal No Indicator of Likely Success of Company or Guarantee of Investment Returns

Under Regulation Crowdfunding, a Company must file a Form C disclosure document with the SEC and provide the disclosure to prospective investors. As noted above, EF Portal will perform a limited review of Companies, including the information proposed to be provided to the SEC and potential investors, to determine whether to permit a Company to engage in Reg Crowdfunding Offerings on the Site. However, none of the SEC, EF Portal, or any Third-Party Funding Portal (if applicable) will be reviewing any Company’s Form C or other offering materials with the view to determine the likelihood of success of the Company’s business strategy or the likelihood that it will generate investment returns. Further, the review of a Company’s Form C by the SEC under Regulation Crowdfunding does not indicate the SEC’s endorsement of such Company or its view concerning the likely financial performance of the Company or the advisability of investing in such Company and is not a guarantee of investment returns.

An Investment in a Company Does Not Offer a Complete Investment Program

An investment in a Company is not a complete or diversified investment program and should represent only a small portion of a potential investor’s investment portfolio.

Possibility of Phantom Income

Your investment may result in “phantom income,” which could require you to pay taxes on your investment even though the Company does not distribute any income (or does not distribute sufficient income to pay the taxes).

Speculative

Investments are speculative and can result in the total loss of capital.

Illiquidity

Your ability to resell your investment in the first year will be restricted with narrow exceptions. You may need to hold your investment for an indefinite period. Unlike investing in companies listed on a stock exchange where you can quickly and easily trade securities, you may have to locate an interested private buyer when you do seek to resell your crowdfunded investment.

No voting rights

You will likely not have any voting rights. If you receive voting shares in a company, your voting rights will likely be diluted when the company raises additional funds.

Cancellation restrictions.

Once you invest in a crowdfunding offering, you can cancel the investment at any time and for any reason up to 48 hours before the offering deadline.

Valuation and capitalization

Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult. You risk overpaying for the equity stake you receive. The class of equity being sold via a crowdfunding offering may have fewer rights than other equity classes issued by a company.

Limited disclosure

The company must disclose information about itself, its business plan, the offering, and its anticipated use of proceeds, among other things. An early-stage company may be able to provide only limited information about its business plan and operations because it does not have fully developed operations or a long history to provide more disclosure. The company is also only obligated to file information regarding its business annually, including financial statements.

Under certain circumstances, the company may cease to publish annual reports and you will have no further information rights.

Investment in personnel

An early-stage investment is also an investment in the founding entrepreneur(s) and/or management of the company. Being able to execute the business plan is often an important factor determining whether the business will be viable and successful. You should also be aware that a portion of your investment may fund the compensation of the company’s employees, including its management. You should carefully review any disclosure regarding the company’s use of proceeds.

Possibility of fraud

As with other investments, there is no guarantee that crowdfunding investments will be immune from fraud.

Lack of professional guidance

Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company’s board of directors and play an important role through their resources, contacts, and experience in assisting early-stage companies in executing their business plans. An early-stage company primarily financed through crowdfunding may not have the benefit of such professional investors.

Other Specific Risks Associated with Investing in a Particular Company May Not Be Disclosed by the Company

Each Company will disclose in the Company Information the particular risks associated with an investment in the Company. YOU SHOULD CONSULT YOUR OWN LEGAL AND TAX ADVISERS REGARDING THE POSSIBLE TAX AND OTHER CONSEQUENCES OF BUYING, HOLDING, TRANSFERRING, AND REDEEMING SECURITIES.

The risk inherent in startup investments; an investor may, and frequently does, lose all of its investment

Investments in Startups involve a high degree of risk. Financial and operating risks confronting Startups are significant. While targeted returns should reflect the perceived level of risk in any investment situation, such 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 possible and can easily occur. Moreover, the timing of any return on investment is highly uncertain.

The Startup market is highly competitive and the percentage of companies that survive and prosper is small. Startup investments often experience unexpected problems in the areas of product development, manufacturing, marketing, financing, and general management, among others, which frequently cannot be solved. In addition, Startups may require substantial amounts of financing, which may not be available through institutional private placements, the public markets, or otherwise.

Investment in new concepts and technologies

The value of an Investor’s investment in Startups may be susceptible to factors affecting the relevant industry and/or to greater risk than an investment in a vehicle that invests in a broader range of securities. Some of the many specific risks faced by such Startups include:

Rapidly changing technologies;
Products or technologies that may quickly become obsolete;
Scarcity of management, technical, scientific, research and marketing personnel with appropriate training;
The possibility of lawsuits related to patents and intellectual property;
Rapidly changing investor sentiments and preferences concerning technology sector investments (which are generally perceived as risky); and
Exposure to government regulation makes these companies susceptible to changes in government policy and delays or failures in securing regulatory approvals.

Changing economic conditions

The success of any investment activity is determined to some degree by general economic conditions. The availability, unavailability, or hindered operation of external credit markets, equity markets and other economic systems which an individual Startup may depend upon to achieve its objectives may have a significant negative impact on a Startup’s operations and profitability. The stability and sustainability of growth in global economies may be impacted by terrorism, acts of war, or a variety of other unpredictable events. There can be no assurance that such markets and economic systems will be available or will be available as anticipated or needed for an investment in a Startup to be successful.

Future and past performance

The past performance of a Startup or its management is not predictive of a Startup’s future results. There can be no assurance that targeted results will be achieved. Loss of principal is possible, and even likely, on any given investment.

Difficulty in valuing startup investments

It is enormously difficult to determine objective values for any Startup. In addition to the difficulty of determining the magnitude of the risks applicable to a given Startup and the likelihood that a given Startup’s business will be a success, there generally will be no readily available market for a Startup’s equity securities, and hence, an Investor’s investments will be difficult to value.

Minority investments

A significant portion of an Investor’s investments will represent minority stakes in privately held companies. An Investor’s shares in a Startup may be non-voting shares. Even with voting shares, as is the case with minority holdings in general, such minority stakes will have neither the control characteristics of majority stakes nor the valuation premiums accorded majority or controlling stakes. Investors will be reliant on the existing management and board of directors of such companies, which may include representatives of other financial investors with whom the Investor is not affiliated and whose interests may conflict with the interests of the Investor.

No voting rights

If and when you receive voting shares in a Startup, your voting rights will likely be diluted when the Startup raises additional funds.

Lack of information for monitoring and valuing startups

The Investor may not be able to obtain all information it would want regarding a particular Startup, on a timely basis or at all. Investors may not be aware on a timely basis of material adverse changes that have occurred concerning certain of its investments. As a result of these difficulties, as well as other uncertainties, an Investor may not have accurate information about a Startup’s current value.

No assurance of additional capital for startups

After an Investor has invested in a Startup, continued development and marketing of the Startup’s products or services, or administrative, legal, regulatory, or other needs, may require that it obtain additional financing. In particular, Startups generally have substantial capital needs that are typically funded over several stages of investment. Such additional financing may not be available on favorable terms, or at all.

Absence of liquidity and public markets

An Investor’s investments will generally be private, illiquid holdings. As such, there will be no public markets for the securities held by the Investor, and no readily available liquidity mechanism at any particular time for any of the investments.

Legal and regulatory risks associated with crowdfunding

There is no assurance that a Startup will comply with all requirements mandated by federal laws permitting private companies to campaign from retail investors on a Title III crowdfunding portal.

Tax risks

There are many tax risks relating to investments in Startups that are difficult to address and complicated. You should consult your tax advisor for information about the tax consequences of purchasing equity securities of a Startup.

Withholding and other taxes

The structure of any investment in a Startup may not be tax efficient for any particular Investor, and no Startup guarantees that any particular tax result will be achieved. In addition, tax reporting requirements may be imposed on Investors under the laws of the jurisdictions in which Investors are liable for taxation. Investors should consult their professional advisors concerning the tax consequences to them of an investment in a Startup under the laws of the jurisdictions in which the Investors and/or the Startup are liable for taxation.

Limited operating history of startups

A Startup may be a newly formed entity with little or no operating history. Each offering should be evaluated on the basis that the Startup’s business plan and projections may not prove accurate and that the Startup will not achieve its objective. The past performance of a Startup or its team is not predictive of future results.

Diverse investors

Investors and employees in a Startup may have conflicting investment, tax, and other interests concerning Startup ownership, which may arise from the structuring of the Startup or the timing of a sale of the Startup, or other factors. As a consequence, decisions made by the Startup management on such matters may be more beneficial for some Investors than for others. Investors should be aware that Startup management tends to consider the investment and tax objective of its shareholders as a whole when making decisions on investment structure or timing of the sale, and not the circumstances of any Investor individually.

Lack of investor control

Investors in a Startup will not make decisions concerning the Startup’s business and affairs.

Confidential information

Certain information regarding the Startups will be highly confidential. Competitors may benefit from such information if it is ever made public, and that could result in adverse economic consequences to the Investors.

Forward-looking statements

The information a Startups makes available to Investors may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. Examples of forward-looking statements include, but are not limited to, statements regarding (i) the adequacy of a Startup’s funding to meet its future needs, (ii) the revenue and expenses expected over the life of the Startup, (iii) the market for a Startup’s goods or services, or (iv) other similar matters.

Each Startup’s forward-looking statement is based on management’s current expectations and assumptions regarding the Startup’s business and performance, the economy, and other future conditions and forecasts of future events, circumstances, and results. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. The Startup’s actual results may vary materially from those expressed or implied in its forward-looking statements. Important factors that could cause the Startup’s actual results to differ materially from those in its forward-looking statements include government regulation, economic, strategic, political, and social conditions, and the following factors:

recent and future changes in technology, services, and standards;
changes in consumer behavior;
changes in a Startup’s plans, initiatives and strategies, and consumer
acceptance thereof;
changes in the plans, initiatives, and strategies of the third parties that are necessary or important to the Startup’s success;
competitive pressures, including as a result of changes in technology;
the Startup’s ability to deal effectively with economic slowdowns or other economic or market difficulties;
increased volatility or decreased liquidity in the capital markets, including any limitation on the Startup’s ability to access the capital markets for debt securities, refinance its outstanding indebtedness or obtain equity, debt, or bank financings on acceptable terms;
the failure to meet earnings expectations;
the adequacy of the Startup’s risk management framework;
changes in U.S. GAAP or other applicable accounting policies;
the impact of terrorist acts, hostilities, natural disasters (including extreme weather), and pandemic viruses;
a disruption or failure of the Startup’s or its vendors’ network and information systems or other technology on which the Company’s businesses rely;
changes in tax, federal communication, and other laws and regulations;
changes in foreign exchange rates and the stability and existence of foreign currencies; and
other risks and uncertainties which may or may not be specifically discussed in materials provided to Investors.

Any forward-looking statement made by a Startup speaks only as of the date on which it is made. Startups are under no obligation to, and generally, expressly disclaim any obligation to, update or alter their forward-looking statements, whether as a result of new information, subsequent events, or otherwise.

Investment Risks

Principal risk: Investing in start-ups will put the entire amount of your investment at risk. There are many situations in which the company may fail or you may not be able to sell the stock that you own in the company. In these situations, you may lose the entire amount of your investment. For investments in startups, total loss of capital is a highly likely outcome. Investing in startups involves a high level of risk and you should not invest any funds unless you can bear the entire loss of the investment.

Returns risk the amount of return on investment, if any, is highly variable and not guaranteed. Some startups may be successful and generate significant returns, but many will not be successful and will only generate small returns if any at all. Any returns that you may receive will be variable in amount, frequency, and timing. You should not invest any funds in which you require a regular, predictable, and/or stable return.

Returns delay: Any returns may take several years to materialize. Most startups take five to seven years to generate any investment return if any at all. It may also take many years before you will know if a startup investment will generate any return. You should not invest any funds in which you require a return within a certain timeframe.

Liquidity risk: It may be difficult to sell your securities. Startup investments are privately held companies and are not traded on a public stock exchange. Also, there is currently no readily available secondary market for private buyers to purchase your securities. Furthermore, there may be restrictions on the resale of the securities you purchase and your ability to transfer. You should not invest any funds in which you require the ability to withdraw, cash-out, or liquidate within a certain period.

Security Risks

Instrument risk: You may be investing in preferred equity, common equity, or convertible notes. These securities instruments all have different inherent risks caused by their structure. You should take the time to understand the nature of the securities instrument that you are investing in.

Dilution: Startup companies may need to raise additional capital in the future. When these new investors make their investment into the company, they may receive newly issued securities. These new securities will dilute the percentage ownership that you have in the business.

Minority stake: As a smaller shareholder in the business, you may have less voting rights or ability to influence the direction of the company than larger investors. In some cases, this may mean that your securities are treated less preferentially than larger security holders.

Valuation risk: Unlike publicly traded companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult to assess. The issuer will set the share price for your investment and you may risk overpaying for your investment. The price you pay for your investment may have a material impact on your eventual return if any at all.

See below for a description of Convertible Notes and risk disclosures related to Convertible Notes.

Business Risks

Failure risk: Investments in startups are speculative and these companies often fail. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup often relies on the development of a new product or service that may or may not find a market. You should be able to afford and be prepared to lose your entire investment.

Revenue risk: The company is still in an early phase, and maybe just beginning to implement its business plan. There can be no assurance that it will ever operate profitably. The likelihood of achieving profitability should be considered in light of the problems, expenses, difficulties, complications, and delays usually encountered by companies in their early stages of development. The company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.

Funding risk: The company may require funds above its existing cash resources to fund operating expenses, develop new products, expand its marketing capabilities, and finance general and administrative activities. Due to market conditions at the time the company needs additional funding, the company may be unable to obtain additional funding when it needs it, or the terms of any available funding may be unfavorable. If the company is unable to obtain additional funding, it may not be able to repay debts when they are due or the new funding may excessively dilute existing investors. If the company is unable to obtain additional funding as and when needed, it could be forced to delay its development, marketing, and expansion efforts and, if it continues to experience losses, potentially cease operations.

Disclosure risks: The company is at an early stage may only be able to provide limited information about its business plan and operations because it does not have fully developed operations or long trading history. The company is also only obligated to provide limited information regarding its business and financial affairs to investors.

Personnel risks: An investment in a startup is also an investment in the management of the company. Being able to execute the business plan is often an important factor in whether the business is viable and successful. You should be aware that a portion of your investment may fund the compensation of the company’s employees, including its management. You should carefully review any disclosure regarding the company’s use of proceeds. You should also carefully consider the experience and expertise of the management team.

Fraud risks: It is possible that certain people involved in the company may commit fraud or mislead investors. If fraud or misleading conduct occurs, then your total investment may be lost. You should carefully review any disclosures regarding the company’s management team and make your assessment of the likelihood of any potential fraud.

Lack of professional guidance: Many successful startups partially attribute their early success to the guidance of professional investors (e.g., angel investors and venture capital firms). These investors often play an important role through their resources, contacts, and experience in assisting startup companies in executing their business plans. A startup company primarily financed by smaller investors may not have the benefit of such professional investors. You should consider the existing professional investors in the company and whether or not they or any other professional investors are participating in the current round.

Growth risk: For a startup to succeed, it will need to expand significantly. There can be no assurance that it will achieve this expansion. Expansion may place a significant strain on the company’s management, operational and financial resources. To manage growth, the company will be required to implement operational and financial systems, procedures, and controls. It also will be required to expand its finance, administrative, and operations staff. There can be no assurance that the company’s current and planned personnel, systems, procedures, and controls will be adequate to support its future operations. The company’s failure to manage growth effectively could have a material adverse effect on its business, results of operations, and financial condition.

Competition risk: The startup may face competition from other companies, some of which might have received more funding than the startup has. One or more of the company’s competitors could offer services similar to those offered by the company at significantly lower prices, which would cause downward pressure on the prices the company would be able to charge for its services. If the company is not able to charge the prices it anticipates charging for its services, there may be a material adverse effect on the company’s results of operations and financial condition.

Market demand risk: While the company believes that there will be customer demand for its products, there is no assurance that there will be broad market acceptance of the company’s offerings. There also may not be broad market acceptance of the company’s offerings if its competitors offer products that are preferred by prospective customers. In such an event, there may be a material adverse effect on the company’s results of operations and financial condition, and the company may not be able to achieve its goals.

Control risks: Because the company’s founders, directors, and executive officers may be among the company’s largest stockholders, they can exert significant control over the company’s business and affairs and have actual or potential interests that may depart from yours. The company’s founders, directors, and executive officers may own or control a significant percentage of the company. In addition to their board seats, such persons will have significant influence over corporate actions requiring stockholder approval, irrespective of how the company’s other stockholders, including you, may vote. Such persons’ ownership may also discourage a potential acquirer from making an offer to acquire the company, which in turn could reduce the company’s stock price or prevent you from realizing a premium on your investment.

RISKS ASSOCIATED WITH EACH TYPE OF SECURITY AVAILABLE FOR PURCHASE

General Top Risks of Private Company Investment

Loss of capital. Many startups fail. Just about 90% of them do. Due to this, it is more likely that you will lose the capital you invested, rather than receive a return from it. Investors should, hence, be extremely conscious of how much capital they invest in private companies and whether the amount of risk posed by private companies matches their risk profile. Investors should ensure they do not invest more capital than they can afford to lose or that would put them in financial hardship.

Potential for fraud. Private company investment is less stringently regulated than other financial market transactions. For this reason, not all the information may be given to investors that are usually required for public equity transactions. Fraudulent activity can occur in the form of the company providing misleading information to investors.

Dilution. Any investment in private companies is subject to dilution, meaning the decline of your percentage ownership of the business. Dilution may occur if the business decides to raise additional capital in the future, issue new shares to investors and give the option of grants to employees. This often means that the value of your shares in the company will decline, as dilution decreases the initial value of your investment.

Illiquidity. Investment in private companies is highly illiquid. As there is no secondary market for private company shares, it is unlikely that you will be able to sell. Shares can only be sold if the business is bought by another company or floats its shares on the securities exchange.

The rarity of dividends. Dividends are rarely paid by private companies. If you invest in a private company, even if the business is successful, it is unlikely you will receive profits or return until you can sell your shares of the business.

The awareness of the potential risks in private company investments is key to an investment process that is safe. Avenues that facilitate private company investment, such as equity crowdfunding platforms, do not offer a guarantee that investors will be protected from the risks. For this reason, diligence on the behalf of the investor is vital to ensure the investment choice was an informative one.

Despite the numerous risks listed above, investors should not disregard private companies as an investment avenue. All investments are characterized by different risk-return characteristics and like any investment, private companies have their benefits. Private company investing is not for everyone, but for those who choose it, knowledge is undeniably an essential ingredient to success.

It’s rare for investment on Secure Living’s platform to offer voting rights directly to smaller investors because founders fear it can scare off venture capitalists who invest in later rounds, due to the hassle of collecting thousands of signatures. You should assume your investment does not include voting rights unless specified otherwise. Your stake will almost certainly be diluted when companies raise follow-on funding.

Yes. An equity stake will almost certainly be diluted.

Successful startups host multiple series of financings, all the way to IPO. For each financing, the startup issues additional stock to the new investors. As long as the value of the company increases with each funding round, this is healthy and normal. Historically, investors in private startups have experienced a range of outcomes, from losing their entire investment to making very favorable returns. Startup investing is quite risky and you will likely lose your entire investment–you should be prepared to experience nearly any possible outcome.

Sometimes, when things are not going well, the startup is given the option of going bankrupt or raising more money in a “down round”, which means the value of the company decreased since the last financing. This is very bad for the founders and past investors alike; the dilution happens much more rapidly. But it’s preferable to the startup going bankrupt and the investors losing everything.

Types of Securities

The funding portal intends to offer the following types of securities:

Common Stock
Convertible Notes
Debt (Promissory Notes)
Profit-Sharing

Common Stock

When investors engage in common stock offerings, they become equity owners of real estate property. As an owner, investors have the right to share in any profit distributions from the issuer.

Convertible Notes

These securities start as debt securities but can be changed – converted – into equity. For example, an issuer might issue debt security, which compensates the holder with a defined interest rate and that can be converted by the holder into common stock at some specified time.

Debt (Promissory Notes)

Debt in the form of promissory notes requires issuers to pay investors their initial investment plus interest at a specified rate, over a specified period. Owning a promissory note does not make investors owners of the property. Instead, investors are creditors. As long as the issuer has enough money to repay your loan, plus any interest you’ve been promised the value of your security stays the same; the fluctuations of the fortunes of the property don’t affect you unless the fortunes go way down.

Profit-Sharing

A profit-sharing note requires the issuer to pay a specified percentage of its revenue. Typically, a profit-sharing note will also state a maximum that investors are entitled to receive and a due date for repayment of the original investment.

Restrictions of Resale and Transferability

It’s safest to assume you cannot resell your investment to another investor. First, there is not yet a liquid secondary market like the New York Stock Exchange for private companies. Second, almost every equity security on Secure Living’s platform prohibits resell, as private companies carefully guard the number of shareholders on their “cap table”. Third, Regulation Crowdfunding specifically prohibits resale of securities for one year, except to the issuer, an accredited investor, a family member, or their trust.

to the issuer of the securities;
to an accredited investor;
as part of an offering registered with the SEC; or
to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser, or in connection with the death or divorce of the purchaser.

The SEC clarified that the transfer restrictions apply to all holders during the one year whether they purchased their securities from the issuer or in a secondary transaction.

Transferability of Securities

The Portal ensures each offering is open for public view for 21 days before accepting investment. Additionally, interested investors can add the offering to his or her “watch list” which allows them to keep abreast of offerings in which he is interested. However, he cannot invest until the offering has been available for public view for 21 days.

Securities issued under Regulation Crowdfunding are not freely transferrable by the purchaser for one year after the date of purchase. The statutory text outlines four situations in which a transfer may be made before the end of one year; the SEC did not significantly alter these provisions in its Rule 501. Before the end of one year, transfers may be made, under 17 C.F.R. § 227.501:

to the issuer of the securities;
to an accredited investor;
as part of an offering registered with the SEC; or
to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser, or in connection with the death or divorce of the purchaser.

The SEC clarified that the transfer restrictions apply to all holders during the one year whether they purchased their securities from the issuer or in a secondary transaction. The SEC did not provide guidance or structure concerning subsequent trading of crowdfunding securities. However, the JOBS Act preemption of state regulation applies only to the initial offer and sale of securities by the issuer. After the end of the statutory restriction on transfer, investors will likely be able to transfer their securities to someone else without registration at the federal level, in reliance on section 4(a)(1) of the Securities Act. However, subsequent trades must also be made under state law, and the law varies widely from state to state regarding how securities of nonpublic companies can be resold. Crowdfunding securities will thus be illiquid.

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