Crowdfunding&

the JOBS ActJeff Lambert – Lambert, Edwards & Jeff Lambert – Lambert, Edwards &

AssociatesPhil Blanchard – DWH

Co-Founders and Principals of RelayFund.com

JOBS Act• Legislation first introduced by House in Dec. 2011

• Goal was to create jobs through less restrictive capital formation

• Bipartisan support; opposition primarily from SEC and U.S. exchanges

• President Obama signed JOBS (Jumpstart Our Business Startups) Act on April 5, 2012

• Phased SEC rulemaking and implementation

� July 2012

� Jan. 2013

JOBS Act Overview• Creates a new class of companies called “Emerging Growth Company (EGC)”

• A company with less than $1 billion in revenues before going public. EGC status lasts until it has $1 billion in revenues or 5 years passes from going public

• EGCs are exempt from Sarbanes-Oxley Section 404(b) which mandates engaging an outside auditing firm to opine as to the adequacy of internal financial controls

• EGC’s are exempt from the new “say on pay” rules requiring a non-binding vote on executive compensation

• EGC’s only have to deliver 2 years of audited financial statements for an IPO instead of the 3 years many would be required to deliver now

• EGCs can conduct an IPO with research reports coming out immediately before and after • EGCs can conduct an IPO with research reports coming out immediately before and after during the previously dubbed “quiet periods.”

• Ends the ban on general solicitation or advertising in Regulation D Rule 506 offerings, if all the purchasers in the offering are accredited investors.

• Authorizes “crowdfunding” allowing new access to internet and social media funding sources for some small companies.

• Initiates changes to SEC Regulation A to allow a “mini” public offering with a downsized offering circular approved by the SEC.

• Raises the limit in a Reg A offering to $50 million, but does require audited financial statements

• Reg A offering would also be exempt from state securities or “blue sky law” if it is sold to “qualified purchasers.”

JOBS Act Highlights

• Streamlines process for small companies to raise capital

• Creates “IPO on ramp”

Relaxed rules for small IPOs

• Solve biggest startup/growth challenge• Bring private equity to the masses

Equity crowdfundingcrowdfunding

• Better defines “Safe Harbor” for marketing to high net worth individuals

• Allows “general marketing” more capital access

Solicitation for RegD Offerings

• Allows broader shareholder base withoutcost/complexity of being public

Raises Shareholder # to Stay Private

Evolution of

Crowdfunding

Crowdsourcing Funding Crowdfunding

Crowdfunding 1.0 (Circa 2009) Crowdfunding 2.0 (Circa 2012)Crowdfunding 1.0 (Circa 2009) • Money (contributions) raised online

to fund charities, projects or for pre-selling products or services

Crowdfunding 2.0 (Circa 2012)• Capital (debt and equity) raised

through online platforms or portals that connects entrepreneurs and small businesses with investors

• Private equity for the masses

Crowdfunding: Rules for

Companies • May raise up to $1 million annually in any 12-month

period

• Must conduct the transaction through an intermediary or registered “funding portal”

• May not advertise individuals deals; can only direct • May not advertise individuals deals; can only direct prospects to the funding portal

• Individual investor limits

Crowdfunding Investor

Criteria Complex Income Caps

Income or Net Worth Max Capital

Commitment

$40,000 or less $2,000

$40,000 to $100,000 5%

= or › $100,000 10% up to $100,000

max

*Income measured on trailing 12 months

Funding Portals &

RelayFund• Register with the SEC

• Register with State regulatory organizations

• Educate and quiz prospective investors

• Perform background checks on each officer, director and ›20% shareholder

• Ensure no investor exceeds annual investment limit

• Protect privacy of investor information • Protect privacy of investor information

• Must not release proceeds until target met, subject to investor right to cancel

• Prohibit officers, directors and partners from having an interest in listed issuers

Crowdfunding: The

Potential Proven: Kickstarter Facilitated $100M in Crowdfunding 1.0 (giving)

$500M raised internationally in equity crowdfunding

Timely: Convergence of social networking and constrained capital

Wall Street and SEC/Regulatory backlash shifts power to the masses

Momentum: Broad support – bipartisan, SMB, entrepreneurs, everyday Americans

Job creator

Tech + Capital Markets

Many beneficiaries – lawyers, accountants, software, insurance

Everybody can play.

Crowdfunding: Challenges

& Solutions

Challenges• Death by a thousand cuts regulation

• Flood of new sites and inevitable shakeout

• Failed offers/investments

• Fraud• Fraud

Solutions

• Trade Group lobbying to match legislative intent with rulemaking

• Robust due diligence and presentation tools

• True social network to transform users into resources

RelayFund.comAmerica’s Crowdfunding Capital • The first equity-based crowdfunding portal started in Michigan

and one of the first in the nation

• Linking small investors with SMBs and startups under the provisions of the new federal JOBS (Jumpstart Our Business Startups) Act.

• Founded by financial advisory and investment banking firm Hartwick Capital(now DWH) and investor relations/PR firm Lambert, Edwards & AssociatesLambert, Edwards & Associates

• Capital raise from HNW individuals and family offices/institutions

• Go live in 1Q 2013 in line with crowdfunding rule making completion

• Goal:

• connect everyday Americans with private equity

• be a pioneer in the democratization of the capital markets

• top 5 crowdfunding sites in U.S. – “America’s CrowdfundingCapital”

Crowdfunding&

the JOBS ActJeff Lambert – Lambert, Edwards & Jeff Lambert – Lambert, Edwards &

AssociatesPhil Blanchard – DWH

Co-Founders and Principals of RelayFund.com