Security Campaign Builder - 7 - SEC Form C - Issuers
The campaign filing creation wizard will walk you through the required fields for a Form C. You can access a downloadable version of the official Form C here. The wizard duplicates the same fields in a format that can be filed through the Umergence platform to the SEC’s EDGAR filing system.
The first step of a Form C is the Disclosure Requirements page. You will be asked to disclose the financial state of the business from your accounting statements for the most recent fiscal year and the previous fiscal year. You will also need to disclose which states the offering will be sold to in the campaign. Currently, all states should be added EXCEPT Tennessee and New Hampshire. A Umergence representative will confirm this information when reviewing the campaign.
The Offering Info section of the Form C campaign builder requests information about the nature of the securities being offered and the selling process.
The Amount of Compensation describes how any intermediary assisting in the offering will be compensated. In the case of Umergence, the standard text we use in this field is:
“5% of the offering amount upon a successful fundraise, securities equal to 3% of the securities sold will be issued to Umergence LLC upon a successful fundraise and Umergence LLC will be entitled to reimbursement for out-of-pocket third party expenses it pays or incurs on behalf of the issuer in connection with the offering.”
A Umergence Administrator will coordinate with you for this field. It can be left blank to begin with.
Unless there is a very unusual circumstance, the response for the Other Financial Interests field should be either “N/A” or “None” for all campaigns.
The Type of Security Offered (eg: common stock, debt) must be disclosed on a Form C. If the type of security is not listed, select “Other” and briefly describe the security. Convertible notes and Future Equity securities are some examples of security types that would need to be disclosed and described under “Other.”
The Number of Security Offered field is the total number of units/shares that can be offered in this offering. It will correspond with the maximum amount of the campaign and not the target. For example, if the target of the campaign is $50,000, the maximum for the campaign is $100,000, and the share price is $1 the Number of Securities Offered is 100,000.
Price per Unit is the price per individual unit or share being offered. This number must be precise and will often need to be stated to several decimal places. Before rounding a number, be sure to consult with your legal counsel on how to appropriately represent the Price per Unit.
Whenever a company sells securities and determines a Price per Unit/Share, the methodology used must be disclosed to potential investors. The description for the Method for Determining Price will vary for every campaign and will be the result of discussions between the company and its advisors. An example text for a Method for Determining Price is:
“Pro-rated portion of the total principal value of $50,000; interests will be sold in increments of $1.”
The Target Offering Amount is the lowest amount you will accept for a successful offering. If this amount is not reached, your backers and investors will be refunded. In a rewards or securities campaign this is the lowest amount you will be able to utilize to achieve your campaign goals. This amount may not be your maximum target – you can set a Maximum later in the campaign builder.
Any campaign utilizing a Form C filing cannot be open-ended. There must be a defined Deadline to Reach Target Offering Amount date because there is a hard limit on the amount of capital a company can raise with a Regulation CF campaign in 12 months. If the Target amount is not raised by the campaign by the Deadline date, investors will be refunded.
The Minimum Investment accepted from any outside Investor amount is the lowest amount a potential investor must commit to before being allowed to invest. This number will depend upon the goals of the campaign and company conducting it. There are advantages and disadvantages to lower or higher minimum investment amounts, so this must be considered with your advisors in the context of your campaign. The minimum investment amount should be carefully considered because it can have a significant effect upon the marketability of the campaign depending on the demographics of the investors you are seeking. Keep in mind that each investor is capped on how much money they can invest in Regulation CF campaigns every year as a function of their income and net worth. You can learn more about the limitations placed on investors here.
If you would like to set a higher maximum amount of fundraising for your campaign than the target amount you have set, you will need to click “yes” for Oversubscriptions Accepted. This will allow you to add a Maximum offering amount and Disclose how oversubscriptions will be allocated.
This tutorial continues for the next section of the campaign builder here.