All members of the Jumpstart Micro Community should read this disclosure carefully
Jumpstart Micro Disclosure
All members of the Jumpstart Micro Community should read this disclosure carefully. You will be asked to acknowledge your understanding before making an Investment or offering securities. These items are all designed to foster a positive environment and protect the rights of all members. They also define what you should expect when using Jumpstart Micro.
There are two types of Jumpstart Micro (JSM) members:
These are individuals, corporate entities and trusts who are reviewing investment opportunities and making investments. It should be clear that Jumpstart Micro is a Funding Portal and we offer no advice or recommendations to Investors. The decision to invest is purely made by Investors and their advisors. Investors must also consent to receiving all communications by email. JSM cannot be held responsible in any way.
An issuer is a company who is selling securities to raise capital for their business. Through the JSM Funding Portal they present the project to Investors for consideration and are available to answer any questions by issuers in a public forum. Issuers are required to provide specific detail on the investment opportunity as outlined below.
The process for the offer, purchase and issuance of securities through the Funding Portal
Offering – Issuers use the Funding Portal tools to create a listing page of pertinent information for Investors to review and consider. Investors have the ability to ask questions in a public forum with other Investors to gain more insight. An offer may be debt with repayment terms and interest or equity (stock) where the Issuer sells shares in their company to Investors.
Purchase – Investors can purchase the securities offered by an Issuer by selecting the “Invest Now” button. An Investor can then review the investment details and risk disclosures which they are also asked to acknowledge. On the page, they can process a secure payment. An email will be sent to confirm the details of the investment and include the amount being invested and the share price. The investments always go into an Escrow Account with a bank to be held until the target amount being raised is met. If the target amount is not met by the closing date the investment is return by the bank. Jumpstart Micro does not hold any investor funds. There is also a right to cancel defined below.
In many cases there is a rolling close once the minimum investment is reached. For example, if the minimum is $50,000 and maximum is $200,000 the Issuer can close on the first $50,000 and then continue to raise up to the maximum of $200,000 with periodic closes. This is disclosed on the listing page and in the Offering Statement filed with the SEC.
Issuance – Once the transaction is completed, the Issuer is responsible for issuing the security documents or shares to the Investors. If held by a Transfer Agent this is an electronic acknowledgement. If not, it will be a paper stock certificate or document sent. Additional notifications and annual reports are also required and defined below.
Refund – If an issuer did not complete an offering, for example, because the target was not reached or the issuer decided to terminate the offering, JSM will, within five business days send to each investor who had made an investment commitment a notification disclosing the cancellation of the offering, the reason for the cancelation, and the refund amount that the investor should expect to receive. This notification, like other notifications is by email.
The risks associated with investing in securities offered and sold in reliance on Regulation Crowdfunding
Risk of Investing - The purchase of stock or debt in early stage companies is only suitable for persons or entities that can afford the risk of losing their entire investment. The Issuers business, financial condition and operating results could be adversely affected by any of a number of factors, and you could lose part or all of your investment. The risks and uncertainties described by Issuers are not the only ones that the company may face. Additional risks and uncertainties not currently known, or that are currently thought of as immaterial, may also impair business operations. Jumpstart Micro, Inc only provides a portal to present investment opportunities and does not evaluate or recommend any investments. Investors and Issuers agree to hold jumpstart micro, Inc. harmless.
An additional risk relates to minority ownership by Investors. Depending on the security an Investor may or may not have voting rights and collectively with the other investors may have a minority interest in the Issuer Company. Having a minority interest limits an Investors ability to make any decisions and all investors should consider this risk and assess their confidence in the management team to make prudent decisions in the interest of all stakeholders.
Types of Securities offered by Issuers
Issuers can offer Equity (stock) or Debt securities. An Equity investment gives the Investor ownership in the Company and does not get paid back for their investment or receive any type of payments. The exception to this is if the company is profitable and management decides to issue a cash dividend to the shareholders. In most cases you are buying the stock in belief that over time the value will grow and the company will either sell the business to a larger company or take action to create liquidity for the shareholders such as going public or bringing in a larger investor who can offer to buy back the shares owned by Investors. There are common stock and preferred stock in a corporation. Preferred is a higher class of stock. A Company may also be a Limited Liability Company (LLC). Please see Learn More for details.
Debt is an agreement to repay your investment with interest over a defined period of time. An example is to raise $300,000 and pay it back at an interest rate of 10% annually over 5 years. The monthly payments will be defined in the agreement. Debt is inherently less risky. In Bankruptcy, a debt holder is paid back before any equity holders receive any benefit.
Read any provisions carefully. Issuers may offer other features that must be disclosed such as buy back rights, or in the case of debt it might be interest only with a balloon payment of the principal at the end. These will be clearly defined.
Dilution and Limited Control
company issues additional shares (stock), this reduces an existing investor's
proportional ownership in that company. This often leads to a common problem
dilution. The end result is that the value of
existing shares may be reduced. This is a risk of investing in stocks that
investors must be aware of. As an example, assume that a business has 10
shareholders and that each shareholder owns one share (10%) of the company.
Suppose that the company then issues 10 new shares and that a single investor
buys them all up. There are now 20 total shares outstanding, and
the new investor owns 50% of the company. Meanwhile, each original investor now owns just 5% of the company (1 share out of 20
outstanding), because their ownership has been diluted by the new shares.
also a factor on Debt Instruments. If an investor is holding a promissory
note and the Company continues to borrow money which may have a liquidation preference
above the investors debt, the company’s ability to pay the investors debt may
be diminished. if the Company becomes insolvent, the Investor will have a
payment preference over equity/stock shareholders, but will also need to share
any final liquidation value of the Company with other debt holders and may
receive less or no value for their promissory note. Investors should not
assume because they have a debt investment that there is no dilution.
Effects of Dilution and Limited Control
When a company issues additional shares (stock), this reduces an existing investor's proportional ownership in that company. This often leads to a common problem called dilution. The end result is that the value of existing shares may be reduced. This is a risk of investing in stocks that investors must be aware of. As an example, assume that a business has 10 shareholders and that each shareholder owns one share (10%) of the company. Suppose that the company then issues 10 new shares and that a single investor buys them all up. There are now 20 total shares outstanding, and the new investor owns 50% of the company. Meanwhile, each original investor now owns just 5% of the company (1 share out of 20 outstanding), because their ownership has been diluted by the new shares.
Dilution is also a factor on Debt Instruments. If an investor is holding a promissory note and the Company continues to borrow money which may have a liquidation preference above the investors debt, the company’s ability to pay the investors debt may be diminished. if the Company becomes insolvent, the Investor will have a payment preference over equity/stock shareholders, but will also need to share any final liquidation value of the Company with other debt holders and may receive less or no value for their promissory note. Investors should not assume because they have a debt investment that there is no dilution.
The restrictions on the resale of securities offered and sold
The securities being purchased are private securities; meaning there is no public market where you can sell the securities. At a minimum you cannot transfer or sell any securities purchased for 12 months. Even after 12 months there may not be a market for the securities. It is best to consider any investment through the Crowdfunding process to be one where you are investing on the long term future of the company. During the first 12 months these transfer exceptions are allowed: 1) to the issuer of the securities; (2) to an accredited investor; (3) as part of an offering registered with the Commission; or (4) 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 the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.
Types of information that an issuer is required to 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
An issuer is required to identify a location on their website where Annual Reports will be filed each year. They must post these for Investors within 120 days from the end of their corporate fiscal year end (when they filed their corporate taxes. Typically 12/31, but not always). An investor may not continually have current financial information about the issuer as described below.
The annual report will contain financial statements certified by the principal executive officer of the issuer to be true and complete in all material respects. If Issuer has financial statements that have been reviewed or audited by an independent certified public accountant they will be provided.
The annual report should include the information filed in the offering statement* and disclose information about the company and its financial condition, as required in connection with the offer and sale of the securities.
*Offering Statement is filed with the Securities Exchange Commission prior to offering securities to Investors. On the right sidebar of every listing page there is a link to the SEC website to view all filings by the Issuer and a link to their Offering Statement relating to the crowdfunding offering. All investors should obtain a copy and read it carefully.
Issuer must post the annual report on its website and make them available to investors. The final rules do not require delivery of a physical copy of the annual report.
Termination of reporting my occur if the following conditions are met:
The issuer has filed at least one annual report and has fewer than 300 holders of record;
The issuer has filed at least three annual reports and has total assets that do not exceed $10 million;
(Sales of the business) The issuer or another party purchases or repurchases all of the securities including any payment in full of debt securities or any complete redemption of redeemable securities; or
The issuer liquidates or dissolves in accordance with state law.
The limits on the amounts investors may invest
The new Crowdfunding Rules limit the amount an Investor may invest in all crowdfunding offerings in any 12-month period.
If you have an annual income or net worth of less than $107,000 you are only permitted to invest up to the greater of (1) $2,200 and (2) 5 percent of the lesser of your annual income or net worth.
If you have an annual income and net worth greater than or equal to $107,000, you may invest up to 10 percent of the lesser of your annual income or net worth.
Regardless of above no investor is permitted to purchase more than $107,000 worth of securities in any 12-month period.
Holders of securities sold in a crowdfunding offerings will generally be required to hold all securities purchased for a least one year before engaging in sales.
The circumstances in which the issuer may cancel an investment commitment
Issuers can cancel an Investors investment under these circumstances:
Issuers are required to report all material changes while selling securities. Investors are notified of the change and have 5 days to reconfirm their investment or it is cancelled. The offering is also extended an additional 5 days. A notice will be sent out to the investor with the reason for the cancellation and the investment will be refunded if funds were collected. All communications will be by email to the Investors registered email address on the portal.
If the target investment is not met, the investment is cancelled and returned to the Investor.
The escrow agent bank will perform and Anti-Money Laundering check which is standard practice at a bank. Should this come back negative the Investor funds will be returned.
The limitations on an investor’s right to cancel an investment commitment
Investors have a right to cancel their investment in these circumstances
Once the Issuer has met its target investment amount the site will reflect that it has reach the target and is no longer accepting investments. A notice from Jumpstart Micro will go to Investors to inform them and Investors will be given 48 hours to cancel their investment. If not cancelled, Investors are required to make their committed investment if he was not already made.
Investors are notified of any material changes and given 5 days to reconfirm their investment before it is cancelled.
The need for the investor to consider whether investing in a security offered and sold is appropriate for him or her
This disclosure identifies a number of risks for investors which include the potential loss of investment, lack of control as a minority shareholder, the unpredictable future of the Company and potentially long term nature of investing in early stage companies. Each Investor should consider these risks seriously and seek any advice needed before making an investment.
Following completion of an offering, there may or may not be any ongoing relationship between the issuer and Jumpstart Micro.
Jumpstart Micro is a Crowdfunding Portal to bring Issuers and Investors together. Once an Issuer has completed their offering there may or may not be an on-going relationship between Jumpstart Micro and the Issuer. Investors will own securities in the Issuer and will have a direct relationship with them regarding the securities. Jumpstart Micro will be available should the Issuer choose to offer additional securities (Issuers can offer up to $1,070,000 each year) and may in the future offer other services to help with annual reports and consulting. Investors should understand this change to working directly with the Issuer once the transaction is complete.
Information Disclosed by Issuers (Note JSM works through process with Issuer)
This information will be disclosed by Issuers to Investors
Information about officers and directors as well as owners of 20 percent or more of the issuer
A description of the issuer’s business and the detailed use of proceeds from the offering
price to the public of the securities or the method for determining
the price, the target offering amount, the deadline to reach the
target offering amount, and whether the issuer will allow an over-subscription of the offering
A discussion of the issuer’s financial condition including certified, reviewed or audited financial information using Generally Accepted Accounting Principals
Copy of FORM C Offering Statement filed with SEC with legend stating the risks of investing in a crowdfunding transaction
Breakdown of compensation to Jumpstart Micro and other costs associated with the offering
The location on the issuer’s website where investors will be able to find the issuer’s annual report and the date by which such report will be available on the issuer’s website
Disclosure if issuer or any of its predecessors previously failed to comply with the ongoing reporting requirements of Regulation Crowdfunding
Issuers must disclose their current number of employees
Issuers must disclosure the material terms of any indebtedness including, among other items, the amount, interest rate and maturity date of the indebtedness
Issuers are required to provide disclosure about the exempt offerings they conducted within the past three years describing the date of the offering, the offering exemption relied upon, the type of securities offered and the amount of securities sold and the use of proceeds
Through JSM, Issuers must show progress updates towards their target amount
Provide a right to cancel the transaction after 48 hour notice of completion
Disclosure of any material changes, whereby the Investors need to reconfirm their investment within 5 days.
Issuers can offer a fixed target amount or target amount and oversubscription up to a stated maximum amount. The Issuer can close on the funds receive once they reach the target amount and provide 48 hours notice to all investors. Investors have a right to cancel during that time. They can then have periodic closes on future investments giving the same 48 hour notice with each closing. Should a material change occur, it will only effect investments which have not been closed with each investor being notified of the requirement to reconfirm their investment within 5 days or it will be cancelled.
On the funding portal investors may ask questions to issuers about the offering and issuers will answer. All questions and answers are available for public viewing in an effort to help all investors assess the opportunity. Investors can also post reviews and issuers can provide periodic updates on their progress. All communications shall be based on principles of fair dealing and good faith.
Issuers and anyone who promotes an Issuer on the portal are required to clearly disclose in all communications the fact that he or she is engaging in promotional activities on behalf of the issuer and identify their relationship and if they are being compensated.
Code of Conduct
The Jumpstart Micro funding portal is designed to bring investors and issuers together and facilitate communications. It is expected that all parties conduct themselves in a professional, respectful manner. No communication may make any false, exaggerated, unwarranted or misleading statement or claim. No communications may be disparaging, or contain any type of foul, sexist or racist comments. We encourage our members to report any concerns of abuse and reserve the right to terminate any persons membership without recourse should we determine any inappropriate behavior.
Jumpstart Micro also reserves the right to terminate an offering if we become aware of information that causes us to believe that the issuer or the offering presents the potential for fraud or otherwise raises concerns about investor protection.
Educational materials are available on the Learn More page. Additional links below provide investment guidance and regulations from the SEC (Securities and Exchange Commission), and FINRA (Financial Industry Regulatory Authority).
Jumpstart Micro is compensated for its services with an upfront listing fee paid for by the Issuer and a success fee which is a percentage of the money raised not to exceed 7% and shares at an equivalent value of 3% of the money raised at the exact terms and conditions of the regulation CF investors. For example, if $100,000 is raised this would amount to $3,000 worth of stock. Some additional fees are passed through to the Issuer for bank services such as an Escrow account and fees on funds going into or out of the escrow account. Funds are held in escrow at a banking institution until the investment target is met.