DEAR micro investor:

 

Thank you for visiting Seed At The Table. The companies featured on our site are local businesses dedicated to serving residents like you. With your help, they can increase their impact, touch more lives, and improve the local economy, However, you should know that you risk losing your entire investment and you should only invest if you can stand to lose all of your committed capital.

 

Please read the following information carefully as it is meant to help you decide whether investing in the offerings posted on Seed At The Table is right for you.

 

With these materials, you will learn the following:

• The process for the offer, purchase and issuance of securities through seed at the table;
• The risks associated with investing in securities offered and sold in reliance on section 4(a)(6);
• The types of securities that may be offered on our platform and the risks associated with each type of security, including the risk of having limited voting power as a result of dilution;
• The restrictions on the resale of securities offered and sold in reliance on section 4(a)(6);
• The 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;
• The limits on the amounts micro investors may invest, as set forth in section 4(a)(6)(b);
• The circumstances in which the issuer may cancel an investment commitment;
• The limitations on your right to cancel an investment commitment;
• The need for you to consider whether investing in a security offered and sold in reliance on section 4(a)(6) is appropriate for him or her; and That following completion of an offering, there may or may not be any ongoing relationship between the issuer and seed at the table From time to time, Seed At The Table may make material changes to these educational materials. If this occurs, we will notify you of such changes before we accept any additional investment commitments or make any further transactions.
• That following completion of an offering, there may or may not be any ongoing relationship between the issuer and Seed At The Table.

From time to time, Seed At The Table may make material changes to these educational materials. If this occurs, we will notify you of such changes before we accept any additional investment commitments or make any further transactions.

 

All communications from Seed At The Table will be electronic.

 

How much money can I invest?

The amount of money you may invest will be limited by your annual income, net worth, and any other investments you have made under Section 4(a)(6) in the last twelve months. Before making any investment commitment, you will be asked to complete an micro investor qualification questionnaire, which will help us determine the maximum amount of money you are allowed to invest.

 

The greater of $2,200, or 5 percent of the greater of the micro investor's annual income or net worth, if either the micro investor's annual income or net worth is less than $107,000.

Ten percent of the greater of the micro investor's annual income or net worth, not to exceed an amount sold of $107,000, if both the micro investor's annual income and net worth are equal to or more than $107,000;

Joint calculation. If you are married, you can calculate by adding your annual income or net worth with your spouse’s income or assets, even if that property is not held jointly. However, if you do calculate your income or assets jointly with your spouse, each of your crowdfunding investments together cannot exceed the limit that would apply to an individual micro investor at that annual income or net worth level.

 

How do I calculate my net worth?

Your net worth is all your minus all your liabilities.

For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on your home does not count as a liability up to the fair market value of your home. If the loan is for more than the fair market value of your home (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.

 

Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount doesn’t exceed the value of the residence) will count as a liability as well. The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.

 

How do I make a crowdfunding investment?

Local business owners (also known as “issuers”) list investment opportunities (also known as “offerings”) on our website to allow micro investors like you to make crowdfunding investments in their businesses. Once you see a business or businesses that you would like to invest in, you open an account and make an investment commitment. You can only purchase crowdfunding investments through a crowdfunding intermediary, either a broker-dealer or a funding portal registered with the Securities Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA). Seed At The Table is a funding portal registered with the SEC and a member of FINRA.

 

You are only allowed to open an account if you agree to accept all written communications relating to your crowdfunding investment electronically.

 

What happens after I make an investment commitment?

Each offering (investment opportunity) will specify a targeted offering amount. This is the amount that micro investors, in aggregate, must commit to the offering before the business owner can receive any money from the micro investors.

 

Targeted offering amount reached or exceeded

Our platform will show each issuer’s progress in reaching the targeted offering. We will notify you when 50% of the targeted amount is reached and again, when 100% of the targeted amount is reached.

 

If the targeted offering amount is reached, the issuer may either wait until the offering deadline to close the offering or it may close the offering at an earlier date, if the offering has been open for at least 21 days. If the offering closes at an earlier date, we will notify you of the new offering deadline at least 5 days before the offering closes.

 

Targeted offering amount not reached

If the targeted offering amount is not reached, the offering will be cancelled and your funds will be promptly returned to you.

 

What if I change my mind?

Your Cancellation Rights

Up to 48 hours before offering closes

You may cancel your investment commitment up to 48 hours before the offering closes. However, if there is a material change in the offering within the 48 hours before the offering deadline, you may cancel your investment commitment at a later time. If you cancel your investment commitment, you will receive an email notification of your cancellation and the refund amount you should expect to receive.

 

Material Change in Offering

If there is a material change in the offering, we will promptly notify you of this change. You must reconfirm your investment commitment within five days of receiving this notice. Otherwise, your investment commitment will be canceled. Within five business days of the cancellation, we will notify you that your investment commitment was canceled, the reason for the cancellation, and the refund amount you should expect to receive.

 

Is there any reason I may not be able to invest in a company after I make an investment commitment? What are my rights when this happens?

An issuer must cancel its offering if it does not reach its target offering amount. It may also terminate the offering for other reasons. If either of these scenarios occurs, we will notify you within five business days of the cancellation, disclosing the cancellation to you, the reason for the cancellation, and the refund amount you should expect to receive.

 

After an issuer cancels its’ offering, you will no longer be allowed to make an investment commitment in that offering.

 

When is my purchase complete?

If the issuer reaches or exceeds its targeted offering amount and you do not cancel your investment commitment at least 48 hours before the offering deadline, your purchase will be complete on the offering deadline. We will notify you that the transaction is complete and direct the transmission of your funds to the business or businesses in which you made an investment commitment(s).

 

The business will record your ownership in its electronic ledger.

 

What should I keep in mind?

The risk of investing in any business depends, in part, on the particular facts and circumstances of a business or offering. As such, we encourage you to carefully review each issuer’s offering materials before you invest in the offering. The offerings on Seed At The Table represent offerings made by small businesses. Small businesses tend to have high rates of failure even after receiving financing. These investments are speculative and there is a risk that your investment will be lost completely. You should be able to afford and be prepared to lose your entire investment.

 

You should also be aware that there is limited liquidity in your investment. The chances of an initial public offering or acquisition by another business is low. Thus, it is unlikely that you will be able to sell your securities on a national securities exchange or to another company in acquisition. You may not sell your securities for at least one year from the purchase date unless in certain limited circumstances. In addition, there currently is no secondary market for the sale of securities issued under 4(a)(6). This means that in order to sell your securities, you may have to locate an interested buyer.

 

Given the above factors, you must consider whether investing in the securities offered on our platform is appropriate for you.

 

What types of securities do you offer on your platform?

We offer equity and debt securities on our platform. We also offer safes.

 

Equity securities

When you invest in an equity security, you become a part-owner of the company. Each share you purchase represents an ownership interest in the company. Your rights depend on the type of equity that you purchase. You may see the following types of equity securities offered on our platform: common shares and preferred shares.

 

Debt securities

When you invest in a debt security, your return on investment is the interest rate that accumulates on the amount that you invest (the principal). In a debt offering, the company is promising to pay you interest on your investment and to return the principal to you on a specified date (the “due date” or “maturity date”). Unlike an investment in an equity security, you do not own any part of the company. We may offer the following types of debt securities on our platform: secured debt, unsecured debt, or convertible debt.

 

Safe

A safe, short for Simple Agreement for Future Equity is an agreement between the micro investor and the company that when a specific event occurs, the micro investor’s money will be converted into shares. The safeholder will then become a shareholder and the safe will terminate.

 

What rights do I have investing in different types of equity?

The rights you have depend on the type of equity you purchase. The following is only a summary of the common types of rights you have when purchasing certain types of securities. Your specific rights are set out in the Company’s offering memorandum. As such, it is important that you read the offering memorandum carefully before making an investment.

 

Equity Securities

Common Shares

As a holder of common shares, you have the right to vote, but your right to be paid is subordinate to preferred shareholders. This means that if a company pays dividends, preferred shareholders will be paid first. If a company liquidates, preferred shareholders will also be paid first.

 

Your ownership percentage and thus your right to vote may be diluted if a company engages in a subsequent offering and issues additional shares. For example, if a company has 100 unique shareholders, each shareholder owns 1% of the company. If the company issues 100 additional shares for a subsequent offering, the current shareholders will have their ownership interest, and thus, their voting power, cut in half or reduced to 0.5%. Even though your percentage ownership is reduced, the money raised from the new offering may increase the company’s profits and the value of its shares.

 

Preferred Shares

Preferred shares have preferred dividend rights, meaning that dividends will be paid to preferred shareholders before common shareholders. A dividend is a percentage or dollar amount that a shareholder earns for each share that he/she owns. Dividends may be cumulative or noncumulative.

 

Cumulative dividends accumulate even if the board does not declare them. This means that for as long as you own the company’s shares, you will earn income on every share that you own.

 

Unlike cumulative dividends, noncumulative dividends do not accumulate and you are not entitled to receive any dividends unless the board declares them.

 

Preferred shares also liquidation preferences, meaning that a preferred shareholder will be paid before a common shareholder.

 

Evidence of Ownership

Some companies send a copy of a share certificate to shareholders as proof that they are shareholders of the company. Other companies simply record the transaction in a stock transfer ledger that indicates information of the offer and sale of the security, such as, date offered, date sold, offer price, price paid, price per share, total shares sold, and name of the shareholder.

 

Secured Debt

A secured debt security is secured by something called, collateral. Collateral is something that a company pledges to secure the debt. Personal property, such as, a business’s assets or its shares are examples of collateral. If the company fails to pay back their debt—i.e., your initial investment in the company—it will repay you with their collateral. Although a company will agree to maintain their collateral, there is no guarantee that the collateral the company has when you make the investment will be worth the same amount that it did at the time you made the investment on the maturity date.

 

An unsecured debt security is not secured by anything. This means your entire investment is at risk of being lost.

 

In addition, a Company pays its creditors in order of priority. Any creditor senior in priority to you will be paid before you and any creditor junior in priority to you will be paid after you. If there is no money remaining after creditors senior to you have been paid, you may lose some or all of your investment.

 

Convertible Debt

Some companies on our platform may offer convertible debt. In a convertible debt offering, your debt securities will become equity securities if the event set forth in the company’s offering memorandum occurs. Once your debt securities become equity securities, you get an ownership share of the company and the company is no longer liable to pay you any additional interest or return your principal.

 

Revenue-sharing

Revenue-sharing debt securities are debt securities that give you a percentage share of a company’s revenues up to a specified multiple of your original investment. For example, if a company offers you a return of 1.5x your investment with revenue sharing of 5% of the company’s annual net profits, and you invest $1,000 in the company, you will receive 5% of the company’s net profits each year until you receive $1,500. At that point, the company would have paid off all debts owed to you.

 

Important Documents for Debt Investments

If you purchase a debt security, you will be provided with a loan agreement and a promissory note. The loan agreement sets forth both the rights and obligations of the company and the micro investor. If the loan is secured by collateral, the loan agreement will describe the collateral. The promissory note is a written promise of the company’s obligation to pay you. For example, the promissory note may specify the interest rate on your investment, when the interest is due, when the principal is due, and whether the company has the right to prepay.

 

What can I do with my securities after I purchase them?

Generally, you must keep your securities for at least one year after purchasing them. However, you may transfer your securities

• Back to the issuer;
• To an accredited micro investor, upon reasonable belief that the purchaser is an accredited micro investor;
• As part of an offering registered with the Commission; or
• To a family member 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.

The one year resale restriction does not only apply to you (the initial purchaser), but applies to any purchaser during the one-year period beginning when the securities were first issued.

 

If you need liquidity during the first year of your investment, a crowdfunding investment may not be right for you.

 

Possible Dilution

If the issuer requires additional capital, it may issue additional shares, diluting the ownership percentage of your shares and diminishing any voting power you may have. For example, if 100 shareholders own 10 shares of the company, each shareholder owns 10% of the company. If the company issues an additional 100 shares, the existing shareholders will then only own 5% of the company’s shares and any voting rights they may have will be reduced accordingly.

 

How will I know what the issuer is doing with my money?

Each issuer must file an annual report with the Securities Exchange Commission, no later than 120 days after the end of the fiscal year covered by the report. For example, if a company’s fiscal year ends on December 31, 2020 the company must file its annual report by April 30, 2021. The company is required to state the specific date that it will file its annual report on its offering memorandum. This report will be available to you on the issuer’s website. The specific web address can be found in the issuer's offering memorandum.

 

Contents of Annual Report

The annual report must contain the issuer's financial statements, certified by the principal executive officer of the issuer to be true and complete in all material respects unless reviewed or audited statements are available. Financial statements contain the following:

• Balance sheets;
• Statements of comprehensive income;
• Statements of cash flows;
• Statements of changes in stockholders’ equity; and
• Notes to the financial statements.

 

The issuer will also disclose information about the company and its financial condition. This includes a description of the following:

• A discussion of liquidity, capital resources and historical results of operations with a focus on whether historical earnings and cash flows are representative of what micro investors should expect in the future. If the issuer does not have a prior operating history, the discussion should focus on financial milestones and operational, liquidity and other challenges.
• The issuer shall discuss the period for which the financial statements are provided and disclose any known material changes or trends in the financial condition and results of operations after such period. This discussion should take into account the proceeds of the offering and any other known or pending sources of capital, including how offering proceeds will affect their liquidity, whether these funds and any other additional funds are necessary to the viability of the business and how quickly the issuer anticipates using its available cash. The report may also describe the other available sources of capital to the business, such as lines of credit or required contributions by principal shareholders.

 

To inform you of financial condition and results of operations of the issuer, you will be provided with management's perspective on the issuer’s operations and financial results, including information about the issuer’s liquidity and capital resources and any known trends or uncertainties that could materially affect the company’s results.

 

The 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. This means that you may not have ongoing financial information about the issuer.

 

Termination of Reporting Requirements

The issuer is required to submit at least one annual report to you. However, if the following events occur, the issuer is no longer required to provide you with any annual reports and you may not continually have current financial info about the issuer:

 

(1) The issuer is required to file reports under Exchange Act Sections 13(a) or 15(d);

 

(2) The issuer has filed at least one annual report and has fewer than 300 holders of record;

 

(3) The issuer has filed at least three annual reports and has total assets that do not exceed $10 million;

 

(4) The issuer or another party purchases or repurchases all of the securities issued pursuant to Section 4(a)(6), including any payment in full of debt securities or any complete redemption of redeemable securities; or

 

(5) The issuer liquidates or dissolves in accordance with state law.

 

Is there any ongoing relationship between the issuer and Seed At The Table?

Once an offering is complete, the relationship between Seed At The Table and the issuer terminates.