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FAQs

FAQ

With such a new model of investing there will be plenty of questions both from the issuer’s standpoint and the investor’s side about how all of this works. We’ve listed several popular questions that should provide the answers you need to move forward.
Equity Crowd-Investing enables investors to gain ownership via shares in a company, whereas, rewards based Crowd-Investing investors receive a “reward” for their investment.

Angel investors are accredited investors.
Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowd-Investing offerings over the course of a 12-month period:If both annual income and net worth are equal to or more than $107,000, then the investor’s limit is 10 percent of the lesser of their annual income or net worth.

During the 12-month period, the aggregate amount of securities sold to an investor through all Regulation Crowd-Investing offerings may not exceed $107,000, regardless of the investor’s annual income or net worth.

The new non-accredited investment limits as of March 17, 2021 are as follows:
(a) The greater of $2,200, or 5 percent of the greater of the investor’s annual income or net worth, if either the investor’s annual income or net worth is less than $107,000; or
(b) Ten percent of the greater of the investor’s annual income or net worth, not to exceed an amount sold of $107,000, if both the investor’s annual income and net worth are equal to or more than $107,000;

There are many different ways to engage a crowd of investors

Create social media pages for your business on sites such as Facebook, Instagram, YouTube or Twitter and post updates and information regularly to entice potential investors. Invite social media contacts to visit your page on Mustrdseed.com/yourcompanyname. Create an email list and continue to expand it as you go, continue to keep potential investors interested using newsletters. 

An issuer “founder” may not, directly or indirectly, advertise the terms of an offering made in reliance on Regulation Crowdfunding rules and regulations except for oral or written communications that meet the specific requirements:

A notice may advertise any of the terms of an issuer’s offering made in reliance on Regulation Crowdfunding rules and regulations if it directs investors to the intermediary’s platform and includes no more than the following information:

        A statement that the issuer is conducting an offering pursuant to Regulation Crowdfunding general rules and regulations

        The name of the intermediary through which the offering is being conducted

        Information (including a link in any written communications) directing the potential investor to the intermediary’s platform;

        Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number and Web site of the issuer, the email address of a representative of the issuer and a brief description of the business of the issuer.

Notwithstanding the prohibition on advertising any of the terms of the offering, an issuer, and persons acting on behalf of the issuer, may communicate with investors and potential investors about the terms of the offering through communication channels provided by the intermediary on the intermediary’s platform, provided that an issuer identifies itself as the issuer in all communications. Persons acting on behalf of the issuer must identify their affiliation with the issuer in all communications on the intermediary’s platform.

Notwithstanding the requirement that a notice advertising any of the terms of an issuer’s offering made in reliance on Regulation Crowdfunding rules and regulations include no more than the information specified earlier in this section, an issuer conducting an offering in reliance on Regulation Crowdfunding concurrently with another offering that discloses the terms of the Regulation Crowdfunding offering in the disclosure document for the other offering will not be deemed to have exceeded these disclosure limitations if the disclosure document for the other offering satisfies all the other requirements of this section. If the disclosure document for the other offering is filed on the Commission’s Electronic Data Gathering and Retrieval System (EDGAR), the link required mentioned in the second paragraph (second bullet) may not be a live hyperlink.

For purposes of this section, terms of the offering means the amount of securities offered, the nature of the securities, the price of the securities, the closing date of the offering period, the planned use of proceeds and the issuer’s progress toward meeting its funding target.

Your funding goal should be what is needed to expand your business, whether it be more materials, hiring more staff, a new office, marketing/advertising or public relations. These cost will all have to be calculated and totaled as one big price and that will be your funding goal.
MustrdSeed will offer debt investment (involves loaning money to an institution or organization with hopes for a return plus interest, however, this is not guaranteed.

Common Stock
Common Stockholders are on the bottom of the priority ladder for ownership structure; in the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debtholders are paid in full.

Convertible Notes
There are several disadvantages for investors when it comes to convertible notes;
◦ It can be difficult for investors to establish whether the terms of a particular note offering are fair pre-valuation
◦ convertible noteholders usually cannot take advantage of the long-term capital gains treatment available to stockholders until the time of the note’s conversion
◦ Convertible noteholders are often at the mercy of others, with little power to sway the outcome of their investments (at least until the conversion event)
◦ Often, the valuation of a noteholder’s investment will be determined by future investors who may negotiate a valuation with which the noteholder does not agree.
◦ If convertible notes are uncapped, the interests of the issuer and the noteholders are not aligned when it comes to this valuation, as issuers want the valuation to be as high as possible, while noteholders want the opposite.

Membership Units

Unlike corporations, LLCs do not and cannot have shares. LLCs are owned by one or more members. LLC members can be people or other business entities. Each member owns a membership interest in the LLC expressed as a percentage or units of membership.

In sum, although LLCs cannot issue shares, they can create ownership structures that parallel to those used by corporations and have a fair degree of flexibility in creating the structure.

A general risk involved with these securities is there may be limited (if any) voting powerdue to dilution. (Dilution, or Equity Dilution, is the decrease in existing shareholdersownership percentage of a company because of the company issuing new equity. Newequity increases the total shares outstanding which has a dilutive effect on the ownershippercentage of existing shareholders)

Accreditation for investors all boils down to net worth, ​ Accredited investors are individuals with a net-worth greater than $1M (excluding their primary residence) or an annual income exceeding $200K per year for two years ($300K if combined with a spouse). With equity crowdfunding, both accredited and non-accredited investors can invest in your business.
Typically campaign length will fall between 60-90 days until there are special circumstances that will require more time. The campaigns will need time to nurture and gain momentum but we do not want them to be drawn out and lose that excitement about the brand.
Dividends are payments made by a business to its shareholders from the company’s profits and are not guaranteed. Most of the companies offering equity on our platform are startups or early-stage companies who will rarely pay dividends to their investors.​ ​ Profits (if any) are typically reinvested into the business to fuel growth and build shareholder value.​ ​ Even if there are profits, businesses are under no obligation to pay any dividends to their shareholders.

Investments in crowdfunding assets should be viewed as long-term and illiquid investments. Securities purchased in a crowdfunding transaction generally cannot be resold for a period of one year, unless the securities are transferred:

• to the issuer of the securities;
• to an “accredited investor”;
• as part of an offering registered with the Commission; 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 the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.

This will be totally up to the issuer, for some every investor will have voting rights and for some none of the investors will have voting rights. Some issuers may elect to have different investment levels that will include voting rights.
MustrdSeed DOES NOT hold, handle, manage or possess investor funds or securites, this is all handled by a third party agent.
MustrdSeed DOES NOT have the authority to solicit purchases, sales, or offers to buy the securities offered or displayed on its website/portal.
In complicance with the rules and regulations set forth by the S.E.C. MustrdSeed does not offer investment advice or recommendations.

An investor may cancel an investment commitment for any reason within 48 hours from the time of his or her investment commitment (or such later period as the issuer may designate). After such 48 hour period, an investment commitment in most cases may not be cancelled.

 
However, If there is a material change to the terms of an offering or to the information provided by the issuer, the intermediary must give or send to any investor who has made an investment commitment notice of the material change and that the investor’s investment commitment will be cancelled unless the investor reconfirms his or her investment commitment within five business days of receipt of the notice. If the investor fails to reconfirm his or her investment within those five business days, the intermediary within five business days thereafter must:

◦ Give or send the investor a notification disclosing that the commitment was cancelled, the reason for the cancellation and the refund amount that the investor is expected to receive; and
◦ Direct the refund of investor funds
Also, ) If material changes to the offering or to the information provided by the issuer regarding the offering occur within five business days of the maximum number of days that an offering is to remain open, the offering must be extended to allow for a period of five business days for the investor to reconfirm his or her investment.

It is absolutely important for investors to consider whether investing in a security is appropriate for the investor. MustrdSeed will ensure that investors have all the necessary information about an offering to make an informed decision.
The relationship between the issuer and MustrdSeed may or may not be ongoing so any communication between the investor and the entrepreneurs will be done directly. Investors may be able to communicate with the entrepreneur and other investors via email and any other channels that the entrepreneur may have open for their investor community. The entrepreneur will disclose in its offering documents the who, what, and when about the communication post-offering. If an investor does not agree with the communication plan it is advised not to invest in that particular campaign.

Under certain circumstances an issuer may cease to publish annual reports and, therefore, an investor may not continually have current financial information about the issuer.

An issuer must continue to comply with the ongoing reporting requirements until one of the following occurs:

1. The issuer is required to file reports under section 13(a) or section 15(d) of the Exchange Act (15 U.S.C. 78m(a) or 78o(d));
2. The issuer has filed, since its most recent sale of securities pursuant to this part, at least one annual report pursuant to this section and has fewer than 300 holders of record;
3. The issuer has filed, since its most recent sale of securities pursuant to this part, the annual reports required pursuant to this section for at least the three most recent years and has total assets that do not exceed $10,000,000;
4. The issuer or another party repurchases all of the securities issued in reliance on section 4(a)(6) of the Securities Act (15 U.S.C. 77d(a)(6)), including any payment in full of debt securities or any complete redemption of redeemable securities; or
5. The issuer liquidates or dissolves its business in accordance with state law.

MustrdSeed requires that any person posting a comment in the communication channels clearly and prominently disclose with each posting whether he or she is a founder or an employee of an issuer engaging in promotional activities on behalf of the issuer, or is otherwise compensated, whether in the past or prospectively, to promote the issuers offering.

In accordance with Regulation Crowdfunding, General Rules and Regulations the platform’s issuers of securities are subject to ongoing reporting requirements which include the following:

1. Must file with the Securities and Exchange Commission (SEC) and post on the issuers website an annual along with the financial statements of the issuer certified by the principal executive officer to the issuer to be true and complete in all material respects:
2. A description of the issuers financial condition, including, to the extent material, liquidity, capital resources and historical results of operations;
a) The discussion must cover each period for which financial statements of the issuer are provided. An issuer also must include a discussion of any material changes or trends known to management in the financial condition and results of operations of the issuer subsequent to the period for which financial statements are provided.
b)  For issuers with no prior operating history, the discussion should focus on financial milestones and operational, liquidity and other challenges. For issuers with an operating history, the discussion should focus on whether historical results and cash flows are representative of what investors should expect in the future. Issuers should take into account the proceeds of the offering and any other known or pending sources of capital. Issuers also should discuss how the proceeds from the offering will affect the issuer’s liquidity, whether receiving these funds and any other additional funds is necessary to the viability of the business, and how quickly the issuer anticipates using its available cash. In addition, issuers should describe the other available sources of capital to the business, such as lines of credit or required contributions by shareholders
c) Any references to the “issuer” under these rules refer to issuer and its predecessors, if any.
3. If an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements must be provided and the certification by the principal executive officer will not be required.
4. The annual report must include the following information
a) The name, legal status (including its form of organization, jurisdiction in which it is organized and date of organization), physical address and Web site of the issuer;
b) The names of the directors and officers (and any persons occupying a similar status or performing a similar function/the term officer means a president, vice president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer, and any person routinely performing similar functions.) of the issuer, all positions and offices with the issuer held by such persons, the period of time in which such persons served in the position or office and their business experience during the past three years, including:
• Each person’s principal occupation and employment, including whether any officer is employed by another employer
• The name and principal business of any corporation or other organization in which such occupation and employment took place
c) The name of each person, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, who is a beneficial owner of 20 percent or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power
d) A description of the business of the issuer and the anticipated business plan of the issuer
e) The current number of employees of the issuer
f) A discussion of the material factors that make an investment in the issuer speculative or risky
g) A description of the ownership and capital structure of the issuer, including;
• The terms of the securities being offered and each other class of security of the issuer, including the number of securities being offered and/or outstanding, whether or not such securities have voting rights, any limitations on such voting rights, how the terms of the securities being offered may be modified and a summary of the differences between such securities and each other class of security of the issuer, and how the rights of the securities being offered may be materially limited, diluted or qualified by the rights of any other class of security of the issuer;
• A description of how the exercise of rights held by the principal shareholders of the issuer could affect the purchasers of the securities being offered;
• The name and ownership level of each person, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, who is the beneficial owner of 20 percent or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power;
• How the securities being offered are being valued, and examples of methods for how such securities may be valued by the issuer in the future, including during subsequent corporate actions;
• The risks to purchasers of the securities relating to minority ownership in the issuer and the risks associated with corporate actions including additional issuances of securities, issuer repurchases of securities, a sale of the issuer or of assets of the issuer or transactions with related parties; and
• A description of the restrictions on transfer of the securities, as set forth in §227.501
h) A description of the material terms of any indebtedness of the issuer, including the amount, interest rate, maturity date and any other material terms;
i) A description of exempt offerings conducted within the past three years; (In providing a description of any prior exempt offerings, disclose)

• 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
j) A description of any transaction since the beginning of the issuer’s last fiscal year, or any currently proposed transaction, to which the issuer was or is to be a party and the amount involved exceeds five percent of the aggregate amount of capital raised by the issuer during the preceding 12-month period, inclusive of the amount the issuer seeks to raise in the current offering, in which any of the following persons had or is to have a direct or indirect material interest
• Any director or officer of the issuer
• Any person who is, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, the beneficial owner of 20 percent or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power
• If the issuer was incorporated or organized within the past three years, any promoter of the issuer; or
• Any member of the family of any of the foregoing persons, which includes a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. The term spousal equivalent means a cohabitant occupying a relationship generally equivalent to that of a spouse.
*For each transaction identified, disclose the name of the specified person and state his or her relationship to the issuer, and the nature and, where practicable, the approximate amount of his or her interest in the transaction. The amount of such interest shall be computed without regard to the amount of the profit or loss involved in the transaction. Where it is not practicable to state the approximate amount of the interest, the approximate amount involved in the transaction shall be disclosed
*A transaction includes, but is not limited to, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships
k) Whether the issuer or any of its predecessors previously failed to comply with the required ongoing reporting requirements

Terms & Definitions

Learning about this industry without any prior experience can be a daunting task and little bit overwhelming if you are not too familiar with the investing world. Here are some key terms that will help you along in this process.
Legally enforceable claims for payment held by a business for goods supplied and or services rendered that customers/clients have ordered but have not paid for
A person or entity who is allowed to deal, trade and invest in financial securities as long as they satisfy one (or more) requirements regarding income, net worth, asset size, governance status or professional experience.
An individual who provides capital for business start-up, usually in exchange for convertible debt or ownership of equity. Angel investors usually give support to start-ups at the initial moments and when most investors are not prepared to back them.
Articles of incorporation is the document that establishes a corporation as a separate business entity.
A team of people elected by a corporations shareholders to represent the shareholders’ interests and ensure that the company’s management acts on their behalf.
A rate at which an enterprise spends money, especially venture capital, in excess of income.
A capitalization table is a table providing an analysis of a company’s percentage of ownership, equity dilution and value equity in each round of investment by founders, investors and other owners.
A share of the profits of an investment paid to the investment manager in excess.
The most liquid current assets found on a business’s balance sheet. Cash equivalents are short-term commitments “with …
The CIK is a unique, public number that is assigned to each entity that submits filings to the SEC. Use of the CIK allows the SEC to differentiate between filing entities with similar names. The CCC is a code used in combination with the CIK to submit a filing via EDGAR. The CCC is eight characters having at least one number (0-9) and at least one special character (@, #, $, *). The CCC is also case-sensitive and must be entered exactly as created, in lower case.
Common stock is a security that represents ownership in a corporation.
A convertible bond or convertible note or convertible debt is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value. It is a hybrid security with debt- and equity-like features.
Cost of goods sold is the carrying value of goods sold during a particular period. Costs are associated with particular goods using one of the several formulas, including specific identification, first-in first-out, or average cost
A custodian is a financial institution that holds customers’ securities for safekeeping in order to minimize the risk of their theft or loss.
The minimum interest rate set by the Federal Reserve for lending to other banks
The term “fiscal year-end” refers to the completion of a one-year or 12-month accounting period. The fiscal year is the period used for calculating annual financial statements.
The Principles of GAAP Generally accepted accounting principles, or GAAP for short, are the accounting rules used to prepare and standardize the reporting of financial statements, such as balance sheets, income statements and cash-flow statements, for publicly traded companies and many private companies in the United States.
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
The internal rate of return is a measure of an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or various financial risks. It is also called the discounted cash flow rate of return
Issuer is a legal entity that develops, registers and sells securities for the purpose of financing its operations. Issuers may be governments, corporations or investment trusts.
A lead investor is a company’s principal capital provider.
A liquid market refers to any market which is always available and liquid, or clear and free flowing. An example would be a major exchange of the U.S. stock market, such as the New York Stock Exchange (NYSE), where for any given stock many millions of shares may change hands between buyers and sellers every day
Long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date.
A change is deem as being material when the new information added could create a change in the original decision.
In business and accounting, net income is an entity’s income minus cost of goods sold, expenses, depreciation and amortization, interest, and taxes for an accounting period.
Post-money valuation is a way of expressing the value of a company after an investment has been made. This value is equal to the sum of the pre-money valuation and the amount of new equity
Stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends.
A pre-money valuation refers to the valuation of a company or asset prior to an investment or financing. If an investment adds cash to a company, the company will have different valuations before and after the investment.
Principal security holder​ of a listed issuer means a person or company who beneficially owns or exercises control or direction over more than 10% of the issued and outstanding securities of any class of voting securities or equity securities of the listed issuer
An asset class consisting of equity securities and/or debt in operating companies that are not publicly traded on a stock exchange.
A ​ signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand.

Regulation A is an exemption from registration requirements—instituted by the Securities
Act—that applies to public offerings of securities that do not exceed $50 million in any one-year
period. Companies utilizing the Regulation A exemption must still ​ file offering statements with
the Securities and Exchange Commission (SEC)​ .

Regulation Crowdfunding enables eligible companies to offer and sell securities through crowdfunding. The rules: require all transactions under Regulation Crowdfunding to take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal.
Rule 506(b) offerings, which cannot use general solicitation but in which non-accredited investors can participate so long as they are provided with extensive information about the issuer of the securities, usually in the form of a private placement memorandum or PPM
Rule 506(c) offerings, which can use general solicitation, but must be sold to accredited investors only, in which the market will let investors dictate the type of information that they need in order to make informed investment decisions.
Income, especially when of a company or organization and of a substantial nature.
Revenue sharing is the distribution of revenue that is the total amount of income generated by the sale of goods and services, among the stakeholders or contributors.
Runway is the amount of time your company can survive if your income and expenses stay constant.

Is an agreement between an ​ investor​ and a ​ company​ that provides rights to the investor for
future ​ equity​ in the company similar to a ​ warrant​ , except without determining a
specific ​ price​ per ​ share​ at the time of the initial investment.

A security, is a certificate or other financial instrument that has monetary value and can be traded. Securities are generally classified as either equity securities, such as stocks and debt securities or bonds and debentures.
Seed Round: Refers to a series of related investments in which 15 or less investors “seed” a new company with anywhere from $50,000 to $2 million. This money is often used to support initial market research and early product development.
A series A round is the name typically given to a company’s first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors in exchange for their investment.
The Employer Identification Number, also known as the Federal Employer Identification Number or the Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service to business entities operating in the United States for the purposes of identification
A valuation cap is applied to counter a scenario of run-away growth in the period after investment but prior to conversion. It limits the maximum price set for conversion of the convertible.
Warrants are a derivative that give the right, but not the obligation, to buy or sell a security—most commonly an equity—at a certain price before expiration. The price at which the underlying security can be bought or sold is referred to as the exercise price or strike price.

Process breakdown

Process Breakdown for investors
Now that you’ve made it to the site, your interest in equity Crowdfunding has peeked and you would like to go forward with purchasing shares, here is what’s to follow:
  • First, read through the offering page and more importantly the offer details (pre-money valuation, securities type, funding goal, minimum investment, amount per share, number of investors already committed, amount currently raised)
  • Once you’ve done all of your due diligence you select the “Invest” button and you are sent to a contract page. Here you will input your financial information for the purchase of shares and sign the share subscription agreement.
  • Once agreement is signed and shares are purchased the investor will receive an email confirmation of the investment commitment. The investor will also be able to see this purchase listed in the “My Portfolio” section of their MustrdSeed profile page.
  • Once the funds are transferred into an escrow account the investor will receive an email confirmation to acknowledge the funds have been received.
  • Investors will then begin receiving email updates and milestone notifications about the campaign as well as updates about the company as a whole.
  • - When the minimum funding target is met prior to the Original Deadline and - the Form C
    - Offering Statement and the information of the securities offering have been posted and publicly available on MustrdSeed for at least 21 days and;
    - the issuer chooses to end the offering earlier than the Original Deadline and;
    - the issuer has notified the investor by email the new deadline for the securities offering (New Deadline) at least 5 business days before the New Deadline and the investor doesn't cancel his or her investment commitment 48-hours prior to the New Deadline.

  • The securities issued in the offering will be in book-entry form only, which means that no physical stock certificates will be issued. The ownership of the securities purchased through the offering will be held in the investor's name in book-entry format by the issuer's transfer agent.

Risks

It is very important to know and understand the inherent risks that are involved with equity crowdfunding, here are a few things to consider.
  • You should only invest an amount you are comfortable losing, as many startup businesses fail.
  • It is very difficult and even impossible in most cases to sell your shares when investing in private companies.
  • Investments made in a Title III crowdfunding transaction can't be resold for a period of one year and there may be some other restrictions on the resale of the securities.
  • You more than likely will not be able to cash in the shares you own in a private company for equal value of what you invested
  • Purchasers of the securities offered may be entitled no voting rights and therefore they are not entitled to exert influence in the affairs of the
  • Future equity financings may dilute their ownership percentage in the issuer. (The value of your investment may be diluted if more shares are issued and many start-up businesses undergo multiple rounds of funding)
  • If you invest in shares in a business, there will be no guarantee that income in the form of dividends will be paid.
  • Return on equity crowdfunded business may take many years to materialize. In many cases, equity may not ever accrue to the investor.
  • Securities issued in a transaction on the platform have limitations/restrictions on resales. Securities purchased through the site may not be transferred during the one year period beginning when the securities are purchased, unless the securities are transferred in the following manner:
    a) Back to the issuers of the securities
    b) To and accredited investor
    c) As a part of an offering registered with the commission (SEC); or
    d) 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.
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