A Conversation About Creating A Global Classroom | Getting Smart
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Jun 11, 2017
Holly's students have participated in several PenPal Schools VR projects, including a VR Field Trip to Pakistan. PenPal Schools recently ...
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PenPal Schools
A collaborative learning community spanning 150 countries
As seen on Meet the Drapers TV Show on Sony Entertainment Television
Deal highlights
- Connecting over 320,000 students from over 7,000 schools in 150 countries
- 78 paying schools and districts (average deal size = $1,770 / year)
- Named Best Education Technology of 2017 by Common Sense Education
- Recognized by President Obama as a leading social enterprise
- Led by an experienced entrepreneur whose previous company generates $5M annual revenue
- Partnered with leading publishers including Time Inc, Via Afrika, and Films BYkids
- $1.25M raised to date from Stanford, Floodgate, Techstars, Capital Factory, Dreamit, Honeycomb Portfolio and more
“Why do we have to learn this?” It’s the question that haunts every teacher. When schoolwork doesn’t seem relevant, students quickly lose interest and stop learning. And with information just a Google search away, memorizing facts for tests seems more pointless than ever.
This lack of student motivation has led to a crisis in our education system, with students failing to meet grade level targets across all ages and skills.
Innovative schools are starting to change
Fortunately, many schools across the US and around the world have recognized that a system based on memorization and testing is not effective. Innovative teachers are leading a movement towards project-based learning, where students demonstrate their learning not by passing a test, but by creating original work. When done well, project-based learning not only motivates students to learn the required content and skills, it also helps them to develop creativity, communication and collaboration skills.
With over 320,000 participating students in more than 150 countries, PenPal Schools is leading the project-based learning revolution.
Explore a map of participating schools in 150 countries
Students on PenPal Schools don’t just write to each other - they collaborate globally to design robots, create films, explore careers, and find local solutions to global problems. Sound like fun? It is!
Meet more teachers and PenPals from around the world
Students on PenPal Schools are so engaged and motivated in their learning that PenPal Schools has earned high-profile press and won numerous prestigious awards, including Best Edtech of the Year by Common Sense Education (a big deal). PenPal Schools was also recognized by President Obama (a bigger deal) as an outstanding social enterprise - an organization that uses a for-profit business model to create positive change.
How Penpal Schools works
These screenshots are nice, but to really get a feel for PenPal Schools you should see a demo. Pick a topic of your choice and preview it to see the quality of the content and technology. The demo looks pretty good on a phone, but it's optimized for a laptop - the way 90% of our students use it.
The market
As you may already know, the K-12 education industry is very large. In the United States alone, there are over 98,000 public schools and 33,000 private schools serving a total of over 56 million students. These schools spend a total of $12.4 billion per year on instructional supplies.
What you may not know, unless you spend a lot of time in schools, is that classrooms today look very different than they did just a few years ago. Schools everywhere recognize the need for students to practice using technology, and are replacing worn out textbooks with digital instructional materials. Today, 98 percent of US school districts provide internet access for students.
Just as classrooms are shifting from textbooks to technology, so are the budgets of schools and school districts:
In addition to what they purchase, schools and districts have also changed how they purchase. In the past, large textbook publishers sold their products by schmoozing administrators with fancy dinners or golf outings. This was great for administrators, but often forced students and teachers to use ineffective products. Fortunately, today schools and districts demand free trials (pilots) of digital resources to make sure that they are effective. This is great for students and teachers, as well as for the companies that have built the products that they love. Like, for example, PenPal Schools.
Penpal Schools' business model fit perfectly with this teacher-driven purchasing system
Teachers can complete any two topics for free on PenPal Schools. After completing their free trial, teachers are given the option to encourage their principal to purchase a license for the school (we don’t believe in charging teachers).
Since implementing this system in 2017, PenPal Schools has sold licenses to 75 schools and 3 districts:
The sales pipeline for 2019 is very strong, with revenue expected to surpass expenses in March based on sales to individual schools alone. In addition, news of PenPal Schools has reached administrators from some of the largest school districts in the US, and pilots are currently underway with 8 districts representing a combined total of 591 schools. Students and teachers from these districts are already using PenPal Schools and sharing their feedback with district administrators, who will make purchases in the Spring for the 2019-20 school year.
What's next
Spring 2019 - PenPal Schools will hire additional account managers to increase sales and manage existing relationships. These account managers will field inbound leads generated from free trials while also focusing on business development with large school districts.
Summer 2019 - PenPal Schools will introduce a mobile app for parents. The free version of this app will enable parents to see the amazing projects that their children create with peers around the world. For a small monthly fee, parents will be able to enroll their children in additional topics beyond those selected by the teacher. Premium subscribers will also have access to advanced analytics and recommendation features, made possible by the thousands of assessments that students receive from peers and teachers.
This freemium parent app will enable PenPal Schools to enter the fast-growing home education market. With US children ages 8-12 spending an average of 6 hours per day online, parents are increasingly willing to pay for educational apps to ensure that screen time is well-spent. While reliable statistics for the size of the home education market are not yet available, the impressive valuations for companies focused on sales to parents, such as ABCmouse and Classdojo, demonstrate the common belief amongst education investors and analysts in the strength of the home education market.
Investors
PenPal Schools has raised a total of $1.25M from a mix of angel and institutional investors.
Meet our team
Join us in making education global, fun, and engaging for students everywhere!
We are especially excited to invite educators to invest in PenPal Schools! Our program has grown and evolved thanks to the support of some truly amazing teachers and administrators. We are so grateful for all you have done for us and for your students, and we are thrilled to offer you the opportunity to share in our success. - Joe
Deal terms
Deadline
May 1
PenPal Schools needs to reach their minimum funding goal before
the deadline. If they don’t, all investments will be refunded.
Learn more
Type of security
Crowd SAFE
·
Learn more
The Crowd SAFE is an agreement for future equity in the startup,
meaning that it can convert to equity in the future.
Discount
20%
If a trigger event for PenPal Schools occurs, the discount provision
gives investors equity shares (or equal value in cash) at a reduced price.
Learn more.
Valuation cap
$12,000,000
The maximum valuation at which your investment converts
into equity shares or cash.
Learn more.
Funding goal
$25,000 – $1,070,000
PenPal Schools needs to raise
$1M
before the deadline. The maximum amount PenPal Schools is willing
to raise is $1.07M.
Learn more
Documents
Official filing on SEC.gov
Form C
About PenPal Schools
Legal Name
PenPal News, Inc.
Founded
Aug 2012
Form
Delaware
Corporation
Headquarters
411 West Monroe Street
, Austin, TX
Headquarters
411 West Monroe Street, Austin, TX, US
PenPal Schools Team
Joe Troyen
Founder & CEO
Miguel Vazquez
Co-Founder & CTO
Mark Danforth
Co-Founder & Chief Learning Officer
Jessica Altounian
Community Manager
Frank Gonzalez
Software Engineer
Maggie Brown
Senior Account Manager
Josh Baer
Advisor
Charles Thornburgh
Advisor
Justin Siegel
Advisor
Azita Ardakani
Advisor & Director
Press
FAQ
How do I earn a return?
How do I earn a return?
We are using Republic's Crowd SAFE security. Learn how this translates into a return on investment here.
How do you deal with the language barrier?
English learners from all over the world (including some of the 5 million English language learners in US public schools) love PenPal Schools because it provides an opportunity to practice English with an authentic audience.
PenPal Schools also offers content in Spanish, French, and Mandarin Chinese. In these lessons, students read and write in the target language with native speakers and language learners from around the world.
How do you deal with the language barrier?
The majority of communication on PenPal Schools is in English. This is possible because English has been widely taught in schools around the world for the last 10+ years. If you've traveled internationally then you may have seen for yourself that young people often speak much better English than their parents!English learners from all over the world (including some of the 5 million English language learners in US public schools) love PenPal Schools because it provides an opportunity to practice English with an authentic audience.
PenPal Schools also offers content in Spanish, French, and Mandarin Chinese. In these lessons, students read and write in the target language with native speakers and language learners from around the world.
What happens if students write something inappropriate?
What happens if students write something inappropriate?
Students can only join if invited by a teacher, so they know their work is monitored! Also, our students have created a culture of responsibility and respect. The vast majority of students are writing positive and thoughtful answers, and any disrespectful content is immediately flagged by students using peer review features. When a message is flagged, both the teacher and the PenPal Schools team are notified. Teachers are then provided with a recommended protocol to help students learn proper digital citizenship skills.
How do you keep students (and their data) safe?
How do you keep students (and their data) safe?
PenPal Schools has a strict Student Safety Protocol which has enabled us to connect over 320,000 students without any security problems. First we ensure that only students and teachers are allowed on PenPal Schools. Students can only join if they are invited by a teacher. All teachers must be verified by their principals in order to join and enroll students. PenPal Schools speaks personally with every principal.
Once enrolled, students collaborate in community forums. There is no private direct messaging between students, ensuring that any inappropriate behavior is immediately seen and flagged. Teachers have access to a 21st Century Skills Toolkit, which helps students to learn about topics like creating secure usernames/passwords and protecting personal information.
Speaking of personal information, PenPal Schools collects a bare minimum of data from students. To create an account, students only provide their first name and last initial. Students don't provide personally identifiable information such as last names or email addresses. The small amount of data that students do provide is secured and encrypted.
We at PenPal Schools pride ourselves on going above and beyond industry safety requirements. Please read our privacy policy for more details.
What ages and grades does PenPal Schools serve?
What ages and grades does PenPal Schools serve?
PenPal Schools is used (and loved) by students ages 8-18. Younger students typically enroll in topics such as World Explorer and A World of Food, while older students typically enroll in more advanced topics such as Robotics and Immigration in the 21st Century. All topics are offered at multiple ability levels, so every student in a class can read and write at their own level. Our algorithm ensures that students always interact with PenPals within two years of their own age.
When do students log on and how long do lessons take?
When do students log on and how long do lessons take?
The majority of students participate in PenPal Schools in the classroom during the school day. Lessons typically take 30-45 minutes each, so a topic containing 4 lessons would typically take 3-5 class periods. Some teachers choose to assign PenPal Schools as homework or to participate as an after-school activity. All topics are self-paced, making it easy for students to participate and easy for teachers to fit into their curriculum.
Do students communicate using video?
Do students communicate using video?
All communication on PenPal Schools is written. This enables schools to participate despite differences in time zones and internet speed/reliability. Written communication also helps students to practice core literacy skills and ensure that all students can share their ideas - not just the loudest!
Can students enroll without a teacher?
Can students enroll without a teacher?
Currently all students must be invited by a teacher. In the future, parents will be able to enroll their children once we verify their identity.
Are scholarships available?
Are scholarships available?
PenPal Schools is proud to offer scholarships to schools in need. We routinely provide our product for free to schools serving low income communities.
What is PenPal Schools' student safety protocol?
What is PenPal Schools' student safety protocol?
You can read about Penpal Schools' safety protocol here.
Why are you crowdfunding?
Why are you crowdfunding?
We’ve raised money the old-fashioned way before and could likely do it again. This time, however, we’ve chosen to raise money on Republic to provide friends, family, and our community with an opportunity to be a part of our journey. Our program has grown and evolved thanks to the support of some truly amazing teachers and administrators. We are so grateful for all they have done for us and for their students, and we are thrilled to offer them the opportunity to share in our success.
Of course, we welcome support from those who are new to PenPal Schools as well, and we hope that all investors will share PenPal Schools with the teachers and school administrators in their networks.
How was PenPal Schools started?
How was PenPal Schools started?
The PenPal Schools story is a great one! But it’s also pretty long, so when you’re ready, check out this 10-minute video: The PenPal Schools Story
Still have questions? Check the
discussion section.
Risks
We have a limited operating history upon which you can evaluate our performance, and accordingly, our prospects must be considered in light of the risks that any new company encounters.
We were incorporated under the laws of Delaware and formed on August 27, 2012. Accordingly, we have little history upon which an evaluation of our prospects and future performance can be made. Our proposed operations are subject to all business risks associated with new enterprises. The likelihood of our continuation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with an early-stage a business operating in a competitive industry, and the continued development of advertising, promotions, and a corresponding client base. We anticipate that our operating expenses will increase for the near future. There can be no assurances that we will ever operate profitably. You should consider the Company’s business, operations and prospects in light of the risks, expenses and challenges faced as an early-stage company.
We may face potential difficulties in obtaining capital.
We may have difficulty raising needed capital in the future as a result of, among other factors, our limited revenues from sales, as well as the inherent business risks associated with our company and present and future market conditions. Future sources of revenue may not be sufficient to meet our future capital requirements. We will require additional funds to execute our business strategy and conduct our operations. If adequate funds are unavailable, we may be required to delay, reduce the scope of or eliminate one or more of our research, development or commercialization programs, product launches or marketing efforts, any of which may materially harm our business, financial condition and results of operations.
Our financial statements have been prepared on a going concern basis and we must raise additional capital to fund our operations in order to continue as a going concern.
IndigoSpire CPA Group, LLC, our independent registered public accounting firm for the fiscal year ended December 30, 2017, has included an explanatory paragraph in their opinion that accompanies our reviewed financial statements as of and for the year ended December 31, 2017 and December 31, 2016, indicating that our current liquidity position raises substantial doubt about our ability to continue as a going concern. If we are unable to improve our liquidity position we may not be able to continue as a going concern. The accompanying reviewed financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment.
In order for the Company to compete and grow, it must attract, recruit, retain and develop the necessary personnel who have the needed experience.
Recruiting and retaining highly qualified personnel is critical to our success. These demands may require us to hire additional personnel and will require our existing management personnel to develop additional expertise. We face intense competition for personnel. The failure to attract and retain personnel or to develop such expertise could delay or halt the development and commercialization of our product candidates. If we experience difficulties in hiring and retaining personnel in key positions, we could suffer from delays in product development, loss of customers and sales and diversion of management resources, which could adversely affect operating results. Our consultants and advisors may be employed by third parties and may have commitments under consulting or advisory contracts with third parties that may limit their availability to us.
We depend on third-party service providers and outsource providers for a variety of services and we outsource a number of our non-core functions and operations.
In certain instances, we rely on single or limited service providers. Although PenPal Schools is an entirely web-based software, and requires no materials and few third-party service providers, our required vendors include web hosting (Amazon), customer communication software (Intercom), and a variety of operational software programs and services (e.g. accounting, payroll, etc.). If our outsourced services are interrupted or not performed or the performance is poor, this could impact our ability to process, record and report transactions with our customers and other constituents. Such interruptions in the provision of services could result in our inability to meet customer demand, damage our reputation and customer relationships and adversely affect our business.
Quality management plays an essential role in determining and meeting customer requirements, improving the Company’s services and maintaining the integrity of the data that supports the value and efficacy of our services and educational products.
Our future success depends on our ability to maintain and continuously improve our quality management program. An inability to address a quality issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products or services.
Changes in employment laws or regulation could harm our performance.
Various federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include minimum wage requirements, overtime pay, healthcare reform and the implementation of the Patient Protection and Affordable Care Act, unemployment tax rates, workers’ compensation rates, citizenship requirements, union membership and sales taxes. A number of factors could adversely affect our operating results, including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, mandated training for employees, increased tax reporting and tax payment requirements for employees who receive tips, a reduction in the number of states that allow tips to be credited toward minimum wage requirements, changing regulations from the National Labor Relations Board and increased employee litigation including claims relating to the Fair Labor Standards Act.
Maintaining, extending and expanding our reputation and brand image are essential to our business success.
We seek to maintain, extend, and expand our brand image through marketing investments, including advertising and consumer promotions, and product innovation. Increasing attention on marketing could adversely affect our brand image. It could also lead to stricter regulations and greater scrutiny of marketing practices. Existing or increased legal or regulatory restrictions on our advertising, consumer promotions and marketing, or our response to those restrictions, could limit our efforts to maintain, extend and expand our brands. Moreover, adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine our customers’ confidence and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.
In addition, our success in maintaining, extending, and expanding our brand image depends on our ability to adapt to a rapidly changing media environment. We increasingly rely on social media and online dissemination of advertising campaigns, and we invite our users to share on your social networks and to mention us with the link @PenPalSchools. The growing use of social and digital media increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our brands or our products on social or digital media, whether or not valid, could seriously damage our brands and reputation. If we do not establish, maintain, extend and expand our brand image, then our product sales, financial condition and results of operations could be adversely affected.
We must correctly predict, identify, and interpret changes in consumer preferences and demand, offer new products to meet those changes, and respond to competitive innovation.
Consumer preferences of our products change continually. Our success depends on our ability to predict, identify, and interpret educational needs and to offer products that appeal to consumer preferences. If we do not offer products that appeal to consumers, our sales and market share will decrease. We must distinguish between short-term fads, mid-term trends, and long-term changes in consumer preferences. If we do not accurately predict which shifts in educational guidelines and preferences will be long-term, or if we fail to introduce new and improved products to satisfy those guidelines, our sales could decline. If we fail to expand our product offerings successfully across product categories, or if we do not rapidly develop products in faster growing and more profitable categories, demand for our products could decrease, which could materially and adversely affect our product sales, financial condition, and results of operations.
In addition, achieving growth depends on our successful development, introduction, and marketing of innovative new products and line extensions. Successful innovation depends on our ability to correctly anticipate customer and consumer acceptance, to obtain, protect and maintain necessary intellectual property rights, and to avoid infringing the intellectual property rights of others and failure to do so could compromise our competitive position and adversely impact our business.
In general, demand for our products and services is highly correlated with general economic conditions.
A substantial portion of our revenue is derived from discretionary spending by schools, school districts and in the future, individuals, which typically falls during times of economic instability. Declines in economic conditions in the U.S. or in other countries in which we operate may adversely impact our consolidated financial results. Because such declines in demand are difficult to predict, we or the industry may have increased excess capacity as a result. An increase in excess capacity may result in declines in prices for our products and services.
Decreases in discretionary consumer spending may have an adverse effect on us.
A substantial portion of the products and services we would like to offer in the future are products or services sold to parents. These consumers may view our products and services as discretionary items rather than necessities. As a result, our results of operations will be sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending. Difficult macroeconomic conditions, particularly high levels of unemployment, will also impact our business, along with other factors, including consumer confidence, employment levels, interest rates, tax rates, consumer debt levels, and fuel and energy costs. Slowdowns in the U.S. or global economy, or an uncertain economic outlook, could adversely affect consumer spending habits and our results of operations.
Our business could suffer if we are unsuccessful in making, integrating, and maintaining relationships with schools and school districts that purchase our products.
We provide our services to our customers through licensing and commercial agreements, strategic alliances, and public-private partnerships. As our agreements terminate, we may be unable to renew or replace these agreements on comparable terms, or at all. We may in the future enter into amendments on less favorable terms or encounter parties that have difficulty meeting their contractual obligations to us, which could adversely affect our operating results.
We rely on various intellectual property rights, in order to operate our business.
As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our intellectual property rights, we may be required to engage in expensive registration process and to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert management’s attention from other business concerns. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.
From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights.
Any dispute or litigation regarding patents, trademarks, copyrights or other intellectual property could be costly and time-consuming due to the dense content of our teaching material and the uncertainty of intellectual property litigation and could divert our management and key personnel from our business operations. A claim of copyright infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, could require us to redesign our teaching material, which would be costly and time-consuming, and/or could subject us to an injunction against development and sale of certain of our products or services. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our products infringe a third party’s proprietary rights. Even if these claims are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our business to be harmed. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of intellectual property infringement.
If we do not respond to technological changes or upgrade our websites and technology systems, our growth prospects and results of operations could be adversely affected.
To remain competitive, we must continue to enhance and improve the functionality and features of our website and technology infrastructure. As a result, we will need to continue to improve and expand our hosting and network infrastructure and related software capabilities. These improvements may require greater levels of spending than we have experienced in the past. Without such improvements, our operations might suffer from unanticipated system disruptions, slow application performance or unreliable service levels, any of which could negatively affect our reputation and ability to attract and retain customers and contributors. Furthermore, in order to continue to attract and retain new customers, we are likely to incur expenses in connection with continuously updating and improving our user interface and experience. We may face significant delays in introducing new services, products and enhancements. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing websites and our proprietary technology and systems may become obsolete or less competitive, and our business may be harmed. In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that our business will improve.
The Crowd SAFE Units of SAFE (Simple Agreement for Future Equity) will not be freely tradable until one year from the initial purchase date. Although the Crowd SAFE Units of SAFE (Simple Agreement for Future Equity) may be tradable under federal securities law, state securities regulations may apply and each Purchaser should consult with his or her attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not be a public market for the Crowd SAFE Units of SAFE (Simple Agreement for Future Equity). Because the Crowd SAFE Units of SAFE (Simple Agreement for Future Equity) have not been registered under the Securities Act or under the securities laws of any state or non-United States jurisdiction, the Crowd SAFE Units of SAFE (Simple Agreement for Future Equity) have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the Securities Act or other securities laws will be effected. Limitations on the transfer of the Crowd SAFE Units of SAFE (Simple Agreement for Future Equity) may also adversely affect the price that you might be able to obtain for the Crowd SAFE Units of SAFE (Simple Agreement for Future Equity) in a private sale. Purchasers should be aware of the long-term nature of their investment in the Company. Each Purchaser in this Offering will be required to represent that it is purchasing the Securities for its own account, for investment purposes and not with a view to resale or distribution thereof.
No Guarantee of Return on Investment
There is no assurance that a Purchaser will realize a return on its investment or that it will not lose its entire investment. For this reason, each Purchaser should read the Form C and all Exhibits carefully and should consult with its own attorney and business advisor prior to making any investment decision.
A majority of the Company is owned by a small number of owners.
Prior to the Offering the Company’s current owners of 20% or more beneficially own up to 50.135% of the Company. Subject to any fiduciary duties owed to our other owners or investors under Delaware law, these owners may be able to exercise significant influence over matters requiring owner approval, including the election of directors or managers and approval of significant Company transactions, and will have significant control over the Company’s management and policies. Some of these persons may have interests that are different from yours. For example, these owners may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change in control of the Company or otherwise discourage a potential acquirer from attempting to obtain control of the Company, which in turn could reduce the price potential investors are willing to pay for the Company. In addition, these owners could use their voting influence to maintain the Company’s existing management, delay or prevent changes in control of the Company, or support or reject other management and board proposals that are subject to owner approval.
Purchasers will not become equity holders until the Company decides to convert the Securities into CF Shadow Securities or until an IPO or sale of the Company.
Purchasers will not have an ownership claim to the Company or to any of its assets or revenues for an indefinite amount of time, and depending on when and how the Securities are converted, the Purchasers may never become equity holders of the Company. Purchasers will not become equity holders of the Company unless the Company receives a future round of financing great enough to trigger a conversion and the Company elects to convert the Securities. The Company is under no obligation to convert the Securities into CF Shadow Securities (the type of equity Securities Purchasers are entitled to receive upon such conversion). In certain instances, such as a sale of the Company, an IPO or a dissolution or bankruptcy, the Purchasers may only have a right to receive cash, to the extent available, rather than equity in the Company.
Purchasers will not have voting rights, even upon conversion of the Securities into CF Shadow Securities.
Purchasers will not have the right to vote upon matters of the Company even if and when their Securities are converted into CF Shadow Securities. Upon such conversion, CF Shadow Securities will have no voting rights and even in circumstances where a statutory right to vote is provided by state law, the CF Shadow Security holders are required to vote with the majority of the security holders in the new round of equity financing upon which the Securities were converted. For example, if the Securities are converted upon a round offering Series B Preferred Shares, the Series B-CF Shadow Security holders will be required to vote the same way as a majority of the Series B Preferred Shareholders vote. Thus, Purchasers will never be able to freely vote upon any director or other matters of the Company.
Purchasers will not be entitled to any inspection or information rights other than those required by Regulation CF.
Purchasers will not have the right to inspect the books and records of the Company or to receive financial or other information from the Company, other than as required by Regulation CF. Other security holders may have such rights. Regulation CF requires only the provision of an annual report on Form C and no additional information. This lack of information could put Purchasers at a disadvantage in general and with respect to other security holders.
In a dissolution or bankruptcy of the Company, Purchasers will be treated the same as common equity holders.
In a dissolution or bankruptcy of the Company, Purchasers of Securities which have not been converted will be entitled to distributions as if they were common stock holders. This means that such Purchasers will be at the lowest level of priority and will only receive distributions once all creditors as well as holders of more senior securities, including any preferred stock holders, have been paid in full. If the Securities have been converted into CF Shadow Securities, the Purchasers will have the same rights and preferences (other than the ability to vote) as the holders of the Securities issued in the equity financing upon which the Securities were converted.
Purchasers will be unable to declare the Security in "default" and demand repayment.
Unlike convertible notes and some other securities, the Securities do not have any "default" provisions upon which the Purchasers will be able to demand repayment of their investment. The Company has ultimate discretion as to whether or not to convert the Securities upon a future equity financing and Purchasers have no right to demand such conversion. Only in limited circumstances, such as a liquidity event, may the Purchasers demand payment and even then, such payments will be limited to the amount of cash available to the Company.
The Company may never elect to convert the Securities or undergo a liquidity event.
The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature.
You should not rely on the fact that our Form C is accessible through the U.S. Securities and Exchange Commission’s EDGAR filing system as an approval, endorsement or guarantee of compliance as it related to this Offering.
Neither the Offering nor the Securities have been registered under federal or state securities laws, leading to an absence of certain regulation applicable to the Company.
The securities being offered have not been registered under the Securities Act of 1933 (the "Securities Act"), in reliance, among other exemptions, on the exemptive provisions of article 4(2) of the Securities Act and Regulation D under the Securities Act. Similar reliance has been placed on apparently available exemptions from securities registration or qualification requirements under applicable state securities laws. No assurance can be given that any offering currently qualifies or will continue to qualify under one or more of such exemptive provisions due to, among other things, the adequacy of disclosure and the manner of distribution, the existence of similar offerings in the past or in the future, or a change of any securities law or regulation that has retroactive effect. If, and to the extent that, claims or suits for rescission are brought and successfully concluded for failure to register any offering or other offerings or for acts or omissions constituting offenses under the Securities Act, the Securities Exchange Act of 1934, or applicable state securities laws, the Company could be materially adversely affected, jeopardizing the Company's ability to operate successfully. Furthermore, the human and capital resources of the Company could be adversely affected by the need to defend actions under these laws, even if the Company is ultimately successful in its defense.
Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt transactions and subsequently disposed of without registration under the Securities Act or state securities laws.
The Company's management may have broad discretion in how the Company uses the net proceeds of an offering.
Unless the Company has agreed to a specific use of the proceeds from an offering, the Company's management will have considerable discretion over the use of proceeds from their offering. You may not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The Company has the right to extend the Offering deadline. The Company has the right to end the Offering early.
The Company may extend the Offering deadline beyond what is currently stated herein. This means that your investment may continue to be held in escrow while the Company attempts to raise the Minimum Amount even after the Offering deadline stated herein is reached. While you have the right to cancel your investment in the event the Company extends the Offering, if you choose to reconfirm your investment, your investment will not be accruing interest during this time and will simply be held until such time as the new Offering deadline is reached without the Company receiving the Minimum Amount, at which time it will be returned to you without interest or deduction, or the Company receives the Minimum Amount, at which time it will be released to the Company to be used as set forth herein. Upon or shortly after release of such funds to the Company, the Securities will be issued and distributed to you. The Company may also end the Offering early; if the Offering reaches its target Offering amount after 21-calendary days but before the deadline, the Company can end the Offering with 5 business day’s notice. This means your failure to participate in the Offering in a timely manner, may prevent you from being able to participate – it also means the Company may limit the amount of capital it can raise during the Offering by ending it early.
Discussion
$30,550
raised from
19 investors
Atul KumarInvested 21 days ago
Nicole SalinasInvested 16 days ago
Kole GojcajInvested 14 days ago
Mario BrownInvested 12 days ago
Tan Quan NguyenInvested 5 days ago
