Oscar Jofre  00:00

move in and out, but we’re here.

Kendall Almerico  00:02

Alright, so fortunately, if we didn’t start this an hour and a half earlier because an hour and a half earlier, the Tampa Bay Buccaneers boat parade with the toy unit was right behind me. And there was just horn It was It sounded like you’re in the middle of you know, the fifth that Fifth Avenue during a parade. It was insanity. You would not have been able to hear me. Glad this just ended like 30 minutes ago. That was crazy.

Oscar Jofre  00:25

Well, they have I mean, first time in history, right? I mean, second three second,

Kendall Almerico  00:29

second. One but but but there’s, you know, it’s beautiful day out here. And there’s literally like 1000 maybe 2000 boats outside my window right now. That’s crazy. It’s total insanity is

Etan Butler  00:40

very cool. But it’s it’s appropriate because we call Kendall now the Tom Brady of RegA. Now, now we’ve elevated it, especially more apropos for kind of his hometown. Another word introduce them.

Oscar Jofre  00:57

But you’ve seen that picture by Tom Brady. Right? Like, I think it’s like this the one with all the rings when he had a finger? Yeah, right. Yeah. So what are we gonna do for him, though, we’re gonna have to get some, like a rings. On another hand.

Etan Butler  01:09

Be very selective. He’s very selective with his clients. So I think he still has a couple extra things.

Kendall Almerico  01:13

I’ve got three more to go. That’s about it. I’ll start using my toes that will be elevated,

Oscar Jofre  01:20

you have to elevate it to the next day. All right, so Okay, we are now on live on YouTube. So let’s, let’s get the motor rolling. And good afternoon, everyone. And welcome once again to the KoreSummit webinar series 2021. My name is Oscar Jofre, and we want to welcome you this afternoon to another one great topic we’re going to have, how can Canadian companies use RegA I mean, obviously, it’s a bit touchy for me. But it’s great. Being a Canadian on all, I’m joined by two great individuals that you’ve seen here on our summits before. And once again, because they obviously been involved with so many of them, they have so much to share with you. And we will get to that, you know, the format is very simple. We have a kind of a conversation, 45 minutes, the last few webinars have been going beyond an hour because of course the conversations are so great. But don’t forget, as well, all the webinars are recorded. They’re available to you at the KoreSummit.io, your website, you can view at any given time, and of course, all the speakers information contact details email address, so you can reach out to them directly and begin the dialogue. So like always, we like to make sure that everybody gets to know who each of the speakers are the panelists today, we have two great ones. Let’s start with yourself, Kendall, let’s get the ball rolling. Say hello and introduce yourself.

Kendall Almerico  02:51

Hi, I’m Kendall Almerico, and we’re going to make this webinar far less than 45 minutes because the answer to the question is Canadian companies file just like us companies. And then you go through the process and then you go sell share. So we’re done. I think we’re I think the summer’s over. Do you have any other questions? I’m ready to take them. Just kidding. There’s probably some other things to talk about. I’m sure Etan has some things. But you know, I am a securities lawyer by trade. Most people refer to me as the least lawyer like lawyer that they’ve ever met. I’m wearing my lawyer costume today, I actually put on a button down shirt instead of my Hawaiian shirt and flip flops. But I tend to do a lot more than just be a lawyer. There’s a lot of great securities lawyers out there who do Regulation A and regulation CF and all these jobs act offerings. As far as I know, I’m the only one who goes beyond that. And my clients, I take on a dual role. I’m not just their securities lawyer who handles all the securities law stuff. But I also act as the quarterback of the offering. And what does that mean? Well, I live here in Tampa. So let me give a tom brady analogy. Tom Brady walks on the field with a team Tampa Bay Buccaneers who hadn’t been in the playoffs for 18 years, Tom Brady takes them to and wins the Super Bowl. You need a leader on your team. Someone who can get in front of this knows all the people involved knows how to make it work knows all the moving pieces, not just the legal part, but knows how to market it knows how to get it into publications knows how to do all those things. And so my role typically is far different than most lawyers. I do both roles. And I love that part. My I’m much more of an entrepreneur at heart than a lawyer. And so I love getting my hands dirty and scrubbing in with the founders of a company or even a company that represent companies are worth over a billion dollars, the Board of Directors of those companies and making these things happen.

Oscar Jofre  04:40

Perfect. Mr. Butler,

Etan Butler  04:44

Etan Butler here I am the chairman at Dalmore Group. We are a FINRA and sec registered broker dealer investment bank headquartered in New York. Founded in 2005, we have investment banking routes and an obsession With many of the JOBS Act born, exemptions, including regulation d 506. c, regulation CF. And what we’re here to talk about today, Regulation A, it’s been a busy 18 months for our firm having on boarded just about 100. At this point, RegA offerings, including included in those have been many of the most successful RegA offerings in history, meaning those who have hit their full maximum offering objectives and are now either launching another RegA or who have gone public or in the process of going public. It’s a fascinating space to be in, we love it. Our obsession is really to fully empower the issuer to be able to take full control of their own capital raising activities in a cost effective and an efficient way. And to share with them what we have seen work and not work so well, given the number of transactions that we’ve been working on. You know,

Oscar Jofre  06:00

Tom Brady, and so at the time you like football, so which which flavor you’re going to be so you know, I’m sorry, I’d love to do the Brady spot. Steelers.

Etan Butler  06:10

I mean, I grew up in my father’s from Pittsburgh. So we were a Steeler fan. So we didn’t really like Tom Brady because the Steelers enjoyed six rings, right? So that was our thing. We had six championships. And then we watched Tom Brady, who I you know, I actually called Kendall the Tom Brady of RegA, because he’s he’s known as the quarterback because he plays a lot of roles. And I’ve seen that in action actually have a number of, we’ve been fortunate to be the broker dealer in a number of Kendall’s, high profile. Reg A’s. So So anyway, so Tom Brady was was a little bit of a difficult one to watch, given that his team, his previous team kind of matched our record, but fortunately, he left and he went to Florida. But But anyway, so I would consider myself the Steelers. You know, that’s that’s kind of we grew up with a terrible towel at home watching the Steelers games. And, uh, you

Oscar Jofre  06:59

know, the Steelers, they take, keep fighting every time they never gave up. Never, ever give up

Kendall Almerico  07:07

a tunnel. So as the person who taught me how to deflate the football, so I could hold them better in the cold air. But we think that we’re not going to talk about I’d like FINRA wants to hear about that. That’s not, it’s not.

Oscar Jofre  07:18

All right. So the topic at hand today is, you know, how can Canadian companies use this amazing regulation, which they already are, I mean, but the vast majority are, you know, they’re still stumped by they really are I’ve, I’ve now done more presentations in Canada than I have in a very long time. ago, what caught my surprise, and this is why I think this is so important. And you know, it just putting it out there. So if you, the legal community was even up to date on the regulation. So if that’s if that becomes a barrier, then you you see how it trickles down, that trickles down to the company to everybody else around in it. So they’re getting mixed signals. And it’s kind of weird. I don’t know how that could happen. But you know, what, we always think that everything flows down. So today, we’re gonna unravel that. And I think, Kendall, you started correctly. It’s very simple. The regulation says, US and Canadian companies and you probably, you’re where you go.

Kendall Almerico  08:24

It is it is really relatively simple. And I say that half jokingly because the real problem is educating people and and also making sure that you do things in a compliant manner in both countries. You know, obviously, Regulation A is a United States securities law, it’s not a Canadian securities law. It’s not in any of the provinces of Canada. It’s a US federal law, which means that the US government decided that for this particular law, we were going to allow Canadian companies to use it also, which is relatively unique thing for the US government to do. In fact, the other parts of the JOBS Act, they didn’t extend the same courtesy for no apparent reason. But the fact is, that’s why I think that a lot of Canadian attorneys are confused by it. Hi, I went to law school. I didn’t study anything about Canadian law when I was in law school. So just as the same thing, Canadian attorneys don’t probably study a whole lot of us securities law. And so when you start doing something that crosses borders, people get a little scared and a little sketchy about doing it. But the reality is, the good news is we have the SEC here, and I know and FINRA and anytime can talk about this, too, you know, if you do things the right way, which is the hallmark of doing anything in the securities world, it’s the most highly regulated world of law that we have in the United States. You got to follow the rules. And there’s a lot of rules. There’s 672 pages of rules for Regulation A just for the SEC alone. And then you have 50 different states that have rules. And then you have all the Canadian provinces that have rules, but if you follow the rules, which Tom Brady doesn’t always do, I wouldn’t Give them a pass as you want a Super Bowl here, you’d hate to have to do that. And that’s why people get a little intimidated. It’s not the law of your country up there in Canada. But it’s a great law that you can use. And it gives you access, you know, 32 million population, I believe in Canada versus 300 million plus, in the United States that Now have you have access to through this law. And that’s accredited investors, as well as regular folks, every day people, mom and pops, retail investors, whatever you want to call them. Anyone can invest in these offers. And that’s what’s so magical about it. And that’s why people in Canada, companies in Canada really should pay a lot of attention to and figure out how to use this because a whole lot of companies are using it successfully already up there. Many, many more in the US are successful. And it’s a it’s a real game changer.

Oscar Jofre  10:50

I agree. It’s it’s, and hopefully today that will be part of it. I just want to before I get to you, Tom, because I know you deal with the companies after they’ve gone through the legal part. And usually with Canadian companies, it’s the legal part that kind of becomes a little bit of roadblock if you can believe it. It’s the weirdest thing on founders. It’s not the accounts, because audit is an audit. It’s the legal but we’re going to touch base here on on the legal part is that Regulation A was around a long time ago, you wrote a great post for us. Thank you. You may recall last year for the KoreSummit. Remember, I told you the number one question people were asking. So what’s this Regulation A plus? I thought it was very good. I think thing that thing was dead. Right? You recall that? And you wrote a blog about it? And we posted it, it’s been great. Can we give a recap, because I think that might be part of the issue.

Kendall Almerico  11:41

Happy to do it. And believe me, there’s people still in the US confused about it. I, I speak publicly a lot. And back in the days before COVID, I traveled a lot and spoke in front of a lot of large groups around the world, not just in the US talking about regulation. And I would routinely get up on stage with other lawyers on a panel and have a lawyer who’s a securities lawyer say, Well, you know, Regulation A and Regulation A plus are different. And I’m saying no, they’re the exact same law, there is no difference. And I’ve even gotten to a little bit of a verbal tussle with one lawyer who was a bit of a smartass on stage once I’ll never forget, where he said there is no such thing as Regulation A plus there’s just Regulation A and Mr. Amerigo keeps referring to it as Regulation A plus, which doesn’t exist. So I pulled out the SEC website and read him the very page called Regulation A plus they call it Regulation A plus. So long story short is there the same law, Regulation A has been around for a long, long time. And it’s a law that allowed a company to go out and raise money from the general public without becoming a public company. You could sell stock to the public, but what you could and you could actually solicit, generally solicit advertise and market but you were only allowed to raise $5 million. And you had to go through state by state, you know, blue sky compliance, which turned it into basically a public offering that cost you a million dollars to do and legal fees and compliance fees to raise $5 million. And nobody would do that. So in 2012, part of the JOBS Act, the part I was most excited about and glommed on to immediately, as opposed to the part everyone else was talking about the crowdfunding part, the smaller law was the fact that this was going to allow companies that are, you know, not just startups, but startups and growing companies, and even now public companies to raise up to $50 million, and a few weeks, it’s going to go up to $75 million from the general public. And you don’t have to go through state by state blue sky compliance. So it’s the same law. The reason they call it regulation, a plus and the SEC refers to it as Regulation A plus is because it’s a new it’s a new version of an old law. regulation. A is still Regulation A but the colloquial name for it is Regulation A plus or RegA plus, because it’s the old law plus a little bit more. That’s really all it comes down to c’est la vie, different day.

Oscar Jofre  13:59

Yeah. And of course, people have that memory of the old RegA where Oh, my God, it’s so cost prohibitive, there’s no way anybody would use it. Nobody can I think, yeah, no, statistically, I

Kendall Almerico  14:08

used to tell people in 2011, because I think that was the the year the last year, I had stats for it before that the JOBS Act in 2012. I think that there was one and I may have this wrong now because it’s been 10 years. And my brain is fried from alcohol from the Super Bowl this weekend here in Tampa, but I think it was, I think there was one company that use Regulation A in 2011, versus, you know, billions of dollars going through reg D and all the other, you know, exempt versions of raising capital. So it was just never used by anybody because it just made no sense to use it except in very, very limited circumstances.

Oscar Jofre  14:45

So one takeaway that I’m going to, obviously just we’re gonna because we’re going to push it forward, but for any Canadian company, obviously, you’re going to hear those mixed signals. So the key is, this is a well, you know, written a book As the candle indicated, you simply need to go to Google search for regulation eight plus, and it will take you to the SEC website, you can point that, once a lawyer sees it and reads it, they’ll understand that there are lawyers who are now getting behind it, and which is really great. But we do understand that that is part of a barrier. and Canada is unique in something else. And I don’t know if you knew this, he done but share this with you, you know, when you work with Kendall, you can look and be in Palm Beach, Miami, Los Angeles, and Campbell is able to provide the legal services for all of USA. That’s a very, you know what, as an intrapreneur, I never appreciated that, until you know, the last 10 years, I really, I love that. In Canada. That’s not how it works. So we keep blaming regulators. So I’m not going to go down in your profession, but we keep blaming regulators why we have 13 of them. But we have a fundamental flaw in how lawyers are, are giving their articles or their didn’t pass the bar. It’s their provincially regulated. So if you have a lawyer in Alberta, they they’re not able to provide you advice in British Columbia, or Ontario. So that’s where the confusion becomes where you could start with a lawyer, you know, our lawyers on Alberta, he’s comfortable versed, we now need to talk to somebody in Ontario. And we now got to spend the time to educate this lawyer to get update. But once that’s done, the real key is the bottom line to all this Canadian company can use the regulation. It’s not a legal issue anymore. It can even more your does play a role in this part. But it is the US lawyer that is actually doing the filing or the form on it correct?

Kendall Almerico  16:47

Yeah. Can I just one more thing, because I feel like this has become the Kendall show. And a ton is far more interesting things to talk about than I do. No. But you’re right, in one sense in that people that practice federal securities law and regulation, a Regulation A plus whatever you want to call it is a federal law, people that practice in that area, like I do, can cross into all 50 States and other countries and whatever we need to do, without having to be licensed in every one of those states. I’m only licensed to practice law in the state of Florida. And yet I practice federal law with companies that are literally all over the world and from states that you know, I’ve never even been to. But, and this is a big butt. So if anyone from the Florida Bar or any other bars are listening, I don’t cross the line and to giving state law advice so much like your Canadian, my Canadian counterparts up north of us. If a question arises as to California law, or arises as to Montana law, a state regulator in Missouri asks a question about our Regulation A offering, I can talk to them from a federal law standpoint, but that’s where a state licensed securities lawyer in that state would have to get involved if there was any kind of issue. And this is why and I get to the point of why Regulation A didn’t work back before 2012, you had to go to every single state in the United States with the old RegA, go to their securities law department file paperwork with them go through a review process, sometimes that was a merit review, where they looked at every single document just like the SEC does and gave you comments and went back and forth. And in many cases, that meant you had to hire a lawyer in all 50 states, not reality isn’t that that’s the case. But most cases, you had to hire multiple lawyers who then had to coordinate with each other. Because if Kansas tells me to change one word, and New York tells me to leave that word in an ad a different word, ultimately, you got to have the same version everywhere. And so it was a nightmare. He just couldn’t do it. And so anyway, that’s why pre empting the state’s ability to do that, and just saying, you know, what, federal government’s going to look at this, the SEC is going to review at the SEC is going to make comments and qualify it and make you change things that they don’t like, the SEC doesn’t say that it’s good, or it’s a great investment or that you should invest in it or anything like that, or even say it’s a great valid offer. All they do is they qualify it before you can go live meaning you’ve been through their review process. And if there’s something in there that shouldn’t be in there. Pretty good chance they’re going to make you take it out. So long story short, is your right Oscar, it’s a different animal up north. However, we have a bit of that here. Also that applies to Regulation A and can come up depending on you know, when you’re marketing in a state or the state securities regulator has a question about something in some cases, yeah, even though I’m the General Attorney for the offering, I may have to bring in some help from us local, like licensed attorney happens very, very rarely, but it does happen.

Oscar Jofre  19:50

Good to know. It’s a bit of an education for me there but thank

Kendall Almerico  19:54

you. It’s pretty esoteric point. I mean, it’s not it’s it hasn’t happened most of the time.

20:00

It can happen.

Oscar Jofre  20:00

I know, but it’s so great, you know, to go for, you know, to talk to a broker dealer or sorry, a lawyer in you move forward, and now we’re gonna move into town. Because it’s interesting in the same way regulators, sorry lawyers are regulated broker dealers regulated the same way if you can believe it, but it is what it is, I mean, it’s it, it’s the opportunity, I guess maybe that’s a better way I’m gonna present it is, is that it are different markets and this is a market in and I’m gonna move with you Tom now because the the broker dealer role is something even though you’re Canadian or US company isn’t going to change. But let me ask you a couple questions. So Canadian company, you’re obviously working with candle or another legal mind into it. What more are you doing from a broker dealer that you need to do in order to ensure you’re treating it just like a US company when they’re coming to you to engage your services?

Etan Butler  21:03

From an issuer perspective, it’s pretty much the same as if they’re in the US or Canada. I’ll tell you, what does come up is, Hey, can we raise money from Canadian investors? That’s that’s the real question. And and can we raise money from international investors in general? And that’s a very interesting question. Because going back to what Kendall said, Remember that RegA is a US exemption. And if you go outside of the US, your you need to make sure you follow the laws of the jurisdiction that you’re conducting securities related activities in. So that’s, that’s more of an interesting question that we that we see not as much a can we raise funds here, we’re here at some time with CF right to see if you don’t have that ability for Canadian companies to access the being able to use CF like they do for RegA, it’s more how do we raise money from Canadian investors? And we defer to a collection of what we consider the thought leaders in the legal and regulatory community for these questions. And, and so the answer so what’s interesting about Canada in particular, is that most crowdfunding platforms and broker dealers, even on their sites will say, don’t accept, you know, we don’t work with Canadian investors. Right? Because I think there’s the the, the Ontario province, I think, is is known for maybe exploring the use of RegA across the border, and may have not been happy with that as at a certain point and, and that kind of triggered and somewhat of an alarm. And and so I think the advice that we give folks that ask that question is, you have 300 and some odd million people to target if it’s that important for you really to set up shop and and look in Canada, these are probably get seek a Canadian equivalent of a broker dealer there and structure offering that works in that jurisdiction, right. And then how that works with your RegA you let the attorneys communicate, there’s best practices, there’s opportunities there, that’s more of what comes up.

Oscar Jofre  22:59

And that’s a great point, I’m going to share my personal experience, because, you know, what, you know, our plans are to do it. We are You’re right, it’s a numbers game, you know, everything’s data driven. Kendall, you said 300 million, Canada 32 million. The math is pretty simple. From the data driven side, cost wise, I would have to spend the same amount in Canada, and the investor would never get the same rights, meaning the American investor has a free trading security that can trade now in a secondary market, they can transfer it here, they can do anything with it, they would just they would be on a lockdown. And you would have to follow in every province. And so I advise I tell Canadian companies as a Canadian company, It’s regrettable, but it is, I’m not going to offer my securities under the RegA to Canadians. But here is the beauty of it doesn’t mean you can’t attract them and keep their names and not because on secondary market. Interesting enough that Canadian laws are different. I know it’s gonna be really funny. The primary race is one, but the secondary rules in Canada are different. It allows the Canadian investor non accredited to hop the border and buy securities from a Canadian company. Because it didn’t come through the primary race, it came to a secondary. So there are there are upsides to that. But on the primary from the cost perspective and return it just in my view, the numbers just don’t make sense, unless you have a very fairly large following. But that following is going to get very destroyed as soon as they see that the RegA investors are treated very different than the Canadians because you’re going to be wrapped around this thing called an offering memorandum. And that a Wham wrapper that everybody calls it the rapper on the RegA. It’s not a rapper. It’s like a choker. You know, because this one’s free Willie and this one doesn’t get to move anywhere. A lot. People didn’t know that. And hopefully I heard the same time that with, with Ontario, the friendly provinces right now are British Columbia and Alberta. They love RegA. In fact, they were the two provinces that allow the companies, they’ve actually created an exemption to allow a Canadian company to freely use the exemption. But they also say you can’t sell the securities. But at least you can go forward.

Kendall Almerico  25:26

So that’s where you might want to I was just thinking about this, with all the services that KoreConX provides, one of the things you should think about is the service where you guys kind of maybe cross the border and sell securities for Canadian people, and then also pick up orders from Americans to buy, you know, prescription drugs and bring them back so that way you can have like a fair, you know, it seems like a good deal for you. I’m not doing it. Of course, I’m not sure it’s legal, but maybe you should look into it.

Oscar Jofre  25:52

Yeah, no, it’s fair to fair comment. All right, so we’ve talked about the legals we’ve talked about the broker dealer. So our one part about the broker dealer because it is very different. So in Canada, typically, when you do a capital raise, you know, you’re paying your BD say, seven to 10%, plus warrants and everything else. So let’s talk I don’t want to go in specifically, but the role of a BD in a RegA is significantly different than the way we think of it from a reg D point of view. And that’s also another if you can provide the insight to that time.

Etan Butler  26:25

Yeah, so when most people hear the word broker dealer, they think investment banking fees, which are appropriate if the broker dealer is performing certain, certain roles, as far as capital raising and marketing and distribution and syndication. But the most basic role that a broker dealer plays in a RegA is simply to be the broker dealer of record, which allows for the company to make their offering available in all 50 states really through a box check on the on the one a filing provided that the broker dealer is nationally registered in all states. And as a result of that, the at least from our perspective, the fees should go down significantly to reflect that role, that the broker dealer playing at a minimum, if the broker dealer obviously is raising capital for the offering, either from retail investors or from institutions, family offices, etc, then more traditional investment banking, like rates are appropriate. If the broker dealer services include really quarterbacking the marketing effort, and the investor relations and the communications and are a lot more extensive, like we do in some of our clients as well, then you’re going to see, you know, more appropriately priced commission Commission’s but but ultimately, it’s to perform due diligence on the issuer, on the officers on the directors, to make sure you’re not working with any bad actors. It’s really to protect the investors at the end of the day, and to allow for the regulator’s to have someone who’s accountable, to come to and say, give me that, show me that. What about that, and for everything to be ready for them to serve, when they when they come in coming out? Because they do they audit? The good thing about working in the regulated world is that there’s no shortcuts. If you know, we’ve been a broker dealer for 16 years, you know, you have to make the decisions you make today are going to be the agenda of tomorrow. Right? So that’s the beauty of of the SEC and FINRA, I find is that, you know, it forces transparency and accountability. So So that’s, that’s really why someone would hire a broker dealer to conduct an offering and what I consider a way more buttoned up way to have someone that is overseeing and collecting the KYC the know your customer, the suitability, the OFAC checks, to making sure all the subscription agreements are signed properly, that all the active stations are made properly, to review all the advertising, right, all the promotions and the advertising, if an issue we’re trying to do that directly, okay, let’s say, you know, it could be you know, that’s where there’s risk, right? So there have someone that that kind of, it’s almost like an insurance wrapper, you know, to have a regulated entity that really has that responsibility, and it’s going to be challenged and audited to make sure they did it properly. So that’s that’s, that’s the primary role of the BD

Oscar Jofre  29:20

your took it away from you, because also, the best thing about having a broker dealer is an insurance policy, right is the best and one of the areas that most people may or may not be aware, of course in Canada, you may not is that there are seven states we call the call the trouble state but what they really means is that you do need to have a registered broker dealer to do it anyway. So if you’re going to do it for those seven do it for at all, you get the whole package, you know, fully insured. That way you don’t have to worry about it in particularly when you consider that the SEC does not work like the 13 Canadian regulators So I’m going to touch up a little bit on that, because it’s important for people from cleaner that that are listening in to this is that the Canadian regulators believe in what we call slapping the hand down, though you’ve been a bad boy, don’t do it again. Okay. Never, ever never had never happened. And you’re great. I

Kendall Almerico  30:18

don’t even know. You’re glad you told me. You’ve probably heard it. But I’ve never never had it happen.

Oscar Jofre  30:23

Yeah, I really haven’t.

Kendall Almerico  30:24

But I, but I like it. You’re right, it’s there. That’s the problem you have Oscar is there are regulators who will come and maybe slap your hand or maybe slap you in jail. That’s why you do things by the rules. That’s why you have a broker dealer, you hit the nail on the head when you said, there are problems states here in the United States. And let me expound on that just real quickly, because I wrote the law. Anyone who reads this stuff I read, I used to write the crowdfunding and jobs that column before. entrepreneur, I typically write at a very elementary school level, because the stuff we deal with is very complicated. And most people don’t want to hear about it. They just want to know the basics. And so I try to write very simply, when I write about stuff, if you read stuff on my website, you’re going to be like, Oh, I understand this not Wow, let me read 600 pages of crap. On the other hand, I got to ask the questions. So many times the first few years that the job the JOBS Act was out, do you need a broker dealer to do a Regulation A offering? I mean, I was getting asked this question every day, 10 times. So I wrote a short version one pager, that was exactly what you said, there’s seven states, eight states, whatever it is that you need to be registered as a dealer. And then I wrote a 38 page Legal Brief that I published on, on medium that’s still I think, the most read thing I’ve ever written, then people still ask me questions about it. But it goes into incredible detail of why you can get in a whole lot of trouble. And I’ll boil it down here, because I think it is relatively interesting for people to understand. Let’s say that, you know, the first of all, Regulation A does not say you need to have a broker dealer. And so people just assumed you could do this without a broker dealer. From the very beginning, everyone thought we don’t need a broker dealer involved. That was like, well, you do. And here’s why when you go into certain states, and I won’t go into all the details of the states, but let’s just say they’re pretty much the biggest states that you sell securities out of pretty much the big ones, all have a requirement that if you don’t use a FINRA licensed broker dealer, who is registered as a broker dealer in that state, you cannot sell securities in that state publicly can’t go to the general public, or you can’t solicit in some states to the general public, unless you the company yourself registers as in essence, a dealer or a broker dealer. So what does that mean? Yeah, you could avoid hiring a times company, you don’t have to use Del Mar group. But you got to go into seven or eight states and get registered to do exactly what he does. And that probably will cost you 1000 times the cost to hire a broker dealer, just in the legal fees alone, getting registered as a dealer to be able to sell securities in the state publicly. That’s what we mean, when we say they’re problem states, these states don’t let you do that. And so what happens if you just say, well, let’s see if we can sneak this one by him, not tell them about it and start selling. All it takes is one person to contact and complain. And you know, you’re very these, these offerings are very public, they’re advertised, they’re all over Facebook. They’re all over Google, you know, you’re getting fed ads every day for these types of things. And so someone’s going to complain, someone’s going to notice it, someone’s going to look it up. And then guess what happens? The State securities regulator who has an unlimited budget to protect little old lady’s nest eggs, comes knocking on your door and says, who’s your broker dealer? We don’t have one. Did you register as a dealer here? Now, no, I didn’t know I need to do that. Well, guess what, give us all the money back, give every investor their money back, we’re gonna slap you with a fine, we’re going to prevent you from ever raising capital in our state, again, the list goes on that they will do, and they will do it. They’re not going to just slap you on the wrist. They’re gonna say, You’re a bad actor. And now you’re a bad actor in one state, you may not be able to raise capital in any state or what the SEC The next time you need to. So there’s huge repercussions to doing this wrong. As opposed to let me just pay someone what they’re supposed to be paid to do and let them be your insurance policy. check off all the boxes for you helped me get through the process of do it the right way.

Oscar Jofre  34:35

Thank you for that that was a great explanation. Obviously we’re all advocates within the ecosystem in in the US with a RegA to ensure that every offering was done in the success of Dell Moore has been making sure that every company has that element because otherwise the consequences are going to be felt. And all of us are watching out. The whole industry is working out to make sure that All of this is done. So now we are delivered. So you know now from a legal perspective, it can be done, there’s some little hoops that you’re gonna need to do to educate your lawyer. But once you get to that boom, because they do need to be part of it. So make no mistake, you do need your Canadian lawyer because the US lawyer is going to need to talk to them to verify your Book of Records. And so so you can lead them out of the picture. So that’s one, number two, broker dealer, insurance policy, but that’s great. But it’s the other elements that they’re doing for you watching over your back, making sure you’re doing things, right. Because you’re going to be drawing eyeballs to your site, into your offering, you want to make sure you do it right. The third piece is the audit fee. So audit it, obviously, whether you’re a startup or your operational business, you need audited financial statements, two years. And there is a there is a difference between Canada and the United States. Us gap and in cannabis IFRS. So, um, you know, I kind of go to you first, is that a difference to you is that is that the audited attorneys are it doesn’t matter to you in the investor base, that’s never been an issue.

Etan Butler  36:10

Truth is, I don’t really get too involved in what that difference is. So I’m not very familiar with, with what you just mentioned, as far as differences, our compliance team really, really handles that. My understanding has always been that every RegA company needs two years audited financials, if they’ve been in business for two years, if they’ve been in business one year, they need one year, if they are a startup, you still need to kind of audit nothing. Right? So it’s a nominal fee, just to kind of go through that exercise. But as far as the the differences as far as the accounting differences between the US and Canada, I’m going to defer to the Kendall on that.

Kendall Almerico  36:46

Yeah, and let me let me reiterate something that a tom just said, that’s very important. I hear people constantly say you have to have two years of audited financials. And I’ve actually had companies that came to me and said, we didn’t do this, because someone told us we had to have two years of audited financials in our companies less than two years old. So we waited until we were two years old. That is not the law. But but there’s lawyers that tell people that and you said it yourself, Oscar, but you didn’t mean it that way. Yeah, people here, you’ve got to have two years. And their thought is, you know, some CFO somewhere who doesn’t understand securities laws and didn’t bother to read it or ask someone goes, we’re not even two years old, we can’t do that, you know, so. So it is up to two years if you’ve been in business for more than two years, but a time set, right. So I’ve had companies that we’ve used Regulation A that were brand new, they were spin offs of other companies, or they were brand new, newly formed, they had a zero balance sheet, literally nothing. But that has to be audited. And if they’ve been in business for a year or less than two years, everything has to be audited. There’s very specific timeframes that you follow, and you know, the auditor’s know them after a certain date, you have to go back to do the next six months, blah, blah, blah. But, you know, following those is important, and yeah, that they made the rules, very clear and very specific, you know, the only thing you didn’t add, under the Canadian laws, you know, if you’re a Canadian company, you have to follow a certain guideline. and Canada, if you’re a US company, it’s to gap which is gas, which is generally accepted, auditing, you know, s whatever the hell it is. But more importantly, if you’re a public company, or if you’re going to be listed, and you’re going to have your financials have to be, you know, for something that’s going to be traded, then they have to be pcaob, which is a nother level of review. So, bottom line is, these are the kinds of things your lawyer can tell you about the compliance people that your broker dealer will tell you about when you go to the auditor, they have to be independent. That can’t be this one I get all the time. Oh, no, no, I’ve got a great bookkeeper. He does all our stuff and our CPA does our taxes, they’ll do it for less than you No, no, no, you the person who prepares your books. And the person who is your staff, accountant or your accounting firm who does your taxes, they prepare your financials to gap generally accepted accounting practices. And then they ship them off to an independent person who audits they can’t do the audit also. So there’s always an expense involved in doing this. But again, if you’re a brand new company, and it’s a zero balance sheet, it’s not that much money to you know, be able to take advantage of the regulation a fun stuff you can do there.

Oscar Jofre  39:27

Yeah, the only closing point I’ll make theories and as a Canadian company, we don’t need to create them for gap we can use IFRS sec acceptable, which is great. You know, right there, you only got one set of Book of Records to create not to, but you do need to use an independent auditor PC. You know, obviously the lawyers in the US will tell you exactly what that is. I do apologize. I can’t remember either, but it has to be registered accounting firm. The good thing is in Canada, I believe there’s about eight or nine accounting firms now that I’ve done it, we’ve, we’ve seen names like video down with some of the small mid size. So it’s cost effective for companies. So I think what we’re starting to see is the momentum, the education is going to work. But we want to make sure everybody understands all the parts. So we got legals, we got the BD, we got the audit, we file we’ve been qualified. So you notice I’ve learned a thing or two from few years ago, I used to say, we’ve been approved. So that’s not the word the word is. Wala phi. Thank you. So now we’re qualified. And I’m coming to you at time. So it Canadian companies like every, I mean, there are some differences. Money’s money. But there are some differences and techniques and things. We are seeing a model that is a bit different, where Canadian companies are using providers to bring in the client acquisition or, you know, taking calls with providers in Canada, how does that all fit in with a broker dealer to make sure that it’s fully compliant? Because we don’t see that with US companies? Right? We This is what’s a little bit different in Canada, I believe, at the moment.

Etan Butler  41:12

But two things one is in addition to sec qualification, which is not approval, the issuer the company would also need their broker dealer to get something from FINRA called a no objections letter. Right. So that’s generally right after your securities attorney files your one a your offering circular with the FTC, starting a process of you know, they have 28 days to respond, they usually will ask you some questions. There’s back and forth. Generally, it’s about a 60 day or so process on average, from our experience. We as your broker dealer, also filing with FINRA looking for a no objections that are so we file our broker dealer agreement with you, and they have the opportunity to review it, ask any questions they might have. And then once you have both the qualification, and the no objections, then you’re you can go live and start accepting funds from investors. As far as investor acquisitions and Canadian companies that have been using companies for IR, I think it applies both to Canadian and US companies. I think what you’re referring to are, you know, when when you’re doing the high volume, RegA offering, you tend to be very sensitive on conversion. And every step in in the process is important to monitor for every dollar I spend, how much am I? How much am I generating in revenue from my offering. Technology is a big factor in that right to properly monitor investor activity and behavior, tagging certain pages, so you know, which marketing and PR strategies are working most effectively. So you can kind of pour more gasoline on those, well, what the ones that aren’t converting or performing? Well, you can tap the brakes on those strategies. And also staying in touch with these potential investors, these hundreds or 1000s of investors, you need to do so in an automated way, ideally, right. So if they are at stage two out of stage five of the investment process, meaning they’ve clicked on invest now, but they didn’t sign their subscription agreements, or they didn’t put their credit card in or they forgot to do a wire, you want to get back to those people, you just paid a lot of money to bring them to step one, step two, you don’t want to, you know, we want to make sure that you that you have an intelligent way of shepherding them through the process to complete the offering. Right. And that, and you could do that in an automated way by reminding people and Being Annoying to Hey, excuse me, I know, I just reached out yesterday. But here we are, again, you’re at stage two, you need to complete this, this is where you are or unsubscribe if you don’t wanna hear from you anymore, right? So that’s an automated way. And then there’s IR in a more human way, right? Some people like even if it’s a $500 investment, they just like knowing that there’s someone that’s going to answer the phone, if they call, or perhaps someone that calls them and says, Hey, just wanted to let you know that, you know, we sent you a few emails, but you haven’t finished your process. So the issuer could do that themselves. Right? The issuers allowed if they have enough people, right to you know, to call people up, say, hey, so and so I’m from the company. Yeah, I see that you’ve you’ve started the process. Can I answer any basic questions you have, the broker dealer could do that if you engage a broker dealer to do that, or you could hire a third party. But if you hire a third party, you need to make sure that they are compliant, right? If they’re not a registered broker dealer, then there’s limitations as far as the role that they can play. If they’re simply serving as an extension of the company to shepherd people through step one to step two, step three, that’s fine. If they’re trying to sell them securities, and certainly if they want to be compensated for the sale of those securities, that’s absolutely not acceptable. Right. So I think we’re seeing the utilization of IR of third party party IR, both from Canadian and from us, issuers that you need. You just need to make sure that you’re careful. The broker dealer needs to make sure that it’s careful it cetera because you don’t want people that are not registered, trying to sell people and and And you want the structure of that relationship to be compliant as well. So it’s very clear what they can and can’t do and how they are paid versus how they can get paid.

Oscar Jofre  45:09

Yeah, that’s a great point. That’s going back to what we said earlier with having a broker dealer, that insurance policy. And, and obviously, it will come down on you, obviously, when nobody wants that, right? Because obviously, you want to be in business. And we’re closely monitoring it. But that is one difference I saw in You are right, we’re starting we, I think we’re gonna see a little bit more of it. Now that you can raise up to 75 million, it does outdo state, we do need more forces coming in trying different channels, if we keep using the same channels, after a while it just gonna run dry, right? I mean, there is, you know, up to 300 million Americans. And if we only touch a little bit of it, clearly, we got to try different approaches. So I’m all for that. And obviously, the key is to make sure that it’s done fully compliant. So one part here that is uniquely, I’m not gonna say uniquely different, but it is black, unlike us law. Look, I’m a Canadian, and I truly liked it. You know why? Because as an intrapreneur, I know how I can walk. I know who I need to speak to, I know where I need to speak to, I know how to do the offering, I know what I can and cannot do to use it. So versus you know, somebody comes to me, Oscar want to help you with your capital raise. My question is very simple. You register FINRA book a deal it? No. Okay, great. Well, then no Commission’s, but you know, you want to help me build up my plan, I can play your flat fee. It’s pretty black and white that way. We have a market North? Of course, we have that a bit. It’s a bit loose in it. And some companies, you know, they keep Come on Oscar, we’re still a Canadian company. Well, coming back to what Kendall said, you know, certain regulators will give you a slap this regulator in the United States that many of you follow form one a correct me if I’m wrong here, Canada, but I believe the SEC has, we’ve shown the what the SEC will do will go to the Canada, arrest of Canadians are making their doorsteps for breaking securities law. Right. I mean, you break it, you break it. Yeah, I

Kendall Almerico  47:13

mean, that’s why you follow the laws and the getting back to your you’re absolutely right. That’s why you just don’t take chances just do things the right way. I mean, I have fired clients before I even had clients that raised a lot of money after that, you know, after I fired them, because they weren’t doing things the right way. And I just can’t, I don’t want to be a part of it, you know, and you just don’t do that. But I would like to say something because you know, a time hit the nail on the head, no matter where you’re at. And this is I’m going to take off my lawyer hat and put back on my quarterback helmet, or whatever I want to call it. This really is all about marketing, regulation, unless you’ve got a built an audience of people just waiting to buy your stock, which I haven’t found that client yet. And when I do, I’ll be thrilled. You know, you got to go out and find investors. And so it’s all about marketing. And marketing is a very generic term that can mean about 20 different things. And every company does it differently. And there’s a lot of different people out there that provide different services, I mean, just off the top of my head. I’m going to give you an example. So we launched an M A times downward group is involved with this one, a company called Evo evolution development group about 10 days ago, I think may have been two weeks ago. Evo is a very unique and cool business. And the reason I bring this up is I’m going to tell you all the different marketing pieces that go into this to get an audience for a business that nobody knew who they were or what they did, up until about two weeks ago. So this is a company that will go out and sign racecar drivers, boxers MMA fighters, tennis players, golfers individual sport athletes, provide them with the financing to get training, extra time driving cars at the racetrack extra time in the gym, extra time on the practice courts or on the fields get them up through the ranks to where they become in some cases, some won’t make it some well, but they could become champions. And when you get a champion who wins the Indy 500 or wins the World Boxing, Tyler wins a PGA tournament. Part of those winnings will go back to the shareholders of iva the contract that Evo has with each athlete will be you give us a piece of your future earnings and we help you get to that stage by financially supporting you with nutritionists and sports psychologists and trainers and everything else. So it’s a fascinating business model. That to my knowledge has never been done. It’s been done with rich people. Rich people have been benefactors for golfers and boxers and racecar drivers for years, but not the average person who can invest 150 bucks on a piece of several athletes as the business develops now. I bring that up and I’m going to anyone who wants to look at this page, it will show you’re going to see what I’m about Talk about now. So the investment page where people invest is E v o Evo invest.com e v o invest calm. And when you go to that page, you’re going to see three different videos that explain the business they’re professionally made. You look at them and you go, Wow, I understand this business model, you’re going to see a video of Michael Andretti of the Andretti Autosport say Mario’s son, who is a shareholder in the company, and on the board of advisors who said, this is this is something that’s going to get every driver that we can bring into this fold, the chance to actually become a champion. Today, they made an announcement that Alexander Rossi, the Indy 500 winner from a couple of years back as has invested in the company, and has joined the board of advisors. Now, what does that mean from you, as a company out there, nobody’s heard of this company before you’re selling a company that’s brand new, that is doesn’t have the drivers or boxers or golfers yet, but they’re going to get them with the money they raise. And it’s going to be like venture capital, some of them are going to make it some of them aren’t. But to get that word out, there’s digital advertising, there’s videos, there’s social media, there’s public relations, I think Alexander Rossi, is doing four different major interviews today. About Evo, there is, you know, digital ads on not just Facebook, but Google and what have you. There’s email marketing, there is as as a ton said, there’s people following up with text messages and phones to people going through the system. There’s an automated system, taking all the people in there are emails going to those people to close, you know, people that forget to bring their money in, or what have you. There is banking involved there as escrow involved, there are so many moving pieces here that have to work together and coordinate so that it all comes out in the end. And looks like Evo invest calm, which looks like this super slick, professional page that you read, and you’re like, Wow, this looks great. This is a really cool company, I want to learn more, you know, that’s what you’re trying to get people to do is to click the button to learn more, and then if they’re interested, and that makes sense for them to invest. But there’s so many pieces that go into doing that the right way on a consumer play like this. Whereas if you’re a company that already has a list of a million customers, and all you’re doing is raising money from those people, your marketing might just be one email that you send out. So building a brand, building a customer base, using RegA, not only as a capital raise, but also as customer acquisition requires a huge number of different disciplines working together to make it all work. And that applies in Canada or in the United States.

Oscar Jofre  52:43

Thank you for that, for sharing that. It is a great site I’ve been to I’ve been following in a really long time.

Kendall Almerico  52:51

It’s really cool stuff. And and you know, and again, but as I tell people, I’m not going to tell I would never tell anybody to invest in any company, my clients, but this is to me, it’s like venture capital for professional athletes, you know, instead of you saying, Hey, you know, I’m gonna watch the sports on TV over the weekend, you’re gonna be able to watch them, once they sign clock, you know, signs of drivers, and what have you, you know, they may sign 10 people and nine of them may never make a dime, but one of them may be the next, you know, tiger woods or some crazy thing like that. And all of a sudden, there’s a payoff, but it’s, it’s really a like a venture capital firm going, I’m going to invest in 10 different companies, and if one of them makes it, it’s worth it. But the reality is, the cool part is anybody can do it, you know, it’s not a very big investment at 150 bucks and, and what do you get to do you get to follow these kids coming up through the ranks, you get to get inside information, you get to see stuff behind, there’s a whole architecture of stuff that goes on even if the kids don’t ever make it make money. So it’s just it’s these kinds of thought processes that when you’re out there with a company and you’re going out to raise money with reg a, especially if you have to build something from scratch, you’ve got to think through that there’s a lot of things you’re going to do that you’ve got to do anyway to market your company. But you can kind of pile them into this way where now you can get people to join you. We already have either already as people posting on their Facebook page the links to invest in the company because they’re so excited that they got involved, you know, so that’s what you want to do you want to build excitement but all of that takes a lot of different people working together with different disciplines doing different things all the same time the right way.

Oscar Jofre  54:29

Yeah, it’s a it’s a great point in it’s kind of it’s perfect for for us because we’ve gone through all the different elements in one of the areas that I think regardless of where you come from, but again, because we don’t do this enough in Canada, and you’re not accustomed to it where you we don’t do general solicitation, get the regulations allow us to do it. But we’re always told not to. But here, you’re hearing from a lawyer. Look how pumped up About. So what you’re hearing is when you budget for this, you’re going to find it. It’s not the lawyers that are taking all the fees or the accounts or, or the broker dealer, the insurance policy. It’s the dollars and cents you’re putting towards your investor acquisition to attract that audience. Because if you don’t do that, you know, somebody was asking me Well, it’s, what’s it like? Well, there’s a needle in a haystack. That’s one point, but I’m gonna go one layer. Where’s the haystack? You know, that’s the point you are on the internet. The internet is massive. Now it’s not like it was in 99, or mid 2000. We’re in 2021, the internet is getting bigger and bigger, more crowded every day, people are getting emails from everything. So you have to have a compelling story. And it’s not, Hey, I got shares for 55 cents, come and buy them. And you know, now this, that’s a great and there are many great companies. Golden City is another one that I really enjoyed. I’ve been speaking about those videos for a long time. Because for the very first time, we saw a cannabis company not to smoke. I don’t know if you saw that he done. I just I really, I really enjoyed that because it felt wholesome, taking an industry that some people have a problem with. And I understand that I, I respect that. But they took it and he saw real people working the farm. Right. And so I think it’s an important element that everyone in particular, where, regardless where you from, is that you take into consideration. So it’s been great talking to the both of you, Tom, you and I were a little bit quieter with Tom Brady. In town, you have to listen,

56:43

I’m just I’m sorry, I’m so hyped up after winning the Superbowl, you know, and my seventh ring that I just I stomped all over you guys, I apologize. I won’t do it next time.

56:52

This is my second time I get to sit in front of Oscar with one of these this week. So and so it’s becoming more and more frequent. So I’ll you stage is yours, brother.

Oscar Jofre  57:00

Yeah. Do you know that the thing about discussion sometimes is they take different directions that kind of have one of the but then I took a look at the end of the day what we’re telling Canadian companies you can do it. When we’re done. We can even companies follow the rules, when we’re telling everybody in Canada is please speak to your professionals. This is this is not one you can do it on your own, you think you can is done the said but it’s it why but why even try and one probably come prepared, come prepared to this game. That is phenomenal. Because there are some great Canadian companies that candles work with. I know Tom has worked with a few that have been very successful using this. And the last part I’m going to add, you don’t need to go public after you raise your money. Okay, so don’t get caught up in that thing to get listed on the TSX V, or CSC, which is the dome, you can grow your business, because what’s the beauty of RegA candle, this is you, you get the best repeat customer of all time. So, which is you can do it year after year after year. Absolutely.

58:01

Don’t go out like this should not be a vehicle to go public unless you’re ready to go public. And most of the shows that are doing this are not ready to go public. I talk more companies out of going public than you can imagine. And they eventually thank me because they’re like, wow, we would have we should. Thank you. That’s I just hear that all the time. But some companies, it’s perfect for going public. If they’re if this is the max, they could raise it could be a great vehicle to do that, too. You just need to think this through.

Oscar Jofre  58:29

Yeah. And that’s it. I mean, I remember. I mean, I’ve never shared this with you guys. But when I was raising capital in Canada during for one of our races, I remember we were asking for a sum amount. And the first thing that came even from our current shareholder base was we got a CPC Oscar, it’s already got the X dollars you need, we’ll get there we got a BD and we’ll do it and we’ll do a reverse takeover. And I said, You know what, why don’t I just hand you the company right now? I’m out. Right? Because that’s what you did the last time right. So that’s what happened to so I’ve gone through that roadshow. So people don’t understand what do you mean? Well, if the glitter is that they’re showing you that 5 million or 3 million, but that’s all you’ll ever get, there’s no more money after that there is no other than that. I call it the roar, because and then. And then. And I really believe in building companies out. And I eat time. This is not it. I know you deal with a lot of public companies. I respect that. But I also believe that we are given an opportunity to build companies or get more capital get get our revenue models figured out. Look, I’m on my 10th year guys 11th years or only few years with coordinates. And we’re still trying to figure that out, right? We’re still modifying, you know it on you and I talked about this a lot, right? So if we can get extra time, raise capital privately build it up and sustain it and make it and then think about that, that. Look at that. We’ll go Better capital markets, we’re going to have better everything. So and obviously I’m pretty pumped up in there. So thank you both so much for today. It’s on as always candle. I look forward to having you both once again. And I will remember that the quarterback, you know, we’re just gonna have a quarterback show and not only perfect, yeah, yeah, it’s uh it’ll be great. You know, March 15 is just around the corner. So I am pumped for everybody else. Thank you for being here with us this afternoon. As I said the video will be on course summit that IO can’t reach to us. We will give you a time, email address and contact details so you get it there or candle. These are individuals who dealt with Canadian companies. They know what you’re looking for. And again, we’ll see you again soon. Have an amazing week, everyone