new fintech funding alternatives for life science companies

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New FinTech Funding

Alternatives for Life Science

Companies

Our Presenter: Scott Jordan,

CEO, S. Jordan Associates

Thursday, April 21, 2016


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2Copyright © 2016, ShareVault Inc. and S. Jordan Associates

Agenda• Introduction – Stephen Joseph

VP of Business Development, ShareVault

• Presentation – Scott Jordan CEO, S. Jordan Associates

• Questions & Answers


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• The webinar will last 60 minutes (until 12pm PDT / 3pm EDT / 7pm GMT).

• Your audio is muted.

• Contribute questions via the Q&A GoToWebinar interface, and we will address them at the end.

• The webinar is being recorded, and we will contact you when it becomes available.

• We welcome your feedback on this webinar as well as topic requests, so that we can provide others of interest to you in the future.

Logistics


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This Webinar Is Hosted by ShareVault

ShareVault is a full-featured, state-of-the-art virtual data room that allows customers to

simply and securely share sensitive documents in the cloud.


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Sample Transactions Using ShareVault


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About Our Presenter, Scott Jordan

Emerging

Growth

Companies,

“Sell Side”

Large BioPharma, MedTECH,Medical Devices,“Sell Side”

• CEO of (SJA), a management consulting and investment banking firm dedicated to:

• Assisting early-stage/growth companies accelerate therapeutic, medical device, and medtech development programs via: • Business development (licensing)• Private placements and• “Exits” (M&A)

• Empowering search and evaluation teams source premium deal flow globally utilizing Financial Technology (FinTECH)


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Scott Jordan’s Background• Over 25+ years of experience:

• Negotiating strategic corporate alliances• Securing international licensing agreements• Building national sales teams• Contributing to successful product development,

approval, and launch

• Cross-functional experience with former leadership roles in: • Sales & marketing• Licensing• Finance• Business Development

• Level II Candidate in the Chartered Financial Analyst (CFA) Program and holds Series 7, 66, 63 & 31 Certifications

• Adviser to the world’s leading online investment platform sponsored by a stock exchange (Singapore, SGX), and venture capital firm (Clearbridge Accelerator): CapBridge

• Founder of Healthios’ investment marketplace, HealthiosXchange, http://www.healthiosxchange.com/ ; raised over $150 million for private emerging growth healthcare companies from 2013-2015

• Has helped numerous companies raise capital, secure licensing agreements and find acquirers, including Calibra Medical, Nippon Kayaku, NeoPharm, and more.


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FinTECH (Financial Technology)

• >3,300 members – Accredited Investors, Early- Stage/Growth Company Executives, Investment Professionals, Strategic Buyers

• 1,500 healthcare companies in 46 Market Sectors Seeking Licensing Partners, Financings, and/or “Exits”

• Sponsors – S. Jordan Associates and Healthios, Chicago-Based Healthcare Investment Bank

• The World’s Premier “Direct Investing” Platform

• Sponsored by:• The Singapore Stock Exchange (SGX)• Venture Capital Firm, Clearbridge Accelerator• HealthiosXchange

• SGX - Raise, Capital for Small-Medium Size Enterprises (SME), Fund Allocation, Shares depository (“IPO On Ramp”)

Launching May 26


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HealthiosXchange Membership Geographic Distribution

48

809 148

229 29

39 2

62


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What SJA Can Do for YouPartner with SJA - Execute Licensing

Agreements with Large

BioPharma, Medical Devices, HIT Companies

Collaborate with SJA and Healthios

Sourcing Capital From Institutional and

“Alternative” Investors

Hire SJA as Your “Internal”

Investment Banking Team

Acquiring Products/ Companies

Business Development

Private Placements

Strategic Advisory


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JOBS Act (Jumpstart Our Business Startups)• Intended to Encourage Funding of United States Small Businesses

by Easing Securities Regulations

• Passed with Bipartisan Support and was Signed Into Law by President Barack Obama on April 5, 2012

• The JOBS Act Substantially Changed a Number of Laws and Regulations Making it Easier for Companies to Both Go Public and to Raise Capital Privately and Stay Private Longer

• Major Provisions:

• Relieve Emerging Growth Companies from Certain Regulatory and Disclosure Requirements in Registration Statement When “Going Public”

• Lift the Ban on General Solicitation and Advertising in Specific Kinds of Private Placement of Securities

• Increase the Number of Shareholders Before a Company Has to Register with SEC and Become a Publicly Reporting Company from 500 to 2,000 Total Shareholders

• Allow Equity Crowdfunding (Non-Accredited Investors)

• Raise the Limit for Securities Offerings Exempted under Regulation A from $5 to $50M (Tier II)


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Titles of the JOBS Act• Title I Reopening American Capital Markets To

Emerging Growth Companies

• Title II Access To Capital For Job Creators

• Title III Crowdfunding

• Title IV Small Company Capital Formation

• Title V Private Company Flexibility And Growth

• Title VI Captal Expansion

• Title VII Outreach On Changes To The Law Or Commission


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JOBS Act Title I

JOBS Act Title II

JOBS Act Title III

Approval Date 09/2013 09/2013 10/2015 (Effective 05/2016)

Description Making IPO’s Easier Reg D 506 (c) - Private Placements

Crowdfunding

Value Propositions “Testing the Waters”Confidential Registration Statement

Lifted Ban on General Solicitation Marketing:

Social Media Online Due Diligence /

Investment

Raise up to $1M in 12-Month Period Reviewed Financials: Capital Raise

$100K><$500KGeneral Solicitation - w/Limitations

Impact Doubled Biotech IPOs from 2013-14

>$1 Billion Raised TBD

Security Public Equity Private Equity Private Equity

Investor Type Non/Accredited Accredited Non-Accredited

Investor $ Limits None None Invest Greater of $2,000 or 5% of the Lesser of Annual Income or Net Worth

Invest Lesser of $100,000 or 10% of the Lesser of Annual Income or Net Worth

Summary 1 of Titles I, II and III


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JOBS Act Title IV, Tier 1


Approval Date 03/2015 (Effective 06/2015) 03/2015 (Effective 06/2015)

Description Reg A+ Reg A+

Value Propositions Raise up to $20M in 12 Months Reviewed Financials General Solicitation

Raise up to $50M in 12 Months State Pre-Emption

General Solicitation

Impact ~Community Banks Selling Stock Intrastate

(Aperion Biologics, BeautyKind)Underwriter — WR Hambrecht

83 Reg A+ Offerings Filed

Security Private/Public Equity Private/Public Equity

Investor Type Non/Accredited Non/Accredited

Investor $ Limits None Non-Accredited: Greater of up to 10% of

Annual Income or Net Worth

Summary 1 of Title IV, Tiers 1 and 2


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JOBS Act Title I

“Making IPO’s Easier”

JOBS Act Title II

Reg D 506 (c) - General Solicitation

JOBS Act Title III

Crowdfunding

Projected $ Raise Unlimited $1-2M <$500K

Cost ~$3.0M (Nasdaq)~$1.5M (SGX)

Accounting/Legal: $10,000+

Accounting/Legal: $10,000+

Company Stage Late Stage Early - Late Stage Early Stage

Exchange/ FinTECH

Platforms

Catalist/Singapore Stock Exchange (SGX)

OTC, NasdaqNYSE

AngelList, AngelMD,

Crowdfunder, Healthfundr,

HealthiosXchange

Crowdfunder, Onevest,

RocketHub

SJA Services “Go Public” on SGX Company Listing / Offering on Capbridge

TBD

Summary 2 of Titles I, II and III


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Reg A+, Mini-IPO


Reg A+, Mini-IPO

Projected $ Raise <=$20M <=$50M

Cost ~$500K ~$1M

Company Stage Mid - Late Stage Mid - Late Stage

FinTECH Platform StartEngine, Banq StartEngine, Banq

Investor $ Limits None None

Summary 2 of Titles IV, Tiers 1 and 2


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“With only ~100 new biotech startups being formed each year, and only a few dozen firms actively doing it, there’s a tiny universe of players responsible for creating the next wave of biotech's likely to mature in the second half of this decade.”

“... the difference between then (1998-2002) and now (2009-2013): in 2000, the number of early-stage investors spiked 75% as the IPO window for biotech began to open up, and stayed high through the collapse of the bubble in 2012.

By contrast, the last few years — even with one of the biggest/longest IPO windows in biotech history — have been defined by restraint and constraint in terms of early-stage biotech venture and startup formation.”

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Then Vs. Now: First/Seed Round BioPharma Investors

Bruce Booth “Early Stage Biotech Venture Scarcity: Fitness, Fear, and Greed,” Forbes, 9/22/14 Data: Dow Jones Venture Source, Franklin Park Associates, NVCA

Is the JOBS Act Important for the Life Sciences Sector?Early Life Science Investors

Early Life Science

Investors


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“Active life science investor numbers (including BioPharma and MedTech) dropped by 25% since 2007, and haven’t rebounded...FLAG Capital Management did a further refinement of “active” investors filtering for only investors that had made at least four new investments with at least $4M in aggregate during 2013, they identified only ~25 active healthcare venture capital investors, and only a subset of those VC’s actually help start or back drug discovery and research stage biotech’s – probably only a dozen firms regularly start or fund more than 4-6 new biotech companies a year.”

Bruce Booth “Early Stage Biotech Venture Scarcity: Fitness, Fear, and Greed,” Forbes, 9/22/14 Data: Dow Jones Venture Source, Franklin Park Associates, NVCA Yearbook 2014, Figure 1.05

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Is the JOBS Act Important for the Life Sciences Sector?Active Life Science Investors

Active Life Science

Investors


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“Investors participating in BioPharma venture deals declined by ~40%, and never recovered those numbers. This represents a major culling of the herd.”

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Is the JOBS Act Important for the Life Sciences Sector?Life Science Investors Life Science

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“The take home message from these data is clear: there’s a huge influx of capital into venture, mostly into technology, and there remains a limited pool of capital flowing into life science venture, and even smaller into early-stage funds – despite the IPO and M&A markets.”

Life ScienceNon-LS Venture (Tech)

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Is the JOBS Act Important for the Life Sciences Sector?Venture Capital Venture

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“In the past two years, we have seen the emergence of non-VC investors, particularly hedge funds, providing “top-up” financing to IPO-ready companies prior to entering the market.” — Jonathan Norris, Kristina Peralta, “Trends in Healthcare Investments and Exits 2015,” Silicon Valley Bank (SVB)

Bruce Booth “Early Stage Biotech Venture Scarcity: Fitness, Fear, and Greed,” Forbes, 9/22/14 Data: “Data Snapshot: Venture-Backed Biotech Financing Riding High,” Forbes, 4/21/15

*Later Rounds of Financing defined as any financing that are not “First Financings.”

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Later Rounds* of Financing in VC-Backed BiotechQuarterly Datapoints and 3Q Rolling Average

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“The later-stage financings that have been driving up the aggregate numbers are almost without exception driven by crossover investors (like hedge funds and mutual funds who typically invest in public companies) or non-traditional partners like financial institutions. For example, The Alaska Permanent Fund put nearly $300M into Juno Therapeutics during their private round.”

Is the JOBS Act Important for the Life Sciences Sector?Crossover Investors (1)

Crossover Investors

1


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Bruce Booth “Early Stage Biotech Venture Scarcity: Fitness, Fear, and Greed,” Forbes, 9/22/14 Data: “Data Snapshot: Venture-Backed Biotech Financing Riding High,” Forbes, 4/21/15

*Later Rounds of Financing defined as any financing that are not “First Financings.”

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Funding ($B)“My estimate, based on discussions with a few bankers who track crossover activity, and an appreciation of Corporate Venture Capital (CVC) contributions, is that only around 50% of the $6B invested in private biotech’s came from “conventional” venture investors (meaning independent venture firms backed by groups of LPs).”


Crossover Investors

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Crossover Investors

3

Companies with Cross-Over Led Pre-IPO Financing Rounds Have:

• Significantly higher pre-money valuations at IPO (128% higher valuation - $290M vs. 127M)

• Cross-over support IPOs at bigger step-ups in price at IPO (multiple over the last private round valuation is 34% higher)

• Post-IPO stock appreciation vastly outperforms for companies with cross-overs in their pre-IPO round (83% stock appreciation, at the median, versus trading down by 10% without cross-overs)

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Crossover Investors

With Crossover Investors

With Crossover Investors

Without Crossover Investors



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1000.6x 0%1500.8x 20%2001.0x 40%

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400 1.8x 120%

300 1.4x 80%

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Pre-Money IPO Valuation ($, Millions)

Step-Up Multiple from Last Round Into the

IPO Valuation

Post-IPO Stock Performance (% Change)

Bruce Booth, “The Biotech Cross-Over Phenom: Biomarker of Quality?” Forbes, 11/7/14

Data: Jonathan Norris, Kristina Peralta, “Trends in Healthcare Investment and Exits 2015,” Silicon Valley Bank (SVB)

Ranges represent 25th and 75th percentiles areound the median value (50th percentile) N=24 companies with cross-over investor led pre-IPO financings, and 70 companies without Data as of October 20, 2014.


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“Everyone in venture-backed emerging companies acknowledges that going into the public markets with a solid list of blue chip cross-over investors in the capital structure is a good idea conceptually. It makes sense to line up big future owners of the stock early to help support the book-building process in the offering.”

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Exhibit 13” Most Active* New Non-VC Investors (2013-2014)

Biopharma Device Dx/Tools

Jonathan Norris, Kristina Peralta, “Trends in Healthcare Investment and Exits 2015,” Silicon Valley Bank (SVB)


Crossover Investors

4


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Can the JOBS Act Increase Access to Capital Including Alternative Investors (~Accredited, Family Office, Cross-Over

Investors, LP’s on a Direct Basis)?


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JOBS ActEquity Crowdfunding: $1.08BLN in 2015

Market Volume in Americas by Alternative Finance Model 2013-2015 ($USD)

Proportion of Total Funding by Institutional Investors Real Estate Dominates Online Equity

Average Fundraising Size

Equity-Based Crowdfunding: 168% Growth Rate (2013-2015)

2015: $598.05M2014: $271.95M 2013: $86.29M

4.68%

$963K

Real Estate: 231% Growth Rate (2013-2015)

2015: $483.77M2014: $138.15M 2013: $44.30M


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Title II - Reg D 506 (c)General Solicitation

Advertising ~Social MediaReach Alternative Investors

• Reg D Market = $1.2 Trillion• Only 6% of 8.7 Million Accredited Investors Have Made a Private Equity

Investment in U.S.

• Of These 500,000 Investors, Only 10% Participate Online (~Portals)• Of the 50,000 Participating Online, Only 10% Made an Investment or• 5,000 Investors

• Bruce Booth - Atlas Ventures (Forbes)• 120M Households in the U.S.• Top 1% (~1M Households) Have a Mean Household Net Worth Near $15M• Invested Just 0.01% of Their Net Worth Each Year – or $15K – Into Crowdfunded

Life Science Companies, Would Create $15B of Fund Flows Into Biotech• This is 3x More Than the Total Biotech Venture Capital Market (2013)


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Title II - Reg D 506 (c)The Investment Process

Market to Prospective Investors via General Solicitation

(email, Social Media, Online Ads)

Prospects Review Offering on Funding Portal and Perform Due

Diligence

Indications of Interest, Investment Confirmations

Received

Portal Performs AML, KYC, and Verifies Accredited Status of

Investors

Investment Capital Transferred into Escrow

Escrow is “Broken” and Proceeds Sent to Company Minus Fees to

Portal (Success/Listing Fees)

Alternative

Investors –

AccreditedCrossoverInvestors

Portal Market Sector

# of Investors

FundersClub Technology 16,000

FundRise Real Estate 80,000

Healthios-Xchange

Healthcare 3,500

SeedInvest Technology 6,500


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Title II - Reg D 506 (c)Online Portals - Track Record

Portal Market Sector $’s Raised on Portal (Since Inception)

Investors Backing Portal

AngelList Technology $163M (2015) Google Ventures

Capbridge All Sectors Launching, Summer 2016 SGX, Clearbridge Accelerator

CircleUp Consumer Goods $193M Union Square Ventures, Canaan

FundersClub Technology $55M Andreesen Horowitz, DFJ

HealthiosXchange* Healthcare $150M None

RealtyMogul Real Estate $200M Canaan

*Includes syndication and co-investing from institutional investors


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Title III - CrowdfundingOpportunities & Constraints

Opportunities Constraints

Investment Limits • Parallel Offerings Allowed Including 506, Reg A+, S-1

• Issuer May Raise Only $1M During Any Rolling 12-Month Period (Applies to Affiliates as Well)

Limits on Investors • Annual Income <$100k: > of $2,000 or 5% of Lesser (Annual Income, Net Worth)

• Annual Income <$100k: < of $100,000 or 10% of Lesser (Annual Income, Net Worth)

Limits on Issuer • Issuer Must be Organized in U.S.• Issuer May Not be a Public Reporting or

Investment Company

Limits on Advertising • Intermediary Can Advertise Itself and Present Issuer Offerings

• Issuer May Not (Except at Portal) Advertise the Details of Offering

Qualified Portal “Intermediary”

• Issuer Seeking to Raise Capital Must List on Qualified Portal

• Offering Must be Conducted Only On “One” Portal

Offering Disclosure Requirements

• SEC Approval not Required • Form C: Issuer Required to Make Extensive Disclosures

Financial Information • Raising <$100K: Financial Statements “Certified by Issuer”; $100k><$500: “Reviewed”

• Raising >$500K: Audited Financials

Shareholder Limits • Investors Don’t Count Toward 2,000 Total or 500 Non-Accredited

Shares Restricted • Yes, 1 Year


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Title III - CrowdfundingSample Portals


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Title III - CrowdfundingReasons to Use/Not Use

Why Use Title III? Why Not Use Title III?

• Raise Capital from Non-Accredited Investors

• Only Need Capital and Nothing Else, Easier Time Raising Capital from Accredited Investors Using Title II (Reg D)• Less Disclosure Requirements• More Flexibility – General Solicitation

• Attract “Affinity” Investors • Company Needs $350k for Patents on a

New Heart Valve• Via a Social Media Campaign, Company

Might Identify Thousands of Potential Investors from Those Affected by Heart Disease

• If Company Requires Larger Amounts of Capital from Non-Accredited Investors, Use Title IV


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Title IV - Reg A+Comparison to Title ITitle I - Initial Public Offerings (IPO’s) Title IV - Reg A+ (Mini “IPO”)

• Emerging Growth Company, <$1BLN in Sales

• Tier 2

• 5-Year Grace Period – Reporting Under Federal Law

• Reduced Financial Disclosures: Only 2 years of Audited Financial Statements

• Reduced “Management’s Discussion and Analysis of Financial Condition”

• Not required to comply with Section 404 of Sarbanes-Oxley Act

• “Testing the Waters” Allowed Before Registration as Long as No Funds Accepted

• Allow “Testing the Waters” to Determine Investor Appetite• Enables Use of Public Channels (Email, Social Media) to Market under General

Solicitation• Raise Up to $50M in a Calendar Year• Only 2 Years of Audited Statements• State Pre-Emption (Avoid Blue Sky Laws)• Access to Non-Accredited Investors

• Lower Filing and Underwriting Costs than Under Traditional IPO • Only Prepare a Six-Month Interim Report vs. Quarterly Reports for Registered Issuers

• Smaller Amounts Can Be Taken From a Larger Number of Investors Without Triggering 34 Act Reporting

• No requirements to Involve FINRA- Approved Underwriter or BD’s (~ELIO Motors)

• Securities Tradable Immediately (“Unrestricted”) Providing Liquidity to Investors and Owners

Tier 1 Fueled Biotech IPO Activity

Biotech IPOs < JOBS Act (Previous 2 Years, 2011 - 2012): 32

Biotech IPOs > JOBS Act (Following 2 Years, 2013 – 2015): 80

Reg A+ Filings to Date

83 Reg A+ Filings >50% (Tier II): Size of Offerings

($50M) and State Preemption

JOBS Act legislation makes it easier for small, innovative

companies to “Go Public” at lower costs by widening the investor base to include non-

accredited investors and the ability to

reach investors via general solicitation.


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Title IV - Reg A+Opens Paths to Financing for US/Canadian Companies

Benefits Those Companies That:• Are Too Large for Angel/VC Funding• Are Too Small for Traditional IPOs • Wish to Avoid Negative Connotations of

Reverse Mergers• Desire to Get Used to Reporting Before

Uplifting to a National Exchange and Becoming a Fully Reporting Company

• Desire to File Confidentially, Providing SEC an Opportunity to Review Offering Statement w/o General Public Knowing

Allows Issuers to:• Raise Money From Non/Accredited Investors • Raise Capital Faster and less Expensively than

Traditional Methods• Allows test the Waters Period to Determine

Investor Appetite• Create Immediate Liquidity, Non-Restrictive

Shares for Shareholders and New Investors• Reduce Filing and Compliance Requirements• Exempt from SEC Registration Requirements

– 12 (g)• Public Float < $75M, Annual Revenues < $50M


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Title IV - Reg A+Comparison to Traditional Way of “Going Public”

Traditional IPO Has High Upfront and Maintenance Costs:

Upfront Costs:• Accounting Fees, Legal Fees, Professional

Advisor Fees, Filing Fees, Financing or Placement Fees, Exchange Fees, Management Meetings, Conference Calls, Roadshows, Marketing Expenses

Maintenance Costs:• Director and Officer Insurance, Accounting,

Legal, Board Compensation, SEC Filing Costs (10-Ks, 10-Qs), Financial Marketing Costs (Analysts, Market Makers, PR), Corporate Governance Setup and Maintenance Costs

Traditional IPO Has Restrictive Listing Standards and Requirements:

#1: Earnings#2: Capitalization w/Cash Flow#3: Capitalization w/ Revenue#4: Assets w/Equity #5: Liquidity: # of Shareholders

Traditionally “Going Pubic” was

very expensive and geared

towards later-stage companies

given high upfront/maintenance costs

and restrictive listing requirement.

Average Cost

to Go Public:

~$3M

Listing: $125K Entry + $25K Application Fee


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Title IV - Reg A+Costs and Listing Requirements

Lower Filing Costs and Ongoing Reporting Requirements:

Tier 1: <$500K, Tier 2: <$1.0M

SEC Filing Process File 1-A, Offering Circular, Subscription Agreements

Offering Process Transfer Agent, Blue Sky Filings, Escrow

Pre-Deal/Marketing Auditing, “Testing the Waters,” Deal Marketing, Solicitation of Interest

Post-Offering Shareholder/Trading

Shareholder Records, Electronic Trading, Brokerage Accounts

Exchange FINRA 15c2-11, Listing Fee OTCQX OTC Quotation

Less Restrictive Listing Requirements:

Go Public Earlier

Raise Smaller IPO <$50M From Alternative Investors

Accredited Investors, Family Offices, LP’s

Reg A+ Eligible via Professional Third-Party Advisor Sponsorship

Designated Advisor for Disclosure (DAD)

Liquidity for Shareholders (Trade Shares post-IPO), FINRA Rule 5110

Acquire Issuer Securities During 180-day Review Period w/o Securities Deemed Underwriting Compensation

Post-Offering Shareholder/Trading

Shareholder Records, Electronic Trading, Brokerage Accounts

Via Reg A+ smaller companies can “Go

Public” without an underwriter

(lower costs), more easily meet listing requirements, and

simultaneously raise capital and list on a public

exchange - OTCQX (highest ranking

OTC level)

“Small Cap IPOs”


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Title IV - Reg A+, Tier 2 - CrowdfundingTier 2 Advantages

Advantages for Investors Advantages for Companies

Access to Pre-IPO Companies Assess Demand via “Testing the Waters” and Confidentially File w/SEC

Emotional Quotient, Customers Eager to Support Companies They Believe In

Sell Equity to Customers Passionate About Company

Existing Shareholders Sell up to $15M in the Offering (No More than 30% of Aggregate Offering Price)

Non-Accredited Investment Minimums Higher than Crowdfunding; > of 10% of Income or Net Worth

No Holding Period for Existing Shareholders (Unrestricted)

Raise Capital and Simultaneously List on Stock Exchange: OTCQX, NASDAQ

Lower Costs vs. Traditional IPOs and Less Punitive than PIPES (Warrant Coverage)

Reg A+ Crowdfunding

enables smaller/innovative

companies to “Go Public” by “Testing the Waters” with

customers who are passionate about investing (ELIO –

Electric Cars).


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Title IV - Reg A+, Tier 2 - CrowdfundingFirst Crowd-Funded IPO

Benefits

Fun-to-Drive

Super-economical: 84mpg

Affordable: $6,800

Safe: • 3 airbags• Reinforced roll-cage frame• Anti-lock braking system• 50% larger crush zones

Environmentally friendly

Creates American jobs

ELIO leveraged Reg A+, Tier 2, to raise $17M from customers (pre-

bought electric car)

Elio MotorsPhoenix, AZwww.eliomotors.comUltra-High Mileage, Low-Cost, Three-Wheeled Vehicle

Indications of Interest

50,414 reservations

Customers as Equity Shareholders

Reg A+ Offering — Raise Capital, Simultaneous OTCQX Listing

Completed Offering Using Internet Portal and General Advertising/Video/Social Media as Marketing Vehicles


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Title IV - Reg A+, Tier 2 - CrowdfundingReward Crowdfunding

Build Customer Base, Pre-Sales50,414 Reservations @$6,800 = $342M Pre-Sold

Sell Equity To Customers under Reg A+, Tier 2

IPO – Awareness Creation Event:• “Tested the Waters” - Confidential Filings• $46M – Indications of Interest from

12,000 Prospective Investors• Stock Offering Conducted over Six Weeks• 6,400 Investors (58% Existing

Customers)• 1.41M Shares Sold @ $12/Share• $17M of Equity Raised • $2,800/Investor

Pre-Reg A+ Filing

Post-Reg A+ Filing

After-Market/ Trading

$240M Market Cap

>$500M Market Cap

Trading Volume: ~8,000 shares/day

$70M of Capital Raised

$17M Raised

Average Transaction Size: 250 Shares

Friend and Family/”Insiders”

Retail Investors

Small Float: 1.41M vs. 26.5 Shares Outstanding

Stock Volatility: $12 $40 ~$20

• Capital Markets Advisor• Designated Advisor for

Disclosure (DAD)• Professional Guidance on

OTCQX, US Security Laws, Corporate Finance Strategy


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Title IV - Reg A+, Tier 2 - CrowdfundingElio 8-Month Listing Process

Ongoing Reporting

Current Reports, 1-U

Semi-Annual, 1-SA

Annual Reports, 1-K

Up list to NASDAQ?After-Market Support

Low Trading Volume Due to Lack of Institution Capital/Research Coverage

Trading

March 2016

When Shares Listed, Investor Executes Trades in Market

Back Office

Investors Complete Sub Docs, Transfer & KYC, AML Completed

Escrow Agent Releases Funds to Issuer and # of Investors To Transfer Agent

Transfer Agent Creates Certificates, Either Sends to Individual, Book Entry, or Brokerage

Shares Deposited in Brokerage Accounts

Marketing

General Solicitation Allowed w/ Disclosure Document > Qualification

Investors Proceed to Campaign Page to Review Marketing/Offering Materials

Confidential Filings

Filed Offering Statement (Form 1-A), SEC Comments, SEC Amended Filing, Notice of Qualification

Filed 8-A (Exchange Act – Listing on Exchange), and15c2-11 for Exchange Quotation - (OTCQX)

Filed DTC – Enables Electronic Trading/Transfer of Securities to Brokerage Accounts

Filed Manual Listing Exemption – Exempt from Blue Sky if:

“Testing the Waters”

July 2015

Solicitation and Road Shows Allowed < 1-A Filing, Rule 254 (a)

Preliminary Offering Circular Provided to Non/Accredited Investors

Secured $45M

Indications of Interest – Non-Binding

• Shares Purchased on Unsolicited Basis on OTCQX

• No Research Issued

January 2016

$17MRaised


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Title IV - Reg A+, Tier 2 - CrowdfundingGoing Public Without an Underwriter

Stock Transfer

Transfer Stock into Brokerage Accounts

OTC Markets, ELIO.QX

Stock Exchange

Back Office

Process $’s Into Escrow/Background Checks

Portal — Orders Taken

Generated Interest on Startengine

Marketing Engine

ELIO Paid $200K to CrowdfundX - Marketing

Branding & Advertising

• Crowdfunding Strategy• Crowdfunding Design• Social Media Marketing• Influencer Marketing• Public Relations• Digital Media Buying• Collateral Design• Website Design• Print/Digital Design• Video Production• Photography

Online Portal

• Deal Hosting/ Company Page

• Front-End Offering• Marketing and

Disclosure Displays• Investor Workflows• Transactions

Online Portal

• Escrow and ACH• AML (Anti-Money

Laundering) • Broker Dealer Services • Accredited Investor

Confirmations• Payment Processing• Registered Transfer

Agent• eSign• Investor Management • Print/Digital Design• Video Production• Photography

Facilitate Stock Transfer

• Companies with 500 Non-Accredited Holders or 2,000 Total Record Holders Must Engage Services of Transfer Agent Registered with SEC

• Establish Trading and DTC Eligibility

• Closing the Offering – Issuance of Securities and Delivery to Brokerage Accounts

Stock Exchange (OTCQX)

• Brokers Accepting Shares:

• Wells Fargo• BofA• Schwab• Merrill Lynch• E*Trade

ELIO utilized online platforms (Internet) to raise capital and list on the OTCQX.


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Title IV - Reg A+, Tier 2 - CrowdfundingUplisting from OTC to NASDAQ

OTCQX is a bridge to a national stock

exchange listing (NASDAQ).

OTCQX – Listings

OTCQX

• In 2015, Introduced New OTCQX Rules to Strengthen Financial Standards and Corporate Governance Standards

• 489 Securities (27% Increase YoY)

• $1.4tn Market Cap (Up 4%)• $41.9bn Annual Volume (Up 16%)• Regulation A Reporting Standards

Introduced for OTCQX to Assist Companies “Go Public”

OTCQX Activity Metrics

OTCQX

• 14 Million Visits in 2015 (up 11.5% YoY)• 23k News Releases (up 40%)• 7,100 Financial Reports (up 2.6%)• 580 Videos and Presentations (up 195%)• Companies from 8 Countries Joined

QTCQX

Up list to National Stock Exchange

OTCQX - Global Leader in Exchange Graduates

• Sixty (60) U.S. and Global Companies Graduated from OTC to a National Securities Exchange in 2015

• 47 of Which Came From the QTCQX and QTCQB• Healthcare Companies: Cynapsus Therapeutics

(CYNA), CRH Medical (CRHM), Xtant Medical Holdings (XTNT), Anavex Life Sciences (AVXL)


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Applicable to Healthcare

Companies w/Existing Customers

(Healthcare Information

Technology, HIT); Biotech?

Web and social media platform for public companies to sell their customer stock ownership plans directly to customers

Received $59M in Commitments From Customers as Part of $427M IPO

Allocated 50% of $1.8 Billion IPO to Dealers and Employees

Title IV - Reg A+, Tier 2 - CrowdfundingCustomer and IPO Allocations


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Title IV - Reg A+, Tier 2 - CrowdfundingOpportunities for a Public Listing

• Opportunity for Customers, Accredited and Non-Accredited Investors to Participate in Pre/IPO Process

• Public Listing Provides Liquidity to Existing and New Shareholders (Unrestricted Shares)

• Public Listing Broadens Investor Base Including Alternative Capital Sources Seeking Liquidity Option (~Family Offices)

• >$500M Post-Money Valuation Could Attract Micro/Small-Cap Buy-Side Investors

Issues can leverage Reg A+ to expand

investor base.


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Title IV - Reg A+, Tier 2 - CrowdfundingChallenges

• No Placement Agents (Underwriters) and Limited Market Makers (One Required for OTC Listing) Makes Securing Institutional Investors Challenging

• Difficult to Attract Research Coverage for Companies with <$300M in Post-Money Valuation (~Market Cap)

• Low Trading Volumes Associated with Lack of Research, Small IPOs/Public Floats, Results in Lack of Institutional Capital Participation

• Hedge Funds/Crossover Investors Reluctant to Participate Given Post Reg A+ Low Trading Volumes (Difficult to “exit”)

• Small Appetite from VC’s to Participate (Preference for Illiquidity, not SEC 34 Exempt – Can’t Own Public Stocks)

Challenges exist for companies seeking to offer shares via Reg A+ pre/post

transaction.3. Broker Dealer Resistance to Accepting Reg A+

Securities Given:

• Unfamiliar with Reg A+ • More Broker Dealer Liability if Accept

Unregistered Shares/Illegal Distribution (OTC)• Financial Industry Reg Authority – Notice 09-

05 (2009)• Brokerage Firm Obligations in the Resale of

Restricted Securities Include Determining if Securities Eligible for Sale

• Broker Dealers Accepting Shares May Charge Large Deposit Fees up to $1,000

2. Low Trading Volumes — Participation

Challenges of Crowdfunding:

1. Institutional Capital Participation


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Title IV - Reg A+, Tier 2 - CrowdfundingUnderwriter

Advantages for Alternative Investors

1. Gain Access to Pre-IPO Companies• “First Come, First Served Basis”• Syndicate Groups (Brokers) –

Add Value to Clients• Institutional Investors (LPs)

Participate on Direct Basis – Lower Costs

2. Easier to Sell Shares

• Faster Exit for New Investors - Unrestricted Securities

• Faster Exit for Existing Investors - Higher $ Limits

Sell Shares and Reinvest In Company vs. Raise More $’s

Advantages for Companies

1. “Go Public” at Lower Costs• <$1M Per IPO• Lower Marketing, Legal, Filing Costs

More Capital Available for Development Programs

2. “Test the Waters” via General Solicitation• Assess Investor Interest < Spending Larger Amounts

of Capital

3. Widened Pool of Investors

• Venture Capitalists? VC’s Not Subject to 34 Act (Invest in Public Securities)

• Crossover Investors, Hedge Funds?

Liquidity > IPO

• Selling Groups Show Clients Unique, High Potential New Issues

• (~Broker Dealers)

Aperion Biologics is pursuing a Reg A+ offering utilizing an underwriter (WR Hambrecht) with

established distribution networks (selling groups

like broker dealers) to raise capital from

investors.

Reg A+ enables companies to widen their investor base

(~institutional) including those who seek the flexibility to

sell post-close (Hedge Funds) given stock is

unrestricted.

Venture Preference is for Illiquidity – Obligated to Distribute $’s to LPs Upon Liquidity Event

WR Hambrecht• Advisor • Underwriter

Sign WHR+Co’s Master Selected Dealer Agreement, Support w/ Internet Marketing, Due Diligence

Market Offerings to Retail and Institutional Investors via General Solicitation


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WR Hambrecht

• Best Efforts to Procure Potential Investors

• Compensation for Advisory Services: $5,000/Month

• Additional Fees: Underwriting Discounts/Commissions (5% of Gross Offering), Warrants (4.5% of Total Shares Outstanding and Priced Equal to 115% of IPO price), Cover Out-of-Pocket (Legal Fees)

JOBS Act

• Defined as Emerging Growth Company• Only Two (2) Years of Audited Financial

Statements• Reduced Disclosure of Executive

Compensation • Exemption from Auditor Attestation

Requirement – Sarbanes-Oxley

IPO

• Selling 3.1M Shares of Common Stock • Closing of Offering, 7.3M Shares of

Common Stock Outstanding • IPO Priced Between $7 - $9/Share• Listing Common Stock on NASDAQ• Sell Lots of 100 or More Shares to a

Minimum of 300 Beneficial Holders

Title IV - Reg A+, Tier 2 - CrowdfundingUnderwriter

WR Hambrecht assisting Aperion with listing on

the NASDAQ via Reg A+.


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Title IV - Reg A+, Tier 2 - CrowdfundingOpportunities & Challenges

Opportunities Challenges

Institutional Capital Sources Pre-IPO Investors, Institutional

• Public Listing Provides Liquidity to Existing and New Shareholders

• Public Listing Broadens Investor Base Including Institutional Capital Participation

• After-Market – Potential for Institutional Investors to Support Trading Volumes

• Research Coverage = “Pay to Play,” Companies/Portals Pay for Coverage (i.e. Moody’s, S&P) Attracting Institutional Investors

• IPOs < $50M too Small for Most Institutional Investors (~Oppenheimer, Raymond James)

• Limited Appetite for VC’s (Unable to Buy Public Stock Under 34 Rule and/or Preference for Illiquidity - Liquidity Event Must Distribute Cash to LP’s vs. Reinvest in Fund) and Other Institutional Investors Given Low Trading Volumes

• Adverse Selection – Companies Utilizing Reg A+ Unable to “Go Public” via Traditional Channels (Quality of Offering, Size of Company, Financial Health); “If Company Could “Go Public” Traditionally, They Would”

Challenges exist for Reg A+ pre/post transaction

including institutional participation.

Reg A+ provides liquidity to existing and new

shareholders.


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Title IV - Reg A+ HybridCombination of Crowdfunding and Institutional Reg A+ Platforms

BANQ and SJA offer Hybrid Reg A+ Models.Partner with SJA, and

BANQ to raise capital via Reg A+.

No Underwriter Underwriter

Reg A+ Crowdfunding Reg A+ Underwriter

• Retail Capital – Customers as Investors • Institutional Capital

Marketing Engine

• Branding and Advertising• Crowdfunding Strategy• Crowdfunding Design• Social Media Marketing• Influencer Marketing• Public Relations• Digital Media Buying• Collateral Design• Website Design• Print/Digital Design• Video Production• Photography

Portal

• Online Portal • Deal Hosting/Company Page• Front-End Offering• Marketing and Disclosure Displays• Investor Workflows• Transactions

Back Office

• Compliance, Regulatory, Back Office• Escrow and ACH• AML (Anti-Money Laundering) • Broker Dealer Services • Accredited Investor Confirmations• Payment Processing• Registered Transfer Agent• eSign• Investor Management • Print/Digital Design• Video Production• Photography


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BanqFirst Fully Electronic Investment Bank

• Fully Licensed Broker Dealer and SIPC Insured, Enabling Direct Nasdaq Listings if Issuer Qualifies

• Brings Third Parties (i.e. Transfer Agent, Broker, Issuer, Investor) Only Single Platform Facilitating Proper Communication

• Shares Can Trade Immediately on Markets when Quoted

• Shares Can be Transferred to other Broker Dealers (i.e. ACAT)

• Provide Shareholders with all Information From a Single, Easy-to-Use and Intuitive Platform

• Eliminate Physical Certificates, Allowing Electronic Deposit and Sale of Securities

• Hosts Electronic IRA Accounts the can Purchase Reg A+ Offerings

• Utilize Web Technology to Create Attractive Marketing Content

• Manage Confidential Information in a Secure Manner

• Open to all Licensed Broker Dealers


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BanqFirst Fully Electronic Investment Bank (continued)

• Firm Overview• Online Electronic Platform Sponsored by TriPoint Global Equities, LLC, a New York Based, Registered

Broker Dealer with SEC and FINRA and Investment Bank• Works with Issuers, Broker Dealers, and Investors Seeking to Raise Capital via Reg A+• Entire Reg A+ Offering Conducted Online and Provides Instantaneous Confirmation and Deposit of

all Investment Transactions• Allows Investors to Deposit and Liquidate Reg A+ Investment Shares Trading on OTC Markets

(~OTCQX) and Nasdaq• Offers Low-Priced Trading Commissions, as Low as $0.99 and $3.95 Per Trade – Make Investing Even

More Accessible to Growing Number of Individual Investors

• Bank Solves Reg A+ Barriers• Processing Large Number of Investor Inquiries, Receiving Investor Funds, and Issuing Securities • Complying with all FINRA Regulations Including those Pertaining to Stock Deposits, Clearing

Certificates, Regulatory Notices (09-05 – OTC Listed Shares)• Broker Dealer Sponsorship – Diligence, SIPC Insurance, Regulations• Verifying Investor Suitability and Investment Objectives• Electronic Trading


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S. Jordan AssociatesAnnual Events Consulting

Private Placements

& Reg A

FinTECH (Financial

Technology)

• Business Development

• Strategic Advisory

• SJA Worked with Milken Institute Drafting Reg A+ Guidance

• HealtihosXchange: Online Investment Marketplace (Crowdfunding, Co-Investments)

• Capbridge: Online Investment Marketplace (Pre-IPO Financing)

• Singapore Exchange (SGX) – Onboard Companies Into Public Markets

• Reg A+ Partner - BANQ

• Campaign Page/Marketing

• Transfer Agent

• Brokerage


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Please enter your Questions into the question box in the GoToWebinar Interface


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Thank You for Joining Us!

S. Jordan [email protected]

+1-847-849-1736

ShareVaultwww.sharevault.com

[email protected]+1-408-717-4955

We will notify you when the recording and slide

deck are available.


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Addendum

16 ®

Reg A+ Overview

Eligible companies organized in and with their principal place of business in the U.S. or Canada

Exemption not available to the following companies :

‐ Reporting company under Exchange Act of 1934

‐ Development stage companies with no business plan or plan to merge into another company

‐ Investment companies

‐ Company issuing fractional interests in oil, gas or other mineral rights

‐ Companies that are disqualified as Bad Actors under Rule 262

Reg A+ Eligible Companies Tier II Eligibility

Tier II securities are exempt from Exchange Act registration under Section 12(g) if issuer meets all of following conditions:

‐ Engages services of a transfer agent registered with the SEC

‐ Remains subject to Tier II reporting obligations

‐ Is current in its annual and semi-annual reporting at fiscal year-end

‐ Has public float of less than $75.0MM as of the last business day of its most recently completed semi-annual period, or, in the absence of a public float, had annual revenues of less than $50.0MM as of its most recently completed fiscal year

An issuer that exceeds Section 12(g) thresholds would have a two-year transition period before it must register its class of securities

Offering statement is filed on Form 1-A with the SEC

‐ Similar to, but less detailed than S-1 registration statement

‐ Audited financials for last two full fiscal years required

‐ May be filed confidentially, providing the SEC an opportunity to review the offering statement and provide feedback without the general public being aware

Pre-filing “testing the waters” allowed

‐ Rule 254(a) allows written materials to be delivered to possible investors to gauge interest prior to filing of Form 1-A

Solicitation allowed

Road shows allowed

Non accredited investors allowed

Offering Process: Key Factors Reg A+ vs. Reg D vs. Reverse Merger

Pros:

Free trading securities – restrictions in fund governing documents limiting or prohibiting investment in restricted securities don’t apply

Public secondary market can develop

Non accredited (retail) investors allowed

Testing waters may be more permissive than general solicitation now allowed under Rule 506(c)

SEC review of offering materials (vs. reverse merger which is disfavored)

Cons:

More expensive than Reg D, although less than full reporting after Form 10, reverse merger or IPO

Ongoing reporting, although scaled SEC review of offering materials

17 ®

Investor Base

Ongoing SEC Reporting Requirements

Restriction on Securities

Ability to “Test the Waters” Before Going To Market

Ability to File Confidentially

Blue Sky Requirements

Limit On Securities Offered By Selling (pre-existing) Shareholders

Dollar Limit for Offering

Tier I & Tier II Comparison

Tier I Offering Tier II Offering

(1) Ongoing SEC reporting for a company that completes a Tier II offering includes (i) annual report on new form 1-K (similar to 10-K), (ii) semi-annual report on new form 1-SA (similar to 10-Q) and (iii) current reports on new form 1-U (similar to 8-K). No quarterly reports are required.

(2) The limitation on the amount of securities non-accredited investors can purchase in a Tier II offering is no more than 10% of the greater of the investor’s annual income or net worth (not including primary residence.

$20.0MM in 12-month period

< $6.0MM OR < 30% of total offering

Yes

Yes

Yes

None (securities are “free-trading”)

None

Accredited & Non-Accredited Investors

$50.0MM in 12-month period

< $15.0MM OR < 30% of total offering

No

Yes

Yes

None (securities are “free-trading”)

Audited Financial Statements(1)

(substantially less than full reporting)

Accredited & Non-Accredited Investors(2)

18 ®

Maximum Total Raised

Number of Investors

Investment per Investor

Investor Disclosure

Intermediary Required

Subject to ongoing SEC reporting following raise

JOBS Act

Unlimited

Unlimited accredited investors; up to 35 non-

accredited investors unless soliciting (if soliciting; 0 non-

accredited investors)

Unrestricted

Not required if all accredited investors; Form D filing

proposed

No

No

$50MM per 12 month period; including up to $15.0MM for

selling shareholders

Unrestricted

Restricted by income / net worth for non-accredited

investors

Required; must be filed with SEC

No

Yes; annual audited financials and annual, semi-annual,

current reporting required

$20MM per 12 month period; including up to $6.0MM for

selling shareholders

Unrestricted

Unrestricted


No

No; as long as exit report filed not later than 30 calendar days

after termination or completion

$1MM per 12 month period

Unlimited but subject to maximum total raised

Restricted by income / net worth


Yes; broker/dealer or funding portal

Yes; at least annually, possibly more frequently

Regulation D Rule 506 (4(a)(2))

Regulation A+ (Tier 2)


Public Crowdfunding

19 ®

Disclosure Liability

Shares Restricted

State Filing

Advertising & General Solicitation

Can public cos., foreign issuers, investment cos. & exempt inv. cos. issue

JOBS Act

Only anti-fraud liability Yes; full disclosure liability

with a knowledge exception Yes; full disclosure liability

with a knowledge exception Yes; full disclosure liability

with a knowledge exception

Yes; for public companies most can sell under Rule 144 after

six months No No Yes; for one year

Usually no if only offering to accredited investors

Exempt from state securities law registration and

qualification requirements

Not exempt from state securities law registration and

qualification requirements

Possibly; depends on future rules by state

Allowed if sales are made only to accredited investors and

issuer takes reasonable steps to verify accreditation status

“Testing the waters” permitted before & after filing; general solicitation permitted before qualification if preliminary

offering circular is provided, general solicitation permitted

after qualification

“Testing the waters” permitted before & after filing; general solicitation permitted before qualification if preliminary

offering circular is provided, general solicitation permitted

after qualification

Not allowed

Yes Only US, Canadian, non-public

issuers may issue Only US, Canadian, non-public

issuers may issue No

Regulation D Rule 506 (4(a)(2))



Public Crowdfunding

new fintech funding alternatives for life science companies

Documents