Risks of Investing

 

Investing in startups and other private companies is highly speculative and should only be done by investors who can bear the complete loss of their investment without any change in their lifestyle. Risks include, but are not limited to an issuer’s: (i) limited operating history, (ii) lack of liquidity or any market for the resale of your investment, (iii) possibility of fraud or misrepresentation, (iv) arbitrary valuation of the company, (v) limited shareholder rights and the possibility of dilution (meaning the reduction in the ownership percentage of a company caused by the issuance of more shares), (vi) inability to generate revenue or raise additional capital to fund operations, and (vii) inability to continue its relationship with the crowdfunding platforms or to publish annual reports where an investor obtains the most current financial information about an issuer.  An issuer has ongoing reporting requirements to post an annual report no later than 120 days after the end of the fiscal year along with the financial statements of the issuer certified by the principal executive officer of the issuer to be true and complete in all material respects and a description of the financial condition of the issuer, and if an issuer has available financial statements that have either been reviewed or audited by a public accountant that is independent of the issuer, those financial statements must be provided to investors along with certification by the principal executive officer, and specific disclosures.  In some instances, however, an issuer may fail in its obligation to publish annual reports and, therefore, an investor may not continually have current financial information about the issuer.

 

 

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