Read The Crowdfunder’s Disclosure

Crowdfunding investors need to read offering materials.

There is a reason why the SEC has certain disclosure requirements. This is not a criticism of the subject company. People invest for various reasons, notwithstanding the company’s current financial condition.

In this instance, the cross fit athletic apparel company just announced the closing of a $12 million Reg. A Tier 2 crowdfunded offering.

Screen Shot 2020-04-08 at 8.49.09 AM

If the reader dug into the notes to the company’s financial statements, s/he we would see: “The Company has incurred losses from operations, has a working capital deficit of approximately $1.7 and 6.0 million and has an accumulated deficit of approximately $15.7 and 20.2 million as of December 31, 2018 and June 30, 2019, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.”

In other words, if additional funding is not obtained and if the Company continues its history of operating losses, it might end up in bankruptcy.

So, the investment risk is high, as noted in very small typeface on the cover of the offering circular.

https://www.sec.gov/Archives/edgar/data/1599738/000168316820001052/hylete_253g2.htm#a53

About JeffKoeppel

I am a corporate/securities attorney in the Washington, DC area. Prior to joining the firm, I was a Senior Attorney Advisor in the Division of Corporation Finance at the U.S. Securities and Exchange Commission. I am a member of the Bars of the States of Maryland, New York and the District of Columbia. You can also follow this blog on LinkedIn at: http://www.linkedin.com/pub/jeffrey-a-koeppel/0/63/5a9
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