A wave of financial innovation and regulatory reform is revolutionizing Wall Street and popularizing new asset classes aimed at democratizing the flow of capital and giving smaller investors and businesses greater opportunities to prosper. As a result, the financial services industry is undergoing a dramatic transformation that is rapidly rendering traditional banking and brokerage revenue models obsolete, conventional capital raising strategies unfeasible and typical asset class returns negligible. This is a must-view presentation for all broker-dealers, investment bankers, financial advisors, issuers and investors looking to capitalize on this surge of industry disruption. This presentation helps prepare investors, asset allocators and issuers for the forthcoming Crowdfunding Revolution. It is loaded with the latest financial and legal knowledge from renowned crowfund industry experts.

1. Capitalizing on Financial Innovation Webinar
Series
Part I - Preparing for the Crowdfunding Revolution
Moderator: Dara Albright, Founder, NowStreet – Panelists: * Richard J. Salute, CPA, Consultant
with extensive expertise in capital markets and securities regulations; *Douglas S. Ellenoff,
Partner at Ellenoff, Grossman & Schole; *Ruth Hedges, CEO of Funding Roadmap

2. Dara Albright, Founder of NowStreet
Twitter: @nowstreet
www.nowstreetjournal.com
dalbright@nowstreetjournal.com
http://facebook.com/nowstreetevents

3. The Crowdfund Investing Industry

4. Crowdfunding:
An efficient new financing model for facilitating
capital between Investors and SMEs and Start Ups
Douglas S. Ellenoff, Esq.
Ellenoff Grossman & Schole LLP
www.CrowdEsq.com

5. EG&S and Crowdfunding
EG&S has been one of the most active IPO law firms in the US for the last 5 years
(top 20 in 2012 and 4th in 2011); #1 Broker-Dealer counsel for PIPEs and Registered
Directs and #1 world wide for SPACs and SPACquisitions. We represent 50 public
companies.
Ellenoff Grossman & Schole has been heavily involved in the crowdfunding program
since its inception. The Firm has sponsored conferences, webinars and has been
invited to speak at different events on the topic. Douglas S. Ellenoff, a member of
the Firm, has met with the SEC on many occasions to discuss many aspects of the
proposed new law, how the industry currently operates and how both the SEC and
FINRA will register and regulate funding portals and the crowdfunding activity to
be conducted.
The Firm is actively engaged with clients (funding portals, broker-
dealers, technology solution providers, software developers, investors and
entrepreneurs). In cooperation with the industry trade association, the Firm
is discussing what level of regulatory review and monitoring is appropriate by the
SEC and FINRA in balancing the interests of the program with investor protection.

6. Douglas S. Ellenoff
Douglas S. Ellenoff, a member of the Firm since its founding in 1992, is a
corporate and securities attorney with a specialty in business transactions and
corporate financings. Mr. Ellenoff and the rest of the corporate department
distinguish themselves from many other transactional lawyers on the basis of their
ability to be part of the establishment of new securities programs, like PIPEs,
SPACs, Registered Directs, Reverse Mergers and CrowdFunding, where the Firm's
professionals have played leadership roles within each of those industries,
assisting in the creation, formation and strategies relating to those financings, as
well as working closely with the regulatory agencies; including the SEC and FINRA;
and the listing exchanges - AMEX and NASDAQ.

7. Crowdfunding
Crowdfunding is the offering of unregistered
securities through a registered internet
intermediary website or broker to raise small
amounts of money (up to $1,000,000) from a large
pool of investors

8. Quotation of President Barak Obama January 2012
“Right now, you can only turn to a limited group of investors
-- including banks and wealthy individuals -- to get
funding. Laws that are nearly eight decades old make it
impossible for others to invest. But a lot has changed in 80
years, and it’s time our laws did as well. Because of this bill,
start-ups and small business will now have access to a big,
new pool of potential investors -- namely, the American
people. For the first time, ordinary Americans will be able
to go online and invest in entrepreneurs that they believe
in.”

9. Title III of the US JOBS Act—
Offerings Limitations & Requirements
– The Act limits both the aggregate value of securities that an issuer may offer
through a crowdfunding intermediary and the amount that an individual can invest.
– An issuer may sell up to an aggregate of $1,000,000 of its securities during any 12
month period.
– Investors with an annual income or net worth of up to $40,000 will be permitted to
invest $2,000 and above $40,000 and less than $100,000 investors shall be entitled
to invest 5% of their annual income or net worth in any 12 month period.
– Investors with an annual income or net worth greater than $100,000 will be
permitted to invest 10% of their annual income or net worth.
– Investors are limited to investing $100,000 in crowdfunding issues in a 12 month
period.
– Investors who purchase securities in a crowdfunding transaction are restricted from
transferring those securities for a period of one year. This restriction is subject to
certain exceptions, including transfers: (i) to the issuer; (ii) to an accredited
investor; (iii) pursuant to an offering registered with the SEC; (iv) or to the
investor’s family members.

10. Title III of the US JOBS Act—
crowdfunding Intermediaries: Funding Portals & Broker
Crowdfunding transactions may only be conducted through either a
broker or funding portal registered with the Securities & Exchange
Commission (“SEC”) and the Financial Industry Regulatory Authority
Unlike a broker, a funding portal is restricted from offering investment
advice or recommendations to investors. Its members may not solicit
purchases, sales or offer to buy securities offered by the portal.
Funding portals are strictly prohibited from paying its agents or
employees any compensation based on the sale of securities offered on
its portal or website.

11. Title III of the US JOBS Act—
Crowdfunding Intermediaries: Funding Portals & Brokers (Continued)
– The crowdfunding intermediaries will have certain obligations to protect investors.
The Act requires a crowdfunding intermediary to:
Ensure that investors review certain educational material and acknowledge that the
investor both understand the risks inherent in a crowdfunding investment and can
sustain the risks of loss;
Ensure that investors demonstrate an understanding of the risks associated with
investing in new ventures and small business;
Implement measures to reduce the risks of fraud;
Implement measure to ensure that the proceeds of an offering are only released to
the issuer when the target offering amount is reached or exceeded;
Comply with applicable privacy rights and protections of information requirements;
Ensure that investors do not purchase an amount of crowdfunding securities during a
12 month period in excess of the statutory limit; and
Prohibit its directors, officers or partners from participating in a crowdfunding
offering or having any financial interest in a company that uses its services.

12. Title III of the US JOBS Act—
Issuer Responsibilities
Equal access to and disclosure of material information is a core principal of federal and state
securities regulations. It is essential for investors to have the necessary information to
appreciate the potential risks and rewards of an investment. The Act requires issuers to provide
investors with a description of the following:
– Company: the issuer and its members, including the name, legal status, physical address, the names of the
directors and officers holding more than 20 percent of the shares of the issuer.
– Offering: the anticipated business plan of the issuer, the target offering amount, the deadline to reach the
target offering amount and the price to the public of the securities.
– Structure: the ownership and capital structure of the issuer, including terms of the securities of the issuer
being offered.
– Valuation: how the securities being offered are being valued, and examples of methods for how such
securities may be valued by the issuer in the future, including during subsequent corporate actions; and
– Risks: the risks to purchasers of the securities relating to minority ownership in the issuer, the risks
associated with corporate actions, including additional issuances of shares, a sale of the issuer or of assets
of the issuer, or transactions with related parties.
– The intermediary crowdfunding portals are also required to make available to the SEC and to potential
investors any information provided by the issuer no later than 21 days prior to the first day on which
securities are sold to any investor.

13. Title III of the US JOBS Act— Issuer Responsibilities (Continued)
Financial Statements
– The extent to which an issuer must disclose its financial statements
varies depending on the aggregate amount offered, including any
prior offerings in the preceding 12 months period.
– For crowdfunding offerings with an aggregate offering amount up to
$100,000, the issuer must disclosure its most recently filed income
tax returns and its financial statements certified by the issuer’s
principal executive officer.
– For offerings that exceed $100,000 during the 12 month period but
are less than $500,000, the issuer must provide financial statements
reviewed by an independent public accountant.
– If an aggregate offering amount exceeding $500,000, the issuer must
provide audited financial statements.

14. Acceptance of Basic Concept of Crowdfunding Law
By Investor Protection Advocates
Designed in Title III of the JOBS Act, so-called crowdfunding, is the novel concept that any investor
(accredited or otherwise) may invest in any available crowdfunding investment opportunity, so
long as it is proportionate to how much they make or are worth and is transacted through a
regulated funding platform or BD after satisfying investor education and disclosure requirements.
The concept of limiting investors based upon income and net worth doesn’t exist in any typical
private placement or public offering statutes– by convention broker-dealers impose such standards
to reduce investor risk and their own liability exposure based upon “suitability standards” only.
Title III is unique in this regard.
If the objective of investor protection advocates is to prevent non-accredited investors from ever
participating in entrepreneurial finance, and thereby, avoid suffering any investment losses
(regardless of properly disclosing the inherent risks in any such investment), then implementing
Title III at all is necessarily inconsistent with such an objective.
In our view, the wisdom of Title III is that it properly balances the undisputed need for investor
protection with the size of the offering and how much is being invested– but you have to really
appreciate how crowdfunding will operate under Title III.
Title II under the JOBS Act is the lifting of the ban in the US on the General Solicitation of
investors– so that any issuer may generally solicit investors, but, only accept funding from
accredited investors.

15. What Problem Does Crowdfunding Address
Provide more capital to entrepreneurs and SMEs, create jobs and provide
opportunities for non-accredited investors to invest in both community based
businesses and entrepreneurial companies.
For the last several years the number of VC financings in the US has continued to
drop-- approximately 3,500 VC led deals; VCs are raising less capital and continue
to finance only larger opportunities with significant IRR potential and with exits of
greater than $50 Million
Although Angel statistics are difficult to obtain they funded nearly as much as VCs
Fewer than 10% of all Accredited Investors in the U.S. invest in private financings
Except as friends or family, non-accredited investors have no exposure to private
financings.
There are 25,000,000 SME in US; many are looking for funding and banks aren’t
lending and identifying investors is extremely difficult given securities laws

16. Existing Crowdfunding
Donations, Rewards, Pre-Order (Kiva, Kickstarter, Indiegogo and RocketHub)
– KIVA-- $400 Million of Loans in increments of $25 and less than 2% defaults
– Kickstarter-- $450 Million pledged by 3,000,000 people for 35,000 campaigns
Domestic Noisy 506 Offerings (Angel List, CircleUp and FundersClub)
– Angel List, $1.8 Billion raised for start ups; $11,500,000 in February 2013
alone.
Internationally (FundingCircle, ASSOB, Symbid, Seedrs and CrowdCube)
– FundingCircle UK Pounds 76,000,000; 1,000 borrowers and less than 1.5%
default rate
– ASSOB $132,500,000 for 1,000 issuers and 86% survival rate

17. Investor Protection Explicit in Statutory Design
Crowdfunding may only be conducted through approved and regulated
Funding Portals and Brokers– SEC and FINRA.
Entrepreneurs seeking capital are specifically limited to what they can
communicated to the public with respect to conducting a crowdfunding
campaign at a particular funding portal or broker-dealer portal; no terms of
the offering may be mentioned.
Even the funding portal and broker-dealer portal is restricted from marketing
the particular campaign and can only market the general activities of the
website.
No incentive fees of any kind may be paid by either the entrepreneur or the
funding portal/broker-dealer portal to induce potential investors to register
on their platform.

18. Investor Protection Explicit in Statutory Design
(continued)
Further, assuming that a potential investor even decides of their own volition to visit a
funding portal/broker-dealer portal, they must register with the platform and share
relevant information
Title III requires that the funding portals provide investors with a well defined education
process
Title III requires review and complete standard private placement investor
documentation (provide full and fair disclosure compliant with Title III, including use of
proceeds and risk factors) all PRIOR to being able to invest.
Funding portals are providing entrepreneurs and issuers with education as well.
Additionally, unlike Title II or most other areas of the securities markets, there is clearly
defined limitation on how much any one investor may invest in any one deal or
crowdfunding deals overall all (in 12 month rolling period)-- capped at a percentage of
their income and net worth (it varies).
Funding Portals are precluded from giving investment advice
Crowd Intelligence (Not Required by Title III)

19. Role of Social Media/Investor Protection
Crowd Intelligence through social media will transparently vet entrepreneurs, their
opportunities and their community of contacts and colleagues
Crowd Intelligence has played a significant and instructive role in the
establishment of other online industries in the last decade; these industries had
similar voiced concerns for consumer protection. Over time, the successful
operators learned to adapt and embrace the role of other consumer experiences
(the crowd as it were) and use such experiences to their collective benefit in a
manner that enabled them to tackle those concerns and demonstrate their ability
to increase overall consumer satisfaction and reduce complications otherwise
experienced by their legacy or offline competitors. By embracing social media and
its transparency, along with the other sophisticated technology solutions that are
offered in the market today, much of the previous and legitimate concerns about
purchasing goods online (think Amazon), or through an informal network of retail
sellers (think EBay), have reduced risks of improper conduct and enhance user
experience-- it stands to reason that without it, there wouldn't be the confidence
in the system necessary to create and industry. Done properly in crowdfunding,
we would expect similar benefits. We don't claim to have all of the answers to
how to properly and effectively combat fraud in the securities world and would
welcome the opportunity to work cooperatively with the SEC's microcap fraud
experts to buttress our efforts and initiatives.

20. Common Concerns, Misconceptions and
Other Provisions of Title III Often Lost on Critics
CrowdFraud
Disclosure requirements and financial statements
Funding for the next app and high growth opportunities
(actually small and community based businesses)
Capital structure and the Crowd
Exits

21. Substantive Issues To Be Considered
Better than friends and family
Fraud v Failure
Investment Advice and Curation
Substantive disclosure is just a good beginning
Title III platforms will be able to demonstrate that investors may have convenient
memories for risk disclosure (digital footprint)
Liabilities of platforms
Valuation is as much a problem with public companies as crowdfunding
Is crowdfunding due diligence any match for conventional
due diligence

22. Timeline
Proposed Rules by End of 1st Quarter
Public Comment Period (60 to 90 days)
Staff Review Period (60 days)
Final SEC Rules (Currently expected 4th Quarter)

23. Contact Information
Ellenoff Grossman & Schole LLP is a New York City-based law firm comprised of almost 60 professionals
(30 Securities Lawyers), offering its clients legal services in a broad range of business related matters.
Founded in 1992, the Firm specializes in many areas of commercial law, including corporate and securities,
'33 Act and '34 Act representation, reverse mergers, PIPEs, SPACs, going private and mergers and
acquisitions. We represent nearly 50 public companies in various industries: biotechnology, medical devices,
information technology, financial services, shipping, alternative energy, consumer products and business
services throughout the world – including Greece, China, India and Israel; Hedge Fund Formation and Regulation;
Broker-Dealer Regulation, transactional Real Estate (leasing, financing and buy/sell; domestic corporate Taxation
and general commercial Litigation).
Douglas S. Ellenoff, Esq.
Ellenoff Grossman & Schole LLP
150 East 42nd Street, New York, NY 10017
(212) 370-1300
Ellenoff@EGSllp.com
This presentation is for informational purposes and does not contain or convey legal advice. The information herein
should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer

24. Disclaimer
• This information may answer some questions, but is not intended as a comprehensive
analysis of the topic. In addition, this information should not be relied upon as the only
source of information.
• This information is supplied from sources we believe to be reliable but we cannot guarantee
its accuracy.
• This document and the information contained herein is confidential. This document has
been furnished to you solely for your information and neither this document nor the
information contained herein my be reproduced, disclosed or redistributed, in whole or in
part, by mail, facsimile, electronic or computer transmission or by any other means to any
other person, except with the prior written consent of the Ellenoff Grossman & Schole LLP.
• The material has been prepared or is distributed solely for information purposes and is not a
solicitation or an offer to buy any security or instrument or to participate in any trading
strategy.
• This presentation is made solely for the interest of friends and clients of Ellenoff Grossman
& Schole LLP and should in no way be relied upon or construed as legal advice. For specific
information on particular factual situations, an opinion of legal counsel should be sought.

25. JOBS Act Implementation
Presented by Richard Salute
January 31, 2013

26. What you need to know
regarding the JOBS ACT
implementation
Communication the Value Proposition
– Be clear about your objectives and the
expected outcomes.
– What is the solution you are offering.
– Why is it relevant.
– Describe the revenue model and anticipated
income.
– Describe why the entities valuation is appropriate.
– And much more!

27. What you need to know
regarding the JOBS ACT
implementation
The team:
– Describe the management skills and experience
and why they can execute the business plan.
– Best practice for achieving transparency requires
that you have the correct advisors i.e., Attorney’s,
Accountants and Investment Bankers.
– Consider forming Boards of Directors and
Advisors.

28. What you need to know
regarding the JOBS ACT
implementation
Financial Reporting
– Depending on the raise GAAP financials are
required.
– The financials may need to be reviewed or
audited.
– There is a cost which will be dependent upon the
entity’s complexity.

29. What you need to know
regarding the JOBS ACT
implementation
On going communications with Stakeholders
– Look at best of breed to see examples of
transparency.
– Discuss key metrics good or bad.
– The crowd is efficient be careful not to under
estimate its power.
– Never forget that you are selling a portion of your
business.
– Good Luck!

50. Thank you for participating in the webinar. To listen to a replay
please visit: https://www.brighttalk.com/webcast/5205/69111
We also hope to meet you in person at the 2nd Annual Crowdfunding
Convention & Bootcamp
www.crowdfundingroadmap.com/bootcamp
Save $25 use the coupon code: nowstreet