Billfolda CSF Issuer Guidance

Section 2: Content Requirements

The contents required must include

1. Information about your company
   • Company details

     Offer Summary:Your company’s name, ACN, company type (e.g. Proprietary company limited by shares) and the address of its registered office and principal place of business.
     Offer details: Minimum target funds and % equity, Maximum target funds and % equity, Commencement Date, End Date, Pre money valuation.

2. Category
   • Your company’s business

     Company Information and Business Information Summary (or combined; Maybe presented as a letter from the Chairman, or Executive summary about the company, followed by an initial summary of what the business is (at a high level). 250-400 words.

     Include the stage of development (StartUp/trading history), the industry sector referencing the Market (size/maturity/channels), Key competitors, and any barriers to entry; Your company’s market share (if known), details of your current activities, and any systemic threats / opportunities (e.g. technology change/government policy change).

   • Founders

     Provide a factual and notable outline of the leadership team, This must including senior management, not just office holders.

   • Team

     Include Role, Skills, Qualifications and Experience relevant to the role they have in the company. Note our preference is to support this by including a link to public profiles on LinkedIn, Twitter, Your Website, or similar.

     You must provide us the full legal name of each Senior Manager and Board member, including their background for checking. Describe each person’s role and a brief duty summary .

     If you have not already created a Billfolda ID under your personal name, you must do so, as must every member of the team. As a legal requirement each person is identity checked through that and other processes, which will delay an offer. The outcome of those and any other enquiry or disclosure will be disclosed within the offer. (Note that the company, its office holders and managers have a duty of good faith and disclosure to Billfolda and our investors throughout the pre-offer and pre-close period, so adverse discovery within our enquires will tarnish the good fame and character assessment we make).

   • Customers

     Provide an outline of existing contracted customers and target customers. Outline the customer needs, attributes, likes and dislikes, perceptions and behaviour that is of interest. The aim here, is to show sufficient knowledge to demonstrate domain experience and leadership.

     Consider adding certified customer endorsements to the offer with a photo of the company-customer.

     Ideally you will obtain the endorsement of famous or influential people.

     Include a brief introduction/bio to outline who the customer is, there needs and consent.

   • Awards and Recognition

     Showcase your achievements to-date if applicable, Grant funding, Awards, Recognition (top 100 fast co), R&D claims, ESIC, EMDG, Accelerator, Competitions, Accelerating commercialisation, JV’s etc.

   • Business model

     How does your company make money?

     We like the HBR canvas to illustrate this, although you are free to use text, infographic or other means to illustrate this.

     https://hbr.org/2013/05/a-better-way-to-think-about-yo

     Explanation the main components of your company’s business model and the key assumptions that support these.

     For example:

     • key suppliers, customers and distribution channels;
     • intellectual property and its legal status (e.g. whether your company has a patent or licence);
     • the importance of key personnel to implementing your company’s business model; and
     • key assets and whether they are owned or leased.

     Compliment this with 150-400 words of narrative.

   • Business strategy

     Explain your company’s medium term goals and long term objectives at a high level.

     An attractively presented timeline should be prepared, and be consistent with the financial representations in ‘Use of Funds’, however you must have a reasonable basis for any predictions illustrated.

     Regulation requires pre-revenue / breakeven StartUp companies to;

     • a clearly disclosure of this pre-revenue/breakeven status, and
     • include an explanation of short-term objectives, and
     • how the company proposes to meet those objectives, and
     • how the company plans to meet the trading shortfall

     A milestone plan could also be incorporated to illustrate ‘go to market’, rollout and or high level tactical elements in your plans.

     Note: This is a public document, so you are not expected to give away trade secrets.

   • Problem Cause Solution

     Why you? If you have not already covered this in the offer video and other element s above, defining each of these elements in 40 words or less at this point is desirable.

     Education of your potential Investor in these matters may help to answer the question ‘why should I invest in this offer’.

   • Criminal and civil legal actions against your company

     Details of and a description of the circumstances giving rise to:

     • any convictions of criminal offences or civil penalties imposed under the Corporations Act against your company;
     • any enforceable undertaking given to ASIC by your company; and
     • any other convictions or penalties (under other laws) against your company in the last 10 years.

     See Issuer onboarding for further detail

     (If ‘No legal action’ applies – we will insert standard wording)

   • Organisational structure

     How does your company tick? Is it Functional, Divisional (Market), Matrix or Flatarchy?

     Provide a description of your company’s organisational design, illustrating how you coordinate amoung functions, share ideas, make decisions and manage conflict. You should illustrate this with roles, responsibilities and reporting flows that help the business achieve its objectives.

     If you have a Flatarchy (non-conventional allocation of roles), and or outsourcing arrangement you will need to describe your processes in detail.

     Illustrated via an org chart that integrates with the personal Bio’s of the management team presented above is ideal.

   • We must disclose risks to your enterprise

     Examples to include

     • Market or competition risk
     • Failure to secure or loss of key personnel
     • Failure to secure or loss of supplier or customer
     • Important contract
     • Intellectual property
   • We must disclose risks to your enterprise - cont
     • Financing risk
     • Legal or regulatory risks
     • Technology and operational risks
     • Adding company specific risks

     If more than 3 exist, all must be noted and described)

   • Corporate Affairs

     Introduce your registry service or plan, outline the key terms of shareholder rights and obligations, produce related party disclosures (if applicable).

     Its here that we may allow lodged in, verified account holders to download your company constitution, supporting documents to the offer, and any particular agreements you require (e.g. deed of accession)

   • Capital structure

     How does your company finances its business?

     Debt, equity, and other types of financing?

     This summary may involve an explanation of how your company finances its start-up, cash flow and ongoing operations, and the extent to which your company depends on equity finance, external or internal debt finance and government loans.

     The finance strategy should be consistent with your internal cashflow budgeting and ‘use of funds’ disclosure.

   • Debt, Director Loans and Grants

     Include a narrative and or tables, outlining all related party loans, director loans, debt, future obligations and grants.

     The narrative should include key terms (e.g. ratchet clauses), term of the loan, principal amount borrowed, amount outstanding, interest rate and any security provided for the loan; whether your company is able to meet repayments from earnings or otherwise (if there is a reasonable basis for predicting this); and or when key financing needs to be renewed (if known).

     If your company relies on government funding, you should include:

     • the amount and term of the funding; and
     • any key terms or conditions of the funding, including repayment terms (if any).
   • Financial Statements

     Compliant financial reporting is of utmost importance to publication of your offer. Issuers must have accounts prepared in accordance with accounting standards (that differ by size and stage of company). Newly incorporated companies >12months old, and Proprietary companies must contact your Billfolda account manager ASAP for instructions.

     We will allow investors to view your financial statements when the offer is published.

     In some instances Audit will be required prior to Publication of the Offer.

   • Payments to related parties and other persons

     Crowdfunded funds are owed by the company, as such you must describe whether any of the funds raised will be paid (directly or indirectly) to:

     • any current or proposed directors or senior managers of your company;
     • any related parties of your company;
     • any person that ‘controls’ your company or persons who hold more that 20% of the voting rights in the company (e.g. controlling or major shareholders);
     • Our fees for publishing the CSF offer or any of the intermediary’s related parties; and
     • any person promoting or marketing the offer.

     This includes whether any of the funds will be paid through an interposed entity for the benefit of the person, for example payments made to a nominee or trust.

   • Rights and liabilities associated with the shares.

     Summarise the key rights associated with all classes of securities on issue contained in the company’s constitution and any shareholder agreements (as applicable), and detail any key provisions (that particularly impact minority shareholders).

     This generally includes:
     Rights to refuse transfer of shares, voting rights; dividend rights; and any special rights held by majority shareholders, such as pre-emptive rights (e.g. majority shareholders may have the first right to buy the shares of a selling shareholder) or ‘tag along’ and ‘drag along’ rights; and any restrictions on the issue or transfer of shares (e.g. if approval of directors or majority shareholders is required).

     Billfolda has standard text for explaining the implications of typical shareholders rights however you or your solicitors must provide details for non-standard rights or restrictions, particularly on transfers of shares for minority shareholders (e.g. shareholders may have limited opportunities to exit their investment).

     The offer must include a description of the rights associated with the shares contained in the company’s constitution, which generally includes:

     • voting rights;
     • dividend rights;
     • rights to call and receive notice of general meetings;
     • rights to elect and remove directors;
     • rights in the event of a winding-up of the company; and
     • any restrictions on the issue or transfer of shares (e.g. if approval of directors or majority shareholders is required).
     • And any other rights material to minority shareholders

     Information about shareholder rights must be explained in plain language and from the perspective of inexperienced retail investors (e.g. what these rights mean in practice and how the different classes of shares rank against each other).

     Current regulations restrict CSF offers to ordinary shares only, though as noted above, your offer must outline all share classes on issue and those shares classes that are likely to be issued in the body of the offer.

     Issuers must include a description or summary of the key provisions of your company’s constitution and any shareholder agreements (as applicable), including information about the exemption from takeover rules (if applicable)

     Should you request it, Billfolda will refer Proprietary companies to a legal practitioner who may upgrade or entirely replace the company constitution and Shareholders Agreement

   • Equity (pre- and post-offer)

     Describe:

     • all classes of shares (e.g. ordinary shares, non-voting shares, preference shares), the number of shares on issue and whether there are any unpaid amounts on issued shares;
     • the number of options on issue (if any) and the key terms of the options (e.g. the exercise period and exercise price);
     • details of any other securities on issue (e.g. convertible notes); and
     • the number of ordinary shares that may be issued under the CSF offer.

     The report must be on an undiluted basis and on a fully diluted basis (i.e. presuming all options and convertible securities are exercised)

     Any current or proposed liquidity preference, ESOP and other options / rights agreements should be outlined in advance.

   • Use of funds

     After completion of the offer, how will your company use the capital raised?

     Please prepare a table outlining the expenditures, based on minimum and maximum subscription amounts covering at least 1 or more years.

     If the funds are to be used for a variety of purposes, consider including a breakdown of how much will be applied to each purpose, each year.

     The table must describe:

     • Offer costs (e.g. advertising).
     • If funds are for working capital, you need to explain what constitutes working capital
     • when funds will be used (if there is a reasonable basis for predicting this);
     • whether the full offer amount and/or the minimum subscription amount are sufficient to meet your company’s objectives. If not, clearly state if your company will need to raise more equity or debt capital (if this is known);
     • why certain activities will be scaled back if only the minimum subscription is raised (i.e. why certain activities are prioritised over others).
   • Exit

     Any plans that the company has for exit or a return of capital to shareholders (via trade sale, share buy-back, IPO)

   • Previous CSF offers

     You must provide a description of all previous CSF offers (if any) made by:

     • your company;
     • any other company in which your company’s directors or senior managers were appointed (at the time of that CSF offer) as a director or senior manager;
     • any related parties of your company; or
     • any other company controlled by (at the time of the CSF offer) a person that ‘controls’ your company (e.g. controlling shareholders).

     You must disclose the following details about the previous CSF offers:

     • who made the offer and when; and
     • a description of the outcome of the offer (for example, whether the offer was complete and the minimum subscription amount was raised, or whether the offer was unsuccessful).