Requirements for Financials Under Title III of the JOBS Act (federal investment crowdfunding exemption)

The financial statements must be prepared in accordance with U.S. generally accepted accounting principles and include balance sheets, statements of comprehensive income, statements of cash flows, statements of changes in stockholders’ equity and notes to the financial statements.  If the financial statements are not audited, they must be labeled as “unaudited.”  The financial statements must cover the two most recently completed fiscal years or the period(s) since inception, if shorter.

For an offering conducted in the first 120 days of a fiscal year, the financial statements provided may be for the two fiscal years prior to the issuer’s most recently completed fiscal year; however, financial statements for the two most recently completed fiscal years must be provided if they are otherwise available. If more than 120 days have passed since the end of the issuer’s most recently completed fiscal year, the financial statements provided must be for the issuer’s two most recently completed fiscal years. If the 120th day falls on a Saturday, Sunday, or holiday, the next business day shall be considered the 120th day for purposes of determining the age of the financial statements.

If the offering is for $100,000 or less, the issuer must provide amount of total income, taxable income and total tax, or the equivalent line items, as reported on the federal income tax returns filed by the issuer for the most recently completed year (if any), which shall be certified by the principal executive officer of the issuer to reflect accurately the information reported on the issuer’s federal income tax returns, and financial statements of the issuer, which shall be certified by the principal executive officer of the issuer to be true and complete in all material respects. If financial statements of the issuer are available that have either been reviewed or audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and need not include the information reported on the federal income tax returns or the certifications of the principal executive officer.

An issuer required to provide information from a tax return before filing a tax return with the U.S. Internal Revenue Service for the most recently completed fiscal year may provide information from its tax return for the prior year (if any), provided that the issuer provides information from the tax return for the most recently completed fiscal year when it is filed with the U.S. Internal Revenue Service (if the tax return is filed during the offering period).  An issuer that requested an extension from the U.S. Internal Revenue Service would not be required to provide information from the tax return until the date the return is filed, if filed during the offering period.  If an issuer has not yet filed a tax return and is not required to file a tax return before the end of the offering period, then the tax return information does not need to be provided.

If the amount being raised is more than $100,000, the issuer must provide financial statements of the issuer reviewed[1] by a public accountant that is independent of the issuer.[2] If financial statements of the issuer are available that have been audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and need not include the reviewed financial statements.

If the issuer will accept proceeds in excess of the target offering amount, the issuer must include the maximum offering amount that the issuer will accept in the calculation to determine the financial statements required.

An issuer providing financial statements that are not audited or must have its principal executive officer provide the following certification:

I, [identify the certifying individual], certify that:
(1) the financial statements of [identify the issuer] included in this Form are true and complete in all material respects; and
(2) the tax return information of [identify the issuer] included in this Form reflects accurately the information reported on the tax return for [identify the issuer] filed for the fiscal year ended [date of most recent tax return].
[Signature and title].

 

 

[1] Financial statement reviews shall be conducted in accordance with the Statements on Standards for Accounting and Review Services issued by the Accounting and Review Services Committee of the American Institute of Certified Public Accountants. A signed review report must accompany the reviewed financial statements, and an issuer must notify the public accountant of the issuer’s intended use of the review report in the offering. An issuer will not be in compliance with the requirement to provide reviewed financial statements if the review report includes modifications.

[2] To qualify as a public accountant that is independent of the issuer for purposes of this part, the accountant must satisfy the independence standards of either: (i) 17 CFR 210.2-01 of this chapter, or
(ii) The American Institute of Certified Public Accountants. The public accountant that audits or reviews the financial statements provided by an issuer must be: (A) Duly registered and in good standing as a certified public accountant under the laws of the place of his or her residence or principal office; or (B) In good standing and entitled to practice as a public accountant under the laws of his or her place of residence or principal office.

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