Sprowtt Investor Education

Legal Notice

Pursuant to SEC Regulation Crowdfunding, Rule 302(a), you must carefully read and agree to the following provisions before continuing with the electronic account opening and registration process for SprowttCrowdFunding.com (the “Site”). We also recommend that you print a copy of this statement and keep a copy for your records.

Consent to Electronic Delivery: By checking the box marked “I consent” below, you hereby consent to us providing you all required Site Documents, as defined herein, electronically. This means you consent to our use of electronic communications (e.g., email, social media messages, instant messages or other electronic media messages), electronic records, and electronic signatures rather than paper documents for all materials, notices, confirmations, disclosures, account statements, communications, forms and agreements provided to you by the Sprowtt Crowdfunding or the issuers of securities.  Site Documents may include, but are not limited to, the following: (i) the educational materials (ii) the terms of use for Sprowtt Crowdfunding, the terms and privacy policy of Sprowtt Crowdfunding, and the privacy policy of the Site covering the use of the Site and collection and use of information from users of the Site; (iii) any and all current and future notices and/or disclosures provided to you by the Site or by issuers of securities offered on the Site; (iv) such other documents regarding the relationship between the Site and you, issuers of securities sold on the Site, promoters of securities sold on the Site, or the Site’s affiliates or assigns; and (v) communications from you to the Site confirming your consent to notices provided by the Site and delivery of questionnaires from you to the Site demonstrating your acknowledgement of and/or agreement to disclosures provided by the Site. You understand that your electronic signature to any Site Document is legally binding, just as if you had signed a paper document. You also understand that by consenting to electronic delivery, we will not be mailing you copies of any Site Documents that we have provided to you electronically.  You further acknowledge that access to the Internet, e-mail, the worldwide web, and social media are required to access Site Documents electronically and you confirm that you have such access and that you have the necessary technical ability to access any such Site Document.  In addition,   you understand that you may incur costs from service providers you engage to grant you access to electronic media permitting you to access to these Site Documents electronically and you agree to be responsible for the associated costs form your service providers.

Notice: You accept that such electronic communications provided to you by the Site are reasonable and proper notice for the purpose of any applicable state and federal laws, rules and regulations, including, but not limited to, the Regulation Crowdfunding Rules promulgated pursuant to Title III of the Jumpstart Our Business Startups Act.  You further agree that the electronic format of the Site Documents fully satisfies any requirement to provide such materials to you in writing or in a format that you may keep. Communications shall be deemed delivered to you when sent by the Site to the electronic address furnished to us by you and not when received.

Electronic Signature: Completing the registration process with Sprowtt Crowdfunding constitutes your electronic signature. Any record containing an electronic signature shall be deemed for all purposes to have been “executed” and will constitute an “original” signature when printed from electronic records established and maintained by Sprowtt Crowdfunding, its affiliates, assigns or agents in the normal course of business. Upon request, you agree to manually sign or place your signature on any paper original of any electronic record provided to you containing your purported electronic signature.



Regulation Crowdfunding requires intermediaries to provide educational materials to investors whenever they open an account. The materials are required to be in plain language and communicate many aspects of investing and interacting with the portal effectively. 

Please note that regulations and our own internal processes and procedures may change from time to time, so you will be required to indicate that you have read and understand the current version of this document each time you begin to pursue an investment in an offering through our portal.

Please let us know immediately if you have any questions or if any part of the following information is unclear to you.

The process for reviewing the offer, making a purchase, and receiving your securities is as follows:

§  Create your account. All potential investors must establish an account with Sprowtt with current contact information.

§  Verify your email address.  We will send you a confirmation email to the email address you provide to ensure proper communication.

§  Verify your income and net worth.  Crowdfunding investments are limited based on your income and net worth, and it is up to you to self-verify that you have not exceeded the allowed investments during the 12-month period preceding the date of your current transaction. Sprowtt will know how many investments you made and the total amount of those investments through our portal, but we are not aware of investments you may have made through other portals. 

§  Review the “tombstone” ads.  You can review the available offerings, filtered and sorted by a variety of criteria, including category or industry, by stage of deal, size of deal, or geographically (for example, bio-tech deals or companies close to Sunnyvale, CA). 

§  Indicate interest in an offering. For each offering in which you are interested, you need to click the “Buy Now” button to gain access to the details of the offering.  Once you indicate an interest, your contact information will be provided to the Issuer so they can follow up with you.

§  Review the details of the offering. Download and review in detail the offering documents, business plans, business overviews, financial projections, pitch decks, and/or investor videos. Please note that we track the materials you have accessed and provide that information to the Issuer. They will know, for example, when you downloaded their business plan, and if you watched any videos they provided.

Remember, you and you alone must decide whether to invest, and if so, how much to invest, so do your homework!

§  Communicate with the Issuer.  Although not required, we strongly recommend that you communicate directly with the Issuer to answer any questions you may have about the offering.

§  Talk with your advisors. We also strongly recommend that you share information about the offering with your attorney(s), CPAs, investment advisors, and other professionals.

§  Make the investment. You can make investments only through the portal. You will need to send your funds to the escrow bank for the benefit of the company in which you are investing. You will be able to see online when those funds have been received into escrow. Once the funds are received into escrow, they are held for a minimum of three (3) days before being made available to the Issuer. If the Issuer is making a “minimum-maximum” offering, the funds will not be available to them until the minimum amount of the offering is raised.

All documents are digitally signed, and no physical paperwork is ever exchanged, with the exception of the shareholder certificates (see below).

And if you change your mind about the investment within three (3) days, you can rescind your investment by notifying the escrow agent, in which case the escrow agent will promptly return your funds without interest or deduction therefrom. 

§  Receive your shareholder certificates. LLC membership interests or stock share certificates will be issued directly by Sprowtt clearing contractors and transfer agents, bonded and insured, to each investor upon close of the offering. In addition, digital copies are stored on our system for five (5) years.

§  Stay in touch. Keep track of the companies in which you invest by signing into the portal and reviewing their progress.  The Issuers may choose to send emails through the Sprowtt portal to you and other investors, but they are not required to do so.

The Risks Associated with Investing in Securities Offered and Sold

Investing in securities of any type is risky. Early stage companies are considerably more risky than more established companies because an early stage company may not have a proven or viable business model, or may not be able to secure additional funds outside your investment to commence operations.  Never invest more than you can afford to lose.

Common risks considered by many sophisticated investors include:

§  Key Man Risk. The risk that one or more of the principals in the company may depart from the company, either by choice or by accident. There is also the risk that the management team will not act in way that is in the investor’s best interests.

§  Invention Risk. The risk that the products may not work as planned.

§  Market Risk. The risk that the market will not purchase the products in sufficient quantities to allow the company to be profitable, or that a significant competitor will emerge and capture a significant market share.

§  Business Model Risk. The risk that the products and services cannot be created, marketed, and sold at a price that is profitable. Audited financial statements are not required unless they are raising more than $500,000.

§  Execution Risk. The risk that the current management team will not be able to execute the plans they create.

§  Expansion Risk. The risk that the suppliers, employees, contractors, and / or customers will not be available in sufficient quantities to allow the company to expand as planned.  

There are many other types of risks, including legal risk, IP risk, and government regulation risk, economic risk, etc.  Please consider all kinds of risks when decided whether to invest.

The Types of Securities Offered on the Sprowtt Platform

The securities offered on the Sprowtt Platform may include:

§  Common Stock. Securities that represent equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also may give the holder a share in a company's profits via dividend payments (when and if declared by the board of directors) or the capital appreciation of the security. Common Stockholders have a junior status to the claims of secured / unsecured creditors, bondholders, and preferred shareholders in the event of liquidation. Founders and employees generally own shares in the company or hold options exercisable into shares of common stock.

§  Preferred Stock. Securities that have some privileges and rights superior to Common Shares, typically in the event of a liquidation of the company. Preferred shareholders may also receive dividends greater than Common Stockholder, have additional or voting privileges (for example, the right to vote separately on a proposed acquisition or merger), and retain the option to convert to common stock. They may also have anti-dilution protection.  In addition, many corporate charters permit the board of directors, without shareholder approval, to designate the rights and preferences for a class of Preferred Stock and issue the preferred shares.  Such right could be used to discourage future takeovers of the company.

§  Debt Securities. Debt securities typically have repayment terms, including timeframes and interest rates, and are generally superior to both Common Stock and Preferred Stock in the event of a liquidation. Debt securities generally do not enjoy the benefit of company asset appreciation and do not confer any voting or other rights as a shareholder.

Please note that the percentage ownership held by Common Stock and Preferred Stock is generally diluted (meaning that the shareholders own less of the company on a percentage basis) whenever the company issues more shares to raise more capital or otherwise compensate executives and other parties. Preferred Shares may carry anti-dilution clauses that either automatically increase the number of shares whenever the company issues additional shares to maintain the percentage of ownership, or offer the option for the Preferred Shareholder to purchase more shares to maintain their percentage ownership. These rights sometimes include reducing the conversion rate for preferred shares if shares are subsequently sold below the conversion price, which means that the Preferred Shareholder would receive more shares of Common Stock upon conversion.

Please also note that when your percentage ownership is diluted, that your voting power is usually decreased as a result of the dilution.

The Restrictions on the Resale of Securities Offered and Sold

Even though the Issuer may advertise publicly, the shares sold are in the context of a private offering and cannot be transferred or resold, except in limited circumstances, for a minimum of one year from the date of purchase. The crowdfunding regulations specifically prohibit the resale of securities for one year, except to the Issuer, an accredited investor, a family member, or a trust created by you for the benefit of a family member.  The securities may also be transferred or resold in the event of death or divorce.

Annual Reports

Crowdfunding investors, as minority shareholders, may receive limited reporting from the company, typically in the form of newsletters and/or annual reports. Investors should anticipate having limited information, unlike public stock companies where financial reporting is regulated and mandated.

Issuers are required to file Form C-AR and financial statements with the SEC each year, no later than 120 days after the end of the Issuer’s fiscal year (which is typically a calendar year).  Each Issuer must also post this information to its own website.

The Form C-AR contains current disclosure information substantially similar to that provided in the Issuer’s initial Form C, including information on the Issuer’s size, location, principals and employees, business,  plan of operations and the risks of investment in the Issuer’s securities; however, offering-specific disclosures are not required.

An Issuer’s obligation to file annual reports can end under any of the following circumstances:

§  The Issuer is required to file reports under Section 13(a) or Section 15(d) of the Exchange Act (although this would trigger a different obligation to file quarterly and annual reports);

§  The Issuer has filed at least one annual report pursuant to Regulation Crowdfunding and has fewer than 300 holders of record and has total assets that do not exceed $10,000,000;

§  The Issuer has filed at least three annual reports pursuant to Regulation Crowdfunding;

§  The Issuer or another party repurchases all of the securities issued in reliance on Section 4(a)(6) of the Securities Act, including any payment in full of debt securities or any complete redemption of redeemable securities; or

§  The Issuer liquidates or dissolves its business in accordance with state law.

In the event that an Issuer ceases to make annual flings, investors may no longer have current financial information about the Issuer available to them.

Investment Limits

Individual investors may, over a 12-month period, invest in the aggregate across all crowdfunding offerings up to the following amounts:

§  If either their annual income or net worth is less than $100,000, than the greater of:

o    $2,000 or

o    5 percent of the lesser of their annual income or net worth.

§  If both their annual income and net worth are equal to or more than $100,000, 10 percent of the lesser of their annual income or net worth, not to exceed $100,000.

In the above, as is common with private offerings, the value of your primary residence cannot be included in your net worth calculations.


See the following table for examples:

Investor Annual Income

Investor      Net Worth


Investment Limit



 Greater of $2,000 or 5% of $30,000 ($1,500)




 Greater of $2,000 or 5% of $80,000 ($1,500)




 10% of $100,000 ($10,000)




 10% of $200,000 ($20,000)




 10% of $1,200,000 ($120,000) subject to $100,000 cap



Please note that it is up to you to self-verify that you have not exceeded the allowed investments in a calendar year. Sprowtt will know how many investments you have made and the total amount of those investments through our portal, but we are not aware of investments you may have made through other portals. 

Cancelling Your Investment

By   law, investors may cancel their investment commitment until 48 hours prior to the deadline identified in the offering materials.  During that 48-hour period, the investor may also cancel their investment commitment if the issuer materially changes the terms of the offering or the disclosure information provided to the investor. If the offering is completed before the deadline, the investor would have five (5) business days from the notification of the early completion to cancel their investment commitment.

All proceeds will be returned after the cancelation notice within not more than five (5) business days from the notice. If the investor does not cancel their investment as outlined above, the investor forfeits all rights to rescind their security purchase. All sales are deemed irrevocable from that date forward, and investors lose all rights to cancel credit cards or other payment revocations as per their legal contract obligations.

Appropriateness of an Investment

There are many risks associated with investing in an early stage company raising capital via crowdfunding, the most significant of which is that it is likely you may lose all or some of your investment. This is typical of all “high risk, high reward” investments.

You should not invest in a crowdfunding offering unless you are able to afford to lose all or most of your investment. You should not be dependent on the use of the funds you are considering investing to take care of your personal financial needs. Even if the company is successful, it will likely require considerable time before the investment would be returned to you, and there is no guarantee of a satisfactory return on your investment.

In addition, securities purchased through crowdfunding are highly illiquid and you should be prepared to hold your shares for an indefinite period.  There is no market for this type of securities, and you are prohibited from transferring or reselling the securities for at least one year, except in limited circumstances. In addition, it is likely that company will need additional rounds of financing in the future to stay in business and they may not be able to secure such financing.

Your investment strategies or your retirement plans may not be consistent with investing in crowdfunding securities.  If you have an investment adviser, you should discuss how and if investing in early stage companies is compatible with your overall investing plans.

Your Ongoing Relationship with an Issuer

Upon completion of the offering, Sprowtt will maintain open access for five years to the investor file, providing the issuer is current in paying the small Sprowtt account fee underwriting this service. Investors are encouraged to download and keep their investor files on their own computer in case the issuer account with Sprowtt is terminated. Sprowtt will maintain investor records and make them available to the investor upon request for a period of five years from date of the close of the offering.

The issuer will have access to the account records as long as their account with Sprowtt is in good standing. Sprowtt’s services following completion or termination of the offering are limited solely to record maintenance. Investors may communicate with investors on the Sprowtt platform as long as their account is active. Investors will be informed in the unlikely event that an issuer terminates their Sprowtt account for any reason. No other interaction between the parties is promised to occur.

Your Privacy

We will provide your contact information to Issuers with whom you have indicated an interest. In addition, they will be able to see which of their documents you have downloaded and which videos you have watched. They will not be able to see if you have indicated an interest in other offerings.

Regulators also have open access to our platform and may access your information for regulatory purposes.

While Sprowtt may communicate directly with you from time to time, we will never share your information with other parties or Issuers with whom you have not indicated an interest.

Your Signature and Consent to Electronic Delivery

Sprowtt is required to verify that you have received this information. By signing below, you attest that you have received it and understand it. By checking the box, you consent to electronic delivery.


I have read the important notice above and consent to the Site’s use of electronic communications, electronic records, and electronic signature.