Date of Last Revision: April 30, 2024

General requirements depending on funding targets:

Raising < $124,000

• • Disclose the following from the issuer’s federal income tax return:
    • total income
    • taxable income
    • total tax
    • Note the following:
      1. Submission of actual tax returns is not required
      2. If the offering occurs prior to the issuer filing the applicable year’s tax return, the prior year’s tax return information can be used
      3. If an issuer hasn’t filed a tax return yet and isn’t required to file a return before the end of the offering period, then the tax information is not required
  • In addition to the income tax return information, financial statements verified by the issuer’s principal executive officer are also required
  • UNLESS reviewed or audited financials are already prepared and available—then this information will replace the financial statements verified by the issuer’s principal executive officer

Raising $124,000 to $1,235,000

• • Disclose reviewed financial statements
  • UNLESS audited financials are already prepared and available—then this information will replace the reviewed financial statements

Raising > $1,235,000

• • Disclose reviewed financial statements
  • UNLESS audited financials are already prepared and available—then this information will replace the reviewed financial statements

Content required in financials:

Balance sheets

Statements of comprehensive income

Statements of changes in stockholders’ equity

Statements of cash flows

Notes to the financial statements

Any financials not audited must be labeled as unaudited

Description of issuer’s financial condition and any material changes or trends known to management in financial condition and results of operations since the period end of the financials provided

Basis of accounting:

The US Generally Accepted Accounting Principles (GAAP)

Issuers are allowed to delay implementation of new accounting standards as permitted by non-public business entities, but:

• • Must disclose choice
  • Must apply choice to all standards
  • The choice may not be elected after initial filing—it has to be elected from inception

Issuers will be considered public business entities as defined by the Financial Accounting Standards Board (FASB) and ineligible to rely on any alternative accounting or reporting standards for non-public business entities

Period covered:

Two most recently completed fiscal years OR

The period since the issuer’s inception (whichever period is shorter)

Timing of issuance:

In the first 120 days of an issuer’s fiscal year, offerings can use financials for the fiscal year prior to the most recently completed fiscal year if the financials for the most recently completed fiscal year are not available

For example, a calendar year-end issuer conducting an offering in April 2016 can include comparative financial statements for December 31, 2014, and 2013

As another example, a calendar year-end issuer conducting an offering in May 2016 would be required to disclose comparative financial statements for December 31, 2015, and 2014

Public accountants

Must comply with Commission’s independence rules OR

Independence standards of the American Institute of CPAs (AICPA)

Must also meet standards of Rule 2-01(a) of Regulation S-X

Not required to be a Public Company Accounting Oversight Board (PCAOB)-registered firm

Review and audit standards:

Reviewed statements—must be in accordance with the Statement on Standards for Accounting and Review Services (SSARS) issued by AICPA

Audited statements—must be in accordance with US Generally Accepted Auditing Standards (GAAS) issued by AICPA OR standards of PCAOB

If an audit is conducted in accordance with the standards of PCAOB, it is also required that the audit comply with US GAAP

Reports:

Audit—only an unqualified opinion will qualify

Review—only a report without any modifications will qualify

However, explanatory language in either report in relation to the issuer’s ability to continue as a going concern is not, under current standards, a qualified opinion or a modified report and would still qualify for the filing requirements