Primer on a successful Safe or convertible note financing

Both the Safe and the convertible note are a security and transactions involving a Safe or a convertible note are subject to state and federal securities laws. You should discuss securities law compliance with your attorney. Any transaction that involves a Safe or convertible note should be used only in connection with a company conducting a private securities offering only to accredited investors.

The following checklist is not comprehensive, but it highlights some key compliance matters for a successful private securities offering.

The company:

  • Is able to truthfully make the representations and warranties contained in the Safe or Note Purchase Agreement, including that the company:
    • Is a corporation properly organized and in good standing in Delaware, California or another US State and has all required authorizations and approvals necessary to complete the transaction.
    • Is not in violation or default of anything applicable to the company including, for example, the Company's certificate of incorporation and bylaws and any statute, regulation, court order, judgment, agreement or similar instrument.
    • Will not be in violation or default of anything applicable to the company nor incur any lien or impairment nor experience any other adverse change to its business as a result of the transaction.
    • Has (or can obtain on commercially reasonable terms) sufficient legal rights to the intellectual property necessary for its business.
  • Has furnished each investor with all material information necessary for the investor to make an informed investment decision.
  • Has not made any untrue statement of a material fact and has not made any of its statements misleading by the omission of a material fact.
  • Makes any filings required under state and federal securities laws.

The offering:

  • Is a private securities offering made available only to accredited investors.
  • Has not involved any form of general solicitation or advertising.

The investor:

  • Is able to truthfully make the Investor's representations and warranties contained in the Safe or Note Purchase Agreement, including that the investor:
    • Has all required authorizations and approvals necessary to complete the transaction.
    • Is an accredited investor under Rule 501 of Regulation D of the Securities Act.
    • Understands the risk of an illiquid investment of this nature and is able to incur a complete loss of their investment without impairing their financial condition.

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