- 8 provisional patent applications filed for the advanced shroud technology (CEO named as the inventor and is drafting an assignment agreement between himself and Halo Energy)
- Executed contract with Shenzhen Valley Ventures (SVV), a full-service engineering, design-for-manufacturing (DFM), and contract manufacturing consortium
- First purchase order received from DRS Global Enterprise Solutions (a wholly-owned subsidiary of Leonardo DRS)
- CEO has 17 years of experience in business and patent law
- Signed distributorship agreement with Wesbell Technologies (a designer and manufacturer of telecommunications towers in Canada, the Bahamas, and the Caribbean) for sales support
- Total Amount Raised: US $226,300
- Total Round Size: US $1,500,000
- Seed :
- Minimum Investment: US $1,000 per investor
- : Crowd Note
- US $4,000,000 :
- Side by Side Offering
Halo Energy aims to use its patent-pending shroud technology to build one of the world's most efficient, small-scale wind turbines.
Small wind struggles as a viable energy category because most small-scale wind turbines are inefficient compared to conventional energy sources or even larger wind turbines.
We want to change that narrative.
Based on our research, because of higher tip losses relative to rotor size, conventional open-bladed wind turbines become increasingly inefficient the smaller they get. Not so with Halo's shrouded wind turbines. Ours are designed to maintain constant efficiency across rotor diameters enabling them to achieve a power coefficient (Cp) that can outperform conventional comparably-sized turbines.
Halo's 6kW wind turbine can be used in a broad range of on-site generation applications. But we believe its compact size and high electrical output make it uniquely suited for installation on telecommunications towers, offshore oil & gas platforms, and mobile power facilities that typically rely heavily on diesel generators as their primary or backup power source. Within these applications, our turbine can be mounted to existing structures eliminating the need for expensive stand-alone towers and foundations. We believe these highly concentrated markets will allow Halo to deploy a single solution that can be applied across an organization's entire portfolio.
By deploying the Halo turbine to offset the consumption of diesel fuel, facility owners lower their OPEX by reducing the cost of electricity and the many logistical challenges of diesel transport and refueling.
Halo Energy’s patent-pending, shrouded wind turbine design maximizes power output by significantly increasing the pass-through air flow rate. Derived from jet engine technology, Halo Energy’s proprietary design utilizes two closely coupled, convex shrouds that encircle the blades. These overlapping shrouds enable air to flow through both the rotor-swept area and the annulus (the narrow open ring created between the two shrouds). As the air flow fully passes the shroud area, this jet flow then mixes with air that has passed through the rotor-swept area. It is this mixing of these two air streams that results in lower air pressure and increased wind speed. The Halo Energy turbine, in effect, acts as a passive pump. As an example, wind approaching the turbine at 10 mph will speed up to approximately 25 mph as it passes through the rotor-sweep area. Halo Energy’s six-kilowatt pre-commercial turbine is estimated to generate two times as much energy as a similar-sized conventional, open-bladed wind turbine*.
Wide-Ranging Applications, Like Solar
Why has commercial and residential solar experienced so much success over the past 15 years? It’s straightforward - the ability to generate energy where electricity is being used (businesses, homes) is much more efficient and economical than transporting energy hundreds of miles along transmission lines that are expensive to build, difficult to maintain, and plagued by energy losses.
Harnessing wind energy for commercial, industrial, and residential uses represents a massive global market that has gone relatively unrealized due to the inefficiencies and large sizes of conventional wind turbines. Halo Energy plans to change that narrative.
Like solar, the Halo Energy wind turbine can be used in a broad range of on-site generation applications. Its compact size makes it uniquely suited for installation on existing and future telecommunications towers, offshore oil and gas platforms, commercial rooftops, and within industrial and business parks. Many of Halo Energy’s prospective customers currently utilize solar energy to lower their electricity bills, but find that they still cannot generate enough onsite solar energy to fulfill their entire energy demand. We believe onsite wind energy generation can be a perfect complement to solar. The combination of Halo Energy’s wind turbine with solar panels will allow for more uniform energy generation (e.g. solar during the day, wind at night), increased battery life, and the lowering of overall operations costs.
Initial Target Market
Halo Energy’s initial target market is the telecommunications industry, where a few major players control the majority of the global telecom tower market. Specifically, Halo is focused on those telecommunications towers that either are isolated from or have weak connections with an electrical grid and use expensive diesel fuel to generate electricity.
*This statement represents the Company’s research on a competitor’s conventional product based on third-party reports and assumes the same wind speed (above 3m/s). Additional assumptions may have been applied.
Led by Vin Loccisano, Charlie Karustis, and Oliver Foley, Halo Energy was formed by a small team that identified an opportunity to apply advanced aerodynamic principles to build one of the world's most efficient, small-scale wind turbines.
The team recognized that small wind historically struggled as a viable energy category because most small-scale wind turbines are inefficient compared to conventional energy sources or even larger wind turbines. With this challenge and our decades of experience, we want to change that narrative.
With backgrounds spanning engineering, finance, intellectual property, manufacturing, and business development, we have built a wind turbine design system that balances unmatched performance with ease of manufacturing. Early on we identified existing market pain points in the distributed energy sector and have intentionally built our solution to address the existing (and future) needs of our clients.
Like our product, Halo's team is built on decades of prior experience and aims to offer industry-best performance.
Halo currently has minimal fixed costs or overhead because the team has foregone salaries to date. Upon a successful fund raise, the current team members anticipate drawing a minimal salary to cover health care expenses. The balance of the funds will be used for certain contract engineering work streams, the future deployment of up to 10 pilot turbines at customer sites and business development and pipeline-related actions in advance of scaled commercial deployments.
As applied to the telecom space, Halo must comply with the TIA-222 standard for telecom towers and those items that mount to such towers. This standard is universally applied across the industry and is well understood. Halo has integrated this standard into our turbine design from the beginning. Additionally, for applications where the Halo turbine is connected directly to the electrical grid UL, CE compliance is required. Halo will work with engineering and manufacturing partners that are capable of certifying the finished turbine assembly to UL and CE standards as part of their scope of work.
A Side by Side offering refers to a deal that is raising capital under two offering types. If you plan on investing less than US $20,000.00, you will automatically invest under the Regulation CF offering type. If you invest more than US $20,000.00, you must be an accredited investor and invest under the Regulation D offering type.
US $151,300 (under Reg CF only)
Investors who invest $50,000 or less will have their securities held in trust with a Custodian that will serve as a single shareholder of record. These investors will be subject to the Custodian’s Account Agreement, including the electronic delivery of all required information.
All non-Major Purchasers will be subject to an Investment Proxy Agreement (“IPA”). The IPA will authorize an investment Manager to act as representative for each non-Major Purchaser and take certain actions for their benefit and on their behalf. Please see a copy of the IPA included with Company's offering materials for additional details.
Over $25,000 investment: Dinner in Boston with Halo Team (including CEO, CDO & advisors)
Over $50,000 investment: Site visit Coachillin Canna-Business Park in CA to see five (5) of Halo Energy’s first commercial turbines
Over $100,000 investment: Invitation to to all board meetings as a non-voting participant
Over $250,000 investment: Three (3) Halo turbines delivered to site of choice
Over $500,000 investment: One-week, expenses-paid visit to Shenzhen, China to visit Halo's manufacturing facility
It is advised that you consult a tax professional to fully understand any potential tax implications of receiving investor perks before making an investment.
The graph below illustrates theor the of Halo Energy's prior rounds by year.
Halo Energy, LLC (a Delaware limited liability company) produces small-scale shrouded wind turbines.
The Company was founded in 2017 and is headquartered in Wellesley, Massachusetts.
The Company has incurred losses from inception through December 31, 2017, of approximately $37,214, and has not yet started full operations, which raises substantial doubt about the Company’s ability to continue as a going concern. As of January 31, 2019, the Company’s cash balance was at $84,413, and although it’s monthly cash burn rate could be curtailed based on certain operational decisions of its management team, the ability of the Company to continue as a going concern is dependent upon management’s plans to raise additional capital from the issuance of debt, through this Regulation Crowdfunding campaign, and/or additional equity financings, and its ultimate ability to commence profitable sales and positive cash flows from its product sales. There are no assurances that management will be able to raise a sufficient amount of capital on acceptable terms to the Company, and the inability to do so would require a reduction in the scope of the Company’s planned development which would be detrimental to the Company’s business, financial condition, and operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.
On August 28, 2018, the Company entered into a Statement of Work & Master Services Agreement with Shenzhen Valley Ventures for product development. Total compensation is $150,000 in cash and $23,000 in equity.
Liquidity and Capital Resources
During 2018, the Company received $200,000 in equity funding from angel investors. However, the proceeds from the Offering are essential to our operations. We plan to use the proceeds as set forth above under “Use of Proceeds”, which is an indispensable element of our business strategy. As of January 31, 2019, the Company’s cash balance was at $84,413, which will be augmented by the Offering proceeds and used to execute our business strategy.
The Company currently does not have any additional outside sources of capital other than the proceeds from the Combined Offerings.
The Company’s financial statements are an important part of this Form C and should be reviewed in their entirety. The financial statements of the Company are uploaded to the Data Room.
Capital Expenditures and Other Obligations
On November 6, 2018, the Company entered into a convertible promissory note with Charles Karustis in the principal amount of $100,000 with an interest rate of 8% per annum, which matures on November 6, 2019. The note automatically converts upon a qualified equity financing of $1,500,000 or greater. On January 5, 2019, the Company entered into a convertible promissory note with George Karustis in the principal amount of $100,000 with an interest rate of 8% per annum, which matures on January 5, 2020. The note automatically converts upon a qualified equity financing of $1,500,000 or greater.
Other than as set forth above under “Use of Proceeds”, the Company does not intend to make any material capital expenditures in the next nine to twelve months.
Trends and Uncertainties
After reviewing the above discussion of the Company’s liquidity, capital expenditures and intended operations, potential Purchasers should consider whether the Company’s intended operations and related estimated time frames are realistic in their judgment. Potential Purchasers should also assess the consequences to the Company of any delays in funding and intended operations and whether the Company will need additional financing to accomplish its business plan.
Halo’s beachhead market is the world’s 1.2M off-grid telecom towers that presently rely on expensive diesel generation (one of the largest operating expenses for off-grid towers) as their primary source of electricity. These off-grid telecom towers spend 20B annually on diesel and emit 45M tons of CO2. This represents our initial target market.
At present, we believe existing solutions in the market have failed to adequately address the high-cost power problem faced by off-grid tower operators. Solar deployments require a significant amount of land, are subject to theft, and require constant cleaning and maintenance. Plus, conventional wind turbines that generate meaningful power are too large to be installed directly on telecom towers.
In contrast, the Halo 6kW turbine has been specifically designed for the needs of telecom owners. It leverages the unused space on the telecom tower by mounting directly to the tower where it can generate up to 100% of the tower’s electrical load. Further, with its location 100+ feet above the ground, theft and vandalism concerns are also addressed.
We believe Halo’s target addressable market is comprised of 200,000 of the world’s 1.2M off-grid telecom towers and represents a $2.8B revenue opportunity. Of these 200,000 towers that are suitable for the Halo turbine, Halo has identified 14,000 towers (a $200M revenue opportunity) in high-wind locations where the Halo solution can offer customers payback periods less than one year.
Risks Related to the Company’s Business and Industry
The reviewing CPA has included a “going concern” note in the reviewed financials. The Company has incurred losses from inception through December 31, 2017 of approximately $37,214, and has not yet started full operations, which raises substantial doubt about the Company’s ability to continue as a going concern. Although the Company's monthly cash burn rate could be curtailed based on certain operational decisions of its management team, the ability of the Company to continue as a going concern is dependent upon management’s plans to raise additional capital from the issuance of debt, through this Regulation Crowdfunding campaign, and/or additional equity financings, and its ultimate ability to commence profitable sales and positive cash flows from its product sales. There are no assurances that management will be able to raise a sufficient amount of capital on acceptable terms to the Company, and the inability to do so would require a reduction in the scope of the Company’s planned development which would be detrimental to the Company’s business, financial condition, and operating results. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.
We will need to raise additional capital and the terms of such securities may be superior to those of the Securities offered in this Offering. Assuming the completion of an Offering equal to the Closing Amount, resulting in gross proceeds to the Company equal to $350,000, we believe that additional funds (whether in the form of equity, debt, collaboration or licensing activities) will be required within nine (9) to twelve (12) months to continue to engage in research and development activities and commercialize our products and execute our business plan. Assuming the completion of the Maximum Amount, resulting in gross proceeds to the Company of approximately $1.07 million, we believe that based on management’s good faith estimates and assumptions for future operations, the Company may not require additional funds for at least 18 months or at all, to continue to develop and commercialize our products and execute our business plan. Future capital requirements will depend on many factors, including the success of our anticipated products, the timeliness and market acceptance of our existing products and any new products and the success of raising funds in this Offering. There can be no assurance that additional funds will be available when needed, or, if available, that such funds can be obtained on terms acceptable to us.
Our capital requirements will depend on many factors, including:
- the revenue generated by sales of our products;
- the costs associated with expanding our sales and marketing efforts, including efforts to engage distributors and resellers and/or hire sales representatives;
- the expenses we incur in developing and commercializing our products; and
- general and administrative expenses.
If adequate funds are unavailable, we may be required, among other things, to:
- delay, reduce the scope of or eliminate the development of our products;
- license rights to technologies or products on terms that are less favorable to us than might otherwise be available; and/or
- obtain funds through arrangements that may require us to relinquish rights to technologies or products that we would otherwise seek to develop or commercialize ourselves.
We have not prepared any audited financial statements. Therefore, you have no audited financial information regarding the Company’s capitalization or assets or liabilities on which to make your investment decision. If you feel the information provided is insufficient, you should not invest in the Company.
We are pre-revenue, have a limited operating history and a history of operating losses regarding our shrouded turbine business, and expect to incur significant additional operating losses. We were formed in 2017, commencing research and development for our wind turbine products and have only a limited operating history concerning our wind turbine business. Therefore, there is limited historical financial information upon which to base an evaluation of our performance and an investment in the Company. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have generated operating income (losses) of $(37,214) from our business activities for the year ended December 31, 2017. We expect to incur substantial additional operating expenses over the next several years as our research, development, and commercial activities increase. The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our ability to generate revenue and achieve profitability will depend on, among other things, entering into customer relationships with strategic partners, obtaining necessary regulatory approvals, if required, by our strategic partners or us from domestic and international regulatory agencies, successful development, sales and marketing arrangements and raising sufficient funds to finance our activities. We might not succeed at any of these undertakings. If we are unsuccessful at some or all of these undertakings, our business, prospects, and results of operations may be materially adversely affected.
As a result of our limited operating capital, for the foreseeable future will be dependent upon its ability to finance operations from the sale of equity or other financing alternatives. There can be no assurance that the Company will be able to successfully raise operating capital. The failure to successfully raise operating capital, and the failure to effectively monetize its products, could result in bankruptcy or other event which would have a material adverse effect on the Company and the value of its equity and the Securities. Because the Company has limited assets and financial resources, such adverse event could put investors’ dollars at significant risk.
The Company is in production of the first commercial units of its wind turbine. Sophisticated technology-based products often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. The development of new or enhanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends, as well as precise technological execution. Despite quality assurance measures, internal testing and prototype testing by customers, the Company cannot guarantee that its current and future products, including upgrades to those products, will be free of serious defects, which could result in lost revenue, refunds without a commensurate decrease in costs, delays in market acceptance, increase in costs, reputational harm and costs associated with defending or settling claims.
The Company does not have an official record of meeting minutes. Meeting minutes serve as an official and legal record of the meeting of the members of a limited liability company. Proper governance typically requires that all appointments of members, approval of capital raising and approval of major decisions were done in accordance with state law and the company’s operating agreement. Meeting minutes should serve as an evidence of the above. The Company works closely and regularly with its two non-executive members of the Company (Dr. Michael Werle and Dr. Dan Gysling). As such, all decisions are made among all members of the Company and meetings are conducted informally on an ad hoc basis.
The Company does not have an employment contract in place with its team members, including Vincent Loccisano, Charlie Karustis, and Oliver Foley. Employment agreements typically provide protections to the Company in the event of the employee’s departure, specifically addressing who is entitled to any intellectual property created or developed by those employees in the course of their employment and covering topics such as non-competition and non-solicitation. As a result, if the team members were to leave the Company, the Company might not have any ability to prevent their direct competition, or have any legal right to intellectual property created during their employment. There is no guarantee that an employment agreement will be entered into.
Management has broad discretion over how the proceeds of this Offering will be used. Our management will have broad discretion and significant flexibility with respect to the use of the net proceeds from this Offering, and you will be relying on the judgment of our management regarding the application of these proceeds. We cannot specify most of the particular uses of the net proceeds we will receive from this Offering. In any case, you will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions regarding how to use the proceeds from the Offering and we may spend those proceeds in ways with which you disagree. If our management does not apply these funds effectively, our financial condition and results of operations could suffer. See “Use of Proceeds from this Offering” found elsewhere in this Offering Memorandum.
The Company’s sales cycle is long and may be unpredictable, which can result in variability of its financial performance. Additionally, long sales cycles may require the Company to incur high sales and marketing expenses with no assurance that a sale will result, which could adversely affect its profitability. The Company’s results of operations may fluctuate, in part, because of the resource-intensive nature of its sales efforts and the length and variability of the sales cycle. A sales cycle is the period between initial contact with a prospective customer and any sale of its products and/or technology. The sales process involves educating customers about the Company’s products and technology, participating in extended products and technology evaluations and making sure the products and technology meet customer-specific needs. During the sales cycle, the Company may expend significant time and money on sales and marketing activities or make other expenditures, all of which lower its operating margins, particularly if no sale occurs or if the sale is delayed as a result of extended qualification processes or delays. It is difficult to predict when, or even if, it will make a sale to a potential customer or if the Company can increase sales to existing customers. As a result, the Company may not recognize revenue from sales efforts for extended periods of time, or at all. The loss or delay of one or more large transactions in a quarter could impact its results of operations for that quarter and any future quarters for which revenue from that transaction is lost or delayed.
The development and commercialization of the Company’s products and services are highly competitive. Halo Energy has dozens of competitors in the micro wind turbine sector with nameplate capacities ranging from several hundred watts to over 10 kilowatts. Many of the Company’s competitors have significantly greater financial, technical and human resources and may have superior expertise in research and development and marketing services and thus may be better equipped than the Company to develop and commercialize products. These competitors also compete with the Company in recruiting and retaining qualified personnel and acquiring technologies. Smaller or early stage companies, such as Xzeres Corp and Bergey Wind Power, may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Accordingly, the Company’s competitors may commercialize products more rapidly or effectively than the Company is able to, which would adversely affect its competitive position, the likelihood that its products and services will achieve initial market acceptance and its ability to generate meaningful additional revenues from its products and services.
Other than Charles Karustis, our Chief Development Officer, the Company has no in-house sales force and depends on a small number of distributors to market and sell its products. The Company anticipates that a large percentage of its future products’ sales will be generated through third-party distributors. If these distributors were to cancel or reduce their purchase commitments, the Company’s revenue would decline significantly. As a result of this concentration, the Company’s future revenue could fluctuate materially and could be materially and disproportionately impacted by decisions of one of its distributors. In the future, any such distributor may alter its purchasing patterns at any time with limited notice, or may decide not to continue to distribute the Company’s products at all, which could cause its future revenue to decline materially and materially harm its financial condition and results of operations. If the Company is not able to diversify its distributors, it will continue to be susceptible to risks associated with distributor concentration.
Our level of debt could have a material adverse effect on our financial position and prevent us from fulfilling our business plan. The Company has outstanding convertible promissory notes in an aggregate principal amount of $200,000 that are due and payable before the maturity date of the Securities being offered hereby. Upon the maturity of the notes, if we do not have the funds necessary to repay the principal amount of the notes, plus accrued interest thereon, we may default on the notes. A default on the notes may have an adverse financial effect on the Company and its ability to obtain further financing. In addition, we may be forced to curtail or cease our operations as a result of the debt burden associated with the notes or in the event the Company would default on the notes. While, like the Securities, the notes automatically convert if the Company is able to raise equity financing under certain terms and conditions, there is no guaranty that the Company will be able to successfully raise equity financing with terms that would trigger the conversion of the notes. Given the early stage of the Company’s operations, this level of debt could have important consequences to you as an investor in our Securities. For example, it could:
- limit our flexibility in planning for the development and marketing of our products;
- place us at a competitive disadvantage compared to any of our competitors that are less leveraged than we are;
- increase our vulnerability to both general and industry-specific adverse economic conditions; and
- limit our ability to borrow additional funds or to raise additional equity capital.
The addition of more debt to our current debt levels could make it more difficult for us to repay the existing notes and would intensify the leverage-related risks that we now face.
The Company relies heavily on its technology and intellectual property, but it may be unable to adequately or cost-effectively protect or enforce its intellectual property rights, thereby weakening its competitive position and increasing operating costs. The Company filed provisional patent applications that they wish to convert to utility patent applications by its mid-March deadline. The CEO is currently named as the inventor and is in the process of drafting an assignment agreement with the Company. To protect its rights in our services and technology, the Company relies on a combination of copyright and trademark laws, patents, trade secrets, confidentiality agreements with members and third parties, and protective contractual provisions. The Company also relies on laws pertaining to trademarks and domain names to protect the value of its corporate brands and reputation. Despite its efforts to protect its proprietary rights, unauthorized parties may copy aspects of the Company’s products or technology, obtain and use information, marks, or technology that the Company regards as proprietary, or otherwise violate or infringe its intellectual property rights. In addition, it is possible that others could independently develop substantially equivalent intellectual property. If the Company does not effectively protect its intellectual property, or if others independently develop substantially equivalent intellectual property, the Company’s competitive position could be weakened.
Effectively policing the unauthorized use of its products and technology is time-consuming and costly, and the steps taken by the Company may not prevent misappropriation of its technology or other proprietary assets. The efforts the Company has taken to protect our proprietary rights may not be sufficient or effective, and unauthorized parties may copy aspects of its products, use similar marks or domain names, or obtain and use information, marks, or technology that the Company regards as proprietary. The Company may have to litigate to enforce its intellectual property rights, to protect its trade secrets, or to determine the validity and scope of others’ proprietary rights, which are sometimes not clear or may change. Litigation can be time consuming and expensive, and the outcome can be difficult to predict.
Our business could be materially and adversely impacted by risks inherent in international markets. We intend to sell our products to customers outside the U.S. International sales subject us to inherent risks related to changes in the economic, political, legal and business environments in the foreign countries in which we are able to do business, including the following:
- fluctuations in currency exchange rates;
- regulatory and product approval requirements;
- tariffs and other trade barriers;
- greater difficulty in accounts receivable collection and longer collection periods;
- difficulties and costs of managing foreign distributors;
- reduced protection for intellectual property rights in some countries;
- burdens of complying with a wide variety of foreign laws;
- the impact of recessions in economies outside the U.S.;
- political and economic instability; and
- U.S. export regulatory restrictions.
If we fail to successfully market and sell our products in international markets, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
The Company’s international operations could be affected by currency fluctuations, capital and exchange controls, expropriation and other restrictive government actions. Because of its intent to target international markets, the Company will have exposure to currency exchange rate fluctuations, primarily the Canadian dollar, Euro, Indian Rupee and Chinese Yuan, related to buying, manufacturing, selling and financing aspects of Company’s business in currencies other than the local currencies of the countries in which the Company operates. At present, the Company has not implemented any measures to reduce the effect of currency exchange rate fluctuations and other risks of future global operations. The Company cannot, therefore, provide assurance that currency exchange rate fluctuations will not otherwise have a material adverse effect on the Company’s financial condition or results of operations.
The Company’s potential cross-border operations will require it to comply with anti-corruption laws and regulations of the U.S. government and various non-U.S. jurisdictions. In addition to the risks set forth above, future business in multiple countries may require the Company to comply with U.S. and foreign anti-corruption laws and regulations, such as the Foreign Corrupt Practices Act of 1977, or the “FCPA.” The FCPA prohibits U.S. companies and their officers, directors, employees and agents acting on their behalf from corruptly offering, promising, authorizing or providing anything of value to foreign officials for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately and fairly reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. As part of future business, the Company may deal with state-owned business enterprises, the employees and representatives of which may be considered foreign officials for purposes of the FCPA. As a result, business dealings between the Company and any such foreign official could expose the Company to the risk of violating anti-corruption laws even if such business practices may be customary or are not otherwise prohibited between the Company and a private third-party. Violations of these legal requirements are punishable by criminal fines and imprisonment, civil penalties, disgorgement of profits, injunctions, debarment from government contracts as well as other remedial measures.
The Company’s industry could be subject to increased global regulatory oversight. The energy industry, and in particular, the wind energy industry, could be subject to increased global regulatory oversight. Changing regulatory policies and other actions by governments and third parties in the countries in which the Company may ultimately operate with respect to curtailment of electricity generation, compliance, electricity grid management restrictions, interconnection rules and transmission may all have the effect of limiting the revenues from, and increasing the operating costs of, the Company’s product deployments which could have a material adverse effect on the Company’s business, financial condition and results of operations.
The Company’s projects may rely on interconnections to transmission lines and other transmission facilities that are owned and operated by third parties. Some deployments of the Company’s products may depend upon interconnection to electric transmission lines owned and operated by regulated utilities to deliver the electricity generated by the Company’s wind turbines. In some grid-connected applications of the Company’s product, generation of electricity may be curtailed without compensation to the Company’s customers due to transmission limitations or limitations on the electricity grid’s ability to accommodate intermittent electricity generating sources. Such occurrences may reduce the Company’s customers’ ability to capitalize fully on a particular project’s potential, thereby making the Company’s products less attractive to its target customers and markets.
Operational problems and natural events may cause electricity generation to fall below expectations. The ability of the Company’s products to generate electricity is dependent upon an ability to maintain the working order of its wind turbines in accordance with any future warranty requirements. A natural disaster, severe weather, accident, failure of major equipment, shortage of or inability to acquire critical replacement or spare parts, could damage or require our wind turbines to be shut down and/or cause our turbines to fail to fulfill any warranty obligations that may be in effect. In addition, replacement and spare parts for wind turbines and key pieces of electrical equipment may be difficult or costly to acquire or may be difficult or costly to install in a timely manner at remote customer sites. In addition, climate change may have the long-term effect of changing wind patterns at customer sites. Changing wind patterns could cause changes in expected electricity generation. These events could also degrade equipment or components at accelerated and not anticipated rates requiring unplanned maintenance costs.
We are very dependent on our management and key personnel for our success. Our success will depend, in part, upon our ability to attract and retain additional skilled personnel, which may require substantial additional funds. Competition for employees in our industry is intense. There can be no assurance that we will be able to find and attract additional qualified employees or retain any such personnel. Our inability to hire qualified personnel, the loss of services of our key personnel, or the loss of services of executive officers, such as Vincent Loccisano, our Chief Executive Officer, member of our Board of Managers and founder, and Charles Karustis, our Chief Development officer and long-term industry participant.
All decisions with respect to our management will be made by our Board of Managers and officers. You will have no right or power to take part in our management and will have no effective means of influencing day to day actions of our Board of Managers or our officers in the conduct of our affairs. Accordingly, no Securities should be purchased by you unless you are willing to entrust all aspects of our management to our Board of Managers and our officers.
The Company may be obligated to provide royalty payments under an asset purchase agreement with Ogin, Inc. Pursuant to the transaction with Ogin, Inc., the Company purchased certain assets consisted of a mix of historical testing data and test equipment. In addition the a payment of $40,000 at closing, the Company is obligated to pay an ongoing fee (payable by quarterly, starting on March 31, 2018 and reconciled annually no later than the last day of December of each year thereafter) in the amount equal to 2% of any revenues generated from any of the Company’s products/projects that utilize any of Ogin, Inc.’s intellectual property rights and interests in the purchased wind-turbine assets. The royalty payments are capped at an aggregate of $500,000.
The Company has conducted related party transactions. On November 6, 2018, the Company entered into a convertible promissory note with Charles Karustis, its Chief Development Officer, in the principal amount of $100,000 with an interest rate of 8% per annum, which matures on November 6, 2019. The note automatically converts upon a qualified equity financing of $1,500,000 or greater. On January 5, 2019, the Company entered into a convertible promissory note with George Karustis, the father or Charles Karustis, in the principal amount of $100,000 with an interest rate of 8% per annum, which matures on January 5, 2020. The note automatically converts upon a qualified equity financing of $1,500,000 or greater.
Risks Related to the Securities
The Crowd Notes will not be freely tradable until one year from the initial purchase date. Although the Crowd Notes may be tradable under federal securities law, state securities regulations may apply and each Purchaser should consult with his or her attorney. You should be aware of the long-term nature of this investment. There is not now and likely will not be a public market for the Crowd Notes. Because the Crowd Notes have not been registered under the 1933 Act or under the securities laws of any state or non-United States jurisdiction, the Crowd Notes have transfer restrictions under Rule 501 of Regulation CF. It is not currently contemplated that registration under the 1933 Act or other securities laws will be affected. Limitations on the transfer of the Crowd Notes may also adversely affect the price that you might be able to obtain for the Crowd Notes in a private sale. Purchasers should be aware of the long-term nature of their investment in the Company. Each Purchaser in this Offering will be required to represent that it is purchasing the Securities for its own account, for investment purposes and not with a view to resale or distribution thereof.
We are selling convertible notes that will convert into shares or result in payment in limited circumstances. These notes only convert or result in payment in limited circumstances. If the Crowd Notes reach their maturity date, investors (by a decision of the Crowd Note holders holding a majority of the principal amount of the outstanding Crowd Notes) will either (a) receive payment equal to the total of their purchase price plus outstanding accrued interest, or (b) convert the Crowd Notes into shares of the Company’s most senior class of preferred stock, and if no preferred stock has been issued, then shares of Company’s common stock. If there is a merger, buyout or other corporate transaction that occurs before a qualified equity financing, investors will receive a payment of the greater of their purchase price plus accrued unpaid interest or the amount of preferred shares they would have been able to purchase using the valuation cap. If there is a qualified equity financing (an initial public offering registered under the 1933 Act or a financing using preferred shares), the notes will convert into a yet to-be-determined class of preferred stock. If the notes convert because they have reached their maturity date, the notes will convert based on a $4,000,000 valuation cap. If the notes convert due to a qualified equity financing, the notes will convert at a discount of 20%, or based on a $4,000,000 valuation cap. This means that investors would be rewarded for taking on early risk compared to later investors. Outside investors at the time of conversion, if any, might value the Company at an amount well below the $4,000,000 valuation cap, so you should not view the $4,000,000 as being an indication of the Company’s value.
We have not assessed the tax implications of using the Crowd Note. The Crowd Note is a type of debt security. As such, there has been inconsistent treatment under state and federal tax law as to whether securities like the Crowd Note can be considered a debt of the Company, or the issuance of equity. Investors should consult their tax advisers.
The Crowd Note contains dispute resolution provisions which limit your ability to bring class action lawsuits or seek remedy on a class basis. By purchasing a Crowd Note in this Offering, you agree to be bound by the dispute resolution provisions found in Section 6 of the Crowd Note. Those provisions apply to claims regarding this Offering, the Crowd Notes and possibly the securities into which the Crowd Note are convertible. Under those provisions, disputes under the Crowd Note will be resolved in arbitration conducted in Delaware. Further, those provisions may limit your ability to bring class action lawsuits or similarly seek remedy on a class basis.
You may have limited rights. The Company has not yet authorized preferred stock, and there is no way to know what voting rights those securities will have. In addition, as an investor in the Regulation CF offering you will be considered a Non-Major Investor (as defined below) under the terms of the notes offered, and therefore, you have more limited information rights.
You will be bound by an investor proxy agreement which limits your voting rights. As a result of purchasing the notes, all Non-Major Investors (including all investors investing under Regulation CF) will be bound by an investor proxy agreement. This agreement will limit your voting rights and at a later time may require you to convert your future preferred shares into common shares without your consent. Non-Major Investors will be bound by this agreement, unless Non-Major Investors holding a majority of the principal amount outstanding of the Crowd Notes (or majority of the shares of the preferred equity the notes will convert into) held by Non-Major Investors vote to terminate the agreement.
A majority of the Company is owned by a small number of owners. Prior to the Offering, the Company’s current owners of 20% or more of the Company’s outstanding voting securities beneficially own up to 59.42% of the Company’s voting securities. Subject to any fiduciary duties owed to our other owners or investors under Rhode Island law, these owners may be able to exercise significant influence over matters requiring owner approval, including the election of directors or managers and approval of significant Company transactions, and will have significant control over the Company’s management and policies. Some of these persons may have interests that are different from yours. For example, these owners may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change in control of the Company or otherwise discourage a potential acquirer from attempting to obtain control of the Company, which in turn could reduce the price potential investors are willing to pay for the Company. In addition, these owners could use their voting influence to maintain the Company’s existing management, delay or prevent changes in control of the Company, or support or reject other management and board proposals that are subject to owner approval.
Start-up investing is risky. Investing in startups is very risky, highly speculative, and should not be made by anyone who cannot afford to lose their entire investment. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market. Before investing, you should carefully consider the specific risks and disclosures related to both this offering type and the company which can be found in this company profile and the documents in the data room below.
Your shares are not easily transferable. You should not plan on being able to readily transfer and/or resell your security. Currently there is no market or liquidity for these shares and the company does not have any plans to list these shares on an exchange or other secondary market. At some point the company may choose to do so, but until then you should plan to hold your investment for a significant period of time before a “liquidation event” occurs. A “liquidation event” is when the company either lists their shares on an exchange, is acquired, or goes bankrupt.
The Company may not pay dividends for the foreseeable future. Unless otherwise specified in the offering documents and subject to state law, you are not entitled to receive any dividends on your interest in the Company. Accordingly, any potential investor who anticipates the need for current dividends or income from an investment should not purchase any of the securities offered on the Site.
Valuation and capitalization. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult to assess and you may risk overpaying for your investment. In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold.
You may only receive limited disclosure. While the company must disclose certain information, since the company is at an early-stage they may only be able to provide limited information about its business plan and operations because it does not have fully developed operations or a long history. The company may also only obligated to file information periodically regarding its business, including financial statements. A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events through continuing disclosure that you can use to evaluate the status of your investment.
Investment in personnel. An early-stage investment is also an investment in the entrepreneur or management of the company. Being able to execute on the business plan is often an important factor in whether the business is viable and successful. You should be aware that a portion of your investment may fund the compensation of the company's employees, including its management. You should carefully review any disclosure regarding the company's use of proceeds.
Possibility of fraud. In light of the relative ease with which early-stage companies can raise funds, it may be the case that certain opportunities turn out to be money-losing fraudulent schemes. As with other investments, there is no guarantee that investments will be immune from fraud.
Lack of professional guidance. Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company's board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company may not have the benefit of such professional investors.
Representatives of SI Securities, LLC are affiliated with SI Advisors, LLC (“SI Advisors”). SI Advisors is an exempt investment advisor that acts as the General Partner of SI Selections Fund I, L.P. (“SI Selections Fund”). SI Selections Fund is an early stage venture capital fund owned by third-party investors. From time to time, SI Selections Fund may invest in offerings made available on the SeedInvest platform, including this offering. Investments made by SI Selections Fund may be counted towards the total funds raised necessary to reach the minimum funding target as disclosed in the applicable offering materials.
Frequently Asked Questions
A Side by Side offering refers to a deal that is raising capital under two offering types. This Side by Side offering is raising under Regulation CF and Rule 506(c) of Regulation D.
The Form C is a document the company must file with the Securities and Exchange Commission (“SEC”) which includes basic information about the company and its offering and is a condition to making a Reg CF offering available to investors. It is important to note that the SEC does not review the Form C, and therefore is not recommending and/or approving any of the securities being offered.
Before making any investment decision, it is highly recommended that prospective investors review the Form C filed with the SEC (included in the company's profile) before making any investment decision.
Rule 506(c) under Regulation D is a type of offering with no limits on how much a company may raise. The company may generally solicit their offering, but the company must verify each investor’s status as an accredited investor prior to closing and accepting funds. To learn more about Rule 506(c) under Regulation D and other offering types check out our blog and academy.
Title III of the JOBS Act outlines Reg CF, a type of offering allowing private companies to raise up to $1 million from all Americans. Prior capital raising options limited private companies to raising money only from accredited investors, historically the wealthiest ~2% of Americans. Like a Kickstarter campaign, Reg CF allows companies to raise funds online from their early adopters and the crowd. However, instead of providing investors a reward such as a t-shirt or a card, investors receive securities, typically equity, in the startups they back. To learn more about Reg CF and other offering types check out our blog and academy.
When you complete your investment on SeedInvest, your money will be transferred to an escrow account where an independent escrow agent will watch over your investment until it is accepted by Halo Energy. Once Halo Energy accepts your investment, and certain regulatory procedures are completed, your money will be transferred from the escrow account to Halo Energy in exchange for your securities. At that point, you will be a proud owner in Halo Energy.
To make an investment, you will need the following information readily available:
- Personal information such as your current address and phone number
- Employment and employer information
- Net worth and income information
- Social Security Number or passport
- ABA bank routing number and checking account number (typically found on a personal check or bank statement)
If you are investing under Rule 506(c) of Regulation D, your status as an Accredited Investor will also need to be verified and you will be asked to provide documentation supporting your income, net worth, revenue, or net assets or a letter from a qualified advisor such as a Registered Investment Advisor, Registered Broker Dealer, Lawyer, or CPA.
An investor is limited in the amount that he or she may invest in a Reg CF offering during any 12-month period:
- If either the annual income or the net worth of the investor is less than $100,000, the investor is limited to the greater of $2,000 or 5% of the lesser of his or her annual income or net worth.
- If the annual income and net worth of the investor are both greater than $100,000, the investor is limited to 10% of the lesser of his or her annual income or net worth, to a maximum of $100,000.
Separately, Halo Energy has set a minimum investment amount of US $1,000.
Accredited investors investing $20,000 or over do not have investment limits.
You are a partial owner of the company, you do own securities after all! But more importantly, companies which have raised money via Regulation CF must file information with the SEC and post it on their websites on an annual basis. Receiving regular company updates is important to keep shareholders educated and informed about the progress of the company and their investment. This annual report includes information similar to a company’s initial Reg CF filing and key information that a company will want to share with its investors to foster a dynamic and healthy relationship.
In certain circumstances a company may terminate its ongoing reporting requirement if:
- The company becomes a fully-reporting registrant with the SEC
- The company has filed at least one annual report, but has no more than 300 shareholders of record
- The company has filed at least three annual reports, and has no more than $10 million in assets
- The company or another party purchases or repurchases all the securities sold in reliance on Section 4(a)(6)
- The company ceases to do business
However, regardless of whether a company has terminated its ongoing reporting requirement per SEC rules, SeedInvest works with all companies on its platform to ensure that investors are provided quarterly updates. These quarterly reports will include information such as: (i) quarterly net sales, (ii) quarterly change in cash and cash on hand, (iii) material updates on the business, (iv) fundraising updates (any plans for next round, current round status, etc.), and (v) any notable press and news.
Currently there is no market or liquidity for these securities. Right now Halo Energy does not plan to list these securities on a national exchange or another secondary market. At some point Halo Energy may choose to do so, but until then you should plan to hold your investment for a significant period of time before a “liquidation event” occurs. A “liquidation event” is when Halo Energy either lists their securities on an exchange, is acquired, or goes bankrupt.
You can return to SeedInvest at any time to view your portfolio of investments and obtain a summary statement. If invested under Regulation CF you may also receive periodic updates from the company about their business, in addition to monthly account statements.
This is Halo Energy's fundraising profile page, where you can find information that may be helpful for you to make an investment decision in their company. The information on this page includes the company overview, team bios, and the risks and disclosures related to this investment opportunity. If the company runs a side by side offering that includes an offering under Regulation CF, you may also find a copy of the Halo Energy's Form C. The Form C includes important details about Halo Energy's fundraise that you should review before investing.
For offerings made under Regulation CF, you may cancel your investment at any time up to 48 hours before a closing occurs or an earlier date set by the company. You will be sent a reminder notification approximately five days before the closing or set date giving you an opportunity to cancel your investment if you had not already done so. Once a closing occurs, and if you have not canceled your investment, you will receive an email notifying you that your securities have been issued. If you have already funded your investment, your funds will be promptly refunded to you upon cancellation. To cancel your investment, you may go to your portfolio page
If you invest under any other offering type, you may cancel your investment at any time, for any reason until a closing occurs. You will receive an email when the closing occurs and your securities have been issued. If you have already funded your investment and your funds are in escrow, your funds will be promptly refunded to you upon cancellation. To cancel your investment, please go to your portfolio page.