2017 Report WhiteClouds
Filed on April 30, 2018
Dear investors,
Marketing
Our recent changes to our marketing strategy have been very effective, specifically our Internet Marketing activities related to Search Engine Marketing and Optimization (SEO/SEM).
- We are now averaging 450 leads per month (with the ability to increase this) – these are potential customers/partners that have completed our contact forms (last summer, this number was 6 leads per month – 75 times improvement).
- Our sales goal is to make personal contact (telephone call, text, email) with these leads within 45 seconds of the lead entering our system. Texting has been very effective if the call goes to voicemail.
- 52% of our leads are turning into bids with 11% of those bids turning into closed sales within 1 week. We don’t have enough history to determine our real close rates, because many of these bids will take 30-120 days to get finalized (we currently have $2.3 Million in unclosed bids). We are testing best practices to improve our close rates – we know we have to be better, but are extremely encouraged by the activity levels we are now experiencing.
- We have rebranded about 70% of the WhiteClouds website, https://www.whiteclouds.com/, moving from a “3D Printing” emphasis to a “Next Generation 3D Models” emphasis. This has resonated extremely well with our customers. While “3D Printing” is great with Buzz, customers are more concerned about the finished product, not the technology that created it.
Sales
Our sales strategy has not been working. We have made significant changes and are starting to see extremely positive results – our sales team has seen more activity in the last 60 days than in the last two years combined.
- New Leadership: We recently separated with our Chief Revenue Officer. Joining with us is a former Executive Vice-President of Sales and Marketing from MarketStar (now part of Omnicom NYSE: OMC). With two decades of hands-on experience at MarketStar, his sales teams and their outsourced sales processes have generated billions in revenue for their customers (some of which are Google, Amazon, HP, Cisco, Verizon, Ebay, Logitech, Motorola and many others). We are excited to be working with him.
- Change to our sales strategy: Our old strategy was focused on outbound reach-out and in building partnerships. We have seen some success, but it has taken way too long for these to develop, sometimes as long as 18 months to get to a point where the effort was worth it. Our new sales strategy is focused on identifying potential customers and partnerships that are ready to move quickly. We are accomplishing that through our SEO/SEM efforts, focusing on those at the bottom-end of the sales funnel. A perfect example of this is with a tradeshow company - we have been trying to have initial discussions for 7 months and have made no progress – because of a Google search, their team found us on and we have since bid 4 different projects for their customers.
- Change to our services: Since we started the company, our service offerings have focused on 3D Printing of scaled-down models (from architectural models to medical models). With our new tradeshow customers, we are finding immediate demands for larger models and scaled-up models. For example, we have 3D printed model airplanes for years, sometimes as small as 1” in length. Not long ago, we took on a project to build a 20 foot model of an FA18 Hornet Fighter jet that will be used in an upcoming tradeshow. While we feel the future is bright for medical models, we are putting more focus into tradeshow related companies and agencies that have immediate demand for our models, large budgets, and encompass the use of ALL of our different types of 3D models and the investments we have made into each of them. Our average order size has increased 56% in the last 30 days (now at $3,608) and we believe this will continue to increase. From a scalability perspective, we have formed some new specialized partnerships to insure we can fulfill projects from either increased demand or that may come with rush requirements.
Customer/Partner Highlights
Here are a few updates from a few of our customers/industries that we have discussed in the past.
- Medical/TeraRecon – Some of their first orders have started to come in from TeraRecon’s customers (UCLA Medical, UofU Medical). We know this is going to take time because of all of the challenges in the medical field related to HIPAA and who is paying for the model, but we are encouraged that we are now getting recurring customers that are seeing the benefits. We are working on a similar relationship with another large medical 3D Visualization company based in Europe.
- Tradeshow/Freeman – We have now trained 10% of their sales staff in offering 3D models to their tradeshow customers. It started slowly back in Q4, but we are now doing 3-4 bids per day. With our new bidding/quoting platform, we can turn these complex bids around in hours. Some of these bids are for projects 6 months out, some are for immediate projects. As an example, the 20 foot FA18 jet project came in on a Thursday night and we had it built within a week for an NHL event. When Freeman reached out to us for this last minute project, they told us that if anyone in the world could do it this quickly, it would be WhiteClouds. We were pleased to hear that. Some of our “Foam” fabrication capabilities (foam sculptures, foam letters, etc. https://www.whiteclouds.com/foam-models/) are getting lots of attention at Freeman – demand is rising quickly – the ability to combine Foam with 3D printing has been a big win for us. Our plans are to continue building this Freeman relationship and implementing something similar at other tradeshow companies and agencies.
- Veterinary Models – This has been delayed and we are working through some new price negotiations with the largest customer of it’s kind, but we anticipate this to go live very soon. You can see more about this at: https://www.whiteclouds.com/veterinary-models/
- Retail Models - we have been approached by a large online retailer (with millions of products) about creating digital 3D models to be used in their future augmented visualization of their products. We are under NDA, so I can’t go into any real details other than to say we are evaluating this project to see if it makes sense to move forward from price perspectives.
We need your help!
Product Spotlights
I wanted to share a couple of product spotlights we recently completed, one is a very unique architectural sales model, the other is a video game map. We are in many discussions with video game manufacturers about creating large dioramas of their video game maps to be used in their esports tourneys – think of a 20’x20’ model of their video game.
- Dota2 Video Game Diorama Model: https://www.youtube.com/watch?v=1_nzIIalEkk
Architectural Model: https://www.youtube.com/watch?v=kig92L7pxlU&feature=youtu.be
Sincerely,
Controller
COO
Chief Executive Officer
CRO
How did we do this year?
☺ The Good
Some of our first orders started to come in from Terarecon and Freeman.
Continue to improve our Gross Margin.
We changed our sales marketing strategy and we are now averaging 450 leads per month
☹ The Bad
Medical models sales are slow because of all of the challenges in the medical field related to HIPAA and who is paying for the model.
Sales were less than anticipated in 2017 but 2018 Q1 sales are promissing.
The sales cycle is very slow. It can take sometimes as long as 18 months to get to a point where the effort was worth it.
2017 At a Glance
January 1 to December 31
$2,293,065 [11%]
Revenue
-$3,238,628
Net Loss
$2,459,072 +151%
Short Term Debt
$2,691,000
Raised in 2017
$66,222
Cash on Hand
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this offering. Some of the information contained in this discussion and analysis, including information regarding the strategy and plans for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
WhiteClouds' proprietary 3D printing software platform enables businesses to produce personalized products for their customers like: a model brain-with-tumor based on a patient's personal MRI, architectural models for future construction, or a custom figurine for a super fan. With our cloud-based software, the options are limitless. We've coupled our 3D as a service (3DaaS) platform with our full color 3D printing facility—that's why just last year we did over $2.5 million in revenue.
At WhiteClouds, we know over 88% of customers want personalization in their products. That's why we make it easy for companies to create personalized products their customers can actually hold in their hands—no expertise in 3D design, software, or equipment necessary. Our robust end-to-end software and dedication to quality is why we have clients ranging from Marvel and Harry Potter to NASA and Microsoft. We aim to be the go-to service provider for ambitious 3D printing projects.
Milestones
WhiteClouds Inc. was incorporated in the State of Utah in January 2013.
Since then, we have:
- 3DaaS Software Platform Built
- Largest Full-Color 3D Printing Production Facility in the World
- Acquired Software 3D Printing Companies: Sandboxr and 3DPlusMe
- Two Pending Patents
- Customers Include: 2nd, 3rd, and 9th Largest Video Game Publishers
- Customers Include: Largest Healthcare 3D Visualization Developer and Largest Anatomical Warehouse Supplier
Historical Results of Operations
- Revenues & Gross Margin. For the period ended December 31, 2017, the Company had revenues of $2,293,065 compared to the year ended December 31, 2016, when the Company had revenues of $2,562,441. Our gross margin was 53.98% in fiscal year 2017, compared to 40.35% in 2016.
- Assets. As of December 31, 2017, the Company had total assets of $3,153,124, including $66,222 in cash. As of December 31, 2016, the Company had $3,965,530 in total assets, including $64,892 in cash.
- Net Loss. The Company has had net losses of $3,238,628 and net losses of $4,728,585 for the fiscal years ended December 31, 2017 and December 31, 2016, respectively.
- Liabilities. The Company's liabilities totaled $7,313,656 for the fiscal year ended December 31, 2017 and $5,828,663 for the fiscal year ended December 31, 2016.
Related Party Transaction
Refer to Question 26 of this Form C for disclosure of all related party transactions.
Liquidity & Capital Resources
To-date, the company has been financed with $3,000,000 in equity, $4,765,000 in convertibles, and $1,070,000 in SAFEs.
We plan to use the proceeds as set forth in this Form C under "Use of Funds". We don’t have any other sources of capital in the immediate future.
We will likely require additional financing in excess of the proceeds from the Offering in order to perform operations over the lifetime of the Company. Except as otherwise described in this Form C, we do not have additional sources of capital other than the proceeds from the offering. Because of the complexities and uncertainties in establishing a new business strategy, it is not possible to adequately project whether the proceeds of this offering will be sufficient to enable us to implement our strategy. This complexity and uncertainty will be increased if less than the maximum amount of securities offered in this offering is sold. The Company intends to raise additional capital in the future from investors. Although capital may be available for early-stage companies, there is no guarantee that the Company will receive any investments from investors.
Runway & Short/Mid Term Expenses
WhiteClouds Inc. cash in hand is $66,222, as of December 2017. Over the last three months, revenues have averaged $238,824/month, cost of goods sold has averaged $86,201/month, and operational expenses have averaged $350,565/month, for an average burn rate of $197,942 per month. Our intent is to be profitable in 3 months.
We are seeing a consistent increase in revenue from month to month. Our revenue increased 21% from February to March and we expect this trend to continue.
Our cost of sales has decreased to 37%. We expect to maintain this great profit margin. Most of our expenses will remain steady but as we increase sales we expect to increase staff and the expenses that are directly related to revenue.
- Net Margin: -141%
- Gross Margin: 54%
- Return on Assets: -103%
- Earnings per Share: -$0.10
- Revenue per Employee: $71,658
- Cash to Assets: 2%
- Revenue to Receivables: 791
- Debt Ratio: 232%
We Our 1,013 Investors
Thank You For Believing In Us
Thank You!
From the WhiteClouds Team
CEO
Jerry founded Purch, an Internet Technology Media company, which exited for $172M. His career has spanned IT, product development, and manufacturing. He has a BS in Technology, has authored two technology books, and loves to coach basketball.
VP of Marketing
Jared has 25 years experience in design and marketing and 10+ years experience as Director of Revenue Optimization and Website General Manager. He was a co-founder of $172M Purch. He has a BA in Graphic Design and breeds dart frogs as a hobby.
VP of Sales
16 years of sales experience. 10+ years in sales management and developing processes. 15 years in the office technology / printer supply industry. He loves basketball, pickleball, and outdoor sports.
Controller
25+ years of working accounting experience. 25+ years of management experience. Set-up 17 companies with new accounting programs to increase efficiency and accuracy of information. BS Degree in accounting.
Wayne Ropelato
Production Manager
Prior to 5 years of 3D Production management at WhiteClouds, Wayne has spent decades in management in Ecommerce Operations, Warehousing, Manufacturing, and Autobody. Wayne has an AS in Automotive Engineering and is an avid golfer.
Details
The Board of Directors
| Director | Occupation | Joined |
|---|---|---|
| Jerry Ropelato | Technology @ WhiteClouds | 2013 |
| Joey Skinner | Management @ WhiteClouds | 2015 |
| Lesa May | Controller @ WhiteClouds | 2015 |
Officers
| Officer | Title | Joined |
|---|---|---|
| Jerry Ropelato | CEO, Director | 2013 |
| David Forsberg | CRO | 2018 |
| Joey Skinner | COO | 2015 |
| Lesa May | Controller | 2015 |
| Holder | Securities Held | Voting Power |
|---|---|---|
| Jerry Ropelato | 13,400,352 Common Stock | 34.2% |
| Ropelato Family Enterprise | 17,444,444 Common Stock | 44.6% |
Past Equity & Loan Fundraises
| Date | Amount | Security | Exemption |
|---|---|---|---|
| 01/2013 | $500,000 | Common Stock | Section 4(a)(2) |
| 05/2013 | $2,500,000 | Section 4(a)(2) | |
| 12/2015 | $600,000 | Section 4(a)(2) | |
| 01/2016 | $3,844,000 | Section 4(a)(2) | |
| 01/2017 | $321,000 | Section 4(a)(2) | |
| 04/2017 | $1,300,000 | Section 4(a)(2) | |
| 07/2017 | $1,070,000 | 4(a)(6) | |
| 03/2018 | $80,000 | Section 4(a)(2) | |
| 06/2018 | $180,000 | Section 4(a)(2) | |
| 09/2018 | $228,029 | 4(a)(6) | |
| 04/2019 | $246,974 | 4(a)(6) | |
| 08/2019 | $200,000 | Common Stock | Regulation D, Rule 506(b) |
| 04/2020 | $267,400 | Other | |
| 01/2021 | $267,475 | Other | |
| 12/2021 | $1,105,374 | Section 4(a)(2) | |
| 05/2022 | $82,600 | 4(a)(6) |
Convertible Note Outstanding
| Issued | Amount | Interest | Discount | Valuation Cap | Maturity |
|---|---|---|---|---|---|
| 12/26/2015 | $600,000 {:data=>{:popover_target=>"content"}} |
8.0% | 0.0% | None | 12/25/2017 {:data=>{:popover_target=>"content"}} |
| 01/23/2016 | $3,844,000 {:data=>{:popover_target=>"content"}} |
8.0% | 0.0% | None | 01/01/2018 {:data=>{:popover_target=>"content"}} |
| 01/28/2017 | $321,000 {:data=>{:popover_target=>"content"}} |
8.0% | 0.0% | None | 01/27/2019 {:data=>{:popover_target=>"content"}} |
| 03/05/2018 | $80,000 {:data=>{:popover_target=>"content"}} |
8.0% | 20.0% | $18,000,000 | 03/05/2020 {:data=>{:popover_target=>"content"}} |
Outstanding Debts
| Lender | Issued | Amount | Oustanding | Interest | Maturity | Current? |
|---|---|---|---|---|---|---|
| Connect VC {:data=>{:popover_target=>"content"}} |
04/17/2017 | $1,300,000 | $859,160 {:data=>{:popover_target=>"content"}} |
8.0% | 05/21/2019 | Yes |
| Jerry Ropelato {:data=>{:popover_target=>"content"}} |
06/30/2018 | $180,000 | $0 {:data=>{:popover_target=>"content"}} |
0.0% | 06/30/2019 | Yes |
| PPP Loan {:data=>{:popover_target=>"content"}} |
04/20/2020 | $267,400 | $0 {:data=>{:popover_target=>"content"}} |
0.0% | 09/30/2020 | |
| PPP Loan {:data=>{:popover_target=>"content"}} |
01/28/2021 | $267,475 | $0 {:data=>{:popover_target=>"content"}} |
0.0% | 12/31/2021 | |
| Jerry Ropelato {:data=>{:popover_target=>"content"}} |
12/31/2021 | $1,105,374 | $1,105,374 {:data=>{:popover_target=>"content"}} |
0.0% | 12/31/2022 | Yes |
Related Party Transactions
The Company has convertible notes (“the Notes”) payable to Jerry Ropelato (CEO of Whiteclouds). The Notes worth $4,765,000 at time of transaction accrue interest at the rate of 8% per annum and have twenty four month terms, with the earliest commencing in November of 2015.
| Key | Value |
|---|---|
| Name | Jerry Ropelato |
| Amount Invested | $180,000 |
| Transaction type | Loan |
| Issued | 06/30/2018 |
| Outstanding principal plus interest | $180,000 as of 07/2018 |
| Interest | 0.0 per annum |
| Maturity | 06/30/2019 |
| Outstanding | Yes |
| Current with payments | Yes |
| Relationship | Owner |
Capital Structure
| Class of Security | Securities (or Amount) Authorized |
Securities (or Amount) Outstanding |
Voting Rights |
|---|---|---|---|
| Preferred | 50,000,000 | 0 | No |
| Common | 50,000,000 | 33,142,304 | Yes |
| Other | 0 | 0 | No |
| Securities Reserved for Issuance upon Exercise or Conversion |
|
|---|---|
| Warrants: | 621 |
| Options: | 6 |
Form C Risks:
We may face potential difficulties in obtaining capital.
Our management team has limited experience in the 3D Printing industry and has not managed a business with similar risks and challenges specific to our business.
In order for the Company to compete and grow, it must attract, recruit, retain and develop the necessary personnel who have the needed experience.
Quality management plays an essential role in determining and meeting customer requirements, preventing defects, improving the Company’s products and services and maintaining the integrity of the data that supports the safety and efficacy of our products.
If we fail to maintain or expand our relationships with our suppliers and manufacturers, we may not have adequate access to new or key technology necessary for our products, which may impair our ability to deliver leading-edge products and services.
Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of the products can lead to injury or other adverse events.
We must acquire or develop new products, evolve existing ones, address any defects or errors, and adapt to technology change.
Our failure to deliver high quality 3D Prints could damage our reputation and diminish demand for our products.
As 3D Printing technology changes, we may need to invest in additional technologies which may have an effect on our business.
Our business could be negatively impacted by cyber security threats, attacks and other disruptions.
The Company’s securities may not be marketable.
Industry consolidation may result in increased competition, which could result in a loss of customers or a reduction in revenue.
If we do not respond to technological changes or upgrade our technology systems, our growth prospects and results of operations could be adversely affected.
The market for technology companies is not predictable. While we may be able to sell the company for its technology, client relationships, team or other factors, there is no guarantee that it can be sold, nor that it will become profitable, nor that it will reach an Initial Public Offering (IPO). Even if those do occur, there is no guarantee that investor returns will be positive.
Through our operations, we collect and store certain personal information that our customers provide to purchase products or services, register on our web site, or otherwise communicate and interact with us.
Cyclical and seasonal fluctuations in the economy, in internet usage and in traditional retail shopping may have an effect on our business.
The Company’s success depends on the experience and skill of its executive officers and key employees.
We currently obtain consumables and certain equipment parts from single or limited sources, and are subject to significant supply and pricing risks.
At some future date, we may be subject to healthcare PHI data and HIPAA requirements that may require additional investment, expertise, consulting expense, employee hires that may have additional risks and challenges specific to our business.
We rely on various intellectual property rights, including patents in order to operate our business.
From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights.
The Company will depend on the performance of distributors, retailers and other resellers.
Although dependent on certain key personnel, the Company does not have any key man life insurance policies on any such people.
We do not plan to pay dividends to its shareholders in the near future and there is no guarantee it will ever receive any profit from its operations so as to be able to declare and pay dividends to its shareholders.
We are not subject to Sarbanes-Oxley regulations and lack the financial controls and safeguards required of public companies.
Changes in employment laws or regulation could harm our performance.
The Company could be negatively impacted if found to have infringed on intellectual property rights.
We may experience substantial competition in the future from companies that have more financial capabilities and resources.
While the Company believes in good faith that its business plans have a reasonable chance of success, the operation of the Company are ultimately speculative and involve the possibility of a total loss of investment, due to any number of considerations. Investment is suitable only for individuals who are financially able to withstand total loss of their investment.
We rely heavily on our technology and intellectual property, but we may be unable to adequately or cost-effectively protect or enforce our intellectual property rights, thereby weakening our competitive position and increasing operating costs.
We have a limited operating history upon which you can evaluate our performance, and accordingly, our prospects must be considered in light of the risks that any new company encounters.
We rely on agreements with third parties to provide certain services, goods, technology, and intellectual property rights necessary to enable us to implement some of our applications, products, and services.
The company intends to use a significant portion of the proceeds from the offering for unspecified working capital. The offering proceeds will be used by the Company in the ways management deems most effective towards the Company’s goals. This means that although we definitely have plans for the proceeds (focused on sales, marketing, and product development) the Company will have ultimate discretion to use the proceeds as it sees fit and the Company has chosen not to limit the Company’s use of the funds to specific uses that investors could evaluate. Such portion of the proceeds from this offering will be used for the purpose that the company’s management deems to be in its best interest in order to address changed circumstances or opportunities. As a result of the foregoing, the Company’s success will be substantially dependent upon its discretion and judgement with respect to application and allocation of such portion of the proceeds of this Offering. The company may choose to use the proceeds in the manner that the investors do not agree with and investor may have no recourse. A use of proceeds that does not further the Company’s business and goals could harm the Company and its operations, and ultimately cause an investor to lose all or portion of his or her investment.
We may be subject to future governmental regulations. Aspects of our business and our products may be regulated at the local, state, and federal levels. Our products may be subject to state, local and Federal environmental laws and regulations, including those relating to the handling and storage of hazardous materials. We and our products may also be subject to significant governmental regulation relating to labor conditions, safety in the workplace, healthcare and other human resource issues. The nature and scope of future legislation, regulations and programs cannot be predicted. While we anticipate that we and our products will be in compliance with all applicable governmental regulations, there still may be risks that such laws and regulations may change with respect to present or future operations. Such additional costs would increase the cost of investments and operations and decrease the demand for products and services. We and our products will be ultimately responsible for compliance with such regulations and for obtaining and maintaining all required permits and licenses. Such compliance may be time consuming and costly, and such expenses may materially affect our future ability to break even or generate profits.
We may not have sufficient product liability insurance to cover potential damages.
Description of Securities for Prior Reg CF Raise
Additional issuances of securities. Following the Investor’s investment in the Company, the Company may sell interests to additional investors, which will dilute the percentage interest of the Investor in the Company. The Investor may have the opportunity to increase its investment in the Company in such a transaction, but such opportunity cannot be assured. The amount of additional financing needed by the Company, if any, will depend upon the maturity and objectives of the Company. The declining of an opportunity or the inability of the Investor to make a follow-on investment, or the lack of an opportunity to make such a follow-on investment, may result in substantial dilution of the Investor’s interest in the Company. Issuer repurchases of securities. The Company may have authority to repurchase its securities from shareholders, which may serve to decrease any liquidity in the market for such securities, decrease the percentage interests held by other similarly situated investors to the Investor, and create pressure on the Investor to sell its securities to the Company concurrently. A sale of the issuer or of assets of the issuer. As a minority owner of the Company, the Investor will have limited or no ability to influence a potential sale of the Company or a substantial portion of its assets. Thus, the Investor will rely upon the executive management of the Company and the Board of Directors of the Company to manage the Company so as to maximize value for shareholders. Accordingly, the success of the Investor’s investment in the Company will depend in large part upon the skill and expertise of the executive management of the Company and the Board of Directors of the Company. If the Board Of Directors of the Company authorizes a sale of all or a part of the Company, or a disposition of a substantial portion of the Company’s assets, there can be no guarantee that the value received by the Investor, together with the fair market estimate of the value remaining in the Company, will be equal to or exceed the value of the Investor’s initial investment in the Company. Transactions with related parties. The Investor should be aware that there will be occasions when the Company may encounter potential conflicts of interest in its operations. On any issue involving conflicts of interest, the executive management and Board of Directors of the Company will be guided by their good faith judgement as to the Company’s best interests. The Company may engage in transactions with affiliates, subsidiaries or other related parties, which may be on terms which are not arm’s-length, but will be in all cases consistent with the duties of the management of the Company to its shareholders. By acquiring an interest in the Company, the Investor will be deemed to have acknowledged the existence of any such actual or potential conflicts of interest and to have waived any claim with respect to any liability arising from the existence of any such conflict of interest.
Minority Ownership
An Investor in the Company will likely hold a minority position in the Company, and thus be limited as to its ability to control or influence the governance and operations of the Company.
The marketability and value of the Investor’s interest in the Company will depend upon many factors outside the control of the Investor. The Company will be managed by its officers and be governed in accordance with the strategic direction and decision-making of its Board Of Directors, and the Investor will have no independent right to name or remove an officer or member of the Board Of Directors of the Company.
Following the Investor’s investment in the Company, the Company may sell interests to additional investors, which will dilute the percentage interest of the Investor in the Company. The Investor may have the opportunity to increase its investment in the Company in such a transaction, but such opportunity cannot be assured.
The amount of additional financing needed by the Company, if any, will depend upon the maturity and objectives of the Company. The declining of an opportunity or the inability of the Investor to make a follow-on investment, or the lack of an opportunity to make such a follow-on investment, may result in substantial dilution of the Investor’s interest in the Company.
Exercise of Rights Held by Principal Shareholders
As holders of a majority-in-interest of voting rights in the Company, the shareholders may make decisions with which the Investor disagrees, or that negatively affect the value of the Investor’s securities in the Company, and the Investor will have no recourse to change these decisions. The Investor’s interests may conflict with those of other investors, and there is no guarantee that the Company will develop in a way that is optimal for or advantageous to the Investor. For example, the shareholders may change the terms of the operating agreement for the company, change the terms of securities issued by the Company, change the management of the Company, and even force out minority holders of securities. The shareholders may make changes that affect the tax treatment of the Company in ways that are unfavorable to you but favorable to them. They may also vote to engage in new offerings and/or to register certain of the Company’s securities in a way that negatively affects the value of the securities the Investor owns. Other holders of securities of the Company may also have access to more information than the Investor, leaving the Investor at a disadvantage with respect to any decisions regarding the securities he or she owns. The shareholders have the right to redeem their securities at any time. Shareholders could decide to force the Company to redeem their securities at a time that is not favorable to the Investor and is damaging to the Company. Investors’ exit may affect the value of the Company and/or its viability. In cases where the rights of holders of convertible debt, SAFES, or other outstanding options or warrants are exercised, or if new awards are granted under our equity compensation plans, an Investor’s interests in the Company may be diluted. This means that the pro-rata portion of the Company represented by the Investor’s securities will decrease, which could also diminish the Investor’s voting and/or economic rights. In addition, as discussed above, if a majority-in-interest of holders of securities with voting rights cause the Company to issue additional stock, an Investor’s interest will typically also be diluted. Based on the risks described above, the Investor could lose all or part of his or her investment in the securities in this offering, and may never see positive returns.
The securities offered via Regulation Crowdfunding may not be transferred by any purchaser of such securities during the one year period beginning when the securities were issued, unless such securities are transferred:
- to the issuer;
-
to an accredited investor
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- as part of an offering registered with the U.S. Securities and Exchange Commission; or
-
to a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance.
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Valuation Methodology for Prior Reg CF Raise
The initial amount invested in a SAFE is determined by the investor, and we do not guarantee that the SAFE will be converted into any particular number of shares of Preferred Stock . As discussed in Question 13, when we engage in an offering of equity interests involving Preferred Stock , Investors may receive a number of shares of Preferred Stock calculated as either (i) the total value of the Investor’s investment, divided by the price of the Preferred Stock being issued to new Investors, or (ii) if the valuation for the company is more than the Valuation Cap, the amount invested divided by the quotient of (a) the Valuation Cap divided by (b) the total amount of the Company’s capitalization at that time. Because there will likely be no public market for our securities prior to an initial public offering or similar liquidity event, the price of the Preferred Stock that Investors will receive, and/or the total value of the Company’s capitalization, will be determined by our board of directors . Among the factors we may consider in determining the price of Preferred Stock are prevailing market conditions, our financial information, market valuations of other companies that we believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. In the future, we will perform valuations of our stock (including both common stock and Preferred Stock) that take into account, as applicable, factors such as the following:
- unrelated third party valuations;
- the price at which we sell other securities in light of the relative rights, preferences and privileges of those securities;
- our results of operations, financial position and capital resources;
- current business conditions and projections;
- the marketability or lack thereof of the securities;
- the hiring of key personnel and the experience of our management;
- the introduction of new products;
- the risk inherent in the development and expansion of our products;
- our stage of development and material risks related to our business;
- the likelihood of achieving a liquidity event, such as an initial public offering or a sale of our company given the prevailing market conditions and the nature and history of our business;
- industry trends and competitive environment;
- trends in consumer spending, including consumer confidence;
- overall economic indicators, including gross domestic product, employment, inflation and interest rates; and
- the general economic outlook.
Company
WhiteClouds, Inc.- Utah Corporation
- Organized January 2013
- 32 employees
Suite 8
Ogden UT 84404 https://www.whiteclouds.com/
Business Description
Refer to the WhiteClouds profile.
EDGAR Filing
The Securities and Exchange Commission hosts the official version of this annual report on their EDGAR web site. It looks like it was built in 1989.
Compliance with Prior Annual Reports
WhiteClouds is current with all reporting requirements under Rule 202 of Regulation Crowdfunding.
All prior investor updates
You can refer to the company's updates page to view all updates to date. Updates are for investors only and will require you to log in to the Wefunder account used to make the investment.
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