A Southern California based green-tech automotive company has been qualified by the Securities and Exchange Commission to raise $22 million through a Tier 2 Regulation A+ offer. Adomani tapped a local California broker-dealer focusing on the Reg A market, Boustead Securities, to sell 4,400,000 of common stock at $5 per share with a $500 minimum investment.
Adomani provides school bus and fleet operators with complete Zero Emission Vehicles and plug-in hybrid solutions. The company brings together electric drivetrain technology, customized products, and service partners to cut total cost of ownership and boost vehicle reliability.
So far sales have led to only $68,000 in revenue with negative net income of $10,685,000 as of the end of 2016. The offering says there will be a focus on expanding sales internationally to the Chinese market. But first any capital raised will be used to pay off $4.2 million of short-term debt due in November. An additional $1 million borrowed from third parties and affiliates for working capital is due this year.
Despite the high burn rate and early-stage nature of the company, Adomani is being promoted as having the potential to list on a national exchange. And the issuer has spent heavily on hiring top professionals to prepare and sell the offer. DLA Piper is counsel for the issuer, booking $400,000 in legal fees, which is at the top range of Reg A legal fees according to AlphaBase, Growth Capitalist’s Reg A deals database. Adomani’s auditor, MaloneBailey, is being paid $67,000 in fees. Adomani’s latest offering documents estimate $4 million in total professional fees and offering costs.
The fledging crowdfinance industry is awash with fear and loathing these days. Just below the surface of the hype and evangelism about crowdfunding’s promise to circumvent the old boys’ club of traditional venture capital and allow entrepreneurs to raise capital directly from so-called “Main Street” investors, lies a growing realization that they – the “picks and shovels” makers of this new Gold Rush – may be the only ones excited about the prospect.
Alternative IPO investment bank WR Hambrecht + Co. is losing the senior banker who has led the firm’s Reg A initiative, putting the future of the firm’s crowdfinance program in doubt. Whitney White, a partner and Hambrecht’s head of equity capital markets, is joining Prime Trust LLC, the trust company and crowdfinance back-office administrator spun off from FundAmerica last summer.
Equity crowdfinance platform Crowdfund.co is moving away from the seed and startup capital world to focus more heavily on post-revenue and “preferably post profitable” private companies in the middle market.