FFS Accredited Investor Status

[Rezwan]

Folks, I just looked into it. How can FFS directly fund LPP or other fusion ventures? By being an accredited investor. Unfortunately, the requirements for a charitable organization are pretty steep. We’d need to have $5 million in assets – and I suspect that’s separate from operating costs.

I think this is a worthy goal : )

I’m getting my info from this site. http://www.sec.gov/answers/accred.htm

Under the Securities Act of 1933, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For some of the exemptions, such as rules 505 and 506 of Regulation D, a company may sell its securities to what are known as “accredited investors.”

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

…

3. a charitable organization, corporation, or partnership with assets exceeding $5 million;

…

If you know otherwise, or if there’s a way to make an exception, let me know. And note the lower requirements for individuals below:

6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;

7. a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;

And my personal favorite – because of the “sophisticated person” requirement:

8. a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

I’m all for turning the Focus Fusion Society into a multi-million dollar charitable corporation : ) Of course, we need a few major endowments for this. And I wonder if we need to maintain the $5 million in assets and can only invest amounts over that?

Does anyone have more info on this? Assuming we could raise the money, what are the pros and cons of investing as a charity rather than rounding up individuals to invest individually? For one, I think that gives FFS shares in whatever we invest in and power as a shareholder to determine how any technology developed would be used.

But you have to start thinking in bigger sums.

[Breakable]

I don’t believe one can invest in charity directly, unless using some loophole to retrieve the profits.
Most big corporations avoid taxes one way or the other – some establish charitable trust funds within their organisation where the sole benefactors are the shareholders.
I cant find a link where I saw it using charitable organization now, but here is the similar scheme by wall-mart by using spending deductions:
http://www.jsonline.com/news/wisconsin/29455149.html

Anyway establishing elaborate funding schemes is only for the rich, because you need expensive lawyers and powerful friends to do it. Maybe it could become possible by first donating to FFS until fusion becomes viable and giving some sort promise to benefactors that they will benefit from fusion breakthrough. IANAL, so I am not sure how sound it is legally, but I think a few years could be won even if operating in grey-legal-state.

Still I believe the best and most legal thing for now would be to find either an accredited charitable investor or try to raise venture capital as a startup until you get better results and funding becomes available for any king of further fundraising (IPO?). If you really need to release a product to make an IPO, then probably you should release one, even if it is just an excuse. For example you have build spark plugs yourself, while the market might not be big for this type of product, it is still a product.

[Rezwan]

Breakable wrote: I don’t believe one can invest in charity directly, unless using some loophole to retrieve the profits.

Not sure what you mean here. The question I had was how can the tax deductible charity FFS become an investor?

Many charities invest. Universities have huge endowments that they invest all over the world, they only use a fraction of their assets for operations and programs. This is to ensure sustainability of the charity. The university wants to exist in perpetuity.

Small nonprofits live from donation check to donation check, all try to grow with endowments so that they can eventually run their programs off of membership fees and the interest of their investments.

When you say “invest in charity…retrieve profits” – you’re talking about FFS NOT becoming an accredited investor, but simply giving money to LPP. Some have argued that you can certainly do this. But then, you will NOT qualify to get a return. What you say here isn’t possible:

Maybe it could become possible by first donating to FFS until fusion becomes viable and giving some sort promise to benefactors that they will benefit from fusion breakthrough.

Any sort of promise is the very definition of promising a return on an investment. If you’ve donated because of the promise, that wasn’t charity. As to promises, the venture can’t promise results – we don’t know if the research will solve fusion. But we can say that if it works out, we will all most likely be benefactors of a world of clean energy. However, you will be one of the people that paid for it that gets the same “the world’s a better place” return as people who didn’t invest. They’ll be free riders. You will go down in history as a generous human being : )

This very day, as a human being, you can write a check to Eric Lerner and give it to him as a gift. He’ll keep doing the research. But there is no promise to you for a return if you’re not a formal, accredited investor. Likewise there will be no promise of return or a shareholder voice as FFS if we don’t invest with formal accredited investor status.

Informal relationships differ. But we can’t promise anything about that. We don’t have legal standing.

And this paragraph below is clearly directed at LPP and not FFS. We really have to clarify the difference.:

Still I believe the best and most legal thing for now would be to find either an accredited charitable investor or try to raise venture capital as a startup until you get better results and funding becomes available for any king of further fundraising (IPO?).

We really need to clarify the difference between LPP and FFS. Per the paragraph avobe, as a charitable organization, we would be striving to BE the charitable investor – so that means our goal would be to raise $5million in assets, and a bit more for the actual research investment and our own operational expenses.

LPP has some investors for its shoestring level of operations. It would need more, with greater investment power, to raise the level of the game, (to move to a better level of research effectiveness, by, for example, getting a higher level of switches and a few more physicists and technicians on staff and more time to conduct the research).

And you’re right on with the below. This is something the guys are thinking about:

If you really need to release a product to make an IPO, then probably you should release one, even if it is just an excuse. For example you have build spark plugs yourself, while the market might not be big for this type of product, it is still a product

They do, indeed have some cool spark plugs in development : ) Murali won’t let me post pictures yet for this very “product” issue.

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