What is a going-concern paragraph in simple terms?

A warning from the auditor that the company may not survive the next twelve months without something changing: new money, a restructuring, cost cuts, or the success of a plan management describes in the notes. The auditor still signs off on the numbers as fairly presented. The paragraph says the numbers are right and the company may not last, which is a different and in some ways more useful statement than a qualified opinion.

Is a going-concern paragraph the same as a qualified audit opinion?

No, and the difference matters. A qualified opinion means the auditor found a departure from GAAP or could not obtain enough evidence on some matter, so the statements are fairly presented 'except for' it. A going-concern paragraph accompanies an unmodified (clean) opinion: the auditor agrees the statements are fairly presented and adds an explanatory paragraph about the entity's ability to continue. Calling it a 'going-concern qualification' is common shorthand and technically wrong; AltStreet uses 'going-concern paragraph' or 'the auditor raised substantial doubt'.

Does a going-concern paragraph mean the company will fail?

No. It means the auditor could not conclude it would survive the year on the evidence. Many issuers carry the paragraph for years: Ark7's three Reg A series LLCs have carried it while continuing to file and distribute, and 291 of the 737 audited Reg A issuers in AltStreet's set have carried it in at least one year. What it does mean is that the entity's continuation depends on the plans in the note, which are usually more capital raising, and that an investor is relying on those plans, not on the balance sheet, for the next twelve months.

How often do Regulation A issuers get a going-concern paragraph?

Often, and less often over time. Across 2,457 audited Form 1-K annual reports extracted into AltStreet's database (a set weighted toward the retail platforms and issuers AltStreet covers, not the whole Reg A universe), 704, or 29 percent, carry a going-concern paragraph. By fiscal year the share was around half for FY2016 to FY2019, 41 percent for FY2020, 35 percent for FY2021, 26 percent for FY2022, 22 percent for FY2023 and 18 percent for FY2024 and FY2025, as the population shifted from early-stage issuers toward larger real estate and credit vehicles.

Why do crowdfunding (Reg CF) annual reports rarely show one?

Because they are not audited. A Form C-AR carries financial statements certified by the chief executive, with no audit or review, so there is no auditor to add the paragraph. Management's own going-concern evaluation under ASC 205-40 still applies to GAAP statements, but small issuers' notes seldom address it. The paragraph does appear on the audited or reviewed statements some issuers include in an offering statement, and on the operator's side: Mainvest's own November 2022 Form C disclosed a going-concern paragraph and 2.5 months of runway eighteen months before the portal closed.

What should I look for in the note the paragraph refers to?

Four things. The conditions: recurring losses, negative working capital, debt maturities, a liquidity mismatch. Management's plans: raising equity, selling assets, refinancing, cutting costs, or, on a retail bond issuer, continuing to sell bonds. Whether the plans depend on things outside management's control, which is the usual reason doubt is not alleviated. And, on issuers that owe investors redemptions or distributions, the risk factor that usually sits beside the paragraph: Worthy Property Bonds' March 2026 report pairs its going-concern paragraph with 'a possibility that bond liability redemption requests may exceed available liquidity', which is the paragraph translated into what it means for a bondholder.

What happened on issuers that carried the paragraph?

The paragraph preceded three different outcomes on AltStreet's record. Worthy's Peer Capital programs suspended redemptions in 2022 and were dissolved in January 2026 with $12.66 million unpaid, and the two Property Bonds issuers still selling carry it today. Mainvest's parent carried it in 2022 and the portal ceased in June 2024 after its banking intermediary failed. Ark7's series LLCs have carried it for successive years while continuing to operate and pay distributions. The paragraph is a statement of dependence on the plans, and the outcomes track whether the plans worked.

Going-Concern Paragraph

Risk & Portfolio Concepts

Definition

A going-concern paragraph is a separate paragraph in an auditor's report stating that conditions or events raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period, one year after the date the financial statements are issued, and referring the reader to the note where management describes those conditions and its plans. Under US GAAP (ASC 205-40) management must evaluate going concern every reporting period and disclose substantial doubt when it is probable the entity cannot meet its obligations as they come due within that year; the auditor, under AU-C 570 for private companies and PCAOB AS 2415 for public ones, evaluates the same question and, if substantial doubt remains after considering management's plans, adds the paragraph. The paragraph is not a qualified opinion. A qualified, adverse or disclaimed opinion concerns whether the statements are fairly presented; a going-concern paragraph accompanies an unmodified opinion and concerns whether the entity will be around to present the next ones. It appears in the audited annual reports (Form 1-K) of Regulation A issuers and in the 10-Ks of public companies; Regulation Crowdfunding annual reports are not audited, so on Reg CF issuers the doubt surfaces, if at all, in management's own notes or in the reviewed or audited statements of an offering.

Why it matters

In an issuer-backed alternative investment, the investor's exposure is to the entity as much as to the asset: the entity holds the loans or the properties, administers the cash, files the reports, runs the redemption program and pays the distributions. A going-concern paragraph is the audit report's way of saying that entity may not be doing any of those things in a year without the plans described in the note. It is the plainest warning the financial reporting system produces, it sits in a document every Regulation A Tier 2 issuer must file annually, and it is routinely absent from the platform's marketing page. On the record it is common: more than a quarter of the audited Reg A annual reports in AltStreet's set carry one. Reading it properly means three things: knowing it is a warning about liquidity rather than a finding about the accounts, so a clean opinion beside it is not reassurance; reading the plans it points to and asking what they depend on; and, on any issuer that owes investors redemptions, treating the paragraph as the answer to whether those redemptions can be counted on. On Worthy the paragraph and the redemption suspensions arrived together, and the site's liquidity language never changed.

Common misconceptions

•It is not a qualified opinion. The auditor's opinion on the financial statements stays unmodified; the paragraph is an explanatory addition about the entity's ability to continue. 'Going-concern qualification' is shorthand that names the wrong thing.
•It is not a prediction of failure. It is a statement that survival for the next year depends on plans the auditor could not conclude would succeed; many issuers carry it for years.
•It is not rare. Around 29 percent of audited Reg A annual reports in AltStreet's set carry one, and about half did for fiscal years 2016 to 2019.
•Its absence on a Reg CF issuer is not reassurance. Form C-AR statements are unaudited, so no auditor was asked; the doubt, if any, is in management's notes or nowhere.
•'Alleviated' does not mean the conditions went away. It means management's plans were judged likely to work; the conditions must still be disclosed, and the plans are what the investor is relying on.

Technical details

The standards: management first, then the auditor

ASC 205-40 (FASB ASU 2014-15, effective for fiscal years ending after December 15, 2016): management evaluates, at each annual and interim reporting date, whether conditions and events raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued (or available to be issued).

Substantial doubt exists when it is probable the entity will be unable to meet its obligations as they become due within that year; 'probable' has its FASB meaning of likely to occur.

If substantial doubt is raised, management discloses the principal conditions, its evaluation of their significance, and its plans. If the plans alleviate the doubt (probable to be implemented and effective), the disclosure states so; if not, the statements say there is substantial doubt.

AU-C 570 (AICPA, private companies and most Reg A issuers) and AS 2415 (PCAOB, public companies): the auditor evaluates management's assessment and plans; if substantial doubt remains, the report includes a separate section or paragraph headed 'Substantial Doubt About the Entity's Ability to Continue as a Going Concern', with a reference to the note. The opinion itself is not modified.

When the auditor disagrees with management or cannot obtain evidence about the plans, the outcome can be a qualified or disclaimed opinion, which is a different and rarer event.

Liquidation basis: if liquidation becomes imminent, ASC 205-30 requires a change from the going-concern basis of accounting to the liquidation basis, which is when the balance sheet itself changes rather than the audit report.

Where it appears in retail private-market filings

Regulation A Tier 2: audited financial statements in the annual report on Form 1-K, so the paragraph appears there; the semiannual Form 1-SA is unaudited but management's disclosure continues. Tier 1 annual reports need not be audited.

Exchange Act reporters: 10-K audit reports carry it under AS 2415; Netcapital Inc., the parent of the Netcapital funding portal, disclosed doubt about its ability to continue in its 2026 reporting.

Regulation Crowdfunding: offering statements above the review threshold carry reviewed or audited statements where a paragraph can appear; annual reports on Form C-AR are certified by the chief executive and unaudited, so no auditor paragraph exists. Mainvest's operator carried one on its own Form C in November 2022.

Regulation D: no public financial statements at all in most cases; the paragraph, if any, is in the private placement memorandum's audited statements.

AltStreet's data layer: the extractor for Reg A statements records going_concern (raised / alleviated / none) per filing, which is what the counts below are built from, and the entity pages show the latest statement with its going-concern status.

The record: audited Reg A annual reports in AltStreet's set

Population: 5,804 extracted Reg A statements (1-K and 1-SA) from the issuers AltStreet tracks, weighted toward retail platforms and their vehicles, not a census of Regulation A; 2,457 are audited Form 1-K annual reports.

Going-concern status across all statements: raised 1,700; alleviated 46; none 3,990; unclassified 68.

Audited 1-Ks with a going-concern paragraph: 704 of 2,457 (28.7 percent).

By fiscal year: FY2016 52 percent (42 reports); FY2017 49 percent (75); FY2018 49 percent (97); FY2019 53 percent (116); FY2020 41 percent (191); FY2021 35 percent (294); FY2022 26 percent (392); FY2023 22 percent (436); FY2024 18 percent (412); FY2025 18 percent (388).

Issuers: 737 distinct audited 1-K filers; 291 (39 percent) carried a going-concern paragraph in at least one fiscal year.

Reading the trend: the falling share reflects the population as much as the issuers; the earlier years are dominated by small operating companies raising under Tier 2, the later ones by real estate, credit and fund-style vehicles with income. It is not evidence that early-stage Reg A issuers became safer.

Three cases, three outcomes

Worthy (Reg A Tier 2, $10 bonds): Assurance Dimensions' reports on Worthy Property Bonds and Worthy Property Bonds 2 for the year ended March 31, 2026 each carry the paragraph, beside stockholders' deficits of $6.68 million and $4.05 million and a risk factor that redemption requests may exceed available liquidity; both issuers continue to sell bonds marketed as redeemable at any time. Their sister programs, Peer Capital I and II, carried it, suspended redemptions from August 2022, and were dissolved on January 30, 2026 with $12.66 million unpaid.

Mainvest (Reg CF portal operator): the operator's own Form C of November 2022 disclosed a $2.08 million annual loss, cash described as 2.5 months of runway and a going-concern paragraph; the portal ceased operations on June 14, 2024 after its banking intermediary failed, with no successor servicer for 779 offerings' notes.

Ark7 (Reg A Tier 2 series LLCs): all three series carry the paragraph in successive annual reports, audited by a sole-practitioner CPA, while continuing to file, operate and pay distributions that exceed net income plus depreciation; the parent, which lends to the series at 7 to 10 percent, files nothing.

What the three share: in each case the paragraph was on EDGAR while the platform's marketing said nothing about it, and in each case the investor's practical question (will I be redeemed, will my note be serviced, will the distribution continue) was the one the paragraph addressed.

How to read one before investing or holding

Find the audit report in the latest 1-K or 10-K and read the paragraph; then find the note it references, usually 'Going Concern' or 'Liquidity', and read the conditions and the plans.

Classify the plans: capital the entity controls (asset sales, cost cuts) versus capital it must persuade others to provide (new offerings, refinancing, parent support); doubt is rarely alleviated when the plans are the second kind.

Check the sequence: a paragraph in year one that becomes 'alleviated' in year two is a recovery; one that persists across three annual reports is a business model that depends on continuous fundraising, which is a fact to price rather than a warning to wait out.

On a redemption or distribution promise, read the paragraph with the related risk factor and the cash on the balance sheet against the amount that could be requested; on Worthy Property Bonds total assets fell from $41.0 million to $16.9 million in two years.

On a platform whose operator files nothing audited (most funding portals), the operator's Form C-AR or Form D is the only window, and the absence of a paragraph there means no one was asked, not that no doubt exists.

Never write 'going-concern qualification' in a note to yourself or anyone else; it invites the wrong response, which is to check the accounting rather than the cash.

Frequently asked questions

What is a going-concern paragraph in simple terms?: A warning from the auditor that the company may not survive the next twelve months without something changing: new money, a restructuring, cost cuts, or the success of a plan management describes in the notes. The auditor still signs off on the numbers as fairly presented. The paragraph says the numbers are right and the company may not last, which is a different and in some ways more useful statement than a qualified opinion.
Is a going-concern paragraph the same as a qualified audit opinion?: No, and the difference matters. A qualified opinion means the auditor found a departure from GAAP or could not obtain enough evidence on some matter, so the statements are fairly presented 'except for' it. A going-concern paragraph accompanies an unmodified (clean) opinion: the auditor agrees the statements are fairly presented and adds an explanatory paragraph about the entity's ability to continue. Calling it a 'going-concern qualification' is common shorthand and technically wrong; AltStreet uses 'going-concern paragraph' or 'the auditor raised substantial doubt'.
Who decides there is substantial doubt, management or the auditor?: Both, in sequence. Since ASU 2014-15 (ASC 205-40), management must evaluate at each reporting date whether it is probable the entity cannot meet its obligations within one year of the issuance date, and if so, disclose the conditions, its plans, and whether those plans alleviate the doubt. The auditor then evaluates management's assessment and plans; if substantial doubt remains, the auditor adds the paragraph. If management's plans are judged likely to be implemented and effective, the doubt is 'alleviated': the conditions are still disclosed in the notes, but no auditor paragraph is added. In AltStreet's Reg A statement set, 1,700 statements raise substantial doubt and 46 disclose it as alleviated.
Does a going-concern paragraph mean the company will fail?: No. It means the auditor could not conclude it would survive the year on the evidence. Many issuers carry the paragraph for years: Ark7's three Reg A series LLCs have carried it while continuing to file and distribute, and 291 of the 737 audited Reg A issuers in AltStreet's set have carried it in at least one year. What it does mean is that the entity's continuation depends on the plans in the note, which are usually more capital raising, and that an investor is relying on those plans, not on the balance sheet, for the next twelve months.
How often do Regulation A issuers get a going-concern paragraph?: Often, and less often over time. Across 2,457 audited Form 1-K annual reports extracted into AltStreet's database (a set weighted toward the retail platforms and issuers AltStreet covers, not the whole Reg A universe), 704, or 29 percent, carry a going-concern paragraph. By fiscal year the share was around half for FY2016 to FY2019, 41 percent for FY2020, 35 percent for FY2021, 26 percent for FY2022, 22 percent for FY2023 and 18 percent for FY2024 and FY2025, as the population shifted from early-stage issuers toward larger real estate and credit vehicles.
Why do crowdfunding (Reg CF) annual reports rarely show one?: Because they are not audited. A Form C-AR carries financial statements certified by the chief executive, with no audit or review, so there is no auditor to add the paragraph. Management's own going-concern evaluation under ASC 205-40 still applies to GAAP statements, but small issuers' notes seldom address it. The paragraph does appear on the audited or reviewed statements some issuers include in an offering statement, and on the operator's side: Mainvest's own November 2022 Form C disclosed a going-concern paragraph and 2.5 months of runway eighteen months before the portal closed.
What should I look for in the note the paragraph refers to?: Four things. The conditions: recurring losses, negative working capital, debt maturities, a liquidity mismatch. Management's plans: raising equity, selling assets, refinancing, cutting costs, or, on a retail bond issuer, continuing to sell bonds. Whether the plans depend on things outside management's control, which is the usual reason doubt is not alleviated. And, on issuers that owe investors redemptions or distributions, the risk factor that usually sits beside the paragraph: Worthy Property Bonds' March 2026 report pairs its going-concern paragraph with 'a possibility that bond liability redemption requests may exceed available liquidity', which is the paragraph translated into what it means for a bondholder.
What happened on issuers that carried the paragraph?: The paragraph preceded three different outcomes on AltStreet's record. Worthy's Peer Capital programs suspended redemptions in 2022 and were dissolved in January 2026 with $12.66 million unpaid, and the two Property Bonds issuers still selling carry it today. Mainvest's parent carried it in 2022 and the portal ceased in June 2024 after its banking intermediary failed. Ark7's series LLCs have carried it for successive years while continuing to operate and pay distributions. The paragraph is a statement of dependence on the plans, and the outcomes track whether the plans worked.