Blueprint
|
Robert R. Kaplan, Jr.
Direct
Dial: 804.823.4055
Direct
Fax: 804.823.4099
rkaplan@kvlegal.com
|
May 24,
2018
VIA EDGAR AND FEDEX
OVERNIGHT
Ms.
Sonia Bednarowski
Ms.
Anne Nguyen Parker
Office
of Transportation and Leisure
Division of
Corporation Finance
United
States Securities and Exchange Commission
100 F
Street, N.E.
Washington, DC
20549
Amendment
No. 3 to Offering Statement on Form 1A
Filed
May 24, 2018 File No. 02410814
Dear
Ms. Bednarowski and Ms. Parker:
This
letter is submitted on behalf of The Chosen, LLC, a Utah limited
liability company (the “Issuer”), in response to
comments received from the staff of the Division of Corporation
Finance (the “Staff”) of the U.S.
Securities and Exchange Commission (the “Commission”) in a letter
(the “Comment
Letter”) dated May 23, 2018 with respect to the
Issuer’s second amendment, filed with the Commission on May
17, 2018 (the “Second Amendment”), to
its Offering Statement on Form 1A (File No. 02410814), filed with
the Commission on March 8, 2018 (the “Offering Statement”).
This letter is being submitted contemporaneously with the filing of
the third amendment to the Offering Statement (the
“Third
Amendment”) containing changes made in response to the
Staff’s comments and for the purpose of updating and revising
certain information in the Offering Statement. Certain capitalized
terms set forth in this letter are used as defined in the Third
Amendment.
For
ease of reference, each Staff comment contained in the Comment
Letter is reprinted below in bold, numbered to correspond with the
paragraph numbers assigned in the Comment Letter and is followed by
the corresponding response of the Issuer.
For the
Staff’s ease of review, we have also provided two clean
copies of the Third Amendment, along with two redlines marked
against the Second Amendment. All page references within the
Issuer’s responses are to pages of the clean copy of the
Third Amendment.
Richmond
Office | 1401 E. Cary St. | Richmond, VA 23219 | Phone:
804.823.4000
Richmond
Office Mailing Address | P.O. Box 2470 | Richmond, VA
23218-2470
www.kv-legal.com
General
1.
We
note your response to our prior comment 1 that the link on
VidAngel's website for your offering will be updated to link to the
most recent version of your Form 1-A. However, the VidAngel
solicitation of interest currently links to the Form 1-A filed on
March 8, 2018. Please update the solicitation of interest on
VidAngel's website to link to the most recent amendment of your
Form 1-A.
Issuer’s
Response:
In
response to the Staff’s comment, the VidAngel solicitation
page has been updated with the URL that links to our SEC filings
page, which includes the most recent amendment to the
Issuer’s Form 1-A.
2.
We
note your response to our prior comment 2 and reissue. We are of
the view that your proposed pricing structure does not comply with
the Rule 251(d)(3)(ii) requirement that securities offered under
Regulation A be offered at a fixed price as the price per security
in this offering varies with each tranche. Please revise your
offering to offer your Class A Preferred Units of Membership
Interest at a fixed price. Each time you change the effective price
per Unit, you should to file an offering circular supplement or
post- qualification amendment as applicable
Issuer’s
Response:
In
response to comment 2, please see the Issuer’s revised
disclosure on the cover page and pages 2, 13 and 26 of the Third
Amendment.
As
explained in the disclosure, the issuance of bonus Units to an
investor is premised upon the investor: (i) having delivered an
indication of interest during the test the water period, (ii)
investing at least as much as indicated in the indication of
interest and (iii) making the investment within thirty days of the
qualification. The bonus issuance not predicated simply on the
purchase of the subscribed for Units by an investor, and, if no
investors who have indicated interest invest within the applicable
time frame, no bonus Units may be issued at all.
Issuer
would respectfully refer the Commission to recently qualified
offerings:
(1)
Startengine
Crowdfunding, Inc. (File No.: 024-10738); and
(2)
Groundfloor Finance
Inc. (File No.: 024-10758 as precedent for a similar bonus
structure that have been recently accepted by the Commission under
Regulation A.
The
foregoing revisions notwithstanding, we respectfully disagree with
the Commission’s comment. Rule 251(d)(3)(ii) prohibits
“at the market” offerings, and further defines
“at the market” to mean “an offering of equity
securities into an existing trading
market for outstanding shares of the same class at other
than a fixed price.” There is no existing trading market, or
any other for the Units offered by the Issuer. By the very
definition set forth in Rule 251(d)(3)(ii), the offering does not
constitute an at the market offering.
The
previous bonus formulation, we also would respectfully submit, was
fixed. The bonuses were to be awarded for a defined contingency
(when the investor invested), established by the issuer – not
the market or third parties – and is readily ascertainable
from the disclosure. Nothing in Rule 251(d)(3)(ii) defines fixed
price as a single price or precludes defined changes to pricing
that is established on fixed and readily ascertainable
conditions.
3.
We
note your response to our prior comment 3 and reissue in part. You
disclose that "[i]f a closing of the Offering does not occur for
any reason, the proceeds from such closing will be promptly
returned to investors without interest." Please discuss the
circumstances under which a closing may not occur.
Issuer’s
Response:
In
response to the Staff’s comment, please see the
Issuer’s revised disclosure on the cover page and page 2 of
the Third Amendment.
Risk Factors
Failure to Raise Funds for Production, page 7
4.
We
note your revised disclosure on page 7. Please clarify here and in
your prospectus summary whether the minimum amount of $3,200,000
for the production of Season 1 includes post-production costs. In
addition, we note your revised disclosure on page 7 that if the
maximum amount is raised in this offering, you intend to spend
approximately $3,032,000 for the marketing of Season I. This
disclosure appears to conflict with your disclosure on page 16 that
you intend to use up to $2,110,479 of the net proceeds for
distribution and marketing. Please revise for clarity and
consistency.
Issuer’s
Response:
In
response to the Staff’s comment, please see the
Issuer’s revised disclosure on pages 7 and 16 of the Third
Amendment.
Securities Being Offered
General, page 26
5.
We
note your response to our prior comment 10 and reissue in part.
Please revise your disclosure on page 26 and in your risk factor
addressing fee shifting to clarify, if true, that the company would
also be entitled to recover fees if it was the prevailing party in
litigation with members. Also, please clarify whether the provision
extends to former members and to your officers and directors. In
addition, please revise your risk factor addressing fee shifting on
page 6 to describe the potential effect of this provision on your
company and your investors.
Issuer’s
Response:
In
response to the Staff’s comment, please see the
Issuer’s revised disclosure on pages 6 and 26 of the Third
Amendment.
Failure to Raise Funds for Production, page 7
6.
We
note your response to our prior comment 11 and reissue in part.
Please expand your discussion of the scope of the exclusive forum
provision in your "First Amendment to the Amended and Restated
Operating Agreement" to clarify whether it applies to former
members and to your officers and directors, and explain the
provision's statement regarding service of process. In addition,
please discuss the enforceability of the exclusive forum provision
under the Utah Business Corporation Act.
Issuer’s
Response:
In
response to the Staff’s comment, please see the
Issuer’s revised disclosure on pages 6 and 26 of the Third
Amendment.
The
Issuer respectfully believes that the information contained herein
is responsive to the Comment Letter. Please feel free to contact me
at the above number for any questions related to this letter. We
appreciate the Staff’s timely response.
Very
truly yours,
/s/ Robert R. Kaplan,
Jr.
Robert R. Kaplan,
Jr.
CC:
Derral Eves (via
electronic mail)
T. Rhys
James, Esq. (via electronic mail)
Kaitlin
L. Cannavo, Esq. (via electronic mail)