Exhibit A
EXHIBIT A TO FORM C – OFFERING STATEMENT
September 7, 2023
THE AUDITION, INC.
Target Offering Amount of $25,000
Maximum Offering Amount of
$2,500,000
The Audition, Inc. (“Audition”, the “Company,” “we,” “us”, or “our”), is offering a minimum amount of $25,000 (the “Target Offering Amount”) and up to a maximum amount of $2,500,000 (the “Maximum Offering Amount”) of the Company’s Series B Common Stock (the “Securities”) on a best-efforts basis as described in this Form C (this “Offering”). We must raise an amount equal to or greater than the Target Offering Amount by April 12, 2024 (the “Offering Deadline”). Unless we raise at least the Target Offering Amount by the Offering Deadline, no Securities will be sold in this Offering, all investment commitments will be cancelled, and all committed funds will be returned without interest or deduction.
Potential purchasers of the Securities are referred to herein as “Investors” or “you.” In order to purchase the Securities, you must complete the purchase process through our intermediary, DealMaker Securities LLC (the “Intermediary”). All committed funds will be held in escrow with Enterprise Bank & Trust (the “Escrow Agent”) until released to the Company following one or more closings. Investors may cancel an investment commitment until up to 48 hours prior to the Offering Deadline, or such earlier time(s) as the Company designates pursuant to Regulation CF, using the cancellation mechanism provided by the Intermediary.
Investment commitments may be accepted or rejected by us, in whole or in part, in our sole and absolute discretion. We have the right to cancel or rescind our offer to sell the Securities at any time and for any reason. The Intermediary has the ability to reject any investment commitment and may cancel or rescind our offer to sell the Securities at any time for any reason.
| Price to Investors | Service Fees and Commissions (1)(2) | Net Proceeds | ||||||||||
| Minimum Individual Purchase Amount (3) | $ | 500.00 | $ | 42.50 | $ | 457.50 | ||||||
| Target Offering Amount | $ | 25,000.00 | $ | 2,125.00 | $ | 22,875.00 | ||||||
| Maximum Offering Amount | $ | 2,500,000.00 | $ | 212,500.00 | $ | 2,287,500.00 | ||||||
| (1) | This excludes other fees and Offering expenses, such as attorneys’ fees, marketing expenses, and audit fees. | |
| (2) | In addition to the eight and one half percent (8.5%) fee shown here, the Intermediary will also receive a monthly maintenance fee of $2,000 and its affiliate DealMaker Reach will receive a monthly fee of $10,000 not shown above. | |
| (3) | The Company reserves the right to amend the Minimum Individual Purchase Amount, in its sole discretion. |
A crowdfunding investment involves risk. You should not invest any funds in this Offering unless you can afford to lose your entire investment.
In making an investment decision, Investors must rely on their own examination of the Company and the terms of the Offering, including the merits and risks involved. These Securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document.
The U.S. Securities and Exchange Commission does not pass upon the merits of any Securities offered or the terms of the Offering, nor does it pass upon the accuracy or completeness of any Offering document or literature.
These Securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these Securities are exempt from registration.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK THAT MAY NOT BE APPROPRIATE FOR ALL INVESTORS. THERE ARE ALSO SIGNIFICANT UNCERTAINTIES ASSOCIATED WITH AN INVESTMENT IN OUR COMPANY AND THE SECURITIES. THE SECURITIES OFFERED HEREBY ARE NOT PUBLICLY TRADED. THERE IS NO PUBLIC MARKET FOR THE SECURITIES AND ONE MAY NEVER DEVELOP. AN INVESTMENT IN OUR COMPANY IS HIGHLY SPECULATIVE. THE SECURITIES SHOULD NOT BE PURCHASED BY ANYONE WHO CANNOT BEAR THE FINANCIAL RISK OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME AND WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE THE SECTION OF THIS FORM C TITLED “RISK FACTORS” BEGINNING ON PAGE 3.
THE SECURITIES OFFERED HEREBY WILL HAVE TRANSFER RESTRICTIONS. NO SECURITIES MAY BE PLEDGED, TRANSFERRED, RESOLD OR OTHERWISE DISPOSED OF BY ANY INVESTOR DURING THE ONE-YEAR PERIOD BEGINNING WHEN THE SECURITIES WERE ISSUED EXCEPT PURSUANT TO RULE 501 OF REGULATION CF. YOU SHOULD BE AWARE THAT YOU COULD BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
YOU ARE NOT TO CONSTRUE THE CONTENTS OF THIS FORM C AS LEGAL, ACCOUNTING, OR TAX ADVICE, OR AS INFORMATION NECESSARILY APPLICABLE TO YOUR PARTICULAR FINANCIAL SITUATION. EACH INVESTOR SHOULD CONSULT THEIR OWN FINANCIAL ADVISER, COUNSEL, AND ACCOUNTANT AS TO LEGAL, TAX, AND RELATED MATTERS CONCERNING THEIR INVESTMENT.
THIS OFFERING IS EXEMPT FROM REGISTRATION ONLY UNDER THE LAWS OF THE UNITED STATES AND ITS TERRITORIES. NO OFFER IS BEING MADE IN ANY JURISDICTION NOT LISTED ABOVE. PROSPECTIVE INVESTORS ARE SOLELY RESPONSIBLE FOR DETERMINING THE PERMISSIBILITY OF THEIR PARTICIPATING IN THIS OFFERING, INCLUDING OBSERVING ANY OTHER REQUIRED LEGAL FORMALITIES AND SEEKING CONSENT FROM THEIR LOCAL REGULATOR, IF NECESSARY. THE INTERMEDIARY FACILITATING THIS OFFERING IS LICENSED AND REGISTERED SOLELY IN THE UNITED STATES AND HAS NOT SECURED, AND HAS NOT SOUGHT TO SECURE, A LICENSE OR WAIVER OF THE NEED FOR SUCH LICENSE IN ANY OTHER JURISDICTION. THE COMPANY AND THE INTERMEDIARY, EACH RESERVE THE RIGHT TO REJECT ANY INVESTMENT COMMITMENT MADE BY ANY PROSPECTIVE INVESTOR, WHETHER FOREIGN OR DOMESTIC.
SPECIAL NOTICE TO FOREIGN INVESTORS
IF YOU LIVE OUTSIDE THE UNITED STATES, IT IS YOUR RESPONSIBILITY TO FULLY OBSERVE THE LAWS OF ANY RELEVANT TERRITORY OR JURISDICTION OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY PURCHASE OF THE SECURITIES, INCLUDING OBTAINING REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER REQUIRED LEGAL OR OTHER FORMALITIES. WE RESERVE THE RIGHT TO DENY THE PURCHASE OF THE SECURITIES BY ANY FOREIGN INVESTOR.
NOTICE REGARDING THE ESCROW AGENT
ENTERPRISE BANK & TRUST, THE ESCROW AGENT SERVICING THE OFFERING, HAS NOT INVESTIGATED THE DESIRABILITY OR ADVISABILITY OF AN INVESTMENT IN THIS OFFERING OR THE SECURITIES OFFERED HEREIN. THE ESCROW AGENT MAKES NO REPRESENTATIONS, WARRANTIES, ENDORSEMENTS, OR JUDGEMENT ON THE MERITS OF THE OFFERING OR THE SECURITIES OFFERED HEREIN. THE ESCROW AGENT’S CONNECTION TO THE OFFERING IS SOLELY FOR THE LIMITED PURPOSES OF ACTING AS A SERVICE PROVIDER.
The Company certifies that all the following statements are TRUE for the Company in connection with this Offering:
| (1) | Is organized under, and subject to, the laws of a State or territory of the United States or the District of Columbia; | |
| (2) | Is not subject to the requirement to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (15 U.S.C. §§ 78m or 78o(d)); | |
| (3) | Is not an investment company, as defined in Section 3 of the Investment Company Act of 1940 (the “Investment Company Act”)(15 U.S.C. § 80a-3), or excluded from the definition of investment company by Section 3(b) or Section 3(c) of the Investment Company Act (15 U.S.C. §§ 80a-3(b) or 80a-3(c)); | |
| (4) | Is not ineligible to offer or sell securities in reliance on Section 4(a)(6) of the Securities Act of 1933 (the “Securities Act”) (15 U.S.C. § 77d(a)(6)) as a result of a disqualification as specified in § 227.503(a); | |
| (5) | Has filed with the SEC and provided to investors, to the extent required, any ongoing annual reports required by law during the two years immediately preceding the filing of this Form C; and | |
| (6) | Has a specific business plan, which is not to engage in a merger or acquisition with an unidentified company or companies. |
Bad Actor Disclosure
The Company is not subject to any bad actor disqualifications under any relevant U.S. securities laws.
The date of this Form C Offering Statement is September 7, 2023.
TABLE OF CONTENTS
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You should rely only on the information contained in this Form C. We have not authorized anyone to provide any information or make any representations other than those contained in this Form C, and no source other than the Intermediary has been authorized to host this Form C and the Offering. If anyone provides you with different or inconsistent information, you should not rely on it. We are not offering to sell, nor seeking offers to buy, the Securities in any jurisdiction where such offers and sales are not permitted. The information contained in this Form C and any documents incorporated by reference herein is accurate only as of the date of those respective documents, regardless of the time of delivery of this Form C or the time of issuance or sale of any Securities.
Statements contained herein as to the content of any agreements or other documents are summaries and, therefore, are necessarily selective and incomplete and are qualified in their entirety by the actual agreements or other documents. Prior to the consummation of the purchase and sale of the Securities, the Company will afford prospective Investors an opportunity to ask questions of, and receive answers from, the Company and its management concerning the terms and conditions of this Offering and the Company.
In making an investment decision, you must rely on your own examination of the Company and the terms of the Offering, including the merits and risks involved. The statements of the Company contained herein are based on information believed to be reliable; however, no warranty can be made as to the accuracy of such information or that circumstances have not changed since the date of this Form C. For example, our business, financial condition, results of operations, and prospects may have changed since the date of this Form C. The Company does not expect to update or otherwise revise this Form C or any other materials supplied herewith.
This Form C is submitted in connection with the Offering described herein and may not be reproduced or used for any other purpose.
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Form C and any documents incorporated by reference herein contain forward-looking statements and are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this Form C are forward-looking statements. Forward-looking statements give our current reasonable expectations and projections regarding our financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “should,” “can have,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
The forward-looking statements contained in this Form C and any documents incorporated by reference herein are based on reasonable assumptions we have made considering our industry experience, perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate under the circumstances. As you read and consider this Form C, you should understand that these statements are not guarantees of performance or results. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect or change, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.
Investors are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements made in this Form C or any documents incorporated by reference herein are accurate only as of the date of those respective documents. Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any reason after the date of this Form C or to conform these statements to actual results or to changes in our expectations.
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The following summary highlights information contained elsewhere or incorporated by reference in this Form C. This summary may not contain all the information that may be important to you. You should read this entire Form C carefully, including the matters discussed under the section titled “Risk Factors.”
The Company
The Company was incorporated in California on February 1, 2021. The Company was formed to democratize the entertainment industry by empowering the community to discover and elevate the best talent, regardless of geography and socio-economic barriers.
The Company will achieve this through development of the Holly™ online platform—a revolutionary new entertainment platform where:
| ● | Talent can sign up for an account and create an online portfolio of their talent and acting abilities; | |
| ● | The community can collaborate on projects and audition opportunities; | |
| ● | Users have access to a marketplace for casting services, legal consultation (outsourced), accounting, 3d scanning of users’ faces to copyright, and other talent representation, and producers and corporate executives can conduct talent searches; | |
| ● | Users can participate in weekly/monthly challenges, virtual live events, and try out to get selected for commercials; and | |
| ● | Popular users will be invited to appear on the Holly™ TV show. |
Holly™ is the product of multi-talented Academy Award nominated actor, singer-songwriter, and record producer, Terrence Howard. Holly™ is born from over 35 years of his insight and experience in the entertainment industry. Every aspect of the platform is developed to solve the problems he has identified in the most seamless and fluid way we believe possible.
The Company will generate revenue via the Holly™ marketplace, paid membership services charged to entertainment insiders for access to the talent database, live and virtual event ticket sales, corporate partners and sponsors, digital advertising and event marketing, and subscription services for online content/webisodes.
The Company has developed Holly™ branding and submitted trademark applications, and has created the Holly™ website and prototype app. It is currently engaged in marketing and advertising, beta launching the Holly™ early access program, and collecting user feedback, with a launch of the app planned for Q4 2023.
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The Offering
| Target (Minimum) Offering Amount | $25,000 |
| Total Amount of the Securities Outstanding after Offering (if Target Offering Amount met) |
25,000 (plus up to 7,500 bonus shares) |
| Maximum Offering Amount | $2,500,000 |
| Total Amount of the Securities Outstanding after Offering (if Maximum Offering Amount met) |
2,500,000 (plus up to 750,000 bonus shares) |
| Price Per Security | $1.00 |
| Minimum Individual Purchase Amount† | $500.00 + |
| Offering Deadline | April 12, 2024 |
† The Company is offering four (4) tiers of time-based Investor rewards:
| Tier 1 (Week 1): Invest in the first seven (7) days of the Offering and receive 20% bonus shares of Series B Common Stock | |
| Tier 2 (Week 2): Invest in the first eight (8) to fourteen (14) days of the Offering and receive 15% bonus shares of Series B Common Stock | |
| Tier 3 (Week 3): Invest in the first fifteen (15) to twenty-one (21) days of the Offering and receive 10% bonus shares of Series B Common Stock | |
| Tier 4 (Week 4): Invest in the first twenty-two (22) to twenty-eight (28) days of the Offering and receive 5% bonus shares of Series B Common Stock | |
| *All time-based perks end at 11:59pm PST. By way of example, “Week 1” begins immediately after the Company’s Form C is available on EDGAR and ends at 11:59pm PST seven days later. |
The Company is offering five (5) tiers of volume-based Investor rewards:
| Tier 1 ($1,000.00+ investment): Investors receive 5% bonus shares of Series B Common Stock | |
| Tier 2 ($2,500.00+ investment): Investors receive 5% bonus shares of Series B Common Stock and a framed Holly™ plaque signed by Terrence Howard | |
| Tier 3 ($5,000.00+ investment): Investors receive 10% bonus shares of Series B Common Stock and a framed Holly™ plaque signed by Terrence Howard | |
| Tier 4 ($10,000.00+ investment: Investors receive 10% bonus shares of Series B Common Stock, a framed Holly™ plaque signed by Terrence Howard, and an exclusive dinner in Beverly Hills with the other Tier 4 investors and Holly™ executive team, including Terrence and Mira Howard (does not include transportation) on such date as selected by the Company within twenty four (24) months from the final closing date of this Offering | |
| Tier 5 ($25,000.00+ investment): Investors receive 10% bonus shares of Series B Common Stock, a framed Holly™ plaque signed by Terrence Howard, and an exclusive dinner in Beverly Hills with the other Tier 4 and Tier 5 investors and Holly™ executive team, including Terrence and Mira Howard (does not include transportation) on such date as selected by the Company within twenty four (24) months from the final closing date of this Offering. Investors also receive a one-on-one call with Terrence Howard for up to sixty-minutes. | |
| The bonuses from the time-based and volume-based rewards are stackable and the bonus shares issued under one reward program is not included in the number of securities purchased for the purposes of calculating the bonus under the other reward program. Therefore, as illustrative purposes only, if an investor purchases 25,000 shares of Series B Common Stock in the Week 1 of the Offering, the investor will be issued a sum of 7,500 (i.e., 30%) bonus shares of Series B Common Stock. |
+ The Company reserves the right to amend the Minimum Individual Purchase Amount, in its sole discretion.
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A crowdfunding investment involves risk. You should not invest any funds in this offering unless you can afford to lose your entire investment. In making an investment decision, Investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. These Securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document. The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature. These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.
Before making an investment decision with respect to the Securities, we urge you to carefully consider the risks described in this section and other factors set forth in this Form C. In addition to the risks specified below, the Company is subject to same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events, and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently riskier than more developed companies. Prospective Investors should consult with their legal, tax, and financial advisors prior to making an investment in the Securities. The Securities should only be purchased by persons who can afford to lose all their investment.
Risks Related to the Company’s Business and Industry
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.
The Company is still in an early phase, and we are just beginning to implement our business plan. There can be no assurance that we will ever operate profitably. The likelihood of our success should be considered in light of the problems, expenses, difficulties, complications, and delays usually encountered by early-stage companies. The Company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
The amount of capital the Company is attempting to raise in this Offering may not be enough to sustain the Company’s current business plan.
In order to achieve the Company’s near and long-term goals, the Company may need to procure funds in addition to the amount raised in the Offering. There is no guarantee the Company will be able to raise such funds on acceptable terms or at all. If we are not able to raise sufficient capital in the future, we may not be able to execute our business plan, our continued operations will be in jeopardy, and we may be forced to cease operations and sell or otherwise transfer all or substantially all of our remaining assets, which could cause an Investor to lose all or a portion of their investment.
We may face potential difficulties in obtaining capital.
We may have difficulty raising needed capital in the future as a result of, among other factors, our lack of revenues, as well as the inherent business risks associated with our Company and present and future market conditions. Our business currently does not generate any sales and future sources of revenue may not be sufficient to meet our future capital requirements. We will require additional funds to execute our business strategy and conduct our operations. If adequate funds are unavailable, we may be required to delay, reduce the scope of, or eliminate one or more of our planned functionalities in the Holly™ platform, any of which may materially harm our business, financial condition, and results of operations.
Our platform offers a revolutionary approach in an established industry that may resist change.
The Holly™ platform seeks to revolutionize the established model where aspiring talent secures work through agents and other middlemen that charge high fees. Producers and corporate executives may be unwilling to abandon the established model in favor of the Holly™ platform, and agents are likely to discourage producers and corporate executives from doing so. Without sufficient participation from producers and corporate executives, our continued operations could be in jeopardy, and we may be forced to cease operations and sell or otherwise transfer all or substantially all of our remaining assets, which could cause an Investor to lose all or a portion of their investment.
Our platform is heavily dependent on participation from aspiring actors.
Just as the Holly™ platform is dependent on producers and corporate executives, it is also dependent on attracting sufficient talent to create the synergies necessary to be successful. While the Company is not aware of any direct competitors specifically targeting aspiring actors, there are other free platforms available such as Facebook, Instagram, and TikTok, whereby aspiring actors may seek to build an online portfolio. If Holly™ is unable to attract a sufficient mass of talent to promote to producers and corporate executives, the Company’s continued operations may be jeopardized.
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Success in the entertainment industry is highly unpredictable and there is no guarantee our content will be successful in the market.
Our success will depend in part on the popularity of our entertainment projects, such as the Holly™ tv show. Viewer tastes, trends, and preferences frequently change and are notoriously difficult to predict. If we fail to anticipate future viewer preferences in the entertainment business, our business and financial performance will likely suffer. The entertainment industry is fiercely competitive. We may not be able to develop projects that will become profitable. We may also invest in projects that end up losing money. Even if one of our projects is successful, we may lose money in others.
Entertainment projects can be risky, and often budgets run over.
The entertainment industry is generally affected by the same risk factors of other industries but due to its nature, the development, production, distribution, and marketing of content can require large capital investments. Developing and monetizing entertainment projects, such as virtual and live events, or the Holly™ tv show, usually require significant capital investment to fund expenditures on production activities. There is often budget over-run. Even with adequate funding, the project may fail to gain traction with viewers.
Public perception is important in the entertainment industry.
In order to continue grow our business, we must maintain credibility and confidence among Hollywood creators and producers, our consumers, investors, and other parties in our long-term financial viability and business prospects, and reputational harm may damage our ability to do any or all of these things. Any derogatory information whether founded or unfounded, against our business, any of our officers, directors, or employees, may harm our business.
We may not be able to protect all our intellectual property.
Our profitability may depend in part on our ability to effectively protect our intellectual property including our trademark and logo, original entertainment content in our projects, and our ability to operate without inadvertently infringing on the proprietary rights of others. Theft of our original entertainment content prior to release could adversely affect our revenue. Policing and protecting our intellectual property against piracy and unauthorized use by third parties is time-consuming and expensive and certain countries may not even recognize our intellectual property rights. Any litigation protecting our intellectual property and defending our original content could have a material adverse effect on our business, operating results, and financial condition, regardless of the outcome of such litigation.
Our business could be negatively impacted by cyber security threats, attacks, and other disruptions.
We may face advanced and persistent attacks on our information infrastructure where we manage and store various proprietary information and sensitive/confidential data relating to our operations, including our talent database. These attacks may include sophisticated malware (viruses, worms, and other malicious software programs) and phishing emails that attack our products or otherwise exploit any security vulnerabilities. These intrusions sometimes may be zero-day malware that are difficult to identify because they are not included in the signature set of commercially available antivirus scanning programs. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information, create system disruptions, or cause shutdowns. Additionally, sophisticated software and applications that we produce or procure from third-parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the information infrastructure. A disruption, infiltration, or failure of our information infrastructure systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters, or accidents could cause breaches of data security, loss of critical data, and performance delays, which in turn could adversely affect our business.
Security breaches of confidential user information in connection with the Holly™ platform may adversely affect our business.
Our business requires the collection, transmission, and retention of personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. The integrity and protection of that data is critical to us. The information, security, and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and customer and employee expectations, or may require significant additional investments or time in order to do so. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss, or misappropriation of, or access to, users’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims, or proceedings.
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Reliance on third-party service providers creates risks for the Company.
Some of the Company’s operations may rely on the Company’s third-party service providers to host and deliver services and data. Any interruptions, delays, or disruptions in and to the delivery of such services, security, or data, including without limitation any privacy breaches or failures in data collection, could expose the Company to liability and harm the Company’s business and reputation.
The Company’s success depends in part on the experience and skill of the board of directors, its executive officers, and key employees.
We are dependent on our board of directors, executive officers, and key employees. These persons may not devote their full time and attention to the matters of the Company. The loss of our board of directors, executive officers, and/or key employees could harm the Company’s business, financial condition, cash flow and results of operations.
Although dependent on certain key personnel, the Company does not have any key person life insurance policies on any such people.
We are dependent on certain key personnel in order to conduct our operations and execute our business plan, however, the Company has not purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, if any of these personnel die or become disabled, the Company will not receive any compensation to assist with such person’s absence. The loss of such person could negatively affect the Company and our operations. We have no way to guarantee key personnel will stay with the Company, as many states do not enforce non-competition agreements, and therefore acquiring key man insurance will not ameliorate all the risk of relying on key personnel.
Security breaches of confidential customer information, in connection with our electronic processing of credit and debit card transactions, or confidential employee information may adversely affect our business.
Our business requires the collection, transmission, and retention of personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. The integrity and protection of that data is critical to us. The information, security, and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and customer and employee expectations, or may require significant additional investments or time in order to do so. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, customers’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings.
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The use of individually identifiable data by our business, our business associates and third parties is regulated at the state, federal and international levels.
The regulation of individual data is changing rapidly, and in unpredictable ways. A change in regulation could adversely affect our business, including causing our business model to no longer be viable. Costs associated with information security – such as investment in technology, the costs of compliance with consumer protection laws and costs resulting from consumer fraud – could cause our business and results of operations to suffer materially. Additionally, the success of our online operations depends upon the secure transmission of confidential information over public networks, including the use of cashless payments. The intentional or negligent actions of employees, business associates or third parties may undermine our security measures. As a result, unauthorized parties may obtain access to our data systems and misappropriate confidential data. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography, or other developments will prevent the compromise of our customer transaction processing capabilities and personal data. If any such compromise of our security or the security of information residing with our business associates or third parties were to occur, it could have a material adverse effect on our reputation, operating results, and financial condition. Any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk.
The Company is not subject to Sarbanes-Oxley regulations and may lack the financial controls and procedures of public companies.
The Company may not have the internal control infrastructure that would meet the standards of a public company, including the requirements of the Sarbanes Oxley Act of 2002. As a privately-held (non-public) Company, the Company is currently not subject to the Sarbanes Oxley Act of 2002, and its financial and disclosure controls and procedures reflect its status as a development stage, non-public company. There can be no guarantee that there are no significant deficiencies or material weaknesses in the quality of the Company’s financial and disclosure controls and procedures. If it were necessary to implement such financial and disclosure controls and procedures, the cost to the Company of such compliance could be substantial and could have a material adverse effect on the Company’s results of operations.
Risks Related to the Offering
The U.S. Securities and Exchange Commission does not pass upon the merits of the Securities or the terms of the Offering, nor does it pass upon the accuracy or completeness of any Offering document or literature.
You should not rely on the fact that our Form C is accessible through the U.S. Securities and Exchange Commission’s EDGAR filing system as an approval, endorsement, or guarantee of compliance as it relates to this Offering. The U.S. Securities and Exchange Commission has not reviewed this Form C, nor any document or literature related to this Offering.
Neither the Offering nor the Securities have been registered under federal or state securities laws.
No governmental agency has reviewed or passed upon this Offering or the Securities. Neither the Offering nor the Securities have been registered under federal or state securities laws. Investors will not receive any of the benefits available in registered offerings, which may include access to quarterly and annual financial statements that have been audited by an independent accounting firm. Investors must therefore assess the adequacy of disclosure and the fairness of the terms of this Offering based on the information provided in this Form C and the accompanying exhibits.
The Company’s management may have broad discretion in how the Company uses the net proceeds of the Offering.
The Company’s management will have considerable discretion over the use of proceeds from the Offering. You may not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The Company has the right to limit individual Investor commitment amounts.
The Company may prevent any Investor from committing more than a certain amount in this Offering for any reason. This means that your desired investment amount may be limited or lowered based solely on the Company’s determination and not in line with relevant investment limits set forth by the Regulation CF rules. This also means that other Investors may receive larger allocations of the Offering based solely on the Company’s determination.
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The Company has the right to extend the Offering Deadline.
The Company may extend the Offering Deadline beyond what is currently stated herein. This means that your investment may continue to be held in escrow while the Company attempts to raise the Target Offering Amount even after the Offering Deadline stated herein is reached. While you have the right to cancel your investment in the event the Company extends the Offering Deadline, if you choose to reconfirm your investment, your investment will not be accruing interest during this time and will simply be held until such time as the new Offering Deadline is reached without the Company receiving the Target Offering Amount, at which time it will be returned to you without interest or deduction, or the Company receives the Target Offering Amount, at which time it will be released to the Company to be used as set forth herein. Upon or shortly after the release of such funds to the Company, the Securities will be issued and distributed to you.
The Company may end the Offering early.
If the Target Offering Amount is met after 21 calendar days, but before the Offering Deadline, the Company can end the Offering by providing notice to Investors at least 5 business days prior to the end of the Offering. This means your failure to participate in the Offering in a timely manner, may prevent you from being able to invest in this Offering – it also means the Company may limit the amount of capital it can raise during the Offering by ending the Offering early.
The Company has the right to conduct multiple closings during the Offering.
If the Company meets certain terms and conditions, an intermediate close of the Offering can occur, which will allow the Company to draw down the proceeds committed and captured in the Offering during the relevant period. The Company may choose to continue the Offering thereafter. Investors should be mindful that this means they can make multiple investment commitments in the Offering, which may be subject to different cancellation rights. For example, if an intermediate close occurs and later a material change occurs as the Offering continues, Investors whose investment commitments were previously closed upon will not have the right to re-confirm their investment as it will be deemed to have been completed prior to the material change.
Using a credit card to purchase Securities may impact the return on your investment as well as subject you to other risks inherent in this form of payment.
Investors in this offering may have the option of paying for their investment with a credit card, which is not usual in the traditional investment markets. Transaction fees charged by your credit card company and interest charged on unpaid card balances (which can reach almost 25% in some states) add to the effective purchase price of the interests you buy. The cost of using a credit card may also increase if you do not make the minimum monthly card payments and incur late fees. Using a credit card is a relatively new form of payment for securities and will subject you to other risks inherent in this form of payment, including that, if you fail to make credit card payments (e.g. minimum monthly payments), you risk damaging your credit score and payment by credit card may be more susceptible to abuse than other forms of payment. Moreover, where a third-party payment processor is used, as in this offering, your recovery options in the case of disputes may be limited. The increased costs due to transaction fees and interest may reduce the return on your investment.
The SEC’s Office of Investor Education and Advocacy issued an Investor Alert dated February 14, 2018 entitled Credit Cards and Investments – A Risky Combination, which explains these and other risks you may want to consider before using a credit card to pay for your investment.
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The Subscription Agreement has a forum selection provision that requires disputes be resolved in state or federal courts in the State of California, regardless of convenience or cost to you, the investor.
As part of this investment, each Investor will be required to agree to the terms of the subscription agreement included as Exhibit D to this Form C. In the agreement, Investors agree to resolve disputes arising under the subscription agreement in state or federal courts located in the State of California, for the purpose of any suit, action or other proceeding arising out of or based upon the agreement. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. The Company believes that the exclusive forum provision applies to claims arising under the Securities Act, but there is uncertainty as to whether a court would enforce such a provision in this context. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. You will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations thereunder. This forum selection provision may limit your ability to obtain a favorable judicial forum for disputes with us. Although we believe the provision benefits us by providing increased consistency in the application of California law in the types of lawsuits to which it applies and in limiting our litigation costs, to the extent it is enforceable, the forum selection provision may limit the ability of Investors to bring claims in judicial forums that they find favorable to such disputes, may increase Investors’ costs of bringing suit and may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the provision inapplicable to, or unenforceable in an action, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition or results of operations.
Financial projections may be wrong.
Certain financial projections concerning the future performance of our business are based on assumptions of an arbitrary nature and may prove to be materially incorrect. No assurance is given that actual results will correspond with the results contemplated by these projections. It is possible that returns may be lower than projected, or that there may be no returns at all.
These and all other financial projections, and any other statements previously provided to the Purchaser relating to the Company or its prospective business operations that are not historical facts, are forward-looking statements that involve risks and uncertainties. Sentences or phrases that use such words as “believes,” “anticipates,” “plans,” “may,” “hopes,” “can,” “will,” “expects,” “is designed to,” “with the intent,” “potential” and others indicate forward-looking statements, but their absence does not mean that a statement is not forward- looking.
Such statements are based on our Manager’s current estimates and expectations, along with currently available competitive, financial, and economic data. However, forward-looking statements are inherently uncertain. A variety of factors could cause business conditions and results to differ materially from what is contained in any such forward-looking statements.
Risks Related to the Securities
The Securities will not be freely transferable under the Securities Act until one year from the initial purchase date. Although the Securities may be transferable under federal securities law, state securities regulations may apply, and each Investor should consult with their attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not ever be a public market for the Securities. Because the Securities have not been registered under the Securities Act or under the securities laws of any state or foreign jurisdiction, the Securities have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the Securities Act or other securities laws will be effected. Limitations on the transfer of the Securities may also adversely affect the price that you might be able to obtain for the Securities in a private sale. Investors should be aware of the long-term nature of their investment in the Company. Each Investor in this Offering will be required to represent that they are purchasing the Securities for their own account, for investment purposes, and not with a view to resale or distribution thereof.
Investors will not be entitled to any inspection or information rights other than those required by law.
Investors will not have the right to inspect the books and records of the Company or to receive financial or other information from the Company, other than as required by law. Other security holders of the Company may have such rights. Regulation CF requires only the provision of an annual report on Form C and no additional information. Additionally, there are numerous methods by which the Company can terminate annual report obligations, resulting in no to limited information rights owed to Investors.
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The securities acquired in this Offering may be significantly diluted as a consequence of subsequent equity financings and the bonus Securities offered in this Offering.
The Company’s equity securities will be subject to dilution. The Company may issue additional equity to employees and third-party financing sources in amounts that are uncertain at this time, and as a consequence, holders of the Securities offered herein will be subject to dilution in an unpredictable amount. Such dilution may reduce the Investor’s control and economic interests in the Company.
The amount of additional financing needed by the Company will depend upon several contingencies not foreseen at the time of this Offering. Generally, additional financing (whether in the form of loans or the issuance of other securities) will be intended to provide the Company with enough capital to reach the next major corporate milestone. If the funds received in any additional financing are not sufficient to meet the Company’s needs, the Company may have to raise additional capital at a price unfavorable to their existing investors, including the holders of the Securities. The availability of capital is at least partially a function of capital market conditions that are beyond the control of the Company. There can be no assurance that the Company will be able to accurately predict the future capital requirements necessary for success or that additional funds will be available from any source. Failure to obtain financing on favorable terms could dilute or otherwise severely impair the value of the Securities.
Additionally, if we issue bonus Securities pursuant to this Offering, some Investors may experience dilution. We are offering our Securities for $1.00 per share. Investors who invest $1,000 or more in this offering will also be entitled to receive bonus Securities of up to 30%. Therefore, investors receiving bonus Securities are effectively receiving a discount on the Securities they purchase. Bonus Securities have identical rights, privileges, preferences as well as restrictions to the Series B Common Stock to be purchased by investors. The issuance of bonus Securities could cause immediate dilution to your investment.
There is no present market for the Securities and we have arbitrarily set the price.
The Offering price was not established in a competitive market. We have arbitrarily set the price of the Securities with reference to the general status of the securities market and other relevant factors. The Offering price for the Securities should not be considered an indication of the actual value of the Securities and is not based on our asset value, net worth, revenues, or other established criteria of value. We cannot guarantee that the Securities can be resold at the Offering price or at any other price.
There is no guarantee of a return on an Investor’s investment.
There is no assurance that an Investor will realize a return on their investment or that they will not lose their entire investment. For this reason, each Investor should read this Form C and all exhibits carefully and should consult with their attorney and business advisor prior to making any investment decision.
Investors have diluted voting rights.
Investors will be entitled to one (1) vote per share of Series B Common Stock, whereas Series A Common Stock holders will be entitled to ten (10) votes per share and will generally be able to control the outcome of matters subject to shareholder vote. Investors may not necessarily agree with the voting decisions of the Series A Common Stock holders, which include the officers and directors of the Company, or such decisions may not be in the best interests of all the Investors. In addition, Investors will be subject to a shareholder agreement that requires appointment of a proxy and requires Investors to vote in accordance with the Series A Common Stock holders, further limiting Series B Common Stock holders’ ability to vote as they would like.
IN ADDITION TO THE RISKS LISTED ABOVE, RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN, OR WHICH WE CONSIDER IMMATERIAL AS OF THE DATE OF THIS FORM C, MAY ALSO HAVE AN ADVERSE EFFECT ON OUR BUSINESS AND RESULT IN THE TOTAL LOSS OF YOUR INVESTMENT.
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Description of the Business
The Company was incorporated in California on February 1, 2021. The Company was formed to democratize the entertainment industry by empowering the community to discover and elevate the best talent, regardless of geography and socio-economic barriers.
The Company will achieve this through development of the Holly™ online platform- hollyentertainment.com* -a revolutionary new entertainment platform where:
| ● | Talent can sign up for a free account and create an online portfolio of their talent and acting abilities; | |
| ● | The community can collaborate on projects and audition opportunities; | |
| ● | Users have access to a marketplace for casting services, legal consultation (outsourced), accounting, 3d scanning of users’ faces to copyright, and other talent representation, and producers and corporate executives can conduct talent searches; | |
| ● | Users can participate in weekly/monthly challenges, virtual live events, and try out to get selected for commercials; and | |
| ● | Popular users will be invited to appear on the Holly™ TV show. |
* The contents of the Company’s platform website referred to above are not incorporated into this filing. Further, our references to the URL for this website are intended to be inactive textual references only. Further the information on the Company’s platform may not have been created by the Company, may be inaccurate, and should not be relied upon by any investor in making a decision to purchase Securities.
Holly™ is the product of multi-talented Academy Award nominated actor, singer-songwriter, and record producer, Terrence Howard. Holly™ is born from over 35 years of his insight and experience in the entertainment industry. Every aspect of the platform is developed to solve the problems he has identified in the most seamless and fluid way we believe possible.
Hollywood is a reflection of the age-old model where actors moved to Los Angeles, struggled to find work, and were constantly hamstrung by agents or other gatekeepers. By putting actors and producers in touch directly, Holly™ is cutting out high-fee middlemen talent agents and allowing rising stars to come up to surface and thrive. Holly™ is building a more effective talent network; it is democratizing access to the entertainment industry.
Moreover, Holly™ is a UI-centric platform that will enable up to date information on high quality projects and talents. As the talents’ membership subscription increases, Holly™ will be the effective platform for publication of casting opportunities. As the quality projects become more accessible on Holly™, talents’ interest in the platform will increase. Holly™ will be the key means of synergetic growth for both talents and producers.
Talents will exercise control over how their profiles will be published. It will be up to them to generate the public’s interest. The public’s interest level in the talents will be instantaneously trackable, which will aid directors and producers to focus on the top-tier talents with the highest interest level.
The opportunity to commoditize the Holly™ platform may include:
| ● | Advertisements on the Holly™ platform | |
| ● | Fees for posting casting calls | |
| ● | Increased or tier-based membership costs for directors, producers, and agents who will have access to the data generated by the talents and public | |
| ● | Marketplace offering for services attractive to talents | |
| ● | TV reality/competition shows with top-tier talents |
The Company will generate revenue via the Holly™ marketplace, paid membership services charged to entertainment insiders for access to the talent database, live and virtual event ticket sales, corporate partners and sponsors, digital advertising and event marketing, and subscription services for online content/webisodes.
The Company has developed Holly™ branding and submitted trademark applications, and has created the Holly™ website and prototype app. It is currently engaged in marketing and advertising, beta launching the Holly™ early access program, and collecting user feedback, with a full launch planned for Q4 2023.
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Competition
There are few competitors in the “democratizing Hollywood through software” space. Based on Company research, the following are potential competitors:
| ● | https://husslup.com/ | |
| ● | https://www.jumpcutmedia.com/ | |
| ● | https://www.stage32.com/ | |
| ● | https://film.io/ | |
| ● | https://legionm.com |
The Company is unique in this space, however, in that it is the only one specifically targeting talent (i.e. actors).
Customer Base
The Company’s target market for the Holly™ platform includes entertainment insiders such as corporate executives and producers, corporate sponsors and partners, content consumers, talent (e.g. aspiring actors), and investors.
Supply Chain
The Company does not have a supply chain in the traditional sense, but will rely upon independent contractors and third-parties for web development, video production, and ongoing technological needs.
Intellectual Property
Application or Registration # |
Title |
Description |
File Date |
Grant Date |
Country | |||||
| 97588389 | Holly | Trademark | 9/13/2022 | Pending | USA | |||||
| 97589874 |  |
Trademark | 9/13/2022 | Pending | USA | |||||
| 97601458 | Audition | Trademark | 9/21/2022 | Pending | USA |
Governmental/Regulatory Approval and Compliance
The Company is subject to and affected by the laws and regulations of U.S. federal, state, and local governmental authorities. These laws and regulations are subject to change.
Litigation
The Company is not subject to any current litigation or threatened litigation.
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The following table illustrates how we intend to use the net proceeds received from this Offering if we raise the Target Offering Amount and if we raise the Maximum Offering Amount. The values below are not inclusive of payments to financial and legal service providers and escrow set up fees, all of which were incurred in the preparation of this Offering and are due in advance of the closing of the Offering.
| Use of Proceeds | Amount if Target Offering Amount Raised | Amount if Maximum Offering Amount Raised | ||||||
| Intermediary Fees | $ | 2,125.00 | $ | 212,500.00 | ||||
| Accrued Compensation & Accounts Payable | $ | 5,500.00 | $ | 500,000.00 | ||||
| Marketing | $ | 2,500.00 | $ | 250,000.00 | ||||
| Future Fund Raising Costs | $ | 1,625.00 | $ | 412,500.00 | ||||
| Research & Development | $ | 7,500.00 | $ | 475,000.00 | ||||
| Professional Fees | $ | 1,250.00 | $ | 150,000.00 | ||||
| Labor Costs | $ | 4,500.00 | $ | 500,000.00 | ||||
| Total | $ | 25,000.00 | $ | 2,500,000.00 | ||||
The Company has discretion to alter the use of proceeds set forth above to adhere to the Company’s business plan and liquidity requirements. For example, economic conditions may alter the Company’s general marketing or general working capital requirements.
DIRECTORS, OFFICERS, MANAGERS, AND KEY PERSONS
The directors, officers, managers, and key persons of the Company are listed below along with all positions and offices held at the Company and their principal occupation and employment responsibilities for the past three (3) years.
| Name | Positions and Offices Held at the Company |
Principal Occupation and Employment Responsibilities for the Last Three (3) Years | ||
| Terrence Howard | Director: April 6, 2021 - Present | Actor, entertainer, producer
Consultant, Universal Bridges, Inc.: July 10, 2014 – Present (Provide consulting services in entertainment)
Consultant, 3rd Finger Productions, Inc.: May 2, 2016 – Present (Provide consulting services in entertainment)
Consultant, QH Ventures, LLC: February 10, 2020 – Present (Provide consulting services in entertainment)
Mr. Howard is also a director and officer of a number of investment vehicle entities in the field of intellectual property development, management, and licensing.
|
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| Name | Positions and Offices Held at the Company |
Principal Occupation and Employment Responsibilities for the Last Three (3) Years | ||
| Mira Howard | Director: April 6, 2021 - Present | Talent manager, producer
Director, CEO/CFO/Secretary, Universal Bridges, Inc.: July 10, 2014 – Present (General corporate governance, management, and operation; talent and production management and consulting; production services)
Director, CEO/CFO/Secretary, 3rd Finger Productions, Inc.: May 2, 2016 – Present (General corporate governance, management, and operation; talent and production management and consulting; production services)
Director, CEO/CFO/Secretary, QH Ventures, LLC: February 10, 2020 – Present (General corporate governance, management, and operation; investment management)
COO of the Company: February 17, 2022 – Present Secretary of the Company: February 17, 2022 – Present
Ms. Howard is also a director and officer of a number of investment vehicle entities in the field of intellectual property development, management, and licensing.
|
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| Name | Positions and Offices Held at the Company |
Principal Occupation and Employment Responsibilities for the Last Three (3) Years | ||
| Mira Howard | Chief Executive Officer: July 10, 2023 – Present (General corporate governance and operations; planning and executing the Company’s strategy, secure and allocate capital; hiring and managing the executive team)
Chief Operating Officer: February 17, 2022 – July 10, 2023 (Leading and coordinating Company’s efforts to develop and implement strategic and operating plans for Company; executing day-to-day general management; developing, maintaining, and solidifying relationships with investors, strategic partners, promoters, and distributors; managing consultants and agents; supporting the development and growth of Company; working with department heads and other officers to support the day to day activity; consulting and mentoring officers, especially with regards to the entertainment industry; evaluating and managing the Company’s posturing in the entertainment industry and recommend strategies; and collaborating with industry incumbents and other corporate partners.)
Secretary: February 17, 2022 – Present (Planning and executing the board of director meetings, including strategic planning, and shareholder meetings; taking meeting minutes and disseminate same; organize corporate documents and records; and advise board of directors on its goals and duties and duties of officers’ individual roles.) |
See Directors section above
| ||
| Christopher Louie | Chief Branding Officer: October 1, 2022 – Present (Shaping the Company brand narrative and brand strategy for capital raise, including equity crowdfund campaign, and Holly™ platform; producing content for the capital raise events and Holly™ platform; coordinating with third party consultants on marketing and public relations; cooperating with other officers, employees, agents of the Company; campaign strategy for brand and product development; collaborating with the investor relations team; optimizing creative for email, ads, paid social media, and videos; advise on partnerships and applicable industry; post production pipeline of changing videos and content; and supporting the development and growth of the Company and its key products and services) |
Member, Manager, CEO, BRNDMKRS LLC: January 28, 2021 – Present (Running point on building brands for clients, leading all creative and production for content creation for clients, consisting of early stage startups to public companies)
|
Indemnification
Indemnification is authorized by the Company to directors, officers or controlling persons acting in their professional capacity pursuant to California law and the Company’s Bylaws. Indemnification includes expenses such as attorney’s fees and, in certain circumstances, judgments, fines and settlement amounts actually paid or incurred in connection with actual or threatened actions, suits or proceedings involving such person, except in certain circumstances where a person is adjudged to be guilty of gross negligence or willful misconduct, unless a court of competent jurisdiction determines that such indemnification is fair and reasonable under the circumstances.
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CAPITALIZATION, DEBT AND OWNERSHIP
Capitalization
The Company’s authorized capital stock consists of 600,000,000 shares of capital stock, consisting of 50,000,000 shares of Series A common stock, par value $0.00001 per share (the “Series A Common Stock”), 500,000,000 shares of Series B common stock, par value $0.00001 per share (the “Series B Common Stock”), and 50,000,000 shares of preferred stock, par value $0.00001 per share (the “Preferred Stock”) subject to designation by the Company’s Board of Directors. At the closing of this Offering, assuming the Maximum Offering Amount is sold, 2,500,000 shares of Series B Common Stock will be issued and outstanding (which figure includes 750,000 bonus securities, assuming all Investors invest in an amount entitling them to the maximum number of bonus Securities).
Outstanding Capital Stock
As of the date of this Form C, the Company’s outstanding capital stock consists of:
| Type | Series A Common Stock | |
| Amount Outstanding | 20,000,000 | |
| Par Value Per Share | $0.00001 | |
| Voting Rights | 10 votes per share. The vote of a majority of the outstanding shares of Series A Common Stock is required to approve a change of control of the Company (as defined in the Company’s Amended and Restated Articles of Incorporation) | |
| Anti-Dilution Rights | With limited exceptions, Series A Common Stock holders have a preemptive right to purchase securities to maintain their pro-rata interest in the Company. | |
How this security may limit, dilute or qualify the Security issued pursuant to Regulation CF |
Each share of Series A Common Stock is convertible into one share of Series B Common Stock | |
Percentage ownership of the Company by the holders of such security (assuming conversion prior to the Offering if convertible securities). |
100% |
Ownership
The table below lists the beneficial owners of twenty percent (20%) or more of the Company’s outstanding voting equity securities as of the date of this Form C, calculated on the basis of voting power.
| Name | Amount and Type or Class Held | Percentage Ownership (in terms of voting power) | ||
| QH Venture, LLC, a Delaware limited liability company | 11,475,000 Shares of Series A Common Stock | 82.38% |
Please see the financial information listed on the cover page of this Form C and attached hereto in addition to the following information. Audited financial statements are attached to this Form C as Exhibit E.
Operations
The Audition, Inc. was incorporated in California on February 1, 2021 and is headquartered in Los Angeles, California. The Company is in its development stage. Since inception, the Company has formed its business plan and prepared for this Offering. The Company has developed Holly™ branding and submitted trademark applications, and has created the Holly™ website and prototype app. It is currently engaged in marketing and advertising, beta launching the Holly™ early access program, and collecting user feedback, with a full launch planned for Q4 2023.
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Cash and Cash Equivalents
For the year ended December 31, 2021, the Company had $58,620.00 cash and cash equivalents on hand, representing cash on hand, demand deposits placed with banks or other financial institutions, and all highly liquid investments with an original maturity of three months or less of the purchase date of such investments.
For the year ended December 31, 2022, the Company had $128,021.00 cash and cash equivalents on hand.
As of July 31, 2023, the Company had $61,495 cash and cash equivalents on hand, leaving the Company with approximately one to two months of runway. However, the Company continues to sustain operations via additional funding sources from its Officers and Directors.
Liquidity and Capital Resources
The proceeds from the Offering are essential to our operations. We plan to use the proceeds as set forth above under the section titled “Use of Proceeds,” which is an indispensable element of our business strategy. The Company anticipates raising additional capital following this offering through other offering exempt under the Securities Act.
Other than additional investments and loans from the Company’s Officers and Directors, the Company currently does not have any additional outside sources of capital other than the proceeds from the Offering.
Capital Expenditures and Other Obligations
Through the end of 2023, the Company anticipates expending approximately $500,000 towards raising additional capital and advertising through DealMaker, $270,000 towards developing the Holly™ platform, and approximately $20,000 on general and administrative expenses. Please see the section titled “Use of Proceeds” for additional information.
Valuation
The Company has ascribed no pre-offering valuation to the Company; the securities are priced arbitrarily.
Trends and Uncertainties
The Company and its development of the Holly platform are subject to current economic uncertainties and potential regulatory changes. Even though the Company operates in an established industry, it is offering a revolutionary approach that makes market trends hard to predict. Further, an inability to raise capital will present significant challenges to development of the platform.
For a more detailed review of the risks and uncertainties affecting the Company, see “Risk Factors” on page 3.
Previous Offerings of Securities
We have made the following issuances of securities within the last three years:
| Security Type | Principal Amount of Securities Sold | Amount of Securities Issued [1] | Use of Proceeds | Issue Date | Exemption from Registration Used or Public Offering | |||||||||
| Series A Common Stock | $ | 124,800 | 400,000 | Operations and Development | 5/21/2021 | Section 4(a)(2) | ||||||||
| Series A Common Stock | $ | 312,400 | 800,000 | Operations and Development | 2/28/2022 | Section 4(a)(2) | ||||||||
| Series A Common Stock | $ | 164,175 | 300,000 | Operations and Development | 12/31/2022 | Section 4(a)(2) | ||||||||
| Series A Common Stock | $ | 150,000 | 2,500,000 | Operations and Development | 7/10/2023 | Section 4(a)(2) | ||||||||
| Series A Common Stock | $ | 150,000 | 2,500,000 | Operations and Development | 7/26/2023 | Section 4(a)(2) | ||||||||
| (1) | Issuances prior to the Amended and Restated Articles of Incorporation filed on April 3, 2023 were subject to a 10 for 1 forward stock split where 1,500,000 shares of Common Stock were exchanged for 15,000,000 shares of Series A Common Stock. |
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TRANSACTIONS WITH RELATED PERSONS AND CONFLICTS OF INTEREST
From time to time the Company may engage in transactions with related persons. Related persons are defined as any director or officer of the Company; any person who is the beneficial owner of twenty percent (20%) or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power; any promoter of the Company; any immediate family member of any of the foregoing persons or an entity controlled by any such person or persons. Additionally, the Company will disclose here any transaction since the beginning of the issuer’s last fiscal year, or any currently proposed transaction, to which the issuer was or is to be a party and the amount involved exceeds five percent (5%) of the aggregate amount of capital raised by the issuer in reliance on section 4(a)(6), including the Target Offering Amount of this Offering, and the counter party is either (i) any director or officer of the issuer; (ii) any person who is, as of the most recent practicable date but no earlier than 120 days prior to the date the offering statement or report is filed, the beneficial owner of twenty percent (20%) or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power; (iii) if the issuer was incorporated or organized within the past three years, any promoter of the issuer; or (iv) any member of the family of any of the foregoing persons, which includes a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. The term spousal equivalent means a cohabitant occupying a relationship generally equivalent to that of a spouse.
The Company has conducted the following transactions with related persons:
| ● | Agreement for Consulting Services dated May 14, 2021 with QH Venture, LLC as the “Consultant.” Agreement effective on February 1, 2021, for a term of 5 years. Annual compensation $260,000. “Services” provided under the Agreement includes consultation on the custom and practice of the entertainment industry, creative development, and investor relations, generally provided by Mira and Terrence Howard. Mira and Terrence Howard are the members and manager of QH Venture, LLC. This Agreement terminated as of October 1, 2022. | |
| ● | Service Agreement dated May 28, 2021 with ISBX. Scope of services include mobile application development, website development, software development, programming or consulting services. Contract amount based on the statement of work, as such statement of work may be supplemented. The initial statement of work was for $107,500. Kelly Chu is a shareholder, director, and the CEO of ISBX. Kelly Chu is also a former Officer and Director of the Company. | |
| ● | Professional Service Agreement dated June 2, 2021 with JNK Accountancy Group, LLP for, among other things, general accounting services. The Agreement provides for a recurring monthly compensation of $3,000, subject to adjustment. Said Agreement has been amended as of October 1, 2022 to provide for increased monthly compensation of $20,000. Andrew Je is a partner of JNK Accountancy Group, LLP. | |
| ● | Service Agreement dated February 7, 2022 with BRNDMKRS. Scope of services include brand video script and production, professional photography, and concept building and writing. Contract amount based on work order, as such work order may be supplemented. The initial work order was for $125,000. Christopher Louie is a shareholder, director, and the CEO of BRNDMKRS. | |
| ● | The Company agreed to pay the base salary in the amount of $120,000 per year to the Chief Branding Officer Christopher Louie based on his employment agreement executed on October 1, 2022. The Base Salary will accrue from October 1, 2022 but shall not be payable until the Company will thereafter have raised capital not less than $3 million from a third party source. The Base Salary will accrue from October 1, 2022 but shall not be payable until the Company will thereafter have raised capital not less than $3 million from a third party source. As of June 30, 2023, the balance of accrued compensation to Chief Branding Officer was $90,000. | |
| ● | The Company agreed to pay the base salary in the amount of $300,000 per year to the Secretary and Chief Operating Officer Mira Howard based on her employment agreement executed on October 1, 2022. The Base Salary will accrue from October 1, 2022 but shall not be payable until the Company will have raised capital not less than $3 million from a third party source. This agreement terminated effective July 10, 2023. | |
| ● | The Company agreed to pay the base salary in the amount of $120,000 per year to the Chief Technology Officer Kelly Chu based on his employment agreement executed on October 1, 2022. The Base Salary will accrue from October 1, 2022 but shall not be payable until the Company will thereafter have raised capital not less than $3 million from a third party source. This agreement terminated effective July 10, 2023. | |
| ● | The Company agreed to pay the base salary in the amount of $120,000 per year to the Chief Financial Officer Andrew Je based on his employment agreement executed on October 1, 2022. The Base Salary will accrue from October 1, 2022 but shall not be payable until the Company will thereafter have raised capital not less than $3 million from a third party source. This agreement terminated effective July 10, 2023. | |
| ● | The Company agreed to pay the base salary in the amount of $240,000 per year to the Chief Executive Officer Mira Howard based on her employment agreement executed on July 10, 2023. The Base Salary will accrue but shall not be payable until the Company will thereafter have raised capital not less than $3 million from a third party source. In addition, the Company issued 1 million shares of Series A Common Stock as consideration for Ms. Howard’s services. Such equity compensation is subject to Company’s buy-back option. | |
| ● | A new Agreement for Consulting Services dated July 10, 2023 was entered into with QH Venture, LLC as “Consultant” for the consulting services of Terrence Howard in the area of entertainment industry, creative development, investor relations, and marketing. The annual compensation is $230,000, but such compensation is not payable until the Company procures a third party capital investment of not less than $3 million. In addition, the Company issued 1.5 million Series A Common Stock. Such equity compensation is subject to Company’s buy-back option. |
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THE OFFERING AND THE SECURITIES BEING OFFERED
The Offering
The Company is offering a minimum amount of $25,000 and up to a maximum amount of $2,500,000 of Series B Common Stock on a best- efforts basis as described in this Form C in order to fund its operations and further develop and implement the Holly™ platform. We must raise an amount equal to or greater than the Target Offering Amount by April 12, 2024, the Offering Deadline. Unless we raise at least the Target Offering Amount by the Offering Deadline, no Securities will be sold in this Offering, all investment commitments will be cancelled and all committed funds will be returned without interest or deduction.
Shares are being offered at $1.00 each. The price of the Securities was determined arbitrarily, does not necessarily bear any relationship to the Company’s asset value, net worth, revenues, or other established criteria of value, and should not be considered indicative of the actual value of the Securities. The minimum amount that an Investor may invest in the Offering is $500, which is subject to adjustment in the Company’s sole discretion.
The Company is offering four (4) tiers of time-based Investor rewards:
| Tier 1 (Week 1): Invest in the first seven (7) days of the Offering and receive 20% bonus shares of Series B Common Stock | |
| Tier 2 (Week 2): Invest in the first eight (8) to fourteen (14) days of the Offering and receive 15% bonus shares of Series B Common Stock | |
| Tier 3 (Week 3): Invest in the first fifteen (15) to twenty-one (21) days of the Offering and receive 10% bonus shares of Series B Common Stock | |
| Tier 4 (Week 4): Invest in the first twenty-two (22) to twenty-eight (28) days of the Offering and receive 5% bonus shares of Series B Common Stock | |
| *All time-based perks end at 11:59pm PST. By way of example, “Week 1” begins immediately after the Company’s Form C is available on EDGAR and ends at 11:59pm PST seven days later. |
The Company is offering five (5) tiers of volume-based Investor rewards:
| Tier 1 ($1,000.00+ investment): Investors receive 5% bonus shares of Series B Common Stock | |
| Tier 2 ($2,500.00+ investment): Investors receive 5% bonus shares of Series B Common Stock and a framed Holly™ plaque signed by Terrence Howard | |
| Tier 3 ($5,000.00+ investment): Investors receive 10% bonus shares of Series B Common Stock and a framed Holly™ plaque signed by Terrence Howard | |
| Tier 4 ($10,000.00+ investment: Investors receive 10% bonus shares of Series B Common Stock, a framed Holly™ plaque signed by Terrence Howard, and an exclusive dinner in Beverly Hills with the other Tier 4 investors and Holly™ executive team, including Terrence and Mira Howard (does not include transportation) on such date as selected by the Company within twenty four (24) months from the final closing date of this Offering | |
| Tier 5 ($25,000.00+ investment): Investors receive 10% bonus shares of Series B Common Stock, a framed Holly™ plaque signed by Terrence Howard, and an exclusive dinner in Beverly Hills with the other Tier 4 and Tier 5 investors and Holly™ executive team, including Terrence and Mira Howard (does not include transportation) on such date as selected by the Company within twenty four (24) months from the final closing date of this Offering. Investors also receive a one-on-one call with Terrence Howard for up to sixty-minutes. | |
| The bonuses from the time-based and volume-based rewards are stackable and the bonus shares issued under one reward program is not included in the number of securities purchased for the purposes of calculating the bonus under the other reward program. Therefore, as illustrative purposes only, if an investor purchases 25,000 shares of Series B Common Stock in the Week 1 of the Offering, the investor will be issued a sum of 7,500 (i.e., 30%) bonus shares of Series B Common Stock. |
In order to purchase the Securities, you must make a commitment to purchase by completing the subscription process hosted by DealMaker Securities LLC, our Intermediary, including complying with the Intermediary’s know your customer (KYC) and anti-money laundering (AML) policies.
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Pursuant to the Subscription Agreement, each Investor must represent and warrant that the Investor is a “qualified purchaser,” as defined in 17 C.F.R. §§ 227.100, .504 for purposes of section 18(b)(3) of the Securities Act (15 U.S.C.
§ 77r(b)(3)), meaning the Investor is either:
A. an “Accredited Investor” as defined in Rule 501 of Regulation D (17 U.S.C. § 230.501) under the Securities Act and indicated on the U.S. Accredited Investor Certificate attached hereto; or
B. the Investor’s subscription amount plus all other investments by Investor pursuant to Regulation Crowdfunding (Section 4(a)(6) of the Securities Act) during the twelve (12) month period preceding the date of the Subscription Agreement does not represent:
i. Where the Investor’s annual income AND net worth are both equal to or greater than $124,000, more than 10% of the greater of Investor’s annual income or net worth, subject to a maximum investment of $124,000.
ii. Where the Investor’s annual income OR net worth is less than $124,000, more than the greater of $2,500 or 5% of the greater of the Investor’s annual income or net
worth.
iii. For this subparagraph, net worth is determined in the same manner as for an Accredited Investor.
Investor funds will be held in escrow with Enterprise Bank & Trust until released to the Company following one or more closings. Investors may cancel an investment commitment until up to 48 hours prior to the Offering Deadline, or such earlier time as the Company designates pursuant to Regulation CF, using the cancellation mechanism provided by the Intermediary. Investors using a credit card to invest may be required to represent and warrant to cancel any investment commitment(s) by submitting a request through the Intermediary at least 48 hours prior to the Offering Deadline, instead of attempting to claim fraud or claw back their committed funds.
The Company will notify Investors when the Target Offering Amount has been reached through the Intermediary. If the Company reaches the Target Offering Amount prior to the Offering Deadline, it may close the Offering early provided (i) the expedited Offering Deadline must be at least twenty-one (21) days from the time the Offering was opened, (ii) the Intermediary must provide at least five (5) business days’ notice prior to the expedited Offering Deadline to the Investors, and (iii) the Company continues to meet or exceed the Target Offering Amount on the date of the expedited Offering Deadline.
Material Changes
If any material change occurs related to the Offering prior to the current Offering Deadline, the Company will provide notice to Investors and receive reconfirmations from Investors who have already made commitments. If an Investor does not reconfirm their investment commitment after a material change is made to the terms of the Offering within five (5) business days of receiving notice, the Investor’s investment commitment will be cancelled, and the committed funds will be returned without interest or deductions. If an Investor does not cancel an investment commitment before the Target Offering Amount is reached, the funds will be released to the Company upon the closing of the Offering and the Investor will receive the Securities in exchange for their investment.
Intermediate Closings
In the event an amount equal the Target Offering Amount is committed and meets all required terms of the Offering prior to the Offering Deadline on such date or such later time the Company designates pursuant to Rule 304(b) of Regulation CF, the Company may conduct the first of multiple closings of the Offering early, provided (i) the early closing date must be at least twenty-one (21) days from the time the Offering opened and (ii) that all Investors will receive notice of such early closing date at least five (5) business days prior to such new offering deadline (absent a material change that would require an extension of the Offering and reconfirmation of all investment commitments). Investors who committed on the date such notice is provided or prior to the issuance of such notice will be able to cancel their investment commitment until 48 hours before such early closing date.
If the Company conducts an initial closing (the “Initial Closing”), the Company agrees to only withdraw half of the proceeds that are in escrow and will only conduct such Initial Closing if there are more than twenty-one (21) days remaining before the Offering Deadline as of the date of the Initial Closing. The Company may conduct another close (a “Subsequent Closing”) before the Offering Deadline if there are more than twenty-one (21) days remaining before the Offering Deadline as of the date of such Subsequent Closing.
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Any investment commitments received after an intermediate closing will be released to the Company upon a Subsequent Closing and the Investor will receive evidence of the Securities via electronic certificate/PDF in exchange for their investment commitment as soon as practicable thereafter.
The Company has agreed to return all funds to Investors in the event a Form C-W is ultimately filed in relation to this Offering, regardless of whether multiple closings are conducted.
Investment commitments are not binding on the Company until they are accepted by the Company, which reserves the right to reject, in whole or in part, in its sole and absolute discretion, any investment commitment. If the Company rejects all or a portion of any investment commitment, the applicable prospective Investor’s funds will be returned without interest or deduction.
Fees and Commissions
DealMaker Securities LLC, our Intermediary, shall receive the following commissions and fees for acting as Intermediary:
$15,000 activation fee
8.5% of the amount raised in the Offering, payable in cash from Offering proceeds (payable monthly)
$2,000 maintenance (monthly)
DealMaker Reach, an affiliate of the Intermediary, will also receive
$12,000 for digital marketing consulting
$10,000 monthly
In addition, the Company will charge each Investor a fee of five percent (5%) of the Investor’s investment amount, up to a maximum of fifty dollars ($50.00).7
7 The aggregate amount of fees paid by Investors will be included towards the $2,500,000.00 Maximum Offering Amount, as well as factored into each Investor’s maximum investment amount permitted for unaccredited investors.
The Securities
We request that you please review this Form C together with the Amended and Restated Articles of Incorporation attached as Exhibit B, our Bylaws attached as Exhibit C hereto, the Series A Common Stock Buy- Sell Agreement in Exhibit G, and the Series B Common Stock Shareholder Agreement in Exhibit H, respectively, in conjunction with the following summary information.
Transfer Agent and Registrar
DealMaker Transfer Agent LLC will act as transfer agent and registrar for the Securities.
Dividends
The Securities do not entitle Investors to any specific dividends except as declared by the Company’s Board of Directors from time to time. We have not declared any dividends since inception and do not intend to declare dividends in the near future.
In the event the Company issues dividends, Series A and Series B Common Stock shall share ratably in such dividends, provided that if the Company issues dividends payable in shares of Common Stock of the Company, or options, warrants, or rights to acquire shares of such Common Stock of the Company, the dividend shall be payable in the same class upon which the dividend is being paid.
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Dissolution
Upon the liquidation, dissolution or winding up of the Company, after payment or provision for payment of the debts and other liabilities of the Company, the holders of shares of Series A Common Stock and Series B Common Stock shall be entitled to share ratably (based on the number of shares of Common Stock held by each such holder in the remaining net assets of the Company.
Voting and Control
The Series B Common Stock offered hereunder are entitled to one (1) vote per share; however, such voting rights are subject to the voting limitations contained in the Series B Common Stock Shareholder Agreement (below discussed). Series A Common Stock is entitled to ten (10) votes per share. The vote of the Series A Common Stock holders voting separately as a class is required for any “change of control” of the Company, as defined in our Amended and Restated Articles of Incorporation.
Directors are elected at each annual meeting of the Company or annually by written consent. Voting generally may be by voice or by ballot, but voting for election of directors must be by ballot if demanded by a Common Stock holder prior to commencement of voting. Cumulative voting for directors is not allowed unless the candidates’ names have been placed in nomination and a Common Stock holder gives notice at the annual meeting, prior to commencement of voting, of intent to cumulate votes—in which case, all Common Stock holders may cumulate votes.
Voting may be by proxy if filed with the secretary of the Company.
Shareholder Agreements
The Series A Common Stock holders have executed a buy-sell agreement, contained in Exhibit G, that places certain restrictions on their ability to dispose of their shares and grants the Company certain abilities to repurchase such shares. Such agreement was executed prior to the recapitalization of Common Stock to Series A Common Stock.
If a Series A Common Stock holder desires to assign, transfer, sale, exchange, convey, dispose, pledge, hypothecate, gift (whether inter-vivos or testamentary), or encumber such shares, or if a Series A Common Stock holder receives an offer to purchase such shares or notice of a third-party’s intent to foreclose on such shares, the Series A Common Stock holder must deliver notice to the Company. Within 30 days, the Company will consent (or not) to any pledge, hypothecation, or encumbrance, or for any other type of disposition, shall have the right to purchase all or some of the Series A Common Stock at the price and on the terms and conditions stated in the notice. If the Company fails to purchase all of the Series A Common Stock, the other Series A Common Stock holders will have the opportunity to purchase same in an amount proportionate to their ownership interest in the total Series A Common Stock of the Company. If neither the Company nor the other Series A Common Stock holders purchase all of the Series A Common Stock, then the Series A Common Stock may be sold on the terms and conditions as set forth in the notice.
The Company also has the right, but not the obligation, to purchase Series A Common Stock upon the occurrence of an involuntary transfer, such as proceedings in bankruptcy, a divorce wherein the Series A Common Stock holder fails to eliminate any interest in his or her spouse or domestic partner, or the Series A Common Stock holder’s death. The Company may, but is not required to, procure life insurance on Series A Common Stock holders to fund such purchases.
The buy-sell agreement also contains a voting agreement wherein each Series A Common Stock holder agrees that, unless and until the Common Stock of the Company is listed for trading on the New York or American Stock Exchanges or through the National Association of Securities Dealers Automated Quotation (NASDAQ) system, if the Company becomes the subject of (i) a tender offer, (ii) reorganization (as that term is defined in the Code §368(a)), or (iii) an offer to purchase either the Company’s stock, substantially all of its assets, or substantially all of the assets of any division or business segment (a “Transaction”), and provided further Series A Common Stock holders holding a 85% majority interest of the Company’s voting power vote to accept the Transaction, then each Series A Common Stock holder shall cast its vote with the majority so that the Transaction will be approved unanimously by all of the Company’s Common Stock holders in accordance with the terms of the Transaction as approved by the majority.
As a condition precedent to the Company’s acceptance of a subscription, Investors must execute the Series B Common Stock Shareholder Agreement, included as Exhibit H to Form C. Pursuant to the Series B Common Stock Shareholder Agreement, Investors grant an irrevocable proxy appointing the CEO of the Company to vote shares on behalf of the Series B Common Stock holders. The Series B Common Stock Shareholder Agreement also requires Series B Common Stock holders to vote in conjunction with the vote of the majority of Series A Common Stock so that the applicable transaction will be approved unanimously by all of the Company’s Series B Common Stock holders in accordance with the terms as approved by the majority of the Series A Common Stock.
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Pursuant to the Series B Common Stock Shareholder Agreement the Company may, but is not required to, redeem Series B Common Stock at any time by giving at least thirty (30) days written notice to the holders thereof. If the Company redeems Series B Common Stock, it will redeem the Securities pro rata in an amount equal to the initial purchase price paid by each Investor to the Company in consideration for the sale and/or issuance of the Share plus a non-compounding return of five percent (5%) per annum based on the actual number of days elapsed from the initial date of issuance of Shares from the Company.
The Series B Common Stock Shareholder Agreement will terminate when the Securities are listed for trading on the New York or American Stock Exchanges or through the National Association of Securities Dealers Automated Quotation (NASDAQ) system. Refer to the Series B Common Stock Shareholder Agreement for more details.
Anti-Dilution Rights
The Securities do not have anti-dilution rights, which means that future equity issuances and other events will dilute the ownership percentage that the Investor may eventually have in the Company. Series A Common Stock shares are entitled to preemptive anti-dilution rights, as detailed in our Amended and Restated Articles of Incorporation, whereby they will be entitled to purchase additional shares of the Company upon certain new issuances of Common Stock of the Company.
Restrictions on Transfer
Any Securities sold pursuant to Regulation CF being offered may not be transferred by any Investor of such Securities during the one-year holding period beginning when the Securities were issued, unless such Securities are transferred: (1) to the Company; (2) to an accredited investor, as defined by Rule 501(d) of Regulation D promulgated under the Securities Act; (3) as part of an IPO; or (4) to a member of the family of the Investor or the equivalent, to a trust controlled by the Investor, to a trust created for the benefit of a member of the family of the Investor or the equivalent, or in connection with the death or divorce of the Investor or other similar circumstances. “Member of the family” as used herein means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother/father/daughter/son/sister/brother-in-law, and includes adoptive relationships. Each Investor should be aware that although the Securities may legally be able to be transferred, there is no guarantee that another party will be willing to purchase them.
In addition to the foregoing restrictions, prior to making any transfer of the Securities, such transferring Investor must either make such transfer pursuant to an effective registration statement filed with the SEC or provide the Company with an opinion of counsel reasonably satisfactory to the Company stating that a registration statement is not necessary to effect such transfer.
The summaries of, and references to, various documents in this Form C do not purport to be complete and in each instance reference should be made to the copy of such document which is either an appendix or Exhibit to this Form C or which will be made available to Investors and their professional advisors upon request.
Prior to making an investment decision regarding the Securities described herein, prospective Investors should carefully review and consider this entire Form C. The Company is prepared to furnish, upon request, a copy of the forms of any documents referenced in this Form C. The Company’s representatives will be available to discuss with prospective Investors and their representatives and advisors, if any, any matter set forth in this Form C or any other matter relating to the Securities described in this Form C, so that prospective Investors and their representatives and advisors, if any, may have available to them all information, financial and otherwise, necessary to formulate a well-informed investment decision. Additional information and materials concerning the Company will be made available to prospective Investors and their representatives and advisors, if any, at a mutually convenient location upon reasonable request.
Ongoing Reporting
Following the first sale of the Securities, the Company will file a report electronically with the Securities and Exchange Commission (“Commission” or “SEC”) annually and post the report on its website, no later than 120 days after the end of the Company’s fiscal year.
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Once posted, the annual report may be found on the Company’s Investor portal website at https://invest.myholly.app/. The Company must continue to comply with the ongoing reporting requirements until:
| (1) | the Company is required to file reports under Section 13(a) or Section 15(d) of the Exchange Act; | |
| (2) | the Company has filed at least three annual reports pursuant to Regulation CF and has total assets that do not exceed $10,000,000; | |
| (3) | the Company has filed at least one annual report pursuant to Regulation CF and has fewer than 300 holders of record; | |
| (4) | the Company or another party repurchases all of the Securities issued in reliance on Section 4(a)(6) of the Securities Act, including any payment in full of debt securities or any complete redemption of redeemable securities; or | |
| (5) | the Company liquidates or dissolves its business in accordance with applicable state law. |
Neither the Company nor any of its predecessors (if any) have previously failed to comply with the ongoing reporting requirement of Regulation CF.
Updates
Updates on the status of this Offering may be found at: https://invest.myholly.app/.
Exhibits
The following are included as Exhibits to this Form C and should be carefully reviewed by Investors prior to purchasing Securities:
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AMENDED AND RESTATED ARTICLES OF INCORPORATION
FOR
THE AUDITION, INC.
| For Office Use Only | |
| -FILED- | |
| File no.: BA20230596833 | |
| Date Filed: 4/3/2023 |
The undersigned certify that:
1, They are the Chief Executive Officer and the Secretary, respectively, of The Audition, Inc., a California corporation with California Entity Number 4696485.
2. The Articles of Incorporation of this corporation are amended and restated to read as follows:
ARTICLE I: NAME
The name of the corporation is The Audition, Inc.
ARTICLE II: PURPOSE
The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.
ARTICLE III: AUTHORIZED STOCK
3.1. Total Authorized.
3.1.1 The total number of shares of all classes of capital stock that the corporation has authority to issue is six hundred million (600,000,000) shares, consisting of: fifty million (50,000,000) shares of Series A Common Stock, $0.00001 par value per share (“Series A Common Stock”), five hundred million (500,000,000) shares of Series B Common Stock, $0.00001 par value per share (“Series B Common Stock” and together with the Series A Common Stock, the “Common Stock”), and fifty million (50,000,000) shares of Preferred Stock, $0.00001 par value per share.
3.1.2 Upon the effective time (the “Effective Time”) of the filing of these Amended and Restated Articles of Incorporation, each one (1) share of the corporation’s Common Stock that is issued and outstanding or held by the corporation as treasury stock immediately prior to the Effective Time, is and shall be reclassified and exchanged into ten (10) fully paid, nonassessable shares of Series A Common Stock (the “Reclassification”). Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”) shall thereafter represent that number of shares of Series A Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been exchanged and reclassified.
3.2. Designation of Preferred Shares.
3.2.1 The Board of Directors is authorized, subject to any limitations prescribed by the laws of the State of California, by resolution or resolutions, to provide for the issuance of the shares of Preferred Stock in one or more series, and, by filing a certificate of determination pursuant to the applicable law of the State of California (“Certificate of Determination”), to establish from time to time the number of shares to be included in each such series, to fix the designation, powers (including voting powers), preferences and relative, participating, optional or other rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof, and to increase (but not above the total number of authorized shares of such class) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series.
3.2.2 Except as otherwise expressly provided in any Certificate of Determination designating any series of Preferred Stock pursuant to the foregoing provisions of this ARTICLE III, any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of Common Stock or the holders of Preferred Stock, or any series therof, and any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, the Preferred Stock, or any future class or series of Preferred Stock or Common Stock.
3.3, Rights of Series B Common Stock and Series A Common Stock.
3.3.1 Equal Status. Except as otherwise provided in these Amended and Restated Articles of Incorporation or required by applicable law, shares of Series A Common Stock and Series B Common Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution or winding up of the corporation), share ratably and be identical in all respects and as to all matters.
3.3.2 Voting Rights. Except as otherwise expressly provided by these Amended and Restated Articles of Incorporation or as provided by law, the holders of shares of Series A Common Stock and Series B Common Stock shall (a) at all times vote together as a single class on all matters (including the election of directors) submitted to a vote or for the consent (if action by written consent of the shareholders is permitted at such time under these Amended and Restated Articles of Incorporation) of the shareholders of the corporation, (b) be entitled to notice of any shareholders’ meeting in accordance with the Bylaws of the corporation, as amended and then in effect (“Bylaws”) and (c) be entitled to vote upon such matters and in such manner as may be provided by applicable law. Except as otherwise expressly provided herein or required by applicable law, each holder of Series B Common Stock shall have the right to one (1) vote per share of Series B Common Stock held of record by such holder and each holder of Series A Common Stock shall have the right to ten (10) votes per share of Series A Common Stock held of record by such holder.
3.3.3 Dividend and Distribution Rights. Except as otherwise expressly provided by these Amended and Restated Articles of Incorporation or as provided by law, any dividend or distribution on the Common Stock shall be payable on shares of Series A Common Stock and Series B Common Stock, share and share alike; provided, however, that in the case of dividends or distributions payable in shares of Common Stock of the corporation, or options, warrants or rights to acquire shares of such Common Stock, or Securities convertible into or exchangeable for shares of such Common Stock, the shares, options, warrants, rights or Securities so payable shall be payable in shares of, or options, warrants or rights to acquire, or securities convertible into or exchangeable for, Common Stock of the same class upon which the dividend or distribution is being paid.
3.3.4 Subdivisions Combinations or Reclassifications. Shares of Series A Common Stock or Series B Common Stock may not be subdivided, combined or reclassifted unless the shares of the other Series are concurrently therewith proportionately subdivided, combined or reclassified in a manner that maintains the same proportionate equity ownership between the holders of the outstanding Series A Common Stock and Series B Common Stock on the record date for such subdivision, combination or reclassification; provided, however, that shares of one such class may be subdivided, combined or reclassified in a different or disproportionate manner if such subdivision, combination or reclassification is approved in advance by the affirmative vote (or written consent if action by written consent of shareholders is permitted at such time under these Amended and Restated Articles of Incorporation) of the holders of a majority of the outstanding shares of Series A Common Stock and Series B Common Stock, each voting separately as a class.
3.3.5 Liquidation, Dissolution or Winding Up. Subject to the preferential or other rights of any holders of Preferred Stock then outstanding, upon the dissolution, liquidation or winding up of the corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the corporation, the holders of shares of Series A Common Stock and Series B Common Stock shall be entitled to share ratably (based on the number of shares of Common Stock held by each such holder), share and share alike, in the remaining net assets of the corporation.
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3.3.6 Merger or Consolidation. In the case of any distribution or payment in respect of the shares of Series A Common Stock or Series B Common Stock upon the consolidation or merger of the corporation with or into any other entity, or in the case of any other transaction having an effect on shareholders substantially similar to that resulting from a consolidation or merger, such distribution or payment shall be made ratably on a per share basis among the holders of the Series A Common Stock and Series B Common Stock as a single class; provided, however, that shares of one such class may receive different or disproportionate distributions or payments in connection with such merger, consolidation or other transaction if (i) the only difference in the per share distribution to the holders of the Series B Common Stock and Series A Common Stock is that any securities distributed to the holder of a share Series A Common Stock has the right to ten times (10x) the vote of the securities distributed to Series B Common Stock holders, or (ii) such merger, consolidation or other transaction is approved by the affirmative vote (or written consent if action by written consent of shareholders is permitted at such time under these Amended and Restated Articles of Incorporation) of the holders of a majority of the outstanding shares of Series A Common Stock and Series B Common Stock, each voting separately as a class,
3.3.7 Change of Control Series A Vote. The corporation shall not consummate a Change in Control Transaction without first obtaining the affirmative vote (or written consent if action by written consent of shareholders is permitted at such time under these Amended and Restated Articles of Incorporation) of the holders of a majority of the then outstanding shares of Series A Common Stock, voting as a separate class, in addition to any other vote required by applicable law, these Amended and Restated Articles of Incorporation or the Bylaws,
3.3.8 Conversion of Series A Common Stock. Each share of Series A Common Stock shall be convertible into one (1) fully paid and nonassessable share of Series B Common Stock at the option of the holder thereof at any time upon written notice to the corporation, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Common Stock where the Series B Common Stock is not subject to a proportionate stock dividend, stock split, combination or other similar recapitalization or vice versa. Before any holder of Series A Common Stock shall be entitled to voluntarily convert any shares of such Series A Common Stock, such holder shall surrender the certificate or certificates therefor (if any), duly endorsed, at the principal corporate office of the corporation or of any transfer agent for the Series A Common Stock, and shall give written notice to the corporation at its principal corporate office, of the election to convert the same and shall state the number of shares of Series B Common Stock into which the Series A Common Stock will be converted and the name or names (i) in which the certificate or certificates representing the new shares of Series B Common Stock into which the shares of Series A Common Stock are so converted are to be issued if such shares are certificated or (ii) in which such shares are to be registered in book entry if such shares are uncertificated. The corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series A Common Stock, or to the nominee or nominees of such holder, a certificate or certificates representing the number of shares of Series B Common Stock to which such holder shall be entitled as aforesaid (if such shares are certificated) or, if such shares are uncertificated, register such shares in book- entry form. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Common Stock to be converted following or contemporaneously with the written notice of such holder’s election to convert required by this Section 3,3.8, and the person or persons entitled to receive the shares of stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of stock as of such date. Each share of Series A Common Stock that is converted pursuant to this Section 3.3.8 shall be retired by the corporation and shall not be available for reissuance.
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3.3.9 Reservation of Stock. The corporation shall at all times reserve and keep available out of its authorized but unissued shares of Series B Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Common Stock, such number of shares of such Series B Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Common Stock into shares of such class or series.
3.3.10 Protective Provision. The corporation shall not, whether by merger, consolidation or otherwise, amend, alter, repeal or waive Sections 3.3, 3.4 or 3,5 of this Article III (or adopt any provision inconsistent therewith), without first obtaining the affirmative vote (or written consent if action by written consent of shareholders is permitted at such time under these Amended and Restated Articles of Incorporation) of the holders of a majority of the then outstanding shares of Series A Common Stock, voting as a separate class, in addition to any other vote required by applicable law, these Amended and Restated Articles of Incorporation or the Bylaws.
3.4. Preemptive Rights.
3.4.1 At any time the corporation proposes to issue any new Common Stock (the “New Securities”), other than; (i) the New Issuance Exceptions and (ii) the issuance of Common Stock on a pro rata basis in connection with the payment of any share dividends, the corporation shall notify the Series A Common Stock holders in writing of such proposal (an “Issue Notice”). The Issue Notice shall specify the number and type of New Securities to be offered by the corporation and all material terms and conditions of the proposed offer (including the proposed price or range of prices) per New Security.
3.4.2 The Series A Common Stock holders shall have the right to purchase up to a number of New Securities so as to enable the Series A Common Stock holders to beneficially hold, after the issue of the New Securities which are the subject to the Issue Notice, a pro rata portion of the New Securities equal to the percentage of the issued and outstanding Common Stock then beneficially owned by the Series A Common Stock holders prior to the issuance of the New Securities upon the same terms and conditions set forth in the Issue Notice, by giving written notice to the corporation of the exercise of this right within ten (10) days of Series A Common Stock holder’s receipt of the Issue Notice (the “Election Notice”). If such notice is not given by a Series A Common Stock holder within such ten (10) days thereof, the Series A Common Stock holder shall be deemed to have elected not to exercise its preemptive rights under this Article III with respect to the issuance described in that specific Issue Notice.
3.4.3 If a Series A Common Stock holder exercises its preemptive rights under this Article III, the closing of the purchase of the New Securities with respect to which such right has been exercised (the “Preemptive Rights Closing Date”) shall take place at the time of the closing of the issuance or transfer of the New Securities, which may not be earlier than five (5) days after the giving of the Election Notice, provided that the Preemptive Rights Closing Date may be extended for a maximum of sixty (60) days to the extent required to comply with applicable laws (including receipt of any required regulatory approvals). The corporation and the Series A Common Stock holders will use commercially reasonable efforts to secure any required regulatory or shareholder approvals or other consents, and to comply with any applicable law necessary in connection with the offer, sale and purchase of, such New Securities,
3.4.4 In the event that a Series A Common Stock holder fails to exercise its preemptive rights under this Article III within such ten (10) day period, or in the event that a Series A Common Stock holder fails to consummate the purchase of such New Securities within the specified period of time pursuant to Section 3.4,3 (other than as a result of breach or fault of the corporation), the corporation shall thereafter be entitled to issue and sell within sixty (60) days the New Securities not elected to be purchased by the Series A Common Stock holders pursuant their preemptive rights to this Article III, at a price no less than that specified in the Issue Notice, and otherwise upon terms and conditions no more favorable to any purchaser of such New Securities than were specified in the Issue Notice. In the event the corporation has not issued and sold such New Securities within such sixty (60) Trading Day period, the corporation shall not thereafter offer, issue or sell such New Securities without first offering such New Securities to the Series A Common Stock holders in the manner provided in this Article III.
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3.4.5 In the case of the offering of New Securities for a consideration in whole or in part other than cash, including securities acquired in exchange therefor, the consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Board of Directors of the corporation; provided, however, that such fair value as determined by the Board of Directors shall not exceed the aggregate market price of the New Securities being offered as of the date the Board of Directors authorizes the offering of such New Securities.
3.5 Definitions. For purposes of these Amended and Restated Articles of Incorporation:
3.5.1 “Change in Control Transaction” means the occurrence of any of the following events:
(a) the sale, lease, exchange, encumbrance or other disposition (other than licenses that do not constitute an effective disposition of all or substantially all of the assets of the corporation and its subsidiaries taken as a whole, and the grant of security interests in the ordinary course of business) by the corporation of all or substantially all of the corporation’s assets; or
(b) the merger or consolidation of the corporation with or into any other entity, other than a merger or consolidation that would result in the Series A Common Stock of the corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its sole parent entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the corporation or such surviving entity or its sole parent entity outstanding immediately after such merger or consolidation.
3.5.2 “New Issuance Exceptions” means the following new issuances of Securities of the corporation:
(a) issuances of Securities to employees and other eligible recipients in the ordinary course of business pursuant to the corporation’s equity-based incentive plans approved by the shareholders and/or the Board of Directors and in effect from time to time;
(b) issuances of Securities as consideration to be paid in acquisitions by the corporation or any of its subsidiaries of businesses, equity securities or assets of a third party (including acquisitions of content);
(c) issuances of Securities pursuant to outstanding options, warrants or other rights to acquire Securities;
(d) issuances of Securities pursuant to any stock split or recapitalization approved by the shareholders and Board of Directors of the corporation; and
(e) issuances of Securities in connection with any shareholder rights plan adopted by the corporation.
3.5.3 “Securities” means any Common Stock, Preferred Stock or any equity interest of, or shares of any class in the share capital (ordinary, preferred or otherwise) of, the corporation and any convertible securities, options, warrants and any other type of equity or equity-linked securities convertible, exercisable or exchangeable for any such equity interest or shares of any class in the share capital of the corporation.
3. The foregoing amendment and restatement of Articles of Incorporation has been duly approved by the board of directors.
4. The foregoing amendment and restatement of Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902, California Corporations Code. The total number of outstanding shares of the corporation is 1,500,000. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50%.
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We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
DATE: March 30, 2023
| BY: | /s/ Kelly Chu | |
| Name: | Kelly Gtfu, CEO | |
| By: | ||
| Name: | Mira Howard, Secretary |
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We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge.
DATE: March 30,2023
| By: | ||
| Name: | Kelly Chu, CEO | |
| By. | /s/ Mira Noward | |
| Name: | Mira Noward, Secretary |
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BYLAWS
SUBSCRIPTION AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND STATE SECURITIES OR BLUE SKY LAWS. ALTHOUGH AN OFFERING STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THAT OFFERING STATEMENT DOES NOT INCLUDE THE SAME INFORMATION THAT WOULD BE INCLUDED IN A REGISTRATION STATEMENT UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON THE MERITS OF THIS OFFERING OR THE ADEQUACY OR ACCURACY OF THE SUBSCRIPTION AGREEMENT OR ANY OTHER MATERIALS OR INFORMATION MADE AVAILABLE TO INVESTOR IN CONNECTION WITH THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
SUBSCRIPTION AGREEMENT
| To: | The Audition, Inc. |
3415 South Sepulveda Blvd. Suite 1000
Los Angeles, CA 90034
Ladies and Gentlemen:
The undersigned (“Investor”) hereby subscribes for the number and dollar amount (“Subscription Amount”) of Shares (defined below) of The Audition, Inc., a California corporation (the “Company”) as indicated on the signature page hereto.
WHEREAS, the Company is offering up to 5,000,000 shares of its Series B Common Stock (the “Shares”) at a price of $1.00 per Share, for proceeds up to $5,000,000, pursuant to its Form C, including Exhibits, as amended and/or supplemented from time to time (“Offering Statement”), filed with the Securities and Exchange Commission (“SEC”) under Regulation Crowdfunding promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
NOW, THEREFORE, it is agreed as follows:
1. The Shares will be held by the Investor as indicated on the signature page hereto (e.g. individual, corporation, custodial account, community property, etc.).
2. To induce the Company to accept this subscription, the Investor hereby agrees and represents that:
A. Concurrent with the execution hereof, the Investor authorizes Enterprise Bank & Trust, as escrow agent for the Company (the “Escrow Agent”), to request the Subscription Amount from the Investor’s bank or other financial institution or the Investor has transferred funds equal to the Subscription Amount to the Escrow Agent concurrently with submitting this Subscription Agreement, unless otherwise agreed by the Company. All forms of payment must be payable to the Escrow Agent.
B. Within five (5) days after receipt of a written request from the Company, the Investor shall provide such information and execute and deliver such documents as the Company may reasonably request to comply with any and all laws and ordinances to which the Company may be subject, including the securities laws of the United States or any other applicable jurisdiction.
C. The Company has entered into, and from time to time may enter into, separate subscription agreements with other Investors for the sale of Shares to such other Investors. The sale of Shares to such other Investors and this sale of the Shares shall be separate sales and this Subscription Agreement and the other subscription agreements shall be separate agreements.
D. The Company may elect at any time after twenty-one (21) days from the date of the Offering Statement, to close all or any portion of this offering on various dates (each a “Closing Date”); provided that, it has raised the target offering amount stated in the Offering Statement. The Company, or an agent thereof, will provide notice of each Closing Date at least five business days prior to such Closing Date. Investor may cancel an investment commitment until 48 hours prior to the Closing Date noticed to Investor. If Investor does not cancel his or her or its investment commitment before the 48-hour period prior to the Closing Date, Investor will not be permitted to cancel the investment and Investor’s funds will be released to the Company promptly upon the Closing Date and the Investor will receive Shares in exchange for his or her or its investment. Shares will be issued in book entry form.
E. The Investor understands the meaning and legal consequences of, and that the Company intends to rely upon, the representations and warranties contained in Sections 2, 3, 4 and 5 hereof, and the Investor hereby agrees to indemnify and hold harmless the Company and each and any manager, member, officer, employee, agent or affiliate thereof from and against any and all loss, damage or liability due to or arising out of a breach of any representation or warranty of the Investor. The representations, warranties and covenants made by Investor herein shall survive the closing or termination of this Subscription Agreement.
3.
The Investor hereby represents and warrants that the Investor is a “qualified purchaser,” as defined in 17 C.F.R.
§§ 227.100, .504 for purposes of section 18(b)(3) of the Securities Act (15 U.S.C.
§ 77r(b)(3)), meaning the Investor is either:
A. an “Accredited Investor” as defined in Rule 501 of Regulation D (17 U.S.C. § 230.501) under the Securities Act and indicated on the U.S. Accredited Investor Certificate attached hereto; or
B. the Subscription Amount plus all other investments by Investor pursuant to Regulation Crowdfunding (Section 4(a)(6) of the Securities Act) during the twelve (12) month period preceding the date of this Subscription Agreement does not represent:
i. Where the Investor’s annual income AND net worth are both equal to or greater than $124,000, more than 10% of the greater of Investor’s annual income or net worth, subject to a maximum investment of $124,000.
ii. Where the Investor’s annual income OR net worth is less than $124,000, more than the greater of $2,500 or 5% of the greater of the Investor’s annual income or net worth.
iii. For this subparagraph, net worth is determined in the same manner as for an Accredited Investor.
4. The Investor hereby further represents, warrants, acknowledges and agrees as follows, which representations and warranties will be true and correct as of Investor’s Closing Date:
A. The information provided by the Investor to the Company via this Subscription Agreement and its exhibits, schedules or appendices, or otherwise is true and correct in all respects as of the date hereof and the Investor hereby agrees to promptly notify the Company and supply corrective information to the Company if, prior to the consummation of its investment in the Company, any of such information becomes inaccurate or incomplete.
B. The Investor, if an individual, is over 18 years of age (or older if required by Investor’s state), and the address set forth above is the true residence and domicile of the Investor, and the Investor has no present intention of becoming a resident or domiciliary of any other state or jurisdiction. If a corporation, trust, partnership or other entity, the Investor has its principal place of business at the address set forth on the signature page.
C. If Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Investor hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Subscription Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares. Investor further represents that Investor’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of Investor’s jurisdiction.
D. The Investor has had an opportunity to ask questions of and receive answers from the Company, or a person or persons acting on its behalf, concerning the Company and the terms and conditions of this investment, and all such questions have been answered to the full satisfaction of the Investor.
E. Except as set forth in this Subscription Agreement, no representations or warranties have been made to the Investor by the Company or any partner, agent, employee, or affiliate thereof. The Investor has not relied on any communication of the Company, including information presented on the Company’s website or business/pitch deck, as investment or financial advice or as a recommendation to purchase the Shares. The Investor is making its own independent investment decision based on the information provided in the Company’s Offering Statement, and not based on any other documents or information generated by the Company or its existing Shareholders, directors, employees, or agents.
F. The Investor is capable of evaluating the merits and risks of an investment in the Company and making an informed investment decision with respect thereto. The Investor has consulted its own advisers with respect to its proposed investment in the Company, as may be desired or advisable.
G. The Investor is not making this subscription in any manner as a representative of a charitable remainder unitrust or a charitable remainder trust.
H. The Investor has the financial ability to bear the economic risk of the Investor’s investment, including a complete loss thereof, has adequate means for providing for its current needs and possible contingencies and has no need for liquidity in its investment.
I. The Investor acknowledges and understands that:
| i. | The Shares are a speculative investment and involve a substantial degree of risk; | |
| ii. | The Company does not have a significant financial or operating history; |
| iii. | The Shares are being offered pursuant to Regulation Crowdfunding under the Securities Act and have not been registered or qualified under any state blue sky or securities law; and | |
| iv. | Any federal income tax treatment which may be currently available to the Investor may be lost through adoption of new laws or regulations, amendments to existing laws or regulations or changes in the interpretations of existing laws and regulations. |
J. The Investor has carefully reviewed and understands the Company’s Offering Statement, as amended or supplemented, and exhibits included therewith, including the “Risk Factors” contained in the Offering Statement.
K. The Investor represents and warrants that (i) the Shares are to be purchased with funds that are from legitimate sources in connection with its regular business activities and which do not constitute the proceeds of criminal conduct; (ii) the Shares are not being acquired, and will not be held, in violation of any applicable laws; (iii) the Investor is not listed on the list of Specially Designated Nationals and Blocked Persons maintained by the United States Office of Foreign Assets Control (“OFAC”); and (iv) the Investor is not a senior foreign political figure, or any immediate family member close associate of a senior foreign political figure.
L. If the Investor is an individual retirement account, qualified pension, profit sharing, or other retirement plan, or governmental plans or units (all such entities are herein referred to as a “Retirement Trust”), the Investor represents that the investment in the Company by the Retirement Trust has been authorized by the appropriate person or persons and that the Retirement Trust has consulted its counsel with respect to such investment and the Investor represents that it has not relied on any advice of the Company or its affiliates in making its decision to invest in the Company.
M. Neither the execution and delivery of this Agreement nor the fulfillment of or compliance with the terms and provisions hereof, will conflict with, or result in a breach or violation of any of the terms, conditions or provisions of, or constitute a default under, any contract, agreement, mortgage, indenture, lease, instrument, order, judgment, statute, law, rule or regulation to which Investor is subject.
N. Investor has all requisite power and authority to (i) execute and deliver this Agreement, and (ii) to carry out and perform its obligations under the terms of this Agreement. This Agreement has been duly authorized, executed, and delivered, and constitutes the legal, valid, and binding obligation of Investor, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting the enforcement of creditors’ rights generally in effect from time to time and by general principles of equity.
O. Investor acknowledges and agrees that there is no ready public market for the Shares and that there is no guarantee that a market for their resale will ever exist. The Company has no obligation to list any of the Shares on any market or take any steps [including registration under the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”)] with respect to facilitating trading or resale of the Shares. Investor must bear the economic risk of this investment indefinitely and Investor acknowledges that Investor is able to bear the economic risk of losing Investor’s entire investment in the Shares. Investor also understands that an investment in the Company involves significant risks and has taken full cognizance of and understands all of the risk factors relating to the purchase of Shares. Investor further understands and agrees that the Shares may not be transferred by Investor during the one-year period beginning at the Closing Date, unless such securities are transferred (i) to the Company; (ii) to an accredited Investor; (iii) as part of an offering registered with the U.S. Securities and Exchange Commission; or (iv) to a member of the family of the Investor or the equivalent, to a trust controlled by the Investor, to a trust created for the benefit of a member of the family of the Investor or the equivalent, or in connection with the death or divorce of the Investor or other similar circumstance. This provision will survive closing or termination of this Subscription Agreement.
5. Investor has accurately answered all questions on and completed the signature page hereto, U.S. Accredited Investor Certificate, AML Certificate, Subscriber Information Appendix and all other exhibits, appendices and schedules included herewith, each made a part hereof by reference.
6. Investor agrees that the Company may rely on the representations and warranties and other information provided by Investor.
7. It is understood that this subscription is not binding on the Company until accepted by the Company by signature of its authorized representative on the acceptance page hereto. The Company may terminate the offering at any time, and may accept or reject this subscription in whole or in part. In the event of rejection of this subscription in its entirety, or in the event the sale of the Shares (or any portion thereof) to Investor is not consummated for any reason, this Subscription Agreement shall have no force or effect with respect to the rejected subscription (or portion thereof), except for Section 2(D) hereof, which shall remain in force and effect.
8. The Company reserves the right to request such information as is necessary to verify the identity of the Investor. The Investor shall promptly on demand provide such information and execute and deliver such documents as the Company may request to verify the accuracy of the Investor’s representations and warranties herein or to comply with the USA PATRIOT Act of 2001, as amended (the “Patriot Act”), certain anti-money laundering laws or any other law or regulation to which the Company may be subject (the “Relevant Legislation”). In addition, by executing this Subscription Agreement the Investor authorizes the Company to provide the Company’s legal counsel and any other appropriate third party with information regarding the Investor’s account, until the authorization is revoked by the Investor in writing to the Company.
9. The Company represents and warrants to the Investor that:
A. The Company is duly formed and validly existing in good standing as a corporation under the laws of the State of California and has all requisite power and authority to carry on its business as now conducted.
B. The execution, delivery, and performance by the Company of this Subscription Agreement have been authorized by all necessary action on behalf of the Company, and this Subscription Agreement is a legal, valid, and binding agreement of the Company, enforceable against the Company in accordance with its terms.
C. The Shares, when so issued, sold and delivered against payment therefor in accordance with the provisions of this Subscription Agreement, will be duly and validly issued, fully paid and non-assessable.
10. Notwithstanding anything contained in this Subscription Agreement, Investor is not being asked to waive, and is not waiving, any right to bring a claim against the Company under the Securities Act or Securities Exchange Act of 1934, as amended; however, the Company may rely on the representations contained in this Subscription Agreement in defense of such claims, if applicable.
11. It is a condition precedent to the Company’s acceptance of this subscription that Investor executes and joins the Company’s Series B Common Stock Shareholder Agreement prior to or concurrent with submitting this subscription, including any power of attorney or Proxy of the Investor contained therein, executed in compliance with the laws of the state, province, or jurisdiction in which such agreements were executed and investor represents and warrants that he, she or it has so executed the Series B Common Stock Shareholder Agreement and agrees to be bound by its terms.
12. Miscellaneous.
A. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular, or plural, as the identity of the person or persons or entity or entities may require.
B. This Subscription Agreement is not transferable or assignable by Investor without the prior written consent of the Company.
C. The representations, warranties, and agreements contained herein shall be deemed to be made by and be binding upon Investor and its heirs, executors, administrators, and successors, and shall inure to the benefit of the Company and its successors and assigns.
D. None of the provisions of this Subscription Agreement may be waived, changed, or terminated orally or otherwise, except as specifically set forth herein or except by a writing signed by the Company and Investor.
E. The invalidity, illegality, or unenforceability of one or more of the provisions of this Subscription Agreement in any jurisdiction shall not affect the validity, legality, or enforceability of the remainder of this Subscription Agreement in such jurisdiction or the validity, legality, or enforceability of this Subscription Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.
F. This Subscription Agreement constitutes the entire agreement between the Investor and the Company with respect to the subject matter hereof and supersedes all prior oral or written agreements and understandings, if any, relating to the subject matter hereof.
G. The terms and provisions of this Subscription Agreement are intended solely for the benefit of each party hereto and their respective successors and assigns, and it is not the intention of the parties to confer, and no provision hereof shall confer, third-party beneficiary rights upon any other person.
H. This Subscription Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
I. No failure or delay by any party in exercising any right, power, or privilege under this Subscription Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
J. Notice, requests, demands, and other communications relating to this Subscription Agreement and the transactions contemplated herein shall be in writing and shall be deemed to have been duly given if and when (a) delivered personally, on the date of such delivery; or (b) mailed by registered or certified mail, postage prepaid, return receipt requested, on the third day after the posting thereof; or (c) emailed, telecopied or cabled, on the date of such delivery. All methods of transmission to be made to the respective parties at the addresses set forth on the signature page hereto with respect to the Investor and above on page 1 of this Subscription Agreement with respect to the Company, except that the Company will not accept notice by email or other electronic communication.
K. THE COMPANY WILL NOT BE LIABLE TO INVESTOR FOR ANY LOST PROFITS OR SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES, EVEN IF INVESTOR TELLS THE COMPANY IT MIGHT INCUR THOSE DAMAGES. There is no guarantee that an investment in the Company will generate a profit or return on investment, or that the Investor will not lose their entire investment. The Investor is advised to seek the advice of professional counsel, including tax, legal, and financial advisors, and the Investor is making its own independent decision on the suitability of an investment in the Company.
L. Investor agrees that the Company may deliver all notices, tax reports, and other documents and information to Investor by email or another electronic delivery method chosen by the Company. Investor agrees to tell the Company immediately if Investor changes its email address or home mailing address so the Company can send information to the new address.
M. Each of the parties hereto agrees that the transaction consisting of this Agreement and its exhibits, appendices and schedules (and, to the extent permitted under applicable law, each related agreement) may be conducted by electronic means. Each party agrees, and acknowledges that it is such party’s intent, that if such party signs this Agreement (or, if applicable, related agreement) using an electronic signature, it is signing, adopting, and accepting this Agreement or such closing document and that signing this Agreement or such related agreement using an electronic signature is the legal equivalent of having placed its handwritten signature on this Agreement or such related agreement on paper. The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Federal Electronic Signatures in Global and National Commerce Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
N. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California as applied to contracts executed in and performed wholly within the State of California, without reference to principles of conflict of laws.
[EXECUTION PAGE FOLLOWS]
The Audition, Inc.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned, desiring to purchase Common Stock of The Audition, Inc. by executing this signature page, hereby executes, adopts and agrees to all terms, conditions and representations of the Subscription Agreement.
The Securities being subscribed for will be owned by, and should be recorded on the Corporation’s books as follows:
| Full legal name of Subscriber (including | Number of securities: Common Stock | ||
| middle name(s), for individuals): | Aggregate Subscription Price: $0.00 USD | ||
| TYPE OF OWNERSHIP: | |||
| (Name of Subscriber) | If the Subscriber is individual: | If the Subscriber is not an individual: | |
By: |
☐ Individual | ||
| (Authorized Signature) | |||
| ☐ Joint Tenant | |||
| (Official Capacity or Title, if the Subscriber is not an individual) | ☐ Tenants in Common | ||
| ☐ Community Property | |||
| (Name of individual whose signature appears above if different than the name of the Subscriber printed above.) | If interests are to be jointly held: | ||
| Name of the Joint Subscriber: | |||
| (Subscriber’s Residential Address, including Province/State and Postal/Zip Code) | Social Security Number of the Joint Subscriber: | ||
| Check this box is the securities will be held in a custodial account: ☐ | |||
| Taxpayer Identification Number | Type of account: | ||
| (Telephone Number) | EIN of account: | ||
| (Offline Investor) | Address of account provider: | ||
| (E-Mail Address) | |||
ACCEPTANCE
The Corporation hereby accepts the subscription as set forth above on the terms and conditions contained in this Subscription Agreement.
| Dated as of | ||
| The Audition, Inc. | ||
| By: | ||
| Authorized Signing Office |
U.S. INVESTOR QUESTIONNAIRE
EITHER (i) The undersigned is an accredited investor (as that term is defined in Regulation D under the Securities Act because the undersigned meets the criteria set forth in the following paragraph(s) of Appendix A attached hereto: ☐
OR (ii) The aggregate subscription amount of 0.00 USD (together with any previous investments in the Securities pursuant to this offering) does not exceed the Investor’s limit of 0.00 in this offering, not the Investor’s total limit for investment in offerings under rule Section 4(a)(6) of the Securities Act of 1933, as amended, being Regulation CF. in the last 12 months.
Aggregate subscription amount invested in this offering: 0.00 USD
The Investor either has ☐ or has not ☐ invested in offerings under Section 4(a)(6) of the Securities Act of 1933, as amended, being Regulation CF. in the last 12 months prior to this offering. If yes, the total amount the Investor has invested in offerings under Section 4(a)(6) of the Securities Act of 1933, as amended, being Regulation CF in the last 12 months prior to this offering is: USD
The Investor’s investment limit for this offering is: 0.00USD
The Investor’s investment limit for all offerings under Section 4(a)(6) of the Securities Act of 1933, as amended, being Regulation CF. in the last 12 months, including this offering is: 0.00USD
The Investor’s net worth (if not an accredited investor): USD
The Investor’s income (if not an accredited investor): USD
If selected (a) above, the Investor hereby represents and warrants that that the Investor is an Accredited Investor, as defined by Rule 501 of Regulation D under the Securities Act of 1933, and Investor meets at least one (1) of the following criteria (initial all that apply) or that Investor is an unaccredited investor and meets none of the following criteria (initial as applicable):
| ☐ | The Investor is a natural person (individual) whose own net worth, taken together with the net worth of the Investor’s spouse or spousal equivalent, exceeds US$1,000,000, excluding equity in the Investor’s principal residence unless the net effect of his or her mortgage results in negative equity, the Investor should include any negative effects in calculating his or her net worth. | |
| ☐ | The Investor is a natural person (individual) who had an individual income in excess of US$200,000 (or joint income with the Investor spouse or spousal equivalent in excess of US$300,000) in each of the two previous years and who reasonably expects a gross income of the same this year. | |
| ☐ | The Investor is an entity as to which all the equity owners are Accredited | |
| ☐ | Investors. If this paragraph is initialed, the Investor represents and warrants that the Investor has verified all such equity owners’ status as an Accredited Investor. | |
| ☐ | The Investor is either (i) a corporation, (ii) an organization described in Section 501(c)(3) of the Internal Revenue Code, (iii) a trust, or (iv) a partnership, in each case not formed for the specific purpose of acquiring the securities offered, and in each case with total assets in excess of US$5,000,000. | |
| ☐ | The Investor is not an Accredited Investor and does not meet any of the above criteria. |
DATED:
| INVESTOR: | (Print Full Name of Entity or Individual) | |
| By: | ||
| (Signature) | ||
| Name: | ||
| (If signing on behalf of entity) | ||
| Title: | ||
| (If signing on behalf of entity) | ||
CANADIAN ACCREDITED INVESTOR CERTIFICATE
TO: The Audition, Inc. (the “Corporation”)
The Investor hereby represents, warrants and certifies to the Corporation that the undersigned is an “Accredited Investor” as defined in Section 1.1 of National Instrument 45-106. The Investor has indicated below the criteria which the Investor satisfies in order to qualify as an” Accredited Investor”.
The Investor understands that the Corporation and its counsel are relying upon this information in determining to sell securities to the undersigned in a manner exempt from the prospectus and registration requirements of applicable securities laws.
The categories listed herein contain certain specifically defined terms. If you are unsure as to the meanings of those terms, or are unsure as to the applicability of any category below, please contact your legal advisor before completing this certificate.
In connection with the purchase by the undersigned Subscriber of the Purchased Common Stock, the Subscriber hereby represents, warrants, covenants and certifies to the Corporation (and acknowledges that the Corporation and its counsel are relying thereon) that:
| a. | the Subscriber is, and at the Closing Time, will be, an “accredited investor” within the meaning of NI 45-106 or Section 73.3 of the Securities Act (Ontario), as applicable, on the basis that the undersigned fits within one of the categories of an “accredited investor” reproduced below beside which the undersigned has indicated the undersigned belongs to such category; | |
| b. | the Subscriber was not created or is not used, solely to purchase or hold securities as an accredited investor as described in paragraph (m) below; and | |
| c. | upon execution of this Schedule B by the Subscriber, including, if applicable, Appendix 1 to this Schedule B, this Schedule B shall be incorporated into and form a part of the Subscription Agreement. |
(PLEASE CHECK THE BOX OF THE APPLICABLE CATEGORY OF ACCREDITED INVESTOR)
| ☐ | (a) | a Canadian financial institution, or a Schedule III bank; | |
| ☐ | (b) | the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada); | |
| ☐ | (c) | a subsidiary of any Person referred to in paragraphs (a) or (b), if the Person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary; | |
| ☐ | (d) | a Person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a Person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador); | |
| ☐ | (e) | an individual registered under the securities legislation of a jurisdiction of Canada as a representative of a Person referred to in paragraph (d); | |
| ☐ | (e.1) | an individual formerly registered under the securities legislation of a jurisdiction of Canada, other than an individual formerly registered solely as a representative of a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador); | |
| ☐ | (f) | the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada; | |
| ☐ | (g) | a municipality, public board or commission in Canada and a metropolitan community, school board,the Comité de gestion de la taxe scolaire de l’île de Montréal or an intermunicipal management board in Québec; | |
| ☐ | (h) | any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government; | |
| ☐ | (i) | a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a pension commission or similar regulatory authority of a jurisdiction of Canada; |
| ☐ | (j) | an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds CAD $1,000,000; | |
| ☐ | (j.1) | an individual who beneficially owns financial assets having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds CAD $5,000,000; | |
| ☐ | (k) | an individual whose net income before taxes exceeded CAD$200,000 in each of the two most recent calendar years or whose net income before taxes combined with that of a spouse exceeded CAD $300,000 in each of the two most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year; | |
| ☐ | (l) | an individual who, either alone or with a spouse, has net assets of at least CAD $5,000,000; | |
| ☐ | (m) | a Person, other than an individual or investment fund, that has net assets of at least CAD $5,000,000 as shown on its most recently prepared financial statements and that has not been created or used solely to purchase or hold securities as an accredited investor; | |
| ☐ | (n) | an investment fund that distributes or has distributed its securities only to (i) a Person that is or was an accredited investor at the time of the distribution,(ii) a Person that acquires or acquired securities in the circumstances referred to in sections 2.10 (Minimum amount investment) and 2.19 (Additional investment in investment funds) of NI 45-106, or (iii) a Person described in paragraph (i) or (ii) that acquires or acquired securities under section 2.18 (Investment fund reinvestment) of NI 45-106; | |
| ☐ | (o) | an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt; | |
| ☐ | (p) | a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be; | |
| ☐ | (q) | a Person acting on behalf of a fully managed account managed by that Person, if that Person (i) is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction, and (ii) in Ontario, is purchasing a security that is not a security of an investment fund; | |
| ☐ | (r) | a registered charity under the Income Tax Act(Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded; | |
| ☐ | (s) | an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (a) to (d) or paragraph (i) in form and function; | |
| ☐ | (t) | a Person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are Persons that are accredited investors; | |
| ☐ | (u) | an investment fund that is advised by a Person registered as an adviser or a Person that is exempt from registration as an adviser; | |
| ☐ | (v) | a Person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as (i) an accredited investor, or (ii) an exempt purchaser in Alberta or Ontario; or | |
| ☐ | (w) | a trust established by an accredited investor for the benefit of the accredited investor’s family members of which a majority of the trustees are accredited investors and all of the beneficiaries are the accredited investor’s spouse, a former spouse of the accredited investor or a parent, grandparent, brother, sister, child or grandchild of that accredited investor, of that accredited investor’s spouse or of that accredited investor’s former spouse. |
The statements made in this Form are true and accurate as of the date hereof.
DATED:
| INVESTOR: | (Print Full Name of Entity or Individual) | |
| By: | ||
| (Signature) | ||
| Name: | ||
| (If signing on behalf of entity) | ||
| Title: | ||
| (If signing on behalf of entity) | ||
Definitions for Accredited Investor Certificate
As used in the Accredited Investor Certificate, the following terms have the meanings set out below:
| a. | “Canadian financial institution” means (i) an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of that Act, or (ii) a bank, loan corporation, trust company, trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada; | |
| b. | “entity” means a company, syndicate, partnership, trust or unincorporated organization; | |
| c. | “financial assets” means cash, securities, or any a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation; | |
| d. | “fully managed account” means an account of a client for which a Person makes the investment decisions if that Person has full discretion to trade in securities for the account without requiring the client’s express consent to a transaction; | |
| e. | “investment fund” means a mutual fund or a non-redeemable investment fund, and, for greater certainty in Ontario, includes an employee venture capital corporation that does not have a restricted constitution, and is registered under Part 2 of the Employee Investment Act (British Columbia), R.S.B.C. 1996 c. 112, and whose business objective is making multiple investments and a venture capital corporation registered under Part 1 of the Small Business Venture Capital Act (British Columbia), R.S.B.C. 1996 c. 429 whose business objective is making multiple investments; | |
| f. | “mutual fund” means an issuer whose primary purpose is to invest money provided by its security holders and whose securities entitle the holder to receive on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in part of the net assets, including a separate fund or trust account, of the issuer; | |
| g. | “non-redeemable investment fund” means an issuer, |
| A. | whose primary purpose is to invest money provided by its securityholders, | |
| B. | that does not invest, |
| i. | for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund, or | |
| ii. | for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and |
| C. | that is not a mutual fund; |
| h. | “related liabilities” means liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets and liabilities that are secured by financial assets; |
| i. | “Schedule III bank” means an authorized foreign bank named in Schedule III of the Bank Act (Canada); | |
| j. | “spouse” means an individual who (i) is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, (ii) is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or (iii) in Alberta, is an individual referred to in paragraph (i) or (ii), or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and | |
| k. | “subsidiary” means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary. |
In NI 45-106 a Person or company is an affiliate of another Person or company if one of them is a subsidiary of the other, or if each of them is controlled by the same Person.
In NI 45-106 a Person (first Person) is considered to control another Person (second Person) if (a) the first Person, directly or indirectly, beneficially owns or exercises control or direction over securities of the second Person carrying votes which, if exercised, would entitle the first Person to elect a majority of the directors of the second Person, unless that first Person holds the voting securities only to secure an obligation, (b) the second Person is a partnership, other than a limited partnership, and the first Person holds more than 50% of the interests of the partnership, or (c) the second Person is a limited partnership and the general partner of the limited partnership is the first Person.
RISK ACKNOWLEDGEMENT FORM (FORM 45-106 F9 )
Form for Individual Accredited Investors
WARNING! This investment is risky. Do not invest unless you can afford to lose all the money you pay for this investment.
| Section 1 –TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER | ||
| Type of Securities: Common Stock | Issuer: The Audition, Inc. (the “Issuer”) | |
| Purchased from: The Issuer | ||
| Sections 2 to 4 –TO BE COMPLETED BY THE PURCHASER | |||
| This investment is risky. Initial that you understand that: | Your Initials | ||
| Risk of loss –You could lose your entire investment of $ | |||
| Liquidity risk –You may not be able to sell your investment quickly –or at all. | |||
| Lack of information –You may receive little or no information about your investment. | |||
| Lack of advice –You will not receive advice from the salesperson about whether this investment is suitable for you unless the sales person is registered. The sales person is the person who meets with, or provides information to, you about making this investment. To check whether the salesperson is registered, go to www.aretheyregistered.ca. | |||
| You must meet at least one of the following criteria to be able to make this investment. Initial the statement that applies to you. (You may initial more than one statement.) The person identified in section 6 is responsible for ensuring that you meet the definition of accredited investor. That person, or the salesperson identified in section 5, can help you if you have questions about whether you meet these criteria. | Your Initials |
| ● | Your net income before taxes was more than CAD$200,000 in each of the 2 most recent calendar years, and you expect it to be more than CAD$200,000 in the current calendar year. (You can find your net income before taxes on your personal income tax return.) | ||
| ● | Your net income before taxes combined with your spouse’s was more than $300,000 in each of the 2 most recent calendar years, and you expect your combined net income before taxes to be more than CAD$300,000 in the current calendar year. | ||
| ● | Either alone or with your spouse, you own more than CAD$1 million in cash and securities, after subtracting any debt related to the cash and securities. | ||
| ● | Either alone or with your spouse, you have net assets worth more than CAD$5 million. (Your net assets are your total assets (including real estate) minus your totaldebt.) |
By signing this form, you confirm that you have read this form and you understand the risks of making this investment as identified in this form.
First and Last Name (please print):
| Signature: | |||
| Date: |
| Section 5 –TO BE COMPLETED BY THE SALESPERSON | ||
| [Instruction: The salesperson is the person who meets with, or provides information to, the purchaser with respect to making this investment. That could include a representative of the issuer or selling security holder, a registrant or a person who is exempt from the registration requirement.] | ||
| First and Last Name of Salesperson (please print): | ||
| Telephone: | Email: | |
| Name of Firm (if registered): | ||
| Section 6 – TO BE COMPLETED BY THE ISSUER OR SELLING SECURITY HOLDER | ||
| 6.For more information about this investment | ||
| For more information about this investment/the Issuer: | ||
| Company Name: The Audition, Inc. | ||
| Address: 9465 Garden Grove Boulevard, Garden Grove, CA, | ||
| Contact: Mira Howard | ||
| Email: mirachoward@gmail.com | ||
| For more information about prospectus exemptions, contact your local securities regulator. You can find contact information at www.securities-administrators.ca. | ||
INTERNATIONAL INVESTOR CERTIFICATE
FOR SUBSCRIBERS RESIDENT OUTSIDE OF CANADA AND THE UNITED STATES
TO: The Audition, Inc. (the “Corporation”)
The undersigned (the “Subscriber”) represents covenants and certifies to the Corporation that:
| i. | The Subscriber (and if the Subscriber is acting as agent for a disclosed principal, such disclosed principal) is not resident in Canada or the United States or subject to applicable securities laws of Canada or the United States; |
| ii. | the issuance of the securities in the capital of the Corporation under this agreement (the “Securities”) by the Corporation to the Subscriber (or its disclosed principal, if any) may be effected by the Corporation without the necessity of the filing of any document with or obtaining any approval from or effecting any registration with any governmental entity or similar regulatory authority having jurisdiction over the Subscriber (or its disclosed principal, if any); |
| iii | the Subscriber is knowledgeable of, or has been independently advised as to, the applicable securities laws of the jurisdiction which would apply to this subscription, if there are any; |
| iv | the issuance of the Securities to the Subscriber (and if the Subscriber is acting as agent for a disclosed principal, such disclosed principal) complies with the requirements of all applicable laws in the jurisdiction of its residence; |
| v | the applicable securities laws do not require the Corporation to register the Securities, file a prospectus or similar document, or make any filings or disclosures or seek any approvals of any kind whatsoever from any regulatory authority of any kind what so ever in the international jurisdiction; |
| vi. | the purchase of the Securities by the Subscriber, and (if applicable) each disclosed beneficial subscriber, does not require the Corporation to be come subject to regulation in the Subscriber’s or disclosed beneficial subscriber’s jurisdiction, nor does it require the Corporation to attorn to the jurisdiction of any governmental authority or regulator in such jurisdiction or require any translation of documents by the Corporation; |
| vii. | the Subscriber will not sell, transfer or dispose of the Securities except in accordance with all applicable laws, including applicable securities laws of Canada and the United States, and the Subscriber acknowledges that the Corporation shall have no obligation to register any such purported sale, transfer or disposition which violates applicable Canadian or United States securities laws; and |
| viii. | The Subscriber will provide such evidence of compliance with all such matters as the Corporation or its counsel may request |
| The Subscriber acknowledges that the Corporation is relying on this certificate to determine the Subscriber’s suitability as a purchaser of securities of the Corporation. The Subscriber agrees that the representations, covenants and certifications contained to this certificate shall survive any issuance of Securities and warrants of the Corporation to the Subscriber. | |
| The statements made in this Form are true and accurate as of the date hereof. | |
| DATED: | |
| INVESTOR: | (Print Full Name of Entity or Individual) |
| By: | |
| (Signature) | |
| Name: | |
| (If signing on behalf of entity) | |
| Title: | |
| (If signing on behalf of entity) | |
AML Certificate
By executing this document, the client certifies the following:
If an Entity:
1. I am the of the Entity, and as such have knowledge of the matters certified to herein;
2. the Entity has not taken any steps to terminate its existence, to amalgamate, to continue into any other jurisdiction or to change its existence in any way and no proceedings have been commenced or threatened, or actions taken, or resolutions passed that could result in the Entity ceasing to exist;
3. the Entity is not insolvent and no acts or proceedings have been taken by or against the Entity or are pending in connection with the Entity, and the Entity is not in the course of, and has not received any notice or other communications, in each case, in respect of, any amalgamation, dissolution, liquidation, insolvency, bankruptcy or reorganization involving the Entity, or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer with respect to all or any of its assets or revenues or of any proceedings to cancel its certificate of incorporation or similar constating document or to otherwise terminate its existence or of any situation which, unless remedied, would result in such cancellation or termination;
4. the Entity has not failed to file such returns, pay such taxes, or take such steps as may constitute grounds for the cancellation or forfeiture of its certificate of incorporation or similar constating document;
5. if required, the documents uploaded to the DealMaker portal are true certified copies of the deed of trust, articles of incorporation or organization, bylaws and other constating documents of the Entity including copies of corporate resolutions or by-laws relating to the power to bind the Entity;
6. The Client is the following type of Entity:
7. The names and personal addresses as applicable for the entity in Appendix 1 are accurate.
All subscribers:
Deal Maker Account Number: (Offline Investor)
If I elect to submit my investment funds by an electronic payment option offered by DealMaker, I hereby agree to be bound by DealMaker’s Electronic Payment Terms and Conditions (the “Electronic Payment Terms”). I acknowledge that the Electronic Payment Terms are subject to change from time to time without notice.
Notwithstanding anything to the contrary, an electronic payment made hereunder will constitute unconditional acceptance of the Electronic Payment Terms, and by use of the credit card or ACH/EFT payment option hereunder, I: (1) authorize the automatic processing of a charge to my credit card account or debit my bank account for any and all balances due and payable under this agreement; (2) acknowledge that there may be fees payable for processing my payment; (3) acknowledge and agree that I will not initiate a chargeback or reversal of funds on account of any issues that arise pursuant to this investment and I may be liable for any and all damages that could ensue as a result of any such chargebacks or reversals initiated by myself.
| DATED: | |
| INVESTOR: | (Print Full Name of Investor) |
| By: | |
| (Signature) | |
| Name of Signing Officer (if Entity): | |
| Title of Signing Officer (if Entity): |
Appendix 1 - Subscriber Information
For the Subscriber and Joint Holder (if applicable)
| Name | Address | Date of Birth (if an Individual) | Taxpayer Identification Number | |||
For a Corporation or entity other than a Trust (Insert names and addresses below or attach a list)
| 1. | One Current control person of the Organization: |
| Name | Address | Date of Birth | Taxpayer Identification Number | |||
| 2. | Unless the entity is an Estate or Sole Proprietorship, list the Beneficial owners of, or those exercising director indirect control or direction over, more than 25% of the voting rights attached to the outstanding voting securities or the Organization: |
| Name | Address | Date of Birth | Taxpayer Identification Number | |||
For a Trust (Insert names and addresses or attach a list)
| 1. | Current trustees of the Organization: |
| Name | Address | Date of Birth | Taxpayer Identification Number | |||
SERIES A COMMON STOCK BUY-SELL AGREEMENT
SERIES B COMMON STOCK SHAREHOLDER AGREEMENT
