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Resonado Labs

The speaker reinvented. High performance, design-conscious flat speaker design
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Co-investors
500 Startups
Accelerator, San Francisco
500 Startups is an early-stage venture fund and seed accelerator that has backed over 2,400+ companies, including Twilio, Udemy, Canva, Credit Karma, Eaze, Grab, Behance and many others.
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Documents

Republic (OpenDeal Portal LLC, CRD #283874) is hosting this Reg CF securities offering by Resonado, Inc.. View the official SEC filing and all updates:
Official SEC Logo Form C SEC.gov
Company documents
Resonado Labs Crowd SAFE Resonado Form C.pdf
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Highlights


$100K+ revenue
Company had over $100K in revenue in the past 12 months
$1M+ raised
Company has previously raised over $1M in capital
Power Founders
Founders previously exited or operated a large business
Tier-1 Venture backing
Company is backed by a tier-1 VC firm
  • Technology licensor introducing the speaker reinvented
  • Over $200k revenue to date
  • $6M in deal pipeline, $2M of revenue projected for 2021
  • Signed contracts with international manufacturers
  • $2.2M in funding to date from 500 Startups, Notre Dame's IDEA Center, etc.
  • $33B addressable high-growth market
  • Featured on media outlets such as Forbes, TechCrunch, NBC Chicago, etc.

Problem


Audio products are rapidly evolving yet still use century-old speaker technology

Have you ever noticed the shape of the volume icon? It’s the profile view of an electrodynamic speaker driver, which has been around for over a century. If you took apart any sound-emitting product today, it’s pretty much guaranteed that you’ll find one or several of those conical drivers inside - even in the latest, most cutting-edge products like smart speakers or electric cars.

Hindering innovation

Designed as an audio source for products from the 1920s, the conventional speaker type is poorly suited for modern products. Its bulky, conical structure can't be miniaturized without sacrificing acoustic performance to meet consumer demands.


Solution


The speaker reinvented - a slim form factor without compromising sound performance

We’ve engineered FCS (Flat Core Speaker) technology to have a thin profile and flat diaphragm to cater perfectly to the growing demand for slim, space-efficient product designs. 

FCS technology is a scalable speaker driver architecture that can deliver a slim form factor without compromising sound performance or breaking the bank – positioning the technology to be the first to truly challenge the ubiquity that the conventional speaker driver has enjoyed for the past hundred years.

Product


FCS™ technology

Our product is our technology - we design, develop, and then license innovative speaker driver architecture. FCS is our flagship product, and we've developed a full suite of technologies around it to address a range of market needs.

How it works + technology advantages explained

Same physics, same materials, completely new architecture. Just enough of the old technology to take advantage of the existing supply chain and keep manufacturing costs low and scalable, and a whole new way of arranging the components for a highly-precise and efficient motor. Here's why this isn't just a cool new technology, but the new standard for audio:

Let's get technical


Traction


700K FCS drivers are set to enter the market this year in soundbars, RVs, boats, and electric cars


With over $200,000 in revenue to date from pilot projects, we're projected to hit $2M in revenue this year from 4 product categories, starting with the RV industry. 

Today, we're addressing only 1.7% of our channel partners' manufacturing capacity, with 1.7M FCS drivers slated annually for ongoing projects. We're projected to grow from our target $10M annual revenue from existing partners, to $50M from partners in our pipeline, to over $100M from new future partners.

As we scale the team and the technology, we will be achieving $30M+ in revenue selling over 50M units of speaker drivers by Y2024.

Customers


FCS-Enabled products are confidential until launch - but here's what we can tell you

Announced FCS-Enabled Products:

FCS technology will first be implemented in iconic travel brand Airstream Inc.’s 2022 Touring Coach model line. The launch will represent the first implementation of FCS technology into an established consumer product line.

FCS-Enabled Products Launching 2021:

Featured channel partners

Business model


We're a technology licensor, much like Qualcomm or Dolby


Resonado Labs has adopted the same technology licensing model as many other successful companies like Dolby, DTS, Qualcomm.

We develop innovative audio technologies, with FCS being our flagship product, and license it to consumer brands through channel partners. We're paid a royalty fee for every speaker driver built with FCS technology that's manufactured and sold by our channel partners to end brands. 

The end consumer brand then brands their product as being "FCS-Enabled." So when the soundbars we're working on launch, you'll see a soundbar by a brand you already know, with "FCS-Enabled" listed as a feature at your favorite retailers.

We've established and continue to bolster long-term defensibility

Market


A $33B+ audio market with plenty of room for growth


Over 7B speaker driver units are sold each year, creating a $10B market. The industry is as hot as its ever been with unprecedented growth stemming from the introduction of smart assistants, 5G, autonomous vehicles, and of course, the work from home era we currently find ourselves in.

And this is just the tip of the iceberg - once we takeoff in the speaker driver industry, we plan to expand to the audio market at large with a host of new technologies beyond FCS.

Competition


Why hasn't anyone else done this before?


With the conventional conical speaker type having been the industry standard for the past century, most of the big audio players you know have accepted its ubiquity and focused instead on innovating on the audio software side with things like noise-cancelling and spatial audio.

A few niche transducer solutions have been invented to attempt to take on the conventional speaker type; but they all lack in at least one key aspect: cost, acoustic performance, or applicability. 

With our technology's scalable nature, design simplicity, and adoption of the same principles as the conventional electrodynamic speaker type, FCS technology is the first to resolve each and every one of these aspects.

Vision and strategy


Redefining the shape of sound


The floppy disk was the primary medium for external writable storage for decades, and it was immortalized as the save icon. Today's generation hardly realizes that that's what the save icon represents, as the floppy disk was replaced by far more efficient external data storage methods.

The conventional electrodynamic speaker driver has been the primary medium for delivering sound from products to your ears for a century; and has been immortalized as the volume icon. Tomorrow's generation will hardly recognize the volume icon as the speaker driver, as they'll have grown up surrounded by FCS-Enabled products.

Funding


Over $2.2M raised to date

Resonado Labs has raised over $2.2M to date and received investments from investors such as Dorm Room Fund, 500 Startups, QCA, and Connetic Ventures.

Founders


The perfect team to execute an ambitious vision

Resonado Labs was founded at the University of Notre Dame by Brian Youngil Cho, CEO, Peter Moeckel, COO, and Erikc Perez-Perez, CMO. The Resonado Labs team grew to include LH Cho, CTO, a serial entrepreneur with multiple startup exits including 1 IPO in Korea (KOSDAQ 36880), industry veterans with over 100 years of combined experiences in audio, and former audio executives on the board of advisors. 

Deal terms


Valuation cap

$12,000,000

The maximum valuation at which your investment converts into equity shares or cash.
Learn more

Discount

0%

If a trigger event for Resonado Labs occurs, the discount provision gives investors equity shares (or equal value in cash) at a reduced price.
Learn more.

Minimum investment

$150

The smallest investment amount that Resonado Labs is accepting.
Learn more

Funding goal

$1.07M

Resonado Labs must achieve its minimum goal of $25K before the deadline. The maximum amount the offering can raise is $1.07M.
Learn more

Deadline
Resonado Labs needs to reach their minimum funding goal before the deadline ( ). If they don’t, all investments will be refunded.
Learn more
Type of security

Crowd SAFE

A SAFE allows an investor to make a cash investment in a company, with rights to receive certain company stock at a later date, in connection with a specific event. · Learn more

How it works

Documents

Republic (OpenDeal Portal LLC, CRD #283874) is hosting this Reg CF securities offering by Resonado, Inc.. View the official SEC filing and all updates:
Official SEC Logo Form C SEC.gov
Company documents
Resonado Labs Crowd SAFE Resonado Form C.pdf

Bonus perks

In addition to your Crowd SAFE, you'll receive perks for investing in Resonado Labs.
Invest
$150
Receive
  • Own a part of Resonado Labs
Invest
$500
Receive
  • Added to Investor Email List for Exclusive Updates
Invest
$1,500
Receive
  • Added to Investor Email List for Exclusive Updates
Invest
$2,500
Receive
  • Added to Investor Email List for Exclusive Updates
  • Exclusive Preview of FCS-Enabled Products Launching in Y2021
Invest
$5,000
Receive
  • Added to Investor Email List for Exclusive Updates
  • Exclusive Preview of FCS-Enabled Products Launching in Y2021
  • Early Prototypes of FCS-Enabled Bluetooth Speakers (Discontinued)
  • Limited (100 left of 100)
Invest
$10,000
Receive
  • Added to Investor Email List for Exclusive Updates
  • Exclusive Preview of FCS-Enabled Products Launching in Y2021
  • Virtual/In-Person Technology Demo (Chicago)
  • Early Prototypes of FCS-Enabled Bluetooth Speakers (Discontinued)
  • Conversation with CEO (Chicago)
  • Limited (100 left of 100)
Invest
$25,000
Receive
  • Added to Investor Email List for Exclusive Updates
  • Exclusive Preview of FCS-Enabled Products Launching in Y2021
  • Virtual/In-Person Technology Demo (Chicago)
  • Early Prototypes of FCS-Enabled Bluetooth Speakers (Discontinued)
  • Conversation with CEO (Chicago)
  • FCS-Enabled Soundbars upon Commercial Launch (Q3/Q4 Y2021)
  • Limited (100 left of 100)
Invest
$50,000
Receive
  • Added to Investor Email List for Exclusive Updates
  • Exclusive Preview of FCS-Enabled Products Launching in Y2021
  • Virtual/In-Person Technology Demo (Chicago)
  • Early Prototypes of FCS-Enabled Bluetooth Speakers (Discontinued)
  • Conversation with CEO (Chicago)
  • FCS-Enabled Soundbars upon Commercial Launch (Q3/Q4 Y2021)
  • Lunch/Dinner with CEO (Chicago)
  • Limited (20 left of 20)

About Resonado Labs

Legal Name
Resonado, Inc.
Founded
May 2017
Form
Delaware Corporation
Employees
5
Website
resonado.com
Social Media
Headquarters
Google Map location of of Resonado Labs
230 East Ohio Street 210 , Chicago, IL
Headquarters
230 East Ohio Street, 210, Chicago, IL, United States 60611

Resonado Labs Team
Everyone helping build Resonado Labs, not limited to employees

Profile picture of Brian Cho
Brian Cho
Co-Founder, CEO
Electrical engineer by training, BA in Finance and Applied Mathematics from the University of Notre Dame. ROK Army veteran specializing in supply chain and logistics of the Weaponry Division.
Profile picture of LH Cho
LH Cho
CTO
Serial entrepreneur with multiple successful startup exits including 1 IPO in South Korea. Former Head of R&D unit at LG Electronics with 30+ years of experience, and the inventor of FCS technology.
Profile picture of Peter Moeckel
Peter Moeckel
Co-Founder, COO
Experience in business development at a startup with an AI-powered education platform and at a quantitative money management firm as well as in conceptualizing and launching a multi-million-dollar foundation for underprivileged college students.
Profile picture of Erikc Perez-Perez
Erikc Perez-Perez
Co-Founder, CMO
Experience as a lead consultant at a global startup providing business solutions to under-resourced businesses in Latin America and sales experience at Coldwell Banker. Professional photographer and cinematographer.
Profile picture of Catharina Lavers Mallet
Catharina Lavers Mallet
Board of Advisors
Former Head of Consumer Wearables at Bose Corporation. Seasoned veteran as a startup operator and product executive for building and scaling businesses.
Profile picture of Tim Bailey
Tim Bailey
Board of Advisors
30+ years of experience in Fortune 500 companies, private equity, and Asian companies in both branded consumer goods and engineered-solutions (B2B). Former president of D+M Holdings (owner of Polk Audio and Denon).
Profile picture of Daniel Bodine
Daniel Bodine
VP of Business Development
Profile picture of Mark Miclean
Mark Miclean
Lead Designer
Profile picture of Paul Vedier
Paul Vedier
Acoustic Simulation Engineer
Profile picture of Ryan Yeom
Ryan Yeom
Supply Chain Manager
7 more team members
Daniel Bodine
VP of Business Development
Brian Cho
Co-Founder, CEO
LH Cho
CTO
Mark Miclean
Lead Designer
Paul Vedier
Acoustic Simulation Engineer
Peter Moeckel
Co-Founder, COO
Erikc Perez-Perez
Co-Founder, CMO
Ryan Yeom
Supply Chain Manager
Catharina Lavers Mallet
Board of Advisors
Tim Bailey
Board of Advisors

Press

Are Conventional Speaker Drivers Destined to be Obsolete?...
CEPRO CEPRO
·
Mar 25, 2021

Will the age-old conventional cylindrical speaker someday go the way of the Dodo bird? If Resonado Labs has its way, the ...

New Slim Speaker Tech Will Put Sound in Unexpected Places...
Digital Trends Digital Trends
·
Feb 11, 2021

The last decade has seen the nonstop development of new kinds of audio products, like soundbars, true wireless earbuds, n...

This Chicago startup's speaker tech will be used in new A...
Chicago Inno Chicago Inno
·
Feb 9, 2021

Airstream, the storied RV company known for its retro-looking chrome campers, is coming out with a new model line later t...

Resonado Labs Makes RV Debut With RiverPark, Airstream - ...
RVBusiness - Breaking RV Industry News RVBusiness - Breaking RV Industry News
·
Feb 3, 2021

Resonado Labs, an audio technology startup out of the University of Notre Dame, has announced its proprietary Flat Core S...

Resonado Adds Former Bose Executive Catharina Lavers Mall...
audioXpress audioXpress
·
Nov 13, 2020

Resonado, the technology startup that is now ready to bring to market its patented Flat Core Speaker (FCS) technology int...

Resonado Signs Another Licensing Contract with SoundLab T...
TWICE TWICE
·
Oct 22, 2020

FCS-enabled products produced through Soundlab are expected to launch mid to late 2021 in the automotive and home audio m...

Resonado Lands First Licensing Deal
Insideindianabusiness Insideindianabusiness
·
Jul 16, 2020

"The biggest thing for any early-stage company is finding the right fit and finding a customer who's as excited as we are...

NBC Chicago Tech Trends: Audio Must-Haves
NBC Chicago NBC Chicago
·
Feb 22, 2020

NBC 5's Charlie Wojciechowski has the latest details on audio technology from a Chicago-based company.

Resonado Is Reshaping The Sound We Hear
Forbes Forbes
·
Jan 3, 2020

Speakers are the foundation of how we experience sound in today's world. From concerts and home music theaters to cellpho...

Redefining the Shape of Sound: Resonado Introduces Flat C...
audioXpress
·
Dec 19, 2019

Resonado, a South Bend, Indiana company founded at the University of Notre Dame, has a new take on electrodynamic speaker...

Resonado Reinvents the Speaker with Its Flat Core Speaker...
IEEE Spectrum: Technology, Engineering, and Science News IEEE Spectrum: Technology, Engineering, and Science News
·
Oct 8, 2019

Notre Dame alumni are developing speakers that can conform to small spaces

Resonado Becomes Official Sound Partner Of Notre Dame Ath...
Notre Dame Fighting Irish - Official Athletics Website Notre Dame Fighting Irish - Official Athletics Website
·
Aug 29, 2019

NOTRE DAME, IN -Notre Dame Global Partnerships has entered into a new partnership with Resonado, an award-winning startup...

Show all

FAQ

How do I earn a return?

How do I earn a return?

We are using Republic's Crowd SAFE security. Learn how this translates into a return on investment here.

What must I do to receive my equity or cash as a result of the conversion of my Crowd SAFE?

What must I do to receive my equity or cash as a result of the conversion of my Crowd SAFE?

Suppose the Company converts the Crowd SAFE as a result of an equity financing. In that case, you must open a custodial account with the custodian and sign subscription documentation to receive the equity securities. The Company will notify you of the conversion trigger, and you must complete necessary documentation within 30 days of such notice. If you do not complete the required documentation, Republic or one of its affiliates will complete such information on your behalf using the information in your Republic account.

If the conversion of the Crowd SAFE is triggered as a result of a Liquidity Event (e.g. M&A or an IPO), then you will be required to select between receiving a cash payment (equal to your investment amount or a lesser amount) or equity.  You are required to make your selection within 30 days of such receiving notice from the Company of the conversion trigger, otherwise you will receive the cash payment option, which will be subject to escheatment laws of the Company’s state of incorporation/formation. The equity consideration varies depending on whether the Liquidity Event occurs before or after an equity financing. For more information, see the Crowd SAFE for this offering

How are you defensible?

How are you defensible?

We have three layers of protections: (1) Intellectual Properties, (2) Trade Secrets on Manufacturing, and (3) Established relationship with key component suppliers. 

First, we dedicate significant resources in protecting and expanding our intellectual properties. We already have 3 issued and granted US patents: US 7502486, US 7480392, US 10743097 and many more are on the way. We work with our legal partner, DLA Piper, to ensure that our intellectual properties are  well-protected in both the US and also in other countries such as China, Japan, Europe and many others. 

Second, we have garnered and accumulated over 15 years worth of experiences and trade-secrets specific to our technology solutions. This knowledge becomes us an indispensable part of the FCS technology ecosystem we created, in both onboarding new licensees and supporting existing licensees and customers who use FCS technology. 

Finally, we have established direct relationships with key component suppliers and certified them with our technology. By directing our licensees and customers to these key component suppliers, we maintain competitive price and quality while ensuring that our technology components are going only to our licensed partners not someone else.

Could you describe your sales process?

Could you describe your sales process?

We have a two-pronged approach: (1) our alpha team engages with channel partners (international OEM/ODMs) to have them license our technology to be certified FCS partner. Channel partners then pay a nominal signing fee and are onboarded by our engineering team. At the same time, (2) our beta team engages with business customers (consumer-facing brands) to showcase the value proposition of our technology for their current and future product offerings. Once the opportunity is identified, we connect them with our certified channel partners to get the product into the pipeline.

Often, there are organic traffics generated where our channel partners recommend FCS technology to their business customers whom our beta team has not gotten to, or vice versa, and result in significant network effects where our technology is advertised through word-of-mouth-advertising or organically, resulting in others reaching out to us to become our channel partner and/or customer.

How do you make money? What is your unit economics?

How do you make money? What is your unit economics?

When a new channel partner (licensee) engages with our team, they pay us a nominal signing fee (typically ranges from $20K - $100K) in order to become a certified FCS partner. After this new channel partner is fully onboarded, we charge a per unit royalty for every FCS transducer unit manufactured and sold by the channel partner. Depending on the product category that our channel partner manufactures for, each product could use anywhere between 2 to 20 FCS transducer units per product.

Are you a hardware company?

Are you a hardware company?

No - we design and license our technology to channel partners, who then manufacture and sell our technology-enabled products to business customers. Our primary role is in investing and designing cutting-edge technology and innovative products that originate from our technology. We do not get involved in manufacturing or distribution: thus, we do not hold any inventory nor have high cost of operations.

Still have questions? Check the discussion section.
Show all FAQ

Risks

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 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.
We rely on other companies to provide components and services for our products.
We depend on suppliers and contractors to meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers may be adversely affected if suppliers or contractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire such items, do not provide components which meet required specifications and perform to our and our customers’ expectations. Our suppliers may be unable to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as financial problems that limit their ability to conduct their operations. The risk of these adverse effects may be greater in circumstances where we rely on only one or two contractors or suppliers for a particular component. Our products may utilize custom components available from only one source. Continued availability of those components at acceptable prices, or at all, may be affected for any number of reasons, including if those suppliers decide to concentrate on the production of common components instead of components customized to meet our requirements. The supply of components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to us adversely affecting our business and results of operations.
We rely on various intellectual property rights, including trademarks, in order to operate our business.
The Company relies on certain intellectual property rights to operate its business. The Company’s intellectual property rights may not be sufficiently broad or otherwise may not provide us a significant competitive advantage. In addition, the steps that we have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented or designed-around, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property or detect or prevent circumvention or unauthorized use of such property, could adversely impact our competitive position and results of operations. We also rely on nondisclosure and noncompetition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights. As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our patent rights, we may be required to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert management’s attention from other business concerns. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.
Although dependent on certain key personnel, the Company does not have any key man 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 every such individual in the event of their death or disability. Therefore, if any of these uncovered 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. The Company does have a policy for Brian (Youngil) Cho in place as of the date of this Offering.
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.
The Company’s success depends on the experience and skill of the board of directors, its executive officers and key employees.
In particular, we are dependent on Brian (Youngil) Cho, our CEO, Erikc Perez-Perez, our CMO, and Peter Moeckel, our COO. The Company has or intends to enter into employment agreements with Brian (Youngil) Cho, Erikc Perez-Perez, and Peter Moeckel, however there can be no assurance that it will do so or that any of them will continued to be employed by the Company for a particular period of time. The loss of any of them could harm the Company's business, financial condition, cash flow and results of operations.
Our business could be negatively impacted by cyber security threats, attacks and other disruptions.
We continue to 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. 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 or that of our customers or other third-parties, 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.
The Company may never elect to convert the Securities or undergo a liquidity event and Investors may have to hold the Securities indefinitely.
The Company may never conduct a future equity financing or elect to convert the Securities if such future equity financing does occur. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an initial public offering. If neither the conversion of the Securities nor a liquidity event occurs, Investors could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
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.
We may implement new lines of business or offer new products and services within existing lines of business.
As an early-stage company, we may implement new lines of business at any time. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Damage to our reputation could negatively impact our business, financial condition and results of operations.
Our reputation and the quality of our brand are critical to our business and success in existing markets, and will be critical to our success as we enter new markets. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected by any negative publicity, regardless of its accuracy. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate and may disseminate rapidly and broadly, without affording us an opportunity for redress or correction.
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.
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.
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.
Unless the Company has agreed to a specific use of the proceeds from 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 based on the Company’s determination of an Investor’s sophistication.
The Company may prevent any Investor from committing more than a certain amount in this Offering based on the Company’s determination of the Investor’s sophistication and ability to assume the risk of the investment. 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.
The Company has the right to extend the Offering deadline. The Company has the right to end the Offering early.
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 Minimum 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, 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 Minimum Amount, at which time it will be returned to you without interest or deduction, or the Company receives the Minimum Amount, at which time it will be released to the Company to be used as set forth herein. Upon or shortly after release of such funds to the Company, the Securities will be issued and distributed to you. The Company may also end the Offering early; if the Offering reaches its target Offering amount after 21-calendary days but before the deadline, the Company can end the Offering with 5 business day’s notice. This means your failure to participate in the Offering in a timely manner, may prevent you from being able to participate – it also means the Company may limit the amount of capital it can raise during the Offering by ending it early.
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 from sales, as well as the inherent business risks associated with our Company and present and future market conditions. 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 research, development or commercialization programs, product launches or marketing efforts, any of which may materially harm our business, financial condition and results of operations.
The Securities will not be freely tradable under the Securities Act until one year from the initial purchase date. Although the Securities may be tradable 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 affected. 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 become equity holders until the Company decides to convert the Securities into “CF Shadow Securities” (the type of equity securities issuable upon conversion of the Securities) or until there is a change of control or sale of substantially all of the Company’s assets.
Investors will not have an ownership claim to the Company or to any of its assets or revenues for an indefinite amount of time and depending on when and how the Securities are converted, the Investors may never become equity holders of the Company. Investors will not become equity holders of the Company unless the Company receives a future round of financing great enough to trigger a conversion and the Company elects to convert the Securities into CF Shadow Securities. The Company is under no obligation to convert the Securities into CF Shadow Securities. In certain instances, such as a sale of the Company or substantially all of its assets, an initial public offering or a dissolution or bankruptcy, the Investors may only have a right to receive cash, to the extent available, rather than equity in the Company.
Investors will not have voting rights, even upon conversion of the Securities into CF Shadow Securities. Upon the conversion of the Securities into CF Shadow Securities (which cannot be guaranteed), the holders of the CF Shadow Securities will be required to enter into a proxy with the Intermediary to ensure any statutory voting rights are voted in tandem with the majority holders of whichever series of securities the CF Shadow Securities follow.
Investors will not have the right to vote upon matters of the Company even if and when their Securities are converted into CF Shadow Securities (the occurrence of which cannot be guaranteed). Upon such conversion, the CF Shadow Securities will have no voting rights and, in circumstances where a statutory right to vote is provided by state law, the CF Shadow Security holders are required to enter into a proxy agreement with the Intermediary to vote their CF Shadow Securities with the majority of the holder(s) of the securities issued in the round of equity financing that triggered the conversion right. For example, if the Securities are converted in connection with an offering of Series B Preferred Stock, Investors would receive CF Shadow Securities in the form of shares of Series B-CF Shadow Preferred Stock and would be required to enter into a proxy that allows the Intermediary to vote their shares of Series B-CF Shadow Preferred Stock consistent with the majority of the Series B Preferred Stockholders. Thus, Investors will essentially never be able to vote upon any matters of the Company.
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 information rights, contractual, statutory or otherwise, owed to Investors. This lack of information could put Investors at a disadvantage in general and with respect to other security holders, including certain security holders who have rights to periodic financial statements and updates from the Company such as quarterly unaudited financials, annual projections and budgets, and monthly progress reports, among other things.
Investors will be unable to declare the Security in “default” and demand repayment.
Unlike convertible notes and some other securities, the Securities do not have any “default” provisions upon which Investors will be able to demand repayment of their investment. The Company has ultimate discretion as to whether or not to convert the Securities upon a future equity financing and Investors have no right to demand such conversion. Only in limited circumstances, such as a liquidity event, may Investors demand payment and even then, such payments will be limited to the amount of cash available to the Company.
Equity securities acquired upon conversion of the Securities may be significantly diluted as a consequence of subsequent equity financings.
The Company’s equity securities will be subject to dilution. The Company intends to issue additional equity to employees and third-party financing sources in amounts that are uncertain at this time, and as a consequence holders of equity securities resulting from the conversion of the Securities 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. In addition, the Company has certain equity grants and convertible securities outstanding. Should the Company enter into a financing that would trigger any conversion rights, the converting securities would further dilute the equity securities receivable by the holders of the Securities upon a qualifying financing.
Equity securities issued upon conversion of the Securities may be substantially different from other equity securities offered or issued by the Company at the time of conversion.
In the event the Company decides to exercise the conversion right, the Company will convert the Securities into equity securities that are materially different from the equity securities being issued to new investors at the time of conversion in many ways, including, but not limited to, liquidation preferences, dividend rights, or anti-dilution protection. Additionally, any equity securities issued at the First Equity Financing Price (as defined in the Crowd SAFE agreement) shall have only such preferences, rights, and protections in proportion to the First Equity Financing Price and not in proportion to the price per share paid by new investors receiving the equity securities. Upon conversion of the Securities, the Company may not provide the holders of such Securities with the same rights, preferences, protections, and other benefits or privileges provided to other investors of the Company. The forgoing paragraph is only a summary of a portion of the conversion feature of the Securities; it is not intended to be complete, and is qualified in its entirety by reference to the full text of the Crowd SAFE agreement, which is attached as Exhibit C.
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 net worth or prior earnings. We cannot guarantee that the Securities can be resold at the Offering price or at any other price.
In the event of the dissolution or bankruptcy of the Company, Investors will not be treated as debt holders and therefore are unlikely to recover any proceeds.
In the event of the dissolution or bankruptcy of the Company, the holders of the Securities that have not been converted will be entitled to distributions as described in the Securities. This means that such holders will only receive distributions once all of the creditors and more senior security holders, including any holders of preferred stock, have been paid in full. Neither holders of the Securities nor holders of CF Shadow Securities can be guaranteed any proceeds in the event of the dissolution or bankruptcy of the Company.
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 on half of 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.
Global crises such as COVID-19 can have a significant effect on our business operations and revenue projections.
With shelter-in-place orders and non-essential business closings potentially happening throughout 2020 and into the future due to COVID-19, the Company’s revenue has been adversely affected. COVID-19 has affected global markets, supply chains, employees and communities. Management of the Company believes it has and is continuing to take appropriate actions to mitigate the negative impact of COVID-19. However, the full impact of COVID-19 is unknown.
We may not have enough authorized capital stock to issue shares of common stock to investors upon the conversion of any security convertible into shares of our common stock, including the Securities.
Currently, the Company’s capital structure consists of 4,308,797 shares of Common Stock, par value $$0.00001 per share (the “Common Stock”) issued and outstanding. Unless we increase our authorized capital structure, we may not have enough authorized shares to be able to obtain funding by issuing shares or securities convertible into shares. We may also not have enough authorized capital stock to issue shares of common stock to investors upon the conversion of any security convertible into shares of our common stock, including the Securities.
We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.
We are also subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements, and retail financing, debt collection, consumer protection, environmental, health and safety, creditor, wage-hour, anti-discrimination, whistleblower and other employment practices laws and regulations and we expect these costs to increase going forward. The violation of these or future requirements or laws and regulations could result in administrative, civil, or criminal sanctions against us, which may include fines, a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business. As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations.
State and federal securities laws are complex, and the Company could potentially be found to have not complied with all relevant state and federal securities law in prior offerings of securities.
The Company has conducted previous offerings of securities and may not have complied with all relevant state and federal securities laws. If a court or regulatory body with the required jurisdiction ever concluded that the Company may have violated state or federal securities laws, any such violation could result in the Company being required to offer rescission rights to investors in such offering. If such investors exercised their rescission rights, the Company would have to pay to such investors an amount of funds equal to the purchase price paid by such investors plus interest from the date of any such purchase. No assurances can be given the Company will, if it is required to offer such investors a rescission right, have sufficient funds to pay the prior investors the amounts required or that proceeds from this Offering would not be used to pay such amounts. In addition, if the Company violated federal or state securities laws in connection with a prior offering and/or sale of its securities, federal or state regulators could bring an enforcement, regulatory and/or other legal action against the Company which, among other things, could result in the Company having to pay substantial fines and be prohibited from selling securities in the future.
A Crowd SAFE holder may lose their right to any appreciation or return on investment due to defaulting on certain notice and require action requirements in such Crowd SAFE; failure to claim cash set aside in this case may result in a total loss of principle.
The Crowd SAFE offered requires a holder to complete, execute and deliver any reasonable or necessary information and documentation requested by the Company or the Intermediary in order to effect the conversion or termination of the Crowd SAFE, in connection with an Equity Financing or Liquidity Event, within thirty (30) calendar days of receipt of notice (whether actual or constructive) from the Company. Failure to make a timely action may result in the Company declaring that the Investor is only eligible to receive a cash payment equal to their Purchase Amount (or a lesser amount in certain events). While the Company will set aside such payment for the investor, such payment may be subject to escheatment laws, resulting in a total loss of principle if the Investor never claims their payment.
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.
While the Securities provide mechanisms whereby holders of the Securities would be entitled to a return of their purchase amount upon the occurrence of certain events, if the Company does not have sufficient cash on hand, this obligation may not be fulfilled.
Upon the occurrence of certain events, as provided in the Securities, holders of the Securities may be entitled to a return of the principal amount invested. Despite the contractual provisions in the Securities, this right cannot be guaranteed if the Company does not have sufficient liquid assets on hand. Therefore, potential Investors should not assume a guaranteed return of their investment amount.
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