VADP Vado Corporation (PK)

PART II — INFORMATION REQUIRED IN OFFERING CIRCULAR

 

An offering statement pursuant to Regulation A relating to these securities has been filed with the United States Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the Offering Statement filed with the United States Securities and Exchange Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the Offering Statement in which such Final Offering Circular was filed may be obtained.

 

 

PRELIMINARY OFFERING CIRCULAR

SUBJECT TO COMPLETION

DATED November 16,  2023

 

 

Offering Circular

Dated November 16 , 2023

 

Vado Corp.

(Exact name of issuer as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

13468 Beach Ave, Marina del Rey, CA 90292

(310)289-4477

(Address, including zip code, and telephone number, including area code of issuer’s principal executive office)

 

7310		30-0968244
(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

Vado Corp.

Offering of up to 20,000,000 Shares of Common Stock, and up to 3,900,000 Bonus Shares of Common Stock

 

This is an offering by Vado Corp., a Nevada corporation (the “Company,” “Vado,” “we” “our” or “us”) of up to 20,000,000 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $0.40 per share. In addition, investors who invest at up to enumerated amounts beginning with at least $10,000, will be entitled to receive additional shares equal to a percentage of the shares purchased in the offering based on the invested amount, for up to a total of 3,900,000 additional shares (the “Bonus Shares”). Such investors will not need to pay any additional consideration to receive the Bonus Shares. See “Plan of Distribution-Investor Bonus Shares” at page 53 for more information.

 

The offering is exempt from registration requirements under the Securities Act of 1933 (the “Securities Act”) pursuant to Tier 2 of Regulation A promulgated by the Securities and Exchange Commission (the “SEC”) thereunder.

 

This offering is being conducted on a “best efforts” basis without any minimum offering amount pursuant to Regulation A of the Securities Act for Tier 2 offerings.

 

Following the qualification of the offering, by the SEC we will designate one or more closing dates (each, a “Closing Date”), which shall be the date(s) our common stock offered in this Offering Statement are issued, subject to our acceptance of your subscription following, appropriate investor due diligence and your funds being cleared in accordance with our escrow agent’s policies and procedures.

 

Thereafter, this offering will terminate at the earlier of: (1) the date at which the maximum offering has been sold; (2) the date which is one year after this offering being qualified by the SEC; or (3) the date on which this offering is earlier terminated by us in our sole discretion.

 

We have engaged Dalmore Group, LLC (“Dalmore” or “Dalmore Group”) to act as our broker-dealer of record for this offering. In connection with this offering, we are paying Dalmore Group 1% of the gross proceeds raised in this offering, as well as a one-time consulting fee of $20,000, a FINRA filing fee of $11,750, a one-time expense fee of $5,000 for out-of-pocket expenses, and a $3,500 monthly platform fee and certain other fees and expenses. See “Plan of Distribution.”

 

 

The minimum purchase requirement per investor is $400, or 1,000 shares of common stock; however, we can waive the minimum purchase requirement on a case-by-case basis in our sole discretion. We expect to commence the sale of the shares as of the date on which the Offering Statement, of which this Offering Circular is a part, is qualified by the SEC.

 

Our common stock currently trades on the OTC Pink under the symbol “VADP” and the closing price of our Common Stock as of November 15, 2023 was $1.19. Our common stock currently trades on a sporadic and limited basis.

 

We intend to file a registration statement on Form 8-A (the “Form 8-A”) incorporating the Offering Statement of which this Offering Circular forms a part by reference within five days of qualification hereof to register our common stock under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”).

 

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or “JOBS Act,” and, as such, we have elected to comply with certain reduced public company reporting requirements for this Offering Circular and future filings.

 

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 5 of this Offering Circular for a discussion of information that should be considered in connection with an investment in our common stock.

 

 

		Price to Public				Broker-Dealer Commissions (1)				Proceeds to Issuer (2)
Per Share		$	0.40			$	0.004			$	0.396
Maximum Offering Amount		$	8,000,000			$	80,000			$	7,920,000

 

(1)

Dalmore Group is engaged to act as the broker-dealer of record and which includes providing administrative and compliance related services in connection with this offering. Once the SEC has qualified the Offering Statement and FINRA issues a No Objection Letter, this offering will commence. Dalmore Group will receive a cash commission equal to 1% of the gross proceeds for investments in this offering. Additionally, the Dalmore Group and its affiliates will receive certain other fees in connection with this offering. See “Plan of Distribution” for more details.

(2)

We estimate that our total commissions, fees, expenses and other costs for the offering, assuming the maximum offering amount is raised, will be approximately $1,492,750, including the commission and fees payable to Dalmore Group as well as other offering-related fees, expenses and other costs paid or payable to third parties. See “Use of Proceeds” for more information.

 

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

The SEC does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the SEC; however, the SEC has not made an independent determination that the securities offered are exempt from registration.

 

Dalmore Group, LLC

 

This Offering Circular is following the disclosure format of SEC Form S-1 as provided under Part II (a)(1)(ii) of Form 1-A.

 

Offering Circular dated                           , 2023

 

 

We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where such offers and sales are permitted. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with any information other than the information contained in this Offering Circular. The information contained in this Offering Circular is accurate only as of its date, regardless of the time of its delivery or of any sale or delivery of our securities. Neither the delivery of this Offering Circular nor any sale or delivery of our securities shall, under any circumstances, imply that there has been no change in our affairs since the date of this Offering Circular. This Offering Circular will be updated and made available for delivery to the extent required by the federal securities laws.

 

 

TABLE OF CONTENTS

 

 

OFFERING CIRCULAR SUMMARY	1
THE OFFERING	4
RISK FACTORS	5
USE OF PROCEEDS	22
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	23
DILUTION	24
UNAUDITED PRO FORMA FINANCIAL INFORMATION	25
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
OUR BUSINESS	35
MANAGEMENT	44
EXECUTIVE COMPENSATION	46
RELATED PARTY TRANSACTIONS	50
PRINCIPAL STOCKHOLDERS	51
DESCRIPTION OF SECURITIES	52
SHARES ELIGIBLE FOR FUTURE SALE	53
PLAN OF DISTRIBUTION	54
LEGAL MATTERS	58
EXPERTS	58
WHERE YOU CAN FIND ADDITIONAL INFORMATION	58
INDEX TO FINANCIAL STATEMENTS	F-1

 

Unless the context otherwise indicates, when used in this Offering Circular, the terms the “Company,” “we,” “us, “our” and similar terms refer to Vado Corp., a Nevada corporation, and our subsidiary Social.com, Inc., a California corporation (“Socialcom”). In addition, “FY 2022” refers to the fiscal year ended December 31, 2022 and, “FY 2021” refers to the fiscal year ended December 31, 2021.

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This Offering Circular contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business and operations following our recent acquisition of a digital marketing and services company, future trends of such business, the planned expansion of those operations into new markets and applications, new technology offerings and the anticipated future benefits and results thereof on our operating results, characteristics and trends in the digital marketing industry and the demand for products and services we offer, the need for and use of proceeds from one or more financings for strategic arrangements and partnerships, our future capital needs and ability to obtain financings and liquidity. All statements other than statements of historical facts contained in this Offering Circular, including statements that relate to our future financial performance, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. These forward-looking statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” “should,” “intend,” “could,” “potential,” “is likely,” “plan,” "continue," and similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

 

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include those summarized in the “Summary of Risk Factors” below and more particularly described below in “Risk Factors”. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

 

Summary of Risk Factors

 

Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Some of the principal risk factors that make an investment in the Company speculative or risky are summarized as follows:

 

	●	We may need to raise additional capital in the future by issuing debt or equity securities which could dilute our stockholders or have other adverse consequences, and we may be unable to obtain necessary financing if and when required.
	●	We have a limited operating history and, as a result, our past results may not be indicative of future operating performance, and if we are not successful, you may lose your entire investment.
	●	We saw a decline in revenue and gross profits in FY 2022 compared to the prior year, and if this trend continues, our business will be harmed.
	●	We have sustained operating losses in prior periods, and there is substantial doubt concerning our ability to continue as a going concern.
	●	The terms of Socialcom’s recently amended loan facility could cause us to lose the Socialcom business, result in a change of control of Vado, or result in other material adverse consequences on our business and Company.
	●	The loss of customers could significantly harm our business, financial condition and results of operations, particularly given our customer concentration.
	●	Failure to manage our growth effectively or to maintain and grow our customer base and spending, could negatively impact our revenue and business.
	●	We may fail to adopt to technological change or market developments, and may experience other challenges or adverse events related to our offerings.
	●	The digital ad industry in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.
	●	Changes in laws or regulations, or a failure to comply with the laws and regulations applicable to us, may adversely affect our business.
	●	Any decrease in the use of or demand for the advertising channels and ad space on which we depend could harm our operating results and growth prospects.
	●	We often have long sales cycles, and may invest limited resources in leads that do not result in a new customer or increased revenue.
	●	We may experience fluctuations in our results of operations.
	●	Our access to quality advertising content and channels could be limited or reduced.
	●	We could fail to meet content and inventory standards and provide services that meet our customers’ and others’ standards in a manner that harms our brand and reputation.
	●	Economic downturns and market conditions beyond our control could adversely affect us.
	●	Any unauthorized access to sensitive or personally identifiable information involving our services and platform would subject us to the risk of loss and other adverse consequences.
	●	Third-party “cookies” or other technology we utilize could be rejected by ad channels or Internet users or become subject to unfavorable regulatory or private action.

 

 

●

Our future success depends on our key employees and on our ability to attract, hire, retain and motivate highly skilled employees.

●

We have limited intellectual property with which to protect our technology infrastructure and operations, and the proprietary rights we do have may be difficult to enforce.

●

We may be sued by third parties for alleged infringement of their proprietary rights, which would result in additional expense and potential damages.

●

We face potential liability and harm to our business including based on the nature of our business and the content we assist in distributing.

●

Because our common stock rarely trades, investors should not rely upon the prices at which our common stock may be or have been sold.

●

Our common stock trades sporadically on the OTC Pink Market, the market price of our common stock at any given time may not be representative of its intrinsic value, and the lack of liquidity may also adversely affect our investors.

●

Due to factors beyond our control, our stock price may be volatile.

●

Because trading in our common stock is so limited, our stockholders may depress the market if they sell common stock.

●

We have issued and may in the future issue preferred stock containing terms that are adverse to our or our other shareholders’ rights

●

The vast majority of our common stock outstanding is by a small number of stockholders some of which are also executive officers and directors, it may be more difficult other shareholders to influence our Company or for a third-party to acquire us and could depress our stock price.

●

You may experience dilution upon the conversion of the Series A and sales of shares of our common stock by stockholders.

 

These and other material risks we face are described more fully in Item 1A. – Risk Factors, which investors should carefully review prior to making an investment decision with respect to the Company or its securities.

 

 

THE OFFERING

 

Common Stock Offered By Us		20,000,000 shares of common stock, plus an additional up to 3,900,000 Bonus Shares.
Common Stock Outstanding After This Offering		202,492,221 shares of common stock, not including a potential of up to 3,900,000 Bonus Shares and shares of common stock underlying outstanding derivative securities as outlined in greater detail below.
Commissions for Selling Shares		The Company has engaged Dalmore Group to act as the broker-dealer of record in connection with this offering, but not for underwriting or placement agent services. The commissions payable to Dalmore Group for these services, excluding other agreed upon fees and expenses, will be 1% of the gross proceeds from the offering.
Use of Proceeds		We plan to use the net proceeds for Sales and Marketing, Product Development, Working Capital, and for Capital Raise Marketing and Offering Costs. See “Use of Proceeds.”
Risk Factors		Investing in our securities involves substantial risks. You should carefully review and consider the “Risk Factors” section of this Offering Circular beginning on page 5 and the other information in this Offering Circular for a discussion of the factors you should consider before you decide to invest in this offering.
Market for Securities		Our common stock is quoted on the OTC Pink under the symbol “VADP.”

 

The number of shares of our common stock to be outstanding after this offering is based on 182,492,222 shares outstanding as of  October 31, 2023, and the 20,000,000 shares of common stock as part of this offering (without giving effect to the potential issuance of up to 3,900,000 Bonus Shares in this offering). Such number also excludes the following:

 

	●	4,466,660 shares issuable upon conversion of 223,333 outstanding shares of Series A Convertible Preferred Stock, subject to beneficial ownership limitations;
	●	21,141,016 options to purchase common stock (on an as-exchanged basis); and
	●	7,493,873 shares issuable upon conversion of outstanding convertible notes.

 

 

RISK FACTORS

 

Investing in our common stock involves a high degree of risk. Investors should carefully consider the following Risk Factors before deciding whether to invest in the Company. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also impair our financial condition. If any of the events discussed in the Risk Factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected. In such case, the value and marketability of our common stock could decline.

 

Risks Related to Our Business and Financial Condition

 

Our ability to continue as going concern is in doubt absent obtaining adequate new financing.

 

In FY 2022, we incurred a net loss of approximately $4.8 million and used approximately $4.36 million in net cash in operations. Based on cash on hand as of June 30, 2023 of approximately $1,402,018, the Company does not have the capital to finance operations for the next 12 months. This raises substantial doubt about our ability to be a going concern. Our auditors issued an audit opinion for FY 2022 which contained what is referred to as a “going concern” opinion. Our continued existence is dependent upon obtaining adequate new financing. Because of our continuing losses, we may have to continue to reduce our expenditures, without new financing. Working capital limitations may impinge on our day-to-day operations, including causing us to reduce our sales efforts to the extent maintain adequate workforce and technology.

 

The terms of Socialcom’s recently amended loan facility could result in the loss of the Socialcom business or result in a change of control of Vado were a default to occur, or cause other material adverse consequences.

 

As more fully described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”, in September 2023 we entered into an amended Socialcom loan facility with a secured lender pursuant to which Socialcom may borrow up to $2,000,000. As of October 31, 2023, $543,740 has been borrowed under this facility, and the facility requires that at least 20% of the maximum amount, or $400,000, be utilized at any given time. The loan facility, which matures on December 31, 2023, is secured by the assets of Socialcom and the Company, and Vado has pledged the Socialcom common stock it holds as collateral. As a result, should an event of default occur under the loan documents, the lender could seek to enforce these rights in which case Vado could lose the Socialcom business and become a shell company with no business or operations. In addition, Jason Wulfsohn, our Chief Executive Officer and a principal stockholder, agreed to pledge his 74,311,816 shares of Vado, representing approximately 41% of the outstanding shares of Vado, to secure payment of the loan facility. Therefore, should a default occur the lender could obtain a significant portion of the Company’s outstanding ownership interest and gain control over us.

 

Further, the loan documents contain provisions restricting our and Socialcom’s ability to take certain actions, including making intercompany advances, which could prevent or delay us from taking a course of action which our Board of Directors deems advisable and have a material adverse effect on our operations and ability to pay expenses at the parent company level, including Vado’s expenses in connection with filing reports with the SEC.

 

Because of the foregoing terms of the loan facility, if we fail to raise sufficient proceeds in this offering or otherwise raise or generate the capital required to repay the loan in a timely manner, we could lose the Socialcom business which constitutes all of our operations or experience a change of control, and we are also subject to the limitations imposed under the loan facility while it remains in effect. If we are unable to raise sufficient proceeds from this offering as necessary to avoid such an outcome, you could lose all or part of your investment.

 

Because we have limited capital, we may need to raise additional capital in the future by issuing debt or equity securities, the terms of which may dilute our current investors and/or reduce or limit their liquidation or other rights.

 

We need additional capital to operate our Socialcom business and execute our strategic plans and growth initiatives. We may not be able to obtain additional capital when required. Future business development activities, as well as administrative expenses such as salaries, insurance, general overhead, legal and compliance expenses and accounting expenses will require a substantial amount of additional capital which this offering may not fully provide depending upon our success in selling shares in this offering.

 

The terms of securities we issue in future capital raising transactions may be more favorable to new investors, and may include liquidation preferences, superior voting rights or the issuance of other derivative securities, which could have a further dilutive effect on or subordinate the rights of investors in this offering. Any additional capital raised through the sale of equity securities will likely dilute the ownership percentage of our stockholders. Additionally, any debt securities we issue would have priority on our assets compared to our investors in this offering and, if convertible into shares of common stock, would also pose the risk of dilution.

 

 

We may be unable to obtain necessary financing if and when required after this offering.

 

Our ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets (both in general and in the particular industry in which we operate), the national and global economies and the condition of the market for microcap securities. Further, factors such as high inflation, the Ukrainian war and the banking crisis and economic downturns including the recession we may be entering combined with high inflation and investor uncertainties may increase our requirements for capital, particularly if such economic downturn persists for an extended period of time, and may limit or hinder our ability to obtain the funding we require. If the amount of capital we are able to raise from financing activities, together with any revenues we may generate from future operations, is not sufficient to satisfy our capital needs, we may be required to reduce or cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms. If any of the foregoing should happen, our stockholders could lose some or all of their investment.

 

We saw a decline in revenue and gross profits in the fiscal year ended December 31, 2022 compared to the prior year, and if this trend continues, our results of operations and prospects will be materially hindered.

 

In 2022, Socialcom lost certain key customers and saw decreased spend for certain existing customers, principally due to loss in key personnel in part linked to the global pandemic, shifting trends and expectations from our customers, and macro-economic factors, such as economic downturn, which may have adversely impacted our revenue. This trend of personnel attrition and resulting adverse consequences on our business may or may not persist, intensify or arise anew in future periods, which would materially adversely affect us. Because we focus on small-to-medium size advertising agencies and businesses which can sometimes be relatively more susceptible to market downturns and sensitivities to budgetary constraints than larger companies, this risk may be particularly relevant to us relative to some of our larger competitors in the digital ad space.

 

Socialcom also experienced turnover in members of its customer-facing personnel during the same period, which directly impacted certain customer relationships and likely contributed to this trend. Another potentially contributing factor has been an increasing focus by customers on transitioning toward in-housing of media buying by advertisers as well as growing widespread access to enterprise technology and data-powered buying solutions by agencies, representing a competitive threat to Socialcom’s value proposition and ability to continue to generate and grow its revenue streams. Other suspected reasons for the decline in demand for Socialcom’s products and services include macro-economic factors such as inflationary pressures, continued Federal Reserve and other central bank interest rate hikes and recessionary fears, the lingering impact of COVID-19 and diminished consumer spending, all of which are likely contributing factors to reduced advertising budgets from customers in general to some degree. Any of these or other factors resulting in declined customer spending on our product and services offerings, and thereby revenue to us, could materially adversely affect our business and our results of operations and financial condition, and thereby your investment in us.

 

The loss of customers could significantly harm our business, financial condition and results of operations, particularly given our customer concentration.

 

Our customer base consists primarily of small-to-mid-sized advertising agencies and businesses, including businesses that advertise their products and services directly to consumers and advertising agencies that assist other businesses in advertising to consumers, over a wide variety of industries. As disclosed under “Item 1. – Business –Customers,” our operating results are subject to a material amount of customer concentration, with five customers accounting for approximately 35% of our revenue and 10 customers accounting for approximately 52% of our revenue in FY 2022. In the majority, but not every instance, we do not have exclusive relationships with customers, and we depend on sales and service focused personnel to work with our existing and prospective customers to build and maintain advertiser and advertising agency relationships and prepare and implement effective advertising campaigns. When they are not long-term Master Service Agreements (MSA) or Agency of Record (AOR) relationships, our agreements with customers generally allow them to terminate their relationship with us on short notice. The loss of our customers, or the personnel in charge of establishing or maintaining relationships with them could potentially significantly harm our business, financial condition and results of operations.

 

Further, a significant proportion of our customers are advertising agencies. In our relationships with these agency customers, Socialcom is contracted to develop and execute digital ad campaigns, and therefore such agency customer could be terminated by its own client, resulting in a loss of revenue to us by reducing that agency’s spending on our platform and services. In addition, due to the often non-exclusive nature of our relationships with customers and the fact that some advertising agencies have strong relationships with our competitors in the industry, such agencies may direct their advertisers to competitors rather than to us in the future.

 

 

In cases where we work with advertising agencies, there is a risk that the agency does not collect from their own advertiser customer and subsequently may be unable to remit payment to us. Further, we sometimes work growth-stage advertisers, who have inherent credit risk profiles that can subject us to greater credit risk in seeking repayment. In addition, typically, we are generally contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all. In addition, we can experience slow payment cycles by advertising agencies, which can sometimes be common in our industry. While we attempt to negotiate long payment periods with our suppliers and shorter periods from our customers, we are not always successful. We also often institute a provision known as sequential liability when can mitigate this risk by requiring advertising agency customers to pay Socialcom regardless of whether they are paid by their customer or not.

 

In addition, our customers may change budget allocations or their own internal technology infrastructure, or otherwise experience changes to their business or operations that encourages or results in them reducing or ceasing the use of our platform and services, in which event we may lose revenue from those customers. In addition, some customers have or could develop their own relationships with suppliers of advertising inventory, channels and technologies, rendering our offerings less advantageous or less impactful, or impose downward pricing pressure on us. Our business may suffer to the extent that customers and other third parties with which we do business, and on which our operations rely, purchase and sell advertising inventory directly from one another or through intermediaries other than us. If we lose key customers or any key customers reduce their use of our platform or services, it could materially adversely affect us and our operating results, and in turn your investment in us could be harmed.

 

Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our financial condition and results of operations.

 

We have experienced and may in the future experience significant growth in a relatively short period of time. To manage our growth effectively, we must continually evaluate and evolve our organization. We must also manage our employees, operations, finances, technology and development and capital investments efficiently. Our efficiency, productivity and the quality of our platform and customer service may be adversely impacted if we do not train our new personnel, particularly our sales and support personnel, quickly and effectively, or if we fail to appropriately coordinate across our organization. Additionally, our rapid growth may place a strain on our resources, infrastructure and ability to maintain the quality of our platform and services. Our financials trends experienced in prior periods should not be considered as indicative of future performance. In future periods, our revenue or profitability could decline or grow more slowly than we expect. Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our financial condition and results of operations.

 

Risks Related to our Operations and the Digital Advertising Industry

 

If we fail to maintain and grow our customer base and spending through our technology and services, our revenue and business may be negatively impacted.

 

To maintain or increase our revenue, we must regularly add new customers and/or encourage existing customers to maintain or increase the amount of advertising and services purchased from us. If our customers reduce spending on our products or services, or competitors introduce lower cost or differentiated offerings that compete with or are perceived to compete with our offerings, our ability to sell our services to new or existing customers could be impaired. We have expended significant resources and effort in cultivating our relationships with customers, and it is possible that we reach a point of saturation at which we cannot continue to grow our revenue from such customers because of internal limits that advertisers may place on the allocation of their advertising budgets to digital media to a particular provider or otherwise. Further, some of our agreements with customers allow, and agreements we enter into in the future may allow, our customers to change the amount they spend through our platform and for our services or terminate our services with limited notice. Further, we do not typically have exclusive relationships with our customers, and there is limited cost, although it can be technically challenging, to move their media spend to our competitors. As a result, we have limited visibility into our future advertising revenue streams. We cannot assure you that our customers will continue to use our solutions or that we will be able to replace, in a timely or effective manner, departing customers with new customers that generate comparable revenue. If a major customer representing a significant portion of our business decides to materially reduce its use of our services or to cease using us altogether, it is possible that our revenue or revenue growth rate could be significantly reduced, and our business negatively impacted.

 

 

We may fail to adopt to technological change, and may experience outages and disruptions to our technology and infrastructure on which our operations depend if we fail to maintain adequate security and supporting systems, which may harm our reputation and negatively impact our business, financial condition and results of operations.

 

As we grow our business, we expect to continue to invest in technology to operate and potentially expand upon our offerings proportionally with increased revenue and demand, and which may require us to commit substantial financial, operational and technical resources, with no assurance our business will increase at a commensurate rate. Further, although we activate client campaigns across a significant number of platforms and partnerships our operations and industry are nonetheless subject to rapid and unpredictable changes in technology, including advanced by third parties that could pose significant risk to the continued economic viability of the technology on which we depend. Without the timely introduction of new products, services and enhancements, our offerings could become technologically or commercially obsolete over time, in which case our revenue and operating results would suffer. If new or existing competitors have more attractive offerings, we may lose customers or customers may decrease their use of our technology and services offerings. New customer demands, superior competitive offerings or new industry standards could require us to make unanticipated and costly changes to our technology and services offerings or business model. If we fail to enhance our current products and services, or fail to develop new products and services to adapt to our rapidly changing industry or to evolving customer needs, demand for our solutions could decrease and our business, operating results and financial condition may be materially adversely affected.

 

We face risks related to our use of artificial intelligence, or AI, for certain of our offerings and functions, and technological advances developed by third parties such as AI may be deployed by competitors and customers, creating an adverse competitive environment and limiting our ability to compete or the advantages of our offerings.

 

In recent years, a large amount of time and resources across firms and economies have been contributed towards developing artificial intelligence, or AI, technology designed to circumvent the need for human input and interaction in a variety of different contexts. We also deploy AI in certain of our advertising solutions offerings, although our use of AI and related technology may fail to compete or keep pace with our competitors and others in the industry and markets we participate in. In the short-to-medium term, the applications of AI are expected to focus on computer-centric tasks and activities, which includes digital marketing on which our business and operations focus. The race towards developing AI has intensified to such a degree that many members of the tech industry have called for the suspension of these efforts given the “dangerous” consequences they may bring. Regardless of the merit of these claims, the push for AI could harm our business by enabling our competitors to overcome any competitive advantage we have in the digital ad space, allowing customers to develop their own internal means of advertising online, or otherwise reducing our competitive position and/or the advantages of using our technology. Therefore, while the adoption of AI could provide us with opportunities to the extent we can adopt and adapt such technology for our business, we may fail to do so without undue costs or other burdens, as needed to remain competitive or at all, in which case the adoption of AI by competitors or customers could materially adversely harm our competitive position and ability to maintain or grow our revenue.

 

Recently we have begun to make significant investments in AI initiatives, including a new product launch in 2023 with a focus on AI technology. In particular, we expect our AI initiatives will require increased investment in infrastructure and personnel capable of supporting these technologies and functions. Because AI technologies are complex and rapidly evolving, and the reality that we face significant competition from other companies as well as an evolving regulatory landscape, AI-focused efforts by us and others, including the introduction of new products or changes to existing products, may result in new or enhanced governmental or regulatory scrutiny, litigation, ethical concerns, or other complications that could adversely affect our business, reputation, or financial results. For example, the use of datasets to develop AI models, the content generated by AI systems, or the application of AI systems may be found to be insufficient, offensive, biased, or harmful, or violate current or future laws and regulations. Use of AI and related technologies also poses risks related to cybersecurity and data breaches, lack of integration with other software and data systems, and a limited pool of qualified personnel to develop, maintain and operate the subject technology, infrastructure and systems deployed in the use of AI. In addition, market acceptance of AI technologies is uncertain, and we may be unsuccessful in our product development efforts. Any of these factors could materially adversely affect our business, reputation, or financial results.

 

 

The market for programmatic buying for advertising campaigns is relatively new and evolving, and if this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected.

 

In part we generate revenue by purchasing omnichannel programmatic digital advertising impressions on third party media sites and other sources for our customers. While we provide certain ancillary services in relation to these digital ads, particularly strategy, content creation and data analytics, as well as non-programmatic channels like paid search and paid social, we expect that spending on programmatic ad buying will continue to be our primary source of revenue for the foreseeable future and that our revenue growth will largely depend on increasing programmatic spend. The market for programmatic ad buying is an emerging market, and our current and potential customers may not shift to programmatic ad buying from other advertising methods as quickly as we expect or anticipate, which would reduce our operating results and growth potential. If the market for programmatic ad buying deteriorates or does not develop or grow as rapidly as we anticipate, or develops or grows more slowly than we expect, it could reduce demand for our solutions, and our business, growth prospects and financial condition would be adversely affected.

 

If customer demand shifts around specific channel mix needs or expectations due to a shift in customer demand, such as customers shifting their usage more quickly or more extensively than expected to channels in which we have relatively less functionality, features, or inventory, then demand for our solutions could decrease, and our business, financial condition, and results of operations could be adversely affected. As the Internet and cellular technology continues to evolve, trends and newly emerging sites and applications often gain popularity quickly, sometimes shifting users’ focus away from existing platforms and technologies. This trend is prevalent for example in social media, where new mobile phone applications have in the past diverted attention away from existing applications. While we believe we can adapt our solutions as needed to address these changes in the short- and medium term, due to the multi-platform nature of our trading desk solution, if we are unable to do so quickly enough to meet shifting consumer or customer demand for certain channels, we may fail to adequately meet our customers’ needs and keep up with competitor offerings, and could lose customers or revenue as a result.

 

In addition, our revenue or profitability may not necessarily grow at the same rate as spending on our offerings. As the market for programmatic buying for advertising matures, growth in spend may outpace growth in our profitability due to a number of factors, including pricing competition, quantity discounts and shifts in product, media, customer and channel mix. Similarly, to the extent heightened cost of revenue increases at a greater rate than revenue growth in future periods, our ability to achieve or maintain profitability or the levels thereof would decline. A significant change in revenue as a percentage of spend could reflect a material adverse change in our business, operating results and growth prospects.

 

The digital ad industry in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.

 

We operate in a highly competitive and rapidly changing industry, with a focus on technology and consumer behaviors that frequently and rapidly evolve and requires constant attention and adaptation to these changing market conditions. We expect competition to persist and intensify in the future, which could harm our ability to increase revenue and maintain profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants develop and offer new products and services aimed at capturing advertising spend or disrupting the digital marketing landscape, such as analytics, automated media buying and exchanges. See “Item 1. – Business – Competition” for more information on our main competitors and the competitive environment we face generally.

 

As computer technology continues to advance and become more affordable, the barriers to entry within our industry decline, opening the door for newer participants who can compete with us, including potentially smaller operations that may not have been able to operate in our industry in an economically feasible way in the past. These new entrants pose a risk of loss of market share to our business in particular, given our focus on relatively smaller businesses that are more cost conscious. If existing or new ventures develop and market comparable competitive products or services at prices that compete with ours, that can result in additional competition for advertising spend. Further, if a competitor acquires one of our other existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our results of operations could be harmed. In addition, some of the 24 channels we access on our tdX platform in the provision of our services and other offerings to customers are also sometimes our competitors in the digital ad space, and customers sometimes aspire to establish in-house marketing capabilities, either of which could reduce or eliminate a customer’s relationship with or allocation of expenditures towards our offerings.

 

 

Many of our current and potential competitors have, and new competitors which could arise in the future may have, significantly more financial, technical, marketing, and other resources than we have, which may allow them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive advertiser bases and broader publisher relationships than we have, and may be better positioned to execute on advertising conducted over certain channels, such as programmatic display, social media, mobile, and video. Some of our competitors may have a longer operating history and greater name recognition. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper advertiser relationships or offer services at lower prices. Any of these developments would make it more difficult for us to sell our solutions and could result in increased pricing pressure, increased sales and marketing expense, or the loss of market share.

 

Changes in laws or regulations, or a failure to comply with the laws and regulations applicable to us, may adversely affect our business, ability to negotiate and complete a business combination, and results of operations.

 

We and our industry are subject to laws and regulations enacted and enforced by federal, state and local governments and agencies. In addition to the data privacy laws described or referenced in the risk factor titled “If unauthorized access to sensitive or personally identifiable information is obtained, or our platform is compromised, our services may be disrupted or perceived as insecure, and we may be subject to reputational harm and legal and financial liabilities, including as a result of date privacy laws and regulations,” we and the customers we serve are or may become subject to laws and regulations relating to monitoring and enforcing employment and labor, consumer protection, anti-bribery, import and export controls, and tax laws and regulations. For example, we and the customers we serve have to deal with possible regulation by the Federal Trade Commission (“FTC”) and states that regulate unfair trade practices, among other laws and regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application by courts and administrative judges may also change from time to time, and any such changes could be unfavorable to us and could have a material adverse effect on our business and results of operations. These laws and regulations impose added costs on our business and could require us to make changes to our business or solutions. Noncompliance with applicable regulations or requirements could subject us to investigations, enforcement actions, sanctions, fines, damages, penalties, injunctions or termination of contracts. Any such matters could have a material adverse effect on our business, results of operations and financial condition.

 

Any decrease in the use of the advertising channels that we are primarily dependent upon, failure to expand the use of emerging channels, or unexpected shift in use among the channels in which we operate, could harm our growth prospects, financial condition and results of operations.

 

We generate revenue by purchasing mobile, display and video ads for our customers, along with paid search and social. Any decrease in the use of these forms of advertising, whether due to customers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability to further penetrate social, native, audio or CTV, or enter new and emerging advertising channels, could harm our growth prospects, financial condition and results of operations. Each advertising channel presents distinct and substantial risk and, in many cases, requires us to continue to develop additional functionality or features to address the particular requirements of the channel. Our ability to provide capabilities across multiple advertising channels, which we refer to as “omnichannel,” may be constrained if we are not be able to maintain or grow advertising offerings for such channels, and some of our omnichannel offerings may not gain market acceptance. If we fail to maintain a diversified channel mix, a decrease in the demand for any channel or channels that we become primarily dependent upon could harm our business, financial condition and results of operations. We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in channel development will correspond to any such changes. Furthermore, if our channel mix changes due to a shift in customer demand, such as customers shifting their spending more quickly or more extensively than expected to channels in which we have relatively less functionality, features, or offerings, then demand for our solutions could decrease, and our business, financial condition, and results of operations could be materially adversely affected.

 

 

Our revenue and operating results are highly dependent on the overall demand for advertising, and factors that affect the amount of advertising spending, such as economic downturns and seasonality, can make it difficult to predict our revenue and could adversely affect our business.

 

Our business depends on the overall demand for advertising and on the economic health of our current and prospective customers. If advertisers reduce their overall advertising spending, our revenue and results of operations are directly negatively affected. Many advertisers devote a disproportionate amount of their advertising budgets to specific periods within the calendar year, such as retailers targeting the Fall months to coincide with the Christmas holidays. If any events occur to reduce the amount of advertising spending during a particular period or in general, or reduce the amount of inventory available to advertisers, it could have a disproportionate adverse effect on our revenue and operating results for the fiscal period in which such event occurs. Economic downturns or instability in political or market conditions generally may cause current or new customers to reduce their advertising budgets. A growing number of analysts and others in the investment community have predicted a recessionary period, which could be prolonged in duration, in the near term as the Federal Reserve and central banks in other countries continue to increase interest rates to combat high inflation. Such an event will have the effect of reducing consumer demand, which could in turn result in a reduction in customer spending on our offerings. Such a development could make our solutions less robust and attractive, and could cause advertisers to delay, decrease or cancel purchases of our solution, and expose us to increased credit risk on advertiser orders. Moreover, any changes in the favorable tax treatment of advertising expenses and the deductibility thereof would likely cause a reduction in advertising demand.

 

We often have long sales cycles, which can result in significant time between initial contact with a prospect and execution of a customer agreement, making it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.

 

Our sales cycle, from initial contact to contract execution and implementation, can take significant time, and concentrated dedication towards a particular sales lead when one is identified. Similarly, following the procurement of our services, our customer relationships require constant attention and dedication of resources, tailored to their particular needs. Some of our customers undertake an evaluation process that frequently involves not only our solutions but also the offerings of our competitors. As a result, it is difficult to predict when we will obtain new customer and begin generating revenue from these new customers. As a result, we may not be able to add customers or generate revenue as quickly as we may expect, which could harm our revenue growth rates.

 

We may face challenges collecting payments for our product and service offerings, including a customer’s inability to make payments or disputes over such payments.

 

Because we often rely on repeat payments from ongoing customer relationships, we sometimes encounter difficulties collecting amounts due to us. One downside to targeting to small and middle sized businesses which offsets the advantage of targeting a large market is that such businesses may sometimes struggle to establish or maintain adequate revenue streams or capital through financing as necessary to meet their payment obligations to third party vendors such as us. Due to prolonged contract cycles and reliance on third party digital ad suppliers, we may incur long-term or continued expenditures in supplying our products and services to our customers, only to fail to achieve the revenue reward of that investment. This is especially true if a customer’s particular ad campaign is unsuccessful in generating sales for that customer. As a result, we sometimes face a timing issue with our accounts payable on shorter cycles than our accounts receivables requiring us to remit payments from our own funds, and accept the risk of credit loss.

 

This collections and payments cycle may increasingly consume working capital and harm our ability to grow our business. If we are unable to borrow on commercially acceptable terms, our working capital availability could be reduced, and as a consequence, our financial condition and results of operations would be materially adversely impacted.

 

Our customers consist of a mixture of mid-market agencies and advertiser-direct relationships. In cases where we work with agencies, there is a risk that the agency does not collect from the advertiser and subsequently remit payment to us. Further, working with growth-stage advertisers has inherent credit risk profiles that subject us to greater credit risk in seeking repayment. In addition, typically, we are contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all. In addition, we sometimes experience slow payment cycles by advertising agencies as is common in our industry. While we attempt to negotiate long payment periods with our suppliers and shorter periods from our customers, we are not always successful.

 

 

We may also be involved in disputes with customers. If we are unable to resolve disputes with our customers, we may lose customers or customers may decrease their use of our solutions and our financial performance and growth may be adversely affected. If we are unable to collect or make adjustments to bills or invoicing to customers, we could incur write-offs for credit loss, which could harm our results of operations. In the future, credit loss may exceed reserves for such contingencies and our credit loss exposure may increase over time. Any increase in write-offs for credit loss could harm our business, financial condition, and results of operations. Even if we are not paid by our customers on time or at all, we are still obligated to pay for the advertising inventory we purchase to meet the customers’ needs, third-party data and other add-on features that customers purchase on our solutions, and as a consequence, our business, financial condition and results of operations would be adversely impacted.

 

We may experience fluctuations in our results of operations, which could make our future results of operations difficult to predict or cause our results of operations to fall below analysts’ and investors’ expectations.

 

Our quarterly and annual results of operations have fluctuated in the past and we expect our future results of operations to fluctuate due to a variety of factors, many of which are beyond our control. Fluctuations in our results of operations could cause our performance to fall below the expectations of investors and other stakeholders, and adversely affect the price of our common stock. Because our business is changing and evolving rapidly, our historical results of operations may not be necessarily indicative of our future results of operations. Factors that may cause our results of operations to fluctuate include the following:

 

	●	changes in demand for programmatic advertising and for our other solutions, including related to the sometimes seasonal nature of our customers’ spending on digital advertising campaigns;
	●	changes to availability of and pricing of competitive products and services, and their effects on our pricing;
	●	technological advances in our industry and adjacent industries, and their impact on us and our customers;
	●	changes in the pricing or availability of data and other third-party services;
	●	changes in our customer base and offerings;
	●	changes in advertising budget allocations, agency affiliations or marketing strategies;
	●	changes to our product, media, customer or channel mix;
	●	changes and uncertainty in the regulatory environment for us, advertisers or others in the advertising industry, and the effects of our efforts and those of our customers and partners to address changes and uncertainty in the regulatory environment;
	●	changes in the economic prospects of advertisers or the economy generally, which could alter advertisers’ budgets or spending priorities, or could increase the time or costs required to complete advertising inventory sales;
	●	changes in the pricing and availability of advertising inventory, including through real-time advertising exchanges or in the cost of reaching end consumers through digital advertising;
	●	disruptions or outages on our technology infrastructure;
	●	factors beyond our control, such as natural disasters, terrorism, war and public health crises;
	●	the introduction of new technologies or offerings by our competitors or others in the advertising marketplace;
	●	timing differences between our payments for advertising inventory and our collection of related advertising revenue;
	●	the length and unpredictability of our sales cycle;
	●	costs related to acquisitions of businesses or technologies and development of new products;
	●	cost of recruiting and retention of employees and other personnel; and
	●	changes to the cost of infrastructure, including the information technology on which we rely.

 

Based upon the factors above and others beyond our control, we have a limited ability to forecast our future revenue, costs and expenses. If we fail to meet or exceed the operating results expectations of investors or other stakeholders, the market price of our common stock could decline. Further, sustained volatility or unpredictability in our operating results could pose challenges in continuing and growing our operations as planned or accessing capital needed to sustain our operations and execute our business plan.

 

 

If our access to quality advertising content and channels is diminished or fails to expand, our revenue could decline and our growth could be impeded.

 

We must maintain a consistent supply of ad content and access to channels that are sufficient to attract customers and meet their campaign goals over the long-term. Our success depends on our ability to secure quality content on reasonable terms across a relatively broad range of advertising networks and exchanges and social media platforms, including video, display, CTV, audio and mobile inventory. The amount, quality, and cost of these resources available to us can change at any time. A few digital ad suppliers and digital content channels hold a significant portion of the programmatic inventory either generally or concentrated in a particular channel, such as audio and social media. In addition, we compete with companies with which we have business relationships. If any of these third-party suppliers limits our access to the advertising content and channels on which we rely to provide our offerings to customers, our business could be adversely affected. If our relationships with certain of our suppliers were to cease, or if the material terms of these relationships were to change unfavorably, our business would be negatively impacted. Our suppliers are generally not bound by long-term contracts. As a result, there is no guarantee that we will have access to a consistent supply of quality inventory on favorable terms. If we are unable to compete favorably for advertising inventory available on real-time advertising exchanges, or if real-time advertising exchanges decide not to make their advertising inventory available to us, we may not be able to place advertisements or find alternative sources of inventory with comparable traffic patterns and consumer demographics in a timely manner. Furthermore, the inventory that we access through real-time advertising exchanges may be of low quality or misrepresented to us, despite attempts by ourselves and our suppliers to prevent fraud and conduct quality assurance checks.

 

Inventory suppliers control the bidding process, rules and procedures for the inventory they supply, and their processes may not always work in our favor. For example, suppliers may place restrictions on the use of their inventory, including prohibiting the placement of advertisements on behalf of specific advertisers. Through the bidding process, we may not win the right to deliver advertising to the inventory that is selected through our buying process and may not be able to replace inventory that is no longer made available to us. Further, if we or our customers fail to comply with the rules and policies enforced by these suppliers, we could be restricted or excluded from future access to that content or channels, which would materially harm our business moving forward.

 

If we are unable to maintain a consistent supply of and access to quality content and channels at reasonable cost to us for any reason, customer retention and loyalty, and our financial condition and results of operations could be materially harmed.

 

Economic downturns and market conditions beyond our control could adversely affect our business, financial condition and results of operations.

 

Our business depends on the overall demand for advertising and on the economic health of advertisers that benefit from our solutions. Economic downturns or unstable market conditions may cause advertisers to decrease or pause their advertising budgets, which could reduce spend on our solutions and adversely affect our business, financial condition and results of operations. In recent times, certain events have begun to affect the global and United States economy including continued inflation, interest rate increases by the Federal Reserve and central banks of other countries in response, substantial increases in the prices of certain products and services, declines in the capital markets. The duration of Ukrainian war and its impact are at best uncertain, and continuation may result in Internet access issues if Russia, for example, began illicit cyber activities. More recently, the conflict in Israel creates the potential for economic uncertainty, and if expanded could result in the significant contraction in economic activity, including consumer spending. The economy appears to be headed into a recession with uncertain and potentially severe impacts upon public companies and us. We cannot predict how this will affect the market for digital ad products and services such as those that we offer, but the impact may be adverse. Among other adverse consequences, our customers, in response to a reduced access to capital or anticipated or actual reduction and consumer spending, could elect not to commence or proceed with ad campaigns on which our revenue primarily relies, which would materially adversely harm our operating results and financial condition.

 

Operational or performance issues with our solutions and the technology on which they depend may adversely affect our business, financial condition and results of operations.

 

We depend upon the sustained and uninterrupted performance on the technology on which our offerings depend to provide digital advertising services to our customers and thereby to generate revenue and protect and expand our brand. If our workforce or technology infrastructure cannot scale to meet demand, if there are errors in the performance or operability of these elements of our business, even if temporary, or if our platform and service offerings otherwise fails to meet customer expectations, then our business may be harmed. We may also face material delays in introducing new offerings, including enhancements to the services technology we offer our customers access to. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing offerings may become less attractive or useful or become altogether obsolete.

 

 

Errors, failures, vulnerabilities, and bugs in our technology infrastructure may be found in the future. Our solutions also depend upon third-party technology and systems to perform properly and enable us to perform our obligations to customers, and the channels our platform deploys digital ads on behalf of customers are often used in connection with computing environments utilizing different operating systems, system management software, equipment, and networking configurations, which may cause errors in, or failures of, our solutions or such other computing environments. Our services also rely on using human interaction, which can also result in errors and inefficiencies that could adversely impact us or our customers and their campaigns. Operational and performance issues with our services and the technology on which they depend could include outages, errors during upgrades or patches, discrepancies in costs billed versus costs paid, failure of user interface, unanticipated volume overwhelming our databases, issues in accessing or interacting with one or more channels for ad distribution, access to or distribution of content in err, server failure, or other adverse events.

 

Any of the foregoing operational or performance issues with our offerings could also result in negative publicity, damage to our brand and reputation, loss of customers, loss of or delay in market acceptance of our solutions, increased costs or loss of revenue, loss of the ability to access our solutions, loss of competitive position, claims by customers for losses sustained by them and loss of investor confidence in us. Alleviating problems resulting from such issues, if possible, could require significant expenditures of capital and other resources and could cause interruptions, delays, or the cessation of our business, any of which may adversely affect our business, financial condition and results of operations.

 

If unauthorized access to sensitive or personally identifiable information is obtained, or technology infrastructure on which we depend is compromised, our services may be disrupted and we may be subject to reputational harm and other adverse consequences.

 

Our products and services and the technology infrastructure on which they depend involve the storage and transmission of significant amounts of data from users, customers and data providers, a large volume of which is hosted by third-party service providers. Our services and data could be exposed to unauthorized access due to activities that breach or undermine security measures, including: negligence or malfeasance by internal or external actors; attempts by outside parties to fraudulently induce personnel, customers or vendors to disclose sensitive information in order to gain access to our data; or errors or vulnerabilities in our systems, products or processes or in those of our service providers, customers, and vendors. Accordingly, we or others may be unable to anticipate or detect these techniques or to implement adequate preventative measures. A breach of our security and/or our failure to respond sufficiently to a security incident could disrupt our services and result in theft, misuse, loss, corruption, or improper use or disclosure of data. Of particular concern, the operation of our solutions in the provision of services to our customers and the steps we take to maintain or enhance customer experience and campaign results are subject to potential operational failures and increased vulnerability to cyberattacks. Such cyberattacks could include denial-of-service attacks impacting service availability (including the ability to deliver ads) and reliability, tricking company personnel into releasing control of their systems to a hacker, or the introduction of computer viruses or malware into our systems with a view to steal confidential or proprietary data. Cyberattacks of increasing sophistication may be difficult to detect and could result in the theft of our intellectual property and data, including personal information, from our solutions. We are also vulnerable to unintentional errors or malicious actions by persons with authorized access to our systems that exceed the scope of their access rights, distribute data erroneously, or, unintentionally or intentionally, interfere with the intended operations of our solutions. These events could also result in the misappropriation or access of sensitive or protected information of third parties, and liabilities and legal violations for which we could face litigation and accompanying costs, distraction of management’s time and attention, and adverse publicity and reputational harm. Moreover, we could be adversely impacted by outages and disruptions in the online platforms of our inventory and data suppliers, such as real-time advertising exchanges. Outages and disruptions of technology infrastructure on which we depend, including due to cyberattacks, may subject us to substantial liabilities or losses, and/or harm our reputation and negatively impact our business, financial condition and results of operations.

 

Additionally, a cyberattack or data breach could expose us to regulatory action under privacy and data protection laws, as are more fully described under “Item 1. – Business – Government Regulations.” Privacy and data protection laws to which we are subject may cause us to incur additional or unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our solutions or business model, which may have a material adverse effect on our business. As that section discloses, information relating to individuals and their devices (sometimes called “personal information” or “personal data”) is regulated under a wide variety of local, state, national and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer (including transfer across national boundaries) and other processing of such data, and the global regulatory landscape regarding the protection of personal information is evolving, and U.S. (state and federal) and foreign governments are considering enacting additional legislation related to privacy and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area. These laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solutions. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited. All of this could impair our or our customers’ ability to collect, use, or disclose information relating to consumers, which could decrease demand for our solutions, increase our costs, and impair our ability to maintain and grow our customer base and increase our revenue.

 

 

Any of the forgoing developments arising with respect to our operations and the technology on which we rely, including the activities and technology of our vendors, customers, and strategic partners, could result in government investigations, enforcement actions and other legal and financial liability, and/or loss of confidence in the availability and security of our products and services, all of which could seriously harm our reputation and brand and impair our ability to attract and retain customers.

 

Third parties control our access to unique identifiers, and if the use of third-party “cookies” or other technology is rejected by Internet users or is otherwise subject to unfavorable regulation or action, our performance or prospects may decline and we may lose advertisers and revenue.

 

Our ability to successfully leverage user data and generate revenue from opportunities to provide digital advertisement solutions could be impacted by restrictions imposed by third parties, including restrictions on our ability to use or read “cookies,” device identifiers, or other tracking features or our ability to use real-time bidding networks or other bidding networks. Digital advertising and in turn our operations largely rely on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads. Devices are identified through unique identifiers stored in cookies, provided by device operating systems for advertising purposes, or generated based on statistical algorithms applied to information about a device, such as the IP address and device type.

 

Digital advertising, including our solutions, makes significant use of cookies to store device identifiers for the advertising activities described above. When we use cookies, they are generally considered third-party cookies, which are cookies owned and used by parties other than the owners of the website visited by the Internet user. The most commonly used Internet browsers—Chrome, Firefox, Internet Explorer and Safari—allow Internet users to modify their browser settings to prevent some or all cookies from being accepted by their browsers. Internet users can delete cookies from their computers at any time. Additionally, some browsers currently, or may in the future, block or limit some third-party cookies by default or may implement user control settings that algorithmically block or limit some cookies. Today, three major web browsers—Apple’s Safari, Mozilla’s Firefox and Microsoft’s Edge—block third-party cookies by default. Google’s Chrome has introduced new controls over third-party cookies and announced anticipated plans to deprecate support for third-party cookies and user agent strings entirely by some time in 2024 or later. Some Internet users also download free or paid ad blocking software that not only prevents third-party cookies from being stored on a user’s computer, but also blocks all interaction with a third-party ad server. In addition, Google has introduced ad-blocking software in its Chrome web browser that will block certain ads based on quality standards established under a multi-stakeholder coalition. While some of these anticipated developments could provide opportunities to our operations and industry, we may be unable to adapt effectively or quickly enough to capitalize on these developments and remain competitive, and the developments could post significant challenges or impediments to our operations and business that materially harm us, rather than benefits, notwithstanding actions we take to address these risks. If such a feature either intentionally or inadvertently blocks our customers’ ads, or if such capabilities become widely adopted and we or the advertising technology industry collectively does not develop alternative technologies to address these developments, our business could be materially harmed.

 

Our future success depends on the continuing efforts of our key employees, and our ability to attract, hire, retain and motivate highly skilled personnel in the future.

 

Our future success depends on the continuing efforts of our executive officers and other key employees, including Jason Wulfsohn, our Chief Executive Officer, Ryan Carhart, our Chief Financial Officer and Garrett MacDonald, our Chief Commercial Officer. We rely on the leadership, knowledge and experience in our business and industry that our executive officers provide. We also rely on a relatively small number of employees to establish, maintain and enhance our relationships with customers. The loss of any of these individuals could materially harm our business and prospects.

 

We also rely on our ability to hire and retain qualified and motivated employees and consultants, including in the areas of product development, support, and sales teams that attract and keep key customers. For example, we are substantially dependent on our sales and support teams to obtain new customers and to increase procurement of our services and other offerings by our existing customers, and our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. Due to the complexity of our solutions, a significant time lag exists between the hiring date of sales and support personnel and the time when they become fully productive. New hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the digital advertising space.

 

 

The market for skilled labor in general, and in the aforementioned areas in particular, as well is in California where we are headquartered, is fiercely competitive, and we may struggle to procure the assistance needed to continue and grow our business on economically favorable terms or at all. As a result, we may incur significant costs to attract and retain personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees or consultants to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Newly hired personnel often require significant training and, in many cases, take significant time before they achieve full productivity.

 

Employee turnover, including changes in our management team, could disrupt our business. None of our founders or other key employees have an employment agreement for a specific term, and all of our employees may terminate their employment with us at any time. The loss of one or more of our executive officers, including our two co-founders, or our inability to attract and retain highly skilled employees could have an adverse effect on our business, financial condition and results of operations.

 

If we fail to offer sufficient customer support, our business and reputation would suffer.

 

Because we offer digital ad campaign services and deploy strategies and communications through our and third party technology, customer support is important for the successful marketing and continued use of our services and solutions and for maintaining and increasing spend from existing and new customers. Providing this support requires that our sales and operational personnel have specific technical and industry knowledge and expertise along with the ability to communicate what are often complicated concepts and processes to others, such as the algorithms and channels on which a customer’s ad campaign strategy is designed and deployed, which makes it more difficult for us to hire qualified personnel and to scale up our support operations due to the extensive training required. The importance of high-quality customer service will increase as and to the extent we expand our business and pursue new customers. If we are not responsive and proactive regarding our customers’ advertising needs, or do not provide effective support for our customers’ advertising campaigns, our ability to retain our existing customers would suffer and our reputation with existing or potential customers would be harmed, which would negatively impact our business.

 

If any of the technology, software, products and services that we use are unavailable, have future terms we cannot agree to, or do not perform as we expect, our business, financial condition and results of operations could be harmed.

 

We depend on various technology, software, products and services from third parties or available as open source, some of which are critical to the features and functionality of our solutions through which we provide our services to customers. Failure by third-party providers to maintain, support or secure their technology either generally or for our accounts specifically, or downtime, errors or defects in their products or services, could adversely impact our solutions, our administrative obligations or other areas of our business. Having to replace any third-party providers or their technology, products or services could result in outages or difficulties in our ability to provide our services. If we are unsuccessful in establishing or maintaining our relationships with our third-party providers or otherwise need to replace them, internal resources may need to be diverted and our business, financial condition and results of operations could be harmed.

 

In the event that the third-party providers on which we rely to operate our technology infrastructure or that of third parties on which we depend experience any interruption in operations or cease business for any reason, or if we are unable to agree on satisfactory terms for continued relationships, we would be forced to enter into a relationship with other service providers or assume some responsibilities ourselves. Even a disruption as brief as a few minutes could have a negative impact on marketplace activities and could result in a loss of revenue. These facilities may be located in areas prone to natural disasters and may experience catastrophic events such as earthquakes, fires, floods, power loss, telecommunications failures, public health crises and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks and similar misconduct. Although we have made certain business continuity arrangements, such events could cause damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result in disruptions to our service.

 

 

Due to a relative lack of intellectual property protection and proprietary rights for our operations and the technology infrastructure on which they depend, competitors or other third parties could gain access to and copy or use aspects of our technology infrastructure or other elements of our business, or those of third parties on which we depend, that are critical to our continued operations and competitive position, thereby eroding our competitive advantages and harming our business.

 

Because our success depends, in large part, on our ability to continue to operate the systems, methods and technologies that we deploy in our operations and the solutions we offer, we lack intellectual protection so that we can prevent others from using such proprietary information and thereby depleting our competitive advantage. If we fail to adequately protect our intellectual property rights or those of third parties on which we rely, our competitors might gain access to our technology and our business might be adversely affected. We, either directly or through the third parties with which we do business, rely upon a combination of trademark and trade secret protections, as well as third-party confidentiality and non-disclosure agreements, to establish and protect our proprietary rights. Establishing trade secret, trademark, and domain name protection can be difficult and expensive, and the laws, procedures and restrictions may provide only limited protection. It may be possible for unauthorized third parties to copy or reverse engineer aspects of our technology or otherwise obtain and use information that we regard as proprietary, or to develop technologies similar or superior to our technology or design around our proprietary rights, despite the steps we have taken to protect our proprietary rights. Despite our efforts to prevent unauthorized access and use of propriety information and technology, the theft or misuse of such proprietary information and technology could occur by employees, contractors or others who have or gain access to such information and technology. Further, we do not have patent protection for our solutions or any related technology that we utilize in our operations, which further exposes us to the risk of competitors reverse engineering or otherwise deploying similar technology to ours, and thereby potentially reducing our market share and prospects.

 

Maintaining intellectual property protection and policing unauthorized use of our technology can be challenging, time-consuming and expensive. In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those of the United States, and mechanisms for enforcement of proprietary rights in such countries may be inadequate. If we are unable to establish, maintain and protect our proprietary rights (including in particular, the proprietary technology used in our solutions) we may find ourselves at a competitive disadvantage despite the expense, time and effort deployed by us to create and protect our propriety information, processes and technology.

 

Because California where we are based does not permit non-compete agreement for employees, we are susceptible to an employee resigning or being terminated and then competing with us.

 

We do not have our employees sign non-competition agreements, since they are not enforceable in California where we are based. A growing number of states have followed California in refusing to enforce non-compete provisions in employment contracts, and early in 2023, the Federal Trade Commission proposed a rule which would ban non-compete in the employment context. While employees may compete against us, they cannot use our trade secrets and other confidential information. If that were to occur, we would have to proof such activities. Intellectual property litigation is expensive, diverts management time and the results are uncertain.

 

We or third parties on which we rely may be sued by third parties for alleged infringement of their proprietary rights, which would harm our business, or result in additional expense and potential damages.

 

There is significant intellectual property development activity in the digital advertising industry. Third-party intellectual property rights may cover significant aspects of our technologies or business methods or those of other third parties with which we do business or on which we rely in our operations or block us from expanding our offerings. Our success depends on the continual development and enhancement of our technology infrastructure and the services we provide through it. From time to time, we may receive claims from third parties that our solutions and underlying technology infringe or violate such third parties’ intellectual property rights. To the extent we gain greater public recognition, we may face a higher risk of being the subject of intellectual property claims. The cost of defending against such claims, whether or not the claims have merit, is significant, regardless of whether we are successful in our defense, and could divert the attention of management, technical personnel and other employees from our business operations. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters. Additionally, we may be required to indemnify our customers or suppliers in connection with certain intellectual property claims. If we are found to infringe the intellectual property rights of others, we could potentially be required to cease utilizing portions of our solutions or performing certain functions or services thereon. We or third party collaborators may also be required to develop alternative non-infringing technology, which could require significant time and expense and limit our operating capabilities and results. Additionally, we could be required to pay royalty payments, either as a one-time fee or ongoing, as well as damages for past use that was deemed to be infringing. If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.

 

 

We face potential liability and harm to our business based on the nature of our business and the content deployed in the provision of the solutions we offer.

 

Advertising often results in litigation relating to misleading or deceptive claims, copyright or trademark infringement, public performance royalties or other claims based on the nature and content of advertising that is distributed through the solutions we offer. Though we contractually require customers to generally represent to us that their advertisements comply with our ad standards and our inventory providers’ ad standards and that they have the rights necessary to serve advertisements through our solutions, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements. If any of these representations are untrue, we may be exposed to potential liability and our reputation may be damaged. While our customers are typically obligated to indemnify us, such indemnification may not fully cover us, or we may not be able to collect. In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive.

 

Risks Related to This Offering and Our Common Stock

 

Because this is a best efforts offering, investors who invest initially will be subject to more risk than later investors.

 

The earlier investors invest in this offering, the greater degree of risk they will incur. This is because there is no minimum amount of proceeds we must raise. If we do not raise a substantial amount of proceeds, we will not have sufficient working capital, not be able to carry out the business as described in this Offering Circular and could be forced to delay the planned expansion outlined in this Offering Circular. Because there is no minimum offering amount required in this offering and the offering fees, expenses and other costs which could prove higher than anticipated, the actual net proceeds to us are not presently determinable and may be substantially less than the maximum amounts we intend to offer.

 

We may undertake additional equity or debt financing that would dilute the shares in this offering.

 

Following this offering, unless we raise all or substantially all of $8 million, we may need to raise additional capital to fund our operations and execute our business plan. Any future offering the Company may undertake further equity or debt financing, which may be dilutive to existing shareholders, including you, or result in an issuance of securities whose rights, preferences and privileges are senior to those of existing shareholders, including you, and also reducing the value of shares subscribed for under this offering.

 

We may not be able to obtain additional financing.

 

Even if we are successful in selling the maximum number of shares in the offering, we may require additional funds to continue and grow our business. We may not be able to obtain additional financing as needed, on acceptable terms, or at all, which would force us to delay our plans for growth and implementation of our strategy which could seriously harm our business, financial condition and results of operations. If we need additional funds, we may seek to obtain them primarily through additional equity or debt financings. Those additional financings could result in dilution to our current shareholders and to you if you invest in this offering.

 

An investment in the shares is speculative and there can be no assurance of any return on any such investment.

 

An investment in the Company's shares is speculative, and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.

 

Because we are offering Bonus Shares to investors in this offering who invest at least $10,000, such investors are effectively receiving a discount on their investment relative to other investors in this offering.

 

Certain investors in this offering who invest at least $10,000 are entitled to receive Bonus Shares based on a percentage of the shares purchased, with the percentage increasing with the amount invested within enumerated investment ranges, as more specifically described in “Plan of Distribution-Investor Bonus Shares” at page 53. The Bonus Shares effectively give such investors a discount on their investment in this offering. Therefore, the shares of common stock purchased by investors who invest less than $10,000 will be immediately and disproportionately diluted by investments made by investors entitled to receive the Bonus Shares, for which investors will effectively pay a lower price per share and thereby receive a discount on their investment in this offering. For example, an investor purchasing 500 shares in this offering would pay $200 for those shares at the $0.40 per share offering price, while an investor purchasing 25,000 shares would pay $10,000 and receive a total of 27,500 shares, comprised of the shares purchased plus 2,500 Bonus Shares, resulting in an effective per share price of $0.275 after giving effect to the Bonus Shares. Further, to the extent an investor invests more than $10,000 but less than other investors who receive Bonus Shares at a higher percentage based on the offering bonus structure, those investors will also be disproportionately diluted relative to such other investors receiving Bonus Shares who invested higher amounts.

 

 

We have not paid dividends in the past and do not expect to pay dividends in the future, so any return on investment may be limited to the value of our shares.

 

We have never paid cash dividends on our shares and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our shares will depend on earnings, financial condition and other business and economic factors affecting it at such time that management may consider relevant. If we do not pay dividends, our shares may be less valuable because a return on your investment will only occur if its stock price appreciates.

 

The offering price has been arbitrarily determined.

 

The offering price of the shares has been arbitrarily established by us based upon our present and anticipated financing needs and bears no relationship to the quotation price of our common stock on the OTC Markets Pink Market or our present financial condition, assets, book value, projected earnings, or any other generally accepted valuation criteria. The offering price of the shares may not be indicative of the value of the shares or the Company, now or in the future. For example, the original Offering Statement filed by the Company on April 20, 2023 contemplated an offering of 10,000,000 shares common stock at $1.00 per share for maximum total gross proceeds of $10,000,000, before we filed the pre-qualification amendment to the Offering Statement of which this Offering Circular forms a part to reduce the offering price to $0.40 per share and the offered amount to 20,000,000 shares (assuming no Bonus Shares) for maximum total gross proceeds of $8,000,000, which action was taken without seeking investor communication or input on interest in this offering or the pricing thereof. The arbitrary nature of the per share price in this offering is further evidenced by the inclusion of Bonus Shares for certain investors who purchase above the specified thresholds, with a tiered percentage based on the amount of their investment within specified investment ranges, as such investors will effectively pay a lower per-share price in exchange for investing a higher amount in the offering.

 

The management of the Company has broad discretion in application of proceeds.

 

The management of the Company has broad discretion to adjust the application and allocation of the net proceeds of this offering in order to address changed circumstances and opportunities. As a result of the foregoing, our success will be substantially dependent upon the discretion and judgment of the management of the Company with respect to the application and allocation of the net proceeds hereof.

 

There can be no assurance that our common stock will ever be approved for listing on a national securities exchange which could negatively affect the value of our common stock and make it difficult or impossible for investors to sell their shares in a timely manner.

 

There is currently very limited trading of our common stock, and an active trading market may never develop. Our common stock is quoted on the OTC Pink Market. The OTC Pink Market is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. While we remain determined to work towards getting our securities listed on a leading national securities exchange, there can be no assurance that this will occur. Further, we cannot apply to the Nasdaq Capital Market until 2024 at the earliest unless we complete a $40 million firm commitment underwritten public offering. As a result, we may never develop an active trading market for our securities which may limit our investors’ ability to liquidate their investments.

 

If we are not successful, you may lose your entire investment.

 

Prospective investors should be aware that if we are not successful in our business, their entire investment in the Company could become worthless. Even if the Company is successful, we can provide no assurances that investors will derive a profit from their investment. We need additional capital to meet our obligations and achieve our business objectives, and we cannot guarantee we will be successful in locating additional required capital as and when needed or that any such amounts will be sufficient for us to establish material revenue growth. If we are not successful, you may lose your entire investment.

 

Because our common stock rarely trades, investors should not rely upon the prices at which our common stock may be or have been sold.

 

Our common stock trades sporadically on the OTC Pink Market. Accordingly, the market price of our common stock at any given time may not be representative of its intrinsic value, and investors should not rely upon the public prices in deciding whether to buy our shares. The lack of liquidity may also result in an investor seeking to purchase our common stock in paying more than the reported price.

 

 

Due to factors beyond our control, our stock price may be volatile.

 

There is currently a limited market for our common stock, and there can be no guarantee that an active market for our common stock will develop. As of October 31, 2023, there were only 40 record holders of our common stock, and trading is very limited and sporadic. Further, even if an active market for our common stock develops, it will likely be subject to significant price volatility when compared to more seasoned issuers. We expect that the price of our common stock will continue to be more volatile than more seasoned issuers for the foreseeable future. Fluctuations in the price of our common stock can be based on various factors in addition to those otherwise described in this Offering Circular, including:

 

	●	The operating performance of Socialcom, including any failure to achieve material revenues therefrom;
	●	The public disclosure of our success in his offering;
	●	the terms of any financing we disclose in the future;
	●	The performance of our competitors in the marketplace, both pre- and post-combination;
	●	The public’s reaction to our press releases, SEC filings, website content and other public announcements and information;
	●	Changes in earnings estimates or recommendations by any research analysts who may follow us;
	●	Variations in general economic conditions, including as may be caused by uncontrollable events;
	●	Actions of our existing stockholders, including sales of common stock by our directors and executive officers or by significant investors; and
	●	The employment or termination of key personnel.

 

Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of whether we can successfully operate Socialcom post-Exchange or achieve and maintain favorable operating performance and financial condition. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.

 

The market price of our common stock may decline if a substantial number of shares of our common stock are sold at once or in large blocks.

 

Presently the market for our common stock is limited. If an active market for our shares develops in the future, some or all of our stockholders may sell their shares of our common stock which may depress the market price. Further, because until the Closing of the Exchange were a “shell” company, Rule 144 will not be available until one year has elapsed from the effective date of this Offering Circular and the Company remains current in its periodic reporting obligations with the SEC. Any sale of a substantial number of these shares in the public market, or the perception that such a sale could occur, could cause the market price of our common stock to decline, which could reduce the value of the shares held by our other stockholders.

 

Because we have issued and may in the future issue preferred stock without the approval of our stockholders, and the vast majority of our common stock outstanding is held by a small number of stockholders some of which are also executive officers and directors, it may be more difficult for a third-party to acquire us and could depress our stock price.

 

Our Board may issue, without a vote of our stockholders, one or more series of preferred stock that have voting rights, liquidation preferences, dividend rights and other rights that are superior to those of our common stock. Any issuance of preferred stock could adversely affect the rights of holders of our common stock in that such preferred stock could have priority over the common stock with respect to voting, dividend, or liquidation rights. For example, the Series A as amended, of which 223,333 shares are outstanding as of October 31, 2023, provide the holders with a liquidation preference in the event of the merger or consolidation of the Company in which the Company is not the surviving entity, the sale of all of the assets of the Company in a transaction which requires stockholder approval or the dissolution or winding up of the Company. Further, because we can issue preferred stock having voting rights per share that are greater than the equivalent of one share of our common stock, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for stockholders to sell their common stock and/or cause the market price of our common stock to drop significantly, even if our business is performing well.

 

 

Further, the Series A also provides the holders with senior ranking with respect to the Company’s capital stock upon the occurrence of a liquidation, dissolution or winding up, and a liquidation preference in the event of the merger or consolidation of the Company in which the Company is not the surviving entity, the sale of all of the assets of the Company in a transaction which requires stockholder approval or the dissolution or winding up of the Company, in each case at a stated value of $30 per share of Series A. This means that the Series A holders are entitled to receive the liquidation preference before any payment or other distribution of assets to holders of our common stock, and the amount of any such payment or other distribution will be reduced by the amount paid to Series A holders.

 

Even absent such an issuance of preferred stock, as a result of the Closing of the Exchange the majority of our common stock outstanding is held by former Socialcom stockholders, three of whom are also executive officers and/or directors as a result of the Closing of the Exchange Agreement. Specifically, as a result of the Exchange the combined beneficial ownership of our common stock among Jason Wulfsohn, our Chief Executive Officer and a director, Ryan Carhart, our Chief Financial Officer, Reeve Benaron, a director, and David Lelong, a director, is 87.1% of our outstanding shares of common stock as of  October 31, 2023. See “Principal Stockholders.” If such stockholders act together, they may have the ability to have a substantial influence on matters submitted to our stockholders for approval, including the election and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of our assets. As a result, our other stockholders may have little or no influence over matters submitted for stockholder approval. In addition, the ownership of such stockholders could preclude any unsolicited acquisition of us, and consequently, adversely affect the price of our common stock. Some or all of our current or future principal stockholders may have a conflict of interest with respect to one or more actions or transactions involving the Company, and these stockholders may make decisions that are adverse to the interests of our other stockholders.

 

 

USE OF PROCEEDS

 

We estimate we will receive net proceeds from this offering of approximately $6,507,250, assuming the maximum number of shares offered hereby are sold, after deducting estimated broker-dealer’s commissions and offering expenses payable by us.

 

The following tables sets forth a breakdown of our estimated use of our net proceeds as we currently expect to use them, assuming the sale of 100%, 75%, 50% and 25% of the maximum offering amount.

 

Assumed Percentage of Shares Sold		100%				75%				50%				25%
Gross Proceeds		$	8,000,000			$	6,000,000			$	4,000,000			$	2,000,000
Offering Costs and Expenses (1)		$	1,492,750			$	1,172,750			$	852,750			$	532,750
Net Proceeds (2)		$	6,507,250			$	4,827,250			$	3,147,250			$	1,467,250
Sales and Marketing Expansion		$	1,626,813			$	1,206,812			$	786,812			$	366,812
Product Investment		$	2,277,538			$	1,689,538			$	1,101,538			$	513,5378
Working Capital		$	2,602,900			$	1,930,900			$	1,258,900			$	586,900

 

---

(1) Consists of the estimated broker-dealer commissions of 1% of the gross proceeds, estimated costs to market the offering, and estimates of other offering-related costs, fees and expenses including other fees and expenses payable to the broker-dealer for the offering, as well as legal, accounting and audit fees and state blue sky filing fees incurred in connection with the offering.

 

(2) Net Proceeds consists of the anticipated Gross Proceeds from the offering less Offering Costs and Expenses.

 

Our expected use of net proceeds from this offering represents our current intentions based upon our plans and business condition. As of the date of this Offering Circular, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of the net proceeds will vary depending on numerous factors, including the factors described under the heading “Risk Factors” in this Offering Circular. As a result, management will have broad discretion in its application of the net proceeds, and investors will be relying on our judgment in such application.

 

In the event we do not sell all of the shares of common stock offered hereby, we may seek additional financing from other sources in order to support the intended use of proceeds indicated above. If we secure additional equity funding, investors in this offering would be diluted. In all events, there can be no assurance that additional financing would be available to us when desired or needed and, if available, on terms acceptable to us.

 

 

MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

 

Market Information

 

Our common stock is not listed on any securities exchange and is quoted on the OTC Pink Market under the symbol “VADP.” Because our common stock is not listed on a securities exchange and its quotations on OTC Pink are limited and sporadic, there is currently no established public trading market for our common stock.

 

The following table reflects the high and low closing sales information for our common stock for each fiscal quarter during FY 2022 and FY 2021. This information was obtained from www.nasdaq.com and reflects inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The historical prices have been adjusted to reflect the three-for-one stock split which was effective March 18, 2021.

 

		COMMON STOCK MARKET PRICE
		HIGH				LOW
FISCAL YEAR ENDED DECEMBER 31, 2022:
First Quarter		$	13.00			$	11.00
Second Quarter		$	13.00			$	11.35
Third Quarter		$	11.36			$	11.30
Fourth Quarter		$	11.30			$	11.30

 

		COMMON STOCK MARKET PRICE
		HIGH				LOW
FISCAL YEAR ENDED DECEMBER 31, 2021:
First Quarter		$	6.30			$	3.47
Second Quarter		$	10.00			$	5.70
Third Quarter		$	16.55			$	7.36
Fourth Quarter		$	13.00			$	11.00

 

Holders

 

As of October 31, 2023, there were 41 stockholders of record of the Company’s common stock based upon the records of the stockholders provided by the Company’s transfer agent. 3,061,360 shares are held at CEDE & CO. The Company’s transfer agent is Equity Stock Transfer, LLC 237 W 37th Street, Suite 602, New York, NY 10018. 

 

Dividends

 

We have never paid or declared any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The declaration, amount and payment of any future dividends on shares of our common stock, if any, will be at the sole discretion of our Board, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our shareholders or by our subsidiaries to us, and any other factors that our Board may deem relevant.

 

 

DILUTION

 

If you invest in our common stock, your ownership interest will be diluted to the extent of the difference between the public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock after the consummation of this offering. Net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the number of shares of common stock then issued and outstanding. As of December 31, 2022, our pro forma net tangible book value (unaudited) was $(2,859,401), or $(0.016) per share of common stock, which represents the amount of our total tangible assets less total liabilities, divided by the number of shares outstanding of 182,435,897.

 

After giving effect to our sale of 20,000,000 shares of our common stock in this offering at the public offering price of $0.40 per share (assuming for this purpose that no Bonus Shares are issued in this offering), and after deducting estimated broker-dealer’s commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2022 would have been $3,710,599, or $0.018 per share). This represents an immediate and substantial dilution of $0.382 per share to new investors purchasing common stock in this offering.

 

The following table illustrates this dilution per share at selected intervals of completion of the offering:

 

% of offering completed*		25%				50%				75%				100%
Shares Sold			5,000,000				10,000,000				15,000,000				20,000,000
Assumed initial offering price per share (no Bonus Shares)		$	0.400			$	0.400			$	0.400			$	0.400
Net tangible book value per share before this offering		$	(0.016	)		$	(0.016	)		$	(0.016	)		$	(0.016	)
Increase in net tangible book value per share with this offering		$	0.009			$	0.017			$	0.026			$	0.034
Pro forma net tangible book value per share after this offering		$	(0.007	)		$	0.001			$	0.010			$	0.018
Dilution per share to new investors with this offering		$	0.407			$	0.398			$	0.390			$	0.382

 

* The table above sets forth dilution and related metrics calculated assuming no Bonus Shares are issued in this offering. As such, the actual dilution to new investors in this offering and related metrics could deviate from the amounts set forth above, including based upon each investor’s particular investment amount and whether and the extent to which such investor receives Bonus Shares in this offering. The number of Bonus Shares to be issued to an investor, if applicable, will be a percentage of the number of shares purchased. See “Plan of Distribution-Investor Bonus Shares” below.

 

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. Each $0.05 increase or decrease in the assumed initial public offering price of $0.40 per share, would increase or decrease, as applicable, our pro forma net tangible book value per share to new investors by $0.005, and would increase or decrease, as applicable, dilution per share to new investors in this offering by $0.005, in each case assuming we sold the full subscription amount of 20,000,000 shares without giving effect to the up to 3,900,000 Bonus Shares  and after deducting estimated broker-dealer commissions and estimated offering expenses payable by us.

 

The following table summarizes, on a pro forma as adjusted basis as of October 30, 2023, the differences between the number of shares of common stock purchased from us, the total price and the average price per share paid by existing shareholders and by the new investors in this offering, before deducting estimated broker-dealer’s commissions and estimated offering expenses payable by us, at an assumed public offering price of $0.40 per share (assuming for this purpose that no Bonus Shares are issued in this offering).

 

		Shares Issued/Purchased								Total Consideration								Average Price
		Number				Percent				Amount				Percent				Per Price
Existing stockholders			18,061,391				47	%		$	3,268,971				29	%		$	0.18
New investors			20,000,000				53	%		$	8,000,000				71	%		$	0.40
Total			38,061,391				100	%		$	11,268,971				100	%

 

To the extent that options and or other derivative securities are exercised or converted or we otherwise issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.

 

 

UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

The following tables present the unaudited pro forma condensed combined financial statements of Socialcom and Vado as if the acquisition had been completed at the beginning of the FY 2022, and includes a total of $8,000,000 for the sale of 20,000,000 shares of common stock included in this offering. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operation that would have been achieved.

 

										Pro forma					Proforma
		Historical								Adjustments					Combined
		Socialcom				Vado
		December 31, 2022				November 30, 2022									December 31, 2022
ASSETS
Current assets
Cash		$	485,053			$	48,154				8,507,250		B1,B2,C,G		$	9,040,457
Accounts receivable			2,080,758				-									2,080,758
Other current assets			245,486				-				100,000		B3			345,486
Total current assets			2,811,297				48,154									11,466,701
Property and equipment, net of accumulated depreciation of $145,166 and $125,901			32,976				-									32,976
Right of use operating leases, net			581,352				-									581,352
Intangible assets -amortizable			286,801				-									286,801
Total Assets		$	3,712,426			$	48,154								$	12,367,830
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities			2,272,119				10,354									2,282,473
Acquisition liabilities			162,500				-									162,500
Deferred revenue			72,630				-									72,630
Lease liability, operating leases, current			631,144				-									631,144
Loans payable, current			348,945				-									348,945
Loans payable, related party, current			757,426				-									757,426
Accrued settlement			1,707,652				-									1,707,652
Total current liabilities			5,952,416				10,354									5,962,770
Loans payable, non-current			2,127,836				-									2,127,836
Loans payable, related party, non-current			342,574				-									342,574
Total Liabilities			8,422,826				10,354									8,433,180
Commitments and contingencies			-				-									-
Stockholders' equity (deficit)
Preferred stock, Series A - $0.001 par value			-				170				53		B1,B2,B3			223
Common stock, $0.001 par value			19,858				99,986				82,592		A,C,D,F			202,436
Additional paid-in capital			1,948,036				300,098				8,162,151		A,B,C,D,E,F			10,410,285
Accumulated deficit			(6,678,294	)			(362,454	)			362,454		E			(6,678,294	)
Total stockholders' equity (deficit)			(4,710,400	)			37,800									3,934,650
Total liabilities and stockholders' equity (deficit)		$	3,712,426			$	48,154								$	12,367,830

 

 

															Pro forma
		Historical								Adjustments					Combined
		Fiscal year ended
		Socialcom				Vado
		December 31, 2022				November 30, 2022									December 31, 2022
Revenue		$	17,619,504			$	-								$	17,619,504
Cost of revenue			11,496,539				-									11,496,539
Gross Profit			6,122,965				-									6,122,965
Operating expenses:
Selling, general and administrative			10,318,956				73,581									10,392,537
Total operating expenses			10,318,956				73,581									10,392,537
Net operating (loss) income			(4,195,991	)			(73,581	)								(4,269,572	)
Other income (expense):
Interest expense, net of interest income			(606,678	)												(606,678	)
Gain on forgiveness of debt			-				38,625									38,625
Total other income (expense)			(606,678	)			38,625									(568,053	)
Net (loss) income before provision for income taxes			(4,802,669	)			(34,956	)								(4,837,625	)
Provision for income taxes			-
Net (loss) income		$	(4,802,669	)		$	(34,956	)							$	(4,837,625	)
Net (loss) income per share - basic		$	(0.24	)		$	(0.00	)							$	(0.03	)
Net (loss) income per share - diluted		$	(0.24	)		$	(0.00	)							$	(0.03	)
Shares outstanding - Basic			19,858,048				99,985,500				82,592,350		A,C,E,F,G			202,435,898
Shares outstanding - Diluted			19,858,048				99,985,500				82,592,350		A,C,E,F,G			202,435,898

 

	A	Cancellation of 93,000,000 shares of Vado common stock by the Vado’s then majority stockholder pursuant to the terms of the Exchange Agreement.
	B1	Sale of 25,000 shares of Series A Preferred Stock at a price of $30 per share for gross proceeds of $750,000 on January 31, 2023.
	B2	Sale of 25,000 shares of Series A Preferred Stock at a price of $30 per share for gross proceeds of $750,000 on May 25, 2023.
	B3	Issuance of 3,333 shares of Series A Preferred Stock at a price of $30 per share and a value of $100,000 to a service provider on June 1, 2023.
	C	Sale of 193,426 shares of Socialcom common stock at a price of $2.58 per share for proceeds of $500,000 pursuant to the third and final tranche of a private placement. Socialcom previously sold 314,466 shares of common stock at a price of $1.59 per share for proceeds of $500,000 under Tranche 1, and 255,067 shares at a price of $1.96 per share for proceeds of $500,000 under Tranche 2.

D

Issuance of 175,450,398 shares of Vado common stock in exchange for 20,051,474 shares of Socialcom common stock.

	Socialcom shares outstanding at December 31, 2022			19,858,048
	Plus: Shares sold in Tranche 3 of a private placement (see note C)			193,426
	Total shares of Socialcom to exchange for Vado shares			20,051,474
	Exchange rate			8.75
	Number of Vado shares issued in exchange for Socialcom shares			175,450,397

	E	Elimination of Vado accumulated deficit to additional paid-in capital
	F	Elimination of Socialcom stock to additional paid-in capital
	G	Shares sold for cash, net of costs, not including 3,900,000 bonus shares

	Number of shares sold			20,000,000
	Price per share		$	0.40
	Gross proceeds		$	8,000,000
	Offering costs		$	(1,492,750	)
	Net proceeds		$	6,507,250

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

 

Overview

 

Socialcom, the Company’s operating subsidiary through which we provide digital ad solutions, was incorporated in the State of California on March 8, 2013, for the purpose of delivering advanced integrated advertising and technology services to independent agencies and brands. Socialcom’s integrated tech solution, both self-service (whereby the Socialcom customer fully manages their own campaign utilizing the company’s platform solutions) and managed service (whereby the company acts on behalf of the Socialcom customer to fully manage their campaign), is built to deliver end-to-end omnichannel performance, including advertising technology, data-driven campaign optimization, reporting and insights, as well as creative services. Since its inception the strategic focus of the company has been oriented toward mid-market businesses, a significant and often underserved segment of the larger U.S. economy, especially with respect to their need for powerful enterprise advertising technology solutions to drive improved business outcomes. Socialcom continues to embrace future-first solutions, recognizing ongoing changes in the ad tech space, from data usage and privacy, to emerging technologies and platforms.

 

During FY 2021, the Company acquired BigBuzz Marketing Group, a New York based creative digital marketing agency to expand its creative-based product and services offerings, including a focus on organic social content.

 

During FY 2022, the Company partnered with the industry’s leading DSP to launch Admatx its self-serve demand side platform (DSP) centered around the principle of democratizing access to enterprise-level adtech by placing control into the hands of the customer without requiring a prohibitive minimum spend or a long-term subscription commitment. Admatx is focused on SMB marketers, looking for an easy-to-use performance DSP without any spend minimums.

 

During FY 2022, the Company lost certain key customers and saw decreased spend for certain existing customers, which had a material impact on revenue. We experienced turnover in members of our customer support team during the period, which directly impacted certain client relationships. We also saw an increasing trend toward in-housing of media buying by advertisers as well as increased access to enterprise technology and data-powered buying solutions by agencies, representing a competitive threat to the Company’s value proposition. Other reasons for the decline in revenue include macro-economic factors such as inflationary pressures, the lingering impact of COVID-19 and diminished consumer spending, all contributing to reduced advertising budgets from customers in general. In response, management has taken steps to (i) improve the employee experience and in turn improve employee retention; and (ii) enhance our product offerings and strengthen our core solutions to the middle market. More specifically, in order to drive increased customer acquisition, the Company is focused on improved market differentiation related to product development and innovation in the key three areas of: (i) predictive analytics, (ii) supply optimization, and (iii) creative automation. In the second quarter we have developed an industry leading, data-driven addition to our tech stack, successfully incorporating several layers of artificial intelligence (AI), predictive analytics, and automation in the application of data science, audience insights and tech-powered creative, an integrated and holistic system designed to optimize performance in real time for our brand and agency customers. We have successfully taken our new AI-powered data science solutions to market through various ongoing sales and marketing activities and are currently activating campaigns and delivering impact for both existing and new customers. In addition, we are actively assessing  the mergers and acquisitions (M&A) landscape to identify potential acquisition targets, whether creative, media or technology companies, with stable customers and revenues, that can drive improved business outcomes through integrated access to the Socialcom media services solution.

 

The Company continues to pursue opportunities to expand and improve upon its current technology offerings in an effort to seek new sources of revenue and enhance customer experience and results. To that end, in FY 2022 Socialcom launched Admatx, a powerful self-serve DSP built on the industry’s leading DSP, centered around the principle of democratizing access to enterprise-level adtech by placing control into the hands of the customer without requiring a prohibitive minimum spend or a long-term subscription commitment, and more recently in FY 2023 Socialcom launched AXi an innovative suite of advanced privacy-first data science tools, delivering first-party data visualization, sophisticated customer journey mapping, predictive audience modeling, and automated campaign optimizations. These tools can be deployed throughout the entire digital customer journey, helping marketers successfully identify, model and target the right audiences, with the goal of significantly improving performance and optimizing spend toward greater ROAS at scale. As of the date of this Offering Circular, the Company cannot predict with certainty the impact these and other developments will have on its financial and operating results, although management anticipates seeing the benefits of these new technologies in future periods.

 

 

Trends and Uncertainties

 

Our operations and industry are subject to the following trends and uncertainties:

 

Seasonality

 

In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, some advertisers may allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically, the fourth quarter of the year reflects our highest level of advertising activity and the first quarter reflects the lowest level of such activity. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

 

Developments in the Programmatic Advertising Market

 

Our operating results and prospects will be impacted by the overall adoption of programmatic advertising by inventory owners and content providers, as well as advertisers and the agencies and service providers that represent them. Programmatic advertising has grown rapidly in recent years, and any acceleration or slowing of this growth may affect our operating and financial performance. In addition, even if the programmatic advertising market continues to grow at its current rate, our ability to position ourselves within the market will impact the future growth of our business.

 

In addition, technological and other changes and developments in the digital ad space will also affect our operations and operating results. For example, many websites including Google are expected to update or alter their privacy settings and practices in the coming years, including by eliminating “cookies” and the collection of personal identifiable information about users, for which we and our industry will need to adjust in order to maintain and grow our operations.

 

Growth in and Retention of Customers

 

Our ability to generate and maintain revenue depends on retaining our existing customers and adding new customers. Our customers consist of small-to-medium sized businesses, with spending patterns that can be inconsistent or unpredictable. We also depend on a relatively small number of customers for a large proportion of our revenue streams. As a result, future revenue and growth depends upon our ability to retain our existing customers and to gain a larger amount of their advertising spend through our platform and related services.

 

Labor Shortages

 

Because of our focus on digital advertisements and the underlying technology and infrastructure involved in those processes, as well as providing a wide variety of businesses with their digital marketing needs, our operations depend on procuring, training and maintaining skilled personnel to assist us and our customers in fulfilling these demands. In recent periods, macroeconomic factors have contributed to labor shortages in the U.S. across industries. As a result of this and other factors, in FY 2022 the loss of certain personnel, including members of our sales and customer support team, adversely impacted our operating results in that period. If the tightened labor market trend continues in general or for our business in particular, this trend could persist.

 

Omnichannel Access

 

Because we assist in the selection and purchase of advertising inventory across a wide variety of formats for our customers, such as display, mobile, video, audio, social and native, our future growth will depend on our ability to maintain and grow the inventory of, and customer spend on, advertising channels. For instance, as we proceed further into the digital age, new channels can arise rapidly and gain popularity within relatively short periods, diverting attention from existing channels and forcing stakeholders in the industry, including us, to adapt quickly. Further, each channel we now or may in the future access to service our customers has its own policies in terms of content and use, and we must continually monitor and adhere to these requirements to continue to access those channels for our customers. We believe that our ability to integrate and offer access to new means of digital communication, such as Connected Television (CTV), digital out-of-home (DOOH), and digital radio advertising inventory and to manage the increased costs that will accompany these developments, will impact the operating results and future growth of our business.

 

 

Results of Operations for the Years Ended December 31, 2022 and 2021

 

Revenue

 

During FY 2022, revenue was $17,619,504, a decrease of $12,152,413 or 40.8% compared to revenue of $29,771,957 during FY 2021. The reason for the decrease was due to a loss of certain key customers and decrease in revenue from certain key customers, loss in key personnel, and macro-economic factors as described above under.

 

Costs of Revenue

 

During FY 2022, costs of revenue was $11,469,539, a decrease of $7,657,404 or 40.0% compared to costs of revenue of $19,153,943 during FY 2021. The decrease was driven primarily by a corresponding decrease in revenue as detailed above.

 

Our gross profit margins were approximately 35% in FY 2022 compared to 36% in FY 2021. The relative consistency between periods resulted from the decrease in revenue being coupled with a commensurate reduction in expenditures, including as a result in a reduction in workforce.

 

Operating Expenses

 

During FY 2022, operating expenses were $10,318,956, a decrease of $898,334 or 8.0% compared to operating expenses of $11,217,290 during FY 2021. The decrease was driven primarily by decreases in personnel related expenses related to sales and operations arising from the loss of certain members of those teams.

 

Other Income (Expense), Net

 

Interest expense, net: During FY 2022, interest expense, net of interest income, was $606,678, a decrease of $113,230 or 15.7% compared to interest expense, net of interest income, of $719,908 during FY 2021. The decrease was due to lower interest charges incurred on our long-term debt financing and our short-term accounts receivable financing.

 

Gain on forgiveness of debt: During FY 2021, we had a gain on forgiveness of debt in the amount of $2,434,773 in connection with the forgiveness of two Paycheck Protection Program (PPP) loans. There were no comparable transactions in FY 2022.

 

Refundable tax credits, net of costs: During FY 2021, we received refundable tax credits in the amount of $737,137 (net of costs) pursuant to the Employee Retention Tax Credit program from the US Treasury. There were no comparable transactions in FY 2022.

 

Results of Operations for the Nine Months Ended September 30, 2023 and 2022

 

Revenue

 

Revenue was $11,665,082 for the nine months ended September 30, 2023, a decrease of $1,128,384, or 8.8% compared to revenue of $12,793,466 for the nine months ended September 30, 2022. The decrease in revenue was primarily due to a loss of certain key customers and decrease in revenue from certain key customers resulting in part from the loss of key personnel, as well as trends in our industry and the U.S. economy including an increased in-housing of media buying by advertisers and agencies, inflationary pressures, interest rate hikes and recessionary concerns resulting in diminished demand and consumer spending. In response to these developments, management has taken steps to improve the employee experience and in turn improve employee retention, and enhance our product offerings and strengthen our core solutions to the middle market in order to drive increased customer acquisition, improved market differentiation and also campaign performance.

 

Costs of Revenue

 

Cost of revenue was $7,656,550 for the nine months ended September 30, 2023, a decrease of $1,315,746, or 14.7% compared to $8,972,296 during the nine months ended September 30, 2022. The decrease was driven primarily by a corresponding decrease in revenue as detailed above, as well as reduced operational costs related to the delivery of campaigns on lower revenues.

 

Our gross profit margins were 34% during the nine months ended September 30, 2023 compared to 30% during the nine months ended September 30, 2022. The increase was driven primarily by an increase in higher margin revenue delivered during the nine months ended September 30, 2023.

 

 

Selling, General, and Administrative Expenses

 

Operating expenses were $7,081,210 for the nine months ended September 30, 2023, a decrease of $702,203, or 9.7%, compared to $7,273,281 during the nine months ended September 30, 2022. The decrease was driven primarily by decreases in expenses related to sales and operations arising from the loss of certain members of those teams and lower operational costs due to lower revenue.

 

Legal Settlement

 

Legal settlement expense was $894,274 for the nine months ended September 30, 2023, an increase of $894,274, or 100%, compared to $0 during the nine months ended September 30, 2022. The increase is due to an increase in the amount of liability claimed by a vendor in a legal dispute and to court costs. See note 16.

 

Other Income (Expense), Net

 

Other income (expense) consisted of interest expense net of interest income, which was $1,611,270 during the nine months ended September 30, 2023, an increase of $1,014,891, or 673.2%, compared to interest expense of $454,463 during the nine months ended September 30, 2022. The increase was driven primarily by the amortization of the discount on the Decathlon loan and to increased principal balances under our notes payable.

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are revenue generated from operations, levels of accounts receivable and accounts payable and capital expenditures. The following summarizes our liquidity and cash flows and certain additional information management considers to be relevant to an evaluation of these measures.

 

Cash Flows from Operating Activities

 

Our cash flows from operating activities are primarily influenced by growth or decline in operations, increases or decreases in collections from our customers, and related payments to suppliers for advertising media and data. Cash flows from operating activities are typically affected by changes in the components of working capital, particularly changes in accounts receivable, accounts payable, and accrued liabilities. Timing differences from cash receipts from customers and payments to suppliers have a significant impact on our cash flows from operating activities. We often pay suppliers in advance of collections from our customers. Our collection and payment cycles can vary from period to period, and we additionally expect seasonality to impact cash flows from operating activities on a quarterly basis during the year.

 

For the years ended December 31, 2022 and 2021

 

Net cash provided by (used in) operating activities decreased from $332,185 provided by operating activities for FY 2021 to ($4,360,072) used in operating activities for FY 2022. The net decrease was primarily due to net loss of ($4,802,669) partially offset by decreases in accounts payable and increases in non-cash add backs during the period.

 

In FY 2022, cash used in operating activities of ($4,360,072) resulted primarily from a net loss of ($4,802,669), adjusted for non-cash items totaling $1,327,302 and a net decrease of ($884,705) in the components of our working capital. The $1,327,302 in non-cash adjustments to net income are attributable to charges of $549,570 related to amortization of our office lease, $431,817 for employee stock-based compensation, $206,947 for depreciation and amortization, and $138,968 for bad debt expense. The change in the components of working capital affected cash flow from operating activities because the following current liabilities were reduced during the year: accrued settlement decreased by $625,000, operating lease liability decreased by $583,884, accounts payable decreased by $575,237, acquisition liability decreased by $150,000, and deferred revenue decreased $129,776. These uses of cash were partially offset by a reduction in current assets during the period, primarily accounts receivable which was reduced to $1,246,298.

 

In FY 2021, cash provided by operating activities of $332,185 resulted primarily from net income of $1,852,726 adjusted for non-cash items totaling $1,626,953 and a net increase of $109,412 in the components of our working capital. The $1,852,726 in non-cash adjustments to net income are attributable to a $2,434,773 gain on forgiveness of debt partially offset by $520,190 related to amortization of our office lease, $180,145 for depreciation and amortization of assets, $63,826 for employee stock-based compensation and $40,659 for bad debt expense. The change in the components or working capital of $109,412 was primarily due to a decrease of $2,495,301 in accounts receivable partially offset by a $1,729,478 million decrease in accounts payable and a $539,466 decrease in our operating lease liability.

 

 

F or the nine months ended September 30, 2023 and 2022

 

For the nine months ended September 30, 2023, cash used in operating activities of ($2,752,819) resulted primarily from a net loss of ($5,578,222) adjusted for non-cash items totaling $2,587,303 and a net increase of $237,600 in the components of working capital. The $2,587,303 in non-cash adjustments to net income are attributable to primarily to charges of $1,172,638 in connection with a minimum interest liability on the Decathlon Loan; $512,153 related to employee stock-based compensation, and $432,901 for amortization of our office lease. The change in the components of working capital of $237,600 was due primarily to a ($1,424,950) increase in accounts receivable and a $1,108,089 increase in accounts payable, with the remaining change attributable to normal operational fluctuations in current assets and current liabilities.

 

For the nine months ended September 30, 2022, cash used in operating activities of ($3,741,713) resulted primarily from a net loss of ($3,906,574) adjusted for non-cash items totaling $855,848 and a net decrease of ($690,987) in the components of working capital. The $855,848 in non-cash adjustments to net income are attributable primarily to charges of $409,298 for amortization of our office lease and $208,540 related to employee stock-based compensation. The change in the components of working capital of ($690,987) during the period was due primarily to a $1,155,758 decrease in accounts receivable and a ($551,077) decrease in accounts payable, with the remaining change attributable to normal operational fluctuations in current assets and current liabilities.

 

Cash Flows from Investing Activities

 

Our primary investing activities consist primarily of the purchase of fixed assets and costs paid for the development of software to improve our platform. As our business grows, we expect our capital expenditures and our investment activity to continue to increase.

 

For the years ended December 31, 2022 and 2021

 

In FY 2022, we used $108,834 of cash in investing activities, consisting of $19,740 to purchase fixed assets and $89,094 invested in capitalized software.

 

In FY 2021, we used $77,231 of cash in investing activities, consisting of $26,297 to purchase fixed assets, $43,454 invested in capitalized software, and $7,642 related to the acquisition of BigBuzz Marketing Group.

 

For the nine months ended September 30, 2023 and 2022

 

For the nine months ended September 30, 2023, we used $1,031,340 of cash in investing activities, consisting of $1,000,786 invested into securities related to the funding of the surety bond described in Notes 13 and 16, $21,848 invested in capitalized software and $8,706 to purchase fixed assets.

 

For the nine months ended September 30, 2022, we used $87,145 of cash in investing activities, consisting of $70,932 of cash for the development of software and $16,213 of cash used to purchase fixed assets.

 

Cash Flows from Financing Activities

 

Our financing activities consisted primarily of the sale of common and preferred stock, borrowings and repayments of our debt, proceeds from forgiveness on borrowings, proceeds from the exercise of options issued under our equity compensation plan.

 

For the years ended December 31, 2022 and 2021

 

In FY 2022, cash provided by financing activities of $1,417,575 was primarily due to $1,000,000 in proceeds from the sale of common stock and $550,000 in proceeds from notes payable, partially offset by $132,530 in principal payments on loans.

 

In FY 2021, cash provided by financing activities of $731,672 was primarily due to $1,104,122 in proceeds from PPP loans and $34,275 in proceeds from stock option exercises, partially offset by $399,225 in principal payments on loans and cash paid for a distribution to an investor.

 

For the nine months ended September 30, 2023 and 2022

 

For the nine months ended September 30, 2023, cash provided by financing activities of $3,754,458 was due to $2,100,000 in proceeds from the issuance of convertible notes payable to related parties, $1,500,000 in proceeds from the sale of preferred stock, $500,000 in proceeds from the sale of common stock, and $5,071 from the exercise of stock options, partially offset by $350,613 in principal payments on loans.

 

For the nine months ended September 30, 2022, cash provided by financing activities of $965,900 was due to $500,000 in proceeds from the issuance of notes payable to related parties, $500,000 from the sale of common stock, and $50,000 in proceeds from notes payable, partially offset by $84,040 in principal payments on loans.

 

 

Non-GAAP Measures

 

Adjusted EBITDA

 

Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) before (a) certain stock-based compensation expense, (b) costs attributable to non-recurring settlement expense, legal activity, professional fees, and other transaction and offering costs, (c) interest, (d) tax, and (e) depreciation and amortization. We use Adjusted EBITDA to evaluate the performance of our core business operations. We believe that information about Adjusted EBITDA assists investors by allowing them to evaluate changes in the operating results of our business separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results. Adjusted EBITDA is not calculated or presented in accordance with GAAP. Accordingly, Adjusted EBITDA should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, Adjusted EBITDA as presented herein may not be comparable to similarly titled measures of other companies.

 

The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the years ended December 31, 2022 and 2021:

 

		Years Ended December 31,
Adjusted Net (Loss) Income		2022				2021
Net (Loss) Income		$	(4,802,669	)		$	1,852,726
Interest, net			605,205				723,579
Taxes			800				475
Depreciation and Amortization			206,947				180,145
EBITDA		$	(3,989,717	)		$	2,756,925
Stock-based compensation costs			431,818				63,790
Settlement expense (1)			-				-
Litigation expense (2)			125,919				230,465
Transaction costs (3)			87,091				-
Adjusted EBITDA		$	(3,344,889	)		$	3,051,175

 

	1.	Relates to one-time settlement accrual for Zeta dispute as described in Legal Proceedings below.
	2.	Relates to litigation expense specific to Zeta dispute as described in Legal Proceedings below.
	3.	Relates to legal and consulting fees specific to share exchange as described in Note 1 to the financial statements contained in this report.

 

The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the three and nine months ended September 30, 2023 and 2022:

 

		Three Months Ended September 30,								Nine Months Ended September 30,
Adjusted Net Loss		2023				2022				2023				2022
Net Loss		$	(1,637,337	)		$	(1,053,487	)		$	(5,578,222	)			(3,906,574	)
Interest, net			1,165,641				150,750				1,611,270				454,463
Taxes			-				-				25				1,791
Depreciation and Amortization			56,493				54,927				169,485				150,184
EBITDA		$	(412,203	)		$	(847,810	)		$	(3,797,442	)		$	(3,300,136	)
Stock-based compensation costs			94,911				156,028				512,153				208,540
Settlement expense (1)			-				-				894,274				-
Litigation expense (2)			3,000				-				28,122				105,067
Transaction costs (3)			27,727				-				198,174				-
Adjusted EBITDA		$	(289,565	)		$	(691,782	)		$	(2,164,719	)		$	(2,986,529	)

 

	1.	Relates to one-time settlement accrual for Zeta dispute as described in Legal Proceedings below.
	2.	Relates to litigation expense specific to Zeta dispute as described in Legal proceedings below.
	3.	Relates to legal and consulting fees specific to share exchange as described in Note 1 to the financial statements contained in this report.

 

 

Liquidity and Capital Resources

 

As of October 30, 2023, we have unrestricted cash on hand of approximately $112,285. Management believes this amount is not sufficient to meet our operating needs for the next 12 months, and in order to meet our working capital requirements, we will need to either raise sufficient capital or reduce our expenditures. We will rely on our ability to improve operating cash flow or raise additional capital through the sale of debt or equity securities and draw on our existing credit facility, in addition to our existing cash and cash equivalents to meet our working capital requirements for at least the next 12 months.

 

As of December 31, 2022 and December 31, 2021 we had cash of $485,053 and $3,536,384, respectively, and working capital (deficiency) of ($3,141,119) and $202,621, respectively. The decrease in working capital is primarily attributable to our net loss of ($4,802,669) during FY 2022, which was due to a loss of certain key customers and decrease in revenue from certain key customers, loss in key personnel, and macro-economic factors (see above).

 

The Company’s working capital position is not sufficient to support the Company’s operations for the 12 months subsequent to the date of this Offering Circular. The Company’s ability to continue as a going concern is dependent upon its ability to improve cash flow and the ability to obtain additional financing, including potentially through proceeds raised in this offering. These and other factors substantial doubt about the Company’s ability to continue as a going concern in the following 12-month period.

 

Our recent financing transactions and outstanding indebtedness are summarized below.

 

Series A Financings

 

On September 28, 2021, Socialcom sold 50,000 shares of Series A to an accredited investor for a total of $100,000 in gross proceeds.

 

On November 22, 2022, Socialcom sold 20,000 shares of the Series A to an accredited investor for $40,000 in gross proceeds.

 

On January 30, 2023, Socialcom entered into the SPA referred to above under “Business-Share Exchange” which as amended provided for the Secondary Financing for total gross proceeds to Socialcom of $1,500,000. The first tranche of the Secondary Financing, in which Socialcom sold 25,000 shares of Series A for $750,000, closed simultaneously with the Closing of the Exchange. The second tranche of the Secondary Financing in which Socialcom sold an additional 25,000 shares of Series A for an additional $750,000 closed on May 25, 2023.

 

Financing Agreements

 

On June 13, 2019, Socialcom entered into an accounts receivable financing and security agreement (the “Financing Agreement”) with SLR Digital Finance, LLC (formerly known as Fast Pay Partners LLC) as the lender, which was amended on September 18, 2023. The Financing Agreement as amended has a maximum loan amount of $2,000,000 and an interest rate per annum equal to 5% plus the “prime rate,” which is defined as the higher of the highest rate as reported by the Wall Street Journal or 8.5%. The Financing Agreement also provides for a financing fee equal to 1/12th of the facility interest rate and additional monthly financing fees of 1/12th of the facility interest rate, and a facility fee equal to 1.5% of the maximum amount. The Financing Agreement is subject to an early termination fee equal to 2% of the maximum amount available under the Financing Agreement. Further, the Financing Agreement provides that Socialcom shall at all times use at least 20% of the maximum amount. The revolving credit facility under the Financing Agreement is secured by the trade accounts receivable of Socialcom and guaranteed by its assets and the assets of Vado, including the Socialcom common stock Vado holds representing 100% of the outstanding Socialcom common stock. Upon any event of default, the lender may, among other things, immediately demand repayment of all advanced amounts thereunder, or foreclose on the collateral. The Financing Agreement provides, among other things, that the lender can immediately terminate the Financing Agreement and demand payment. In addition, Jason Wulfsohn, our Chief Executive Officer and a principal stockholder, guaranteed the loan and pledged his shares of Vado common stock to secure payment. For information on the risks involving the Financing Agreement, see the risk factor titled “The terms of Socialcom’s recently amended loan facility could result in the loss of the Socialcom business or result in a change of control of Vado were a default to occur, or cause other material adverse consequences” at page 5 of this Offering Circular.

 

 

On December 31, 2019 Socialcom borrowed $3,000,000 (the “Decathlon Loan”). The Decathlon Loan is due June 30, 2024 and is secured by all the assets of Socialcom. The Decathlon Loan accrues interest at a variable rate based upon internal rate of return targets, which interest multiple is subject to increase by 0.015 upon an event of default. The effective rate of interest for the years ended December 31, 2021 and 2020 was approximately 17%. Repayments are required based upon a fixed percentage of our earned revenue. If not repaid prior the final balance is due on June 13, 2024. The Decathlon Loan is subject to minimum interest that escalates over the term of the loan. At December 31, 2022 and 2021, the potential liability for unearned minimum interest was $1,661,504 and $1,462,173, respectively. During the year ended December 31, 2022, Socialcom made principal and interest payments in the amount $132,530 and $402,648, respectively, on the Decathlon loan. During the year ended December 31, 2021, Socialcom made principal and interest payments in the amount $399,225 and $450,692, respectively, on the Decathlon Loan.

 

Related Party Indebtedness

 

As disclosed in “Related Party Transactions” and in footnote 11 to our financial statements for FY 2022 and FY 2021, in addition to the litigation indebtedness described below Socialcom has total of $1,100,000 in outstanding related party indebtedness payable to our officers and directors or affiliated entities. $600,000 of this indebtedness accrues interest at 15% per annum and matures in March 2024 with the remaining $500,000 accruing interest at 8.25% per annum and maturing in December 2025.

 

On February 7, 2023, in connection with the Zeta litigation described under “Legal Proceedings,” Socialcom borrowed $800,000 from Kahala19 LLC, an entity controlled by Reeve Benaron, the Company’s director and a principal shareholder. The note accrues interest at 7.25% per annum and matures in December 2023. The interest rate is subject to increase to 18% upon the occurrence of an event of default. In March 2023, we issued Kahala 19 LLC an identical note and it cancelled the Socialcom note. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of approximately $0.233 per share.

 

On May 16, 2023, in connection with the Zeta litigation described under “Legal Proceedings,” Socialcom borrowed $1,300,000 from a trust controlled by Jason Wulfsohn, the Company’s Chief Executive Officer and a principal shareholder. The note accrues interest at 7.25% per annum and matures in December, 2025. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of $0.32 per share.

 

On November 15, 2023, the Company borrowed $625,000 from a trust controlled by Jason Wulfsohn, the Company’s CEO and a principal shareholder, and issued a convertible promissory note in the principal amount of $625,000. The note accrues interest at 8.5% per annum and matures in December 2025. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of $0.32 per share.

 

SBA Loan

 

On July 7, 2020 Socialcom borrowed $150,000 pursuant to the Small Business Administration Economic Injury Disaster Loan Program (the “EIDL Loan”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). On March 31, 2022, Socialcom borrowed an additional $50,000 under the EIDL Loan. Under the EIDL Loan, payments in the amount of $989 per month are due beginning in January 2023. The term of the EIDL Loan is 30 years, and the annual interest rate is 3.75%. EIDL Loan recipients can apply for, and be granted forgiveness for, all or a portion of loans granted if certain conditions are met. During the years ended December 31, 2022 and 2021, Socialcom accrued interest in the amount of $6,935 and $5,410, respectively, on the EIDL Loan. EIDL Loan amounts in excess of $25,000 are secured by Socialcom’s assets.

 

General

 

To meet future capital requirements, we plan to raise additional capital through the sale of equity securities or through equity-linked or debt-financing arrangements. Our primary goal is to raise all $8 million from this offering.

 

There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We continue to monitor macro-economic factors such as inflationary pressures, continued Federal Reserve and other central bank interest rate hikes and recessionary fears, and the lingering impact of COVID-19, all of which may affect our working capital requirements.

 

 

OUR BUSINESS

 

General Information

 

Vado Corp. (the “Parent,” the “Company,” “we,” “our” or “us”) was incorporated in the State of Nevada on February 10, 2017. Effective February 24, 2023, the Parent completed a reverse merger transaction with Socialcom, which as a result became our subsidiary. At the same time, we also changed our fiscal year end from November 30 to December 31. The financial results and business descriptions contained in this Offering Circular reflect the foregoing business combination and the business and operations of Socialcom. For more information on our acquisition of Socialcom and related transactions, see “Share Exchange” on page 35.

 

Our Business

 

Socialcom, our operating subsidiary following the February 2023 share exchange described below, was incorporated in the State of California on March 8, 2013, for the purpose of delivering integrated advertising and technology services to independent agencies and brands.

 

The Socialcom platform, both self-service (whereby the Socialcom customer fully manages their own campaign utilizing the company’s platform solutions) and managed service (whereby the company acts on behalf of the Socialcom customer to fully manage their campaign utilizing the company’s platform solutions), enables Socialcom to provide integrated digital advertising services to its customers, with the goal of driving integrated omnichannel performance, powered by advertising technologies, data-driven campaign optimization, analytics and insights, advanced attribution, as well as creative services. Since its inception the strategic focus of Socialcom has been oriented toward middle-market businesses, a significant and generally underserved segment of the larger U.S. economy, especially with respect to their need for powerful enterprise advertising technology solutions to drive improved business outcomes and level the playing field against often larger, better-funded competitors.

 

Socialcom operates tdX, an omnichannel trading desk platform, providing unified buy-side access to a significant number of available performance channels and relating technologies, including 24 platforms across programmatic, display, CTV, digital out-of-home (DOOH), and programmatic audio, along with paid search and social media solutions. Taken together, tdX represents a holistic performance solution, unified by Socialcom’s robust data infrastructure, delivering powerful real-time campaign learnings and cross-channel performance insights, along with sophisticated analytics designed to deliver scalable and sustainable campaign outcomes. Through tdX, Socialcom evaluates a customer’s advertising needs, prepares an ad campaign strategy, and executes that strategy on the customer’s behalf.

 

The Socialcom business model and strategic plan envisions embracing future-first solutions, recognizing ongoing changes and opportunities in the ad tech landscape, from predictive analytics, data deployment and usage, to emerging technologies across creative, supply optimization, and emerging performance platforms.

 

Socialcom also launched Admatx in late FY 2022, which is a simplified digital ad trading platform designed for customers to engage in self-service in their digital ad campaigns. Unlike larger trading desks, Admatx is accessible without any spending minimums, rendering it more affordable for smaller businesses which are unwilling or unable to commit to deploying a specified portion of capital towards their campaigns.

 

In addition, in early FY 2023, Socialcom launched AXi an innovative suite of advanced privacy-first data science tools, delivering first-party data visualization, sophisticated customer journey mapping, predictive audience modeling, and automated campaign optimizations. These tools can be deployed throughout the entire digital customer journey, helping marketers successfully identify, model and target the right audiences, with the goal of significantly improving performance and optimizing spend toward greater ROAS at scale.

 

 

Our History

 

In 2013, co-founders Reeve Benaron and Jason Wulfsohn formed Socialcom by bringing together three businesses they held: a creative agency, a digital performance agency, and a demand side platform (DSP) or programmatic media-buying platform. The core areas of expertise represented by each of these companies – creative and brand building, performance marketing and ad tech – still defines Socialcom’s unique competitive advantage today, as it continues to lean into full-funnel and omnichannel performance solutions for independent agencies and brands. During the last 10 years Socialcom has experienced significant achievements in terms of growth, market relevance, and product innovation, evidenced by an array of prestigious industry awards, including being named one of the fastest-growing companies in America by Deloitte, The Financial Times and the Los Angeles Business Journal, as well ranking on the Inc. 5000 list for four consecutive years, starting in 2019 and most recently in 2022. In 2021, Socialcom was an AdExchanger finalist for Best Programmatic Capabilities, a W3 Silver Award winner for best integrated campaign and in 2022 Socialcom VP of Partnership Solutions, Danielle Gale, was honored by Cynoposis as one of the Top Women in Media.

 

Share Exchange

 

On February 24, 2023, the Company completed the share exchange (the “Exchange”) contemplated by the Share Exchange Agreement (the “Exchange Agreement”) dated January 30, 2023 with Socialcom and the stockholders of Socialcom signatory thereto (the “Closing”). Pursuant to the Closing of the Exchange, the Company issued the Socialcom stockholders signatory thereto a total of 169,434,640 shares of the Company’s common stock, representing approximately 96% of the shares of the Company’s outstanding common stock after giving effect to such issuance, in exchange for all of the shares of Socialcom common stock held by such Socialcom stockholders. As a result of the Closing of the Exchange, Socialcom became an approximately 96.6% owned subsidiary of the Company.

 

In connection with the Exchange, the Company also agreed to the following: (i) the cancellation of 93 million shares of common stock held by David Lelong, a director of the Company who at that time was also the Company’s sole officer, which cancellation was effected at the Closing, (ii) the issuance 22,793,540 options to purchase common stock of the Company to Socialcom directors, officers, employees and consultants under the Company’s 2023 Equity Incentive Plan in exchange for the cancellation of 2,604,976 outstanding Socialcom stock options held by such persons, and (iii) execution of the Stock Purchase Agreement (the “SPA”) for a financing resulting in gross proceeds to the Company of $1,500,000 (the “Secondary Financing”). The first tranche of the Secondary Financing, in which the Company sold 25,000 shares of Series A Convertible Preferred Stock (the “Series A”) for $750,000, closed simultaneously with the Closing of the Exchange. The second tranche of the Secondary Financing in which the Company sold an additional 25,000 shares of Series A for an additional $750,000 closed on May 25, 2023.

 

Effective at the Closing, the number of directors of the Company was fixed at three, and Jason Wulfsohn and Reeve Benaron were appointed to serve on the Board of Directors. Effective upon the Closing, David Lelong tendered his resignation as the sole officer of the Company, and Jason Wulfsohn and Ryan Carhart were appointed as the Company’s Chief Executive Officer and Chief Financial Officer, respectively. Mr. Lelong remains as a director.

 

Following the Exchange, in May 2023 the Company issued a total of 6,015,757 shares of common stock in exchange for 687,515 shares of Socialcom commons stock held by the then minority shareholders of Socialcom. As a result of the foregoing Socialcom became a wholly-owned (rather than a 96.6% owned) subsidiary of the Company.

 

Our Industry

 

Digital advertising is a rapidly growing industry that is constantly evolving, in a highly competitive, increasingly complex marketplace. Magna forecasts a 3.7% increase in total U.S. ad spending in 2023 with digital formats expected to increase by 7.7%, while non-digital formats decrease by 5.9%. According to Statista, advertisers in 2021 in the United States spent nearly 106 billion U.S. dollars on programmatic digital display advertising with expenditures expected to increase to nearly 142 billion U.S. dollars by the end of 2023.

 

In its 10 years of operations Socialcom has been a leader in providing complete end-to-end solutions for digital marketing, during which time our industry has experienced major changes that are expected to continue to transform our industry. These include:

 

Reduce access to third-party data: Beginning in 2024, Google is expected to phase out the system of third-party “cookies’’ that has dominated the addressable advertising industry for over a decade. While third-party data is already significantly weakened by evolving privacy policies, this full deprecation is expected to create significant opportunities for next-generation technology companies that can provide media buying solutions and minimize performance disruption for advertisers and agencies. As increasingly savvy audiences grow fatigued with the proliferation of “ad noise” in the ecosystem, concerned with data privacy and more likely to opt out of tracking when given the option, it becomes more challenging for marketers to reach their audiences and accurately track performance metrics. Socialcom thrives in delivering actionable solutions and tactics that help our customers stay ahead of this rapidly accelerating curve.

 

 

Increased use of artificial intelligence (AI) and machine learning: These technologies allow for more targeted and personalized advertising, as well as improved ad placement and optimization.

 

Shift to mobile: With more and more people using mobile and multiple devices to access the internet, mobile advertising is becoming increasingly important.

 

Growth of omnichannel advertising: Amid the rise of over-the-top (OTT), CTV and social media platforms continue to rival and in many cases overtake traditional linear broadcast, advertisers and audiences have embraced an omnichannel, “Everything, Everywhere, All at Once” expectation.

 

Increased focus on privacy and data protection: With growing concerns about data privacy and security, companies are investing in new technologies and practices to protect consumer data and ensure compliance with regulations.

 

Emergence of new ad formats: From augmented reality to interactive video, innovative ad formats offer new ways for brands to engage with consumers, and for customers to engage with brands.

 

Growth of Programmatic Advertising: Accurate audience segmentation with more efficient targeting and measurable results facilitates more sophisticated digital content delivery across multiple platforms. This results in more personalized content, and greater customer engagement, which in turn translates into higher retention and extended customer lifecycles, representing additional opportunities to sell and upsell customers.

 

Results for small- and mid-sized businesses: While large companies have been able to deploy massive, expensive, enterprise solutions, the rise of highly targeted, measurable and efficient advertising technologies, powered by programmatic expertise, has enabled small and mid -sized businesses to effectively harness the same power of digital media in equally meaningful ways. Localized campaigns, yielding measurable results and higher advertising return on investment (ROI), means these companies can deploy marketing dollars and make decisions on their digital spend based on measurable success metrics linked to their digital campaigns.

 

Audience segmentation means delivering for traditionally underserved sectors: Granular dissection of audience profiles allows for significant audiences that may have been ignored or overlooked to be served. The definition of underserved audiences may include multi-cultural, minority and LGBTQ+ which combined, according to some estimates, make up an increasing percentage of the U.S. population, a trajectory that some expect to continue. Advertisers increasingly want to connect with these segments of the population in their natural media consumption environment and to learn from the insights gathered from these consumers.

 

Industry fragmentation: There are clear indicators that the fragmentation of the digital advertising landscape will continue to accelerate with more destinations, more suppliers, more measurement and more data. The resulting complexity and friction places an even greater premium on the tools, products, interfaces and expertise to navigate the fragmented landscape. Simply put, when everything is broken into pieces that do not talk to each other, the need for connective tissue is greatest. This need for a new interoperability presents a sizable opportunity for an integrated and unified solution.

 

Our Market Opportunity

 

We identify our core market opportunity as small to medium sized businesses that comprise the mid-market sector, often defined as companies reporting up to $1 billion to 3 billion in annual revenue. These companies combined, are generally considered to represent a majority of U.S. GDP.

 

Socialcom is highly effective at serving this market in three ways, through direct-to-consumer (D2C), business-to-business (B2B) and business-to-consumer (B2C), and across multiple verticals, from retail and ecommerce, health and wellness, to financial services, higher education, governmental agencies and consumer electronics to name just a few. We engage both directly with performance-oriented brands and also with the independently owned and operated digital ad agencies who service them. Estimates suggest there are over 10,000 digital advertising agency businesses in the U.S. as of 2023, an increase of over 18% from 2022.

 

Since the COVID-19 pandemic, and in a down economy, there is often greater pressure on ad spend performance. This has only grown the market reliance on digital performance tactics that are more measurable, more targeted and can be more directly linked to business goals. As marketers move more of their advertising budgets from brand to performance, this can drive an increasing and frequently unmet need for an integrated omnichannel solution that achieves improved performance and return on advertising spend (ROAS) outcomes, by effectively targeting audiences wherever they are, on any device, with the message they want, and at the moment they want it.

 

 

Our Solution

 

Socialcom is a performance-first omnichannel programmatic advertising company that partners with challenger brands and independent agencies to exponentially increase their revenues and lower their cost of customer acquisition through our unique combination of technology, data, and talent.

 

Our mission is to imbue every audience interaction across the digital ecosystem with measurable performance and bring those interactions together to deliver better business outcomes for our customers.

 

We work with our customers to deliver effective and flexible media plans built around digital strategies focused on the unique key performance indicators (KPIs) of every campaign, leveraging the widest available range of platforms and tactics from across the full-breadth of the digital media landscape. We deliver a suite of products and tools that allow marketers to engage and convert their desired audience segments with data-powered precision, driven by personalized messaging crafted to an exact moment within the non-linear conversion journey of today’s consumer. This is achieved with an array of specialized products, along with a unified tech stack that powers the journey from start to finish, from audience targeting to bespoke creative to powerful reporting tools.

 

We believe that Socialcom is exceptionally well positioned to continue to deliver results for both agency and brand direct customers, and we have built integrated, future-first products, platforms, and services to drive successful end-to-end campaigns:

 

For agencies, we offer strategic, omnichannel programmatic solutions using a combination of innovative technology, targeted media buying, data-driven analytics and high-impact creative to ensure better campaign performance. Our seamless omnichannel reporting tools can be clear-labeled for customers to quantify and visualize performance and attribution data.

 

For brands, our expert strategic teams leverage the latest programmatic and machine learning technologies to analyze and optimize across 24 real time ad platforms, using a suite of tools designed to maximize any ad spend, all continuously optimized with real-time data, actionable insights, and omnichannel performance tracked in one seamless, unified dashboard. Analyzing millions of historical data points with our machine learning technology, every campaign’s unique goals and KPIs are considered to ensure we recommend and deploy the optimal blend of platforms and channels that will deliver meaningful performance results.

 

Our business intelligence tools collect data across the entire user journey, reporting trends on channel, tactic, platform, audience, media type and creative. Comprehensive access to this data, including by activating an array of post-cookie solutions, puts relevant insights and learnings directly into the hands of our buyers and also our customers, offering clear ways to understand which campaigns are most effective and why, while also providing the insights for our buying team and traders to continuously optimize media plans to drive growth. Although anticipated cookie restrictions pose challenges to our industry, as described below under “Risk Factors,” we believe they also pose opportunities to digital ad enterprises willing to adapt to the industry changes that will result.

 

Our in-house creative team, AX Studio, crafts captivating and high-performing digital ad content from landing pages to animated ad units, as well as photo shoots and video production. We offer a full range of capabilities in branding, design and production across the spectrum of app, web, photo and video. With this ability to produce a full end-to-end service for our performance customers, we not only drive multiple revenue streams for our company, but we harness each of our core service solutions to ensure successful, sustainable and scalable campaigns for our customers, taking direct responsibility for their campaign success and ROI throughout every step of the campaign journey.

 

Products and Services

 

Omnichannel Platform

 

Socialcom’s key technology which enables it to provide digital advertising services to customers is tdX, an innovative omnichannel trading desk platform providing unified buy-side access at scale to the digital media ecosystem, including 24 performance platforms across programmatic, display, CTV, DOOH, and audio, along with search and social. tdX offers a holistic performance solution, unified by Socialcom’s robust data infrastructure, delivering real-time campaign learnings and cross-channel performance optimizations, along with sophisticated insights and predictive analytics demonstrated to drive scalable and sustainable campaign outcomes. Tech-enabled creative services, available from the Company’s internal creative team, Socialcom Studio, provides performance-oriented brand and product ad creative and other digital content for deployment within customer campaigns.

 

The 24 channels and platforms represented within tdX are comprised of multi-use web companies such as Google and Amazon, social media sites such as Facebook and TikTok, and programmatic advertising platforms such as theTradeDesk and AdsWizz, to name just a few. Socialcom uses tdX to prepare, analyze, execute, and monitor digital ad campaigns that are tailored to a customer’s specific digital advertising needs and desires.

 

 

By providing marketers comprehensive access to the digital advertising activities of each of these platforms within a single integrated system, Socialcom is able to deliver digital advertising solutions to its customers in a manner designed to more effectively execute and deploy their marketing strategies and locate, engage and convert target audiences. Through their managed service solution Socialcom is able to support their customers’ campaigns by leveraging the Company’s ability to deploy programmatic omnichannel advertising campaigns on the channels that can be accessed through tdX. Programmatic advertising refers to using software to purchase digital advertising space for distribution over the Internet. Programmatic advertising makes the purchasing of digital ads more efficient by employing computer technology to provide for a more streamlined and efficient ad space selection, purchasing and deployment process when compared to more traditional approaches such as contacting website operators directly and negotiating terms on an individualized basis. In this respect, we and our platform, together with the channels accessible on it, serve as an intermediary between customers seeking to execute an effective ad campaign, and the appropriate channels of digital communication on which to display digital advertisements to prospective consumers of the products and services being advertised.

 

Unlike non-digital advertising, digital advertising allows for more data-driven ad campaigns and can give real-time performance details of advertising campaigns and outcomes. The availability of user data and rich targeting capabilities makes digital advertising an effective and important tool for businesses to connect with their audiences. Socialcom’s software offers data analytics and makes strategic recommendations that assist users in making decisions to allocate their available advertising budgets and other resources towards platforms and ads that may better position their advertising campaign for success. In one key innovation, the platform evaluates over 250 specific campaign criteria, implementing up to 50 filters to help identify the best combination of platforms and channel combination to optimally deliver against a campaign’s unique KPIs, powered by a review of millions of historical campaign data points. As described below under “Competition” some of the DSPs and platforms available on tdX are both key partners as well as being our competitors.

 

In 2022 Socialcom launched Admatx, a powerful self-serve DSP built on the industry’s leading DSP, centered around the principle of democratizing access to enterprise-level adtech by placing control into the hands of the customer without requiring a prohibitive minimum spend or a long-term subscription commitment. Unlike tdX which is built to serve the needs of the middle-market, Admatx is focused entirely on the small-to-midsize businesses (SMB) marketer, looking for an easy-to-use performance DSP without any spend minimums. As discussed above, the scale of this addressable market is considerable, covering both smaller independent digital agencies and also brand direct relationships, representing a substantial portion of the U.S. economy.

 

During early FY 2023, the Company launched AXi an innovative suite of advanced privacy-first data science tools, delivering first-party data visualization, sophisticated customer journey mapping, predictive audience modeling, and automated campaign optimizations. These tools can be deployed throughout the entire digital customer journey, helping marketers successfully identify, model and target the right audiences, with the goal of significantly improving performance and optimizing spend toward greater ROAS at scale.

 

To supplement and enhance our technology offerings and customer experience and marketing capabilities, Socialcom also has an integrated creative team, which designs and develops targeted brand and product messaging to customers – in the form of static, animated and high-impact ad units, organic social content, including video, as well as landing pages and complete websites – with a view to strengthening performance outcomes with various target audiences.

 

Our Growth Strategy

 

We advise our customers to learn and iterate using data driven strategies to drive growth. If it’s good for our customers, it’s good for us too.

 

For this reason, we have developed a multi-pronged strategy designed to build on the momentum we have generated over the last 10 years and take advantage of significant growth opportunities moving forward.

 

Our strategic focus on underserved middle-market agencies and brands has enabled us to develop a market share for our offerings. However, although we have been consistently ranked as one of the fastest growing ad tech companies over the last four consecutive years by Inc. 5000, we have still only penetrated a fraction of the total addressable market. So while we continue to build on our momentum, delivering exceptional performance outcomes for our customers and driving sustainable repeat business, we are also evolving our sales and marketing strategies to drive improved outcomes, by building out internal and external lead generation solutions, plus improving efficiencies and streamlining both departments to strengthen impact and our ability to grow our customer base through more robust access to our targeted addressable markets.

 

That includes expanding geographically into underserved, potential high growth, international markets including Asia, the Middle East and Africa.

 

 

That also means product development and innovation in three key areas:

 

Predictive Analytics: our data science team can leverage powerful machine learning to produce statistical representations of customer behavior, without sacrificing privacy or quality, ensuring that our customers understand performance projections from the very start of every campaign. In addition, through a combination of advanced machine learning technology with high quality behavioral data, we can more accurately identify prospective customers across the full omnichannel landscape, driving improved performance outcomes throughout the campaign lifecycle. This end-to-end predictive model is intended to improve upon the performance of standard audience segments and native DSP targeting, enabling a dynamic bid-optimization solution that automatically adjusts bids based on the model’s prediction about a customer’s propensity to act. Ultimately this allows advertisers to allocate more budget to the ads and impressions that are most likely to perform, while also deploying campaigns faster based on recommendations that anticipate campaign performance pre-launch.

 

Supply Optimization: our technology team is developing solutions to ensure that our ad operations (ad ops) and buying teams are able to find the optimal route to the best performing programmatic and digital performance inventory, removing any redundant intermediaries and streamlining access to the best performing supply. We also anticipate the results of these tech powered innovations to include improved business processes for the company, in part by replacing unprofitable bids with those that ensure customers receive optimal value and improved outcomes for their digital media budgets.

 

Creative Automation: through industry partnerships our creative team is developing creative automation tools to remove design repetition tasks for the production of high-volume campaigns, reducing the need to manually crop, resize, and lay out image ads. Beyond this we are developing dynamic optimization solutions that create hyper-personalized ads based upon real-time data about the viewer at the moment of ad serving to ensure ads are both more relevant and better optimized toward performance. Our tools are able to interpret an array of meaningful targeting variables to ensure the most personalized ad is served.

 

That means continuing to expand into new channels and finding the customer where they are, from CTV to DOOH to programmatic audio.

 

And that means developing new and next generation opportunities for customers in emerging technologies, including augmented reality (AR) and virtual reality (VR), web3, non-fungible tokens (NFT) programs and metaverse integrations.

 

Moving forward we intend to advance our industry leading, data-driven approach to the next level, incorporating additional layers of AI, predictive analytics, and automation in the application of data science, audience insights and tech-powered creative, an integrated and holistic system designed to optimize performance in real time for our brand and agency customers.

 

Finally, we are constantly assessing the M&A landscape to identify potential acquisition targets, whether creative or media agencies, with stable customers and revenues, that can drive stronger business outcomes through integrated access to the Socialcom media services solution. With a proven track record of executing this model, through our prior purchase of Big Buzz Marketing Group, this is an approach that can drive revenue growth and expanded market share, plus enable us to improve operational and cost efficiencies by integrating teams and implementing other efficiency solutions.

 

Customers

 

The digital advertising industry is undergoing significant expansion, replacing traditional models and constantly refreshing newer models. In this evolving landscape we serve many of the constituents on the demand-side of the ecosystem, from performance-oriented brands that we work with directly, to middle-market ad agencies which we assist in providing services to third party businesses, with our revenue streams maintaining a split between D2C, B2B and B2C marketers, and across numerous verticals, reflecting our resilience in the face of temporary market fluctuations in specific sectors. Our customers represent a large range of business types, sectors and audiences.

 

In recent years, high-growth verticals for Socialcom have included, but are not limited to, ecommerce, financial services, health and wellness, higher education, D2C and government agencies. During this same period independent agencies, looking to leverage our technical and strategic expertise and access the broadest possible range of available performance channels – and without having to recruit and retain large internal teams or meet costly monthly minimum spend requirements on specific platforms – have also represented a significant opportunity for the Company.

 

We have a material amount of customer concentration with respect to our cumulative revenue. In FY 2022, five customers accounted for approximately 35% of our revenue, and 10 customers accounted for approximately 52%.

 

 

Competition

 

The digital advertising industry in general, and buy-side digital advertising industry in particular, is a highly competitive, technology-driven and constantly evolving industry with new market entrants frequently emerging, in part due to relatively few barriers to entry when compared to certain other industries. Overall digital advertising spending historically has been highly concentrated in a small number of very large companies that have their own inventory, including Google, Facebook and Amazon, as well as Internet and cellular service providers, all of which with which we compete for digital advertising space and demand. We also compete with larger publicly traded digital ad platform operators, such as theTradeDesk, Viant Technology, Inc. and Direct Digital Holdings, Inc., which have greater financial and other resources than we do, and smaller digital ad and related businesses with a specialized focus such as in serving a particular industry or geographic reach. Further, because of the online nature of our operations, the channels we offer access to on our platform are sometimes also our competitors, and customers may elect to terminate us as an intermediary and go directly to those platforms for their ad campaign with relative ease, with any obstacles to access including spend minimums and some technical knowledge.

 

Furthermore, there has been rapid evolution and consolidation in the advertising technology industry, and we expect these trends to continue, thereby increasing the capabilities and competitive posture of competitive enterprises, particularly those that are already dominant in the industry in various ways, and enabling new or stronger competitors to emerge. Based on the current focus of our competitors, there is even more opportunity for engagement in the underserved and multicultural markets on which we focus, although this may be coupled with an increase of competitive offerings in response to this trend.

 

Human Capital

 

As of November 13, 2023, we have 45 employees, including 45 full-time employees and 0 part time employees, as well as 11 independent contractors.

 

We seek to hire the very best talent in the U.S. and since COVID-19 we also now hire internationally, and we endeavor to maintain good relations with a diverse workforce built upon the goal of delivering the optimal employee experience, from ongoing learning to professional growth to purpose and community outreach. Our longstanding policy of inclusiveness is designed to foster an environment that promotes innovation and a wide range of perspectives. Our work practices are founded on a fundamental respect for equity and inclusion and a commitment to ethical business conduct that extends to our relations with our employees, customers, and other stakeholders. We also actively measure employee engagement and satisfaction on an ongoing basis, as we believe a happy workforce leads to a more innovative, productive, and ultimately more successful enterprise.

 

Our culture leans into the core principles of passion, purpose, and performance with multiple opportunities for team members to participate in purpose-led projects, from pro-bono campaigns for impact organizations and nonprofits, to contributing to ongoing campaigns on behalf of various purpose-driven customers, covering advocacy, politics and sustainability. From a performance standpoint we seek to foster a working environment that consistently delivers learning and growth opportunities for each of our employees, while closely tying compensation, and specifically bonus payments, to the measurable performance of customer campaigns. Simply put, we endeavor to create a workplace environment where employees treat our customers’ success as linked directly to their own success, thereby producing high levels of professional drive and engagement throughout the entirety of the Company’s workforce.

 

Sales and Marketing

 

Socialcom focuses on maintaining effective sales and marketing teams, with the goal of robust out-bound market penetration and driving a high volume of high-quality in-bound leads. The sales team leverages leading enterprise tools for prospecting and lead generation, with powerful customer relationship management (CRM) and full-customer lifecycle management systems, and with sales leaders located in key markets across the United States, including New York, Dallas and San Francisco. Our marketing team, which works in close partnership with our strategy, ad ops and creative teams, leverages paid media, content marketing, organic content, webinars, events and public relations to drive awareness and visibility for the Socialcom brand and ensure we are driving strong in-bound lead generation. Team members at Socialcom are have often been quoted and published in trade publications that include Entrepreneur, Forbes, Digiday, Adweek, AdExchanger, Modern Retail, MarTech Series and AW360.

 

 

Government Regulation

 

In the United States, both federal and state legislation govern activities such as the collection and use of data and privacy issues in the advertising technology industry. International regulations also exist and are addressed only generally herein. As to the United States, federal and states laws may limit the ability to collect, augment, analyze, use, and share data. Applicable laws and regulations may change from time to time, including those relating to the level of consumer notice, consent, and/or choice required when a company employs cookies or other electronic tools to collect data about interactions with users online. Thus, the below constitutes a general summary of the applicable legal and regulatory environment at this time as well as some notable laws on the horizon.

 

If signed into law, the American Data and Privacy Protection Act (“ADPPA”) would give consumers certain rights over their data and require that businesses process data under a fiduciary obligation. While data collected to provide a service unrelated to advertising would remain a permitted use, under ADPPA, a business could not collect data simply for the purpose of targeting ads. The bill does carve out one exception related to advertising: It permits collecting data to measure the performance of advertisements. Additionally, ADPPA would also empower the FTC to regulate privacy in a more explicit manner.

 

In 2022, the ADPPA won bipartisan support in the U.S. House of Representatives, but was not passed in that prior Congress. Since the 2022 mid-term election winners took office in the new Congress, the ADPPA has not yet been voted on in the House, but there remains bi-partisan support. As of the date of this Offering Circular, debate surrounding a federal regulatory regime for data privacy remains ongoing.

 

Additionally, the Children’s Online Privacy Protection Act (“COPPA”) imposes restrictions on the collection and use of data provided by children under the age of 13 by child-directed websites or online services, such as apps, directed to children or any website if the collection of such data is known to the website or app operator.

 

Also, the FTC and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. In addition, federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. Generally, the U.S. government has enacted legislation and regulations, and may enact further legislation or regulations in the future, that could significantly restrict the ability of companies and individuals to utilize online behavioral tracking, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. This is also occurring with state laws, as shown below.

 

In addition to federal laws on the horizon, in 2023, several states are set to institute their own privacy regulations. The California Privacy Rights Act, approved in 2020 and passed to clarify and supplement the preceding California Consumer Privacy Act, took effect on January 1, 2023. Many aspects of this new law require informed consent on the part of consumers whose data is collected. Consumers can also opt-out of the sale of their data. And, the new law provides California residents with the right to know who is collecting their information, how it is being used, and to whom it is disclosed. Further, under the California Privacy Rights Act regulations, contracts to sell data to third parties have to contain certain provisions defining how the third party may use that data, and it must include caveats about consumers being able to opt-out and thus prohibiting the transfer of such data.

 

California also has a Data Broker Privacy law which requires data brokers to register with, and provide certain information to, the state’s Attorney General. The registration requirement applies to any business that knowingly collects and sells any consumer information to third parties with which that business has no direct relationship.

 

Other states like Colorado, Connecticut, Utah, and Virginia have additional privacy laws in the works as well. The Virginia Consumer Data Protection Act (“VCDPA”) gives that state’s consumers the option to access and control personal data collected about them. Virginia consumers have the right to submit a request to access, correct any inaccurate information, and delete personal data a business has obtained from them. VCDPA also gives consumers the right to opt out of targeted advertising. The law went into effect on January 1, 2023.

 

Similar to the VCDPA, the Colorado Privacy Act (“CPA”) gives consumers in Colorado the right to access, correct, or delete personal data. The CPA also gives consumers the option to opt out of targeted advertising. The CPA went into effect on July 1, 2023. A similar law in Connecticut went into effect on July 1, 2023, while a similar Utah privacy law will go into effect on December 31, 2023.

 

 

As for outside the United States, there is an evolving concert of both national laws and regulatory bodies which should be considered. One of the most notable regulatory bodies is the European Union. The European Union’s “GDPR” is perhaps the most restrictive approach to data collection regulations. The GDPR defines “personal data” broadly, and it enhances data protection obligations for controllers of such data and for service providers processing the data. The GDPR requires companies to have a legal basis for data processing, which shall be lawful only under specific conditions, such as to fulfil a contract, gain consent, and or some other legitimate interest. In a recent, notable ruling by the GDPR’s “board of protection”, it held that META (formerly Facebook) will need substantial evidence to indicate that its collection of data for personalized ads is needed to provide a social media service and is thus lawful under the GDPR.

 

Generally, the GDPR applies to any company established in the European Economic Area (“EEA”) and to companies established outside the EEA that process personal information in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA. More specifically, these obligations may include limiting personal information processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal information processing; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal information; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal information; mandating notice of certain personal information breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the appointment of representatives in the UK and/or the EU in certain circumstances.

 

Properties.

 

We lease approximately 10,246 of office space located at 13468 Beach Avenue, Marina Del Rey, California, 90292. This lease expires December 31, 2023.

 

Legal Proceedings

 

Socialcom is subject to the following material litigation:

 

Zeta Global Corp. (“Zeta”) filed a complaint against Socialcom arising from a contract dispute for outstanding accounts payable of approximately $1.3 million. Socialcom filed a cross-complaint against the plaintiff seeking breach of contract and business tort damages. Zeta Global Corp. v Socialcom, Inc., Los Angeles Superior Court Case No. 19SMCV01066. The Court rendered a final decision in January 2023 following a bench trial, with the plaintiff entitled to recover $2,144,652 on its complaint ($1.2 million plus interest), and Socialcom entitled to recover $562,000 on its cross-complaint as an offset, with a final judgment entered by the Court against Socialcom in February 2023. Later in February 2023 Socialcom appealed, and its former principal stockholder has lent $800,000, and another former principal stockholder has lent $1,300,000, to act as an appeal bond which will stay enforcement of the adverse judgement. See “Related Party Transactions” for more information.

 

Following the Court’s final decision, the following developments occurred in the Zeta litigation:

 

On March 17, 2023, Zeta filed a new complaint against Socialcom seeking $162,457 plus 10% prejudgment interest from July 30, 2019 for alleged unpaid invoices.

 

On July 18, 2023, the Court awarded Zeta attorneys’ fees totaling approximately $750,000 in connection with the original Zeta litigation. Socialcom intends to appeal this award.

 

 

MANAGEMENT

 

The following table sets forth the names and positions of our executive officers and directors. Directors will be elected at our annual meeting of stockholders and serve for one year or until their successors are elected and qualify. Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board.

 

Name		Age		Positions
Jason Wulfsohn		51		Chief Executive Officer and Director
Ryan Carhart		43		Chief Financial Officer
Garrett MacDonald		48		Chief Commercial Officer
Reeve Benaron		47		Chairman
David Lelong		46		Director

 

A description of the business experience during the past several years for our directors and executive officer is set forth below.

 

Jason Wulfsohn became Chief Executive Officer and a director of the Company in connection with the Share Exchange in February 2023. He has also been the Chief Executive Officer and a director of Socialcom since 2021, and prior to that served as President and Chief Operating Officer of Socialcom from 2013 to 2021. He was co-founder of Socialcom. Mr. Wulfsohn is a frequent public speaker at trade events, university guest lecturer on advertising and ad tech and also devotes considerable time to pro-bono work for various impact organizations in sustainability, arts programs and political advocacy.

 

Mr. Wulfsohn’s qualifications and background that qualify him to serve on the Board include his strong managerial and leadership experience, his extensive knowledge of Socialcom as its co-founder and his related experience in the digital advertising industry.

 

Ryan Carhart is the Chief Financial Officer of the Company, and has been Chief Financial Officer of Socialcom since May 2019. Mr. Carhart previously was the Senior Director of Finance/Controller at MNTN from June 2017 to May 2019, an advertising software Company, and prior to that worked in the auditing practice at PriceWaterhouseCoopers in the technology and advertising technology practice from 2012-2017.

 

David Lelong has been a director of the Company since May 2020. Mr. Lelong also served as the Company’s Chief Executive Officer from May 2020 until he resigned in connection with the Share Exchange in February 2023. Prior to his appointment, Mr. Lelong served as Chief Executive Officer and a director at Better Choice Company Inc. from April 29, 2016 until March 4, 2019 and March 14, 2019, respectively.

 

Mr. Lelong’s qualifications and background that qualify him to serve on the Board include his experience as an executive officer and director of a public company, the sole director and officer of Vado, and as a business and marketing consultant, as well as his general knowledge of the financial markets.

 

Reeve Benaron became Chairman of the Board of Directors of the Company in connection with the Share Exchange in February 2023. He has also served as Chairman of the Board of Directors of Socialcom, a title he has held since 2013 which he co-founded. Mr. Benaron previously served as the Chief Executive Officer of Socialcom from 2013 until October, 2021. Mr. Benaron is currently the Co-Chief Executive Officer and Founder of Intrivo, a healthcare technology company, a role in which he has served since May 2020.

 

Mr. Benaron’s qualifications and background that qualify him to serve on the Board include his strong managerial and leadership experience, his extensive knowledge of Socialcom as its co-founder and his related experience in the digital advertising industry.

 

Garrett MacDonald has served as the Chief Commercial Officer of Socialcom since December 30, 2022. Mr. MacDonald previously served as the Chief Commercial Officer of IRIS.TV from June, 2021 through October, 2022, and as Executive Vice President of Sales at Kochava from October, 2014 until June, 2021.

 

Election of Directors and Officers

 

Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board following the next annual meeting of stockholders and until their successors have been elected and qualified.

 

 

Audit Committee

 

We do not have any committees of the Board as until the Closing of the Share Exchange we only had one director. Our Board acts as the Company’s Audit Committee as required.

 

Board Meetings

 

The Board did not hold any meetings in FY 2022, as until the Closing of the Share Exchange, our sole director was David Lelong.

 

Director Independence

 

We do not currently have any independent directors other than David Lelong, as each of our other directors are either executive officers or principal shareholders of the Company. We evaluate independence by the standards for director independence established by the Rules of the New York Stock Exchange.

 

Board Leadership Structure

 

Our Board has not adopted a formal policy regarding the separation of the offices of Chief Executive Officer and Chairman of the Board. Rather, the Board believes that different leadership structures may be appropriate for our Company at different times and under different circumstances, and it prefers flexibility in making this decision based on its evaluation of the relevant facts at any given time.

 

Beginning in February 2023, following the completion of the Share Exchange between the Company and certain shareholders of Socialcom, and the appointment of Mr. Jason Wulfsohn as our Chief Executive Officer and Reeve Benaron as our Chairman, we separated the offices of Chief Executive Officer and Chairman of the Board. Under our current Board leadership structure, the Chief Executive Officer is responsible for the day-to-day leadership and performance of our Company, and the Chairman of the Board is responsible for presiding over Board meetings otherwise furthering the Board’s role of providing governance and oversight to the Company’s affairs.

 

Code of Business Conduct and Ethics

 

We have not adopted a code of business conduct and ethics, however we plan to adopt such a code, that will apply to all of our employees, officers and directors, prior to or upon to qualification of the Offering Statement of which this Offering Circular is a part. Upon the adoption of the code of business conduct and ethics, we intend to file the full text of such code as an exhibit to our filings with the SEC, and to disclose any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website or in filings under the Exchange Act.

 

 

EXECUTIVE COMPENSATION

 

Set forth below is the information regarding the compensation paid, distributed or accrued by us for FY 2022 and FY 2021 to (i) each person who served as our Chief Executive Officer (principal executive officer) at any time during the last fiscal year, (ii) the two other most highly compensated executive officers serving as of December 31, 2022 whose compensation exceeded $100,000, and (iii) up to two additional individuals who would have been included under clause (ii) but for the fact that they were not serving as executive officers as of December 31, 2022 (collectively, the “Named Executive Officers”). In accordance with SEC rules, the determination of Named Executive Officers gives effect to the Exchange and reflects compensation paid, distributed or accrued to applicable individuals by Socialcom during the periods covered. Stock awards and option awards reflect grant date fair value calculated in accordance with FASB ASC Topic 718.

 

																				All
												Stock				Option				Other
Name and Principal				Salary				Bonus				Awards				Awards				Compensation				Total
Position		Year		($)				($)				($)				($)*				($)				($)
Jason Wulfsohn (a)		2022			312,500				-				-				157,492				69,224				539,216
		2021			462,500				-				-				-				73,558				536,058
Ryan Carhart (b)		2022			276,667				20,119				-				1,177				13,838				311,801
		2021			262,938				72,653				-				8				11,771				347,370
Brian Ko (c)		2022			314,854				31,150				-				16,924				94,200				457,128
		2021			290,000				110,575				-				34,140				117,940				552,655
David Lelong (d)		2022			–								–				–				–				–
Former CEO, CFO, President, Secretary and Treasurer		2021			52,500								–				–				–				52,500

 

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*Option Awards represent the grant date fair value of Socialcom stock options held by the Named Executive Officer, calculated in accordance with FASB ASC Topic 718. As described below under “Outstanding Equity Awards at Fiscal Year End”, reflects Vado stock options on an as-exchanged basis. As of the date of this Offering Circular, the exchange has not yet occurred.

(a) During FY 2022 and FY 2021, All Other Compensation consisted of health-related benefits of $27,327 and 30,742, respectively, and automotive benefits of $41,896 and $42,816, respectively.

(b) During FY 2022 and FY 2021, All Other Compensation consisted of health-related benefits of $2,480 and 25,766, respectively, automotive benefits of $10,945 and $18,775, respectively, and consulting fees of $30,000 and $0, respectively.

(c) Mr. Ko is Socialcom’s former Chief Commercial Officer. During FY 2022, stock award value consisted of RSU grants valued at $16,924. During FY 2021, stock award value consisted of RSU grants valued at $34,132 and option award comprised one option grant valued at $8.00. During the FY 2022 and FY 2021, All Other Compensation consisted of sales commission amounts of $80,349 and $105,426, respectively, health benefits amounts of $8,726 and $7,639, respectively, and 401k incentives in the amount of $5,125 and $4,875, respectively.

(d) Mr. Lelong served as the Company’s Chief Executive Officer from May 22, 2020 to February 24, 2023, when he was replaced in such roles by Messrs. Wulfsohn and Carhart, members of Socialcom management, pursuant to the Exchange. Mr. Lelong received compensation in the amount of $7,500 per month. This compensation was subsequently terminated effective June 1, 2021.

 

Named Executive Officer Employment Agreements

 

Ryan Carhart, Chief Financial Officer, is employed pursuant to a written offer letter, and Jason Wulfsohn, Chief Executive Officer, is employed pursuant to an oral employment agreement. Under these agreements our Named Executive Officers are entitled to receive annual base salaries as follows: $400,000 for Jason Wulfsohn, and $250,000 for Ryan Carhart.

 

Under Mr. Carhart’s employment agreement, he is also entitled to receive six months’ salary and benefits if terminated by the Company without cause. For this purpose, “cause” means (i) the commission of a felony or other crime involving moral turpitude or the commission of any other act or omission involving misappropriation, dishonesty, unethical business conduct, disloyalty, fraud or breach of fiduciary duty, (ii) repeated failure to perform duties as reasonably directed by the Board and/or the Company’s principal executive officer, (iii) gross negligence or willful misconduct with respect to the Company or affiliates or in the performance of his duties, (iv) obtaining any personal profit not thoroughly disclosed to and approved by the Board in connection with any transaction entered into by, or on behalf of, the Company, its subsidiaries or any of their affiliates, or (v) materially violating any of the terms of the Company, its subsidiaries’ or any of their affiliates’ rules or policies which, if curable, is not cured to the Board’s satisfaction within 15 days after written notice, or any other breach of the employment agreement or any other agreement between such officer and the Company or any of its subsidiaries which, if curable, is not cured to the Board’s satisfaction within 15 days after written notice.

 

 

Outstanding Equity Awards at December 31, 2022

 

The Company has not issued our Named Executive Officers stock options or equity incentive plan awards as of December 31, 2022. However, certain of our Named Executive Officers held options to purchase Socialcom common stock as of such date. In connection with the Exchange, Vado agreed to issue options to Socialcom directors, officers, employees, and consultants, including the Named Executive Officers, under Vado’s 2023 Equity Incentive Plan in exchange for the cancellation of outstanding Socialcom stock options held by such persons at an exchange ratio of 8.75 Vado options for each Socialcom option. As of the date of this Offering Circular, such exchange has not taken place. The below table reflects these Socialcom options on an as-exchanged basis with respect to the number of Vado options and exercise price, and with vesting information reflected as of December 31, 2022.

 

		Options Awards																Stock Awards
Name		Number of Securities Underlying Unexercised Options (#) Exercisable (1)				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock that Have Not Vested				Market Value of Shares of Units of Stock that Have Not Vested ($)
Jason Wulfsohn			3,237,299				3,237,308			$	0.10			7/26/2032					-			$	-
Ryan Carhart			-				39,375			$	0.09			6/30/2032					-			$	-
Brian Ko			-				-			$	-				-				-			$	-
David Lelong			-				-			$	-				-				-			$	-

 

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(1) As described above, reflects Vado stock options on an as-exchanged basis. As of the date of this Offering Circular, the exchange has not yet occurred.

 

Director Compensation

 

Set forth is summary compensation information of the Company’s non-employee director for FY 2022. For a description of the corresponding categories set forth in the table, see the “Summary Compensation Table” above.

 

		Fees earned in cash				Option Awards (1)				Other Compensation (2)				Total (3)
Reeve Benaron			135,833				126,143				43,429				305,405

 

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(1) Option Awards represent the grant date fair value of Socialcom stock options held by Mr. Benaron, calculated in accordance with FASB ASC Topic 718. As described above under “Outstanding Equity Awards at Fiscal Year End”, reflects Vado stock options on an as-exchanged basis. As of the date of this Offering Circular, the exchange has not yet occurred.

(2) During FY 2022 and FY 2021, All Other Compensation consisted of health related benefits of $2,480 and 25,766, respectively, automotive benefits of $10,945 and $18,775, respectively, and consulting fees of $30,000 and $0, respectively.

(3) Does not including amounts paid to Mr. Benaron by the Company for purposes other than his services as a director, such as consulting fees and repayment of indebtedness and interest, as more particularly disclosed under “Related Party Transactions.”

 

Equity Compensation Plan Information

 

In connection with the Socialcom Exchange, on January 30, 2023, David Lelong, in his capacity as sole director and majority shareholder of the Company, approved the 2023 Equity Incentive Plan (the “2023 Plan”) of the Company. Under the Exchange Agreement, the Company agreed to issue a total of 22,793,540 options to purchase common stock of the Company to Socialcom directors, officers, employees and consultants under the 2023 Plan in exchange for the cancellation of a total of 2,604,976 outstanding Socialcom stock options held by such persons. As of the date of this Offering Circular, such exchange has not yet occurred.

 

A summary of the material terms of the 2023 Plan is set forth below under “Overview of 2023 Equity Incentive Plan.”

 

Overview of the 2023 Equity Incentive Plan

 

The following is a summary of the material terms of the 2023 Plan, which is qualified in its entirety by the full text of the 2023 Plan, a copy of which is filed as Exhibit 3.5 to this Offering Circular.

 

 

Duration of the 2023 Plan

 

The 2023 Plan became effective upon approval by the Board and will remain in effect until January 30, 2033, unless terminated earlier by the Board.

 

Plan Administration

 

The 2023 Plan will be administered by the Board or if we form a Compensation Committee (the “Committee”) by the Committee (the “Administrator”). The Administrator will have the authority to, among other things, interpret the 2023 Plan, determine who will be granted awards under the 2023 Plan, determine the terms and conditions of each award, and take action as it determines to be necessary or advisable for the administration of the 2023 Plan.

 

Eligibility

 

The Administrator may grant awards to any employee, consultant or director of the Company and its affiliates. However, only employees are eligible to receive Incentive Stock Options (“ISOs”) as defined by the Internal Revenue Code.

 

Shares Available for Awards; Limits on Awards

 

The 2023 Plan authorizes the issuance of up to 30,000,000 shares of the Company’s common stock. If any outstanding award expires or is cancelled, forfeited, or terminated without issuance of the full number of shares of common stock to which the award related, then the shares subject to such award will again become available for future grant under the 2023 Plan.

 

Types of Awards That May Be Granted

 

Subject to the limits in the 2023 Plan, the Administrator has the authority to set the size and type of award and any vesting or performance conditions. The types of awards that may be granted under the 2023 Plan are: stock options (including both ISOs and non-qualified stock options), restricted stock, restricted stock units (“RSUs”), and Stock Appreciation Rights (“SARs”).

 

Stock Options

 

A stock option is the right to purchase shares of common stock at a future date at a specified price per share called the exercise price. An option may be either an ISO or a non-qualified stock option. Except in the case of options granted pursuant to an assumption or substitution for another option, the exercise price of a stock option may not be less than the fair market value (or in the case of an ISO granted to a 10% stockholder, 110% of the fair market value) of a share of common stock on the grant date.

 

Stock Appreciation Rights

 

A SAR is the right to receive payment of an amount of cash or shares of common stock having a value equal to the excess of the fair market value of a share of common stock on the date of exercise of the SAR over the exercise price. The exercise price of a SAR may not be less than the fair market value of a share of common stock on the grant date. SARs may be granted alone or in tandem with an option granted under the 2023 Plan. SARs may be settled in cash or in common stock at the discretion of the Administrator.

 

Restricted Stock

 

A restricted stock award is an award of actual shares of common stock which is subject to certain restrictions on sale for a period of time determined by the Administrator. Restricted stock may be held by the Company or in escrow or delivered to the participant pending the release of the restrictions. Participants who receive restricted stock awards generally have the rights and privileges of stockholders regarding the shares of restricted stock during the restricted period, including the right to vote and the right to receive dividends, provided that any cash or stock dividends with respect to the restricted stock will be withheld by the Company for the participant’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Administrator. The cash dividends or stock dividends so withheld will be distributed to the participant in cash or, at the discretion of the Administrator, in shares of common stock having a fair market value equal to the amount of such dividends upon the release of restrictions on such restricted stock, unless such restricted stock is forfeited.

 

 

Restricted Stock Units (RSUs)

 

An RSU is an award of hypothetical common stock units having a value equal to the fair market value of an identical number of shares of common stock, which may be subject to certain restrictions for a period of time determined by the Administrator. One feature of an RSU is that delivery of the underlying common stock is delayed until vesting or a later date. No shares of common stock are issued at the time an RSU is granted, and the Company is not required to set aside any funds for the payment of any RSU award. Because no shares are outstanding, the participant does not have any rights as a stockholder. The Administrator may grant RSUs with a deferral feature (deferred stock units or DSUs), which defers settlement of the RSU beyond the vesting date until a future payment date or event set out in the participant’s award agreement. The Administrator has the discretion to credit RSUs or DSUs with dividend equivalents.

 

Adjustments Upon Changes in Stock

 

In the event of changes in the outstanding common stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the grant date of any award, awards granted under the 2023 Plan and any award agreements, the exercise price of options and SARs, the maximum number of shares of common stock subject to all awards and the maximum number of shares of common stock with respect to which any one person may be granted awards during any period will be equitably adjusted or substituted, as to the number, price or kind of a share of common stock or other consideration subject to such awards to the extent necessary to preserve the economic intent of the award.

 

Change of Control

 

In the event of a change of control, the vesting of all awards will fully accelerate and all outstanding options and SARs will become immediately exercisable only if the successor corporation refuses to assume or substitute for the outstanding awards. The change of control is defined as (i) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets in a transaction which requires stockholder approval under applicable state law; or (ii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

 

Limitation on Awards

 

The exercise price of options or SARs granted under the 2023 Plan shall not be less than the fair market value of the underlying common stock at the time of grant. In the case of ISOs, the exercise price may not be less than 110% of the fair market value in the case of 10% stockholders. Options and SARs may not be exercisable for a period of more than 10 years after the date of grant, except that the exercise period of ISOs granted to 10% stockholders is limited to five years. The exercise price may be paid by check or wire transfer or, at the discretion of the Administrator, by delivery of shares of our common stock having a fair market value equal, determined as provided for in the 2023 Plan or otherwise as approved by the Administrator, as of the date of exercise to the cash exercise price, or a combination thereof.

 

Amendment or Termination of the 2023 Plan

 

The Board may amend or terminate the 2023 Plan at any time. However, except in the case of adjustments upon changes in common stock, no amendment will be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable laws or the rules of any stock exchange or quotation system on which the shares of common stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the 2023 Plan. Further, any amendment to the 2023 Plan that impairs the rights of participants who received outstanding grants under the 2023 Plan must be approved by such participants.

 

Amendment of Awards

 

The Administrator may amend the terms of any one or more awards. However, the Administrator may not amend an award that would impair a participant’s rights under the award without the participant’s written consent.

 

 

Forfeiture and Recoupment

 

Each award and the applicable participant’s rights, payments and benefits with respect to an award are subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of the participant’s: (i) breach of a duty of confidentiality, (ii) purchasing or selling securities of the Company in violation of the Company’s insider trading guidelines, (iii) competing with the Company, (iv) soliciting Company personnel after employment is terminated, (v) failure to assign any invention or technology to the Company if such assignment is a condition of employment or any other agreements between the Company and the participant, (vi) being terminated for cause, (vii) violating of the Company’s insider trading policy, or (viii) engaging in other conduct that is disloyal or detrimental to the interests of the Company as determined by the Board.

 

Transfer of Awards

 

Except for ISOs, all awards are transferable subject to compliance with the securities laws and the 2023 Plan. ISOs are only transferable by will or by the laws of descent and distribution.

 

RELATED PARTY TRANSACTIONS

 

As a result of the Exchange described above under “The Share Exchange,” Jason Wulfsohn, Ryan Carhart and Reeve Benaron become officers and/or directors of the Company, and also received shares of the Company’s common stock, directly and in Mr. Benaron’s case through trusts in which he is the trustee, in the Exchange in exchange for their shares of Socialcom common stock transferred to the Company pursuant thereto. The shares issued to these individuals are reflected under “Principal Stockholders.” Further, the Company agreed to issue stock options to these individuals in exchange for stock options of Socialcom, as set forth under “Executive Compensation.” Pursuant to the Exchange, David Lelong, the then Chief Executive Officer and sole director, also canceled 93 million shares of the Company’s common stock held by him.

 

Socialcom has an outstanding loan payable to an entity affiliated to Jason Wulfsohn, the Company’s CEO, originally dated March 21, 2020 and renewed March 21, 2023 in the amount of $300,000 bearing interest at the rate of 15% and due March 21, 2024 (the “Wulfsohn Related Party Loan”). During the years ended December 31, 2022 and 2021, Socialcom made interest payments of $45,000 and $45,000, respectively, and no principal payments on the Wulfsohn Related Party Loan.

 

Socialcom has an outstanding loan payable to Michael and Paula Brand Community Property Trust, an entity affiliated to Reeve Benaron, the Company’s Chairman, originally dated March 21, 2020 and due March 21, 2024 (the “Benaron Related Party Loan”). During the years ended December 31, 2022 and 2021, Socialcom made interest payments of $45,000 and $45,000, respectively, and no principal payments on the Benaron Related Party Loan.

 

On January 1, 2022, Socialcom entered into a Management Agreement with Kahala19, LLC, an entity managed by Reeve Benaron, a then principal stockholder and director of Socialcom who became a principal stockholder and director of the Company as a result of the Share Exchange. Under this agreement, Mr. Benaron’s entity provides certain services for Socialcom, which include administrative, marketing and sales, financial reporting support and other services in exchange for a cash fee of $6,000 per month from August through December 2022, and thereafter a mutually agreed upon fee. This agreement as a term ending on December 31, 2023. In 2022, Mr. Benaron’s entity, received a total of $36,000 in management consulting fees under these agreements.

 

Socialcom has an outstanding loan which as amended on November 13, 2023 is payable to Kahala19, LLC,  an entity controlled by Reeve Benaron, in the amount of $500,000 (the “Benaron Loan”). The Benaron Loan as amended bears interest at the rate of 8.25% per annum (increased from its original interest rate of 2.19%) and is due December 31, 2025. The Benaron Loan is payable in 18 monthly installments of $31,354 beginning on July 20, 2024. During the years ended December 31, 2022 Socialcom accrued interest in the amount of $5,849 on the Benaron Loan.

 

On February 7, 2023, in connection with the Zeta litigation described under “Legal Proceedings,” Socialcom borrowed $800,000 from Kahala19, LLC, an entity managed by Reeve Benaron, the Company’s Chairman and a principal shareholder, and issued the entity an $800,000 convertible promissory note. The note accrues interest at 7.25% per annum and matures in December 2024. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of approximately $0.233 per share.

 

On May 16, 2023, in connection with the Zeta litigation described under “Legal Proceedings,” the Company borrowed $1,300,000 from a trust controlled by Jason Wulfsohn, the Company’s CEO and a principal shareholder, and issued a convertible promissory note in the principal amount of $1,300,000. The note accrues interest at 7.25% per annum and matures in December 2025. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of $0.32 per share.

 

 

On September 18, 2023, Socialcom and Vado entered into certain loan agreements in connection with the amendment to Socialcom’s loan facility under the Financing Agreement, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” In connection with the amendment, Vado became a party to loan documents as guarantor of Socialcom’s indebtedness evidenced by the Financing Agreement, and also pledged the Socialcom common stock Vado holds, which represents 100% of the outstanding Sociolcom common stock, as collateral. In addition, Jason Wulfsohn, our Chief Executive Officer and principal stockholder, also agreed to guarantee the indebtedness, and pledged his assets, including the Vado Corp. common stock he holds which represents approximately 41% of the outstanding Vado common stock, as collateral. Finally, the entities controlled by Messrs. Benaron and Wulfsohn which hold the total of $2,100,000 in indebtedness, agreed to the subordination of such indebtedness to the secured lender.

 

On November 15, 2023, the Company borrowed $625,000 from a trust controlled by Jason Wulfsohn, the Company’s CEO and a principal shareholder, and issued a convertible promissory note in the principal amount of $625,000. The note accrues interest at 8.5% per annum and matures in December 2025. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of $0.32 per share.

 

The Company has entered into indemnification agreements with certain of its officers and directors.

 

PRINCIPAL STOCKHOLDERS

 

The following table sets forth certain information as of  October 31, 2023, regarding the beneficial ownership of our Common Stock by (i) each person (including any “group” as such term is used in Section 13(d)(3) of the Exchange Act) known by us to be a beneficial owner of more than 5% of our common stock, (ii) each of our directors and “Named Executive Officers;” and (iii) all of our directors and executive officers as a group. At October 31, 2023, we had 182,492,222 shares of common stock issued and outstanding. Unless otherwise indicated, the address of each of the stockholders listed is 13468 Beach Avenue, Marina Del Rey, California, 90292. Percentage of shares beneficially owned after the offering assumes the sale of the maximum offering.

 

		Number of Shares Beneficially Owned (1)				Percentage of Shares Beneficially Owned Before The Offering (1)				Percentage Of Shares Beneficially Owned After The Offering (1)
Officers and Directors:
Jason Wulfsohn (2)			84,849,272				44.5	%			40.4	%
Ryan Carhart (3)			3,420,743				1.9	%			1.7	%
David Lelong (4)			2,919,000				1.6	%			1.4	%
Reeve Benaron (5)			84,217,794				43.8	%			39.7	%
Brian Ko (6)			1,399,484				0.8	%			0.7	%
All officers and directors as a whole (5 persons) (7)			176,806,293				87.2	%			79.5	%
5% or more stockholders:
Edward Cutter (8)			10,762,500				5.9	%			5.3	%

 

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(1) Beneficial ownership is determined in accordance with the rules of the SEC and includes general voting power and/or investment power with respect to securities. Shares of Common Stock issuable upon exercise of options or warrants that are currently exercisable or exercisable within 60 days of October 31, 2023 and shares of Common Stock issuable upon conversion of other securities currently exercisable or convertible or exercisable or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage of the person holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Under the applicable SEC rules, each person’s beneficial ownership is calculated by dividing the total number of shares with respect to which they possess beneficial ownership by the total number of outstanding shares. In any case where an individual has beneficial ownership over securities that are not outstanding but are issuable upon the exercise of options or warrants or similar rights within the next 60 days, that same number of shares is added to the denominator in the calculation described above. Because the calculation of each person’s beneficial ownership set forth in the “Percentage Class” column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column may exceed 100%. For shares outstanding after the offering, reflects the issuance of the maximum offering amount of 20,000,000 shares of common stock but does not give effect to any issuances of Bonus Shares, which may total an additional 3,900,000 shares.

(2) Mr. Wulfsohn is our Chief Executive Officer and a director. Includes (i) 6,015,625 shares of common stock issuable upon conversion of convertible notes described elsewhere in this Offering Circular, and (ii) 6,474,956 shares of common stock underlying stock options which Mr. Wulfsohn is entitled to receive in exchange for Socialcom stock options he holds. As of the date of this Offering Circular, such exchange has not yet occurred. The 74,311,816 shares Mr. Wulfsohn holds individually are pledged as collateral to secure the up to $2,000,000 of indebtedness pursuant to the Financing Agreement with SLR Digital Finance, LLC as the secured lender/pledgee. If an event of default occurs, the lender will obtain voting and dispositive power over the shares, and may seek to recover any sum allegedly due and if successful seek to acquire the shares.

(3) Mr. Carhart is our Chief Financial Officer. Includes 48,125 shares of common stock underlying stock options which Mr. Carhart is entitled to receive in exchange for Socialcom stock options he holds. As of the date of this Offering Circular, such exchange has not yet occurred.

 

 

(4) Mr. Lelong is a director and our former Chief Executive Officer. Address is 2191 S McClelland St #835 Salt Lake City, UT 84106.

(5) Mr. Benaron is our Chairman of the Board. Includes (i) shares of common stock held in five separate trusts for the benefit of Mr. Reeve’s family members for which Mr. Reeve is the trustee, (ii) shares of common stock held by trusts for family members in which Mr. Benaron is the trustee, and shares of common stock beneficially held by Kahala19 LLC, an entity which Mr. Benaron controls, (iii) 3,431,373 shares of common stock issuable upon conversion of a convertible note to be issued in connection with the Zeta litigation described elsewhere in this Offering Circular, and (iv) 6,474,606 shares of common stock underlying stock options which Mr. Benaron is entitled to receive in exchange for Socialcom stock options he holds. As of the date of this Offering Circular, such exchange has not yet occurred.

(6) Mr. Ko is Socialcom’s former Chief Commercial Officer until December 2022, and thereby a Named Executive Officer for FY 2022.

(7) Directors and Executive Officers as a group. This amount includes ownership by all directors and all current executive officers including those who are not Named Executive Officers under the SEC’s disclosure rules.

(8) Address is 2828 Greenfield Ave., Los Angeles, CA 90064.

 

DESCRIPTION OF SECURITIES

Capital Stock

 

Our authorized capital stock consists of 490,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of “blank check” preferred stock, par value $0.001 per share. As of the date of this Offering Circular, 182,492,222 shares of our common stock and 223,333 shares of our Series A are issued and outstanding. The following description summarizes the material terms of our securities. Because it is only a summary, it may not contain all the information that is important to you. For a complete description, you should refer to our Articles of Incorporation, as amended, our Bylaws, and the Certificate of Designation setting forth the terms of the Series A, as amended, each of which are filed as an exhibit to this Offering Circular, and to the applicable provisions of Nevada law, including Chapter 78 of the Nevada Revised Statutes (the “NRS”).

 

Common stock

 

Voting Rights

 

Holders of our common stock are entitled to one vote for each share held on all matters properly submitted to a vote of stockholders on which holders of common stock are entitled to vote. Our Articles of Incorporation do not provide for cumulative voting with respect to the election of directors. The directors are elected by a plurality of the votes cast at the election.

 

Dividend Rights

 

Subject to applicable law and to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our common stock are entitled to receive dividends out of funds legally available if our Board, in its discretion, determines to declare and pay dividends and then only at the times and in the amounts that our Board may determine.

 

Liquidation Rights

 

If the Company becomes subject to a liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock, including the Series A described below.

 

Other Rights and Preferences

 

The holders of the common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences, and privileges of the holders of the common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that the Board may designate and issue in the future.

 

Series A Convertible Preferred Stock

 

The Company has authorized 1,000,000 shares of Series A, of which 223,333 shares are outstanding. Subject to certain limitations set forth in the Certificate of Designation of the Series A, each share of Series A is convertible into 20 shares of the Company’s common stock. The Series A is non-voting except as may be required by applicable law. The Series A also provides the holders with senior ranking with respect to the Company’s capital stock upon the occurrence of a liquidation, dissolution or winding up, and a liquidation preference in the event of the merger or consolidation of the Company in which the Company is not the surviving entity, the sale of all of the assets of the Company in a transaction which requires stockholder approval or the dissolution or winding up of the Company, in each case at the stated value of $30 per share of Series A.

 

 

SHARES ELIGIBLE FOR FUTURE SALE

 

Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. Based on the number of shares outstanding as of the date of this Offering Circular, upon the completion of this offering, we estimate that we will have 202,492,221 shares of common stock, not including a potential of up to 3,900,000 Bonus Shares and assuming no exercise of outstanding options or other derivative securities.

 

Rule 144

 

Because we were a shell company until the completion of the Share Exchange in February 2023, Rule 144 is not available for our shareholders until 12 months have passed following effectiveness of the Form 8-A, provided we remain current in our SEC reporting obligations during that time and thereafter.

 

When the above-described requirement is and remains satisfied, pursuant to Rule 144 of the Securities Act, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that:

 

●	such person is not deemed to have been one of our affiliates at the time of, or at any time during, the three months preceding, a sale; and

 

●	we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.

 

Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of:

 

●	1% of the total number of shares of common stock then outstanding; or

 

●	the average weekly reported trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

 

Sales by our affiliates under Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about us.

 

For purposes of the six-month holding period requirement of Rule 144, a person who beneficially owns restricted shares of our common stock issued pursuant to a cashless exercise of a warrant shall be deemed to have acquired such shares, and the holding period for such shares shall be deemed to have commenced on the date the warrant was originally issued.

 

 

PLAN OF DISTRIBUTION

 

Engagement with Dalmore Group

 

The Company has engaged Dalmore Group, LLC, referred to elsewhere in this Offering Circular as Dalmore or Dalmore Group, a broker-dealer registered with the Commission and a member of FINRA, to act as the broker-dealer of record for this offering, but not for underwriting or placement agent services. Under this arrangement, Dalmore will perform the following administrative and technology related functions in connection with this offering:

 

	●	Review investor information, including KYC (“Know Your Customer”) data, AML (“Anti Money Laundering”), OFAC (“Office of Foreign Assets Control”) compliance background checks (KYC and AML processes may be performed by a qualified third party)
	●	Review each investor’s subscription agreement to confirm such investor’s participation in the offering, and provide confirmation of completion of such subscription document to the Company
	●	Contact and/or notify the Company, if needed, to gather additional information or clarification on an investor.
	●	Not provide any investment advice nor any investment recommendations to any investor.
	●	Keep investor information and data confidential and not disclose to any third-party except as required by regulatory agencies or pursuant to the terms of the agreement (e.g. as needed for AML and background checks).
	●	Coordinate with third party providers to ensure adequate review and compliance.

 

As compensation, the Company has agreed to pay Dalmore a commission equal to 1% of the amount raised in the offering to support the offering on all invested funds after the issuance of a No Objection Letter by FINRA. In addition, the Company has paid Dalmore a one-time advance set up fee of $5,000 to cover reasonable out-of-pocket accountable expenses actually anticipated to be incurred by Dalmore, such as, among other things, preparing the FINRA filing. Dalmore will refund any fee related to the advance to the extent it is not used, incurred or provided to the Company. In addition, the Company will pay a one-time $20,000 consulting fee that will be due immediately after FINRA issues a No Objection Letter, and also agreed to reimburse Dalmore for the $11,500 FINRA Corporate Filing Fee in connection with this offering. In addition, the Company will pay $3,500 monthly to Dalmore as a platform fee, totaling $42,000 over the 12 months of the initial contract term. Our agreement with Dalmore provides for an initial term of 12 months, with automatic renewal for additional successive 12 month terms unless the Company or Dalmore provides notice of termination or non-renewal. In the event that the agreement is renewed for an additional term or terms, the $3,500 monthly platform will continue to apply for platform fees, continuing to total $42,000 for each such additional 12 month term. Additionally, the Company will also pay Dalmore a $1,000 fee for each Form 1-A POS post-qualification amendment to the Offering Statement of which this Offering Circular forms a part in connection with the offering, which would occur within 12 months from a given qualification date and potentially more frequently to the extent necessary to reflect a fundamental change to the information contained in the Offering Statement.

 

Assuming that the Offering is open for 12 months, the Company estimates that fees due to pay Dalmore, pursuant to the 1% commission would be $80,000 for a fully-subscribed offering. Finally, the total fees that the Company estimates that it will pay Dalmore, pursuant to a fully-subscribed offering would be $137,500. These assumptions were used in estimating the fees due in the “Use of Proceeds.”

 

Investor Bonus Shares

 

The Bonus Shares available to investors that subscribe in the amounts set forth below are as follows:

 

The Company is offering the following incentives to subscribers:

 

	●	Subscriptions of $10,000 - $49,999.99 will receive 10% more shares of common stock for their subscription;
	●	Subscriptions of $50,000 - $99,999.99 will receive 15% more shares of common stock for their subscription;
	●	Subscriptions of $100,000 - $249,999.99 will receive 20% more shares of common stock for their subscription;
	●	Subscriptions of $250,000 - $499,999 will receive 25% more shares of common stock for their subscription;
	●	Subscriptions of $500,000 - $999,999 will receive 35% more shares of common stock for their subscription; and
	●	Subscriptions of $1,000,000 or more will receive 40% more shares of common stock for their subscription.

 

 

Investors may not combine the different Bonus Share levels to increase the amount of Bonus Shares to which they are entitled. These Bonus Shares available to investors are not to be combined or cumulative.

 

The Company will absorb the cost of the issuance of the Bonus Shares; to the extent any are issued, it will reduce the net proceeds that the Company receives in this offering. The issuance of these Bonus Shares will have a maximum potential dilutive effect of 20% or 3,900,000 Bonus Shares. This Bonus Share incentive reduces the effective per share price of the common stock in this offering and if the maximum number of Bonus Shares are issued, lower the per share price to $0.3355 per share. It is recommended that investors consult a tax professional to fully understand any tax implications of receiving any Bonus Shares before investing.

 

There are no selling shareholders for this offering.

 

Escrow Agent

 

The Company expects to enter into an Escrow Agreement with North Capital Private Securities Corporation ( “North Capital”), which is acting as an intermediary facilitator for purposes of coordinating with Flagstar Bank, a third party acting as escrow agent for this offering. Investors should understand that acceptance of their funds into escrow does not necessarily result in their receiving Shares; escrowed funds may be returned.

 

Neither North Capital nor the escrow agent is participating as an underwriter or placement agent or sales agent of this offering, and neither will solicit any investment in the Company, recommend the Company’s securities or provide investment advice to any prospective Investor, and no communication through any medium, including any website, should be construed as such, or distribute this Offering Circular or other offering materials to investors. The use of North Capital’s technology should not be interpreted and is not intended as an endorsement or recommendation by it of the Company or this offering. All inquiries regarding this offering or escrow should be made directly to the Company.

 

For its services, North Capital will receive fees of $575.00 for the set-up of the escrow account, $10.00 per check (incoming or outgoing), $100.00 for each additional escrow break, $100.00 for each escrow amendment, $25.00 per domestic wire (incoming/outgoing), $45.00 per international wire (incoming/outgoing), $10 per check for check handling, and reimbursement for out of pocket expenses.

 

Investment Limitations

 

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth (please see below on how to calculate your net worth). Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

Offering Period; Expiration Date; Closing Date

 

This offering will start on the date this Offering Circular is qualified by the SEC. We expect to commence the sale of the securities as of the date on which the Offering Statement of which this Offering Circular is a part is qualified by the SEC. The offering will terminate at the earlier of: (1) the date at which the maximum offering has been sold; (2) the date which is one year after this offering being qualified by the SEC; or (3) the date on which this offering is earlier terminated by us in our sole discretion. Following the qualification of the offering, we will designate one or more closing dates (each, a “Closing Date”), which shall be the date(s) are common stock are issued, subject to our acceptance of your subscription following, appropriate investor due diligence and your funds being cleared in accordance with our escrow agent’s policies and procedures.

 

Procedures for Subscribing

 

You will be able to make an investment in our common stock through an online investment platform. If you decide to subscribe for our securities offered in this offering, you should:

 

1.         Carefully read this Offering Circular, and any current supplement, as well as any documents described in the Offering Circular and attached hereto or which you have requested. Consult with your tax, legal and financial advisors to determine whether an investment in our common stock is suitable for you.

 

2.         Review the Subscription Agreement and execute the completed Subscription Agreement via electronic signature.

 

 

3.        Before or after a Subscription Agreement is signed, an integrated online payment portal will facilitate your transfer of funds by ACH, direct payment or by credit card (credit card investment may result in incurrence of third-party fees and charges, interest obligations which will lower your expected investment returns and could exceed your actual returns) in an amount equal to the purchase price of your shares (as set out on the front page of your Subscription Agreement) into an escrow account with the escrow agent. The escrow agent will hold such subscription funds in escrow until a Closing Date or such time as your subscription is rejected by us.

 

4.         We and Dalmore will review the subscription documentation completed and signed by you. You may be asked to provide additional information. We or Dalmore will contact you directly, if required. We reserve the right to reject any subscriptions, in whole or in part, for any or no reason, and to withdraw the offering at any time prior to a Closing Date.

 

5.         Once the review is complete, we or Dalmore will inform you whether or not your application to subscribe for our shares is approved or denied and if approved, the number of shares for which you are entitled to subscribe. If your subscription is rejected in whole or in part, then your subscription payments (being the entire amount if your application is rejected in whole or the payments associated with those subscriptions rejected in part) will be refunded, without interest or deduction. We will accept subscriptions on a first-come, first served basis subject to the right to reject or reduce subscriptions.

 

6.          If all or a part of your subscription is approved, then the number of shares you are entitled to subscribe will be issued to you on a Closing Date. Simultaneously with the issuance of your shares, the subscription monies held by the escrow agent in escrow on your behalf will be transferred to us.

 

By executing the Subscription Agreement, you agree to be bound by the terms of the Subscription Agreement. We and Dalmore will rely on the information you provide in the Subscription Agreement and the supplemental information you provide in order for Dalmore to verify that you are qualified to invest in this offering. If any information about your status changes prior to you being issued shares, please notify Dalmore or us immediately using the contact details set out in the Subscription Agreement.

 

Any potential investor will have ample time to review the Subscription Agreement, along with their counsel, prior to making any final investment decision. We shall only deliver such Subscription Agreement upon request after a potential investor has had ample opportunity to review this Offering Circular.

 

Right to Reject Subscriptions. After we receive your complete, executed Subscription Agreement and the funds required under the Subscription Agreement have been transferred to the escrow account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. The escrow agent will return all monies from rejected subscriptions promptly to you, without interest or deduction.

 

Acceptance of Subscriptions. Upon our acceptance of a Subscription Agreement, we will countersign the Subscription Agreement and issue the shares subscribed at the applicable Closing Date provided, however, that we reserve the right to reject any subscription, in whole or in part, for any reason or for no reason. Once you submit the Subscription Agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted Subscription Agreements are irrevocable.

 

Under Rule 251 of Regulation A, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser's revenue or net assets (as of the purchaser's most recent fiscal year end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser's annual income or net worth (please see below on how to calculate your net worth).

 

NOTE: For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the securities.

 

In order to purchase the securities and prior to the acceptance of any funds from an investor, an investor will be required to represent, to our satisfaction, that he or she is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this offering.

 

If, on the initial Closing Date, we have sold less than the maximum offering, then we may hold one or more additional closings for additional sales until the termination date. We will consider various factors in determining the timing of any additional closings, including but not limited to the amount of proceeds received at the initial closing, any additional closings that have already been held, and indications of interest shown by any additional prospective investors.

 

 

From the date of qualification until the initial Closing Date, and thereafter pending any additional closings on subsequent Closing Dates the proceeds from the offering will be kept in an escrow account. Upon the initial Closing Date and upon each additional Closing Date, if any, the proceeds therefrom will be distributed to us and the associated securities will be issued to the investors therein. If the initial closing never occurs, the proceeds from the offering will be promptly returned to investors, without deduction or interest.

 

PLEASE NOTE INVESTORS IN THIS OFFERING WILL BE INVESTING IN THE ISSUER OF THE SECURITIES AND WILL NOT BE CLIENTS OF DALMORE GROUP, A REGISTERED BROKER-DEALER AND MEMBER FINRA/SIPC, BY VIRTUE OF SUCH INVESTMENT. DALMORE GROUP’S ROLE IN THE TRANSACTION IS TO FACILITATE BACK OFFICE AND REGULATORY FUNCTIONS RELATED TO THE REGULATION A TRANSACTION, AND ACTS ONLY AS THE BROKER/DEALER OF RECORD FOR THE OFFERING LISTED. DALMORE GROUP IS NOT PROVIDING INVESTMENT ADVICE OR RECOMMENDATIONS, OR LEGAL OR TAX ADVICE.

 

NO MONEY OR OTHER CONSIDERATION IS BEING SOLICITED, AND IF SENT IN RESPONSE, WILL NOT BE ACCEPTED. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE OFFERING STATEMENT FILED BY THE COMPANY WITH THE SEC, OF WHICH THIS OFFERING CIRCULAR FORMS A PART, HAS BEEN QUALIFIED BY THE SEC. ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME BEFORE NOTICE OF ACCEPTANCE GIVEN AFTER THE DATE OF QUALIFICATION. AN INDICATION OF INTEREST INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND. AN OFFERING STATEMENT REGARDING THIS OFFERING HAS BEEN FILED WITH THE SEC.

 

No Minimum Offering Amount

 

There is no minimum offering amount the Company will be required to raise in this offering and we may close on any funds that we receive. Potential investors should be aware that there can be no assurance that any other funds will be invested in this offering other than their own funds. See “Risk Factors.”

 

No Selling Security Holders

 

No securities are being sold for the account of security holders; all net proceeds of this offering will go to the Company.

 

 

LEGAL MATTERS

 

The validity of the securities offered by this Offering Circular has been passed upon for us by Nason Yeager, Gerson, Harris & Fumero, P.A., Palm Beach Gardens, Florida.

 

EXPERTS

 

Our consolidated balance sheets as of December 31, 2022 and 2021 and the related consolidated statements of operations, shareholders’ deficit and cash flows for the fiscal years ended December 31, 2022 and 2021 included in this Offering Circular have been audited by M&K CPAS, PLLC, independent registered public accounting firm, as indicated in their report with respect thereto, and have been so included in reliance upon the report of such firm given on their authority as experts in accounting and auditing.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the SEC a Regulation A Offering Statement on Form 1-A under the Securities Act with respect to the shares of our common stock to be sold in this offering. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement and exhibits and schedules to the Offering Statement. For further information with respect to our company and the shares of common stock to be sold in this offering, reference is made to the Offering Statement, including the exhibits and schedules to the Offering Statement. Statements contained in this Offering Circular as to the contents of any contract is an exhibit to the Offering Statement, each statement is qualified in all respects by the exhibit to which the reference relates. In addition, upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act, and will file annual, quarterly and current reports and other information with the SEC. You may read and copy this information at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.

 

 

INDEX TO FINANCIAL STATEMENTS

 

 

Vado Corp.

 

Condensed Consolidated Financial Statements

 

	Page No.
Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	F-2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2023 and 2022	F-3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2023 and 2022	F-4
Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months Ended September 30, 2023 and 2022	F-5
Notes to Financial Statements	F-6
Report of Independent Registered Public Accounting Firm (PCAOB ID 2738)	F-21
Balance Sheets as of December 31, 2022 and 2021	F-22
Statements of Operations for the Years Ended December 31, 2022 and 2021	F-23
Statements of Cash Flows for the Years Ended December 31, 2022 and 2021	F-24
Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2022 and 2021	F-25
Notes to Financial Statements	F-26

 

 

Vado Corp.

Condensed Consolidated Balance Sheets

 

		September 30,				December 31,
		2023				2022
ASSETS
Current assets
Cash		$	455,352			$	485,053
Investments - restricted			1,016,236				-
Accounts receivable			3,391,491				2,080,758
Other current assets			294,063				245,486
Total current assets			5,157,142				2,811,297
Property and equipment, net of accumulated depreciation of $166,921 and $152,058			27,569				32,976
Right of use operating leases, net			148,451				581,352
Intangible assets -amortizable			153,277				286,801
Total Assets		$	5,486,439			$	3,712,426
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities			3,426,530				2,272,119
Acquisition liabilities			50,000				162,500
Deferred revenue			389,149				72,630
Lease liability, operating leases, current			160,899				631,144
Accrued settlement			2,476,926				1,707,652
Loans payable, current			3,098,806				348,945
Loans payable, related party, current			630,638				757,426
Convertible notes payable, related party, current, net of discount			739,503				-
Total current liabilities			10,972,451				5,952,416
Loans payable			200,000				2,127,836
Notes payable, related party			469,362				342,574
Convertible notes payable, related party, net of discount			1,021,670				-
Total Liabilities			12,663,483				8,422,826
Commitments and contingencies			-				-
Stockholders' equity (deficit)
Common stock, $0.001 par value, 490,000,000 shares authorized, 182,492,222 and 173,757,921 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			182,493				173,758
Preferred stock, Series A; $0.001 par value, 1,000,000 shares authorized, 223,333 and 170,000 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively			223				170
Additional paid-in capital			4,896,756				1,793,966
Accumulated deficit			(12,256,516	)			(6,678,294	)
Total stockholders' equity (deficit)			(7,177,044	)			(4,710,400	)
Total liabilities and stockholders' equity (deficit)		$	5,486,439			$	3,712,426

 

The accompanying notes are an integral part of these financial statements.

 

 

Vado Corp.

Condensed Consolidated Statements of Operations

(unaudited)

 

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2023				2022				2023				2022
Revenue		$	4,349,533			$	4,310,536			$	11,665,082			$	12,793,466
Cost of revenue			2,599,210				3,207,119				7,656,550				8,972,296
Gross Profit			1,750,323				1,103,417				4,008,532				3,821,170
Operating expenses:
Selling, general and administrative			2,222,019				2,006,154				7,081,210				7,273,281
Cost of legal settlement			-				-				894,274				-
Total operating expenses			2,222,019				2,006,154				7,975,484				7,273,281
Net operating loss			(471,696	)			(902,737	)			(3,966,952	)			(3,452,111	)
Other expense:
Interest expense, net of interest income			(1,165,641	)			(150,750	)			(1,611,270	)			(454,463	)
Total other expense			(1,165,641	)			(150,750	)			(1,611,270	)			(454,463	)
Net loss before provision for income taxes			(1,637,337	)			(1,053,487	)			(5,578,222	)			(3,906,574	)
Provision for income taxes			-				-				-				-
Net loss		$	(1,637,337	)		$	(1,053,487	)		$	(5,578,222	)		$	(3,906,574	)
Net loss per share - basic		$	(0.01	)		$	(0.01	)		$	(0.03	)		$	(0.02	)
Net loss per share - diluted		$	(0.01	)		$	(0.01	)		$	(0.03	)		$	(0.02	)
Weighted average shares outstanding - basic			182,438,137				168,579,889				181,193,901				169,250,716
Weighted average shares outstanding - diluted			182,438,137				168,579,889				181,193,901				169,250,716

 

The accompanying notes are an integral part of these financial statements.

 

 

Vado Corp.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

		For the Nine				For the Nine
		Months Ended				Months Ended
		September 30,				September 30,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income		$	(5,578,222	)		$	(3,906,574	)
Adjustment to reconcile net (loss) income to net cash used in operating activities:
Stock based compensation			512,143				208,540
Amortization of discount on investment			(15,450	)			-
Depreciation and amortization			169,485				150,184
Amortization of ROU asset			432,901				409,298
Amortization of discount on convertible note payable			201,859				-
Provision for doubtful accounts			114,217				87,826
Minimum interest liability on loan			1,172,638				-
Changes in assets and liabilities:
Accounts receivable			(1,424,950	)			1,155,758
Other current assets			51,423				(58,271	)
Accounts payable			1,108,089				(551,077	)
Deferred revenue			316,519				(127,364	)
Acquisition liability			(112,500	)			(112,500	)
Accrued settlement			769,274				(562,500	)
Operating lease liability			(470,245	)			(435,033	)
Net cash (used in) provided by operating activities			(2,752,819	)			(3,741,713	)
INVESTING ACTIVITIES
Cash paid for fixed assets			(8,706	)			(16,213	)
Cash paid for development of intangible assets			(21,848	)			(70,932	)
Investment in securities			(1,000,786	)			-
Net cash provided by (used in) investing activities			(1,031,340	)			(87,145	)
FINANCING ACTIVITIES
Proceeds from sale of common stock			500,000				500,000
Proceeds from notes payable - related parties			-				500,000
Proceeds from EIDL Loan			-				50,000
Proceeds from convertible notes payable - related parties			2,100,000				-
Issuance of Series A Preferred Stock for cash			1,500,000				-
Principal payments on loan payable			(350,613	)			(84,040	)
Stock options exercised for cash			5,071				-
Net cash provided by (used in) financing activities			3,754,458				965,960
Net increase in cash and cash equivalents			(29,701	)			(2,862,898	)
Cash and cash equivalents at beginning of period			485,053				3,536,384
Cash and cash equivalents at end of period		$	455,352			$	673,486
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid		$	365,039			$	345,020
Income taxes paid		$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
		$	-			$	-

 

The accompanying notes are an integral part of these financial statements.

 

 

Vado Corp.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2023 and 2022

 

		Common Stock								Preferred Stock Series A								Additional Paid-in				Accumulated
		Shares				Amount				Shares				Amount				Capital				Deficit				Total
Balance, June 30, 2022			168,773,282			$	168,773				150,000			$	150			$	419,561			$	(4,728,712	)		$	(4,140,228	)
Proceeds from sale of common stock			2,751,578				2,752				-				-				497,248				-				500,000
Exercise of stock options			613				-				-				-				52				-				52
Vesting of stock options			-				-				-				-				156,028				-				156,028
Net loss for the three months ended September 30, 2022			-				-				-				-				-				(1,053,487	)			(1,053,487	)
Balance, September 30, 2022			171,525,473			$	171,525				150,000			$	150			$	1,072,889			$	(5,782,199	)		$	(4,537,635	)
			-				-				-				-				-				-				-
Balance, December 31, 2021			168,579,889			$	168,580				150,000			$	150			$	367,242			$	(1,875,625	)		$	(1,339,653	)
Issuance of restricted stock awards to employee			193,393				193				-				-				(193	)			-				-
Proceeds from sale of common stock			2,751,578				2,752				-				-				497,248				-				500,000
Exercise of stock options			613				-				-				-				52				-				52
Vesting of stock options			-				-				-				-				208,540				-				208,540
Net loss for the nine months ended September 30, 2022			-				-				-				-				-				(3,906,574	)			(3,906,574	)
Balance, September 30, 2022			171,525,473			$	171,525				150,000			$	150			$	1,072,889			$	(5,782,199	)		$	(4,537,635	)
Balance, June 30, 2023			182,435,898			$	182,436				223,333			$	223			$	4,796,831				(10,619,179	)			(5,639,689	)
Share based compensation			-				-				-				-				94,911				-				94,911
Shares issued for conversion of stock options			56,324				57				-								5,014				-				5,071
Issuance of shares to service provider			-				-				-				-				-				-				-
Sale of Series A Preferred Stock for cash			-				-				-				-				-				-				-
Discount on convertible notes payable			-				-				-				-				-				-				-
Net loss for the three months ended September 30, 2023			-				-				-				-				-				(1,637,337	)			(1,637,337	)
Balance, September 30, 2023			182,492,222			$	182,493			$	223,333			$	223			$	4,896,756			$	(12,256,516	)		$	(7,177,044	)
Balance, December 31, 2022			173,757,921			$	173,758				170,000			$	170			$	1,793,966				(6,678,294	)			(4,710,400	)
Effect of reverse merger			6,985,500				6,986								-				(53,308	)			-				(46,322	)
Share based compensation			-				-				-				-				512,143				-				512,143
Issuance of shares to service provider			-				-				3,333				3				99,997								100,000
Sale of common stock for cash			1,692,477				1,692				-				-				498,308				-				500,000
Sale of Series A Preferred Stock for cash			-				-				50,000				50				1,499,950				-				1,500,000
Discount on convertible notes payable			-				-				-				-				540,686				-				540,686
Shares issued for conversion of stock options			56,324				57												5,014				-				5,071
Net loss for the nine months ended September 30, 2023			-				-				-				-				-				(5,578,222	)			(5,578,222	)
Balance, September 30, 2023			182,492,222			$	182,493				223,333			$	223			$	4,896,756			$	(12,256,516	)		$	(7,177,044	)

 

The accompanying notes are an integral part of these financial statements.

 

 

VADO CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(UNAUDITED)

 

1. Organization and Business

 

Vado Corp. (“Vado” or the “Company”) is a Nevada corporation established on February 10, 2017. On February 24, 2023 the Company completed a share exchange agreement (the “Exchange Agreement”) with Socialcom, Inc, a California corporation (“Socialcom”) and the shareholders of Socialcom (the “Closing”). Pursuant to the closing of the Exchange Agreement, the Company issued to the Socialcom shareholders a total of 173,757,921 shares of the Company’s common stock, representing approximately 96% of the outstanding shares of common stock of the Company after giving effect to such issuance, in exchange for all of the shares of Socialcom common stock held by such Socialcom shareholders. The net amount of 6,985,500 shares of the Company’s common stock were held by the previous Vado Corp. shareholders subsequent to the Exchange Agreement. Following the Closing, in May 2023 the Company issued a total of 6,015,757 shares of common stock in exchange for 687,515 shares of Socialcom common stock held by the then minority shareholders of Socialcom. As a result of the foregoing Socialcom became a wholly-owned (rather than a 96.6% owned) subsidiary of the Company. As a result of the Closing, Socialcom became an approximately 96% owned subsidiary of the Company. The Company acquired no assets and $46,322 of liabilities in connection with the Exchange Agreement. Following the closing, the Company through Socialcom operates as a digital marketing and services company focused on delivering integrated advertising and technology performance solutions to independent agencies and brands through its omnichannel trading desk platform.

 

Socialcom was incorporated in the State of California on March 8, 2013, for the purpose of delivering integrated advertising and technology services to independent agencies and brands. The Company’s tech solution, both self-service and managed service, is built to deliver end-to-end omnichannel performance, including advertising technology, data-driven campaign optimization and creative services. Since its inception the strategic focus of the company has been oriented toward mid-market businesses, a significant and generally underserved segment of the larger US economy, especially with respect to their need for powerful enterprise advertising technology solutions to drive improved business outcomes and level the playing field against often larger, better-funded competitors.

 

Socialcom continues to embrace future-first solutions, recognizing ongoing changes in the ad tech space, from data usage and privacy, to emerging technologies and platforms. The Company operates tdX, an omnichannel trading desk platform, providing unified buy-side access to the full-breadth of the ad tech ecosystem, including 24 performance platforms across programmatic, display, CTV, DOOH, and audio, along with search and social. tdX represents a holistic performance solution, unified by the company’s robust data infrastructure, delivering powerful real-time campaign learnings and cross-channel performance optimizations, along with sophisticated analytics designed to deliver scalable and sustainable campaign outcomes. Tech-enabled creative services, delivered by the Company’s internal creative team, Socialcom Studio, ensures that creative is a powerful driver of campaign success, providing differentiated, performance-oriented brand and product ad units and other digital content for deployment within customer campaigns.

 

Each of these elements, seamlessly integrated within Socialcom’s tech stack, represents a unified customer acquisition and growth solution for the performance marketer, seeking a holistic advertising solution that can deliver measurable and scalable results against clearly defined business goals.

 

The preparation of unaudited condensed interim financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

The unaudited interim condensed financial statements have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. These unaudited condensed interim financial statements should be read in conjunction with the audited consolidated financial statements and notes for the fiscal year ended December 31, 2022 of Socialcom, which was the accounting acquirer in the February 2023 share exchange described above as Vado was a shell company with no operations at the time of the closing of the share exchange. Such audited Socialcom financial statements are included in the Company’s Offering Statement on Form 1-A originally filed with the SEC on April 19, 2023, as amended.

 

 

2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in US dollars. The Company has adopted a fiscal year end of December 31. The accompanying condensed consolidated financial statements include the accounts of Socialcom and Vado Corp. All material intercompany transactions have been eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash of $455,352 and $485,053 and no cash equivalents as of September 30, 2023 and December 31, 2022, respectively.

 

Restricted Investment

 

The Company has a restricted investment in the amount of $1,016,236 in connection with a complaint filed by a former services provider of the Company in the amount of $1,442,441 for amounts due. The restricted investment is held in the form of a United States Treasury Bill which matures on May 16, 2024. It is the Company’s intention to hold this investment to maturity. See notes 13 and 16.

 

Property, Plant, and Equipment

 

Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy:

 

		Years
Office equipment			3 to 5
Furniture & fixtures			3 to 7
Leasehold improvements		Term of lease

 

Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation are eliminated and any resulting gain or loss is reflected in operations.

 

Long-Lived Assets

 

The Company reviews its property and equipment and any identifiable intangibles including goodwill for impairment on an annual basis utilizing the guidance set forth in the Statement of Financial Accounting Standards Board ASC 350 “Intangibles – Goodwill and Other” and ASC 360 “Property, Plant, and Equipment.” At September 30, 2023 and December 31, 2022, the net carrying value of intangible assets on the Company’s balance sheet was $153,277 and $286,801, respectively.

 

Concentrations of Credit Risk

 

The Company maintains its cash in bank deposit accounts and other accounts, the balances of which at times may be uninsured or exceed federally insured limits. From time to time, some of the Company’s funds are also held by escrow agents; these funds may not be federally insured. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts.

 

Advertising and Marketing Costs

 

All costs associated with advertising and promoting products are expensed as incurred. Total recognized advertising and marketing expenses were $123,820 and $282,071 for the nine months ended September 30, 2023 and 2022, respectively.

 

 

Fair Value of Financial Instruments

 

Pursuant to Accounting Standards Codification (“ASC”) No. 825 - Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying amounts of the Company’s cash and cash equivalents, notes receivable, convertible notes payable, accounts payable and accrued expenses, none of which is held for trading, approximate their estimated fair values due to the short-term maturities of those financial instruments.

 

A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.

 

Level 3 - Significant unobservable inputs that cannot be corroborated by market data.

 

Capitalized Software Development Costs

 

The Company capitalizes certain costs associated with creating and enhancing internally developed software related to the development of the Company’s platform solution. These costs include third party development expenses for that are directly associated with and devote time to software development projects. Software development costs that do not qualify for capitalization, as further discussed below, are expensed as incurred and recorded in operating expenses in the consolidated statements of operations.

 

The Company’s customers do not take possession of the software and cannot run the software on their own hardware. For these reasons, pursuant to ASC 985-20 Costs of Software to Be Sold, Leased, or Marketed (“ASC 982-20”), the software is considered a software hosting arrangement and the Company applied the guidance of ASC 350-40 Intangibles – Goodwill and Other: Internal Use Software” (“ASC 350-40"). Pursuant to ASC 350-40, software development activities typically consist of three stages: (1) the planning phase; (2) the application and infrastructure development stage; and (3) the post-implementation stage. Costs incurred in the planning and post implementation phases, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. The Company capitalizes costs associated with software developed when the preliminary project stage is completed, management implicitly or explicitly authorizes and commits to funding the project and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development phases, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete and the software is ready for its intended purpose. Software development costs are amortized using a straight-line method over the estimated useful life of three years, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived.

 

Operating Leases

 

The Company accounts for its leasing arrangements by applying the guidance of Accounting Standards Update No. 2016-02, Leases (Topic 842), (“ASU 2016-02”). The Company enters into operating leases for its office space. The Company does not have finance leases.

 

The Company determines if an arrangement is, or contains, a lease at inception. Operating lease assets represent the Company’s right to control the use of an identified asset for a period of time, or term, in exchange for consideration, and operating lease liabilities represent its obligation to make lease payments arising from the aforementioned right.

 

Operating lease assets and liabilities are initially recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit for each of the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate, based on the information available at the lease commencement date in determining the present value of its expected lease payments. The Company has elected to not separate lease and non-lease components.

 

Operating lease assets are amortized on a straight-line basis in operating lease expense over the lease term on the consolidated statements of operations. The related amortization, along with the change in the operating lease liabilities, are separately presented within the cash flows from operating activities on the consolidated statements of cash flows. The Company records lease expense for operating leases, some of which have escalating rent payments, on a straight-line basis over the lease term.

 

 

Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services. These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees and other factors.

 

Refer to Note 8 for additional information.

 

Revenue Recognition

 

The Company generates its revenue by providing marketers and advertising agencies with the ability to deliver digital marketing and marketing-related solutions. The Company’s primary business is to deliver omnichannel programmatic, paid search, and paid social advertising services for its customers. The Company also does a limited amount of marketing-related project work for customers, including creative services, and also has a reseller solution with a partner. This results in the following revenue streams:

 

	●	Programmatic Solutions
	●	Paid Search & Social Solutions
	●	Services Revenue
	●	Self-Serve Revenue

 

The Company applies a five-step approach as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606: Revenue from Contracts with Customers (“ASC 606”) in determining the amount and timing of revenue to be recognized:

 

	●	Identification of a contract with a customer;
	●	Identification of the performance obligation in the contract;
	●	Determination of the transaction price;
	●	Allocation of the transaction price to the performance obligations in the contract; and
	●	Recognition of revenue when or as the performance obligations are satisfied.

 

The determination of whether revenue should be reported on a gross or a net basis is based upon an assessment of whether we are acting as the principal or agent in the transaction based upon the guidance in ASC 606. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative. We act as a principal and recognize revenue on a gross basis if (i) we control the advertising inventory before it is transferred to our clients; (ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices. We applied the guidance of ASC 606 to our revenue streams as follows:

 

Programmatic Solutions: Programmatic revenue consists of delivering our customer’s budget programmatically through our trading desk model, where multiple Demand Side Platforms (“DSP”) are utilized to deliver advertising budgets as paid impressions. The Company, through its deep understanding of DSP platforms, transacts to spend customer’s budgets within the platforms to execute against customer marketing goals as efficiently and effectively as possible. In this arrangement, our team will perform all of the setup, activation, strategy, tactic building, implementation and delivery of the campaign through a partner platform or platforms. We enter into an Insertion Order / Media Plan (“IO”) with all Programmatic customers. The IO states the services that are to be performed and a budget for each tactic or tactics. We bill our customers for a percentage of the total spend, and recognize revenue upon completion of the performance obligation. Because we are in control of this process and assume inventory risk, we recognize revenue on a gross basis.

 

Paid Search & Social Solutions: We also enter into an IO with all Paid Search & Social customers. The IO states the services that are to be performed and a budget for each tactic. We bill our customers for a percentage of the total spend, and recognize revenue upon completion of the performance obligation. In instances where we pay the third party for inventory, we recognize revenue on a gross basis because we bear the inventory risk. In instances where the customer pays the third party, we recognize revenue on a net basis.

 

 

Services Revenue: We enter into Statement of Work (“SOW”) agreements with all Services customers. The SOW includes estimated costs to be applied against the services to be performed, and establishes payment and billing terms. Services revenue is recognized on a gross basis.

 

Self-Serve Revenue: Self-serve revenue consists of revenues generated through our Admatx platform, as well as through reselling access to a major enterprise DSP. Users of Admatx agree to our platform terms and conditions, and we enter into Master Services Agreements (“MSA”) with all reseller customers. The Platform Terms and Conditions and MSAs detail the work and responsibilities of each party and their respective obligations. Self-serve revenue is recognized on a net basis.

 

Deferred Revenue

 

Certain customer arrangements in the Company's business result in deferred revenues when cash payments are received in advance of performance.

 

The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets:

 

Balance acquired as of December 31, 2022			72,630
Cash payments received			1,994,020
Net sales recognized			(1,677,501	)
Balance as of September 30, 2023		$	389,149

 

Stock-Based Compensation

 

We recognize compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Under FASB ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Equity instruments issued to other than employees are recorded pursuant to the guidance contained in ASU 2018-07 (“ASU 2018-07”), Improvements to Non-employee Share-Based Payment Accounting, which simplified the accounting for share-based payments granted to non-employees for goods and services. Under the ASU 2018-07, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees.

 

Basic and Diluted Earnings or Loss Per Share

 

Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options to purchase common stock. Basic and diluted net loss per share are computed based on the weighted average number of shares of common stock outstanding during the period. At September 30, 2023 and December 31, 2022, the Company had the following potentially dilutive instruments outstanding: a total of 21,141,015 and 21,412,527 shares, respectively, issuable upon the exercise of stock options.

 

The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculations. At September 30, 2023 and 2022, 21,141,015 and 21,412,527 stock options, respectively, are excluded from the calculation of fully-diluted shares outstanding.

 

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method in accordance with ASC 740. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred tax assets and liabilities are classified as current and non-current based on their characteristics. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

 

Commitments and Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company management may consult its legal counsel to evaluate the perceived merits of any legal proceedings or unasserted claims brought to such legal counsel’s attention as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

 

Recent Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock, as well as amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard was effective for us on January 1, 2022. The adoption of this standard did not have a material effect on our consolidated financial statements.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

3. Accounts Receivable

 

Accounts receivable, net was $3,391,491 and $2,080,758 at September 30, 2023 and December 31, 2022, respectively. During the nine months ended September 30, 2023 and 2022, the Company charged the amount of $114,217 and $87,826, respectively, to bad debt expense. At September 30, 2023 and December 31, 2022, the Company maintained a reserve for doubtful accounts in the amount of $204,122 and $173,382, respectively.

 

On June 13, 2019, the Company entered into an accounts receivable financing and security agreement (the “Financing Agreement”) in the maximum amount of $10,000,000 whereby the Company would be advanced 85% of the gross value of accounts receivable invoices submitted to the lender for purchase. The cost of the financing consists of (i) an initial financing fee equal to one-twelfth of the net amount advanced multiplied by the facility rate, initially defined as LIBOR plus 6.5% per annum (the “Facility Rate”), and (ii) an additional financing fee consisting of one-twelfth of the amount advanced, prorated on a daily rate, multiplied by the Facility Rate. On June 11, 2021, the maximum amount available under the Financing Agreement was reduced to $5,000,000, and on June 8, 2022, the maximum amount available under the Financing Agreement was reduced to $3,000,000 and the Facility Rate was increased to LIBOR plus 7.25% per annum. On September 18, 2023, the maximum amount available under the Financing Agreement was reduced to $2,000,000 and the Facility Rate was increased to Prime Rate (defined as the higher of the highest rate as reported by the Wall Street Journal or 8.5%) plus 5% per annum. During the nine months ended September 30, 2023 and 2022, the Company charged to interest expense the amount of $88,142 and $75,490, respectively, pursuant to the Financing Agreement.

 

 

Accounts receivable, net consisted of the following at September 30, 2023 and December 31, 2022:

 

		September 30,				December 31,
		2023				2022
Accounts receivable		$	3,423,726			$	2,048,001
Due under Financing Agreement, net			171,887				257,731
Allowance for doubtful accounts			(204,122	)			(224,974	)
Total		$	3,391,491			$	2,080,758

 

4. Other Current Assets

 

Other current assets consisted of the following at September 30, 2023 and December 31, 2022:

 

		September 30,				December 31,
		2023				2022
Deposits		$	39,792				174,092
Prepaid expenses			254,271				71,394
Total		$	294,063			$	245,486

 

5. Property and Equipment

 

Property and equipment consisted of the following at September 30, 2023 and December 31, 2022:

 

		September 30,				December 31,
		2023				2022
Computer equipment		$	148,599			$	139,143
Leasehold improvements			45,891				45,891
Less: accumulated depreciation			(166,921	)			(152,058	)
Property and equipment, net		$	27,569			$	32,976

 

The Company made payments in the amounts of $8,706 and $16,213 for property and equipment during the nine months ended September 30, 2023 and 2022, respectively. Depreciation expense was $4,325 and $6,602 for the three months ended September 30, 2023 and 2022, respectively. Depreciation expense was $14,113 and $19,265 for the nine months ended September 30, 2023 and 2022, respectively.

 

6. Intangible Assets

 

In January 2021 the Company completed the acquisition of certain assets consisting of customer contracts and customer lists (the “BigBuzz Customer Lists”) from BigBuzz Marketing Group (“BigBuzz”). The cost of the BigBuzz Customer Lists was $475,000 payable over three years (see note 9). The Company also capitalized the direct costs of this transaction in the amount of $7,462 for a total cost basis of $482,462. The BigBuzz Customer Lists are being amortized over a period of three years based on the expected customer life of the assets acquired.

 

The Company began to capitalize the costs of development of internal use software in August 2021, and software was first placed into service in May, 2022. During the year ended December 31, 2022, the Company capitalized $89,094 of costs to develop internal use software, placed $123,937 of costs to develop internal use software into service, and amortized the amount of $19,969. During the nine months ended September 30, 2023, the Company capitalized $21,847 of costs to develop internal use software, placed $25,961 of costs to develop internal use software into service, and amortized the amount of $22,793.

 

The Company has $4,497 and $8,611 in capitalized software costs that have not yet been placed into service at September 30, 2023 and December 31, 2022, respectively.

 

 

Intangible assets consisted of the following at September 30, 2023 and December 31, 2022:

 

		September 30, 2023
						Accumulated
		Gross				Amortization				Net
Customer lists		$	482,462			$	(428,855	)		$	53,607
Internal use software			154,395				(54,725	)			99,670
Total		$	636,857			$	(483,580	)		$	153,277

 

		December 31, 2022
						Accumulated
		Gross				Amortization				Net
Customer lists		$	482,462			$	(308,240	)		$	174,222
Internal use software			132,548				(19,969	)			112,579
Total		$	615,010			$	(328,209	)		$	286,801

 

The Company amortized the amount of $52,167 and $42,390 during the three months ended September 30, 2023 and 2022, respectively. The Company amortized the amount of $155,371 and $82,595 during the nine months ended September 30, 2023 and 2022, respectively.

 

7. Right of Use Assets and Liabilities

 

The Company leases its corporate office under an operating lease. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. The lease terms may include options to extend when it is reasonably certain that the Company will exercise that option.

 

Topic ASC 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. Right of use assets are recorded in other assets on the Company’s condensed consolidated balance sheets. Current and non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on its condensed consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease.

 

At September 30, 2023 and December 31, 2022, the Company had total right of use assets of $148,451 and $581,352, respectively, and lease liabilities of $160,899 and $631,144, respectively, which were included in the Company’s balance sheets. Right to use assets – operating leases are summarized below:

 

		September 30, 2023				December 31, 2022
Administrative office		$	148,451			$	581,352
Right to use assets, net		$	148,451			$	581,352

 

Operating lease liabilities are summarized below:

 

		September 30, 2023				December 31, 2022
Administrative office		$	160,899			$	631,144
Lease liability		$	160,899			$	631,144
Less: current portion			(160,899	)			(631,144	)
Lease liability, non-current		$	-			$	-

 

The Company’s lease expense was entirely comprised of operating leases. Lease expense for the nine months ended September 30, 2023 and 2022 was $449,582 and $449,582, respectively. The Company’s right of use (“ROU”) asset amortization for the nine months ended September 30, 2023 and 2022 was $432,901 and $409,298, respectively; the difference between the lease expense and the associated ROU asset amortization consists of interest.

 

Maturity analysis under these lease agreements are as follows:

 

For the twelve months ended September 30, 2024		$	162,309
Less: Present value discount			(1,410	)
Lease liability		$	160,899

 

 

8. Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consisted of the following at September 30, 2023 and December 31, 2022:

 

		September 30,				December 31,
		2023				2022
Trade accounts payable		$	2,527,929			$	1,585,352
Credit cards payable			564,435				371,773
Accrued payroll and payroll taxes			194,193				261,535
Accrued interest			139,973				53,459
Total		$	3,426,530			$	2,272,119

 

9. Acquisition Liabilities

 

In January 2021 the Company recorded a liability in the amount of $475,000 in connection with the acquisition of the BigBuzz Customer Lists (see note 6), which consisted of a three-year employment agreement for each of the two founders of BigBuzz. As this was an acquisition of only certain assets consisting of customer contracts and customer lists (see note 6), no other assets were acquired that would give rise to acquisition related liabilities; there were no requirements to hire any other employees as part of the asset acquisition. The Company paid $25,000 of this amount on February 2, 2021; the remainder is payable at the rate of $12,500 per month through January 31, 2024. During the nine months ended September 30, 2023 and 2022, the Company paid the amount of $112,500 in connection with this liability.

 

10. Loans Payable

 

		September 30, 2023				December 31, 2022
Loan payable to Decathlon dated December 31, 2019 (the “Decathlon Loan”) in the principal amount of $3,000,000. The Decathlon Loan is due June 30, 2024 and is collateralized by all the assets of the Company. The Decathlon Loan accrues interest at a variable rate based upon internal rate of return targets. The effective rate of interest for the year ended December 31, 2022 and the nine months ended September 30, 2023 was approximately 17%. There are no restrictive covenants in the loan and it is not convertible. Repayments are required based upon a fixed percentage of our earned revenue. If not repaid prior the final balance is due on June 13, 2024. The Decathlon Loan is subject to minimum interest that escalates over the term of the loan. During the three months ended September 30, 2023, the minimum interest on this loan increased by $900,000 to a total of $3,900,000. The Company accounted for the minimum interest liability as a discount on the debt. At September 30, 2023 and December 31, 2022, the potential liability for unearned minimum interest was $1,388,866 and $1,661,504, respectively. During the nine months ended September 30, 2023, the Company made principal payments in the amount $350,613 on the Decathlon loan. During the nine months ended September 30, 2022, the Company made principal payments in the amount $84,040 respectively, on the Decathlon loan.		$	3,098,806			$	2,276,781
Loan payable to the US Small Business Administration (the “EIDL Loan”) dated July 7, 2020 pursuant to the Small Business Administration Economic Injury Disaster Loan Program (the “EIDL”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the original principal amount of $150,000. Effective March 31, 2022, the Company borrowed an additional $50,000 under the EIDL Loan and the balance due was amended to $200,000. Interest payments in the amount of $989 per month were due beginning in January 2023. The term of the EIDL Loan is 30 years, and the annual interest rate is 3.75%. EIDL Loan recipients can apply for, and be granted forgiveness for, all or a portion of loans granted. During the nine months ended September 30, 2023 and 2022, the Company accrued interest in the amount of $8,901 and $3,154, respectively, on the EIDL Loan.			200,000				200,000
Total		$	3,298,806			$	2,476,781
Current portion		$	3,098,806			$	348,945
Long-term maturities			200,000				2,127,836
Total		$	3,298,806			$	2,476,781

 

 

Aggregate maturities of loans payable as of September 30, 2023 are as follows:

 

For the twelve months ended September 30,

 

2024		$	3,098,806
2025			-
2026			1,363
2027			4,496
2028 and thereafter			194,141
Total		$	3,298,806

 

11. Loans Payable – Related Parties

 

		September 30, 2023				December 31, 2022
Loan payable to an entity affiliated to Jason Wulfsohn, the Company’s CEO and a director, originally dated March 21, 2020 and renewed March 21, 2021, March 21, 2022, and March 21, 2023 in the amount of $300,000 bearing interest at the rate of 15% and due March 21, 2024 (“March 2021 Loan 1”). During the three months ended September 30, 2023 and 2022, the Company made interest payments of $11,250 on the March 2021 Loan 1. During the nine months ended September 30, 2023 and 2022, the Company made interest payments of $33,750 on the March 2021 Loan 1.		$	300,000			$	300,000
Loan payable to an entity affiliated to Reeve Benaron, the Company’s Chairman, originally dated March 21, 2020 and renewed March 21, 2021, and March 21, 2022, and March 11, 2023 in the amount of $300,000 bearing interest at the rate of 15% and due March 21, 2024 (the “March 2021 Loan 2”). During the three months ended September 30, 2023 and 2022, the Company made interest payments of $11,250 on the March 2021 Loan 2. During the nine months ended September 30, 2023 and 2022, the Company made interest payments of $33,750 on the March 2021 Loan 2.			300,000				300,000
Loan payable to an entity affiliated to Reeve Benaron, the Company’s Chairman and a principal stockholder, dated June 20, 2022 in the amount of $500,000 bearing interest at the rate of 2.19% and due December 31, 2024 (the “June 2022 Loan”). The June 2022 Loan is payable in eighteen monthly installments of $28,889 beginning on July 20, 2023. On November 13, 2023, the June 2022 Loan was amended to the loan being payable in eighteen monthly installments of $31,354 beginning on July 20, 2024, and the interest rate on the loan was increased to 8.25%. During the three months ended September 30, 2023 and 2022 the Company accrued interest in the amount of $10,312 and $2,738, respectively, on the June 2022 Loan. During the nine months ended September 30, 2023 and 2022 the Company accrued interest in the amount of $15,788 and $3,650, respectively, on the June 2022 Loan.			500,000				500,000
Total		$	1,100,000			$	1,100,000
Current portion		$	630,638			$	757,426
Long-term maturities			469,362				342,574
Total		$	1,100,000			$	1,100,000

 

Aggregate maturities of loans payable – related parties as of September 30, 2023 are as follows:

 

For the nine months ended September 30,

 

2024		$	630,638
2025			348,119
2026			121,243
Total		$	1,100,000

 

 

12. Convertible Note Payable – Related Party

 

		September 30, 2023				December 31, 2022
Convertible promissory note payable to an entity affiliated to Reeve Benaron, the Company’s Chairman and a principal shareholder, dated February 7, 2023 in the amount of $800,000 bearing interest at the rate of 7.25% and due December 31, 2023 (the “February Convertible Note”). The February Convertible Note is convertible into common stock of the Company at a price of $2.04 per share. The Company recorded a beneficial conversion feature in the amount $215,686 in connection with the February Convertible Note; during the three and nine months ended September 30, 2023, $60,497 and $155,189, respectively, of the discount was amortized to interest expense. During the three and nine months ended September 30, 2023, the Company accrued interest in the amount of $15,096 and $38,614, respectively, on the February Convertible Note.			800,000				-
Convertible promissory note payable to an entity affiliated to Jason Wulfsohn, the Company’s CEO and a director, dated May 12, 2023, in the amount of $1,300,000 bearing interest at the rate of 7.25% and due December 31, 2025 (the “May Convertible Note”). The May Convertible Note is convertible into common stock of the Company at a price of $0.32 per share. The Company recorded a beneficial conversion feature in the amount $325,000 in connection with the May Convertible Note. During the three and nine months ended September 30, 2023, $31,113 and $46,670 of the discount, respectively, was amortized to interest expense. During the three and nine months ended September 30, 2023, the Company accrued interest in the amount of $24,531 and $36,667, respectively, on the May Convertible Note.			1,300,000				-
Total		$	2,100,000			$	-
Current portion		$	800,000			$	-
Long-term maturities			1,300,000				-
Total		$	2,100,000			$	-

 

Principal		$	2,100,000			$	-
Discount			(338,827	)			-
Principal net of discount		$	1,761,173			$	-

 

13. Accrued Settlements

 

On December 31, 2019, the Company accrued the amount of $650,000 in connection with the settlement of a dispute with a former contractor. See note 16. At December 31, 2022, the balance due under this accrued liability was $62,500. During the nine months ended September 30, 2023 and 2022, the Company made payments on this accrued liability in the amount of $62,500 and $0, respectively. At September 30, 2023, the amount of $0 remains on the Company’s balance sheet as an accrued liability.

 

On December 31, 2018, the Company accrued the amount of $100,000 in connection with the settlement of a dispute with a former employee. See note 16. During the nine months ended September 30, 2023 and 2022, the Company made payments on this accrued liability in the amount of $62,500 and $0, respectively. At September 30, 2023, the amount of $0 remains on the Company’s balance sheet as an accrued liability.

 

On December 31, 2019 the Company accrued $1,582,652 in connection with a vendor dispute. During the three months ended September 30, 2023, the Company accrued an additional $894,274 pursuant to this dispute. See note 16. At September 30, 2023, the amount of $2,476,926 remains on the Company’s balance sheet as an accrued liability. The Company has investments in the amount of $1,016,236 on its balance sheet at September 30, 2023 for the purpose of funding a surety bond in connection with this liability. See note 16.

 

 

14. Stockholders’ Equity

 

The Company’s authorized capital stock consists of 490,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of preferred stock, par value $0.001, 1,000,000 shares of which are designated as Series A Preferred Stock.

 

Common Stock

 

Nine months ended September 30, 2023:

 

On January 30, 2023, Socialcom sold 1,692,477 shares of common stock at a price of $0.295 per share for cash in the amount of $500,000. These shares of Socialcom common stock were later exchanged for Vado common stock at a ratio of one-for-8.75 pursuant to the Exchange Agreement described in the paragraph that immediately follows.

 

On February 24, 2023 the Company completed the Exchange Agreement with pursuant which to the Company issued to the Socialcom shareholders a total of 173,757,921 shares of the Company’s common stock, representing approximately 96% of the outstanding shares of common stock of the Company after giving effect to such issuance, in exchange for all of the shares of Socialcom common stock held by such Socialcom shareholders. As a result of the foregoing, Socialcom became an approximately 96.6% owned subsidiary of the Company. Following the Closing, in May 2023 the Company issued a total of 6,015,757 shares of common stock in exchange for 687,515 shares of Socialcom common stock held by the then minority shareholders of Socialcom. As a result of the foregoing Socialcom became a wholly-owned (rather than a 96.6% owned) subsidiary of the Company. See note 1.

 

On August 29, 2023, the Company issued 56,324 shares of common stock for the exercise of stock options at a price of $0.09 per shares.

 

Nine months ended September 30, 2022:

 

None.

 

Preferred Stock

 

Series A Convertible Preferred Stock

 

The Company has designated 1,000,000 shares of Series A Convertible Preferred Stock, par value $0.001. Subject to certain limitations set forth in the Certificate of Designation of the Series A, each share of Series A is convertible into 20 shares of the Company’s common stock. The Series A is non-voting except as may be required by applicable law. The Series A also provides the holders with senior ranking with respect to the Company’s capital stock upon the occurrence of a liquidation, dissolution or winding up, and a liquidation preference in the event of the merger or consolidation of the Company in which the Company is not the surviving entity, the sale of all of the assets of the Company in a transaction which requires stockholder approval or the dissolution or winding up of the Company, in each case at the stated value of $30 per share of Series A.

 

Nine months ended September 30, 2023:

 

On February 24, 2023, the Company sold 25,000 shares of Series A Preferred Stock at a price of $30.00 per share for cash proceeds of $750,000 in the first tranche of a Securities Purchase Agreement entered into on January 30, 2023. On May 25, 2023, the Company sold an additional 25,000 shares of Series A Preferred stock for cash proceeds of $750,000.

 

On June 1, 2023, the Company issued 3,333 shares of Series A Preferred Stock to a service provider with a fair value of $30 per shares. The amount of $100,000 was charged to prepaid expenses and will be amortized over the one year term of the agreement. During the three months ended June 30, 2023, the Company charged to operations the amount of $3,333 in connection with this transaction.

 

Nine months ended September 30, 2022:

 

None.

 

 

Options

 

The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company as of September 30, 2023:

 

													Weighted								Weighted
									Weighted				average								average
									average				exercise								exercise
	Range of				Number of				Remaining				price of				Number of				price of
	exercise				options				contractual				outstanding				options				exercisable
	Prices				Outstanding				life (years)				Options				Exercisable				Options
	$	0.035				525,000				3.25			$	0.035				525,000			$	0.035
	$	0.086				367,500				6.98			$	0.086				271,793			$	0.086
	$	0.088				2,900,625				7.47			$	0.088				1,664,679			$	0.088
	$	0.094				4,398,678				8.86			$	0.094				1,646,645			$	0.097
	$	0.104				12,949,212				6.32			$	0.104				12,949,212			$	0.104
						21,141,015				6.95			$	0.098				17,057,329			$	0.099

 

Transactions involving stock options are summarized as follows:

 

		Number of Shares				Weighted Average Exercise Price
Options outstanding at December 31, 2021			7,076,563			$	0.083
Granted			18,905,390				0.102
Exercised			(1,225	)			0.086
Cancelled / Expired			(3,187,188	)			0.089
Options outstanding at December 31, 2022			22,793,540			$	0.098
Granted			-				-
Exercised			(56,324	)			0.089
Cancelled / Expired			(1,596,201	)			0.092
Options outstanding at September 30, 2023			21,141,015			$	0.098

 

During the three months ended September 30, 2023, the Company charged $94,911 to stock based compensation expense for stock options. During the three months ended September 30, 2022, the Company charged $56,564 to stock based compensation expense, including $48,102 for stock options and $8,462 for stock awards.

 

During the nine months ended September 30, 2023, the Company charged $512,143 to stock based compensation expense for stock options. During the nine months ended September 30, 2022, the Company charged $208,540 to stock based compensation expense, including $200,078 for stock options and $8,462 for stock awards.

 

The aggregate intrinsic value of options outstanding and exercisable at September 30, 2023 and December 31, 2022 was $4,169,287 and $2,884,456, respectively. Aggregate intrinsic value represents the difference between the fair value of the Company’s stock on the last day of the fiscal period, which was $0.295 and $0.22 as of September 30, 2023 and December 31, 2022, respectively, and the exercise price multiplied by the number of options outstanding.

 

There were no options valued during the nine months ended September 30, 2023. During the year ended December 31, 2022, the Company valued options using the Black-Scholes valuation model utilizing the following variables:

 

		December 31,
		2022
Volatility			69.93-79.02	%
Dividends		$	-
Risk-free interest rates			1.47-4.35	%
Expected term (years)			2.77-6.15

 

 

15. Income Taxes

 

The Company uses the asset and liability method to account for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If a carryforward exists, the Company decides as to whether the carryforward will be utilized in the future. Currently, a valuation allowance is established for all deferred tax assets and carryforwards as their recoverability is deemed to be uncertain. If the Company’s expectations for future operating results at the federal or at the state jurisdiction level vary from actual results due to changes in healthcare regulations, general economic conditions, or other factors, it may need to adjust the valuation allowance, for all or a portion of the Company’s deferred tax assets. The Company’s income tax expense in future periods will be reduced or increased to the extent of offsetting decreases or increases, respectively, in the Company’s valuation allowance in the period when the change in circumstances occurs. These changes could have a significant impact on the Company’s future earnings.

 

Income tax expense was $0 for the nine months ended September 30, 2023, compared to $0 for the nine months ended September 30, 2022. The annual forecasted effective income tax rate for 2023 is 0%. The Company has no net operating loss carryforward due to the change of control inherent in the Exchange Agreement (see note 1). The Company has no uncertain tax positions at September 30, 2023 or December 31, 2022.

 

16. Commitments and Contingencies

 

In September 2019 there was an allegation of discrimination made by a former consultant. The Company vigorously denies any wrongdoing. See Note 13. The Company has recorded a liability in the amount of $650,000 on the balance sheet related to this matter. During the nine months ended September 30, 2023 and 2022, the Company made payments on this accrued liability in the amount of $62,500 and $0, respectively. At September 30, 2023, the amount of $0 remains on the Company’s balance sheet as an accrued liability.

 

In October 2019, there was an allegation of discrimination made by a former employee. The Company vigorously denies any wrongdoing. See Note 13. The Company has recorded a liability in the amount of $100,000 on the balance sheet related to this matter. During the nine months ended September 30, 2023 and 2022, the Company made payments on this accrued liability in the amount of $62,500 and $0, respectively. At September 30, 2023, the amount of $0 remains on the Company’s balance sheet as an accrued liability.

 

In June 2019, a former services provider of the Company filed a complaint in the amount of $1,442,441 for amounts due. See Note 13. The Company countersued for breach of agreement. During the three months ended September 30, 2023, the Company accrued an additional $894,274 pursuant to this dispute as a result a claim for an additional liability and a judgment for court costs against the Company. The Company plans to appeal this judgement which the Company believes is unlawful. The Company has recorded a liability in the amount of $2,476,926 on the balance sheet at September 30, 2023 in connection with this complaint. The Company has restricted cash in the amount of $1,016,236 for purposes of funding a surety bond in connection with this complaint. See note 13.

 

From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business, or current or previous employees, or current or previous directors, or as a result of acquisitions and dispositions or other corporate activities. The Company intends to vigorously defend its positions. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our financial position or our business, and the outcome of these matters cannot be ultimately predicted.

 

17. Going Concern

 

As of September 30, 2023, we had unrestricted cash on hand of $455,352 and a working capital deficit of $5,815,309. Management believes this amount is not sufficient to meet our operating needs for the 12 months subsequent to the date of this filing. In order to meet our working capital requirements, we will need to either raise sufficient capital and/or increase revenue by executing against our various ongoing strategic growth initiatives while continuing to actively reduce, maintain, or manage our current expenditures. The Company’s ability to continue as a going concern is dependent upon its ability to improve cash flow and the ability to obtain additional financing, including debt and equity offerings. These and other listed factors cause substantial doubt about the Company’s ability to continue as a going concern.

 

 

18. Related Party Transactions

 

See Notes 11 and 12 for a description of related party transactions.

 

19. Subsequent Events

 

On October 27, 2023, the Board of Directors of the Company’s subsidiary Socialcom, approved the issuance of options to purchase a total of 607,810 shares of Socialcom common stock to Socialcom employees. The shares exercise price of the options is $2.58 per share, which is the fair market value per share of Socialcom common stock on the date of the grant.  Except for a total of 35,000 options which vest over a four-year period ending in 2027, these options were fully vested at the date of the grant. Subject to regulatory compliance and the requisite approvals, it is the Company’s intention to exchange these Socialcom options into options to purchase shares of the Company’s common stock at the rate of 8.75 to 1, which is the exchange ratio used in the Exchange Agreement. See note 14. This exchange would result in the issuance of options to purchase approximately 5,318,338 shares of the Company’s common stock. with an exercise price of approximately $0.295.

 

On November 13, 2023, Amendment No. 1 to the Promissory Note related to June 2022 Loan with Reeve Benaron was entered into (see related disclosures in Footnote 11 above), wherein the repayment start date was amended to July, 2024, the interest rate was increased to 8.25%, the monthly repayment amount was amended to $31,354, and the noteholder was replaced with an entity affiliated with Mr. Benaron.

 

On November 15, 2023, the Company borrowed $625,000 from a trust controlled by Jason Wulfsohn, the Company’s CEO and a principal shareholder, and issued a convertible promissory note in the principal amount of $625,000. The note accrues interest at 8.5% per annum and matures in December 2025. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of $0.32 per share.

 

 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of Socialcom, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Socialcom, Inc. (the Company) as of December 31, 2022 and 2021, and the related statements of operations, stockholders’ equity, and cash flows for each of the two-year periods ended December 31, 2022 and 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022 and 2021 in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

 

Revenue Recognition

 

As discussed in Note 2, the Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company offers customers the ability to acquire multiple services. Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements. Given these factors and due to the volume of transactions, the related audit effort in evaluating management's judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment.

 

We tested the Company’s allocation of the transaction price and other variables that impact revenue recognition.

 

/s/ M&K CPAS, PLLC

 

We have served as the Company’s auditor since 2022

Houston, TX

April 5, 2023

 

 

SOCIALCOM, INC.

Balance Sheets

 

		December 31,				December 31,
		2022				2021
ASSETS
Current assets
Cash		$	485,053			$	3,536,384
Accounts receivable, net			2,080,758				3,466,024
Other current assets			245,486				178,380
Total current assets			2,811,297				7,180,788
Property and equipment, net of accumulated depreciation of $152,058 and $125,901			32,976				39,393
Right of use operating leases, net			581,352				1,130,922
Intangible assets -amortizable, net			286,801				378,497
Total Assets		$	3,712,426			$	8,729,600
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities			2,272,119				2,847,356
Acquisition liabilities			162,500				312,500
Deferred revenue			72,630				202,406
Lease liability, operating leases, current			631,144				583,884
Loans payable, current			348,945				99,369
Loans payable, related party, current			757,426				600,000
Accrued settlement			1,707,652				2,332,652
Total current liabilities			5,952,416				6,978,167
Lease liability, operating leases, non-current			-				631,144
Loans payable, non-current			2,127,836				2,459,942
Loans payable, related party, non-current			342,574				-
Total Liabilities			8,422,826				10,069,253
Commitments and contingencies			-				-
Stockholders' equity (deficit)
Common stock, $0.001 par value, 30,500,000 shares authorized, 19,858,048 and 19,266,273 shares issued and outstanding at December 31, 2022 and 2021, respectively			19,858				19,266
Additional paid-in capital			1,948,036				516,706
Accumulated deficit			(6,678,294	)			(1,875,625	)
Total stockholders' equity (deficit)			(4,710,400	)			(1,339,653	)
Total liabilities and stockholders' equity (deficit)		$	3,712,426			$	8,729,600

 

The accompanying notes are an integral part of these financial statements.

 

 

SOCIALCOM, INC.

Statement of Operations

 

		For the Year Ended
		December 31,
		2022				2021
Revenue		$	17,619,504			$	29,771,957
Cost of revenue			11,496,539				19,153,943
Gross Profit			6,122,965				10,618,014
Operating expenses:
Selling, general and administrative			10,318,956				11,217,290
Total operating expenses			10,318,956				11,217,290
Net operating (loss) income			(4,195,991	)			(599,276	)
Other income (expense):
Interest expense, net of interest income			(606,678	)			(719,908	)
Gain on forgiveness of debt			-				2,434,773
Refundable tax credit, net of costs			-				737,137
Total other income (expense)			(606,678	)			2,452,002
Net (loss) income before provision for income taxes			(4,802,669	)			1,852,726
Provision for income taxes			-				-
Net (loss) income		$	(4,802,669	)		$	1,852,726
Net (loss) income per share - basic		$	(0.25	)		$	(0.25	)
Net (loss) income per share - diluted		$	(0.25	)		$	(0.23	)
Weighted average shares outstanding - basic			19,472,691				19,140,172
Weighted average shares outstanding - diluted			19,472,691				19,182,036

 

The accompanying notes are an integral part of these financial statements.

 

 

SOCIALCOM, INC.

Statement of Cash Flows

 

		For the				For the
		Year Ended				Year Ended
		December 31,				December 31,
		2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income		$	(4,802,669	)		$	1,852,726
Adjustment to reconcile net (loss) income to net cash used in operating activities:
Gain on forgiveness of debt			-				(2,434,773	)
Stock based compensation			431,817				63,826
Depreciation and amortization			206,947				180,145
Amortization of ROU asset			549,570				520,190
Provision for doubtful accounts			138,968				40,659
Changes in assets and liabilities:
Acquisition liability			(150,000	)			(162,500	)
Accounts receivable			1,246,298				2,495,301
Other current assets			(67,106	)			(38,276	)
Accounts payable			(575,237	)			(1,729,478	)
Deferred revenue			(129,776	)			158,832
Accrued settlement			(625,000	)			(75,000	)
Operating lease liability			(583,884	)			(539,467	)
Net cash (used in) provided by operating activities			(4,360,072	)			332,185
INVESTING ACTIVITIES
Cash paid for fixed assets			(19,740	)			(26,297	)
Cash paid for development of intangible assets			(89,094	)			(43,454	)
Cost of investment in BBMG			-				(7,462	)
Net cash provided by (used in) investing activities			(108,834	)			(77,213	)
FINANCING ACTIVITIES
Proceeds from sale of common stock			1,000,000				-
Proceeds from exercise of stock options			105				34,275
Proceeds from related party notes payable			500,000				-
Proceeds from EIDL Loan			50,000				-
Proceeds from PPP Loan			-				1,104,122
Principal payments on loan payable			(132,530	)			(399,225	)
Cash paid for distribution to investor			-				(7,500	)
Net cash provided by (used in) financing activities			1,417,575				731,672
Net increase in cash and cash equivalents			(3,051,331	)			986,644
Cash and cash equivalents at beginning of period			3,536,384				2,549,740
Cash and cash equivalents at end of period		$	485,053			$	3,536,384
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid		$	402,648			$	937,829
Income taxes paid		$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrual of investment costs		$	-			$	475,000

 

The accompanying notes are an integral part of these financial statements.

 

 

SOCIALCOM, INC.

Statement of Changes in Stockholders' Equity (Deficit)

Years ended December 31, 2022 and 2021

 

										Additional
		Common Stock								Paid-in				Accumulated
		Shares				Amount				Capital				Deficit				Total
Balance, December 31, 2021			19,105,568			$	19,106			$	426,265			$	(3,728,351	)		$	(3,282,980	)
Stock issued for exercise of options			80,500				80				34,195				-				34,275
Issuance of restricted stock awards to employees			80,205				80				(44	)			-				36
Vesting of stock options			-				-				63,790				-				63,790
Distribution to shareholder			-				-				(7,500	)			-				(7,500	)
Net income for the year ended December 31, 2021			-				-				-				1,852,726				1,852,726
Balance, December 31, 2021			19,266,273				19,266				516,706				(1,875,625	)			(1,339,653	)
Balance, December 31, 2022			19,266,273			$	19,266			$	516,706			$	(1,875,625	)		$	(1,339,653	)
Proceeds from the sale of common stock			569,533				570				999,430				-				1,000,000
Issuance of restricted stock awards to employee			22,102				22				16,902	)			-				16,924
Issuance of shares for exercise of stock options			140				-				105				-				105
Vesting of stock options			-				-				414,893				-				414,893
Net income for the year ended December 31, 2022			-				-				-				(4,802,669	)			(4,802,669	)
Balance, December 31, 2022			19,858,048			$	19,858			$	1,948,036			$	(6,678,294	)		$	(4,710,400	)

 

The accompanying notes are an integral part of these financial statements.

 

 

SOCIALCOM, INC.

 

Notes to Financial Statements

 

1. Nature of Operations

 

SocialCom, Inc., a California corporation (the “Company,” “we,” “us,” or “SocialCom”) was incorporated in the State of California on March 8, 2013, for the purpose of delivering integrated advertising and technology services to independent agencies and brands. The Company’s tech solution, both self-service and managed service, is built to deliver end-to-end omnichannel performance, including advertising technology, data-driven campaign optimization and creative services. Since its inception the strategic focus of the company has been oriented toward mid-market businesses, a significant and generally underserved segment of the larger US economy, especially with respect to their need for powerful enterprise advertising technology solutions to drive improved business outcomes and level the playing field against often larger, better-funded competitors.

 

The company continues to embrace future-first solutions, recognizing ongoing changes in the ad tech space, from data usage and privacy, to emerging technologies and platforms. The Company operates tdX, an omnichannel trading desk platform, providing unified buy-side access to the full-breadth of the ad tech ecosystem, including 24 performance platforms across programmatic, display, CTV, DOOH, and audio, along with search and social. tdX represents a holistic performance solution, unified by the company’s robust data infrastructure, delivering powerful real-time campaign learnings and cross-channel performance optimizations, along with sophisticated analytics designed to deliver scalable and sustainable campaign outcomes. Tech-enabled creative services, delivered by the Company’s internal creative team, Socialcom Studio, ensures that creative is a powerful driver of campaign success, providing differentiated, performance-oriented brand and product ad units and other digital content for deployment within customer campaigns.

 

Each of these elements, seamlessly integrated within the Socialcom, Inc. tech stack, represents a unified customer acquisition and growth solution for the performance marketer, seeking a holistic advertising solution that can deliver measurable and scalable results against clearly defined business goals.

 

2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in US dollars. The Company has adopted a fiscal year end of December 31.

 

Going Concern

 

Our financial statements were prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. As shown in the accompanying financial statements, during the year ended December 31, 2022, the Company incurred a net loss from operations in the amount of $4,802,669. At December 31, 2022, the Company had cash in the amount of $485,053, a working capital deficit in the amount of $3,141,119, and an accumulated deficit of $6,678,294. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the audited financial statements. Management intends to finance operating costs over the next twelve months with the proceeds from the sale of equity securities, and/or revenues from operations. Although the Company has been successful in raising funds, there can be no assurance that we will be successful in our efforts to raise additional debt or equity capital and/or that cash generated by our future operations will be adequate to meet our needs.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. The Company had cash of $485,053 and $3,536,384 and no cash equivalents as of December 31, 2022 and 2021, respectively.

 

 

Property, Plant, and Equipment

 

Property and equipment is recorded at the lower of cost or estimated net recoverable amount, and is depreciated using the straight-line method over its estimated useful life. Property acquired in a business combination is recorded at estimated initial fair value. Property, plant, and equipment are depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based upon the following life expectancy:

 

		Years
Office equipment			3 to 5
Furniture & fixtures			3 to 7
Leasehold improvements		Term of lease

 

Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation are eliminated and any resulting gain or loss is reflected in operations.

 

Long-Lived Assets

 

The Company reviews its property and equipment and any identifiable intangibles including goodwill for impairment on an annual basis utilizing the guidance set forth in the Statement of Financial Accounting Standards Board ASC 350 “Intangibles – Goodwill and Other” and ASC 360 “Property, Plant, and Equipment.” At December 31, 2022 and 2021, the net carrying value of intangible assets on the Company’s balance sheet was $286,801 and $378,497, respectively.

 

Concentrations of Credit Risk

 

The Company maintains its cash in bank deposit accounts and other accounts, the balances of which at times may be uninsured or exceed federally insured limits. From time to time, some of the Company’s funds are also held by escrow agents; these funds may not be federally insured. The Company continually monitors its banking relationships and consequently has not experienced any losses in such accounts.

 

Advertising and Marketing Costs

 

All costs associated with advertising and promoting products are expensed as incurred. Total recognized advertising and marketing expenses were $100,862 and $333,168 for the years ended December 31, 2022 and 2021, respectively.

 

Fair Value of Financial Instruments

 

Pursuant to Accounting Standards Codification (“ASC”) No. 825 - Financial Instruments, the Company is required to estimate the fair value of all financial instruments included on its balance sheets. The carrying amounts of the Company’s cash and cash equivalents, notes receivable, convertible notes payable, accounts payable and accrued expenses, none of which is held for trading, approximate their estimated fair values due to the short-term maturities of those financial instruments.

 

A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.

 

Level 3 - Significant unobservable inputs that cannot be corroborated by market data.

 

Capitalized Software Development Costs

 

The Company capitalizes certain costs associated with creating and enhancing internally developed software related to the development of the Company’s platform solution. These costs include third party development expenses for that are directly associated with and devote time to software development projects. Software development costs that do not qualify for capitalization, as further discussed below, are expensed as incurred and recorded in operating expenses in the consolidated statements of operations.

 

 

The Company’s customers do not take possession of the software and cannot run the software on their own hardware. For these reasons, pursuant to ASC 985-20 Costs of Software to Be Sold, Leased, or Marketed (“ASC 982-20”), the software is considered a software hosting arrangement and the Company applied the guidance of ASC 350-40 Intangibles – Goodwill and Other: Internal Use Software” (“ASC 350-40"). Pursuant to ASC 350-40, software development activities typically consist of three stages: (1) the planning phase; (2) the application and infrastructure development stage; and (3) the post-implementation stage. Costs incurred in the planning and post implementation phases, including costs associated with the post-configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. The Company capitalizes costs associated with software developed when the preliminary project stage is completed, management implicitly or explicitly authorizes and commits to funding the project and it is probable that the project will be completed and perform as intended. Costs incurred in the application and infrastructure development phases, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete and the software is ready for its intended purpose. Software development costs are amortized using a straight-line method over the estimated useful life of three years, commencing when the software is ready for its intended use. The straight-line recognition method approximates the manner in which the expected benefit will be derived.

 

Operating Leases

 

The Company accounts for its leasing arrangements by applying the guidance of Accounting Standards Update No. 2016-02, Leases (Topic 842), (“ASU 2016-02”). The Company enters into operating leases for its office space. The Company does not have finance leases.

 

The Company determines if an arrangement is, or contains, a lease at inception. Operating lease assets represent the Company’s right to control the use of an identified asset for a period of time, or term, in exchange for consideration, and operating lease liabilities represent its obligation to make lease payments arising from the aforementioned right.

 

Operating lease assets and liabilities are initially recorded based on the present value of lease payments over the lease term, which includes the minimum unconditional term of the lease, and may include options to extend or terminate the lease when it is reasonably certain at the commencement date that such options will be exercised. As the rate implicit for each of the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate, based on the information available at the lease commencement date in determining the present value of its expected lease payments. The Company has elected to not separate lease and non-lease components.

 

Operating lease assets are amortized on a straight-line basis in operating lease expense over the lease term on the consolidated statements of operations. The related amortization, along with the change in the operating lease liabilities, are separately presented within the cash flows from operating activities on the consolidated statements of cash flows. The Company records lease expense for operating leases, some of which have escalating rent payments, on a straight-line basis over the lease term.

 

Certain leases contain provisions for property-related costs that are variable in nature for which the Company is responsible, including common area maintenance and other property operating services. These costs are calculated based on a variety of factors including property values, tax and utility rates, property services fees and other factors.

 

Refer to Note 7—Leases for additional information.

 

Revenue Recognition

 

The Company generates its revenue by providing marketers and advertising agencies with the ability to deliver digital marketing and marketing-related solutions. The Company’s primary business is to deliver omnichannel programmatic, paid search, and paid social advertising services for its customers. The Company also does a limited amount of marketing-related project work for customers, including creative services, and also has a reseller solution with a partner. This results in the following revenue streams:

 

●

Programmatic Solutions

 

●

Paid Search & Social Solutions

 

●

Services Revenue

 

●

Self-Serve Revenue

 

 

The Company applies a five-step approach as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606: Revenue from Contracts with Customers (“ASC 606”) in determining the amount and timing of revenue to be recognized:

 

●

Identification of a contract with a customer;

 

●

Identification of the performance obligation in the contract;

 

●

Determination of the transaction price;

 

●

Allocation of the transaction price to the performance obligations in the contract; and

 

●

Recognition of revenue when or as the performance obligations are satisfied.

 

The determination of whether revenue should be reported on a gross or a net basis is based upon an assessment of whether we are acting as the principal or agent in the transaction based upon the guidance in ASC 606. Making such determinations involves judgment and is based on an evaluation of the terms of each arrangement, none of which are considered presumptive or determinative. We act as a principal and recognize revenue on a gross basis if (i) we control the advertising inventory before it is transferred to our customers; (ii) we bear sole responsibility for fulfillment of the advertising promise and inventory risks and (iii) we have full discretion in establishing prices. We applied the guidance of ASC 606 to our revenue streams as follows:

 

Programmatic Solutions: Programmatic revenue consists of delivering our customer’s budget programmatically through our trading desk model, where multiple Demand Side Platforms (“DSP”) are utilized to deliver advertising budgets as paid impressions. The Company, through its understanding of DSP platforms, transacts to spend customer’s budgets within the platforms to execute against customer marketing goals as efficiently and effectively as possible. In this arrangement, our team will perform all of the setup, activation, strategy, tactic building, implementation and delivery of the campaign through a partner platform or platforms. We enter into an Insertion Order / Media Plan (“IO”) with all Programmatic customers. The IO states the services that are to be performed and a budget for each tactic or tactics. We bill our customers for a percentage of the total spend, and recognize revenue upon completion of the performance obligation. Because we are in control of this process and assume inventory risk, we recognize revenue on a gross basis.

 

Paid Search & Social Solutions: We enter into an Insertion Order / Media Plan (“IO”) with all Paid Search & Social customers. The IO states the services that are to be performed and a budget for each tactic. We bill our customers for a percentage of the total spend, and recognize revenue upon completion of the performance obligation. In instances where we pay the third party for inventory, we recognize revenue on a gross basis because we bear the inventory risk. In instances where the customer pays the third party, we recognize revenue on a net basis.

 

Services Revenue: We enter into Statement of Work (“SOW”) agreements with all Services customers. The SOW includes estimated costs to be applied against the services to be performed, and establishes payment and billing terms. Services revenue is recognized on a gross basis.

 

Self-Serve Revenue: Self-serve revenue consists of revenues generated through our Admatx platform, as well as through reselling access to a major enterprise DSP. Users of Admatx agree to our platform terms and conditions, and we enter into Master Services Agreements (“MSA”) with all reseller customers. The Platform Terms and Conditions and MSAs detail the work and responsibilities of each party and their respective obligations. Self-serve revenue is recognized on a net basis.

 

Deferred Revenue

 

Certain customer arrangements in the Company's business result in deferred revenues when cash payments are received in advance of performance.

 

The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets:

 

Balance acquired as of December 31, 2020		$	43,574
Cash payments received			2,995,398
Net sales recognized			(2,836,566	)
Balance as of December 31, 2021		$	202,406
Cash payments received			1,649,836
Net sales recognized			(1,779,612	)
Balance as of December 31, 2022		$	72,630

 

 

Stock-Based Compensation

 

We recognize compensation costs to employees under FASB ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). Under FASB ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each option’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

 

Equity instruments issued to recipients other than employees are recorded pursuant to the guidance contained in ASU 2018-07 (“ASU 2018-07”), Improvements to Non-employee Share-Based Payment Accounting, which simplified the accounting for share-based payments granted to non-employees for goods and services. Under the ASU 2018-07, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees.

 

Basic and Diluted Earnings or Loss Per Share

 

Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options to purchase common stock. Basic and diluted net loss per share are computed based on the weighted average number of shares of common stock outstanding during the period. At December 31, 2022 and 2021, the Company had the following potentially dilutive instruments outstanding: a total of 897,266 and 184,808 shares, respectively, issuable upon the exercise of stock options.

 

The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculations. At December 31, 2022 and 2021, 1,009,176 and 142,945 stock options are excluded from the calculation of fully-diluted shares outstanding.

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method in accordance with ASC 740. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred tax assets and liabilities are classified as current and non-current based on their characteristics. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

 

Commitments and Contingencies

 

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims brought to such legal counsel’s attention as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.

 

 

Recent Accounting Pronouncements

 

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU became effective for the Company on January 1, 2020. Adoption of ASU 2017-04 did not have a material effect on the Company’s financial statements.

 

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard effective January 1, 2021; we do not expect the adoption to have a material impact on the Company’s financial statements.

 

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within such fiscal year. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our consolidated financial statements.

 

There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

 

3. Accounts Receivable

 

Accounts receivable, net was $2,080,758 and $3,466,024 at December 31, 2022 and 2021, respectively. During the years ended December 31, 2022 and 2021, the Company charged the amount of $138,968 and $40,659, respectively, to bad debt expense. At December 31, 2022 and 2021, the Company maintained a reserve for doubtful accounts in the amount of $224,974 and $86,369, respectively.

 

On June 13, 2019, the Company entered into an accounts receivable financing and security agreement (the “Financing Agreement”) in the maximum amount of $10,000,000 whereby the Company would be advanced up to 85% of the gross value of its accounts receivable invoices submitted to the lender for purchase. On June 11, 2021, the maximum amount available under the Financing Agreement was reduced to $5,000,000, and on June 8, 2022, the maximum amount available under the Financing Agreement was reduced to $3,000,000 and the facility interest rate was increased to LIBOR plus 7.25% per annum (up from LIBOR plus 6.50%). The Financing Agreement provides for an initial financing fee equal to 1/12th of the facility interest rate and additional monthly financing fees of 1/12th of the facility interest rate. The revolving credit facility under the Financing Agreement is secured by the trade accounts receivable of the Company and guaranteed by its assets. During the years ended December 31, 2022 and 2021, the Company charged to interest expense the amount of $101,754 and $166,734, respectively, pursuant to the Financing Agreement.

 

Accounts receivable, net consisted of the following at December 31, 2022 and 2021:

 

		December 31,				December 31,
		2022				2021
Accounts receivable		$	2,048,001			$	3,450,632
Due under Financing Agreement, net			257,731				101,761
Allowance for doubtful accounts			(224,974	)			(86,369	)
Total		$	2,080,758			$	3,466,024

 

 

4. Other Current Assets

 

Other current assets consisted of the following at December 31, 2022 and 2021:

 

		December 31,				December 31,
		2022				2021
Deposits		$	174,092				39,792
Prepaid expenses			71,394				138,588
Total		$	245,486			$	178,380

 

5. Property and Equipment

 

Property and equipment consisted of the following at December 31, 2022 and 2021:

 

		December 31,				December 31,
		2022				2021
Computer equipment		$	139,143			$	119,403
Leasehold improvements			45,891				45,891
Less: accumulated depreciation			(152,058	)			(125,901	)
Property and equipment, net		$	32,976			$	39,393

 

The Company made payments in the amounts of $19,740 and $26,297 for property and equipment during the years ended December 31, 2022 and 2021, respectively. Depreciation expense totaled $26,157 and $32,726 for the years ended December 31, 2022 and 2021, respectively.

 

6. Intangible Assets

 

In January 2021 the Company completed the acquisition of certain assets consisting of customer contracts and customer lists (the “BigBuzz Customer Lists”) from BigBuzz Marketing Group (“BigBuzz”). The cost of the BigBuzz Customer Lists was $475,000 payable over three years (see note 9). The Company also capitalized the direct costs of this transaction in the amount of $7,462 for a total cost basis of $482,462. The BigBuzz Customer Lists are being amortized over a period of three years based on the expected customer life of the assets acquired.

 

The Company began to capitalize the costs of development of internal use software in August 2021, and software was first placed into service in May 2022. In 2021, the Company capitalized $43,454 of costs to develop internal use software. In 2022, the Company capitalized an additional $89,094 of costs to develop internal use software. The Company placed $123,937 of costs to develop internal use software into service and amortized the amount of $19,969 during the year ended December 31, 2022. The Company has $8,611 in capitalized software costs that have not yet been placed into service at December 31, 2022.

 

Intangible assets consisted of the following at December 31, 2022 and 2021:

 

		December 31, 2022
						Accumulated
		Gross				Amortization				Net
Customer lists		$	482,462			$	(308,240	)		$	174,222
Internal use software			132,548				(19,969	)			112,579
Total		$	615,010			$	(328,209	)		$	286,801

 

		December 31, 2021
						Accumulated
		Gross				Amortization				Net
Customer lists		$	482,462			$	(147,419	)		$	335,043
Internal use software			43,454				-				43,454
Total		$	525,916			$	(147,419	)		$	378,497

 

 

The Company amortized the amount of $180,790 and $147,419 during the years ended December 31, 2022 and 2021, respectively.

 

7. Right of Use Assets and Liabilities

 

The Company leases its corporate office under an operating lease. Leased assets and corresponding liabilities are recognized based on the present value of the lease payments over the lease term. The lease terms may include options to extend when it is reasonably certain that the Company will exercise that option.

 

Topic ASC 842 requires the Company to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. Right of use assets are recorded in other assets on the Company’s condensed consolidated balance sheets. Current and non-current lease liabilities are recorded in other accruals within current liabilities and other non-current liabilities, respectively, on its condensed consolidated balance sheets. Costs associated with operating leases are recognized on a straight-line basis within operating expenses over the term of the lease.

 

At December 31, 2022 and 2021, the Company had total right of use assets of $581,352 and $1,130,922, respectively, and lease liabilities of $1,215,028 and $1,215,028, respectively, which were included in the Company’s balance sheets. Right to use assets – operating leases are summarized below:

 

		December 31, 2022				December 31, 2021
Administrative office		$	581,352			$	1,130,922
Right to use assets, net		$	581,352			$	1,130,922

 

Operating lease liabilities are summarized below:

 

		December 31, 2022				December 31, 2021
Administrative office		$	631,144			$	1,215,028
Lease liability		$	631,144			$	1,215,028
Less: current portion			(631,144	)			(583,884	)
Lease liability, non-current		$	-			$	631,144

 

The Company’s lease expense was entirely comprised of operating leases. Lease expense for the years ended December 31, 2022 and 2021 was $607,837 and $638,084, respectively. The Company’s ROU asset amortization for the years ended December 31, 2022 and 2021 was $549,750 and $520,190, respectively; the difference between the lease expense and the associated ROU asset amortization consists of interest.

 

Maturity analysis under these lease agreements are as follows:

 

For the twelve months ended December 31, 2023			649,236
Total		$	649,236
Less: Present value discount			(18,092	)
Lease liability		$	631,144

 

8. Accounts Payable and Accrued Liabilities

 

Accounts payable and accrued liabilities consisted of the following at December 31, 2022 and 2021:

 

		December 31,				December 31,
		2022				2021
Trade accounts payable		$	1,585,352			$	1,566,328
Credit cards payable			371,773				813,243
Accrued payroll and payroll taxes			261,535				425,129
Accrued interest			53,459				42,656
Total		$	2,272,119			$	2,847,356

 

 

9. Acquisition Liabilities

 

In January 2021 the Company recorded a liability in the amount of $475,000 in connection with the acquisition of the BigBuzz Customer Lists (see note 6), which consisted of a three-year employment agreement for each of the two founders of BigBuzz. As this was an acquisition of only certain assets consisting of customer contracts and customer lists (see note 6), no other assets were acquired that would give rise to acquisition related liabilities; there were no requirements to hire any other employees as part of the asset acquisition. The Company paid $25,000 of this amount on February 2, 2021; the remainder is payable at the rate of $12,500 per month through January 31, 2024. During the years ended December 31, 2022 and 2021, the Company paid the amount of $150,000 and $162,500, respectively, in connection with this liability.

 

10. Loans Payable

 

		December 31, 2022				December 31, 2021
Loan payable to Decathlon dated December 31, 2019 (the “Decathlon Loan”) in the principal amount of $3,000,000. The Decathlon Loan is due June 30, 2024 and is collateralized by all the assets of the Company. The Decathlon Loan accrues interest at a variable rate based upon internal rate of return targets. The effective rate of interest for the years ended December 31, 2021 and 2020 was approximately 17%. Repayments are required based upon a fixed percentage of our earned revenue. If not repaid prior the final balance is due on June 13, 2024. The Decathlon Loan is subject to minimum interest that escalates over the term of the loan. At December 31, 2022 and 2021, the potential liability for unearned minimum interest was $1,661,504 and $1,462,173, respectively. During the year ended December 31, 2022, the Company made principal and interest payments in the amount $132,530 and $402,648, respectively, on the Decathlon loan. During the year ended December 31, 2021, the Company made principal and interest payments in the amount $399,225 and $450,692, respectively, on the Decathlon loan.		$	2,276,781			$	2,409,311
Loan payable to the US Small Business Administration (the “EIDL Loan”) dated July 7, 2020 pursuant to the Small Business Administration Economic Injury Disaster Loan Program (the “EIDL”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the original principal amount of $150,000. Effective March 31, 2022, the Company borrowed an additional $50,000 under the EIDL Loan, and the balance due was amended to $200,000. Loan. Payments in the amount of $989 per month will be due beginning in January 2023. The term of the EIDL Loan is 30 years, and the annual interest rate is 3.75%. EIDL Loan recipients can apply for, and be granted forgiveness for, all or a portion of loans granted if certain conditions are met. During the years ended December 31, 2022 and 2021, the Company accrued interest in the amount of $6,935 and $5,410, respectively, on the EIDL Loan.			200,000				150,000
Total		$	2,476,781			$	2,559,311
Current portion		$	348,945			$	99,369
Long-term maturities			2,127,836				2,459,942
Total		$	2,476,781			$	2,559,311

 

Aggregate maturities of long-term notes payable as of December 31, 2021 are as follows:

 

For the year ended December 31,

2023		$	348,945
2024			1,951,572
2025			11,868
2026			11,868
2027 and thereafter			152,528
Total		$	2,476,781

 

 

11. Loans Payable – Related Parties

 

		December 31, 2022				December 31, 2021
Loan payable to an entity affiliated to Jason Wulfsohn, the Company’s CEO, originally dated March 21, 2020 and renewed March 21, 2021 and March 21, 2022 in the amount of $300,000 bearing interest at the rate of 15% and due March 21, 2023 (the “Wulfsohn Related Party Loan”). During the years ended December 31, 2022 and 2021, the Company made interest payments of $45,000 and $45,000, respectively, and no principal payments on the Wulfsohn Related Party Loan.		$	300,000			$	300,000
Loan payable to an entity affiliated to Reeve Benaron, the Company’s Chairman, originally dated March 21, 2020 and renewed March 21, 2021 and March 21, 2022 in the amount of $300,000 bearing interest at the rate of 15% and due March 21, 2023 (the “Benaron Related Party Loan”). During the years ended December 31, 2022 and 2021, the Company made interest payments of $45,000 and $45,000, respectively, and no principal payments on the Benaron Related Party Loan.			300,000				300,000
Loan payable to Reeve Benaron, the Company’s Chairman, dated June 20, 2022 in the amount of $500,000 bearing interest at the rate of 2.19% and due December 31, 2024 (the “Benaron Loan”). The Benaron Loan is payable in eighteen monthly installments of $28,889 beginning on July 20, 2023. During the years ended December 31, 2022 the Company accrued interest in the amount of $5,849 on the Benaron Loan.			500,000				-
Total		$	1,100,000			$	600,000
Current portion		$	757,426			$	600,000
Long-term maturities			342,574				-
Total		$	1,100,000			$	600,000

 

Aggregate maturities of loans payable – related parties as of December 31, 2022 are as follows:

 

For the year ended December 31,

2023		$	757,426
2024			342,574
Total		$	1,100,000

 

12. Accrued Settlements

 

On December 31, 2019, the Company accrued the amount of $650,000 in connection with the settlement of a dispute with a former contractor. See note 17. During the years ended December 31, 2022 and 2021, the Company made payments on this accrued liability in the amount of $587,500 and $0, respectively. At December 31, 2022, the amount of $62,500 remains on the Company’s balance sheet as an accrued liability.

 

On December 31, 2018, the Company accrued the amount of $100,000 in connection with the settlement of a dispute with a former employee. See note 17. During the years ended December 31, 2022 and 2021, the Company made payments on this accrued liability in the amount of $37,500 and $0, respectively. At December 31, 2022, the amount of $62,500 remains on the Company’s balance sheet as an accrued liability.

 

On December 31, 2019 the Company accrued $1,582,652 in connection with a vendor dispute. See note 17. At December 31, 2022, the amount of $1,582,652 remains on the Company’s balance sheet as an accrued liability.

 

13. Stockholders’ Equity

 

The Company’s authorized capital stock consists of 30,500,000 shares of common stock, par value $0.001, at December 31, 2022 and 2021. The Company had 19,858,048 and 19,266,273 shares of common stock issued and outstanding as of December 31, 2022 and 2021, respectively.

 

 

Common Stock

 

Year ended December 31, 2022:

 

On August 1, 2022, the Company entered into a stock purchase agreement (the “2022 Stock Purchase Agreement”) whereby the Company offered for sale shares of common stock representing 3.26% ownership of the Company at an average price of $1.97 per shares. The sales was structured to occur in three tranches, contingent upon the Company’s achievement of certain milestones:

 

Tranche 1: The sale of 314,466 shares of common stock at a price of $1.59 per share for proceeds of $500,000 upon the Company’s engaging pre-audit resources and Public Company Oversight Board registered audit firm. This milestone was achieved and this tranche was closed on August 1, 2022.

 

Tranche 2: The sale of 255,067 shares of common stock at a price of $1.96 per share for proceeds of $500,000 upon the Company’s completion of pre-audit financial statements, but no sooner than September 30, 2022. This milestone was achieved and this tranche was closed on September 30, 2022.

 

Tranche 3: The sale of 193,426 shares of common stock at a price of $2.58 per share for proceeds of $500,000 upon completion of more than 50% of the audit, but no sooner than October 31, 2022. This milestone was not achieved at December 31, 2022; see footnote 19.

 

During the year ended December 31, 2022, the Company sold a total of 569,533 shares of common stock for aggregate proceeds of $1,000,000 pursuant to the 2022 Stock Purchase Agreement.

 

On June 30, 2022, the Company issued 22,102 restricted stock units with a grant date fair value of $0.77 per share to an employee as compensation.

 

During the year ended December 31, 2022, the Company issued 140 shares of common stock for the exercise of stock options at a weighted average exercise price of approximately $0.75 per share for cash proceeds of $105.

 

Year ended December 31, 2021:

 

On December 31, 2021, the Company agreed to issue a total of 197,740 shares of common stock to a former employee for services previously rendered. 36,000 of these shares were issued on December 31, 2021. The remaining 161,740 shares may be issued at the request of the former employee. The estimated fair value of these shares in the aggregate amount of $200,000 was charged to paid-in capital during prior periods.

 

On December 31, 2021, the Company issued 44,205 shares of common stock with a value of $0.75 per share to an employee for services. The value of these shares was charged to operations in a prior period.

 

During the year ended December 31, 2021, the Company issued 80,500 shares of common stock for the exercise of stock options at a weighted average exercise price of approximately $0.43 per share for cash proceeds of $34,275.

 

Options

 

Year ended December 31, 2022:

 

During the year ended December 31 2022, the following option activity occurred:

 

●

610,000 options were issued with a weighted-average grant date fair value of $0.49 and a weighted-average exercise price of $0.77

 

●

80,500 options were exercised at a weighted-average exercise price of $0.43

 

●

262,554 options with a weighted-average exercise price of $0.76 were forfeited

 

●

272,008 options with a weighted-average exercise price of $0.61 expired

 

 

Year ended December 31, 2021:

 

During the year ended December 31 2021, the following option activity occurred:

 

●

610,000 options were issued with a weighted-average grant date fair value of $0.49 and a weighted-average exercise price of $0.77

 

●

80,500 options were exercised at a weighted-average exercise price of $0.43

 

●

262,554 options with a weighted-average exercise price of $0.76 were forfeited

 

●

272,008 options with a weighted-average exercise price of $0.61 expired

 

The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company as of December 31, 2022:

 

													Weighted								Weighted
									Weighted				average								average
									average				exercise								exercise
	Range of				Number of				Remaining				price of				Number of				price of
	exercise				options				contractual				outstanding				options				exercisable
	Prices				Outstanding				life (years)				Options				Exercisable				Options
	$	0.31				60,000				4.00			$	0.31				60,000			$	0.31
	$	0.75				68,860				7.62			$	0.75				-41,672			$	0.75
	$	0.77				376,500				8.13			$	0.77				160,840			$	0.77
	$	0.82				614,206				9.58			$	0.82				18,126			$	0.82
	$	0.91				1,479,910				7.07			$	0.91				616,628			$	0.91
	$	2.82				2,500				9.50			$	2.82				-			$	2.82
	$	3.82				3,000				9.50			$	3.82				-			$	3.82
						2,604,976				7.76			$	0.64				897,266			$	0.84

 

The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company as of December 31, 2021:

 

													Weighted								Weighted
									Weighted				average								average
									average				exercise								exercise
	Range of				Number of				Remaining				price of				Number of				price of
	exercise				options				contractual				outstanding				options				exercisable
	Prices				Outstanding				life (years)				Options				Exercisable				Options
	$	0.31				60,000				5.00			$	0.31				60,000			$	0.31
	$	0.75				115,250				7.70			$	0.75				53,062			$	0.75
	$	0.77				633,500				9.12			$	0.77				71,746			$	0.77
						808,750				8.61			$	0.73				184,808			$	0.61

 

 

Transactions involving stock options are summarized as follows:

 

		Number of Shares				Weighted Average Exercise Price
Options outstanding at December 31, 2020			813,812			$	0.64
Granted			610,000				0.77
Exercised			(80,500	)			0.43
Cancelled / Expired			(534,562	)			0.68
Options outstanding at December 31, 2021			808,750			$	0.73
Granted			2,160,616				0.89
Exercised			(140	)			0.75
Cancelled / Expired			(364,250	)			0.78
Options outstanding at December 31, 2022			2,604,976			$	0.86

 

During the year ended December 31, 2022, the Company charged $431,817 to stock based compensation expense, including $414,893 for stock options and $16,924 for stock awards. During the year ended December 31, 2021, the Company charged $63,826 to stock based compensation expense, including $29,694 for stock options and $34,132 for stock awards.

 

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2022 and 2021 was $2,884,456 and $184,808, respectively. Aggregate intrinsic value represents the difference between the fair value of the Company’s stock on the last day of the fiscal period, which was $1.96 and $0.77 as of December 31, 2022 and 2021, respectively, and the exercise price multiplied by the number of options outstanding.

 

The Company valued warrants and options using the Black-Scholes valuation model utilizing the following variables:

 

		December 31,				December 31,
		2022				2021
Volatility			69.93-79.02	%			57.90-75.78	%
Dividends		$	-			$	-
Risk-free interest rates			1.47-4.35	%			0.34-3.09	%
Expected term (years)			2.77-6.15				5.00-6.16

 

Equity Distributions

 

Year ended December 31, 2022:

 

None.

 

Year ended December 31, 2021:

 

The Company charged the amount of $7,500 to additional paid-in capital representing a cash distribution to an investor.

 

14. Gain on Forgiveness of Debt

 

On January 25, 2021, the Company received notification of the forgiveness of the first PPP Loan in amount of $1,322,453, consisting of $1,312,500 of principal and $9,953 of interest. On October 26, 2021, the Company received notification of the forgiveness of the second PPP Loan in amount of $1,022,320, consisting of $1,014,122 of principal and $8,198 of interest. The total amount forgiven under both loans was $2,343,773; this amount is recorded as other income on the Company’s statement of operations for the twelve months ended December 31, 2021.

 

15. Employee Retention Tax Credit

 

On November 2, 2021 and November 9, 2021, the Company received an Employee Retention Tax Credit (“ERC”) from the U.S. Treasury in the amount of $326,674 and on November 23, 2021, the Company received a ERC in the amount of $511,208 for a total tax credit in the amount of $837,882. The cost of obtaining these credits was $100,745, and the net tax credit recorded on the Company’s statement of operations for the twelve months ended December 31, 2021 was $737,137.

 

 

16. Income Taxes

 

The provision for income taxes attributable to the Company consisted of the following for the year ended December 31, 2022 and 2021:

 

		Year Ended December 31,
Current:		2022				2021
U.S. federal income tax		$	-			$	-
State and local income tax		$	-			$	-
Foreign income tax		$	-
Deferred:
U.S. federal income tax		$	(584,800	)		$	(184,900	)
State and local income tax		$	(268,300	)		$	(135,200	)
Foreign income tax		$	-
Income tax provision		$	(853,100	)		$	(320,100	)

 

The effective tax rate for the year ended December 31, 2022 was 0.0%. A reconciliation of the statutory tax rate to the effective tax rate for the period presented is as follows:

 

		Year Ended December 31,
		2022				2021
Income tax expense at federal statutory rate		$	(584,800	)		$	(184,900	)
State and local taxes, net of federal benefit		$	(268,300	)		$	(135,200	)
Permanent differences		$	-			$	-
Stock-based compensation		$	-
Valuation allowance		$	853,100			$	320,100
Total effective rate			0	%			0	%

 

Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities:

 

		Year Ended December 31,
		2022				2021
Deferred tax assets
Net operating loss carryforwards		$	1,530,800			$	517,600
Other, net		$	(191,700	)		$	(31,600	)
Subtotal		$	1,339,100			$	486,000
Valuation allowance		$	(1,339,100	)		$	(486,000	)
Total deferred tax assets		$	-			$	-
Deferred tax liabilities
Other, net		$	--
Total deferred tax liabilities		$	--
Net deferred tax (liabilities) assets

 

In assessing the realizability of deferred tax assets, the Company considers whether it is probable that some or all of the deferred tax assets will not be realized. In determining whether the deferred taxes are realizable, the Company considers the period of expiration of the tax asset, historical and projected taxable income, and tax liabilities for the tax jurisdiction in which the tax asset is located. Valuation allowances are provided to reduce the amounts of deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. As of December 31, 2022, the Company has recorded a valuation allowance against its deferred tax assets of $1,339,100, as management cannot conclude whether it is more likely than not that these deferred tax assets will be realized.

 

As of December 31, 2022, the Company has federal net operating losses of approximately $4.85 million. As of December 31, 2022, the Company has state net operating losses of approximately $5.79 million. The federal net operating losses carry forward indefinitely and state net operating losses begin to expire in 2040.

 

 

As of December 31, 2022, the Company has no significant unrecognized tax benefits and has not recorded interest and penalties related to uncertain tax positions.

 

The Company is subject to U.S. federal and state income taxes. The Company’s U.S. federal and state returns are open to examination for all periods ending December 31, 2020 and thereafter. However, to the extent allowed by law the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward and make adjustments up to the amount of the net operating loss or credit carry forward amount.

 

17. Commitments and Contingencies

 

In September 2019 there was an allegation of discrimination made by a former consultant. The Company vigorously denies any wrongdoing. See Note 12. The Company has recorded a liability in the amount of $650,000 on the balance sheet related to this matter. During the year ended December 31, 2022, the Company made payments against this liability in the amount of $587,500; the net liability in the amount of $62,500 remains accrued on the Company’s balance sheet at December 31, 2022.

 

In October 2019, there was an allegation of discrimination made by a former employee. The Company vigorously denies any wrongdoing. See Note 12. The Company has recorded a liability in the amount of $100,000 on the balance sheet related to this matter. During the year ended December 31, 2022, the Company made payments against this liability in the amount of $31,250; the net liability in the amount of $62,500 remains accrued on the Company’s balance sheet at December 31, 2022.

 

In June 2019, a former services provider of the Company filed a complaint in the amount of $1,442,441 for amounts due. See Note 12. The Company countersued for breach of agreement. The Company has recorded a liability in the amount of $1,582,652 on the balance sheet at December 31, 2022.

 

From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business, or current or previous employees, or current or previous directors, or as a result of acquisitions and dispositions or other corporate activities. The Company intends to vigorously defend its positions. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our financial position or our business, and the outcome of these matters cannot be ultimately predicted.

 

18. Related Party Transactions

 

None other than as described in Note 11.

 

19. Subsequent Events

 

On January 30, 2023, the Company entered into a share exchange agreement, as amended and restated on February 17, 2023 (the “Share Exchange Agreement”) with Vado Corp., pursuant to which the Company’s shareholders agreed to exchange 19,363,959 shares of its issued and outstanding common stock in exchange for Vado Corp. common stock at a ratio of 8.75 shares of Vado Corp. common stock for each share of the Company’s common stock. Upon the closing of the Share Exchange Agreement, the Company’s shareholders received a total of 169,434,640 shares of Vado Corp. common stock, representing approximately 96% of the shares of Vado Corp. outstanding common stock after giving effect to such issuance. As a result of the closing, the Company became an approximately 96.6% owned subsidiary of Vado Corp., and the Company’s shareholders who participated in the share exchange became the holders of a total of 96% of the issued and outstanding shares of Vado Corp.

 

On January 31, 2023, the Company issued 193,426 shares of common stock at a price of $2.58 per share for cash proceeds of $500,000.

 

On February 7, 2023, in connection with the Zeta litigation described under “Legal Proceedings,” Socialcom borrowed $800,000 from Kahala19, LLC, an entity managed by Reeve Benaron, the Company’s Chairman and a principal shareholder, and issued the entity an $800,000 convertible promissory note. The note accrues interest at 7.25% per annum and matures in December 2024. The interest rate is subject to increase to 18% upon the occurrence of an event of default. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of approximately $0.233 per share.

 

On April 14, 2023, the Company’s Board of Directors approved the exchange of (i) a total of 687,515 shares of Socialcom common stock held by Socialcom’s minority stockholders for a total of 6,015,756 shares of the Company’s common stock, (ii) a total of 2,525,976 Socialcom options for 22,102,290 corresponding Company options and (iii) a $800,000 Socialcom convertible promissory note for a corresponding convertible promissory note issued by the Company.

 

 

Up to 20,000,000 Shares of Common Stock, and up to 3,900,000 Bonus Shares of Common Stock

 

 

---

 

OFFERING CIRCULAR

 

---

 

 

Dalmore Group, LLC

 

                                               , 2023

 

 

 

 

PART III

 

EXHIBIT INDEX

 

		Incorporated by Reference			Filed or Furnished Herewith
Exhibit #	Exhibit Description	Form	Date	Number
2.1(a)	Articles of Incorporation	S-1	01/18/18	3.1
2.1(b)	Certificate of Amendment to Articles of Incorporation	10-Q	07/15/20	3.1B
2.1(c)	Certificate of Amendment to Articles of Incorporation	8-K	04/01/21	3.1
2.1(d)	Certificate of Amendment to Articles of Incorporation	10-Q	10/12/21	3.1D
2.2	Amended and Restated Bylaws	8-K	05/29/20	3.1
2.3	Certificate of Designations of Series A Convertible Preferred Stock	8-K	11/29/22	4.1
2.3(a)	Certificate of Amendment to Certificate of Designation of Series A Convertible Preferred Stock	8-K	2/21/23	4.1
3.1	Form of Convertible Promissory Note	1-A/A	7/25/2023	3.1
4.1	Form of Subscription Agreement				Filed
6.1	Form of Amended and Restated Stock Purchase Agreement	8-K	11/29/22	10.1
6.2	Form of Amended and Restated Share Exchange Agreement*	8-K	2/21/23	10.1
6.3	Form of Amended and Restated Stock Purchase Agreement*	8-K	2/21/23	10.2
6.4	Form of Amended and Restated Investor Rights Agreement*	8-K	2/21/23	10.3
6.5	Executive Employment Agreement with Ryan Carhart+	1-A/A	7/25/2023	6.5
6.6	Management Services Agreement with Kahala19, LLC	1-A/A	7/25/2023	6.6
6.7	Form of Indemnification Agreement+	1-A/A	7/25/2023	6.7
6.8	Vado Corp. 2023 Equity Incentive Plan+	8-K	2/21/23	10.4
6.9	Financing and Security Agreement, as amended*				Filed
6.10	Corporate Guaranty				Filed
6.11	Guaranty Security Agreement*				Filed
6.12	Stock Pledge Agreement				Filed
8.1	Escrow Agreement				Filed
11.1	Consent of Nason, Yeager, Gerson, Harris & Fumero, P.A.				**
11.2	Consent of M&K CPAS, PLLC				Filed
12.1	Opinion of Nason, Yeager, Gerson, Harris & Fumero, P.A.	1-A/A	7/25/2023	12.1

 

* Certain schedules and exhibits to this agreement have been omitted. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission upon request.

 

**	Included in Exhibit 12.1.
+	Management contract or compensatory plan or arrangement.

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Marina Del Ray, State of California on November 16, 2023.

 

	Vado Corp.
	By:	/s/ Jason Wulfsohn
		Jason Wulfsohn,
		Chief Executive Officer

 

This Offering Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Name		Positions		Date
/s/ Jason Wulfsohn		Chief Executive Officer and Director (principal executive officer)		November 16, 2023
Jason Wulfsohn
/s/ Ryan Carhart		Chief Financial Officer (principal financial and accounting officer)		November 16, 2023
Ryan Carhart
/s/Reeve Benaron		Director		November 16, 2023
Reeve Benaron
/s/ David Lelong		Director		November 16, 2023
David Lelong

 

 

 

Exhibit 4.1

 

 

SUBSCRIPTION AGREEMENT

 

____________, 202__

 

 

Vado Corp.

13468 Beach Ave.

Marina Del Rey, CA 90292

Attention: Jason Wulfsohn

 

Dear Mr. Wulfsohn:

 

By signing this Agreement, the undersigned investor (the “Investor”) agrees to purchase shares of common stock of Vado Corp. (the “Company”) in the offering pursuant to the Offering Circular dated _________, 20__ (the “Offering Circular”) on the terms and conditions contained herein.

 

1.         Subscription. Investor hereby subscribes for and agrees to purchase the number of shares of the Company’s common stock (the “Shares”) at a price of $0.40 per share plus for a total purchase price as set forth on Investor’s signature page hereto (the “Subscription Amount”). Investor acknowledges and understands that the offering being made pursuant to the Offering Circular includes a “bonus structure” wherein subscribers who invest within enumerated thresholds will be entitled to receive additional shares of common stock for no additional consideration (“Bonus Shares”), with the number of Bonus Shares determined by multiplying the number of shares purchased by the subscriber in the offering by a percentage as follows:

 

●

Subscriptions below $10,000 will not receive any Bonus Shares;

●

Subscriptions of $10,000 - $49,999.99 will receive 10% more shares of common stock for their subscription;

●

Subscriptions of $50,000 - $99,999.99 will receive 15% more shares of common stock for their subscription;

●

Subscriptions of $100,000 - $249,999.99 will receive 20% more shares of common stock for their subscription;

●

Subscriptions of $250,000 - $499,999 will receive 25% more shares of common stock for their subscription;

●

Subscriptions of $500,000 - $999,999 will receive 35% more shares of common stock for their subscription; and

●

Subscriptions of $1,000,000 or more will receive 40% more shares of common stock for their subscription (the “Maximum Tier”).

 

If a subscriber invests in the offering more than once, the number of Bonus Shares, if any, to which such subscriber is entitled will be determined on a cumulative basis based on the subscriber’s combined investments, which may result in the subscriber moving to a higher tier compared to the earlier investment and becoming entitled to a larger number of Bonus Shares.

 

 

Without limiting anything in this Agreement or the Offering Circular, Investor acknowledges and understands that, to the extent Investor does not purchase Shares in the offering at the Maximum Tier, Investor’s investment in the Shares will be diluted, and the Shares will be purchased by Investor at an effectively higher per share price, relative to other subscribers in the offering who are entitled to receive Bonus Shares.

 

2.         Investor Eligibility Certifications. Investor understands that to purchase the Shares, Investor must either be an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933 (the “Act”), or if Investor is a non-accredited investor, Investor’s investment in the Shares must be limited to a maximum of: (i) if Investor is a natural person, 10% of Investor’s net worth or annual income, whichever is greater; or (ii) if Investor is not a natural person, 10% of Investor’s revenues or net assets, whichever is greater, for Investor’s most recently completed fiscal year (as applicable, the “Investment Limitation”). Investor understands that if Investor is a natural person Investor must determine my net worth for purposes of these representations by calculating the difference between Investor’s total assets and total liabilities. Investor understands that this calculation must exclude the value of Investor’s primary residence and any indebtedness secured by Investor’s primary residence (up to an amount equal to the value of Investor’s primary residence). Investor hereby further represents and warrants that Investor meets one of the following qualifications to purchase Shares (check one):

 

☐  Investor is a non-accredited investor and the aggregate purchase price for the Shares Investor is purchasing in the offering does not exceed the Investment Limitation applicable to Investor; or

 

☐   Investor is an accredited investor.

 

Investor acknowledges that Investor’s investment in the Shares, and the calculation of Investor’s status as an accredited investor and/or the Investment Limitation is unique to Investor, and represents and warrants that Investor has had an opportunity to review such investment and calculation(s) with appropriate accounting, financial and legal professionals before executing this Agreement and paying the Subscription Amount.

 

3.         Subscription Payment. As payment for this subscription, simultaneously with the execution hereof, Investor shall deliver herewith to the Company a check made payable to the order of the Company in an amount equal to the Subscription Amount or transfer the payment of the Subscription Amount to an account designated by the Company.

 

4.         Offering Circular. Investor understands that the Shares are being offered pursuant to the Offering Circular as filed with the Securities and Exchange Commission. By subscribing to the Offering, the Investor acknowledges that Investor has received and reviewed a copy of the Offering Circular and any other information required by Investor to make an investment decision with respect to the Shares.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, this Subscription Agreement is executed.

 

Sincerely yours,

 

INVESTOR:

 

 

By:                                            

Name:                                           

Title (if applicable):                                           

 

 

Number of Shares Subscribed For:
Bonus Shares (if any):
Total Purchase Price:	$
Name of Investor:
Address of Investor:
Investor E-mail Address:
Investor’s SS# or Tax ID#:

 

 

 

ACCEPTED BY:

VADO CORP. 

 

                                                       

Jason Wulfsohn, CEO

 

Date of Acceptance:                               , 20       

 

 

[Signature Page to Subscription Agreement]

Exhibit 6.9

 

 

 

FINANCING AND SECURITY AGREEMENT

 

INTRODUCTION

 

This Financing and Security Agreement (“Agreement”) is made and entered into on June  13, 2019 by and between SOCIALCOM INC. (“Borrower”), and Fast Pay Partners LLC, a Delaware limited liability company (“Lender”). Borrower has agreed to sell and Lender has agreed to purchase Accounts for which Lender will make Advances of the Purchase Price. Lender is agreeable to providing this facility, provided that Borrower agrees to the provisions of this Agreement.

 

GENERAL RATES AND FEES
The items referenced below are subject to and defined within the provisions of this Agreement:
(a)	Maximum Line Amount: Ten Million Dollars ($10,000,000.00)
(b)	Advance Rate: 85% of gross value of Invoices
(c)	Minimum Invoice Size: One hundred dollars ($100); provided each individual Advance hereunder must be at least five thousand dollars ($5,000)
(d)	Initial Financing Fee: A flat fee equal to 1/12 multiplied by the Facility Rate, based on the net amount Advanced with respect to any Invoice for a Purchased Account (or the net amount Advanced for Advances not tied to any Invoice), for the initial 30-day period
(e)	Additional Financing Fee: A monthly rate equivalent to 1/12 multiplied by the Facility Rate, prorated daily on the net amount Advanced outstanding with respect to any Invoice for a Purchased Account (or the net amount Advanced outstanding for Advances not tied to any Invoice), commencing on day 31.   For the  purposes of this Agreement, “Facility Rate” means the sum of: (x) the LIBOR Rate plus (y) 6.50% per annum; provided, on and after any time Borrower has not complied with clause (l) below or Section 12.12 herein, the Facility Rate shall increase to the sum of: (i) the LIBOR Rate plus (y) 7.25% per annum.
(f)	Misdirected Payment Fee: Repayment of all Advances must be paid by the Account Debtor directly to Lender. In the event an Account Debtor fails to pay Lender directly, Lender will provide Borrower a grace period of five (5) business days to notify Lender of any Misdirected Payment and to forward the full amount of the Misdirected Payment to Lender otherwise Borrower may be assessed a Misdirected Payment Fee equaling 20% of the amount of such payment.
(g)	Concentration Limit: The percentage of any debt from a single Account Debtor over the total amount outstanding from Borrower’s Purchased Accounts must remain below 25%. In the event the percentage exceeds the foregoing limit, Lender may exercise its right not to purchase more accounts from said Account Debtor.
(h)	Non-Refundable Deposit: $15,000. Lender acknowledges prior receipt of such Non-Refundable Deposit.
(i)	Wire Fee: An amount equal to Thirty-Five Dollars ($35.00) to cover fees and costs associated with incoming and outgoing wire transfers to/from the Lockbox or as between Lender/Borrower.
(j)	Termination: Subject to a fee equal to 2% of the Maximum Line Amount with respect to any termination of this Agreement prior to the 2nd anniversary of the date hereof (the “Early Termination Fee”), Borrower may terminate this Agreement at any time upon 60 days prior written notice to Lender whereupon this Agreement shall terminate upon successful repayment of all outstanding Obligations.
(k)	Minimum Utilization: Beginning on the 31st day after the date hereof, Borrower shall at all times utilize at least 20% of the Maximum Line Amount. The Financing Fees otherwise set forth herein shall be adjusted to reflect such minimum utilization.
(l)	Payment Services Covenant: Borrower shall at all times submit to Lender all of Borrower’s accounts payable and vendor payments through Lender and/or Lender’s affiliates’ payments platform as set forth in the ePay Agreement.

 

 

SIGNATURES

 

By their signatures below, the parties represent they have read, understand and agree to be bound by the Financing and Security Agreement, including the Standard Terms and Conditions referenced herein.

 

BORROWER AND LENDER have executed this Agreement through their authorized officers as of the date set forth above.

 

“BORROWER” SOCIALCOM INC. /s/ Reeve Benaron Name: Reeve Benaron Title: CEO	“LENDER” Fast Pay Partners LLC /s/ Secil Baysal Name: Secil Baysal Title: Chief Operating Officer
Contact Information: Socialcom Inc. 13468 Beach Ave Marina del Rey, CA 90292 Ph: 310-289-4477 e-mail: rcarhart@audiencex.com	Contact Information: Fast Pay Partners LLC 8201 Beverly Blvd, Suite 600 Los Angeles, CA 90048 Ph: (310) 651-9201 e-mail: legal@gofastpay.com

 

Banking Information:

 

Bank:                                                        

 

Address:                                                       

 

ABA or Swift #:                                               

 

Account #:                                                       

 

 

 

FINANCING AND SECURITY AGREEMENT STANDARD TERMS AND CONDITIONS

 

1. Sale; Purchase Price; Billing

 

1.1. Assignment and Sale

 

1.1.1. Borrower shall offer to sell to Lender as absolute owner, with full recourse, such of Borrower's Accounts as submitted to Lender for purchase.

 

1.1.2. Each Account submitted by Borrower for purchase shall be accompanied by such documentation supporting and evidencing the Account.

 

1.1.3. Lender may not purchase any Account which will cause the unpaid balance of Purchased Accounts to exceed the Maximum Line Amount.

 

1.1.4. Accounts submitted to Lender must exceed Minimum Invoice Size as stated within the General Rates and Fees, except as otherwise agreed by both parties in an Authenticated Record.

 

1.1.5. Lender shall pay the Purchase Price, of any Purchased Account, less any amounts due to Lender from Borrower, including, without limitation, any amounts due under Sections 2.1 and 3.1 hereof, to Borrower within five (5) business days of the Purchase Date, whereupon the Accounts shall be deemed purchased hereunder.

 

1.1.6. Upon execution of this Agreement, Borrower shall pay the Closing Fee.

 

1.1.7. All Purchases shall be made at the absolute sole discretion of the Lender.

 

1.2. Redirection of Payments. Lender may send a monthly statement to all Payors itemizing their account activity during the preceding billing period. All Payors will be instructed to make payments to Lender.

 

 

2. Reserve Account

 

2.1. Borrower shall pay to Lender on demand the amount of any Reserve Shortfall.

 

2.2. Upon request of the Borrower, Lender shall pay to Borrower any amount by which the Reserve Account exceeds the Required Reserve, unless reserve is necessary to cover other Obligations of the Borrower.

 

2.3. Lender may charge the Reserve Account with any Obligation.

 

2.4. Lender may pay any amounts due Borrower hereunder by a credit to the Reserve Account.

 

2.5. Lender may retain the Reserve Account until Complete Termination.

 

 

3. Exposed Payments

 

3.1. Upon termination of this Agreement Borrower shall pay to Lender (or Lender may retain), to hold in a non-segregated non-interest bearing account, the amount of all Exposed Payments (the “Preference Reserve”).

 

3.2. Lender may charge the Preference Reserve with the amount of any Exposed Payments that Lender pays to the bankruptcy estate, receivership estate, assignee for benefit of creditors, creditor body or representative of any of the foregoing of the Payor that made the Exposed Payment or on whose behalf such Exposed Payment was made, on account of a claim asserted under Sections 547, 548, 549 or 550 of the Bankruptcy Code or any equivalent type state or federal law, rule or regulation.

 

3.3. Lender shall refund to Borrower from time to time that balance of the Preference Reserve for which a claim under Sections 547, 548, 549 or 550 of the Bankruptcy Code or any equivalent type state or federal law, rule or regulation can no longer be asserted against the Exposed Payments due to the passage of the statute of limitations, settlement with the bankruptcy estate, receivership estate, assignee for benefit of creditors, creditor body or representative of any of the foregoing.

 

 

4. Authorization for Purchases. Subject to the terms and conditions of this Agreement, Lender is authorized to purchase Accounts upon telephonic, facsimile or other instructions received from anyone purporting to be an officer, employee or representative of Borrower.

 

 

 

5. Fees and Expenses. Borrower shall pay to Lender:

 

5.1. Financing Fee. The Initial Financing Fee and Additional Financing Fee shall be due on the date on which a Purchased Account is Closed. Financing Fees and interest hereunder are subject to upward adjustment in accordance with Section 12.8 herein and also shall include the additional Default Rate on the Obligations, at Lender’s sole election, upon the occurrence and continuance of an Event of Default.

 

5.2. Misdirected Payment Fee. Any Misdirected Payment Fee immediately upon its accrual.

 

5.3. Out-of-pocket Expenses. The out-of-pocket expenses directly incurred by Lender in the administration of this Agreement such as wire transfer fees (“Wire Fee”), postage and audit fees. So long as no Event of Default has occurred and is continuing, Borrower shall not be required to reimburse Lender for more than one (1) audit per twelve-month period.

 

 

6. Repurchase Of Accounts. Lender may require that Borrower repurchase, by payment of the then unpaid Face Amount thereof, together with any unpaid fees relating to the Purchased Account on demand, or, at Lender's option, by Lender's charge to the Reserve Account:

 

6.1. Any Purchased Account, the payment of which has been disputed by the Payor or the Account Debtor obligated thereon, Lender being under no obligation to determine the bona fide nature of such dispute;

 

6.2. Any Purchased Account regarding which Borrower has breached any representation or warranty as set forth in the Section 14.

 

6.3. Any Purchased Account owing from an Account Debtor or Payor which (a) in Lender’s reasonable credit judgment has become insolvent or (b) has indicated an inability or unwillingness to pay the Purchased Account when due;

 

6.4. All Purchased Accounts upon the occurrence of an Event of Default, or upon the termination date of this Agreement; and

 

6.5. Any Purchased Account that remains unpaid beyond the Late Payment Date.

 

 

7. Security Interest

 

7.1. As collateral securing the Obligations, Borrower grants to Lender a continuing first priority security interest in the Collateral.

 

 

8. Clearance Days. For all purposes under this Agreement, Clearance Days will be added to the date on which Lender receives any payment if such payment is received other than by wire directly to the Lockbox.

 

 

9. Authorization to Lender

 

9.1. Authorization: Borrower explicitly authorizes and grants to Lender the ability for Lender (acting through any of its employees, attorneys or agents) at any time, at its option but without obligation, with or without notice to Borrower, and at Borrower's sole expense, to do any or all of the following, in Borrower's name or otherwise until all of the Obligations have been paid in full:

 

9.1.1. Receive, take, endorse, assign, deliver, accept and deposit, in the name of Lender or Borrower, any and all proceeds of any Collateral securing the Obligations or the proceeds thereof;

 

9.1.2. Take or bring, in the name of Lender or Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or desirable to effect collection of or other realization upon Lender’s Accounts;

 

9.1.3. With respect to any of the following established or issued for the benefit of Borrower, either individually or as a member of a class or group, file any claim under (a) any bond or (b) under any trust fund;

 

9.1.4. Pay any sums necessary to discharge any lien or encumbrance which is senior to Lender's security interest in any assets of Borrower, which sums shall be included as Obligations hereunder, and in connection with which sums the Late Charge shall accrue and shall be due and payable;

 

9.1.5. File in the name of Borrower or Lender or both: (a) Mechanic’s lien or related notices, or (b) Claims under any payment bond, in connection with goods or services sold by Borrower in connection with the improvement of realty;

 

9.1.6. Notify any Payor obligated with respect to any Account, that the underlying Account has been assigned to Lender by Borrower and that payment thereof is to be made to the order of and directly and solely to Lender;

 

9.1.7. Communicate directly with Borrower’s Payors to verify the amount and validity of any Account created by Borrower;

 

9.1.8. After an Event of Default: (a) Change the address for delivery of mail to Lender and to receive and open mail addressed to Borrower; (b) Extend the time of payment of, compromise or settle for cash, credit, return merchandise, and upon any terms or conditions, any and all Accounts and discharge or release any Account Debtor or other obligor (including filing of any public record releasing any lien granted to Borrower by such Account Debtor), without affecting any of the Obligations;

 

9.1.9 Any and all sums paid and any and all costs, expenses, liabilities, obligations and legal fees incurred by Lender with respect to the foregoing shall be added to and become part of the Obligations. In no event shall Lender's rights under the foregoing authorization or any of Lender's other rights under this Agreement be deemed to indicate that Lender in control of the business, management of properties of Borrower;

 

9.1.10. File any initial financing statements and amendments thereto that: (a) Indicate the collateral as all assets of the Borrower or words of similar effect, regardless of whether any particular asset comprised in the collateral falls within the scope of Article 9 of the UCC, or as being of an equal or lesser scope or with greater detail; (b) Contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (i) whether the Borrower is an organization, the type of organization, and any organization identification number issued to the Borrower and, (ii) in the case of a financing statement filed as a fixture filing or indicating collateral to be as-extracted collateral or timber to be cut, a sufficient description of real property to which the collateral relates; and (c) Contain a notification that the Borrower has granted a negative pledge to the Lender, and that any subsequent lienor may be tortuously interfering with Lender’s rights;

 

 

9.1.11. Advises third parties that any notification of Borrower’s Account Debtors will interfere with Lender’s collection rights; and

 

9.1.12. File any Correction Statement in the name of Borrower under Section 9-518 of the Uniform Commercial Code that Lender reasonably deems necessary to preserve its rights hereunder.

 

9.2. Borrower authorizes Lender to accept, endorse and deposit on behalf of Borrower any checks tendered by an account debtor “in full payment” of its obligation to Borrower. Borrower shall not assert against Lender any claim arising therefrom, irrespective of whether such action by Lender effects an accord and satisfaction of Borrower's claims, under §3-311 of the Uniform Commercial Code, or otherwise.

 

9.3. Borrower grants Lender ownership and full license to use any data collected during the Term of this contract provided that no personally identifiable information is disclosed to the public.

 

 

10. ACH Authorization.

 

10.1. In order to satisfy any of the Obligations, Borrower authorizes Lender to initiate electronic debit or credit entries through the ACH system to any deposit account maintained by Borrower. Lender shall provide Borrower with advance notice of its intention to initiate electronic debit entries of Borrower’s deposit account through the ACH system. Such notice may be provided electronically. If an ACH debit request is not honored by the financial institution, for any reason, Borrower agrees to immediately pay, in the form of a check, money order or cash, such sums as are necessary to bring the balance then due hereunder current, and Borrower will be subject to such fees or charges for non-payment, as if Client had delivered a NSF check or made no payment to Lender.

 

10.2. Borrower is not required to sign this Authorization as a condition to obtaining any extension of credit from Lender. This Authorization is made at Borrower’s request to aid its ability to timely pay amounts due Lender.

 

10.3 Lender shall be permitted to: (a) disseminate a form of “tombstone” and other related marketing materials or press releases publicly disclosing the transaction subject to this Agreement and (b) market its and its affiliates’ services to Borrower’s vendors in connection with the rendering of the services under the ePay Agreement.

 

 

11. Electronic Transactions Authorization. The Parties agree that all business between one another shall be conducted by electronic means and adopt the provisions of the California Uniform Electronic Transactions Act (UETA) as set forth in California Civil Code, Division 3, Part 2, Title 2.5, Sections 1633.1 – 1633.17, inclusive. Each document that is subject to or provided in furtherance of this Agreement, all documents provided in furtherance thereof, as amended, modified or supplemented from time to time that a party has sent to the other by electronic means or the Borrower has clicked to approve to adopt this Agreement or Borrower submits through the Online Reporting System shall be intended as and constitute an original and deemed to contain a valid signature for all purposes acknowledging and consenting to the terms of the agreement applicable thereto. In furtherance of the above, the Borrower hereby authorizes Lender to regard the Borrower’s printed name or electronic approval for any document, agreement, assignment schedules or invoices as the equivalent of a manual signature by one of the Borrower's authorized officers or agents. The Borrower’s failure to promptly deliver to Lender any schedule, report, statement, writing or other information (“Record”) required by this Agreement or any document related hereto shall not affect, diminish, modify or otherwise limit Lender’s security interests in the Collateral. Lender may rely upon, and assume the authenticity of, any such electronic approval, and any material applicable to such approval as the duly confirmed, authorized and approved signature of the Borrower by the person approving same, shall constitute an “authenticated” record for all purposes (including, without limitation, the Uniform Commercial Code) and shall satisfy the requirements of any applicable statute of frauds. Borrower is not required to agree to conduct business pursuant to the UETA and the purchase of Accounts of Advance being granted in furtherance of this Agreement is not conditioned upon Borrower agreeing to conduct business in accordance with the UETA. Borrower may terminate this Electronic Transactions Authorization by providing Lender with not less than ten (10) days written notice as provided in Section 35.1, below. Thereafter, Borrower shall incur and be responsible to pay Lender a “Manual Reporting Fee” for any Record when submitted to Lender.

 

12. Covenants By Borrower

 

12.1. After written notice by Lender to Borrower, and automatically, without notice, after an Event of Default, Borrower shall not, without the prior written consent of Lender in each instance, (a) grant any extension of time for payment of any of its Accounts, (b) compromise or settle any of its Accounts for less than the full amount thereof, (c) release in whole or in part any Payor, or (d) grant any credits, discounts, allowances, deductions, return authorizations or the like with respect to any of the Accounts.

 

 

12.2. From time to time as requested by Lender, at the sole expense of Borrower, Lender or its designee shall have access, during reasonable business hours if prior to an Event of Default and at any time if on or after an Event of Default, to all premises where Collateral is located for the purposes of inspecting (and removing, if after the occurrence of an Event of Default) any of the Collateral, including Borrower's books and records, and Borrower shall permit Lender or its designee to make copies of such books and records or extracts therefrom as Lender may request. Without expense to Lender, Lender may use any of Borrower's personnel, equipment, including computer equipment, programs, printed output and computer readable media, supplies and premises for the collection of accounts and realization on other Collateral as Lender, in its sole discretion, deems appropriate. Borrower hereby irrevocably authorizes all accountants and third parties to disclose and deliver to Lender at Borrower's expense all financial information, books and records, work papers, management reports and other information in their possession relating to Borrower.

 

12.3. Before sending any Invoice to an Account Debtor, Borrower shall mark same with a notice of assignment as may be required by Lender.

 

12.4. Borrower shall pay when due all payroll and other taxes, and shall provide proof thereof to Lender in such form as Lender shall reasonably require.

 

12.5. Borrower shall not: (a) create, incur, assume or permit to exist, any lien upon or with respect to any assets in which Lender now or hereafter holds as a security interest or (b) except as disclosed on Schedule 12.5 attached hereto and not to exceed the applicable maximum principal amount(s) listed thereunder, incur any indebtedness for borrowed money.

 

12.6. Notwithstanding Borrower’s obligation to pay the Misdirected Payment Fee, Borrower shall pay to Lender on the next banking day following the date of receipt by Borrower, the amount of any payment on account of a Purchased Account.

 

12.7. Avoidance Claims

 

12.7.1. Borrower shall indemnify Lender from any loss (including defense costs, expenses and legal fees) arising out of the assertion, defense, or judgment or otherwise of any Avoidance Claim, and shall pay to Lender on demand the amount thereof.

 

12.7.2. Borrower shall notify Lender within two business days after Borrower becomes aware of the assertion of an Avoidance Claim.

 

12.7.3. This provision shall survive termination of this Agreement.

 

12.8. Minimum Utilization. Borrower shall at all times cause the aggregate gross value of Accounts purchased hereunder to be equal or greater than the amount set forth in the General Rates and Fees; any violation of the foregoing covenant shall cause the Financing Fees owed hereunder by Borrower to be equal to the fees that would have accrued had Borrower not violated this clause.

 

12.9. No ACH Debit Block. Borrower shall at all times maintain each of its deposit accounts in a manner that allows Lender to utilize the ACH authorization set forth in Section 10 or otherwise herein. Borrower shall not use any ACH debit block or any other service or functionality that prevents Lender from initiating and completing electronic debit or credit entries through the ACH system to any deposit account maintained by Borrower.

 

12.10 Disposal of Assets or Change of Control. Borrower shall not convey, sell, lease, license, assign, transfer, or otherwise dispose any of its assets in a manner not in the ordinary-course-of-business. Borrower shall also notify Lender promptly, and in any event at least thirty (30) days prior to the date of any transaction that results or would result in a Change of Control.

 

12.11 Financial Reporting. Borrower shall provide to Lender:

 

(a) within 30 days of each calendar month end, financial statements and accounts payable aging reports of Borrower and its subsidiaries for such month on a consolidated and consolidating basis, in accordance with Generally Accepted Accounting Principles and otherwise in form reasonably acceptable to Lender; and

 

(b) promptly upon request by Lender, any other financial reporting or information reasonably requested by Lender.

 

12.12 Payment Services Covenant. Borrower shall at all times this Agreement is in effect:

 

 

(a) not terminate the ePay Agreement; and

 

(b) abide by the payment services covenant set forth in the General Rates and Fees.

 

12.13 Registration of Intellectual Property. Borrower shall not register any of its patents, copyrights, or trademarks with any federal registry, including but not limited to the United States Patent and Trademark Office (“USPTO”) or the United States Copyright Office (“USCO”), except to the extent that such registrations are subject to a security agreement filed with such federal registry, USPTO, or USCO, as applicable in favor of Lender as secured party, in form and substance acceptable to Lender in its sole discretion.

 

 

13. Account Disputes. Borrower shall notify Lender promptly of and, if requested by Lender, will settle all disputes concerning any Purchased Account, at Borrower's sole cost and expense. Lender may, but is not required to, attempt to settle, compromise, or litigate (collectively, “Resolve”) the dispute upon such terms, as Lender in its sole discretion deem advisable, for Borrower's account and risk and at Borrower's sole expense. Upon the occurrence of an Event of Default, Lender may Resolve such issues with respect to any Account of Borrower.

 

 

14. Representation and Warranties. Borrower represents and warrants that:

 

14.1. Existence and Power. If Borrower is a partnership, limited liability company, or corporation, Borrower is and will continue to be duly authorized, validly existing and in good standing under the laws of the jurisdiction of its organization until all of the Obligations have been paid in full. Borrower is and will continue to be qualified and licensed in all jurisdictions in which the nature of the business transacted by it, or the ownership or leasing of its property, make such qualification of licensing necessary, and Borrower has and will continue to have all requisite power and authority to carry on its business as it is now, or may hereafter be, conducted.

 

14.2. Authority. Borrower is, and will continue to be, duly empowered and authorized to enter into, and grant security interests in its property, pursuant to and perform its obligations under, this Agreement, and all other instruments and transactions contemplated hereby or relating hereto. The execution, delivery and performance by Borrower of this Agreement, and all other instruments and transactions contemplated hereby or relating hereto, have been duly and validly authorized, are enforceable against the Borrower in accordance with their terms, and do not and will not violate any law or any provision of, nor be grounds for acceleration under, any agreement, indenture, note or instrument which is binding upon Borrower, or any of its property, including without limitation, Borrower's Operating Agreement, Partnership Agreement, Articles of Incorporation, By-Laws and any Shareholder Agreements (as applicable).

 

14.3. Name; Trade Names and Styles. Borrower has set forth above Borrower’s absolutely true and correct name. Listed on Schedule 14.3 is each prior true name of Borrower and each fictitious name, trade name and trade style by which Borrower has been, or is now known, or has previously transacted, or now transacts business, as aforementioned noted. Borrower shall provide Lender with thirty (30) days advance written notice before changing its legal name or doing business under any other name, fictitious name, trade name, or trade style. Borrower has complied, and will hereafter comply, with all laws relating to the conduct of business under, the ownership of property in, and the renewal or continuation of the right to use, a corporate, fictitious or trade name or trade style.

 

14.4 Place and Nature of Business; Location of Collateral. Borrower does not engage in any Restricted Industry. Borrower's books and records including, but not limited to, the books and records relating to Borrower's Accounts, are and will be kept and maintained at Borrower's Address unless and until Lender otherwise consents in writing. In addition to Borrower's Address, Borrower has places of Business and Collateral located only at the following locations, as aforementioned noted. Borrower will provide Lender with at least thirty (30) days advance written notice in the event Borrower moves the Collateral, or obtains, opens or maintains any new or additional place(s) for the conduct of Borrower's business or the location of any Collateral, or closes any existing place of business.

 

14.5 Title to Collateral; Liens. With the exception of Accounts Purchased hereunder where title vests with Lender, Borrower is now, and will at all times hereafter be, the true, lawful and sole owner of all the Collateral., except for the security interest granted to Lender the Collateral now is and will hereafter remain, free and clear of any and all liens, charges, security interests, encumbrances and adverse claims. Except as expressly provided to the contrary in this Section, Lender now has, and will hereafter continue to have, a fully perfected and enforceable first priority security interest in all of the Collateral, and Borrower will at all times defend Lender and the Collateral against all claims and demands of others.

 

 

14.6. Each and every Purchased Account sold and assigned to Lender shall, on the date the assignment is made and thereafter, comply with all of the following representations, warranties and covenants: (a) each Purchased Account represents an undisputed bona fide existing unconditional obligation of the Account Debtor created by the sale, delivery, and acceptance of goods or the rendition of services in the ordinary course of Borrower's business; (b) each Purchased Account is owned by Borrower free and clear of any and all deductions, disputes, liens, security interests and encumbrances; (c) the Account Debtor has received and accepted the goods sold and services rendered which created the Purchased Account and the invoice therefor and will pay the same without any dispute; (d) no Account Debtor on any Purchased Account is a shareholder, director, partner or agent of Borrower, or is a person or entity controlling, controlled by or under common control with Borrower, or is engaged in a Restricted Industry; and (e) no Purchased Account is owed by an Account Debtor to whom Borrower is or may become liable in connection with goods sold or services rendered by the Account Debtor to Borrower or any other transaction or dealing between the Account Debtor and Borrower. Immediately upon discovery by Borrower that any of the foregoing representations, warranties, or covenants are or have become untrue with respect to any Purchased Account, Borrower shall immediately give written notice thereof to Lender.

 

14.7. Borrower has not received notice or otherwise learned of actual or imminent bankruptcy, insolvency, or material impairment of the financial condition of any applicable Account Debtor regarding Purchased Accounts.

 

14.8 Intellectual Property. Except as disclosed on Schedule 14.8 attached hereto, Borrower does not have any registered patents, copyrights, trademarks, or material licenses to use trademarks, patents and copyrights of others (excluding off-the-shelf or shrinkwrap licenses).

 

 

15. Indemnification. Borrower agrees to indemnify Lender against and save Lender harmless from any and all manner of suits, claims, liabilities, demands and expenses (including reasonable legal fees and collection costs) resulting from or arising out of this Agreement, whether directly or indirectly, including the transactions or relationships contemplated hereby (including the enforcement of this Agreement), and any failure by Borrower to perform or observe its obligations under this Agreement.

 

 

16. Disclaimer of Liability. In no event will Lender be liable to Borrower for any lost profits, lost savings or other consequential, incidental or special damages resulting from or arising out of or in connection with this Agreement, the transactions or relationships contemplated hereby or Lender's performance or failure to perform hereunder, even if Lender has been advised of the possibility of such damages.

 

 

17. Default

 

17.1. Events of Default. The occurrence of any one of more of the following shall constitute an Event of Default hereunder: (a) Borrower fails to pay or perform any Obligation as and when due; (b) there shall be commenced by or against Borrower any voluntary or involuntary case under the United States Bankruptcy Code, or any assignment for the benefit of creditors, or appointment of a receiver or custodian for any of its assets, or Borrower makes or sends notice of a bulk transfer; (c) Borrower or any guarantor of the Obligations shall become insolvent in that its debts are greater than the fair value of its assets, or Borrower is generally not paying its debts as they become due or is left with unreasonably small capital; (d) any lien, garnishment, attachment, execution or the like is issued against or attaches to the Borrower, the Purchased Accounts, or the Collateral; (e) Borrower shall breach any covenant, agreement, warranty, or representation set forth herein; (f) Borrower delivers any document, financial statement, schedule or report to Lender which is false or incorrect in any material respect; (g) Lender, at any time, acting in good faith and in a commercially reasonable manner, deems itself insecure with respect to the prospect of repayment or performance of the Obligations; (h) any present or future guarantor of the Obligations revokes, terminates or fails to perform any of the terms of any guaranty, endorsement or other agreement of such party in favor of Lender or any affiliate of Lender or shall notify Lender of its intention to rescind, modify, terminate or revoke any guaranty of the Obligations, or any such guaranty shall cease to be in full force and effect for any reason whatever; or (i) the termination of any ePay Agreement or the occurrence of any default by Borrower under any ePay Agreement.

 

17.2. Waiver of Notice. LENDER'S FAILURE TO CHARGE OR ACCRUE INTEREST OR FEES AT ANY “DEFAULT” OR “PAST DUE” RATE SHALL NOT BE DEEMED A WAIVER BY LENDER OF ITS CLAIM THERETO.

 

 

17.2.1. The failure of Lender at any time or times hereafter to require Borrower strictly to comply with any of the provisions, warranties, terms or conditions of this Agreement or any other present or future instrument or agreement between Borrower and Lender shall not waive or diminish any right of Lender thereafter to demand and receive strict compliance therewith and with any other provision warranty, term and condition; and any waiver of any default shall not waive or affect any other default, whether prior or subsequent thereto and whether of the same or of a different type. None of the provisions, warranties, terms or conditions of this Agreement or other instrument or agreement now or hereafter executed by Borrower and delivered to Lender shall be deemed to have been waived by any act or knowledge of Lender or its agents or employees, but only by a specific written waiver signed by an officer of Lender and delivered to Borrower. Borrower waives any and all notices or demands which Borrower might be entitled to receive with respect to this Agreement, or any other agreement by virtue of any applicable law. Borrower hereby waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, Account, general intangible, document or guaranty at any time held by Lender on which Borrower is or may in any way be liable, and notice of any action taken by Lender unless expressly required by this Agreement. Borrower hereby ratifies and confirms whatever Lender may do pursuant to this Agreement and agrees that Lender shall not be liable for the safekeeping of the Collateral or any loss or damage thereto, or diminution in value thereof, from any cause whatsoever, any act or omission of any carrier, warehouseman, bailee, forwarding agent or other person, or any act of commission or any omission by Lender or its officers, employees, agents, or attorneys, or any of its or their errors of judgment or mistakes of fact or of law.

 

17.3. Effect of Default

 

17.3.1. Upon the occurrence of any Event of Default, in addition to any rights Lender has under this Agreement or applicable law, Lender may immediately terminate this Agreement, at which time all Obligations shall immediately become due and payable without notice.

 

17.3.2. The Late Charge shall accrue and is payable on demand on any Obligation not paid when due.

 

 

18. Remedies

 

18.1 Generally. Upon the occurrence of any Event of Default, and at any time thereafter, Lender, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower) may do any one or more of the following: (a) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement, and any other document or agreement; (b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation as well as charging the Default Rate on the Obligations above and in addition to any applicable rate hereunder; (c) Take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes Lender without judicial process to enter onto any of the Borrower's premises without hindrance to search for, take possession of, keep, store, or remove any of the Collateral and remain on such premises or cause a custodian to remain thereon in exclusive control thereof without charge for so long as Lender deems necessary in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Lender seek to take possession of any or all of the Collateral by Court process or through a receiver, Borrower hereby irrevocable waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Lender retain possession of and not dispose of any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral and make it available to Lender at a place or places to be designated by Lender which is reasonably convenient to Lender and Borrower, and to remove the Collateral to such locations as Lender may deem advisable; (e) Place a receiver in exclusive control of Borrower’s business and/or any or all of the Collateral, in order to assist Lender in enforcing its rights and remedies; (f) Sell, reclaim, lease or otherwise dispose of all or any portion of the Collateral in its condition at the time Lender obtains possession or after further manufacturing, processing or repair; at any one or more public and/or private sale(s) (including execution sales); in lots or in bulk; for cash, exchange for other property or on credit; and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Lender shall have the right to conduct such disposition on Borrower's premises without charge for such time or times as Lender deems fit, or on Lender's premises, or elsewhere and the Collateral need not be located at the place of disposition. Lender may directly or through any affiliated company purchase or lease any Collateral at any such public disposition and, if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition at the time of sale; (g) Demand payment of, and collect any Accounts, Instruments, Chattel Paper, Supporting Obligations and General Intangibles comprising part or all of the Collateral; or (h) Demand and receive possession of any of Borrower's federal and state income tax returns and the books, records and accounts utilized in the preparation thereof or referring thereto. Any and all legal fees, expenses, costs, liabilities and obligations incurred by Lender with respect to the foregoing shall be added to and become part of the Obligations and shall be due on demand.

 

 

18.2 Application of Proceeds. The proceeds received by Lender from the disposition of or collection of any of the Collateral shall be applied to such extent and in such manner as Lender shall determine in its sole discretion. If any deficiency shall arise, Borrower shall remain liable to Lender therefore. In the event that, as a result of the disposition of any of the Collateral, Lender directly or indirectly enters into a credit transaction with any third party, Lender shall have the option, exercisable at any time, in its sole discretion, of either reducing the Obligations by the principal amount of such credit transaction or deferring the reduction thereof until the actual receipt by Lender of cash therefore from such third party.

 

18.3 Online Access. Upon an Event of Default, all of Borrower’s rights and access to any online internet services that Lender makes available to Borrower shall be provisional pending Borrower’s curing of all such Events of Default. During such period of time, Lender may limit or terminate Borrower’s access to online services. Borrower acknowledges that the information Lender makes available to Borrower through online internet access, both before and after an Event of Default, constitutes and satisfies any duty to respond to a request for accounting or request regarding a statement of account that is referenced in the Uniform Commercial Code as enacted in the State of California.

 

18.4 Standards of Commercial Reasonableness. After an Event of Default, the parties acknowledge that it shall be presumed commercially reasonable and Lender shall have no duty to undertake to collect any Account, including those in which Lender receives information from an Account Debtor that a dispute exists. Furthermore, in the event Lender undertakes to collect or enforce an obligation of an Account Debtor or any other person obligated on the Collateral and ascertains that the possibility of collection is outweighed by the likely costs and expenses that will be incurred, Lender may at any such time cease any further collection efforts and such action shall be considered commercially reasonable. Before Borrower may, under any circumstances, seek to hold Lender responsible for taking any commercially unreasonable action, Borrower shall first notify Lender in writing, of all of the reasons why Borrower believes Lender has acted in any commercially unreasonable manner and advise Lender of the action that Borrower believes Lender should take.

 

18.5 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, Lender shall have all other rights and remedies accorded a secured party under the Uniform Commercial Code as enacted in California and under any and all other applicable laws and in any other instrument or agreement now or hereafter entered into between Lender and Borrower and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Lender of one or more of its rights or remedies shall not be deemed an election, nor bar Lender from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Lender to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

 

 

19. Account Stated. Lender shall render to Borrower a statement setting forth the transactions arising hereunder. Each statement shall be considered correct and binding upon Borrower as an account stated, except to the extent that Lender receives, within sixty (60) days after the mailing of such statement, written notice from Borrower of any specific exceptions by Borrower to that statement, and then it shall be binding against Borrower as to any items to which it has not objected.

 

 

20. Amendment and Waiver. Only a writing signed by all parties hereto may amend this Agreement. No failure or delay in exercising any right hereunder shall impair any such right that Lender may have, nor shall any waiver by Lender hereunder be deemed a waiver of any default or breach subsequently occurring. Lender’s rights and remedies herein are cumulative and not exclusive of each other or of any rights or remedies that Lender would otherwise have.

 

 

21. Termination; Effective Date.

 

21.1. Subject to the Early Termination Fee, this Agreement will be effective on the date it is signed by the Parties, shall continue for the Term, and shall be automatically extended for successive Terms unless Borrower shall provide 60 days prior written notice to Lender of its intention to terminate whereupon this Agreement shall terminate on the date set forth in said notice (an “Early Termination Date”) upon successful repayment of all outstanding Obligations.

 

21.2. Lender may terminate this Agreement and demand immediate payment of all outstanding Obligations at any time and for any reason.

 

 

22. No Lien Termination without Release. In recognition of the Lender's right to have its legal fees and other expenses incurred in connection with this Agreement secured by the Collateral, notwithstanding payment in full of all Obligations by Borrower, Lender shall not be required to record any terminations or satisfactions of any of Lender's liens on the Collateral unless and until Complete Termination has occurred. Borrower understands that this provision constitutes a waiver of its rights under §9-513 of the UCC.

 

 

23. Conflict. Unless otherwise expressly stated in any other agreement between Lender and Borrower, if a conflict exists between the provisions of this Agreement and the provisions of such other agreement, the provisions of this Agreement shall control.

 

 

24. Severability. In the event any one or more of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, then such provision shall be ineffective only to the extent of such prohibition or invalidity, and the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

 

 

25. Enforcement. This Agreement and all agreements relating to the subject matter hereof is the product of negotiation and preparation by and among each party and its respective attorneys, and shall be construed accordingly.

 

 

26. Relationship of Parties. The relationship of the parties hereto shall be that of Borrower and Lender of Accounts, and Lender shall not be a fiduciary of the Borrower, although Borrower may be a fiduciary of the Lender.

 

 

27. Legal Fees. Borrower agrees to reimburse Lender on demand for:

 

27.1. The actual amount of all costs and expenses, including legal fees, which Lender has incurred or may incur in;

 

27.1.1. Negotiating, preparing, or administering this Agreement and any documents prepared in connection herewith; Any way arising out of or in connection with this Agreement, and whether or not arising out of a dispute which does not involve Lender;

 

27.1.2. Protecting, preserving or enforcing any lien, security or other right granted by Borrower to Lender or arising under applicable law, whether or not suit is brought, including but not limited to the defense of any Avoidance Claims or the defense of Lender’s lien priority;

 

27.2. The actual costs, including photocopying (which, if performed by Lender's employees, shall be at the rate of $.10/page), travel, and legal fees and expenses incurred in complying with any subpoena or other legal process in any way relating to Borrower. This provision shall survive termination of this Agreement; and

 

27.3. The actual amount of all costs and expenses, including legal fees, which Lender may incur in enforcing this Agreement and any documents prepared in connection herewith, or in connection with any federal or state insolvency proceeding commenced by or against Borrower, including but not limited to those (a) arising out the automatic stay, (b) seeking dismissal or conversion of the bankruptcy proceeding, (c) opposing confirmation of Borrower's plan thereunder, or (d) validating Lender’s security interest or lien priority with respect to the Collateral.

 

 

28. Entire Agreement. No promises of any kind have been made by Lender or any third party to induce Borrower to execute this Agreement. No course of dealing, course of performance or trade usage, and no parole evidence of any nature, shall be used to supplement or modify any terms of this Agreement.

 

 

29. Choice of Law. This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the Chosen State.

 

 

30. Jury Trial Waiver. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY), THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE PARTIES ACTIONS IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF OR THEREOF. THE PARTIES EACH ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF ADVICE OF COUNSEL OF ITS CHOOSING. THE PARTIES EACH ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.

 

IN THE EVENT THAT ANY PARTY HERETO ELECTS TO BRING ANY ACTION OR PROCEEDING IN THE STATE OF CALIFORNIA, RELATING TO THIS AGREEMENT OR ANY OF THE OBLIGATIONS, THE PARTIES AGREE THAT SUCH ACTION OR PROCEEDING SHALL BE TRIED SOLELY THROUGH A JUDICIAL REFEREE AS PROVIDED IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.1. THE PARTIES FURTHER AGREE TO THE APPOINTMENT OF JAMS AS THE REFEREE APPOINTMENT TO CONDUCT THE TRIAL AND SUCH RELATED PROCEEDINGS. THE PARTIES AGREE THAT THE FILING OF ANY PRE-TRIAL MOTION OR ANY PRE-TRIAL PROVISIONAL REMEDY SHALL NOT OPERATE AS A WAIVER OF EACH PARTY’S RIGHT TO TRIAL SOLELY THROUGH A JUDICIAL REFEREE. THE PARTIES ACKNOWLEDGE THAT THE JUDICIAL REFEREE WILL LIKELY CHARGE FEES AND COSTS OVER AND ABOVE THOSE NORMALLY CHARGED BY A COURT. THE PARTIES AGREE TO INITIALLY EVENLY SPLIT THE FEES AND COSTS OF SUCH REFEREE BETWEEN THE PARTIES, SUBJECT TO SUCH FURTHER RULINGS BY THE REFEREE.

 

 

31. Venue; Jurisdiction. Any suit, action or proceeding arising hereunder, or the interpretation, performance or breach hereof, shall, if Lender so elects, be instituted in any court sitting in the Chosen State, in the city in which Lender’s chief executive office is located, or if none, any court sitting in the Chosen State (the “Acceptable Forums”). Borrower agrees that the Acceptable Forums are convenient to it, and submits to the jurisdiction of the Acceptable Forums and waives any and all objections to jurisdiction or venue. Should such proceeding be initiated in any other forum, Borrower waives any right to oppose any motion or application made by Lender to transfer such proceeding to an Acceptable Forum.

 

 

32. Service of Process. Borrower agrees that Lender may effect service of process upon Borrower by regular mail at the address set forth herein or at such other address as may be reflected in the records of Lender, or at the option of Lender by service upon Borrower’s agent for the service of process.

 

 

33. Assignment. Lender may assign its rights and delegate its duties hereunder. Upon such assignment, Borrower shall be deemed to have attorned to such assignee and shall owe the same obligations to such assignee and shall accept performance hereunder by such assignee as if such assignee were Lender.

 

 

34. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by facsimile to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.

 

 

35. Notice

 

35.1. All notices required to be given to any party other than Lender shall be deemed given upon the first to occur of (a) a deposit thereof in a receptacle under the control of the United States Postal Service, (b) transmittal by electronic means to a receiver under the control of such party, or (c) actual receipt by such party or an employee or agent of such party. All notices to Lender shall be deemed given upon actual receipt by a responsible officer of Lender.

 

35.2. For the purposes hereof, notices hereunder shall be sent to the addresses set forth as Contact Addresses on the face page hereof, or to such other addresses as each such party may in writing hereafter indicate.

 

 

36. Definitions and Index to Definitions. The following terms used within this Agreement shall have the following meaning. All capitalized terms not defined within this Agreement shall have the meaning set forth in the Uniform Commercial Code:

 

(a)	“Additional Financing Fee” – As stated within the General Rates and Fees, or 30 days based on a 30 day month and 360 day year if unstated.
(b)	“Advance” – The funding of the Purchase Price
(c)	“Advance Rate” – As stated in the General Rates and Fees.
(d)	“Avoidance Claim” - Any claim that any lien or payment received by Lender is avoidable under the Bankruptcy Code, any other debtor relief statute, including fraudulent conveyance claims, or through receivership, assignment for the benefit of creditors or any equivalent type payment recovery laws, rules or regulations intended to benefit creditors.
(e)	“Base Fees” - Initial Financing Fee and Additional Financing Fee (not to overlap).
(f)	“Change of Control” – means the person or entity constituting the majority ultimate beneficial owner of the voting equity interests of Borrower (or having the ability to elect a majority of the board of directors of Borrower) as of the date hereof no longer constituting the majority ultimate beneficial owner of the voting equity interests of Borrower (or having the ability to elect a majority of the board of directors of Borrower).
(g)	“Chosen State” - California.
(h)	“Clearance Days”- None.
(i)	“Closed” - A Purchased Account is closed upon receipt of full payment by Lender from a Payor or from the Borrower (including its being charged to the Reserve Account).
(j)	“Collateral”- All of Borrower’s now owned and hereafter acquired personal property including, without limitation, all Accounts, Chattel Paper, Deposit Accounts, Inventory, Equipment, Instruments, Investment Property, Documents, Letter of Credit Rights, Commercial Tort Claims, General Intangibles (including Intellectual Property but excluding any intent-to-use trademark applications for which non statement of use has been filed), and all proceeds of each of the foregoing.
(k)	“Complete Termination” – Complete Termination occurs upon satisfaction of the following conditions: (1) Payment in full of all Obligations of Borrower to Lender; (2) If Lender has issued or caused to be issued guarantees, promises, or letters of credit on behalf of Borrower, acknowledgement from any beneficiaries thereof that Lender or any other issuer has no outstanding direct or contingent liability therein; and (3) Borrower has executed and delivered to Lender a general release in the form required by Lender and complied with Section 21.1.
(l)	“Concentration Limit” – As stated within the General Rates and Fees, or 25% of the entire amount outstanding from Borrower. The concentration limit refers to the percentage any debt from a single debtor has over the total amount outstanding from Borrower’s Purchased Accounts.
(m)	“Default Rate” – the lesser of: (1) 1% per month on the gross amount of Invoices and (2) the highest default rate permitted by applicable law; the foregoing Default Rate is in addition to any standard rate accruing hereunder.
(n)	“Early Termination Date” – see Section 21.1 hereof.
(o)	“Early Termination Fee” – As stated in the General Rates and Fees.

 

 

(p)	“Eligible Account” - An Account that is acceptable for purchase as determined by Lender in the exercise of its reasonable sole credit or business judgment.
(q)	“ePay Agreement” – means any SaaS agreement, ePay SaaS agreement, or similar agreement regarding Lender or Lender’s affiliates’ ePay services entered into between Borrower and Lender or Lender’s affiliates (including but not limited to FastPay Payment Technologies Inc.), and any agreements related thereto, including but not limited to any agreements or terms & conditions between Borrower and any of Lender or Lender’s affiliates’ card or issuing bank partners.
(r)	“Events of Default” - See Section 17.1.
(s)	“Exposed Payments” – Payments received by Lender from or for the account of a Payor that has become subject to a bankruptcy proceeding, to the extent such payments cleared the Payor’s deposit account within ninety (90) days of the commencement of said bankruptcy case.
(t)	“Face Amount” - the amount initially invoiced on an Account at the time of purchase.
(u)	“Facility Rate” – if applicable, as set forth in the General Rates and Fees.
(v)	“Financing Fee(s) “ – Refers to the Initial Financing Fee or Additional Financing Fee and means the Percentage in the amount aforementioned multiplied by the Face Amount of a Purchased Account, for each Financing Fee Period or portion thereof, that any portion thereof remains unpaid, computed from the end of the Initial Fee Period to and including the date on which a Purchased Account is Closed.
(w)	“Initial Financing Fee” - The first 30 days after the Purchase Price is paid to Borrower or credited by Lender to Borrower’s Reserve Account based on a 30 day month and 360 day year unless explicitly overridden within the General Rates and Fees.
(x)	“Intellectual Property” – all intellectual and similar property, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software and databases; all embodiments or fixations thereof and all related documentation, applications, registrations and franchises; all licenses or other rights to use any of the foregoing; and all books and records relating to the foregoing.
(y)	“Invoice” - The document that evidences or is intended to evidence an Account. Where the context so requires, reference to an Invoice shall be deemed to refer to the Account, Eligible Account or Purchased Account to which it relates.
(z)	“Late Charge” – None.
(aa)	“Late Payment Date” - Ninety (90) days from the date on which a Purchased Account was Purchased.
(bb)	“LIBOR Rate” – means, for any calendar month, the greater of: (a) two and three quarters of a percent (2.75%) per annum, and (b) the three (3) month U.S. LIBOR rate per annum as reported on Reuters Screen LIBOR01 page (or any successor page) two (2) Business Days prior to the commencement of such calendar month (and, if any such rate is below zero, the LIBOR Rate shall be deemed to be zero), which determination shall be made by Lender and shall be conclusive in the absence of demonstrable error. In the event the LIBOR Rate is unavailable for any reason, Lender may use a replacement index as determined by Lender in its sole discretion.
(cc)	“Misdirected Payment Fee” – Unless otherwise stated in the General Rates and Fees, 20% of the amount of any payment (but in no event less than $1,000) on account of a Purchased Account which has been received by Borrower and not delivered in kind to Lender on the next business day following the date of receipt by Borrower, or 30% of the amount of any such payment which has been received by Borrower as a result of any action taken by Borrower to cause such payment to be made to Borrower.
(dd)	“Obligations” - All present and future obligations owing by Borrower to Lender whether arising hereunder or otherwise, and whether arising before, during or after the commencement of any Bankruptcy Case in which Borrower is a Debtor. Without limiting the generality hereof, Borrower acknowledges and agrees that the term "Obligations" shall also include: (1) any obligations of Borrower under any ePay Agreement, including any extensions of credit or advances in connection therewith (or any guarantees by Lender or its affiliates of the foregoing); (2) any payment obligations owed by Borrower to any payee or vendor of Borrower that is paid by Lender or any of Lender’s affiliates or partners; and (3) all ledger debt of Borrower, which shall mean and include all indebtedness of Borrower now or hereafter owing to a third party, which Lender has heretofore or hereafter purchases from such third party, acquires by way of assignment, or in which Lender has heretofore or hereafter acquires a security interest, whether as a result of Lender financing the accounts receivable of such third party or otherwise. Borrower acknowledges that Lender will be relying upon this provision in financing the accounts receivable of such third parties (consisting of indebtedness and obligations now or hereafter due from Borrower to such third parties), as well as in permitting Account Debtor’s to incur other indebtedness due to Borrower, but nothing herein shall constitute a commitment of any kind by Lender to factor or finance the accounts receivable of any third party to the extent they represent amounts owing by Borrower to such third parties.
(ee)	“Parties” - Borrower and Lender.

 

 

(ff)	“Payor” - An Account Debtor or other obligor on an Account, or entity making payment thereon for the account of such party.
(gg)	“Purchase Date” - The date on which Borrower has been advised in writing that Lender has agreed to purchase an Account.
(hh)	“Purchase Price” - The Face Amount of a Purchased Account.
(ii)	“Purchased Accounts” - Accounts purchased hereunder which have not been Closed.
(jj)	“Repurchased” - An Account has been repurchased when Borrower has paid to Lender the then unpaid Face Amount.
(kk)	“Required Reserve Amount” - The Reserve Percentage multiplied by the unpaid balance of Purchased Accounts.
(ll)	“Reserve Account” - A bookkeeping account on the books of the Lender representing the portion of the Purchase Price which has not been paid by Lender to Borrower, maintained by Lender to ensure Borrower's performance with the provisions hereof.
(mm)	“Reserve Percentage” - 100% less the Advance Rate. The Reserve Percentage may be increased or decreased at any time in Lender’s sole discretion.
(nn)	“Reserve Shortfall” - The amount by which the Reserve Account is less than the Required Reserve Amount.
(oo)	“Restricted Industry” – any of the following industries: adult entertainment, firearm or ammunition sales or manufacturing, or gaming/gambling.
(pp)	“Term” – Twenty-Four Months.
(qq)	“UCC” – The Uniform Commercial Code as adopted in the Chosen State.

 

 

[SIGNATURES AGREEING TO THE STANDARD TERMS AND CONDITIONS APPEAR ON THE FIRST PAGE]

 

 

 

 

SCHEDULE 12.5

PERMITTED INDEBTEDNESS FOR BORROWED MONEY

 

 

 

 

 

SCHEDULE 14.3

 

FORMER NAMES AND TRADE NAMES

 

SCHEDULE 14.8

 

DISCLOSURE OF REGISTERED PATENTS, COPYRIGHTS, AND TRADEMARKS

 

PATENTS AND PATENT APPLICATIONS

 

 

 

 

COPYRIGHTS AND COPYRIGHT APPLICATIONS

 

 

 

 

TRADEMARKS OR TRADEMARK APPLICATIONS

 

 

 

 

MATERIAL INTELLECTUAL PROPERTY LICENSES

 

 

 

 

AMENDMENT NO. 1 TO FINANCING AND SECURITY AGREEMENT

 

This Amendment No. 1 to Financing and Security Agreement (this “Amendment”) shall be entered into on December 23, 2019, by and between SOCIALCOM INC. (“Borrower”) and FAST PAY PARTNERS LLC (“Lender”).

 

RECITALS

 

WHEREAS, the Borrower and Lender entered into that certain Financing and Security Agreement (as amended from time to time, the “Financing Agreement”) dated on or around June 13, 2019;

 

WHEREAS, the Borrower and Lender deem it desirable and necessary to supplement and modify certain terms and provisions to the Financing Agreement by this Amendment;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.

All capitalized terms not otherwise defined herein shall have their respective meanings as set forth in the Financing Agreement. This Amendment and the terms and provisions hereof, are incorporated in their entirety into the Financing Agreement by reference. In the event of any conflict between this Amendment and the Financing Agreement, the terms of this Amendment shall prevail.

 

2.

Amendments to the Financing Agreement.

 

a.

The General Rates and Fees box on the first page of the Financing Agreement is hereby amended by deleting such box in its entirety and replacing it with the following:

 

GENERAL RATES AND FEES
The items referenced below are subject to and defined within the provisions of this Agreement:
(m)	Maximum Line Amount: Ten Million Dollars ($10,000,000.00)
(n)	Advance Rate: 85% of gross value of Invoices
(o)	Minimum Invoice Size: One hundred dollars ($100); provided each individual Advance hereunder must be at least five thousand dollars ($5,000)
(p)	Initial Financing Fee: A flat fee equal to 1/12 multiplied by the Facility Rate, based on the net amount Advanced with respect to any Invoice for a Purchased Account (or the net amount Advanced for Advances not tied to any Invoice), for the initial 30-day period
(q)	Additional Financing Fee: A monthly rate equivalent to 1/12 multiplied by the Facility Rate, prorated daily on the net amount Advanced outstanding with respect to any Invoice for a Purchased Account (or the net amount Advanced outstanding for Advances not tied to any Invoice), commencing on day 31. For the purposes of this Agreement, “Facility Rate” means the sum of: (x) the LIBOR Rate plus (y) 6.50% per annum; provided, on and after any time Borrower has not complied with clause (l) below or Section 12.12 herein, the Facility Rate shall increase to the sum of: (i) the LIBOR Rate plus (y) 7.25% per annum.
(r)	Misdirected Payment Fee: Repayment of all Advances must be paid by the Account Debtor directly to Lender. In the event an Account Debtor fails to pay Lender directly, Lender will provide Borrower a grace period of five (5) business days to notify Lender of any Misdirected Payment and to forward the full amount of the Misdirected Payment to Lender otherwise Borrower may be assessed a Misdirected Payment Fee equaling 20% of the amount of such payment.
(s)	Concentration Limit: The percentage of any debt from a single Account Debtor over the total amount outstanding from Borrower’s Purchased Accounts must remain below 25%. In the event the percentage exceeds the foregoing limit, Lender may exercise its right not to purchase more accounts from said Account Debtor.
(t)	Non-Refundable Deposit: $15,000. Lender acknowledges prior receipt of such Non-Refundable Deposit.
(u)	Wire Fee: An amount equal to Thirty-Five Dollars ($35.00) to cover fees and costs associated with incoming and outgoing wire transfers to/from the Lockbox or as between Lender/Borrower.
(v)	Termination: Subject to a fee equal to 2% of the Maximum Line Amount with respect to any termination of this Agreement prior to June 13, 2021 (the “Early Termination Fee”), Borrower may terminate this Agreement at any time upon 60 days prior written notice to Lender whereupon this Agreement shall terminate upon successful repayment of all outstanding Obligations.
(w)	Minimum Utilization: Borrower shall at all times utilize at least 20% of the Maximum Line Amount. The Financing Fees otherwise set forth herein shall be adjusted to reflect such minimum utilization.
(x)	Payment Services Covenant: Borrower shall at all times submit to Lender all of Borrower’s accounts payable and vendor payments through Lender and/or Lender’s affiliates’ payments platform as set forth in the ePay Agreement.

 

 

b.

Section 12.11 (Financial Reporting) of the Financing Agreement is hereby amended by adding the following:

 

“(c) a revenue report on or prior to the 15^th of every calendar month with respect to the immediately preceding month.”

 

c.

Section 17.1 (Events of Default) of the Financing Agreement is hereby amended by adding the following new clause (j) to the end of such existing section:

 

“or (j) the occurrence of any default or Event of Default under any Decathlon Loan Document.”

 

d.

Section 36 (Definitions and Index to Definitions) of the Financing Agreement is hereby amended by adding the following definitions of “Decathlon”, “Decathlon Loan Agreement” and “Decathlon Loan Documents” therein in alphabetical order definitions:

 

“Decathlon” – Decathlon Alpha IV, L.P. or any of its investment affiliates.

 

“Decathlon Loan Agreement” – Revenue Loan and Security Agreement by and between Borrower and Decathlon dated as of December 13, 2019.

 

“Decathlon Loan Documents”- the Decathlon Loan Agreement and any other document related thereto.

 

3.

Conditions Precedent to Effectiveness of this Amendment.

 

a.

The Financing Agreement must be in effect, without termination;

 

b.

No Default or Event of Default shall have occurred or be continuing under the Financing Agreement; and

 

c.

Borrower shall pay all of Lender’s reasonable out-of-pocket fees and expenses in connection with this Amendment.

 

4.

Sections 29, 30, and 31 of the Financing Agreement are hereby incorporated herein by reference mutatis mutandis.

 

 

IN WITNESS WHEREOF, the parties here have executed this Amendment as of the day, month, and year first above written.

 

BORROWER:                                                                            SOCIALCOM INC.

 

 

/s/ Reeve Benaron

Name: Reeve Benaron

Title: CEO

 

LENDER:                                                                                    FAST PAY PARTNERS LLC

 

 

/s/ Secil Baysal

Name: Secil Baysal

Title: Chief Operating Officer

 

 

 

AMENDMENT NO. 2 TO FINANCING AND SECURITY AGREEMENT

 

This Amendment No. 2 to Financing and Security Agreement (this “Amendment”) shall be entered into on June 11, 2021, by and between SOCIALCOM INC. (“Borrower”) and FAST PAY PARTNERS LLC (“Lender”).

 

RECITALS

 

WHEREAS, the Borrower and Lender entered into that certain Financing and Security Agreement (as amended from time to time, the “Financing Agreement”) dated on or around June 13, 2019;

 

WHEREAS, the Borrower and Lender deem it desirable and necessary to supplement and modify certain terms and provisions to the Financing Agreement by this Amendment;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

5.

All capitalized terms not otherwise defined herein shall have their respective meanings as set forth in the Financing Agreement. This Amendment and the terms and provisions hereof, are incorporated in their entirety into the Financing Agreement by reference. In the event of any conflict between this Amendment and the Financing Agreement, the terms of this Amendment shall prevail.

 

6.

Amendments to the Financing Agreement.

 

e.

The General Rates and Fees box on the first page of the Financing Agreement is hereby amended by deleting such box in its entirety and replacing it with the following:

 

GENERAL RATES AND FEES
The items referenced below are subject to and defined within the provisions of this Agreement:
(yy)	Maximum Line Amount: Five Million Dollars ($5,000,000.00)
(zz)	Advance Rate: 85% of gross value of Invoices
(aa)	Minimum Invoice Size: One hundred dollars ($100); provided each individual Advance hereunder must be at least five thousand dollars ($5,000)
(bb)	Initial Financing Fee: A flat fee equal to 1/12 multiplied by the Facility Rate, based on the net amount Advanced with respect to any Invoice for a Purchased Account (or the net amount Advanced for Advances not tied to any Invoice), for the initial 30-day period
(cc)	Additional Financing Fee: A monthly rate equivalent to 1/12 multiplied by the Facility Rate, prorated daily on the net amount Advanced outstanding with respect to any Invoice for a Purchased Account (or the net amount Advanced outstanding for Advances not tied to any Invoice), commencing on day 31. For the purposes of this Agreement, “Facility Rate” means the sum of: (x) the LIBOR Rate plus (y) 6.50% per annum.
(dd)	Misdirected Payment Fee: Repayment of all Advances must be paid by the Account Debtor directly to Lender. In the event an Account Debtor fails to pay Lender directly, Lender will provide Borrower a grace period of five (5) business days to notify Lender of any Misdirected Payment and to forward the full amount of the Misdirected Payment to Lender otherwise Borrower may be assessed a Misdirected Payment Fee equaling 20% of the amount of such payment.
(ee)	Concentration Limit: The percentage of any debt from a single Account Debtor over the total amount outstanding from Borrower’s Purchased Accounts must remain below 25%; provided solely with the respect to Moon Tide Media LLC and its affiliates in the aggregate, the foregoing limit shall be 30%. In the event the percentage exceeds the foregoing limit, Lender may exercise its right not to purchase more accounts from said Account Debtor.
(ff)	Non-Refundable Deposit: $15,000. Lender acknowledges prior receipt of such Non-Refundable Deposit.
(gg)	Wire Fee: An amount equal to Thirty-Five Dollars ($35.00) to cover fees and costs associated with incoming and outgoing wire transfers to/from the Lockbox or as between Lender/Borrower.
(hh)	Termination: Subject to a fee (the “Early Termination Fee”) equal to 1.5% of the Maximum Line Amount with respect to any termination of this Agreement prior to June 13, 2022, Borrower may terminate this Agreement at any time upon 60 days prior written notice to Lender whereupon this Agreement shall terminate upon successful repayment of all outstanding Obligations. For the avoidance of doubt, the Early Termination Fee shall expire on June 13, 2022.
(ii)	Minimum Utilization: Borrower shall at all times utilize at least 20% of the Maximum Line Amount. The Financing Fees otherwise set forth herein shall be adjusted to reflect such minimum utilization.
(jj)	[Reserved].

 

 

f.

Section 12.12 of the Financing Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

 

“12.12 [Reserved].”

 

7.

Conditions Precedent to Effectiveness of this Amendment.

 

d.

The Financing Agreement must be in effect, without termination;

 

e.

No Default or Event of Default shall have occurred or be continuing under the Financing Agreement; and

 

f.

Borrower shall pay all of Lender’s reasonable out-of-pocket fees and expenses in connection with this Amendment.

 

8.

Sections 29, 30, and 31 of the Financing Agreement are hereby incorporated herein by reference mutatis mutandis.

 

 

 

 

 

IN WITNESS WHEREOF, the parties here have executed this Amendment as of the day, month, and year first above written.

 

BORROWER:                                                                            SOCIALCOM INC.

 

 

/s/ Reeve Benaron

Name: Reeve Benaron

Title: CEO

 

LENDER:                                                                                    FAST PAY PARTNERS LLC

 

 

/s/ Jeffrey K. Goldrich

Name: Jeffrey K. Goldrich

Title: President/CEO

 

 

 

AMENDMENT NO. 3 TO FINANCING AND SECURITY AGREEMENT

 

This Amendment No. 3 to Financing and Security Agreement (this “Amendment”) shall be entered into on June 8, 2022, by and between SOCIALCOM INC. (“Borrower”) and FAST PAY PARTNERS LLC (“Lender”).

 

RECITALS

 

WHEREAS, the Borrower and Lender entered into that certain Financing and Security Agreement (as amended from time to time, the “Financing Agreement”) dated on or around June 13, 2019;

 

WHEREAS, the Borrower and Lender deem it desirable and necessary to supplement and modify certain terms and provisions to the Financing Agreement by this Amendment;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

9.

All capitalized terms not otherwise defined herein shall have their respective meanings as set forth in the Financing Agreement. This Amendment and the terms and provisions hereof, are incorporated in their entirety into the Financing Agreement by reference. In the event of any conflict between this Amendment and the Financing Agreement, the terms of this Amendment shall prevail.

 

10.

Amendments to the Financing Agreement.

 

g.

The General Rates and Fees box on the first page of the Financing Agreement is hereby amended by deleting such box in its entirety and replacing it with the following:

 

GENERAL RATES AND FEES
The items referenced below are subject to and defined within the provisions of this Agreement:
(kk)	Maximum Line Amount: Five Million Dollars ($5,000,000.00)
(ll)	Advance Rate: 85% of gross value of Invoices
(mm)	Minimum Invoice Size: One hundred dollars ($100); provided each individual Advance hereunder must be at least five thousand dollars ($5,000)
(nn)	Initial Financing Fee: A flat fee equal to 1/12 multiplied by the Facility Rate, based on the net amount Advanced with respect to any Invoice for a Purchased Account (or the net amount Advanced for Advances not tied to any Invoice), for the initial 30-day period
(oo)	Additional Financing Fee: A monthly rate equivalent to 1/12 multiplied by the Facility Rate, prorated daily on the net amount Advanced outstanding with respect to any Invoice for a Purchased Account (or the net amount Advanced outstanding for Advances not tied to any Invoice), commencing on day 31. For the purposes of this Agreement, “Facility Rate” means the sum of: (x) the LIBOR Rate plus (y) 6.50% per annum.
(pp)	Misdirected Payment Fee: Repayment of all Advances must be paid by the Account Debtor directly to Lender. In the event an Account Debtor fails to pay Lender directly, Lender will provide Borrower a grace period of five (5) business days to notify Lender of any Misdirected Payment and to forward the full amount of the Misdirected Payment to Lender otherwise Borrower may be assessed a Misdirected Payment Fee equaling 20% of the amount of such payment.
(qq)	Concentration Limit: The percentage of any debt from a single Account Debtor over the total amount outstanding from Borrower’s Purchased Accounts must remain below 25%; provided solely with the respect to Moon Tide Media LLC and its affiliates in the aggregate, the foregoing limit shall be 30%. In addition, QBO ACH Accounts, may not exceed 10% of all Purchased Accounts at any one time In the event the applicable percentages exceed the foregoing limits, Lender may exercise its right not to purchase more accounts from said Account Debtor or any other QBO ACH Accounts, as applicable.
(rr)	3rd Amendment Fee: On or prior to the 3rd Amendment Effective Date, Borrower shall pay to Lender an amendment fee of $2,000.00 in connection with that certain Amendment No. 3 to Financing and Security Agreement between Borrower and Lender, with such amendment fee being fully earned, due and payable as of the 3rd Amendment Effective Date.
(ss)	Wire Fee: An amount equal to Thirty-Five Dollars ($35.00) to cover fees and costs associated with incoming and outgoing wire transfers to/from the Lockbox or as between Lender/Borrower.
(tt)	Termination: Subject to a fee (the “Early Termination Fee”) equal to 1.5% of the Maximum Line Amount with respect to any termination of this Agreement prior to June 13, 2022, Borrower may terminate this Agreement at any time upon 60 days prior written notice to Lender whereupon this Agreement shall terminate upon successful repayment of all outstanding Obligations. For the avoidance of doubt, no Early Termination Fee shall applicable if termination occurs on or after June 13, 2022.
(uu)	Minimum Utilization: Borrower shall at all times utilize at least 20% of the Maximum Line Amount. The Financing Fees otherwise set forth herein shall be adjusted to reflect such minimum utilization.
(vv)	[Reserved].

 

 

h.

Section 17.1 of the Financing Agreement is hereby amended by deleting the “or” after clause (h) of that section, deleting the “.” at the end of clause (i) and replacing it with “; or” and adding the following new clauses (j) and (k) immediately thereafter:

 

“(j) Borrower fails to promptly remit any payment in respect of any QBO ACH Account to the Lockbox; or (k) Lender is removed from any email distribution list in respect of QBO ACH Accounts which is generated by the applicable payment platform.

 

i.

Section 36 of the Financing Agreement is hereby amended by adding the following definition in the appropriate alphabetical order:

 

“(ii1) QBO ACH Accounts- Purchased Accounts where the applicable Account Debtor has made payment in respect of the same using the intuit payment platform, QuickBooks payment platform or similar payment platform.

 

11.

Conditions Precedent to Effectiveness of this Amendment.

 

g.

The Financing Agreement must be in effect, without termination;

 

h.

No Default or Event of Default shall have occurred or be continuing under the Financing Agreement; and

 

i.

Borrower shall pay all of Lender’s reasonable out-of-pocket fees and expenses in connection with this Amendment.

 

12.

Sections 29, 30, and 31 of the Financing Agreement are hereby incorporated herein by reference mutatis mutandis.

 

 

 

IN WITNESS WHEREOF, the parties here have executed this Amendment as of the day, month, and year first above written.

 

BORROWER:                                                                            SOCIALCOM INC.

 

 

/s/ Reeve Benaron

Name: Reeve Benaron

Title: CEO

 

LENDER:                                                                                    FAST PAY PARTNERS LLC

 

 

/s/ Danielle Baldaro

Name: Danielle Baldaro

Title: Senior Vice President, FP Portfolio Manager

 

 

 

AMENDMENT NO. 4 TO FINANCING AND SECURITY AGREEMENT

 

This Amendment No. 4 to Financing and Security Agreement (this “Amendment”) shall be entered into on July 20, 2022, by and between SOCIALCOM INC. (“Borrower”) and SLR DIGITAL FINANCE LLC, formerly known as Fast Pay Partners LLC (“Lender”).

 

RECITALS

 

WHEREAS, the Borrower and Lender entered into that certain Financing and Security Agreement (as amended from time to time, the “Financing Agreement”) dated on or around June 13, 2019;

 

WHEREAS, the Borrower and Lender deem it desirable and necessary to supplement and modify certain terms and provisions to the Financing Agreement by this Amendment;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, and other good and valuable consideration, the

 

receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.    All capitalized terms not otherwise defined herein shall have their respective meanings as set forth in the Financing Agreement. This Amendment and the terms and provisions hereof, are incorporated in their entirety into the Financing Agreement by reference. In the event of any conflict between this Amendment and the Financing Agreement, the terms of this Amendment shall prevail.

 

2.    Amendments to the Financing Agreement.

 

a.         Schedule 12.5 of the Financing Agreement is hereby amended by adding a new promissory note to the Permitted Indebtedness for Borrower Money chart below:

 

Name of Loan Document	Date of Issuance/Document	Holder of Permitted Indebtedness	Maximum Principal Amount

 

3.         Conditions Precedent to Effectiveness of this Amendment.

 

a.

The Financing Agreement must be in effect, without termination;

 

b.

No Default or Event of Default shall have occurred or be continuing under the Financing Agreement;

 

c.

Borrower shall have paid Lender an amendment fee in the amount of $5,000, which has been fully earned and charged to the Reserve Account; and

 

d.

Borrower shall pay all of Lender’s reasonable out-of-pocket fees and expenses in connection with this Amendment.

4. Sections 29, 30, and 31 of the Financing Agreement are hereby incorporated herein by reference mutatis mutandis.

 

 

IN WITNESS WHEREOF, the parties here have executed this Amendment as of the day, month, and year first above written.

 

 

BORROWER:                                                                            SOCIALCOM INC.

 

 

/s/ Reeve Benaron

Name: Reeve Benaron

Title: CEO

 

LENDER:                                                                                    SLR DIGITAL FINANCE LLC,

Formerly known as Fast Pay Partners LLC

 

/s/ Danielle Baldaro

Name: Danielle Baldaro

Title: Senior Vice President, FP Portfolio Manager

 

 

 

AMENDMENT NO. 5 TO FINANCING AND SECURITY AGREEMENT

 

This Amendment No. 5 to Financing and Security Agreement (this “Amendment”) dated as of September 18, 2023, by and among SOCIALCOM INC. (“Borrower”), and SLR DIGITAL FINANCE LLC, formerly known as Fast Pay Partners LLC (“Lender”).

 

RECITALS

 

WHEREAS, the Borrower and Lender entered into that certain Financing and Security Agreement (as amended from time to time, the “Financing Agreement”) dated on or around June 13, 2019;

 

WHEREAS, on or about May 11, 2022, Lender changed its name to SLR Digital Finance LLC;

 

WHEREAS, the Borrower and Lender deem it desirable and necessary to supplement and modify certain terms and provisions to the Financing Agreement and all related financing documents by this Amendment;

 

NOW, THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

13.

All capitalized terms not otherwise defined herein shall have their respective meanings as set forth in the Financing Agreement. This Amendment and the terms and provisions hereof, are incorporated in their entirety into the Financing Agreement by reference. In the event of any conflict between this Amendment and the Financing Agreement, the terms of this Amendment shall prevail.

 

14.

Amendments to the Financing Agreement.

 

j.

The General Rates and Fees box on the first page of the Financing Agreement is hereby amended by deleting such box in its entirety and replacing it with the following:

 

GENERAL RATES AND FEES
The items referenced below are subject to and defined within the provisions of this Agreement:
(a)	Maximum Line Amount: Three Million Dollars ($3,000,000.00)
(b)	Advance Rate: 85% of gross value of Invoices
(c)	Minimum Invoice Size: One hundred dollars ($100); provided each individual Advance hereunder must be at least five thousand dollars ($5,000)
(d)	Initial Financing Fee: A flat fee equal to 1/12 multiplied by the Facility Rate, based on the net amount Advanced with respect to any Invoice for a Financed Account (or the net amount Advanced for Advances not tied to any Invoice), for the initial 30-day period.
(e)	Additional Financing Fee: A monthly rate equivalent to 1/12 multiplied by the Facility Rate, prorated daily on the net amount Advanced outstanding with respect to any Invoice for a Financed Account (or the net amount Advanced outstanding for Advances not tied to any Invoice), commencing on day 31. For the purposes of this Agreement, “Facility Rate” means the sum of: (x) the Prime Rate plus (y) 5.00% per annum.
(f)	Misdirected Payment Fee: Repayment of all Advances must be paid by the Account Debtor directly to Lender. In the event an Account Debtor fails to pay Lender directly, Lender will provide Borrower a grace period of five (5) business days to notify Lender of any Misdirected Payment and to forward the full amount of the Misdirected Payment to Lender otherwise Borrower may be assessed a Misdirected Payment Fee equaling 20% of the amount of such payment.
(g)	Concentration Limit: The percentage of any debt from a single Account Debtor over the total amount outstanding from Borrower’s Purchased Accounts must remain below 25%. In the event the percentage exceeds the foregoing limit, Lender may exercise its right not to purchase more Accounts from said Account Debtor.
(h)	Wire Fee: An amount equal to Thirty-Five Dollars ($35.00) to cover fees and costs associated with incoming and outgoing wire transfers to/from the Lockbox or as between Lender/Borrower.
(i)	Termination: Subject to a fee (the “Early Termination Fee”) equal to 2.00% of the Maximum Line Amount with respect to any termination of this Agreement prior to December 31, 2023, Borrower may terminate this Agreement at any time upon 60 days prior written notice to Lender whereupon this Agreement shall terminate upon successful repayment of all outstanding Obligations (inclusive of the Early Termination Fee).
(j)	Minimum Utilization: Borrower shall at all times utilize at least 20% of the Maximum Line Amount. The Financing Fees otherwise set forth herein shall be adjusted to reflect such minimum utilization.
(k)	Facility Fee: In consideration of Lender’s entering into this Agreement, Borrower shall pay to Lender a facility fee (the “Facility Fee”) in the amount of 1.50% of the Maximum Line Amount which Facility Fee will be fully earned on the Effective Date. As an accommodation to Borrower, the Facility Fee shall be due and payable in 6 monthly installments, commencing on the last day of July 2023 and on each subsequent one-month anniversary of such date until paid in full. Notwithstanding the foregoing, the unpaid balance of the Facility Fee shall be payable in full on the earlier of (a) the termination of this Agreement, (b) the last day of the then effective Term, and (c) at Lender’s option, upon Lender’s declaration of an Event of Default.

 

 

k.    The Agreement shall be amended by the deletion of Section 8 in its entirety and adding the following revised Section 8:

 

“8. Clearance Days. The receipt of any item of payment by Lender for the sole purpose of determining availability for borrowing hereunder, subject to final payment of such item, shall be provisionally applied to reduce the Obligations on the date of receipt of such item of payment by Lender; provided however, the receipt of such item of payment by Lender for the calculation of Initial Financing Fee and Additional Financing Fee on the Obligations, shall not be deemed to have been paid to Lender until three (3) business days after the date of Lender’s actual receipt of such item of payment. Notwithstanding anything to the contrary contained herein, payments received by Lender after 3:00 p.m. Pacific time shall be deemed to have been received by Lender as of the opening of business on the immediately following business day.”

 

l.

The Agreement shall be amended by deleting Section 12.11 (a) in its entirety and adding the following revised Section 12.11 (a):

“(a)         within 30 days of each calendar month end, financial statements and accounts payable aging reports of Borrower and its subsidiaries for such month on a consolidated and consolidating basis, in accordance with Generally Accepted Accounting Principles and otherwise in form reasonably acceptable to Lender; and”

 

m.

The Agreement shall be amended by adding the following Section 12.14:

 

“12.14 Prohibition on transfer of Assets. Each Borrower covenants and agrees that other than Permitted Transfers (as defined below), it will not and will cause each Borrower not to transfer, loan, contribute, make a dividend or distribution to or otherwise make available in any manner whatsoever to any Affiliate that is not a Borrower, any Advances, loans, loan repayments, cash, funds or assets owned by each and every Borrower or to otherwise provide a guaranty or other financial support or accommodation.”         “Permitted Transfers” shall mean (i) funds transferred to Parent or paid on behalf of Parent for expenses incurred by Parent for legal, accounting, audit and other corporate related expenses, (ii) funds transferred or otherwise used by Parent for normal course of business transactions approved by the Board of Directors of Parent, and (iii) funds deployed towards the Company’s Regulation A securities offering under the Securities Act of 1933, provided that with respect to funds borrowed under this Loan Agreement, no more than $50,000 per month may be used for such offering.

 

n.

The Agreement shall be amended by adding the following Section 12.15:

 

“12.15. Prohibition on payments on subordinated debt. Other than payment specifically permitted under the Intercreditor Agreement with Decathlon, Borrower covenants and agrees that it shall make no payments of any kind on any subordinated or other indebtedness.”

 

o.

Section 17.1 Events of Default shall be amended by adding the following Sub-Sections (j) and (k):

 

“(j)         Borrower or any Affiliate defaults under any other agreement for indebtedness if the effect of such default is to enable the holder of such indebtedness to make demand for payment prior to the maturity thereof and such default continues beyond any applicable grace or cure period; or (k) A Change of Control occurs.”

 

p.

Section 21 Termination; Effective Date. Shall be amended by the deletion of Section 21.1 in its entirety and adding the following revised Section 21.1:

 

“21.1. Subject to the Early Termination Fee, this Agreement will be effective on the date it is signed by the Parties and shall continue until December 31, 2023 unless Borrower shall provide 60 days prior written notice to Lender of its intention to terminate whereupon this Agreement shall terminate on the date set forth in said notice (an “Early Termination Date”) upon successful repayment of all outstanding Obligations.”

 

 

q.

Section 36 Definitions and Index to Definitions. is amended as follows:

 

(a)

The definition of “Clearance Days” in Section 36(h) is hereby amended and restated as follows:

 

“(h) “Clearance Days” – Three (3) Business Days.”

 

(b)

The definition of “Loan Documents” is hereby added to Section 36 of the Agreement alphabetically as follows:

 

“Loan Documents” shall mean, collectively, this Financing and Security Agreement and any other agreements, instruments, certificates or other documents entered into in connection with this Financing and Security Agreement, including collateral documents, letter of credit agreements, riders covering inventory or other loans, security agreements, pledges, guaranties, mortgages, deeds of trust, assignments and subordination agreements, and any other agreement executed by Borrower, any guarantor or any affiliate of Borrower or any guarantor pursuant hereto or in connection herewith.”

 

(c)

The Agreement is amended by deleting the definition of LIBOR Rate in Section (bb) and reserving that section and by adding the following definition of Prime Rate alphabetically as follows:

 

“Prime Rate” means the greater of: (a) 8.50% or (b) the highest rate published from time to time by the Wall Street Journal as the Prime Rate for such day, or, in the event the Wall Street Journal ceases to publish the Prime Rate, the base, reference or other rate then designated by Wells Fargo Bank for general commercial loan reference purposes, it being understood that such rate is a reference rate, not necessarily the lowest, established from time to time, which serves as the basis upon which effective interest rates are calculated for loans making reference thereto (and, if any such announced rate is below zero, then the rate determined pursuant to this clause (b) shall be deemed to be zero). The effective interest rate applicable to undersigned’s loans shall change on the date of each change in the Wall Street Journal Prime Rate.”

 

(d)

The definition of “Term” in Section 36(pp) is hereby amended and restated as follows:

 

“(pp) “Term” – December 31, 2023”

 

r.

Schedules 12.5, 14.3 and 14.8 attached hereto replace and supersede the Schedules of the Financing Agreement and are current, true and correct. Borrower agrees to update the Schedules if any changes shall occur.

 

s.

Amendment to all Loan Documents. All references to “Fast Pay Partners LLC”, “Lender”, or other similar references in the Loan Documents shall be amended and deemed to be references to SLR Digital Finance LLC.

 

 

15.

Conditions Precedent to Effectiveness of this Amendment.

 

j.

The Financing Agreement must be in effect, without termination;

 

k.

No Default or Event of Default shall have occurred or be continuing under the Financing Agreement;

 

l.

The payment to Lender of an amendment fee in the amount of $10,000 which has been fully earned and charged to the Reserve Account;

 

m.

Borrower shall pay all of Lender’s reasonable legal services fees and expenses in the in connection with this Amendment.

 

n.

Vado Corp., a Nevada corporation, shall have executed and delivered to Lender a Guaranty Agreement, Security Agreement, Secretary’s Certificate and such other documents as Lender shall require in connection with a full guaranty by Vado Corp., of the full and timely payment and performance by Borrower of its Obligations;

 

o.

Jason Wulfsohn, a California resident, shall have executed and delivered to Lender a Guaranty Agreement, Security Agreement, Secretary’s Certificate and such other documents as Lender shall require in connection with a full guaranty by Jason Wulfsohn, of the full and timely payment and performance by Borrower of its Obligations;

 

p.

Lender shall have received evidence satisfactory to it regarding the indebtedness of Borrower, and to the extent requested by Lender, acceptable intercreditor or subordination agreements shall be delivered to Lender with respect to any such debt.

 

q.

Effective Date. Upon completion of the foregoing conditions, this Amendment shall be effective as of the July 1, 2023, provided however that all changes to Fees provided for in this Amendment No. 5 shall be deemed effective as of July 31, 2023 except payment of the Early Termination Fee which shall be deemed to have been effective since the date of the Financing Agreement, subject to any changes to the amount or timing of payment of such Early Termination Fee set forth in this or any other amendment to the Financing Agreement.

 

 

16.

Conditions Subsequent. The following Conditions subsequent must be completed within the respective time periods indicated. If such items are not so completed, an Event of Default shall be deemed to have occurred under the terms of the Financing Agreement:

 

a.         Borrower shall cause collections and all other payments due to Borrower to Lender’s Wells Fargo account ending in 1856;

b.         Borrower shall provide read only access to Lender for Borrower’s read-only bank access to its Chase account; and

c.         Borrower to provide to Lender evidence satisfactory to it that Borrower’s Bridge Bank account ending in #6232 has been and remains closed.

 

17.

Sections 29, 30, and 31 of the Financing Agreement are hereby incorporated herein by reference mutatis mutandis.

 

 

[SIGNATURES BEGIN ON FOLLOWING PAGE]

 

 

IN WITNESS WHEREOF, the parties here have executed this Amendment as of the day, month, and year first above written.

 

 

BORROWER:                                                                            SOCIALCOM INC.

 

 

Signature: /s/ Jason Wulfsohn

Name: Jason Wulfsohn                           

Title:           CEO                                    

 

LENDER:                                                                                    SLR DIGITAL FINANCE LLC,

f/k/a Fast Pay Partners LLC

 

Signature: Danielle Baldaro

Name:         Danielle Baldaro                 

Title: SVP, DF Portfolio Manager          

 

 

 

SCHEDULE 12.5

 

PERMITTED INDEBTEDNESS FOR BORROWED MONEY

 

 

 

 

 

SCHEDULE 14.3

 

FORMER NAMES AND TRADE NAMES

 

 

 

 

 

SCHEDULE 14.8

 

DISCLOSURE OF REGISTERED PATENTS, COPYRIGHTS, AND TRADEMARKS

 

 

PATENTS AND PATENT APPLICATIONS

 

 

COPYRIGHTS AND COPYRIGHT APPLICATIONS

 

 

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Exhibit 6.10

 

CORPORATE GUARANTY

 

THIS CORPORATE GUARANTY (this "Guaranty"), dated as of September 18, 2023 is made by VADO CORP, a Nevada corporation ("Guarantor"), with an office at 4001 South 700 East, Suite 500, Salt Lake City, Utah 84107 in favor of SLR DIGITAL FINANCE LLC ("Lender"), with an office at 15260 Ventura Boulevard, Suite 700, Sherman Oaks, California 91403.

 

WHEREAS, Lender has agreed to purchase from SOCIALCOM INC. ("Borrower") certain account receivable (the “Accounts”) with recourse, pursuant to that certain Financing and Security Agreement dated June 13, 2019, by and among Borrower and Lender (as amended, modified, supplemented, substituted, extended or renewed from time to time, the "Financing Agreement"; capitalized terms used herein and not defined have the meanings ascribed to such terms under the Financing Agreement);

 

WHEREAS, Guarantor recently acquired all outstanding equity interests of Borrower and will benefit from the financial accommodations made to Borrower by Lender, and

 

WHEREAS, to induce Lender to make and/or to continue to make loans and other financial accommodations to or on behalf of Borrower, Guarantor has agreed to execute and deliver a guaranty of all present and future liabilities of Borrower to Lender.

 

NOW, THEREFORE, in consideration of the foregoing premises to induce Lender to make loans, advances and other financial accommodations to or on behalf of Borrower, and with full knowledge that said loans, advances and other financial accommodations would not be issued without this Guaranty, Guarantor agrees as follows:

 

1.         The term "Liability of Borrower" shall include all obligations and liabilities, direct or indirect, absolute or contingent, joint and several, now or hereafter existing, due or to become due of Borrower to, or held or to be held by Lender for its own account or as agent for others, whether created directly or acquired by assignment or otherwise, including, without limitation, all principal of and interest (including without limitation any post-petition interest on all obligations at the rate set forth in the appropriate loan documents, accruing whether or not granted or permitted in any bankruptcy or similar insolvency proceeding) and fees and all costs and expenses, including attorney's fees, on all present and future liabilities and indebtedness of Borrower to Lender, and further including without limitation the obligation and liabilities arising under that certain Factoring and Security Agreement dated June 13, 2019, between Borrower and Lender (as amended, modified, supplemented, substituted, extended or renewed from time to time, the "Financing Agreement"), whether or not the same involve modifications to interest rates or other payment terms of such indebtedness, obligations or liabilities.

 

2.         (A)         Guarantor hereby jointly and severally guarantees the full, prompt and unconditional payment when due of each and every Liability of Borrower to Lender, now existing or hereafter incurred, whether matured or unmatured, and the full, prompt, and unconditional performance of every term and condition of any transaction to be kept and performed by Borrower to Lender. This Guaranty is a primary obligation of Guarantor and shall be a continuing inexhaustible Guaranty without limitation as to the amount or duration and may not be revoked except by notice (the "Notice") in writing to Lender received at least thirty (30) days prior to the date set for such revocation; provided, however, no Notice shall affect the liability under this Guaranty for any such Liability of Borrower arising prior to the date set for revocation whether made before or after the Notice.

 

(B)         (i)         For the purposes of this Guaranty, "Collateral" shall mean all present and future Collateral described in the Financing Agreement and in the Security Agreement of even date herewith between Guarantor and Lender (“Collateral”). Guarantor acknowledges that they have reviewed and approved the Financing Agreement under which Borrower granted to Lender a security interest in the Collateral and the UCC financing statement(s) filed by Lender to perfect its security interest in the Collateral and Lender has no obligations or duty toward Guarantor to take any other action to perfect its security interest in the Collateral, and Guarantor waives any defense to their obligations hereunder based upon Lender's failure to perfect its security interest by any action or inaction beyond the filing of the existing financing statements.

 

 

(ii)         Guarantor acknowledges that from time to time Borrower may request Lender to release its liens on specific items of the Collateral with or without consideration being received by Lender. Guarantor hereby consents to any such releases by Lender upon the request of Borrower and agrees that Lender may so release its lien on items of the Collateral with or without consideration, without notice to or consent of Guarantor and without affecting the obligations of Guarantor hereunder.

 

(iii)         Subject to subsections 2(B)(iv) and (v) below, notwithstanding any term of this Guaranty to the contrary, upon an Event of Default under the Liability of Borrower to Lender, Lender may not demand payment under this Guaranty and enforce the payment obligation of Guarantor hereunder until (a) sixty (60) days from the occurrence of the Event of Default, or (b) that point in time when Lender has liquidated or otherwise realized all, or substantially all, of the Collateral, whichever is earlier.

 

(iv)         If following an Event of Default under the Liability of the Borrower to Lender, Lender is precluded by operation of law from taking possession of and liquidating the Collateral, if the Borrower refuses to turn over possession of the Collateral to Lender or if Guarantor fails to cooperate with Lender in liquidating the Collateral, notwithstanding the terms of subsection 2(B)(iii) of this Guaranty to the contrary, Lender may make immediate demand for payment under this Guaranty and enforce the payment obligation of Guarantor hereunder.

 

(v)         If there is a proceeding under Title 11 of the United States Code, as amended from time to time, or any successor statute (the "Bankruptcy Code") against Borrower, Lender may, but shall have no obligation to, institute appropriate proceedings under the Bankruptcy Code, to have the amount of its claim secured by its lien on the Collateral determined.

 

(vi)    Guarantor agrees that at any secured party's foreclosure sale of the Collateral, Lender shall have no obligation to bid at said sale or otherwise purchase any of said Collateral.

 

3.         Guarantor hereby represents and warrants the following:

 

(A)         Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada.

 

(B)         Guarantor has the power to execute, deliver and carry out the terms and provisions of this Guaranty. This Guaranty has been duly executed and delivered by Guarantor and constitutes Guarantor's binding, valid and enforceable obligation, enforceable in accordance with its terms, except as enforcement thereof may be limited, modified or prevented by any law relating to bankruptcy, insolvency or the like.

 

(C)         Guarantor is not in default under any indenture, mortgage, deed of trust or other instrument to which Guarantor is a party or by which Guarantor or any of Guarantor's assets may be bound. The execution and delivery of this Guaranty, the consummation of the transactions herein contemplated and the compliance with the provisions hereof will not violate any law or regulation, or any order or decree of any court or governmental instrumentality, will not conflict with, or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, agreement or other instrument to which Guarantor is a party or by which Guarantor may be bound, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property of Guarantor thereunder.

 

(D)         Guarantor's most recent financial statements furnished to Lender accurately represent Guarantor's financial condition as of the date thereof, and there has been no material adverse change in such condition from the date of said financial statements to the date hereof.

 

(E)         Guarantor has relied upon Guarantor's own due diligence in making Guarantor's own independent evaluation and appraisal of Borrower, Borrower's business affairs and financial condition including the Liability of Borrower to Lender; Guarantor will continue to be responsible for making Guarantor's own independent appraisal of such matters; and Guarantor has not relied upon and will not hereafter rely upon Lender for information regarding Borrower, any Collateral (as defined in the Financing Agreement) or the Liability of Borrower to Lender.

 

 

4.         Without incurring responsibility to Guarantor and without impairing or releasing Guarantor's obligation hereunder, Lender may at any time and from time to time, without the consent of or notice to Guarantor, upon any terms or conditions:

 

(A)         Change the manner, place or terms of payment (including changes to interest rates, maximum line amount, fees and charges) and/or change or extend from time to time the time for payment or renew or alter the Liability of Borrower or any security therefor, and this Guaranty shall apply to the Liability of Borrower as so changed, extended, increased, renewed or altered;

 

(B)         Sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged, mortgaged or in which a lien is given to secure the Liability of Borrower or the indebtedness of any of the Obligors, as such term is defined below, to Lender;

 

(C)         Exercise or refrain from exercising any rights against Borrower or any surety, endorser or guarantor (including the Guarantor) (collectively, the "Obligors") or against any security, or otherwise act or refrain from acting;

 

(D)         Release, settle or compromise any Liability of Borrower or any obligation of any Obligor, dispose of any security therefor, with or without consideration, or any liability incurred directly or indirectly in respect thereof or hereof;

 

(E)         Apply any sums by whomsoever paid or howsoever realized to any Liability of Borrower; and

 

(F)         Take or refrain from taking any or all actions against Borrower, any Obligor, or any of the security, whether similar or dissimilar to the foregoing.

 

5.         Guarantor waives any right to require Lender to:

 

(A)         make any presentment, protest, demand, or notice of any kind, including notice of change of any terms of repayment of the Liability of Borrower, default by Borrower or any other guarantor or surety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Liability of Borrower;

 

(B)         proceed against any person, including Borrower, before proceeding against Guarantor;

 

(C)         proceed against any collateral for the Liability of Borrower, including Borrower's collateral, before proceeding against Guarantor;

 

(D)         apply any payments or proceeds received against the Liability of Borrower in any order;

 

(E)         give notice of the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale;

 

(F)         disclose any information about the Liability of Borrower, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or

 

(G)         pursue any remedy or course of action in Lender's power whatsoever.

 

6.         Guarantor also waives any and all rights or defenses arising by reason of:

 

(A)         any disability or other defense of Borrower, any other guarantor or surety or any other person;

 

 

(B)         the cessation from any cause whatsoever, other than payment in full, of the Liability of Borrower;

 

(C)         the application of proceeds of the Liability of Borrower by Borrower for purposes other than the purposes understood and intended by Guarantor and Lender;

 

(D)         any act of omission or commission by Lender which directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Liability of Borrower, or the loss or release of any Collateral by operation of law or otherwise;

 

(E)         any statute of limitations in any action under this Guaranty or on the Liability of Borrower;

 

(F)         any modification or change in terms of the Liability of Borrower, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the time payment of the Liability of Borrower is due and any change in the interest rate, and including any such modification or change in terms after revocation of this Guaranty on the Liability of Borrower incurred prior to such revocation;

 

(G)         Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may become available to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive, and 3433 until the Liability of Borrower is paid in full; and

 

(H)         Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor's rights of subrogation and reimbursement against Borrower by operation of Section 580d of the California Code of Civil Procedure or otherwise.

 

7.         Guarantor waives all rights and defenses that Guarantor may have if Borrower's obligation is secured by real property. This means among other things: (A) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; and (B) if Lender forecloses on any real property collateral pledged by Borrower: (1) the amount of Borrower's obligation may be reduced only by the price for which the collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price; and (2) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower's obligation is secured by real property. These rights and defenses include, but are not limited to, any rights and defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure.

 

Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantor might otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws of suretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Liability of Borrower is paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person, and further, Guarantor waives any right to participate in any collateral for the Liability of Borrower now or hereafter held by Lender.

 

8.         Guarantor warrants and agrees that each of the waivers set forth in Sections 5, 6, 7 is made with Guarantor's full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

 

9.         The Guarantor warrants and represents to the Lender that (a) the Guarantor is sufficiently knowledgeable and experienced in financial and business matters to evaluate and understand the risks assumed in connection with the execution of the Guaranty; (b) the Guarantor has had the opportunity to examine the records,

 

 

reports, financial statements, and other information relating to the financial condition of the Borrower and the Obligations; (c) the Guarantor has relied solely upon investigations of the Borrower’s financial condition conducted by the Guarantor or its authorized representative in deciding to execute the Guaranty; and (d) the Guarantor, or its authorized representative, will continue to independently review, monitor and investigate the financial condition of the Borrower and will independently keep itself informed of the terms of the Borrower’s present and future credit facilities and other financial relationships with the Lender while the Guaranty is in effect. The Lender has no duty, obligation or responsibility of any nature whatsoever to advise the Guarantor of any change in the Borrower’s financial condition or in the terms of the Borrower’s present or future credit facilities and other financial relationships with the Lender.

 

10.         (A)         No invalidity, irregularity or unenforceability of all or any part of the Liability of Borrower, failure to perfect on or the impairment or loss of any security therefor, whether caused by any actions or inactions of Lender, or otherwise, shall affect, impair or be a defense to this Guaranty.

 

(B)         Guarantor hereby waives any right of subrogation to any security.

 

(C)         Guarantor hereby waives any claim, right or remedy Guarantor may now have or hereafter acquire against Borrower that arises hereunder and/or as a result of Guarantor's performance hereunder including, without limitation, any claim, remedy or right of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right or remedy of Lender against Borrower or any security which Lender now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise.

 

11.         Upon an Event of Default, as defined in the Financing Agreement, under the Liability of Borrower, Lender may, without notice to Borrower declare the Liability of Borrower immediately due and payable by Guarantor. If Lender refers this Guaranty to an attorney for collection, Guarantor shall pay Lender any and all reasonable attorneys' fees and other costs and expenses incurred by Lender in enforcing Lender's rights hereunder.

 

12.         (A)         In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Lender by law, Lender shall have, with respect to Guarantor's indebtedness to Lender under this Guaranty and to the extent permitted by law, a contractual possessory security interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges and transfers to Lender all of Guarantor's right, title and interest in and to, all deposits, moneys, securities, and other property of Guarantor now or hereafter in the possession of or on deposit with Lender, whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding however all IRA, Keogh and trust accounts. Every such security interest and right of setoff may be exercised without demand upon or notice to Guarantor. No security interest or right of setoff shall be deemed to have been waived by any act or condition on the part of Lender or by any neglect to exercise such right of setoff or to enforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right of setoff or security interest is specifically waived or released by an instrument in writing executed by Lender.

 

(B)         In the event that for any reason whatsoever Borrower is now or shall hereafter become indebted to Guarantor, Guarantor agrees that the amount of such sums and of such indebtedness and all interest thereon shall at all times be subordinate as to lien, time of payment and in all respects to all sums, including principal and interest and other amounts, at any time owing on the Liability of Borrower to Lender, and Guarantor shall not be entitled to enforce or receive payment thereof until the Liability of Borrower to Lender is paid in full, whether or not Borrower becomes insolvent. In the event of insolvency and consequent liquidation of the assets of Borrower through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be applied first by Lender to the Liability of Borrower to Lender. Guarantor does hereby assign to Lender all claims which Guarantor may have or acquire against Borrower or against any assignees or trustee in bankruptcy of Borrower, provided, however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Liability of Borrower to Lender.

 

 

(C)         If a claim is ever made upon Lender for repayment or recovery of any amount or amounts received by Lender in payment or on account of any of the Liability of Borrower and Lender repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over Lender or any of its property, or (b) any settlement or compromise of any such claim effected by Lender with any such claimant (including Borrower), then, and in such event, Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon it, notwithstanding any revocation hereof or the cancellation of any instrument evidencing any Liability of Borrower, and Guarantor shall be liable to Lender under this Guaranty for the amount so repaid or recovered to the same extent as if such amount had never originally been received by Lender.

 

(D)         This Guaranty shall remain in full force and effect, and shall be automatically reinstated, without any further action on the part of the Lender, if Lender is required, in any bankruptcy, insolvency or other proceeding involving Borrower, to return or rescind any payment made to, or value received by, Lender from or for the account of Borrower. This paragraph shall remain in full force and effect notwithstanding any revocation or termination of this Guaranty or release by Lender of Guarantor.

 

(E)         Settlement of any claim by Lender against Borrower or any other Obligor, whether in any proceedings or not, and whether voluntary or involuntary, shall not reduce the amount due under this Guaranty except to the extent of any amount actually received by Lender under any such settlement that is applied to the Liability of Borrower.

 

(F)         All rights, powers and remedies of Lender hereunder and under any agreement(s) between Borrower or any other Obligor and Lender, now, or at any time hereafter in force, shall be cumulative and not alternative, and shall be in addition to all rights, powers and remedies given to Lender by law or at equity.

 

(G)         No delay on the part of Lender in exercising any of its options, powers or rights or partial or single exercise thereof shall constitute a waiver thereof. No waiver of any of Lender's rights hereunder and no modification or amendment of this Guaranty shall be deemed to be made by Lender unless the same shall be in writing, executed on behalf of Lender by a duly authorized officer, and each such waiver, if any, shall apply only with respect to the specific instance involved, and shall in no way impair the rights of Lender or the obligations of Guarantor to Lender in any other respect at any other time.

 

(H)         Guarantor hereby authorizes Lender, in its sole discretion, to disclose any financial or other information about Guarantor to any present, future or prospective participant or successor in interest in any loan, Advance or other financial accommodation to Borrower from the Lender, or any regulatory body or agency having jurisdiction over Lender.

 

(I)         Guarantor shall indemnify, defend and hold Lender and any member, officer, director, investor, bank group member, official, agent, employee and attorney of Lender, and their respective heirs, successors and assigns (collectively, the "Indemnified Parties"), harmless from any claim, cause of action, demand, or other matter that is brought or threatened against any Indemnified Party by Borrower, or by any third party including, without limitation, any receiver, trustee, or other person appointed in any bankruptcy, insolvency, or other proceeding involving Borrower, and from all costs and expenses (including, without limitation, attorney's fees and expenses) relating to or arising out of Lender's relationship with Borrower (each of which may be defended, compromised, settled, or pursued with counsel of Lender's selection) but at Guarantor's risk and expense. This paragraph shall remain in full force and effect notwithstanding any termination of this Guaranty or release by Lender of Guarantor.

 

(J)         Guarantor's obligation to pay and perform in accordance with the terms of this Guaranty, any remedy for the enforcement thereof and/or the amount of the Liability of Borrower shall not be impaired, modified, changed, stayed, released or limited in any manner whatsoever by any impairment, modification, change, discharge, release, limitation or stay of the Liability of Borrower or the obligations of any of the Obligors or any Obligor's estate in bankruptcy or any remedy for the enforcement thereof, resulting from the operation of any present or future provision of the federal Bankruptcy Code or other statute, state or federal, or from the decision of any court interpreting any of the same, and Guarantor shall be obligated under this Guaranty and the amount of the Liability of Borrower shall for the purposes of this Guaranty be determined as if no such impairment, stay, modification, change, discharge, release or limitation had occurred.

 

 

(K)         Guarantor waives notice of acceptance of this Guaranty and notice of any Liability of Borrower to which notice may apply and waives notice of default, non-payment, partial payment, presentment, demand, protest, notice of protest or dishonor and all other notices to which Guarantor might otherwise be entitled or which might be required by law to be given to Guarantor by Lender.

 

(L)         This Guaranty shall be binding upon Guarantor and its successors and shall inure to the benefit of Lender, its successors and assigns. This Guaranty shall be construed in accordance with the laws of the State of California, without regard to principles of conflicts of law.

 

(M)         Guarantor hereby irrevocably consents to the non-exclusive jurisdiction of the courts of the State of New Jersey or any federal court in such State in connection with any action or proceeding arising out of or related to this Guaranty. Guarantor hereby irrevocably waives, to the fullest extent permitted by applicable law, any right Guarantor may have to assert the doctrine of "forum non conveniens" or to object to venue to the extent any proceeding is brought in accordance with this paragraph. In any such litigation, Guarantor waives personal service of any summons, complaint or other process and agrees that service may be made by certified or registered mail to Guarantor, at the address provided herein. Guarantor agrees that any action brought by Guarantor against Lender shall be commenced and maintained only in a court in the federal judicial district or county in which Lender has its principal place of business in New Jersey. Nothing in this Guaranty restricts the right of Lender to bring legal actions or other proceedings in any other competent jurisdiction.

 

(N)         Nothing herein shall in any way be deemed to limit the ability of Lender to serve any such writs, process or summonses in any other manner permitted by applicable law or to obtain jurisdiction over Guarantor in such other jurisdictions, and in such manner as may be permitted by applicable law.

 

(O)         Guarantor agrees to furnish to Lender within ninety (90) days of the end of each year a financial statement in form satisfactory to Lender and a copy of Guarantor's federal and state income tax returns (including all schedules thereto) within thirty (30) days of filing same.

 

(P)         If Guarantor consists of more than one person, the liabilities and obligations of each such person shall be joint and several and the word "Guarantor" means each of them, any of them and/or all of them.

 

(Q)         As used herein, the singular shall include the plural, the plural shall include the singular and the use of the masculine, feminine or neuter gender shall include all genders.

 

(R)         GUARANTOR WAIVES TRIAL BY JURY IN ANY ACTION UNDER OR RELATING TO THIS GUARANTY AND TO THE LIABILITY OF BORROWER TO LENDER.

 

(S)         IF THE WAIVER OF THE RIGHT TO A TRIAL BY JURY SET FORTH ABOVE IS NOT ENFORCEABLE, THE GUARANTOR AND, BY ACCEPTANCE HEREOF, LENDER (COLLECTIVELY, THE “PARTIES”) AGREE THAT ANY AND ALL DISPUTES OR CONTROVERSIES OF ANY NATURE BETWEEN THEM ARISING AT ANY TIME SHALL BE DECIDED BY A REFERENCE TO A PRIVATE JUDGE, WHO SHALL BE A RETIRED STATE OR FEDERAL COURT JUDGE, MUTUALLY SELECTED BY THE PARTIES OR, IF THEY CANNOT AGREE, THEN ANY PARTY MAY SEEK TO HAVE A PRIVATE JUDGE APPOINTED IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE §§ 638 AND 640 (OR PURSUANT TO COMPARABLE PROVISIONS OF FEDERAL LAW IF THE DISPUTE FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS). THE REFERENCE PROCEEDINGS SHALL BE CONDUCTED PURSUANT TO AND IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE §§ 638 THROUGH 645.1, INCLUSIVE. THE PRIVATE JUDGE SHALL HAVE THE POWER, AMONG OTHERS, TO GRANT PROVISIONAL RELIEF, INCLUDING WITHOUT LIMITATION, ENTERING TEMPORARY RESTRAINING ORDERS, ISSUING

 

 

 

 

PRELIMINARY AND PERMANENT INJUNCTIONS AND APPOINTING RECEIVERS. ALL SUCH PROCEEDINGS SHALL BE CLOSED TO THE PUBLIC AND CONFIDENTIAL AND ALL RECORDS RELATING THERETO SHALL BE PERMANENTLY SEALED. IF DURING THE COURSE OF ANY DISPUTE, A PARTY DESIRES TO SEEK PROVISIONAL RELIEF, BUT A JUDGE HAS NOT BEEN APPOINTED AT THAT POINT PURSUANT TO THE JUDICIAL REFERENCE PROCEDURES, THEN SUCH PARTY MAY APPLY TO THE COURT FOR SUCH RELIEF. THE PROCEEDING BEFORE THE PRIVATE JUDGE SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF EVIDENCE APPLICABLE TO JUDICIAL PROCEEDINGS. THE PARTIES SHALL BE ENTITLED TO DISCOVERY WHICH SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF DISCOVERY APPLICABLE TO JUDICIAL PROCEEDINGS. THE PRIVATE JUDGE SHALL OVERSEE DISCOVERY AND MAY ENFORCE ALL DISCOVERY RULES AND ORDERS APPLICABLE TO JUDICIAL PROCEEDINGS IN THE SAME MANNER AS A TRIAL COURT JUDGE. THE PARTIES AGREE THAT THE SELECTED OR APPOINTED PRIVATE JUDGE SHALL HAVE THE POWER TO DECIDE ALL ISSUES IN THE ACTION OR PROCEEDING, WHETHER OF FACT OR OF LAW, AND SHALL REPORT A STATEMENT OF DECISION THEREON PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE § 644(A). NOTHING IN THIS PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY AT ANY TIME TO EXERCISE SELF-HELP REMEDIES, FORECLOSE AGAINST COLLATERAL, OR OBTAIN PROVISIONAL REMEDIES. THE PRIVATE JUDGE SHALL ALSO DETERMINE ALL ISSUES RELATING TO THE APPLICABILITY, INTERPRETATION, AND ENFORCEABILITY OF THIS PARAGRAPH. THE PARTIES AGREE THAT TIME IS OF THE ESSENCE IN CONDUCTING THE REFERENCED PROCEEDINGS. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS HEREOF. THE COSTS SHALL BE BORNE EQUALLY BY THE PARTIES.

 

VADO CORP.

 

 

By:/s/ Jason Wulfsohn                               

 

Name:  Jason Wulfsohn                             

 

Title:    CEO                                               

 

 

 

Exhibit 6.11

 

GUARANTY SECURITY AGREEMENT

 

THIS GUARANTY SECURITY AGREEMENT (this “Agreement”) is dated as of September 18, 2023, by and between VADO CORP., a Nevada corporation (“Guarantor”), and SLR DIGITAL FINANCE LLC, a Delaware limited liability company (“Secured Party”).

 

Pursuant to a certain Financing and Security Agreement dated as of even date herewith (as amended, modified, supplemented, substituted, extended or renewed from time to time, the “Financing Agreement”), Secured Party is extending credit accommodations to SOCIALCOM INC., a California corporation (“Borrower”).

 

As a condition to extending and thereafter continuing to extend credit to Borrower, Secured Party has required the execution and delivery by Guarantor of a Corporate Guaranty dated as of even date herewith, guaranteeing the payment and performance of all present and future obligations of Borrower to Secured Party, including, without limitation, those arising under or pursuant to the Financing Agreement (as amended, modified, supplemented, substituted, extended or renewed from time to time, the “Guaranty”). As a further condition to same, Secured Party has required the execution and delivery of this Agreement by Guarantor. Guarantor owns 100% of the outstanding equity interest of Borrower.

 

ACCORDINGLY, in consideration of the mutual covenants contained in the Financing Agreement and herein, the parties hereby agree as follows:

 

1.    Definitions. All terms defined in the recitals hereto and the Financing Agreement that are not otherwise defined herein shall have the meanings given them in the recitals and the Financing Agreement. All terms defined in the UCC and not otherwise defined herein have the meanings assigned to them in the UCC. In addition, the following terms have the meanings set forth below or in the referenced Sections of this Agreement:

 

“Accounts” means, collectively, in addition to the definition of “Account” in the UCC, all presently existing and hereafter arising accounts receivable, contract rights, health-care-insurance receivables and all other forms of obligations owing to Guarantor arising out of the sale, lease, license or assignment of goods or other property or the rendition of services by Guarantor, whether or not earned by performance, all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Guarantor and Guarantor's Books relating to any of the foregoing.

 

“Chattel Paper” has the same meaning ascribed to such term in the UCC (whether tangible or electronic).

 

“Collateral” means all assets of Guarantor, whether now owned or existing, or hereafter acquired or arising, and wherever located, including, without limitation, all of the following assets, properties, rights and interests in property of Guarantor: all Accounts, all Equipment, all Goods, all Commercial Tort Claims, all General Intangibles, all Chattel Paper, all Inventory, all Negotiable Collateral, all Investment Property, all Financial Assets, all Letter-of-Credit Rights, all Supporting Obligations, all Deposit Accounts, all money or assets of Guarantor which hereafter come into the possession, custody, or control of Secured Party; all proceeds and products, whether tangible or intangible, of any of the foregoing, including proceeds of insurance covering any or all of the foregoing; any and all tangible or intangible property resulting from the sale, lease, license or other disposition of any to the foregoing, or any portion thereof or interest therein, and all proceeds thereof; and any other assets of Guarantor which may be subject to a lien in favor of Secured Party as security for the Obligations.

 

“Commercial Tort Claims” has the meaning ascribed to such term in the UCC.

 

“Guarantor's Books” means all of Guarantor's books and records including all of the following: ledgers; records indicating, summarizing, or evidencing Guarantor's assets or liabilities, or the Collateral; all information relating to Guarantor's business operations or financial condition; and all computer programs, disk or tape files, printouts, runs, or other computer prepared information, whether inscribed on tangible medium or stored in an electronic or other medium and which information is retrievable in perceivable form and the goods containing such information.

 

NMC Master Security Agreement (Guarantor)

 

“Deposit Account” has the meaning ascribed to such term in the UCC.

 

“Documents” has the meaning ascribed to such term in the UCC.

 

“Equipment” means, collectively, in addition to the definition of “Equipment” in the UCC, all of Guarantor's present and hereafter acquired equipment, machinery, machine tools, motors, furniture, furnishings, fixtures, motor vehicles, rolling stock, processors, tools, pans, dies, jigs, goods (other than consumer goods or farm products), together with any warranties, rights and interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located.

 

“Event of Default” has the meaning given in Section 6.

 

“Financial Assets” has the meaning ascribed to such term in the UCC.

 

“General Intangibles” means, collectively, in addition to the definition of “General Intangibles” in the UCC, all of Guarantor's present and future general intangibles and other personal property (including choses or things in action, goodwill, patents, trade names, trademarks, service marks, copyrights, blueprints, drawings, purchase orders, customer lists, monies due or recoverable from pension funds, route lists, infringement claims, computer programs, computer discs, computer tapes, Guarantor's Books, literature, reports, catalogs, Deposit Accounts, insurance premium rebates, tax refunds and tax refund claims) other than goods and Accounts.

 

“Instruments” has the meaning ascribed to such term in the UCC.

 

“Inventory” means, collectively, in addition to the definition of “Inventory” in the UCC, all present and future inventory in which Guarantor has any interest, including goods held for sale or lease or to be furnished under a contract of service, Guarantor's present and future raw materials, work in process, finished goods, tangible property, stock in trade, wares and materials used in or consumed in Guarantor's business, goods which have been returned to, repossessed by, or stopped in transit by Guarantor, packing and shipping materials, wherever located, any documents of title representing any of the above, and Guarantor's Books relating to any of the foregoing.

 

“Investment Property” has the meaning ascribed to such term in the UCC.

 

“Letter-of-Credit Rights” has the meaning ascribed to such term in the UCC.

 

“Lien” means any security interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement or similar instrument or device, including the interest of each lessor under any capitalized lease and the interest of any bondsman under any payment or performance bond, in, of or on any assets or properties of a person, whether now owned or hereafter acquired and whether arising by agreement or operation of law.

 

“Negotiable Collateral” means all of Guarantor's present and future letters of credit, notes, drafts, Instruments, Documents, leases, and Chattel Paper.

 

“Obligations” means each and every debt, liability and obligation of every type and description which Guarantor may now or at any time hereafter owed to Secured Party, whether such debt, liability or obligation now exists or is hereafter created or incurred and whether it is or may be direct or indirect, due or to become due, or absolute or contingent, including, without limitation, all obligations under the Guaranty.

 

“Permitted Liens” means (a) the Security Interest, (b) covenants, restrictions, rights, easements and minor irregularities in title which do not materially interfere with Guarantor's business or operations as presently conducted, and (b) Liens in existence on the date hereof, if any, and described on Exhibit C hereto.

 

NMC Master Security Agreement (Guarantor)

 

“Security Interest” has the meaning given in Section 2.

 

“Supporting Obligation” has the meaning ascribed to such term in the UCC.

 

“UCC” means the New Jersey Uniform Commercial Code, as amended or revised from time to time.

 

2.    Security Interest. Guarantor hereby grants Secured Party a security interest (the “Security Interest”) in the Collateral to secure payment of the Obligations.

 

3.    Representations, Warranties and Agreements. Guarantor hereby represents, warrants and agrees as follows:

 

(a)    Title. Guarantor (i) has absolute title to each item of Collateral in existence on the date hereof, free and clear of all Liens except the Security Interest and Permitted Liens, (ii) will have, at the time Guarantor acquires any rights in Collateral hereafter arising, absolute title to each such item of Collateral free and clear of all Liens except Permitted Liens, (iii) will keep all Collateral free and clear of all Liens except Permitted Liens, and (iv) will defend the Collateral against all claims or demands of all persons other than Secured Party. Guarantor will not sell or otherwise dispose of the Collateral or any interest therein, without the prior written consent of Secured Party, except for the sale of Inventory in the ordinary course of business to good faith purchasers for value.

 

(b)    Chief Executive Office, Identification Number. Guarantor's chief executive office and principal place of business is located at the address set forth under its signature below.

 

(c)    Location of Collateral. As of the date hereof, the tangible Collateral is located only in the states and at the address, as identified on Exhibit A attached hereto. Guarantor will not permit any tangible Collateral to be located at any other address without giving Secured Party at least ten (10) days' prior written notice.

 

(d)    Changes in Organizational Documents, Location, Name. Guarantor will not change its articles of incorporation, bylaws, or jurisdiction of incorporation to the extent such change adversely affects Secured Party’s rights hereunder or under the Financing Agreement, without the prior written consent of Secured Party. Guarantor will not change its business address or name without prior written notice to Secured Party.

 

(e)    Fixtures. Guarantor will not permit any tangible Collateral to become part of or to be affixed to any real property without first assuring to the reasonable satisfaction of Secured Party that the Security Interest will be prior and senior to any Lien then held or thereafter acquired by any mortgagee of such real property or the owner or purchaser of any interest therein. If any part or all of the tangible Collateral is now or will become so related to particular real estate as to be a fixture, the real estate concerned and the name of the record owner are accurately set forth in Exhibit B hereto.

 

(f)    Rights to Payment. Each right to payment and each Instrument, Document, Chattel Paper and other agreement constituting or evidencing Collateral is (or will be when arising, issued or assigned to Secured Party) the valid, genuine and legally enforceable obligation, subject to no defense, setoff or counterclaim of the account Guarantor or other obligor named therein or in Guarantor's records pertaining thereto as being obligated to pay such obligation. Guarantor will neither agree to any material modification or amendment nor agree to any forbearance, release or cancellation of any such obligation, nor not subordinate any such right to payment to claims of other creditors of such account Guarantor or other obligor.

 

(g)    Commercial Tort Claims. Promptly upon knowledge thereof, Guarantor will deliver to Secured Party notice of any Commercial Tort Claims it may bring against any person, including the name and address of each defendant, a summary of the facts, an estimate of Guarantor's damages, copies of any complaint or demand letter submitted by Guarantor, and such other information as Secured Party may request. Upon request by Secured Party, Guarantor will grant Secured Party a security interest in all Commercial Tort Claims it may have against any person.

 

NMC Master Security Agreement (Guarantor)

 

(h)    Miscellaneous Covenants. Guarantor will:

 

(i)    keep all tangible Collateral in good repair, working order and condition, normal depreciation excepted, and will, from time to time, replace any worn, broken or defective parts thereof;

 

(ii)    promptly pay all taxes and other governmental charges levied or assessed upon or against any Collateral or upon or against the creation, perfection or continuance of the Security Interest;

 

(iii)    at all reasonable times, permit Secured Party or its representatives to examine or inspect any Collateral, wherever located, and to examine, inspect and copy Guarantor's books and records pertaining to the Collateral and its business and financial condition and to send and discuss with account Guarantors and other obligors requests for verifications of amounts owed to Guarantor;

 

(iv)    keep accurate and complete records pertaining to the Collateral and pertaining to Guarantor's business and financial condition and submit to Secured Party such periodic reports concerning the Collateral and Guarantor's business and financial condition as Secured Party may from time to time reasonably request;

 

(v)    promptly notify Secured Party of any loss of or material damage to any Collateral or of any adverse change, known to Guarantor, in the prospect of payment of any sums due on or under any Instrument, Chattel Paper or Account constituting Collateral;

 

(vi)    if Secured Party at any time so requests, promptly deliver to Secured Party any Instrument, Document or Chattel Paper constituting Collateral, duly endorsed or assigned by Guarantor;

 

(vii)    at all times keep all tangible Collateral insured against risks of fire (including so-called extended coverage), theft, collision (in case of Collateral consisting of motor vehicles) and such other risks and in such amounts as Secured Party may reasonably request, with any such policies containing a lender loss payable endorsement acceptable to Secured Party;

 

(viii)    from time to time execute such other documents as Secured Party may reasonably require in order to perfect the Security Interest and, if any Collateral consists of a motor vehicle, execute such documents as may be required to have the Security Interest properly noted on a certificate of title;

 

(ix)    pay when due or reimburse Secured Party on demand for all costs of collection of any of the Obligations and all other out-of-pocket expenses (including in each case all reasonable attorneys' fees) incurred by Secured Party in connection with the creation, perfection, satisfaction, protection, defense or enforcement of the Security Interest or the creation, continuance, protection, defense or enforcement of this Agreement or any or all of the Obligations, including expenses incurred in any litigation or bankruptcy or insolvency proceedings;

 

(x)    execute, deliver or endorse any and all instruments, documents, assignments, security agreements and other agreements and writings which Secured Party may at any time reasonably request in order to secure, protect, perfect or enforce the Security Interest and Secured Party's rights under this Agreement; and

 

(xi)    not use or keep any Collateral, or permit it to be used or kept, for any unlawful purpose or in violation of any federal, state or local law, statute or ordinance.

 

NMC Master Security Agreement (Guarantor)

 

(i)    Secured Party's Right to Take Action. Guarantor authorizes Secured Party to file from time to time where permitted by law, such financing statements against the Collateral described as “all personal property” or “all assets” as Secured Party deems necessary or useful to perfect the Security Interest. Guarantor will not amend any financing statements in favor of Secured Party except as permitted by law. Further, if Guarantor at any time fails to perform or observe any agreement contained in Section 3(h), immediately upon the occurrence of such failure, Secured Party may (but need not) perform or observe such agreement on behalf and in the name, place and stead of Guarantor (or, at Secured Party's option, in Secured Party's own name) and may (but need not) take any and all other actions which Secured Party may reasonably deem necessary to cure or correct such failure (including, without limitation, the payment of taxes, the satisfaction of security interests, liens, or encumbrances, the performance of obligations under contracts or agreements with account Guarantors or other obligors, the procurement and maintenance of insurance, the endorsement of instruments, and the procurement of repairs or transportation), and, except to the extent that the effect of such payment would be to render any loan or forbearance of money usurious or otherwise illegal under any applicable law, Guarantor shall thereupon pay Secured Party on demand the amount of all moneys expended and all costs and expenses (including reasonable attorneys' fees) incurred by Secured Party in connection with or as a result of Secured Party's performing or observing such agreements or taking such actions, together with interest thereon from the date expended or incurred by Secured Party at the highest rate then applicable to any of the obligations of Borrower to Secured Party. To facilitate the performance or observance by Secured Party of such agreements of Guarantor, Guarantor hereby irrevocably appoints (which appointment is coupled with an interest) Secured Party, or its delegate, as the attorney-in-fact of Guarantor with the right (but not the duty) from time to time to create, prepare, complete, execute, deliver, endorse or file, in the name and on behalf of Guarantor, any and all instruments, documents, financing statements, applications for insurance and other agreements and writings required to be obtained, executed, delivered or endorsed by Guarantor under this Section 3 and Section 4.

 

4.    Rights of Secured Party. At any time and from time to time, whether before or after an Event of Default, Secured Party may take any or all of the following actions:

 

(a)    Account Verification. Secured Party may at any time and from time to time send or require Guarantor to send requests for verification of accounts or notices of assignment to account Guarantors and other obligors. Secured Party may also at any time and from time to time telephone account Guarantors and other obligors to verify accounts.

 

(b)    Collateral Account. Secured Party may establish a collateral account for the deposit of checks, drafts and cash payments made by Guarantor's account Guarantors. If a collateral account is so established, Guarantor shall promptly deliver to Secured Party, for deposit into said collateral account, all payments on Accounts and Chattel Paper received by it. All such payments shall be delivered to Secured Party in the form received (except for Guarantor's endorsement where necessary). Until so deposited, all payments on Accounts and Chattel Paper received by Guarantor shall be held in trust by Guarantor for and as the property of Secured Party and shall not be commingled with any funds or property of Guarantor. All deposits in said collateral account shall constitute proceeds of Collateral and shall not constitute payment of any Obligation. Unless otherwise agreed in writing, Guarantor shall have no right to withdraw amounts on deposit in any collateral account.

 

(c)    Lockbox. Secured Party may, by notice to Guarantor, require Guarantor to direct each of its account Guarantors to make payment directly to a lockbox to be under the control of Secured Party. Guarantor hereby authorizes and directs Secured Party to deposit all checks, drafts and cash payments received in said lockbox into the collateral account established as set forth above.

 

(d)    Direct Collection. Secured Party may notify any account Guarantor, or any other person obligated to pay any amount due, that such Chattel Paper, Account, or other right to payment has been assigned or transferred to Secured Party for security and shall be paid directly to Secured Party. At any time after Secured Party or Guarantor gives such notice to an account Guarantor or other obligor, Secured Party may (but need not), in its own name or in Guarantor's name, demand, sue for, collect or receive any money or property at any time payable or receivable on account of, or securing, any such Chattel Paper, Account, or other right to payment, or grant any extension to, make any compromise or settlement with or otherwise agree to waive, modify, amend or change the obligations (including collateral obligations) of any such account Guarantor or other obligor.

 

NMC Master Security Agreement (Guarantor)

 

5.    Assignment of Insurance. Guarantor hereby assigns to Secured Party, as additional security for the payment of the Obligations, any and all moneys (including, but not limited to, proceeds of insurance and refunds of unearned premiums) due or to become due under, and all other rights of Guarantor under or with respect to, any and all policies of insurance covering the Collateral, and Guarantor hereby directs the issuer of any such policy to pay any such moneys directly to Secured Party. After the occurrence of an Event of Default, Secured Party may (but need not), in its own name or in Guarantor's name, execute and deliver proofs of claim, receive all such moneys, endorse checks and other instruments representing payment of such moneys, and adjust, litigate, compromise or release any claim against the issuer of any such policy.

 

6.    Events of Default. Each of the following occurrences shall constitute an event of default under this Agreement (herein called an “Event of Default”): (a) an Event of Default shall occur under the Financing Agreement; or (b) Guarantor shall fail to pay any or all of the Obligations when due or (if payable on demand) on demand; or (c) Guarantor shall fail to observe or perform any covenant or agreement herein binding on it or under any other agreement in favor of or held by Secured Party.

 

7.    Remedies upon Event of Default. Upon the occurrence of an Event of Default and at any time thereafter, Secured Party may exercise any one or more of the following rights and remedies: (a) declare all unmatured Obligations to be immediately due and payable, and the same shall thereupon be immediately due and payable, without presentment or other notice or demand; (b) exercise and enforce any or all rights and remedies available upon default to a secured party under the UCC, including, but not limited to, the right to take possession of any Collateral, proceeding without judicial process or by judicial process (without a prior hearing or notice thereof, which Guarantor hereby expressly waives), and the right to sell, lease or otherwise dispose of any or all of the Collateral, and in connection therewith, Secured Party may require Guarantor to make the Collateral available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties and if notice to Guarantor of any intended disposition of Collateral or any other intended action is required by law in a particular instance, such notice shall be deemed commercially reasonable if given (in the manner specified in Section 9) at least ten (10) days prior to the date of intended disposition or other action; and/or (c) exercise or enforce any or all other rights or remedies available to Secured Party by law or agreement against the Collateral, against Guarantor or against any other person or property. Secured Party is hereby granted a nonexclusive, worldwide and royalty-free license to use or otherwise exploit all intellectual property rights owned by or licensed to Guarantor that Secured Party deems necessary or appropriate to the disposition of any Collateral.

 

8.    Other Personal Property. Unless at the time Secured Party takes possession of any tangible Collateral, or within seven (7) days thereafter, Guarantor gives written notice to Secured Party of the existence of any goods, papers or other property of Guarantor, not affixed to or constituting a part of such Collateral, but which are located or found upon or within such Collateral, describing such property, Secured Party shall not be responsible or liable to Guarantor for any action taken or omitted by or on behalf of Secured Party with respect to such property.

 

9.    Notices; Requests for Accounting. All notices and other communications hereunder shall be in writing and shall be (a) personally delivered, (b) sent by first class United States mail, (c) sent by overnight courier of national reputation or (d) transmitted by facsimile or other electronic transmission, in each case addressed or sent by facsimile or other electronic transmission to the party to whom notice is being given at its address or telecopier or facsimile number (or other address for electronic transmission) as set forth below its signature or, as to each party, at such other address or facsimile number (or other address for electronic transmission) as may hereafter be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section. All such notices, requests, demands and other communications shall be deemed to have been given on (a) the date received if personally delivered, (b) when deposited in the mail if delivered by mail, (c) the date sent if sent by overnight courier, or (d) the date of transmission if delivered by telecopy, facsimile or other electronic transmission. All requests under Section 9-210 of the UCC (a) shall be made in a writing signed by an authorized person, (b) shall be personally delivered, sent by registered or certified mail, return receipt requested, or by overnight courier of national reputation (b) shall be deemed to be sent when received by Secured Party and (d) shall otherwise comply with the requirements of Section 9-210. Guarantor requests that Secured Party respond to all such requests which on their face appear to come from an authorized individual and releases Secured Party from any liability for so responding. Guarantor shall pay Secured Party the maximum amount allowed by law for responding to such requests.

 

10.    Miscellaneous. This Agreement has been duly and validly authorized by all necessary corporate action. This Agreement does not contemplate a sale of Accounts or Chattel Paper. This Agreement can be waived,

 

NMC Master Security Agreement (Guarantor)

 

modified, amended, terminated or discharged, and the Security Interest can be released, only explicitly in an authorization signed by Secured Party, and, in the case of amendment or modification, in an authorization signed by Guarantor. A waiver signed by Secured Party shall be effective only in the specific instance and for the specific purpose given. Mere delay or failure to act shall not preclude the exercise or enforcement of any of Secured Party's rights or remedies. All rights and remedies of Secured Party shall be cumulative and may be exercised singularly or concurrently, at Secured Party's option, and the exercise or enforcement of any one such right or remedy shall neither be a condition to nor bar the exercise or enforcement of any other. Secured Party's duty of care with respect to Collateral in its possession (as imposed by law) shall be deemed fulfilled if Secured Party exercises reasonable care in physically safekeeping such Collateral or, in the case of Collateral in the custody or possession of a bailee or other third person, exercises reasonable care in the selection of the bailee or other third person, and Secured Party need not otherwise preserve, protect, insure or care for any Collateral. Secured Party shall not be obligated to preserve any rights Guarantor may have against prior parties, to realize on the Collateral at all or in any particular manner or order, or to apply any cash proceeds of Collateral in any particular order of application. This Agreement shall be binding upon and inure to the benefit of Guarantor and Secured Party and their respective successors and assigns and shall take effect when signed by Guarantor and delivered to Secured Party, and Guarantor waives notice of Secured Party's acceptance hereof. Secured Party may execute this Agreement if appropriate for the purpose of filing, but the failure of Secured Party to execute this Agreement shall not affect or impair the validity or effectiveness of this Agreement. This Agreement shall be governed by and construed in accordance with the substantive laws (other than conflict laws) of the State of New Jersey. If any provision or application of this Agreement is held unlawful or unenforceable in any respect, such illegality or unenforceability shall not affect other provisions or applications which can be given effect and this Agreement shall be construed as if the unlawful or unenforceable provision or application had never been contained herein or prescribed hereby. All representations and warranties contained in this Agreement shall survive the execution, delivery and performance of this Agreement and the creation and payment of the Obligations. The parties hereto hereby (a) consent to the personal jurisdiction of the state and federal courts located in the State of New Jersey in connection with any controversy related to this Agreement, (b) waive any argument that venue in any such forum is not convenient, (c) agree that any litigation initiated by Secured Party or Guarantor in connection with this Agreement or the other Loan Documents may be venued in either the state or federal courts located in New Jersey and (d) agree that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.

 

IF THE WAIVER OF THE RIGHT TO A TRIAL BY JURY SET FORTH ABOVE IS NOT ENFORCEABLE, THE GUARANTOR AND, BY ACCEPTANCE HEREOF, LENDER (COLLECTIVELY, THE “PARTIES”) AGREE THAT ANY AND ALL DISPUTES OR CONTROVERSIES OF ANY NATURE BETWEEN THEM ARISING AT ANY TIME SHALL BE DECIDED BY A REFERENCE TO A PRIVATE JUDGE, WHO SHALL BE A RETIRED STATE OR FEDERAL COURT JUDGE, MUTUALLY SELECTED BY THE PARTIES OR, IF THEY CANNOT AGREE, THEN ANY PARTY MAY SEEK TO HAVE A PRIVATE JUDGE APPOINTED IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE §§ 638 AND 640 (OR PURSUANT TO COMPARABLE PROVISIONS OF FEDERAL LAW IF THE DISPUTE FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS). THE REFERENCE PROCEEDINGS SHALL BE CONDUCTED PURSUANT TO AND IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE §§ 638 THROUGH 645.1, INCLUSIVE. THE PRIVATE JUDGE SHALL HAVE THE POWER, AMONG OTHERS, TO GRANT PROVISIONAL RELIEF, INCLUDING WITHOUT LIMITATION, ENTERING TEMPORARY RESTRAINING ORDERS, ISSUING PRELIMINARY AND PERMANENT INJUNCTIONS AND APPOINTING RECEIVERS. ALL SUCH PROCEEDINGS SHALL BE CLOSED TO THE PUBLIC AND CONFIDENTIAL AND ALL RECORDS RELATING THERETO SHALL BE PERMANENTLY SEALED. IF DURING THE COURSE OF ANY DISPUTE, A PARTY DESIRES TO SEEK PROVISIONAL RELIEF, BUT A JUDGE HAS NOT BEEN APPOINTED AT THAT POINT PURSUANT TO THE JUDICIAL REFERENCE PROCEDURES, THEN SUCH PARTY MAY APPLY TO THE COURT FOR SUCH RELIEF. THE PROCEEDING BEFORE THE PRIVATE JUDGE SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF EVIDENCE

 

NMC Master Security Agreement (Guarantor)

 

 

 

APPLICABLE TO JUDICIAL PROCEEDINGS. THE PARTIES SHALL BE ENTITLED TO DISCOVERY WHICH SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF DISCOVERY APPLICABLE TO JUDICIAL PROCEEDINGS. THE PRIVATE JUDGE SHALL OVERSEE DISCOVERY AND MAY ENFORCE ALL DISCOVERY RULES AND ORDERS APPLICABLE TO JUDICIAL PROCEEDINGS IN THE SAME MANNER AS A TRIAL COURT JUDGE. THE PARTIES AGREE THAT THE SELECTED OR APPOINTED PRIVATE JUDGE SHALL HAVE THE POWER TO DECIDE ALL ISSUES IN THE ACTION OR PROCEEDING, WHETHER OF FACT OR OF LAW, AND SHALL REPORT A STATEMENT OF DECISION THEREON PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE § 644(A). NOTHING IN THIS PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY AT ANY TIME TO EXERCISE SELF-HELP REMEDIES, FORECLOSE AGAINST COLLATERAL, OR OBTAIN PROVISIONAL REMEDIES. THE PRIVATE JUDGE SHALL ALSO DETERMINE ALL ISSUES RELATING TO THE APPLICABILITY, INTERPRETATION, AND ENFORCEABILITY OF THIS PARAGRAPH. THE PARTIES AGREE THAT TIME IS OF THE ESSENCE IN CONDUCTING THE REFERENCED PROCEEDINGS. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS HEREOF. THE COSTS SHALL BE BORNE EQUALLY BY THE PARTIES.

 

 

 

[signatures on next page]

 

NMC Master Security Agreement (Guarantor)

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

 

SLR DIGITAL FINANCE LLC	VADO CORP.
By: /s/ Danielle Baldaro                                                 Name:          Danielle Baldaro                                        Title:          SVP, DF Portfolio Manager	By: /s/ Jason Wulfsohn                                                Name:          Jason Wulfsohn                                       Title:          CEO

 

 

NMC Master Security Agreement (Guarantor)

 

 

 

EXHIBIT A

 

LOCATION OF COLLATERAL

 

 

 

NMC Master Security Agreement (Guarantor)

 

 

 

EXHIBIT B

 

REAL ESTATE DESCRIPTION

 

 

 

Guarantor is record owner.

 

[insert details]

 

NMC Master Security Agreement (Guarantor)

 

 

 

EXHIBIT C

 

PERMITTED LIENS

 

 

 

NMC Master Security Agreement (Guarantor)

12

Exhibit 6.12

 

STOCK PLEDGE AGREEMENT

 

 

THIS STOCK PLEDGE AGREEMENT, dated as of September 18, 2023, is executed and delivered by VADO CORP. (“Pledgor”), in favor of SLR DIGITAL FINANCE LLC (“Secured Party”).

 

W I T N E S S E T H :

 

WHEREAS, Pledgor is the record and beneficial owner of the shares of capital stock described in Exhibit A hereto (the “Pledged Securities”) issued by each corporation named therein (individually and collectively referred to as the “Issuer”); and

 

WHEREAS, SOCIALCOM INC. (“Borrower”) and the Secured Party have entered into a Financing and Security Agreement dated as of June 13, 2019 (as amended, modified, supplemented and restated from time to time, the “Financing Agreement”), pursuant to which the Secured Party has agreed to make certain loans and other financial accommodations to the Borrower; and

 

WHEREAS, Pledgor has guaranteed the Obligations of Borrower to Secured Party in accordance with the terms of the Loan Documents and as a condition precedent to the Secured Party’s obligation to make loans under the Financing Agreement, and as security for all of the Obligations, the Secured Party is requiring that Pledgor execute and deliver this Stock Pledge Agreement and grant the security interest contemplated hereby.

 

NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, and to induce the Secured Party to enter into the Financing Agreement and make the loans under the Financing Agreement, it is agreed as follows:

 

1.         Definitions. Unless otherwise defined herein, terms defined in the Financing Agreement are used herein as there‐in defined, and the following shall have (unless other‐wise provided elsewhere in this Stock Pledge Agreement) the following respective meanings (such meanings being equally applicable to both the singular and plural form of the terms defined):

 

“Agreement” shall mean this Stock Pledge Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.

 

“Bankruptcy Code” shall mean Title 11, United States Code, as amended from time to time, and any successor statute thereto.

 

“Event of Default” shall mean any of the following events:

 

(a)         there shall occur any “Event of Default” under the Financing Agreement, as such term is defined therein;

 

Stock Pledge Agreement

 

(b)         any of the Pledged Collateral shall be attached or levied upon or seized in any legal proceedings, or held by virtue of any Lien or distress, which attachment or process shall continue undischarged or unstayed for thirty (30) days;

 

(c)         Pledgor shall default in the observance or performance of any covenant or agreement set forth in this Agreement, and such default shall continue for ten (10) days after written notice thereof is given to Pledgor by the Secured Party (provided such cure period shall not apply to defaults under Sections 6.1, 6.2, 6.4, 6.5 or 6.7); or

 

(d)         Pledgor or any affiliate of Pledgor makes any representations or warranties in this Agreement or in any certificate or statement furnished at any time hereunder or thereunder or in connection herewith or therewith which proves to have been untrue or misleading in any material respect when made or furnished and which continues to be untrue or misleading in any material respect.

 

“Lien” means any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, capital lease, conditional sale or other title retention agreement, or other security interest, security title or encumbrance of any kind in respect of any property.

 

“Person” means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other entity.

 

“Pledged Collateral” shall have the meaning assigned to such term in Section 2 hereof.

 

2.         Pledge. Pledgor hereby pledges, conveys, hypothecates, mortgages, assigns, sets over, delivers and grants to the Secured Party a security interest in all of the following (collectively, the “Pledged Collateral”):

 

2.1         One hundred percent (100%) of the issued and outstanding capital stock of the Issuer as represented by the Pledged Securities and the certificates representing the Pledged Securities, and all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Securities; and

 

2.2         all proceeds of any of the foregoing.

 

3.         Security for Obligations. This Agreement secures, and the Pledged Collateral is security for, the payment and performance of all of the Obligations.

 

4.         Delivery of Pledged Collateral. All certi‐ficates representing or evidencing the Pledged Securities shall be delivered to and held by or on behalf of the Secured Party pursuant hereto and shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party. The Secured Party shall have the right, in its discretion and without notice to Pledgor at any time after the occurrence of an Event of Default, to transfer to or to register in the name of the Secured Party, or any of its nominees, subject

 

Stock Pledge Agreement

 

to the terms of this Agreement, any or all of the Pledged Securities. In addition, the Secured Party shall have the right at any time following an Event of Default to exchange certificates or instruments representing or evidencing Pledged Securities for certificates or instruments of smaller or larger denominations.

 

5.         Representations and Warranties. Pledgor represents and warrants to the Secured Party that:

 

5.1         Pledgor is, and at the time of delivery of the Pledged Securities to the Secured Party pursuant to Section 4 hereof will be, the sole holder of record and the sole beneficial owner of the Pledged Collateral free and clear of any Lien thereon or affecting the title thereto except for the Lien created by this Agreement and the Lien created in favor of the Secured Party under the Financing Agreement.

 

5.2         The Pledged Securities included in the Pledged Collateral constitute the percentage of the issued and outstanding shares of capital stock of the Issuer as is set forth on Exhibit A attached hereto. All of the Pledged Securities have been duly authorized, validly issued and are fully paid and non-assessable; and there are no existing options, warrants or commitments of any kind or nature or any outstanding securities or other instruments convertible into shares of any class of capital stock of the Issuer, and no capital stock of the Issuer is held in the treasury of the Issuer.

 

5.3         Pledgor has the right and requisite authority to pledge, assign, transfer, deliver, deposit and set over the Pledged Collateral to the Secured Party as provided herein.

 

5.4         None of the Pledged Securities has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject. Pledgor’s execution and delivery of this Agreement and the pledge of the Pledged Collateral hereunder do not, directly or indirectly, violate or result in a violation of any such laws.

 

5.5         None of the Pledged Securities included in the Pledged Collateral is, as of the date of this Agreement, Margin Stock (as such term is defined in 12 C.F.R. Section 207), and Pledgor shall, promptly after learning thereof, notify the Secured Party of any Pledged Collateral which is or becomes Margin Stock and execute and deliver in favor of the Secured Party any and all instruments, documents and agreements (including, but not limited to Form U‑1) necessary to cause the pledge of such Margin Stock to comply with all applicable laws, rules and regulations.

 

5.6         No consent, approval, authorization or other order of any Person and no consent, authorization, approval, or other action by, and no notice to or filing with, any governmental departments, commissions, boards, bureaus, agencies or other instrumentalities, domestic or foreign, is required to be made or obtained by Pledgor either (a) for the pledge of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by Pledgor or (b) for the exercise by the Secured Party of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally.

 

Stock Pledge Agreement

 

5.7         The pledge, assignment and delivery of the Pledged Collateral pursuant to this Agreement will create a valid Lien on and a perfected security interest in the Pledged Collateral pledged by Pledgor, and the proceeds thereof, securing the payment of the Obligations.

 

5.8         This Agreement has been duly authorized, executed and delivered by Pledgor and constitutes a legal, valid and binding obligation of Pledgor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, or other similar laws affecting the rights of creditors generally or by the application of general equity principles.

 

The representations and warranties set forth in this Section 5 shall survive the execution and delivery of this Agreement.

 

6.         Covenants. Pledgor covenants and agrees that until the later to occur of (a) the end of the Term, or (b) the payment in full of the Obligations and the termination of the Secured Party’s commitment to advance funds under the Financing Agreement:

 

6.1         Except as provided herein and as permitted under the Financing Agreement, without the prior written consent of the Secured Party, Pledgor will not sell, assign, transfer, pledge, or otherwise encumber any of its rights in or to the Pledged Collateral or any unpaid dividends or other unpaid distributions or payments with respect thereto or grant a Lien therein.

 

6.2         Pledgor will not, subsequent to the date of this Agreement, other than as permitted in the Financing Agreement, cause or permit the Issuer to issue any shares of capital stock or securities convertible into shares of capital stock, unless and except upon first having obtained the prior written consent of the Secured Party thereto which consent is hereby given for a Reg A securities offering to be made by Borrower for an approximate amount of up to $8,000,000, and any employee stock grants or other normal course of business transactions approved by the Board of Directors subject to Lender’s due diligence requirements regarding purchasers, if applicable.

 

6.3         Pledgor will, at its expense, promptly execute, acknowledge and deliver all such instruments and take all such action as the Secured Party from time to time may reasonably request in order to ensure to the Secured Party the benefits of the Liens in and to the Pledged Collateral intended to be created by this Agreement, including the filing of any necessary or desirable Uniform Commercial Code financing statements, which may be filed by the Secured Party with or without the signature of Pledgor, and will cooperate with the Secured Party, at Pledgor’s expense, in obtaining all necessary approvals and making all necessary filings under federal or state law in connection with such Liens or any sale or transfer of the Pledged Collateral.

 

6.4         Pledgor has and will defend the title to the Pledged Collateral and the Liens of the Secured Party thereon against the claim of any Person and will maintain and preserve such Liens.

 

Stock Pledge Agreement

 

6.5         Pledgor will, upon obtaining any additional shares of capital stock of the Issuer which are not already Pledged Collateral, promptly (and in any event within three (3) Business Days) deliver to the Secured Party a Pledge Amendment, duly executed by Pledgor, in substantially the form of Exhibit B hereto (a “Pledge Amendment”), to confirm the pledge of such additional Pledged Securities pursuant to this Agreement; provided, however, that the failure of Pledgor to execute and deliver any such Pledge Amendment shall not prevent such additional Pledged Securities from being subject to the Lien created by this Agreement. Pledgor hereby authorizes the Secured Party to attach each Pledge Amendment to this Agreement and agrees that all shares of stock listed on any Pledge Amendment delivered to the Secured Party shall for all purposes hereunder be considered Pledged Securities hereunder and shall be included in the Pledged Collateral.

 

6.6         Pledgor will pay all taxes, assessments and charges levied, assessed or imposed upon the Pledged Collateral owned by it before the same become delinquent or become Liens upon any of the Pledged Collateral except where such taxes, assessments and charges may be contested in good faith by appropriate proceedings and appropriate reserves have been established on Pledgor’s books in accordance with GAAP.

 

6.7         Pledgor will not create, grant or suffer to exist any Lien on any of the Pledged Collateral except those in favor of the Secured Party.

 

7.         Distributions; Etc.

 

7.1         Right of Pledgor to Receive Distributions. For so long as no Event of Default exists, Pledgor shall have the right to receive cash distributions declared and paid with respect to the Pledged Collateral, to the extent such distributions are permitted by the Financing Agreement. Any and all stock or liquidating distributions, other distributions in property, return of capital or other distributions made on or in respect of Pledged Collateral, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock of the Issuer or received in exchange for Pledged Collateral or any part thereof or as a result of any merger, consolidation, acquisition or other exchange of assets to which the Issuer may be a party or otherwise, shall be and become part of the Pledged Collateral pledged hereunder and, if received by Pledgor, shall be received in trust for benefit of the Secured Party, be segregated from the other property and funds of Pledgor, and shall forthwith be delivered to the Secured Party to be held subject to the terms of this Agreement. Notwithstanding anything herein to the contrary, Pledgor may receive, and Pledgor and the Issuer may engage in, intercompany loans or advances for purposes of general corporate expenses, and for normal course of business transactions approved by the Board of Directors, and for the Company’s Regulation A securities offering under the Securities Act of 1933, and nothing herein shall be interpreted to preclude or limit such transactions.

 

7.2         Holding Pledged Collateral; Exchanges. The Secured Party may hold any of the Pledged Collateral, endorsed or assigned in blank, and following an Event of Default, may deliver any of the Pledged Collateral to the issuer thereof for the purpose of making denominational exchanges or registrations or transfers or for such other reasonable purpose in furtherance of this Agreement as the Secured Party may deem desirable. The Secured Party shall have the right, if necessary to perfect its security interest, to transfer to or register in the name of the Secured Party or

 

Stock Pledge Agreement

 

any of its nominees, any or all of the Pledged Collateral; provided that notwithstanding the foregoing, until any transfer of beneficial ownership with respect to the Pledged Collateral pursuant to any exercise of remedies under Section 8 hereof, Pledgor shall continue to be the beneficial owner of the Pledged Collateral. In addition, the Secured Party shall have the right at any time following an Event of Default to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations.

 

7.3         Termination of Pledgor’s Right to Receive Distributions. During the existence of any Event of Default, all rights of Pledgor to receive any cash distributions pursuant to Section 7.1 hereof shall cease, and all such rights shall thereupon become vested in the Secured Party, and the Secured Party shall have the sole and exclusive right to receive and retain the distributions which Pledgor would otherwise be authorized to receive and retain pursuant to Section 7.1 hereof. In such event, Pledgor shall pay over to the Secured Party any distributions received by it with respect to the Pledged Collateral and any and all money and other property paid over to or received by the Secured Party pursuant to the provisions of this Section 7.3 shall be retained by the Secured Party as Pledged Collateral hereunder and/or shall be applied to the repayment of the Obligations in accordance with the provisions hereof.

 

8.         Remedies. Upon and after an Event of Default, the Secured Party shall have the following rights and remedies:

 

8.1         Secured Creditor. All of the rights and remedies of a secured party under the Uniform Commercial Code of the State where such rights and remedies are asserted, or under other applicable law, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights and remedies contained in this Agreement.

 

8.2         Right of Sale. The Secured Party may, without demand and without advertisement, notice or legal process of any kind (except as may be required by law), all of which Pledgor waives, at any time or times (a) apply any cash distributions received by the Secured Party pursuant to Section 7.3 hereof to the Obligations and (b) if following such application there remains outstanding any Obligations, sell the remaining Pledged Collateral, or any part thereof at public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Secured Party shall deem appropriate. The Secured Party shall be authorized at any such sale (if, on the advice of counsel, it deems it advisable to do so) to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Pledged Collateral for their own account for investment and not with a view to the distribution or resale thereof, and upon consummation of any such sale the Secured Party shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Pledged Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which Pledgor now has or may have at any time in the future under any rule of law or statute now existing or hereafter enacted. The proceeds realized from the sale of any Pledged Collateral shall be applied as set forth in the Financing Agreement.

 

Stock Pledge Agreement

 

8.3         Notice. In addition thereto, Pledgor further agrees that in the event that notice is necessary under applicable law, written notice mailed to Pledgor in the manner specified in Section 16 hereof ten (10) days prior to the date of the disposition of the Pledged Collateral subject to the security interest created herein at any such public sale or sale at any broker’s board or on any such securities exchange, or prior to the date after which private sale or any other disposition of said Pledged Collateral will be made, shall constitute commercially reasonable and fair notice.

 

8.4         Securities Act, etc. If, at any time when the Secured Party shall determine to exercise its right to sell the whole or any part of the Pledged Collateral hereunder, such Pledged Collateral or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as now or hereafter in effect, or any similar statute now or hereafter in effect in any jurisdiction (collectively, the “Securities Laws”), the Secured Party may, in its discretion (subject only to applicable requirements of law), sell such Pledged Collateral or part thereof by private sale in such manner and under such circumstances as the Secured Party may deem necessary or advisable, but subject to the other requirements of this Section 8, and shall not be required to effect such registration or to cause the same to be effected. Without limiting the generality of the forego‐ing, in any such event, the Secured Party in its discretion (a) may, in accordance with applicable securities laws, proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Collateral or part thereof could be or shall have been filed under any applicable Securities Law, (b) may approach and negotiate with a single possible purchaser to effect such sale, and (c) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment and not with a view to the distribution or sale of such Pledged Collateral or part thereof. In addition to a private sale as provided above in this Section 8, if any of the Pledged Collateral shall not be freely distributable to the public without registration under applicable Securities Laws at the time of any proposed sale pursuant to this Section 8, then the Secured Party shall not be required to effect such registration or cause the same to be effected but, in its discretion (subject only to applicable requirements of law), may require that any sale hereunder (including a sale at auction) be conducted subject to restrictions (i) as to the financial sophistication and ability of any Person permitted to bid or purchase at any such sale, (ii) as to the content of legends to be placed upon any certificates representing the Pledged Collateral sold in such sale, including restrictions on future transfer thereof, (iii) as to the representations required to be made by each Person bidding or purchasing at such sale relating to that Person’s access to financial information about Pledgor and such Person’s intentions as to the holding of the Pledged Collateral so sold for investment, for its own account, and not with a view to the distribution thereof, and (iv) as to such other matters as the Secured Party may, in its discretion, deem necessary or appropriate in order that such sale (notwithstanding any failure so to register) may be effected in compliance with the Bankruptcy Code and other laws affecting the enforcement of creditors’ rights and all applicable Securities Laws.

 

8.5         Registration. Pledgor acknowledges that notwithstanding the legal availability of a private sale or a sale subject to the restrictions described above in paragraph 8.4, the Secured Party may, in its discretion and at its sole expense, elect to register any or all of the Pledged Collateral under applicable Securities Laws. Pledgor, however, recognizes that the Secured Party may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof. Pledgor also acknowledges that any such private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale

 

Stock Pledge Agreement

 

and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Secured Party shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit the registrant to register such securities for public sale under applicable Securities Laws, even if Pledgor would agree to do so.

 

8.6         Waiver of Certain Rights. Pledgor agrees that following the occurrence and during the continuance of an Event of Default it will not at any time plead, claim or take the benefit of any appraisal, valuation, stay, extension, moratorium or redemption law now or hereafter in force in order to prevent or delay the enforcement of this Agreement, or the absolute sale of the whole or any part of the Pledged Collateral or the possession thereof by any purchaser at any sale hereunder, and Pledgor waives the benefit of all such laws to the extent it lawfully may do so. Pledgor agrees that it will not interfere with any right, power or remedy of the Secured Party provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by the Secured Party of any one or more of such rights, powers or remedies. No failure or delay on the part of the Secured party to exercise any such right, power or remedy and no notice or demand which may be given to or made upon Pledgor by the Secured Party with respect to any such remedies shall operate as a waiver thereof, or limit or impair the Secured Party’s right to take any action or to exercise any power or remedy hereunder, without notice or demand, or prejudice its rights as against Pledgor in any respect.

 

8.7         Specific Performance. Pledgor further agrees that a breach of any of the covenants contained in this Section 8 will cause irreparable injury to the Secured Party, that the Secured Party has no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 8 shall be specifically enforceable against Pledgor, and Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that the Obligations are not then due and payable in accordance with the agreements and instruments governing and evidencing such obligations.

 

9.         Power of Attorney; Proxy.

 

9.1         During the existence of an Event of Default, Pledgor irrevocably designates, makes, constitutes and appoints the Secured Party (and all Persons designated by the Secured Party) as its true and lawful attorney (and agent‑in‑fact) and the Secured Party, or the Secured Party’s agent, may, without notice to Pledgor, and at such time or times thereafter as the Secured Party or said agent, in its discretion, may determine, in the name of Pledgor or the Secured Party: (a) transfer the Pledged Collateral on the books of the issuer thereof, with full power of substitution in the premises; (b) endorse the name of Pledgor upon any checks, notes, acceptance, money orders, certificates, drafts or other forms of payment of security that come into the Secured Party’s possession to the extent they constitute Pledged Collateral; and (c) do all acts and things necessary, in the Secured Party’s discretion, to fulfill the obligations of Pledgor under this Agreement.

 

9.2         During the existence of an Event of Default, the Secured Party, or its nominee, without notice or demand of any kind to Pledgor, shall have the sole and exclusive right to exercise all voting powers pertaining to any and all of the Pledged Collateral (and to give written

 

Stock Pledge Agreement

 

consents in lieu of voting thereon) and may exercise such power in such manner as the Secured Party, in its sole discretion, shall determine. THIS PROXY IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE. The exercise by the Secured Party of any of its rights and remedies under this Section shall not be deemed a disposition of Pledged Collateral under Article 9 of the Uniform Commercial Code nor an acceptance by the Secured Party of any of the Pledged Collateral in satisfaction of any of the Obligations.

 

10.         Waiver. No delay on the Secured Party’s part in exercising any power of sale, Lien, option or other right hereunder, and no notice or demand which may be given to or made upon Pledgor by the Secured Party with respect to any power of sale, Lien, option or other right hereunder, shall constitute a waiver thereof, or limit or impair the Secured Party’s right to take any action or to exercise any power of sale, Lien, option, or any other right hereunder, without notice or demand, or prejudice the Secured Party’s rights as against Pledgor in any respect.

 

11.         Assignment. The Secured Party may assign, endorse or transfer any instrument evidencing all or any part of the Obligations as provided in, and in accordance with, the Financing Agreement, and the holder of such instrument shall be entitled to the benefits of this Agreement.

 

12.         Termination. This Agreement shall terminate and be of no further force or effect at such time as the Obligations shall be paid and performed in full and the Secured Party’s commitment to lend under the Financing Agreement shall have been terminated. Upon such termination of this Agreement, the Secured Party shall deliver to Pledgor the Pledged Collateral at the time subject to this Agreement and then in the Secured Party’s possession or control and all instruments of assignment executed in connection therewith, free and clear of the Liens hereof and, except as otherwise provided herein, all of Pledgor’s obligations hereunder shall at such time terminate.

 

13.         Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Borrower for liquidation or reorganization, should Borrower become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Borrower’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a “voidable preference”, “fraudulent conveyance”, or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

14.         Miscellaneous. This Agreement shall be binding upon Pledgor and its successors and assigns, and shall inure to the benefit of, and be enforceable by, the Secured Party and its successors and assigns, and shall be governed by, and construed and enforced in accordance with, the internal laws in effect in the State of Oklahoma, and none of the terms or provisions of this Agreement may be waived, altered, modified or amended except in writing duly signed for and on behalf of the Secured Party and Pledgor.

 

Stock Pledge Agreement

 

15.         Severability. If for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or effect those portions of this Agreement which are valid.

 

16.         Notices. Except as otherwise provided herein, whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by any other party, or whenever any of the parties desires to give or serve upon any other a communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be delivered in accordance with the terms of Section 13 of the Financing Agreement.

 

17.         Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

 

18.         Counterparts. This Agreement may be executed in any number of counterparts, including DocuSign, which shall, collectively and separately, constitute one agreement.

 

19.         PLEDGOR WAIVES TRIAL BY JURY IN ANY ACTION UNDER OR RELATING TO THIS STOCK PLEDGE AGREEMENT AND TO THE LIABILITY OF BORROWER TO LENDER.

 

20.         IF THE WAIVER OF THE RIGHT TO A TRIAL BY JURY SET FORTH ABOVE IS NOT ENFORCEABLE, THE PLEDGOR AND, BY ACCEPTANCE HEREOF, LENDER (COLLECTIVELY, THE “PARTIES”) AGREE THAT ANY AND ALL DISPUTES OR CONTROVERSIES OF ANY NATURE BETWEEN THEM ARISING AT ANY TIME SHALL BE DECIDED BY A REFERENCE TO A PRIVATE JUDGE, WHO SHALL BE A RETIRED STATE OR FEDERAL COURT JUDGE, MUTUALLY SELECTED BY THE PARTIES OR, IF THEY CANNOT AGREE, THEN ANY PARTY MAY SEEK TO HAVE A PRIVATE JUDGE APPOINTED IN ACCORDANCE WITH CALIFORNIA CODE OF CIVIL PROCEDURE §§ 638 AND 640 (OR PURSUANT TO COMPARABLE PROVISIONS OF FEDERAL LAW IF THE DISPUTE FALLS WITHIN THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS). THE REFERENCE PROCEEDINGS SHALL BE CONDUCTED PURSUANT TO AND IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE §§ 638 THROUGH 645.1, INCLUSIVE. THE PRIVATE JUDGE SHALL HAVE THE POWER, AMONG OTHERS, TO GRANT PROVISIONAL RELIEF, INCLUDING WITHOUT LIMITATION, ENTERING TEMPORARY RESTRAINING ORDERS, ISSUING PRELIMINARY AND PERMANENT INJUNCTIONS AND APPOINTING RECEIVERS. ALL SUCH PROCEEDINGS SHALL BE CLOSED TO THE PUBLIC AND CONFIDENTIAL AND ALL RECORDS RELATING THERETO SHALL BE PERMANENTLY SEALED. IF DURING THE COURSE OF ANY DISPUTE, A PARTY DESIRES TO SEEK PROVISIONAL RELIEF, BUT A JUDGE HAS NOT BEEN APPOINTED AT THAT POINT PURSUANT TO THE JUDICIAL REFERENCE PROCEDURES, THEN SUCH PARTY MAY APPLY TO THE COURT FOR SUCH RELIEF. THE PROCEEDING BEFORE THE PRIVATE JUDGE

 

Stock Pledge Agreement

 

SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF EVIDENCE APPLICABLE TO JUDICIAL PROCEEDINGS. THE PARTIES SHALL BE ENTITLED TO DISCOVERY WHICH SHALL BE CONDUCTED IN THE SAME MANNER AS IT WOULD BE BEFORE A COURT UNDER THE RULES OF DISCOVERY APPLICABLE TO JUDICIAL PROCEEDINGS. THE PRIVATE JUDGE SHALL OVERSEE DISCOVERY AND MAY ENFORCE ALL DISCOVERY RULES AND ORDERS APPLICABLE TO JUDICIAL PROCEEDINGS IN THE SAME MANNER AS A TRIAL COURT JUDGE. THE PARTIES AGREE THAT THE SELECTED OR APPOINTED PRIVATE JUDGE SHALL HAVE THE POWER TO DECIDE ALL ISSUES IN THE ACTION OR PROCEEDING, WHETHER OF FACT OR OF LAW, AND SHALL REPORT A STATEMENT OF DECISION THEREON PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE § 644(A). NOTHING IN THIS PARAGRAPH SHALL LIMIT THE RIGHT OF ANY PARTY AT ANY TIME TO EXERCISE SELF-HELP REMEDIES, FORECLOSE AGAINST COLLATERAL, OR OBTAIN PROVISIONAL REMEDIES. THE PRIVATE JUDGE SHALL ALSO DETERMINE ALL ISSUES RELATING TO THE APPLICABILITY, INTERPRETATION, AND ENFORCEABILITY OF THIS PARAGRAPH. THE PARTIES AGREE THAT TIME IS OF THE ESSENCE IN CONDUCTING THE REFERENCED PROCEEDINGS. THE PARTIES SHALL PROMPTLY AND DILIGENTLY COOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAY BE NECESSARY TO OBTAIN PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE OR CONTROVERSY IN ACCORDANCE WITH THE TERMS HEREOF. THE COSTS SHALL BE BORNE EQUALLY BY THE PARTIES.

 

 

 

[signature appears on following page]

 

 

Stock Pledge Agreement

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first written above.

 

VADO CORP. By:/s/ Jason Wulfsohn                                     Name: Jason Wulfsohn                                    Title:         CEO

 

 

Stock Pledge Agreement

 

EXHIBIT A

to the Stock Pledge Agreement

 

 

Attached to and forming a part of that certain Stock Pledge Agreement dated as of September 18, 2023 executed and delivered by Pledgor to Secured Party.

 

 

	Class of	Certificate	Number of	Number of Shares
Issuer	Stock	Number(s)	Shares	Issued & Outstanding

 

 

 

Stock Pledge Agreement

 

EXHIBIT B

to the Stock Pledge Agreement

 

PLEDGE AMENDMENT

 

This Pledge Amendment, dated September 18, 2023, is delivered pursuant to Section 6.5 of the Stock Pledge Agreement referred to below. The undersigned hereby (a) pledges, conveys, hypothecates, mortgages, assigns, sets over, delivers and grants to the Secured Party a security interest in the shares of capital stock set forth below (the “Additional Securities”) and all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Additional Securities, all on the terms and conditions set forth in that certain Stock Pledge Agreement, dated as of September 18, 2023 (the “Stock Pledge Agreement”), executed and delivered by the undersigned, as Pledgor, to SLR DIGITAL FINANCE LLC, which terms and conditions are hereby incorporated herein by reference; (b) agrees that this Pledge Amendment may be attached to the Stock Pledge Agreement; and (c) agrees that the Additional Securities listed on this Pledge Amendment shall be deemed to be a part of the Pledged Securities under the Stock Pledge Agreement, shall become a part of the Pledged Collateral referred to in the Stock Pledge Agreement and shall secure all Obligations referred to in the Stock Pledge Agreement. Capitalized terms used herein but not defined shall have the meanings ascribed to such terms in the Stock Pledge Agreement.

 

 

VADO CORP. By:/s/ Jason Wulfsohn                                     Name: Jason Wulfsohn                                    Title:         CEO

 

 

 

 

 

	Class of	Certificate	Number of	Number of Shares
Issuer	Stock	Number(s)	Shares	Issued & Outstanding
Socialcom Inc	Common		170,122,156	170,122,156

 

 

Stock Pledge Agreement

Exhibit 8.1

 

 

ESCROW AGREEMENT

 

This Escrow Agreement (this “Agreement”), effective as of the effective date set forth on the signature page hereto (“Effective Date”), is entered into by the following:

 

(i)

the issuer set forth on the signature page hereto (“Issuer”); and

(ii)

the broker-dealer for Issuer’s offering set forth on the signature page hereto (“Manager”); and

(iii)

North Capital Private Securities Corporation, a Delaware corporation, as the facilitator of escrow as set forth herein through the institution in Section 1(d) below as escrow agent (“NCPS”).

 

For purposes of this Agreement: (a) the above parties other than and excluding NCPS are referred to herein as “Issuer Party”; (b) references to “Issuer Party” in this Agreement shall include references to each Issuer Party individually, together and collectively, jointly and severally; and (c) Issuer Party, collectively with NCPS, are referred to herein as the “Parties” and each, a “Party”.

 

The following Exhibits are incorporated by reference into this Agreement:

 

Exhibit A – Contingent Offering (if applicable)

Exhibit B – Fees and Expenses

 

Recitals

 

A.

NCPS is a broker-dealer registered with the U.S. Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”).

 

B.

Issuer Party is engaging NCPS to serve as the facilitator of escrow as set forth herein through the institution in Section 1(d) below as escrow agent in connection with Issuer’s sale of debt, equity or hybrid securities (“Securities”) in an offering exempt from registration under the U.S. Securities Act of 1933, as amended (“Securities Act”), pursuant to Rule 506(b) of Regulation D, 506(c) of Regulation D, Regulation A or Regulation Crowdfunding, as indicated on the signature page hereto (“Offering”).

 

C.

In accordance with the private placement memorandum, offering memorandum, Form 1-A or Form C applicable to the Offering provided by Issuer Party for dissemination to investors in connection with the Offering (“Offering Document”), subscribers to the Securities (“Subscribers”) will be required to submit full payment for their respective investments at the time they enter into subscription agreements.

 

D.

In accordance with the Offering Document, all payments by Subscribers subscribing for Securities shall be sent directly to NCPS as the facilitator of escrow as set forth herein through the institution in Section 1(d) below as escrow agent, and NCPS by this Agreement agrees to accept, hold and promptly disburse or transmit such funds deposited with it with respect thereto (“Escrow Funds”) in accordance with the terms of this Agreement and in compliance with Rule 15c2-4 of the U.S. Securities Exchange Act of 1934, as amended (“Exchange Act”), and in the case of an Offering pursuant to Regulation Crowdfunding, Regulation Crowdfunding Rule 303(e), as applicable, and related SEC guidance and FINRA rules.

 

E.

If the Offering is being made by Issuer on an “all-or-none” basis or on any other basis that contemplates payments to be made to Issuer only upon the occurrence of some further event or contingency as set forth in Exhibit A, as applicable, NCPS will promptly deposit any and all Escrow Funds NCPS receives into a separate bank escrow account as set forth in Section 1(d) below, for the persons or entities with a beneficial interest therein, until the appropriate event or contingency has occurred, at which time the Escrow Funds will be promptly transmitted to Issuer, else promptly returned to the persons or entities entitled thereto pursuant to Section 3 and 4 below.

 

F.

NCPS will be a participant in the Offering for the limited purpose of facilitating escrow described in this Agreement, and if required by an Offering pursuant to Regulation Crowdfunding, NCPS will be the “qualified third party”, as defined in Regulation Crowdfunding Rule 303(e)(2). NCPS accepts no other role and assumes no other responsibilities related to the Offering, such as managing broker-dealer, placement agent, selling group member or referring broker-dealer, unless and until the roles and responsibilities are expressly delineated in a separately executed placement, managing broker, selling or referral agreement, as the case may be, if any.

 

 

In consideration of the mutual representations, warranties and covenants contained in this Agreement, the Parties, intending to incorporate the foregoing Recitals into this Agreement and to be legally bound, agree as follows:

 

Agreement

 

1.    Definitions. Capitalized terms used in this Agreement and not otherwise defined above or elsewhere in this Agreement shall have the meanings as set forth below:

 

(a)

“ACH” means Automated Clearing House.

 

(b)

“Business Day” means a calendar day other than Saturday, Sunday or any public holiday when banks are closed for business in Delaware, Pennsylvania or Utah.

 

(c)

“Cash Investment” means an amount in US Dollars equal to (i) the number of Securities to be purchased by a Subscriber, multiplied by (ii) the offering price per Security as set forth in the Offering Document.

 

(d)

“Cash Investment Instrument” means, in full payment of the Cash Investment for the Securities to be purchased by a Subscriber, a check, money order or similar instrument made payable by Subscriber to the order of or endorsed to the order of:

 

NCPS at ________________/______________/______________ - Escrow Account

          (Offering Name*) (Subscriber Name**)

 

or wire transfer or ACH transmitted by Subscriber to the following account (“Escrow

Account”):

 

Institution: _________________

ABA: ___________

Account Name: _________________

Account Number: _______________

For Further Credit To:         ________________________

                   (Offering Name*)

         _______________________‐_

                   (Subscriber Name**)

 

or, if applicable to the Offering, funds transmission by credit or debit card or ACH through and subject to the terms and conditions of NCPS’s payment processing facilitation services; all instruments of payment must be payable to the institution as set forth above as escrow agent until any applicable minimum contingency requirement is met.

 

*Offering Name as set forth on the signature page hereto.

**Subscriber Name as completed by Subscriber.

 

(e)

“Expiration Date” means 12 months from the Effective Date, unless mutually extended by the Parties in writing (which may be via email).

 

(f)

“Instruction Letter” means written instructions in a form acceptable to NCPS and executed by Issuer Party with Issuer Party directing NCPS to promptly disburse the Escrow Funds to Issuer pursuant to Section 4(a).

 

(g)

“Minimum Offering” has the meaning as set forth on the signature page hereto.

 

(h)

“Minimum Offering Notice” means, if applicable to an Offering, a written notification in a form acceptable to NCPS and signed by Issuer Party with Issuer Party representing to NCPS that: (i) subscriptions for at least the Minimum Offering have been received by Issuer; (ii) to the best of Issuer Party’s knowledge after due inquiry and review of Issuer Party’s records, Cash Investment Instruments in full payment for that number of Securities equal to or greater than the Minimum Offering have been received, deposited with and collected by NCPS; (iii) such subscriptions have not been withdrawn, rejected or otherwise terminated; and (iv) Subscribers have no statutory or regulatory rights of rescission without cause or all such rights have expired.

 

 

(i)

“NACHA” means National Automated Clearing House Association.

 

(j)

“Subscription Accounting” means an accounting of all subscriptions for Securities received and accepted by Issuer Party as of the date of such accounting, indicating for each subscription Subscriber’s name and address, the number and total purchase price of subscribed Securities, the date of receipt by Issuer of the Cash Investment Instrument and notations of any nonpayment of the Cash Investment Instrument submitted with such subscription, any withdrawal of such subscription by Subscriber, any rejection of such subscription by Issuer Party or other termination, for whatever reason, of such subscription.

 

2.    Appointment of Facilitator of Escrow. Issuer Party hereby appoints NCPS to serve as the facilitator of escrow as set forth herein through the institution in Section 1(d) as escrow agent, and NCPS hereby accepts such appointment, in accordance with the terms of this Agreement. Issuer Party shall take all necessary steps to assure that all funds necessary to consummate the Transaction are deposited into the Escrow Account. Issuer Party shall not receive interest on the Escrow Funds and the Escrow Account shall be a non-interest bearing account as to Issuer Party.

 

3.    Deposits into Escrow Account.

 

(a)    Issuer Party shall direct Subscribers to, and Subscribers shall, directly deliver to NCPS all Cash Investment Instruments for deposit in the Escrow Account. Each such direction shall be accompanied by a Subscription Accounting.

 

ALL FUNDS DEPOSITED INTO THE ESCROW ACCOUNT PURSUANT TO THIS SECTION 3 SHALL REMAIN THE PROPERTY OF EACH SUBSCRIBER ACCORDING TO SUCH SUBSCRIBER’S INTEREST AND SHALL NOT BE SUBJECT TO ANY LIEN OR CHARGE BY NCPS, THE INSTITUTION IN SECTION 1(D) OR BY JUDGMENT OR CREDITORS’ CLAIMS AGAINST ISSUER PARTY UNTIL ELIGIBLE TO BE RELEASED TO ISSUER IN ACCORDANCE WITH SECTION 4(a). ISSUER PARTY SHALL NOT RECEIVE CASH INVESTMENT INSTRUMENTS DIRECTLY FROM SUBSCRIBERS.

 

(b)    Issuer Party understands and agrees that all Cash Investment Instruments received by NCPS pursuant to this Agreement are subject to collection requirements of presentment, clearing and final payment, and that the funds represented thereby cannot be drawn upon or disbursed until such time as final payment has been made and is no longer subject to dishonor. NCPS shall process each Cash Investment Instrument for collection promptly upon receipt, and the proceeds thereof shall be held as part of the Escrow Funds until disbursed in accordance with Section 4. If, upon presentment for payment, any Cash Investment Instrument is dishonored, NCPS’s sole obligation shall be to notify Issuer Party of such dishonor and, if applicable, to promptly return such Cash Investment Instrument to Subscriber. Notwithstanding, if for any reason any Cash Investment Instrument is uncollectible after payment or disbursement of the funds represented thereby has been made by NCPS, Issuer Party shall immediately reimburse NCPS upon receipt from NCPS of written notice thereof, including, without limitation, any fees or expenses with respect thereto, which NCPS may collect from Issuer Party pursuant to Section 10.

 

(c)    Upon receipt of any Cash Investment Instrument that represents payment of an amount less than or greater than the Cash Investment, NCPS’s sole obligation shall be to notify Issuer Party, depending upon the source of the Cash Investment Instrument, of such fact and to pay to Subscriber by the same method the amount of the Cash Investment received by NCPS from such Subscriber or promptly return to Subscriber such Subscriber’s Cash Investment Instrument upon receipt from Subscriber of any required payment instructions; provided that amounts in excess of $25,000 will be returned via wire transfer upon confirmation by NCPS of Subscriber’s account information.

 

(d)    NCPS shall not be obligated to accept, or present for payment, any Cash Investment Instrument that is not properly made payable or endorsed as set forth in Section 1(d).

 

(e)    Issuer Party shall, or cause Subscriber to, provide NCPS with information sufficient to effect such return to Subscriber as outlined in this Section 3, including, without limitation, updated payment information in the event a return to Subscriber for any reason cannot be made by the same method as received by NCPS.

 

 

(f)    In the event any party other than NCPS receives a Cash Investment Instrument, Issuer Party agrees to promptly, and in no event later than one Business Day after receipt, deliver or cause to be delivered such Cash Investment Instrument to NCPS for deposit into the Escrow Account.

 

4.    Disbursement of Escrow Funds.

 

(a)    Subject to Section 3(b) and Section 10, NCPS shall promptly disburse in accordance with the Instruction Letter the liquidated value of the Escrow Funds from the Escrow Account to Issuer by wire transfer no later than one Business Day following receipt of the following documents:

 

	(i)	Minimum Offering Notice;
	(ii)	Subscription Accounting substantiating the fulfillment of the Minimum Offering;
	(iii)	Instruction Letter; and
	(iv)	such other certificates, notices or other documents as NCPS may reasonably require;

 

 

provided that NCPS shall not be obligated to disburse the liquidated value of the Escrow Funds to Issuer if NCPS has reason to believe that (A) Cash Investment Instruments in full payment for that number of Securities equal to or greater than the Minimum Offering have not been received, deposited with and collected by NCPS, or (B) any of the information or the certifications, representations, warranties or opinions set forth in the Minimum Offering Notice, Subscription Accounting, Instruction Letter or other certificates, notices or other documents are incorrect or incomplete. After the initial disbursement of Escrow Funds to Issuer pursuant to this Section 4(a), NCPS shall promptly disburse any additional funds received with respect to the Securities to Issuer by wire transfer no later than one Business Day after NCPS receives from or on behalf of Issuer (1) Issuer’s request for closing via NCPS’s online portal and (2) Issuer’s written verification that the subscriptions therefor are in good order.

 

Any ACH transaction must comply with all applicable laws, rules, regulations, codes and orders of applicable governmental, regulatory, judicial and law enforcement authorities and self-regulatory authorities (collectively, “Law”), including, without limitation, NACHA’s operating rules that apply to the ACH network as in effect from time to time. NCPS is not responsible for errors in the completion, accuracy or timeliness of any transfer properly initiated by NCPS in accordance with joint written instructions occasioned by the acts or omissions of any third party financial institution or a party to the transaction, or the insufficiency or lack of availability of funds on deposit in any account.

 

NOTWITHSTANDING ANY REFERENCE HEREIN TO THE REQUIREMENT OF A PROMPT DISTRIBUTION OR RETURN OF A CASH INVESTMENT, OR A DISTRIBUTION OR RETURN OF A CASH INVESTMENT TO BE MADE WITHIN A PARTICULAR NUMBER OF DAYS, FOR PURPOSES OF FULFILLING RETURNS IN SECTION 3 ABOVE AND THIS SECTION 4, NCPS SHALL NOT BE REQUIRED TO PROCESS A RETURN OF A PAYMENT OF A CASH INVESTMENT MADE BY A SUBSCRIBER VIA ACH AS THE CASH INVESTMENT INSTRUMENT (“ACH SUBSCRIBER”) UNTIL THE EXPIRATION OF ANY DISPUTE, CHARGEBACK, REVERSAL OR RETURN PERIOD UNDER THE NACHA RULES, TYPICALLY 60 DAYS. ISSUER PARTY SHALL INFORM ACH SUBSCRIBERS OF THE TIMING OF RETURNS AS PART OF ISSUER PARTY’S SUBSCRIPTION PROCESS.

 

(b)    No later than three Business Days after receipt from Subscriber of any required payment instructions and receipt by NCPS of written notice: (i) from Issuer Party that Issuer Party intends to reject a Subscriber’s subscription; (ii) from Issuer Party that there will be no closing of the sale of Securities to Subscribers; (iii) from any federal or state regulatory authority that any application by Issuer to conduct banking business has been denied; or (iv) from the SEC or any other federal or state regulatory authority that a stop or similar order has been issued with respect to the Offering Document and has remained in effect for at least 20 days, NCPS shall pay to such Subscriber in (i) and each Subscriber in (ii)-(iv) by the same method the amount of the Cash Investment received by NCPS from such Subscriber or promptly return to Subscriber such Subscriber’s Cash Investment Instrument; provided that amounts in excess of $25,000 will be returned via wire transfer upon confirmation by NCPS of Subscriber’s account information.

 

(c)    Notwithstanding anything to the contrary contained herein, if NCPS shall not have received an Instruction Letter on or before the Expiration Date or the Termination Date (as defined below), subject to Section 5, NCPS shall, within three Business Days after such Expiration Date or Termination Date and receipt from Subscriber of any required payment instructions, and without any further instruction or direction from Issuer Party, pay to each Subscriber by the same method the amount of the Cash Investment received by NCPS from such Subscriber or promptly return to Subscriber such Subscriber’s Cash Investment Instrument; provided that amounts in excess of $25,000 will be returned via wire transfer upon confirmation by NCPS of Subscriber’s account information. For purposes of this Agreement, “Termination Date” means, if the Offering is a contingent Offering, the date on which the minimum offering contingencies are required to have been met, as such date may be amended as provided in the Offering Document.

 

 

(d)    Issuer Party shall, or cause Subscriber to, provide NCPS with information sufficient to effect such payment or return to Subscriber as outlined in this Section 4, including, without limitation, updated payment information in the event a payment or return to Subscriber for any reason cannot be made by the same method as received by NCPS.

 

5.    Suspension of Performance or Disbursement Into Court. If, at any time, (a) there shall exist any dispute between Issuer Party, NCPS, any Subscriber or any other person with respect to the holding or disposition of all or any portion of the Escrow Funds or any other obligations of NCPS hereunder, or (b) NCPS is unable to determine, to NCPS’s reasonable satisfaction, the proper disposition of all or any portion of the Escrow Funds or NCPS’s proper actions with respect to its obligations hereunder, or (c) Issuer Party has not within 30 days of NCPS’s notice of resignation pursuant to Section 7 appointed a successor provider of escrow services or agent to act hereunder, then NCPS may, in its reasonable discretion, take either or both of the following actions: (i) suspend the performance of any of its obligations (including, without limitation, any disbursement obligations) under this Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of NCPS or until a successor provider of escrow services or agent shall have been appointed (as the case may be); or (ii) petition (by means of an interpleader action or any other appropriate method) any court of competent jurisdiction in any venue convenient to NCPS, for instructions with respect to such dispute or uncertainty, and to the extent required or permitted by Law, pay into such court all funds held by it in the Escrow Funds for holding and disposition in accordance with the instructions of such court. NCPS shall have no liability to Issuer Party, any Subscriber or any other person with respect to any such suspension of performance or disbursement into court, specifically including any liability or claimed liability that may arise, or be alleged to have arisen, out of or as a result of any delay in the disbursement of the Escrow Funds or any delay in or with respect to any other action required or requested of NCPS.

 

6.    No Commingling, Investment of Funds or Interest to Issuer Party. NCPS shall not: (a) commingle Escrow Funds received by it in escrow with funds of others that are not Escrow Funds, including funds received by NCPS in escrow in connection with any other offering of debt, equity or hybrid securities; or (b) invest such Escrow Funds. The Escrow Funds will be held in the Escrow Account, which shall not accrue interest in favor of Issuer Party or any Subscriber.

 

7.    Resignation of NCPS. NCPS may resign and be discharged from the performance of its duties hereunder at any time by giving 30 days prior written notice to Issuer Party specifying a date when such resignation shall take effect. Upon any such notice of resignation, or upon any termination of this Agreement pursuant to Section 17, Issuer Party shall appoint a successor provider of escrow services or agent hereunder prior to the effective date of such resignation or termination. NCPS shall transmit all records pertaining to the Escrow Funds and shall pay all Escrow Funds to the successor provider of escrow services or agent, after making copies of such records as NCPS deems advisable. After NCPS’s resignation or the termination of this Agreement, as applicable, and the fulfillment of NCPS’s obligations with respect thereto, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the facilitator of escrow under this Agreement.

 

8.    Role of NCPS as Facilitator of Escrow.

 

(a)    NCPS’s sole responsibility as a participant in the Offering under this Agreement is as the facilitator of escrow as set forth herein through the institution in Section 1(d) as escrow agent to facilitate the safekeeping with, and disbursement by, the escrow agent of the Escrow Funds, in accordance with the terms hereto. NCPS shall have no implied duties or obligations and shall not be charged with knowledge or notice of any fact or circumstance not specifically set forth herein. NCPS may rely upon any notice, instruction, request or other instrument, not only as to its due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein, which NCPS shall believe to be genuine and to have been signed or presented by the person or parties purporting to sign the same. NCPS shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines by final unappealed or non-appealable order pursuant to Section 20(a) that NCPS’s fraud, willful misconduct or gross negligence was the primary cause of any Losses (as defined below) to Issuer Party (“Ineligible Losses”).

 

 

(b)    NCPS shall not be obligated to take any legal action or commence any proceeding in connection with the Escrow Funds, any account in which Escrow Funds are deposited, this Agreement or the Offering Document, or to appear in, prosecute or defend any such legal action or proceeding.

 

(c)    NCPS shall have no liability under and no duty to inquire as to the provisions of any agreement other than this Agreement, including, without limitation, the Offering Document. Without limiting the generality of the foregoing, NCPS shall not be responsible for or required to enforce any of the terms or conditions of any subscription agreement with any Subscriber or any other agreement between Issuer Party or any Subscriber. NCPS shall not be responsible or liable in any manner for the performance by Issuer or any Subscriber of their respective obligations under any subscription agreement nor shall NCPS be responsible or liable in any manner for the failure of Issuer Party or any third party (including any Subscriber) to honor any of the provisions of this Agreement.

 

(d)    NCPS is authorized, in its sole discretion, to comply with orders issued or process entered by any court with respect to the Escrow Funds, without determination by NCPS of such court’s jurisdiction in the matter. If any portion of the Escrow Funds is at any time attached, garnished or levied upon under any court order, or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decree shall be made or entered by any court affecting such property or any part thereof, then and in any such event, NCPS is authorized, in its reasonable discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel selected by it is binding upon it without the need for appeal or other action; and if NCPS complies with any such order, writ, judgment or decree, it shall not be liable to any of the parties hereto or to any other person or entity by reason of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated. Notwithstanding the foregoing, to the extent legally permissible, NCPS shall provide Issuer Party with prompt notice of any such court order or similar demand and the opportunity to interpose an objection or obtain a protective order.

 

(e)    NCPS may consult legal counsel selected by it in the event of any dispute or question as to the construction of any of the provisions hereof or of any other agreement or of its duties hereunder, or relating to any dispute involving any party hereto, and shall incur no liability and shall be fully indemnified from any liability whatsoever in acting in accordance with the opinion or instruction of such counsel. Issuer Party shall promptly pay, upon demand, the fees and expenses of any such counsel.

 

(f)    By this Agreement, Subscribers are not customers of NCPS and NCPS shall have no obligation to determine a Subscriber’s suitability to participate in the Offering, whether the Offering complies with Law, verify a Subscriber’s identity or perform anti-money laundering, know your customer or other due diligence, such responsibilities being obligations of Issuer Party or Issuer Party’s agents. Notwithstanding, NCPS may ask Issuer Party to provide, and Issuer Party shall provide promptly upon NCPS’s request, certain information about Subscribers, including, but not limited to, name, physical address, tax identification number, organizational documents, certificates of good standing, financial statements, licenses to do business and other information that will help NCPS to identify and verify a Subscriber’s identity. Any further participation by NCPS in the Offering (if any) other than to facilitate escrow as set forth in this Agreement shall be governed by separate agreement.

 

(g)    NCPS makes no representation, warranty or covenant as to the compliance of any transaction related to the escrow with any Law. NCPS shall not be responsible for the application or use of any funds released from the Escrow Account pursuant to this Agreement.

 

9.    Indemnification of NCPS.

 

(a)    Issuer Party (including Issuer Party’s affiliates, collectively, the “Indemnifying Party”) agrees (and agrees to cause the other Indemnifying Parties) jointly and severally and at their own cost and expense to release, indemnify, defend and hold harmless NCPS and its affiliates and their respective directors, officers, employees, agents, representatives, advisors and consultants, and their respective successors and assigns (each, an “NCPS Parties”), to the fullest extent permitted by Law, from and against (and no NCPS Party shall be liable for) any Losses, joint or several, in connection with all actions (including equity owner actions), claims, disputes, inquiries, indemnification, proceedings, investigations and other legal process regardless of the source (including NCPS Parties) (collectively, “Actions”) arising out of or relating to the offering of securities, this Agreement, the provision of NCPS’s services hereunder or the engagement of NCPS hereunder (including, without limitation, any breach or alleged breach of this Agreement or any representation, warranty or covenant herein, any breach or alleged breach of Law or any rejection of a Cash Investment, or the suspension of performance or disbursement into court pursuant to Section 5), and will reimburse NCPS Parties for all expenses (including attorneys’ fees) as they are incurred by NCPS Parties in connection with investigating, preparing, defending or appearing as a third party witness in connection with any such Action whether or not related to a pending or threatened Action in which NCPS is a party. Notwithstanding, Issuer Party will not be responsible for any Ineligible Losses, and NCPS agrees to immediately refund any indemnification payments made to an NCPS Party upon such determination. “Losses” means any and all losses, damages, liabilities, deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs or expenses of whatever kind, including, without limitation, reasonable attorneys’ fees, the costs of enforcing any right hereunder, the costs of pursuing any insurance providers, the costs of collection and the costs of defending against or appearing as a witness, whether direct, indirect, consequential or otherwise. Indemnifying Parties shall pay to NCPS Parties all amounts due under this Section 9 promptly after written demand therefor.

 

 

(b)    Promptly after the receipt by any NCPS Party of notice of the commencement of any Action, NCPS shall, if a claim with respect thereto is or may be made against the Indemnifying Party, give the Indemnifying Party written notice of the commencement of such Action. The failure to give such notice shall not relieve any Indemnifying Party of any of its indemnification obligations, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. With respect to any Action in which a NCPS Party may be entitled to indemnification under this Agreement, the Indemnifying Party may by written notice to NCPS request to assume the defense of any such Action with counsel reasonably satisfactory to the NCPS Party. If NCPS agrees to the assumption by the Indemnifying Party of the defense of any such Action, the NCPS Party shall have the right to participate in such Action and to retain its own counsel, but the Indemnifying Party shall not be liable for any fees or expenses of other counsel subsequently incurred by such NCPS Party in connection with the defense thereof unless: (i) the Indemnifying Party has agreed to pay such fees and expenses; (ii) the Indemnifying Party shall have failed to employ counsel reasonably satisfactory to the NCPS Party in a timely manner; or (iii) the NCPS Party shall have been advised by counsel that there are actual or potential conflicting interests between the Indemnifying Party and the NCPS Party, including situations in which there are one or more legal defenses available to the NCPS Party that are different from or additional to those available to the Indemnifying Party. No Indemnifying Party shall settle any Action on behalf of a NCPS Party without the prior written consent of such NCPS Party.

 

(c)    In the event NCPS performs any service not specifically provided hereinabove, or that there is any assignment or attachment of any interest in the subject matter of this escrow or any modification thereof, or that any controversy arises hereunder, or that NCPS is made a party to, or intervenes in, any dispute pertaining to this escrow or the subject matter hereof, NCPS shall be reasonably compensated therefor and reimbursed for all costs and expenses occasioned thereby; and Issuer Party hereto agree jointly and severally to pay the same and to jointly and severally and at their own cost and expense release, indemnify, defend and hold harmless the NCPS Parties pursuant to subsection (a) above, it being understood and agreed that NCPS may interplead the subject matter of this escrow into any court of competent jurisdiction, and the act of such interpleader shall immediately relieve NCPS of any duties, liabilities or responsibilities.

 

(d)    For the sole purpose of enforcing and otherwise giving effect to the provisions of this Section 9, Issuer Party hereby consents to personal jurisdiction and service and venue in any court in which any claim that is subject to this Agreement is brought against any NCPS Party.

 

(e)    If an Action is commenced or threatened and is ultimately settled, Issuer Party shall use its commercially reasonable efforts to cause NCPS and the other NCPS Parties, by name or description, to be included in any release or settlement agreement, whether or not NCPS and the other NCPS Parties are named as defendants in such Action.

 

10.    Compensation to NCPS.

 

(a)    Issuer Party shall pay or cause to be paid to NCPS for its services as the facilitator of escrow as outlined in Exhibit B, which may be updated from time to time by NCPS by providing written notice to Issuer Party. Issuer Party’s obligation to pay such fees to NCPS and reimburse NCPS for such expenses is not conditioned upon a successful closing. Upon Issuer Party’s request, NCPS will provide Issuer Party with copies of all relevant invoices, receipts or other evidence of such expenses. The obligations of Issuer Party under this Section 10 shall survive any termination of this Agreement and the resignation or removal of NCPS.

 

 

(b)    All of the compensation and reimbursement obligations shall be payable by Issuer Party upon demand by NCPS and will be charged automatically by NCPS to the credit card or other payment method separately provided or as otherwise agreed by the Parties. Issuer Party consents to NCPS retaining and using Issuer Party’s payment information for future invoices and as provided in this Agreement. Issuer Party agrees and acknowledges that NCPS and its third party vendors may retain and use Issuer Party’s payment information to facilitate the payments provided for in this Agreement. Issuer Party agrees to provide NCPS written notice (which may be via email) of any update or changes to Issuer Party’s payment information. Absent current payment information, Issuer Party shall make, or cause to be made, all payments to NCPS within 10 days of receiving an invoice therefor. All payments made to NCPS shall be in US dollars in immediately available funds.

 

(c)    If Issuer Party fails to make any payment when due then, in addition to all other remedies that may be available: (a) NCPS may charge interest on the past due amount at the rate of 1.5% per month, calculated daily and compounded monthly, or if lower, the highest rate permitted under Law, which Issuer Party shall pay; such interest may accrue after as well as before any judgment relating to collection of the amount due; and (b) Issuer Party shall reimburse, or cause to be reimbursed, NCPS for all costs incurred by NCPS in collecting any late payments or interest, including attorneys’ fees, court costs and collection agency fees; provided that cumulative late payments are subject to the overall limits as may be required by Law as set forth in Exhibit B.

 

(d)    Only upon the fulfillment of the Minimum Offering, and only when Escrowed Funds are eligible to be released to Issuer in accordance with Section 4(a), and otherwise in compliance with Law, NCPS is authorized to and may disburse from time to time, to itself or to any NCPS Party from the Escrow Funds (but only to the extent of Issuer’s rights thereto), the amount of any compensation and reimbursement of out-of-pocket expenses due and payable hereunder (including any amount to which NCPS or any NCPS Party is entitled to seek indemnification pursuant to Section 9 hereof). NCPS shall notify Issuer Party of any disbursement from the Escrow Funds to itself or to any NCPS Party in respect of any compensation or reimbursement hereunder and shall furnish to Issuer copies of all related invoices and other statements.

 

(e)    Only upon the fulfillment of the Minimum Offering, and only when Escrowed Funds are eligible to be released to Issuer in accordance with Section 4(a), and otherwise in compliance with Law, Issuer shall grant to NCPS and the NCPS Parties a security interest in and lien upon such Escrow Funds (but only to the extent of Issuer’s rights thereto) to secure all obligations hereunder, and NCPS and the NCPS Parties shall have the right to offset the amount of any compensation or reimbursement due any of them hereunder (including any claim for indemnification pursuant to Section 9 hereof) against the Escrow Funds (but only to the extent of Issuer’s rights thereto). If for any reason the Escrow Funds available to NCPS and the NCPS Parties pursuant to such security interest or right of offset are insufficient to cover such compensation and reimbursement, Issuer Party shall promptly pay such amounts to NCPS and the NCPS Parties upon receipt of an itemized invoice.

 

11.    Representations and Warranties.

 

(a)    Issuer Party jointly and severally represents, warrants and covenants to NCPS as of the Effective Date and at all times during the Term, including, without limitation, at the time of any deposit to or disbursement from the Escrow Funds:

 

(i)    Issuer Party is an entity duly organized, validly existing and in good standing under the laws of the state where it was formed. Issuer Party has all requisite power and authority to own those properties and conduct those businesses presently owned or conducted by it. Issuer Party is duly qualified and properly licensed and registered to do business and is in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification, licensure or registration, except where the failure to do so would not have a material adverse effect on Issuer Party or Issuer Party’s business.

 

 

(ii)    Manager is a broker-dealer registered with the SEC and a member of FINRA and SIPC. Manager has implemented, and complies with, a written know-your-customer (KYC) and anti-money laundering (AML) compliance program reasonably designed to comply with the applicable requirements of the USA PATRIOT Act and Bank Secrecy Act and the implementing regulations promulgated thereunder, including policies that could be reasonably expected to detect and cause the reporting of suspicious transactions (“Requirements”). Manager maintains in its files documentation supporting these representations and warranties as required by the Requirements, and shall make such information available to NCPS upon reasonable request.

 

(iii)    Issuer Party has full power and authority to enter into and perform this Agreement. This Agreement has been duly executed by Issuer Party and constitutes the legal, valid, binding, and enforceable obligation of Issuer Party, enforceable against Issuer Party in accordance with its terms. The execution, delivery and performance of this Agreement does not and will not: (A) conflict with or violate any of the terms of any organizational or governance document, stakeholder agreement, any court order or administrative ruling or decree to which it is a party or any of its property is subject, any agreement, contract, indenture, or other binding arrangement to which it is a party or any of its property is subject or any Law; or (B) conflict with, or result in a breach or termination of any of the terms of, or result in the acceleration of any indebtedness or obligations under, any agreement, obligation or instrument by which Issuer Party is bound or to which any property of Issuer Party is subject, or constitute a default thereunder. The execution, delivery and performance of this Agreement is consistent with and accurately described in the Offering Document as set forth in Section 4(b) and Section 4(c) and has been properly described therein.

 

(iv)    Issuer Party acknowledges that the status of NCPS is that of agent only for the limited purposes set forth herein to facilitate escrow as set forth herein through the institution in Section 1(d) as escrow agent, and if required by an Offering pursuant to Regulation Crowdfunding, NCPS will be the “qualified third party”, as defined in Regulation Crowdfunding Rule 303(e)(2), and hereby represents and covenants that no representation or implication shall be made that NCPS has investigated the desirability or advisability of investment in the Securities or has approved, endorsed or passed upon the merits of the investment therein and that the name of NCPS has not and shall not be used in any manner in connection with the offer or sale of the Securities other than to state that NCPS has agreed to serve as the facilitator of escrow for the limited purposes set forth herein. Issuer Party shall comply with all Law in connection with the offering of the Securities. By this Agreement, NCPS accepts no other role and assumes no other responsibilities related to the Offering, including, without limitation, managing broker-dealer, placement agent, selling group member or referring broker-dealer.

 

(v)    Issuer Party has the obligation to, and shall, determine a Subscriber’s suitability to participate in the Offering, make sure the Offering complies with Law and the Offering Document, verify a Subscriber’s identity and perform anti-money laundering, know your customer and any other due diligence in connection with the transactions contemplated by the Offering. The Offering and any offer or sale in the Offering complies with or is exempt from all applicable registrations or qualification requirements, including, without limitation, those of the SEC or state securities regulatory authorities.

 

(vi)    No person or entity other than the Parties and the prospective Subscribers have, or shall have, any lien, claim or security interest in the Escrow Funds or any part thereof. No financing statement under the Uniform Commercial Code is on file in any jurisdiction claiming a security interest in or describing (whether specifically or generally) the Escrow Funds or any part thereof.

 

(vii)    Any deposit with NCPS by Subscriber and/or Issuer Party of Cash Investment Instruments pursuant to Section 3 shall be deemed a representation and warranty by Issuer Party that such Cash Investment Instrument represents a bona fide sale to such Subscriber of the amount of Securities set forth therein in accordance with the terms of the Offering Document.

 

(viii)    In the event Issuer is a Series LLC and/or a series of a Series LLC, Issuer Party shall allocate and/or cause to be allocated any disbursement of Escrow Funds under this Agreement to the appropriate series, and perform any reporting and sub-accounting, all as required by and in compliance with Law and the Offering Document.

 

(ix)    To the extent Issuer Party will be sharing personal or financial information of a third party with NCPS in connection with this Agreement, Issuer Party shall maintain and obtain the agreement of each such third party, which shall permit the sharing of such third party’s information with NCPS and its affiliates and service providers for NCPS and its affiliates and service providers to use, disclose and retain it in connection with this Agreement and the provision of the services hereunder and as required by Law. NCPS shall be a third party beneficiary to such agreement.

 

 

(x)    Issuer Party’s representations, warranties and covenants are continuing and deemed to be reaffirmed each time Issuer Party provides NCPS with any instructions in connection with the Escrow Account. Issuer Party shall immediately notify NCPS if any representation, warranty or covenant ceases to be true, correct, accurate and complete.

 

(xi)    Issuer Party shall provide NCPS with immediate notice of any Action (as defined above), threatened Action or facts or circumstances that could lead to any Action involving any NCPS Party, the escrow agent or this Agreement.

 

(b)    NCPS represents, warrants and covenants to Issuer Party as of the Effective Date and at all times during the Term, including, without limitation, at the time of any deposit to or disbursement from the Escrow Funds:

 

(i)    NCPS is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware. NCPS is a broker-dealer registered with the SEC and a member of FINRA and SIPC. NCPS is duly qualified and properly licensed and registered to do business and is in good standing in all jurisdictions in which its obligations herein require such qualification, license or registration, except where the failure to do so would not have a material adverse effect on NCPS’s ability to perform its obligations under this Agreement.

 

(ii)    NCPS has full power and authority to enter into and perform this Agreement. This Agreement has been duly executed by NCPS and constitutes the legal, valid, binding, and enforceable obligation of NCPS, enforceable against NCPS in accordance with its terms. NCPS shall comply with Law in all material respects in performing its obligations under this Agreement.

 

(iii)    NCPS’s representations, warranties and covenants are continuing and deemed to be reaffirmed each time Issuer Party provides NCPS with any instructions in connection with the Escrow Account. NCPS shall promptly notify Issuer Party if any representation, warranty or covenant ceases to be true, correct, accurate and complete.

 

12.    Disclaimer of Advice. Issuer Party is NCPS’s sole customer pursuant to this Agreement. By this Agreement, NCPS is not undertaking to provide any recommendations or advice to any party, including any Subscriber who may be a retail investor, in connection with any offering of securities, NCPS’s engagement hereunder or its provision of the services contemplated by this Agreement (including, without limitation, business, investment, solicitation, legal, accounting, regulatory or tax advice). Issuer Party understands that it will be solely responsible for ensuring that any offering and any sale of securities complies with all Law. Issuer Party acknowledges and agrees that it will rely on its own judgment in using NCPS’s services.

 

13.    Survival. Notwithstanding the expiration or termination of this Agreement or the resignation or removal of NCPS as the facilitator of escrow, the Parties shall continue to be bound by the provisions of this Agreement that reasonably require some action or forbearance (or are required to implement such action or forbearance) after such expiration or termination, including, but not limited to, those related to fees and expenses, indemnities, limitations of and exclusions to liability, warranties, choice of law, jurisdiction and dispute resolution and such provisions shall remain operative and in full force and effect and shall survive any disbursement of Escrow Funds and the expiration or termination of this Agreement. Except as the context otherwise requires, all representations, warranties and covenants of a Party contained in this Agreement shall be deemed to be representations, warranties and covenants during the Term, and such representations, warranties and covenants shall remain operative and in full force and effect and shall survive the sale of, and payment for, the securities and the expiration or termination of this Agreement to the extent required for the enforcement thereof.

 

14.    Assignment. Except as provided in Section 17, no Party shall assign or otherwise transfer any of its rights, or delegate or otherwise transfer any of its obligations or performance, under this Agreement, in each case whether voluntarily, involuntarily, by operation of law or contract or otherwise, without each other Party’s prior written consent; provided NCPS may assign or otherwise transfer its rights, or delegate or otherwise transfer its obligations or performance, under this Agreement pursuant to Section 7 or to an affiliated provider of escrow services or agent without any other Party’s consent. Any purported assignment, delegation or transfer in violation of this Section 14 is void. Subject to this Section 14, this Agreement is binding upon and inures to the benefit of the Parties and their respective successors and permitted assigns irrespective of any change with regard to the name of or the personnel of any Party.

 

 

15.    Entirety. This Agreement incorporates by reference NCPS’s and its affiliates’ data privacy policies and website terms of use, as posted on NCPS’s and its affiliates’ website from time to time, with which Issuer Party shall, and shall cause issuers to, comply. This Agreement (including all exhibits, all schedules and NCPS’s and its affiliates’ data privacy policies and website terms of use) constitutes the sole and entire agreement between the Parties with respect to the acceptance, collection, holding, investment and disbursement of the Escrow Funds and sets forth in their entirety the obligations and duties of NCPS with respect to the Escrow Funds and supersedes and merges all prior and contemporaneous proposals, understandings, agreements, representations and warranties, both written and oral, between the Parties relating to such subject matter.

 

16.    Amendment; Waiver. Except as set forth in Section 7, Section 14 and Section 22, no amendment to or modification of this Agreement will be effective unless it is in writing and signed by an authorized representative of each Party. No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

17.    Term and Termination.

 

(a)    The term of this Agreement commences as of the Effective Date and, unless terminated earlier pursuant to any of this Agreement’s express provisions, will continue in effect until the first to occur of the final closing of the Offering and/or the disbursement of all amounts in the Escrow Funds or deposit of all amounts in the Escrow Funds into court pursuant to Section 5 or Section 8 hereof (“Term”), at which time this Agreement shall terminate and NCPS shall have no further obligation or liability whatsoever with respect to the Escrow Funds.

 

(b)    Notwithstanding, NCPS may terminate this Agreement for cause immediately without notice to Issuer Party upon: (i) fraud, malfeasance or willful misconduct by Issuer Party or any of their affiliates; (ii) conduct by Issuer Party or any of their affiliates that may jeopardize NCPS’s current business, prospective business or professional reputation; (iii) any material breach by Issuer Party of this Agreement if such breach is not cured within 10 days of receipt of written notice thereof (to the extent it can be cured), including, but not limited to, any failure to pay any amount under this Agreement when due; or (iv) if Issuer Party ceases regular operations or files any petition or commences any case or proceeding under any provision or chapter of the Federal Bankruptcy Act, the Federal Bankruptcy Code, or any other federal or state law relating to insolvency, bankruptcy or reorganization; the adjudication that Issuer Party is insolvent or bankrupt or the entry of an order for relief under the Federal Bankruptcy Code with respect to Issuer; an assignment for the benefit of creditors; the convening by Issuer Party of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or extension or composition of its debts; or the failure of Issuer Party generally to pay its debts on a timely basis (“Bankruptcy Event”). Notwithstanding, Issuer Party may terminate this Agreement: (i) for cause immediately with notice to NCPS upon: (A) NCPS’s fraud, willful misconduct or gross negligence; (B) any material breach by NCPS of this Agreement if such breach is not cured within 10 days of receipt of written notice thereof (to the extent it can be cured); or (C) upon a Bankruptcy Event of NCPS; or (ii) with 30 days’ prior written notice to NCPS in the event of any increase in the amount of fees or expenses pursuant to Section 10(a) and Exhibit B and such increase is not either applicable to NCPS’s escrow services customers generally or reasonably related to the specific services being provided to Issuer Party. Any Party may terminate this Agreement for any other or no reason with 90 days’ prior written notice to each other Party.

 

(c)    No termination or expiration of this Agreement shall affect the ongoing obligations of Issuer Party to make payments to NCPS in accordance with the terms hereunder and such obligations shall survive. Issuer Party shall pay or shall cause to be paid all previously-accrued but not yet paid fees on receipt of NCPS’s invoice therefor or as otherwise set forth in Exhibit B, Section 9 or Section 10. In addition, Issuer Party shall remove any and all references to NCPS from any Offering Document, cease use of NCPS intellectual property and no longer refer to NCPS in connection with the Offering.

 

 

18.    Dealings. NCPS and any stockholder, director, officer or employee of NCPS may buy, sell and deal in any of the securities of Issuer Party and become pecuniarily interested in any transaction in which Issuer Party may be interested, and contract and lend money to Issuer and otherwise act as fully and freely as though it were not the facilitator of escrow under this Agreement. Nothing herein shall preclude NCPS from acting in any other capacity for Issuer Party or any other entity.

 

19.    Compliance with Law; Further Assurances. The Parties expressly agree that, to the extent that the existing law relating to this Agreement changes, and such change affects this Agreement, they will reform the affected portion of this Agreement to comply with the change. Each Party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes of this Agreement.

 

20.    Choice of Law, Jurisdiction and Dispute Resolution.

 

(a)    This Agreement shall be governed by and construed under the laws of the State of Delaware, without giving effect to its choice of law, conflict of laws or “borrowing”, statutes, rules, principles and precedent. The Parties irrevocably consent to the exclusive jurisdiction of the state and federal courts located in the State of New York, County of New York.

 

(b)    Each Party acknowledges and agrees that a breach or threatened breach by a Party of any of its obligations under this Agreement may cause any other Party irreparable harm for which monetary damages may not be an adequate remedy and agrees that, in the event of such breach or threatened breach, any other Party will be entitled to seek equitable relief, including a restraining order, an injunction, specific performance and any other relief that may be available from any court, without any requirement to post a bond or other security, or to prove actual damages or that monetary damages are not an adequate remedy. Such remedies and any other remedies set forth in this Agreement are not exclusive and are cumulative in addition to all other remedies that may be available at law, in equity or otherwise.

 

(c)     TO THE FULLEST EXTENT PERMITTED BY LAW, EXCEPT FOR INELIGIBLE LOSSES, THE COLLECTIVE AGGREGATE LIABILITY OF THE NCPS PARTIES UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ITS SUBJECT MATTER, TO ISSUER PARTY, ANY OTHER PARTY OR THIRD PARTY, UNDER ANY LEGAL OR EQUITABLE THEORY, WHETHER ARISING OUT OF TORT (INCLUDING NEGLIGENCE), BREACH OF CONTRACT, STRICT LIABILITY, INDEMNIFICATION, BREACH OF STATUTORY DUTY, BREACH OF WARRANTY, RESTITUTION OR OTHERWISE, WHETHER BROUGHT DIRECTLY OR AS A THIRD PARTY CLAIM, SHALL BE LIMITED TO THE LESSER OF (A) $1,000 OR (B) THE AMOUNT OF FEES PAID BY ISSUER PARTY TO AND RECEIVED BY NCPS DURING THE SIX MONTHS PRECEDING THE DATE OF THE EVENT GIVING RISE TO THE ACCRUAL OF THE ACTION.

 

(d)     EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. To the full extent permitted by law, no legal proceeding shall be joined with any other or decided on a class-action basis.

 

(e)    Subject to Section 20(c), in any Action, by which one Party either seeks to enforce this Agreement or seeks a declaration of any rights or obligations under this Agreement, the non-prevailing Party will pay the prevailing Party’s costs and expenses, including, but not limited to, reasonable attorneys’ fees.

 

(f)    None of the NCPS Parties shall be liable to any Issuer Party or to anyone else for any special, exemplary, indirect, incidental, consequential or punitive damages of any kind or for any costs of procurement of substitution of services or any lost profits, lost business, trading losses, loss of use of data or interruption of business or services arising out of this Agreement, including, without limitation, any breach of this Agreement or any services performed, regardless of the basis of liability.

 

(g)    All rights and remedies of any Party in this Agreement will be in addition to all other rights and remedies available at law or in equity.

 

21.    Notices; Consent to Electronic Communications. All notices, requests, consents, claims, demands, waivers and other communications under this Agreement (“notices”) have binding legal effect only if in writing and addressed to a Party as set forth on the signature page hereto (or to such other address that such Party may designate from time to time in accordance with this Section 21). Notices sent in accordance with this Section 21 will be deemed effectively given: (a) when received, if delivered by hand, with signed confirmation of receipt; (b) when received, if sent by a nationally recognized overnight courier, signature required; (c) on the third day after the date mailed by certified or registered mail, return receipt requested, postage prepaid; or (d) upon receipt by recipient’s email system, if sent by email.

 

 

22.    Severability. If any provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or invalidate or render unenforceable such provision in any other jurisdiction. Upon such determination that any provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.

 

23.    Relationship of the Parties. Nothing contained in this Agreement shall be construed as creating any agency, partnership, joint venture or other form of joint enterprise, employment or fiduciary relationship between the Parties, and no Party shall have authority to contract for or bind any other Party in any manner whatsoever.

 

24.    No Third Party Beneficiaries. Except as otherwise set forth in Section 9, this Agreement is for the sole benefit of the Parties and, subject to Section 14, their respective successors and assigns. Nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. NCPS Parties shall be third party beneficiaries as set forth in Section 9.

 

25.    Interpretation; Headings and References. The Parties intend this Agreement to be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting an instrument or causing any instrument to be drafted. Further, the headings used in this Agreement and the references throughout to the policies and documents constituting this Agreement are for convenience only and are not intended to be used as an aid to interpretation. All such references are subject to the full text of such policies and documents.

 

26.    Gender; Number. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context indicates is appropriate. If one or more persons or entities constitute “Issuer Party”, as defined in the introductory paragraph, references to “Issuer Party” in this Agreement shall include references to each Issuer Party individually, together and collectively, jointly and severally.

 

27.    Intellectual Property; Confidential Information. All trademarks, service marks, patents, copyrights, trade secrets, confidential information, and other proprietary rights of each Party shall remain the exclusive property of such Party, whether or not specifically recognized or perfected under Law. No Party shall use, disclose or retain confidential information (including personally identifiable information or other account information) of any other Party or any third parties that such Party or its affiliates or their employees, directors, officers, consultants, independent contractors, advisors and auditors may receive or otherwise have access to in connection with the transactions contemplated by this Agreement except as contemplated by this Agreement or the performance hereof. Each Party may retain copies of and disclose any data or information collected from or on behalf of any other Party as required in connection with legal, financial or regulatory filings, audits, discussions or examinations or as required by Law.

 

28.    Counterparts. This Agreement may be executed in counterparts, each of which is deemed an original, but all of which together are deemed to be one and the same agreement. Upon execution and delivery of a counterpart to this Agreement by the Parties, each Party shall be bound by this Agreement. A signed copy of this Agreement by facsimile, email or other means of electronic transmission or signature is deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

29.    Anti-Money Laundering.

 

(a)    Issuer Party acknowledges that NCPS is subject to U.S. federal Law, including the CIP requirements under the USA PATRIOT Act and its implementing regulations, pursuant to which NCPS must obtain, verify and record information that allows NCPS to identify customers of NCPS opening accounts. Accordingly, NCPS will ask Issuer Party to provide, and Issuer Party shall provide upon NCPS’s request, certain information, including, but not limited to, name, physical address, tax identification number, organizational documents, certificates of good standing, financial statements, licenses to do business and other information that will help NCPS to identify and verify a person’s identity.

 

 

(b)    The Parties agree to comply with all applicable anti-money laundering Law and government guidance, including the reporting, recordkeeping and compliance requirements of the Bank Secrecy Act, as amended by the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2002, Title III of the USA PATRIOT Act, its implementing regulations, and related SEC, state regulatory organizations and FINRA rules. Each Party shall comply with all other anti-money laundering Law outside of the U.S. applicable to such Party or such Party’s activities under this Agreement. NCPS is entitled to rely on Issuer Party’s CIP, anti-money laundering program and OFAC Sanctions Compliance Program, and upon NCPS’s request, Issuer Party shall provide customary certifications with respect thereto.

 

30.    Privacy.

 

(a)    Each Party agrees any non-public personal information (as defined in Regulation S-P of the SEC) disclosed to it in connection with this Agreement is being disclosed for the specific purpose of permitting such Party to perform such Party’s obligations and the services set forth in this Agreement. Each Party agrees that, with respect to such information, it will comply with all applicable U.S. privacy Law (including, without limitation, as applicable to the Party, Regulation S-P of the SEC and the Gramm-Leach-Bliley Act (15 U.S.C § 6081 et seq.)) and it will not disclose any non-public personal information received in connection with this Agreement to any other party (except to the other Party), except to the extent required to carry out this Agreement or as otherwise permitted or required by Law. Each Party shall comply with all other privacy Law outside of the U.S. applicable to such Party or such Party’s activities in connection with this Agreement.

 

(b)    In relation to each Party’s performance of this Agreement, each Party shall, as applicable to such Party: (a) comply with all applicable requirements of Data Privacy Law (as defined below), when collecting, using, retaining or disclosing personal information; (b) limit personal information collection, use, retention and disclosure to activities reasonably necessary and proportionate to the performance of this Agreement or other compatible operational purpose; (c) only collect, use, retain or disclose personal information collected in connection with this Agreement; (d) not collect, use, retain, disclose, sell or otherwise make personal information available for such Party’s own commercial purposes or in a way that does not comply with Data Privacy Law; (e) promptly comply with another Party’s request or instruction requiring such Party to provide, amend, transfer or delete the personal information, or to stop, mitigate, or remedy any unauthorized processing; (f) reasonably cooperate and assist another Party in meeting any compliance obligations and responding to related inquiries, including responding to verifiable consumer requests, taking into account the nature of such Party’s processing and the information available to such Party; and (g) notify each other Party immediately if it receives any complaint, notice or communication that directly or indirectly relates to any Party’s compliance in connection with this Agreement. For purposes of this Agreement, “Data Privacy Law” means applicable local, state, national and international laws, rules, regulations and orders of any governmental, judicial, regulatory or enforcement authority or self-regulatory organization regarding consumer data privacy rights.

 

31.    Citations. Any reference to Law are current citations. Any changes in the citations (whether or not there are any changes in the text of such Law) shall be automatically incorporated into this Agreement.

 

[Signatures appear on following page(s).]

 

 

 

In witness whereof, the Parties have duly executed this Agreement effective as of the Effective Date.

 

Effective Date: 10/7/2023                                    

 

Offering Name: Vado Corp                           

 

Minimum Offering: $0.00                           

 

Total Offering Amount: $8,000,000.00                  

 

Offering Exemption:      ☐  Rule 506(b) of Regulation D   ☐  Rule 506(c) of Regulation D     ☒  Regulation A

                                      ☐  Regulation Crowdfunding

 

ISSUER (If a Series LLC, include both the Series and the Series LLC):                           

 

Entity Name: Vado Corp                                                                                                                              Entity Name:                                             

 

Jurisdiction: Nevada                                                                                                                                     Jurisdiction:                                             

 

By: /s/ Jason Wulfsohn                                                                                                                                 By:                                                      

(Signature)                                                                                                                                                                    (Signature)

 

Name: Jason Wulfsohn                                                                                                                                 Name:                                                      

 

Title: CEO                                                                                                                                                    Title:                                                      

 

Date: 10/7/2023                                                                                                                                            Date:                                                      

 

Email:                                                                                                                                                           Email:                                                      

 

With a copy to:                                                                                                                                             With a copy to:                                              

 

Address:          13468 Beach Ave.                                                                                                                 Address:                                              

                     Marina Del Rey, CA 90292                                                                                                                                                              

 

MANAGER:                                                                                                                                               NCPS:

 

Entity Name: Dalmore Group, LLC                                                                                                             North Capital Private Securities Corporation

 

Jurisdiction: New York                                                                                                                                 Jurisdiction:         Delaware                           

 

By: /s/ Etan Butler                                                                                                                                        By: /s/ Linsey Harkness                                    

            (Signature)                                                                                                                                                          (Signature)                           

Name:         Etan Butler                                                                                                                                Name:         Linsey Harkness                           

 

Title: Chairman                                                                                                                                            Title: Managing Director                            

 

Date:         8/28/2023                                                                                                                                    Date:         8/25/2023                                    

 

Email:                                                                                                                                                           Email:                                                                       

 

Address:                                                                                                                                                        With a copy to:                                                    

            ___________________________                                                                                                                           __________________________

 

                                                                                                                                                        Address: _______________________________

                                                                                                                                                                    _______________________________

 

 

EXHIBIT A

 

CONTINGENT OFFERING

 

If the Offering is a contingent offering as this term is referenced under Rule 15c2-4 of the Exchange Act (“Rule”), the distribution is being made with the express understanding that Escrow Funds are not to be released to Issuer until some further event or contingency occurs, as described in this Exhibit A, in accordance with the Rule.

 

Investor funds will be promptly deposited in a separate bank escrow account, with NCPS serving as agent for the persons who have the beneficial interests therein, until the appropriate event or contingency has occurred.

 

Upon certification that all contingencies have been met, the Escrow Funds will be promptly distributed to Issuer. If the contingencies fail to be satisfied as required by the Offering, the Escrow Funds will be returned to the persons or entities entitled thereto.

 

The following contingencies apply to the Offering (please check all that apply):

 

☐

None.

 

☐

Issuer KYC, AML, and Bad Actor Check screening are complete for Issuer and all Control Persons of Issuer.

 

☐

Certain listed events will have occurred prior to closing (please specify):

 

Subscriptions for at least the Minimum Offering of $                                  (amount) to be received by (date), as such amount and date may be amended as provided in the Offering Document.

 

☐

Other contingencies (please describe):

__________________________________________________________

__________________________________________________________

__________________________________________________________

 

 

EXHIBIT B

 

FEES AND EXPENSES

 

Escrow Administration Fee:*	$575 set-up and administration for 12 months (or partial period);
	$250 for each additional 12 months (or partial period)
Issuer Routable Account Number:	$150 per month
Out-of-Pocket Expenses:**	Billed at cost
Check Handling:	$10.00 per check (incoming/outgoing)
Transactional Costs:***	$100.00 for each additional escrow break
	$150.00 for each escrow amendment
	$100.00 for reprocessing a closing
Wire Handling:	$25.00 per domestic wire (incoming/outgoing)
	$45.00 per international wire (incoming/outgoing)
ACH Disbursements:	0.15% on the amount transferred
ACH Dispute/Chargeback:	$50.00 per reversal/chargeback
ACH Failure Return Fee:	$1.50 per failure/return
Plaid Bank Verification Fee:****	$1.80 per linked account
Credit Card Transaction Fees Percentage Rate:****	3.15% on the amount transferred
Credit Card Transaction Fees Base Rate:****	$0.70 per each transaction
Credit Card Dispute/Chargeback Fee:****	$50.00 per reversal/chargeback
Bad Actor Checks:*****	$100.00 per covered person

 

Issuer Party shall pay NCPS the Escrow Administration Fee upon execution of this Agreement. In the event the escrow is not funded, the Fee and all related expenses, including attorneys’ fees, remain due and payable, and once paid, will not be refunded. Annual fees cover a full year in advance, or any part thereof, and thus are not pro-rated in the year of termination.

 

Issuer Party shall pay all fees and expenses (including, without limitation, payment for or reimbursement of any uncollectible Cash Investment Instruments or chargebacks, reversals or other amounts) immediately upon NCPS’s demand, or at NCPS’s option, NCPS may deduct such fees from any disbursement of Escrow Funds from the Escrow Account as provided in Section 10(d).

 

The fees quoted in this schedule apply to services ordinarily rendered in the administration of an Escrow Account and are subject to reasonable adjustment based on final review of documents, or when NCPS is called upon to undertake unusual duties or responsibilities, or as changes in law, procedures, or the cost of doing business demand. Services in addition to and not contemplated in this Agreement, including, but not limited to, document amendments and revisions, non-standard cash and/or investment transactions, calculations, notices and reports and legal fees, will be billed as extraordinary expenses and capped at $15,000 (except as provided by Section 9).

 

Extraordinary fees are payable to NCPS for duties or responsibilities not expected to be incurred at the outset of the transaction, not routine or customary, and not incurred in the ordinary course of business. Payment of extraordinary fees is appropriate where particular inquiries, events or developments are unexpected, even if the possibility of such things could have been identified at the inception of the transaction.

 

Unless otherwise indicated, the above fees relate to the establishment of one escrow account. Additional sub-accounts governed by the same Escrow Agreement may incur an additional charge. Transaction costs include charges for wire transfers, ACHs, checks, internal transfers and securities transactions.

 

NCPS may increase the amounts set forth in this Exhibit B by providing written notice to Issuer Party such increase to be effective as of such notice, and the fees will be deemed amended accordingly without further notice or consent; provided that Issuer Party may terminate this Agreement pursuant to Section 17.

 

NCPS may submit any payment information provided to it by an Issuer Party in connection with this Agreement against any fees due from such Issuer Party. Each Issuer Party consents to NCPS retaining and using such payment information for future invoices and as provided in this Agreement. All payments shall be in US dollars in immediately available funds.

 

*Escrow Administration Fee includes KYC and AML due diligence for up to three entities for a single escrow account. If the escrow account under review has more than two control entities associated with the issuing entity, a $25 fee will be assessed for each additional entity review.

 

**Out-Of-Pocket Expenses include any custom features or additional work that the North Capital team may need to perform. These fees are uncommon and will be disclosed in such cases prior to invoicing.

 

***Reprocessing fees apply if a closing is submitted but not ready to be processed (including, but not limited to, Flow of Funds not complete or funds not settled in escrow).

 

****If applicable to the Offering and subject to the terms and conditions for NCPS’s payment processing facilitation services.

 

*****Covered persons include, but are not limited to, the issuer, directors, general partners, managing members, executive officers, 20% beneficial owners, and promoters connected to the issuer. A complete list of covered persons can be found  at https://www.sec.gov/info/smallbus/secg/bad-actor-small-entity-compliance-guide#part2. 

 

******The fees payable under this Agreement, plus the other relevant fees, attributable to any public offering (including any interest thereon), shall be capped at an aggregate amount not to exceed as permitted by applicable FINRA rules.

 

ALL FEES AND EXPENSES PAID TO NCPS ARE NON-REFUNDABLE ABSENT ERROR OR MISTAKE.

 

Exhibit 11.2

 

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation in this Offering Statement on Form 1-A of our report dated April 5, 2023 of Socialcom, Inc. relating to our audit of the financial statements, as of December 31, 2022 and 2021, and for the periods then ended, and the reference to our firm under the caption “Experts” in the Offering Statement.

 

 

/s/ M&K CPAS, PLLC

www.mkacpas.com

Houston, Texas

 

November 16, 2023

 

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