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253G2 1 form253g2.htm

 

Filed Pursuant to Rule 253(g)(2)

File No. 024-12419

 

OFFERING CIRCULAR

DATED JULY 25, 2024

 

Mode Mobile, Inc.

 

One East Erie Street, Suite 525

Chicago, IL 60611

 

Up to

300,000,000 shares of Class AAA Common Stock(1)

Including up to 150,000,000 Bonus Shares(7) and 30,000,000 shares to be sold by
selling securityholders(5)

 

We are offering, on a “best efforts” basis, a maximum of 300,000,000 shares of
Class AAA Common Stock, composed of 120,000,000 shares to be offered directly by
us at $0.25 per share for cash consideration of up to $30,000,000, a maximum of
150,000,000 shares to be issued as “Bonus Shares” for no additional cash
consideration to eligible investors in this offering based on certain criteria,
and 30,000,000 shares to be sold by selling stockholders at $0.25 per share for
up to $7,500,000, the proceeds from which will be received directly by the
selling securityholders, and not by us.(5)

 

Each purchaser of Class AAA Common Stock is limited to up to one Bonus Share for
each Class AAA Common Stock purchased for $0.25 per share. See “Plan of
Distribution” for further details.

 

The minimum investment in this offering is $1,000.00, or 4,000 shares of Class
AAA Common Stock.

 

  

Price Per Share to

the Public

  

Underwriting

Discounts and

Commissions, per

share(2)

  

Proceeds to Company

Before

Expenses

  

Proceeds to other

persons (5)

  Per Share of Class AAA Common Stock(4)  $0.25   $0.01250   $0.24250   $0.25 
Investor Fee Per Share(3)  $0.00500                 Per Share Plus Investor Fee 
$0.25500   $0.01250   $0.24000   $0.25  Total Maximum  $37,500,000(6) 
$1,875,000   $28,125,500   $7,500,000 

 

(1) The Company is offering up to 120,000,000 shares of Class AAA Common Stock
directly to investors (the “Cash Shares”) for up to a maximum of $30,000,000,
plus up to 150,000,000 additional shares of Class AAA Common Stock eligible to
be issued as Bonus Shares to eligible investors at no additional charge based
certain criteria. Investors in this 30,000,000 shares of Class AAA Common Stock
are being offered by selling stockholders of the Company for up to $7,500,000,
the proceeds from which will be received directly by the selling
securityholders, and not by our Company. See “Plan of Distribution and Selling
Securityholders” for further details.

 

(2) The Company has engaged DealMaker Securities, LLC, member FINRA/SIPC (the
“Broker” or “Dealmaker Securities”), as broker-dealer of record, to perform
broker-dealer administrative and compliance related functions in connection with
this Offering, but not for underwriting or placement agent services. The Broker
and its affiliates will receive a monthly fee of $5,000 up to a maximum of
$45,000 after the Offering commencement, and a $5,000 accountable expense up to
$15,000 prior to the Offering commencement. Once the Commission has qualified
the Offering Statement and this Offering commences, the Broker will receive a
cash commission equal to five percent (5.0%) of the amount raised in the
Offering. There is also a budgeted fee of $330,000 for media management and
supplementary services on a case-by-case basis, but not to exceed the total. See
“Plan of Distribution and Selling Security Holders” for more details. In the
case of a fully subscribed offering, the maximum amount the Company would pay
DealMaker Securities is $2,302,500 in commissions, expense reimbursements, and
fees. To the extent that the Company’s officers and directors make any
communications in connection with the Offering they intend to conduct such
efforts in accordance with an exemption from registration contained in Rule
3a4-1 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and, therefore, none of them is required to register as a broker-dealer.

 

(3) Investors will be responsible for a transaction fee equal to two percent
(2.0%) of the purchase price for shares of Class AAA Common Stock paid at the
time of investment (the “Investor Fee”). Broker will receive commissions on the
Investor Fee. If fully subscribed, this would represent a maximum commission of
$37,500. See Plan of Distribution and for additional discussion of this Investor
Fee. We note that the Investor Fee will only be based on the purchase price for
shares in this Offering, and therefore will not be affected by any Bonus Shares
investors receive in this Offering.

 

(4) Does not include effective discount that would result from the issuance of
Bonus Shares. For details of the effective discount, see “Plan of Distribution
and Selling Securityholders”     (5) Shares of Class AAA Common Stock will be
sold by selling securityholders of the Company only after the Company has
received aggregate gross proceeds $5,000,000 as a part of this Offering. This
amount represents proceeds that will be received directly by the selling
securityholders listed in this Offering Circular. See “Plan of Distribution and
Selling Securityholders” for more information. Shares will be sold in proportion
with the Cash Shares so that at no point will the selling securityholder shares
be greater than 30% of the value of the Class AAA Common Stock issued in this
Offering.     (6) The total maximum offering proceeds that the Company may
receive in this Offering is $30,000,000. The remainder of this total represents
the maximum offering proceeds that selling securityholders in this Offering may
receive ($7,500,000).     (7) Each purchaser of Class AAA Common Stock is
limited to up to one Bonus Share for each Class AAA Common Stock purchased for
$0.25 per share. Investors will be eligible for Bonus Shares regardless of
whether shares are purchased from the Company or from Selling Stockholders. See
“Plan of Distribution and Selling Securityholders” for further details,
including the eligibility criteria to receive Bonus Shares in this Offering. We
note that purchasing shares of Class AAA Common Stock on this offering is a
requirement to receive Bonus Shares. Even if investors, existing stockholders of
our Company or Mode Mobile users and/or members meet the criteria set forth in
“Plan of Distribution and Selling Stockholders”, such as signing up for
membership, attending webinars, entering sweepstakes, redeeming rewards points,
or making referrals, they will not receive any Bonus Shares unless they purchase
shares of Class AAA Common Stock for cash in this Offering Circular.

 

The Company is selling shares of Class AAA Common Stock.

 

The Offering will terminate at the earlier of the date at which the maximum
offering amount has been sold or the date at which the offering is earlier
terminated by the Company at its sole discretion. At least every 12 months after
this Offering has been qualified by the United States Securities and Exchange
Commission, the Company will file a post-qualification amendment to include the
Company’s recent financial statements. The Offering covers an amount of
securities that we reasonably expect to offer and sell within two years,
although the Offering Statement of which this Offering Circular forms a part may
be used for up to three years and 180 days under certain conditions.

 

This Offering does not have a minimum offering amount. The Company will not
utilize a third-party escrow account for this offering, and all funds tendered
by investors will be held in a segregated account until investor subscriptions
are accepted by the Company and reviewed by DealMaker Securities. Once investor
subscriptions are accepted by the Company and reviewed by DealMaker Securities,
funds will be deposited into an account controlled by the Company.

 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE
MERITS OR GIVE ITS APPROVAL OF 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 COMMISSION; HOWEVER, THE COMMISSION
HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT
FROM REGISTRATION.

 

 

 

 

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.

 

This Offering is inherently risky. See “Risk Factors” on page 6.

 

Sales of these securities will commence on approximately July 25, 2024.

 

The Company is following the “Offering Circular” format of disclosure under
Regulation A.

 

SUMMARY 4     RISK FACTORS 6     DILUTION 11     USE OF PROCEEDS TO ISSUER 16  
  OUR BUSINESS 16     THE COMPANY’S PROPERTY 18     MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18     DIRECTORS,
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES 21     COMPENSATION OF DIRECTORS
AND EXECUTIVE OFFICERS 23     SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITY HOLDERS 24     INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN
TRANSACTIONS 24   SECURITIES BEING OFFERED 25     PLAN OF DISTRIBUTION AND
SELLING SECURITY HOLDERS 35     FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2023 AND 2022 F-1

 



2

 

 



Implications of Being an Emerging Growth Company

 

The  Company is not subject to the ongoing reporting requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) because it is
not registering its securities under the Exchange Act. Rather, it will be
subject to the more limited reporting requirements under Regulation A, including
the obligation to electronically file:

 

  ● annual reports (including disclosure relating to the company’s business
operations for the preceding three fiscal years, or, if in existence for less
than three years, since inception, related party transactions, beneficial
ownership of the issuer’s securities, executive officers and directors and
certain executive compensation information, management’s discussion and analysis
(“MD&A”) of the issuer’s liquidity, capital resources, and results of
operations, and two years of audited financial statements),

 

  ● semi-annual reports (including disclosure primarily relating to the issuer’s
interim financial statements and MD&A) and

 

  ● current reports for certain material events.

 

In addition, at any time after completing reporting for the fiscal year in which
this offering statement was qualified, if the securities of each class to which
this offering statement relates are held of record by fewer than 300 persons and
offers or sales are not ongoing, the company may immediately suspend the
Company’s ongoing reporting obligations under Regulation A.

 

If and when the Company becomes subject to the ongoing reporting requirements of
the Exchange Act, as an issuer with less than $1.07 billion in total annual
gross revenues during its last fiscal year, it will qualify as an “emerging
growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”) and this status will be significant. An emerging growth company may take
advantage of certain reduced reporting requirements and is relieved of certain
other significant requirements that are otherwise generally applicable to public
companies. In particular, as an emerging growth company it:

 

  ● will not be required to obtain an auditor attestation on its internal
controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

 

  ● will not be required to provide a detailed narrative disclosure discussing
its compensation principles, objectives and elements and analyzing how those
elements fit with its principles and objectives (commonly referred to as
“compensation discussion and analysis”);

 

  ● will not be required to obtain a non-binding advisory vote from its
shareholders on executive compensation or golden parachute arrangements
(commonly referred to as the “say-on-pay,” “say-on-frequency” and
“say-on-golden-parachute” votes);

 

  ● will be exempt from certain executive compensation disclosure provisions
requiring a pay-for-performance graph and CEO pay ratio disclosure;

 

  ● may present only two years of audited financial statements and only two
years of related Management’s Discussion and Analysis of Financial Condition and
Results of Operations, or MD&A; and

 

  ● will be eligible to claim longer phase-in periods for the adoption of new or
revised financial accounting standards.

 

The Company intends to take advantage of all of these reduced reporting
requirements and exemptions, including the longer phase-in periods for the
adoption of new or revised financial accounting standards under Section 107 of
the JOBS Act. The company’s election to use the phase-in periods may make it
difficult to compare its financial statements to those of non-emerging growth
companies and other emerging growth companies that have opted out of the
phase-in periods under Section 107 of the JOBS Act.

 

Under the JOBS Act, the company may take advantage of the above-described
reduced reporting requirements and exemptions for up to five years after the
company’s initial sale of common equity pursuant to a registration statement
declared effective under the Securities Act of 1933, as amended, or such earlier
time should it no longer meet the definition of an emerging growth company. Note
that this offering, while a public offering, is not a sale of common equity
pursuant to a registration statement, since the offering is conducted pursuant
to an exemption from the registration requirements. In this regard, the JOBS Act
provides that the Company would cease to be an “emerging growth company” if the
Company has more than $1.07 billion in annual revenues, has more than $700
million in market value of its common stock held by non-affiliates, or issues
more than $1 billion in principal amount of non-convertible debt over a
three-year period.

 

Certain of these reduced reporting requirements and exemptions are also
available to the Company due to the fact that it may also qualify, once listed,
as a “smaller reporting company” under the Commission’s rules. For instance,
smaller reporting companies are not required to obtain an auditor attestation on
their assessment of internal control over financial reporting; are not required
to provide a compensation discussion and analysis; are not required to provide a
pay-for-performance graph or CEO pay ratio disclosure; and may present only two
years of audited financial statements and related MD&A disclosure.

 

3

 

 

SUMMARY

 

The following summary of certain information contained in this Offering Circular
is not intended to be complete in itself. The summary does not provide all the
information necessary for you to make an investment decision. You are encouraged
to review the more detailed information in the remainder of the Offering
Circular.

 

As used in this Offering Circular, unless the context otherwise requires, the
terms “Company”, “Mode”, “we”, “our” and “us” refer to Mode Mobile, Inc. and
Current (Gibraltar) Limited on a consolidated basis, unless the context
indicates otherwise.

 

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION
RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY,
AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF,
ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S
MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,”
“PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD
LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH
RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD
CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN
THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON
WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR
UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER
SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

 

Mode Mobile Company Overview

 

Mode Mobile, Inc. was founded in 2015 as a Limited Liability Company with a
mission to provide people around the world with income and saving opportunities
through their everyday mobile activities. Mode Mobile was previously known as
Nativ Mobile, Inc. before it changed its name to Mode Mobile, Inc. in 2022.
Prior to that, the Company was originally founded as Nativ Mobile, LLC before a
name change and conversion a Delaware corporation in 2021. The Company aims to
unlock the full potential of the world’s most accessible income-generating
asset, the smartphone, currently sitting untapped in the pockets of over 7
billion global consumers. These consumers spend 4 trillion hours per year on
their smartphones and we believe this presents a massive opportunity to turn
people’s phones into income streams, just like Uber and Airbnb did with cars and
homes. At Mode, we enable customers to earn and save money directly from the
things they already do – like playing games, listening to music, watching
videos, and even charging and unlocking their phones.

 

4

 

 

Selected Risks Associated With The Business

 

Our business is subject to a number of risks and uncertainties, including those
highlighted in the section titled “Risk Factors” immediately following this
summary. These risks include, but are not limited to, the following:

 

  ● We have a limited operating history upon which to evaluate our performance
and have not yet generated profits or net income.

 

  ● We are constantly updating and advancing our technology and there is no
guarantee that we will be able to find a product-market fit that will allow us
to see consistent profits.

 

  ●

We conducted a token offering, through our Gibraltar-based subsidiary, which may
open us up to future regulatory action or litigation.

 

  ● We will be required to raise additional capital in order to continue to
develop our technology and commercial ready versions of our product.

 

  ● We rely on a small management team to execute our business plan.

 

  ● We may need to raise additional capital, which might not be available or
might be available only on terms unfavorable to us or our investors.

 

  ● There is no current market for any shares of the Company’s stock.

 

  ● The auditor included a “going concern” note in its audit report.

 

Offering Terms

 

Securities Offered by the Company Maximum of 120,000,000 of Class AAA Common
Stock at $0.25 per share for up to $30,000,000, plus up to 150,000,000
additional shares of Class AAA Common Stock eligible to be issued as Bonus
Shares for no additional consideration. See “Plan of Distribution and Selling
Securityholders” for more information on the eligibility criteria to receive
Bonus Shares, which will only be offered to investors in this Offering.    
Securities Offered by Selling Securityholders Maximum of 30,000,000 of Class AAA
Common Stock at $0.25 per share for up to $7,500,000 to be received by the
selling securityholders. Minimum Investment The minimum investment in this
offering is $1,000.00 or 4,000 shares of Class AAA Common Stock. Securities
outstanding before the Offering (as of May 28, 2024):   Class AAA Common Stock
79,685,903 Class A Common Stock 646,825,014 Class B Common Stock (1) 237,578,169
Class C Common Stock 10,993,629 Series Seed Preferred Stock 353,712,906    
Securities outstanding after the Offering (assuming the maximum number of shares
of Class AAA Common Stock are sold in this offering).(2)   Class AAA Common
Stock 349,685,903 Class A Common Stock 646,825,014 Class B Common Stock(1)
237,578,169 Class C Common Stock 10,993,629 Series Seed Preferred Stock
353,712,906     Use of Proceeds The proceeds of this Offering will be used for
product development, payroll, marketing, and general overhead. See the “Use of
Proceeds” section of this Offering Circular for further details.

 

(1) Includes up to 221,542,649 shares issuable upon the exercise of options for
Class B Common Stock

(2) Assumes all 120,000,000 of Class AAA Common Stock offered for cash by the
Company are sold, plus to the maximum of 150,000,000 Bonus Shares are issued in
this Offering. Additionally, assumes all 30,000,000 shares of Class AAA Common
Stock are sold by selling stockholders in this Offering. These shares of Class
AAA Common Stock would be newly issued as a result of conversion by the
following holders: 19,478,247 shares of Class A Common Stock, 8,635,079 shares
of Series Seed Preferred Stock, and options exercisable for 1,886,674 shares of
Class B Common Stock. This would therefore have the effect of reducing the
number of issued and outstanding Class A Common Stock, Series Seed Preferred
Stock, and Class B Common Stock by those amounts.

 

5

 

 

The SEC requires that we identify risks that are specific to our business and
financial condition. We are still subject to all the same risks that all
companies in our business, and all companies in the economy, are exposed to.
These include risks relating to economic downturns, political and economic
events and technological developments (such as hacking and the ability to
prevent hacking). Additionally, early-stage companies are inherently more risky
than more developed companies. You should consider general risks as well as
specific risks when deciding whether to invest.

 

RISK FACTORS

 

Risks Related to Our Company

 

We have a limited operating history upon which to evaluate our performance and
have generated minimal profits and net income.

 

While we were first organized in 2015, we still have a limited operating history
and have yet to consistently generate operating profits or net income. We have
been generating revenue since 2020, but we also continue to iterate on our
products and technology and as such, cannot guarantee that our prior operating
history will be indicative of our future operating results, or future products
will be able to consistently generate revenue and operating profits.

 



Our audited consolidated financial statements for the fiscal years ended
December 31, 2023 and 2022 have been prepared on a going concern basis. 

 

The Company has suffered recurring losses from operations and, as of December
31, 2023, had a net capital deficiency that raises substantial doubt about its
ability to continue as a going concern. The Company’s ability to continue as a
going concern in the next twelve months following the date of the consolidated
financial statements is dependent upon its ability to produce revenues and/or
obtain financing sufficient to meet current and future obligations and deploy
such to produce profitable operating results.

 

If the Company cannot raise sufficient funds, it will not succeed.

 

The Company may receive up to a maximum of $30,000,000 from the sale of Class
AAA Common Stock in this Offering, with additional proceeds going to selling
securityholders. Even if the maximum amount is raised, the Company is likely to
need additional funds in the future in order to grow, and if it cannot raise
those funds for whatever reason, including reasons relating to the Company
itself or to the broader economy, it may not survive. If the Company manages to
raise only the minimum amount of funds sought, it will have to find other
sources of funding for some of the plans outlined in “Use of Proceeds.”

 

Any valuation at this stage is difficult to assess.

 

The valuation for the Offering was established by the Company. Unlike listed
companies that are valued publicly through market-driven stock prices, the
valuation of private companies, especially startups, is difficult to assess and
you may risk overpaying for your investment.

 

Our subsidiary conducted a token offering which may open us up to future
regulatory action or litigation.

 

In 2018, our Gibraltar-based subsidiary, Current (Gibraltar) Limited, conducted
and completed a security token offering where we offered $CRNC tokens to
investors in consideration for their investments, the proceeds of which are to
be used to build out a rewards earning system. The token offering was conducted
pursuant to the registration exemption under Rule 506(b) of Regulation D. There
is a chance that the rewards earning system may never be completed, and as a
result, the holders of the $CRNC token may pursue litigation against us, and may
seek damages to recoup the amount invested in the Company in this offering.
Additionally, if the SEC or other regulatory bodies determine that the token
offering constituted the sale of securities without compliance with applicable
exemptions, the Company may face regulatory enforcement actions, fines, and
legal proceedings. Such actions could result in significant financial and
reputational harm, as well as diversion of management resources to address
regulatory compliance matters. Investors should be aware that regulatory
scrutiny and legal challenges in the cryptocurrency space are ongoing, and
adverse regulatory outcomes could materially and adversely affect the Company’s
operations and financial condition. The Company may also be required to
undertake remedial measures, cease certain activities, or restructure its
operations to comply with securities laws, which could further impact its
business and financial performance.

 

The Company depends on key personnel and faces challenges recruiting needed
personnel.

 

The Company’s future success depends on the efforts of a small number of key
personnel. These key personnel include our Chief Executive Officer, Dan Novaes,
and our Chief Technology Officer, Kiran Panesar. In addition, due to its limited
financial resources and the specialized expertise required across marketing,
business development, and product development, it may not be able to recruit the
individuals needed for its business needs. There can be no assurance that the
Company will be successful in attracting and retaining the personnel the Company
requires to operate and be innovative.

 

6

 

 

Competitors may be able to call on more resources than the Company.

 

While the Company believes that its platform and product are unique, it is not
the only way that its customers and user base can earn supplemental income.
Additionally, competitors may replicate our business ideas and produce directly
competing products. These competitors may be better capitalized than us, which
would give them a significant advantage.

 

Our new products and services could fail to achieve the market acceptance.

 

Our future success is partially based on an assumption that our new products
will be able to gain traction in the marketplace. It is possible that these new
products will fail to gain market acceptance for any number of reasons. If our
products fail to achieve significant traction and acceptance in the marketplace,
this could materially and adversely impact the value of your investment.

 

Expansion of our platform to a larger number of users will pose challenges.

 

As the number of customers using our platform grows, we will face challenges
associated with managing our growth. For example, we may need to license rights
from content developers. There is no guarantee that we will be able to license
such rights at prices that are advantageous to the Company.

 

The Company is vulnerable to hackers and cyber-attacks.

 

As an internet-based business, we may be vulnerable to hackers who may access
the data of the users of our platform. Further, any significant disruption in
service on Mode Mobile or in its computer systems could reduce the
attractiveness of the platform and result in a loss of investors and users
interested in using our platform. Further, we rely on a third-party technology
provider to provide some of our back-up technology. Any disruptions of services
or cyber-attacks either on our technology provider or on Mode Mobile could harm
our reputation and materially negatively impact our financial condition and
business.

 

Any breach of our users’ data could impose liability upon the Company.

 

If we or third parties with which we do business were to fall victim to
successful cyber-attacks or experience other cybersecurity incidents, including
the loss of individually identifiable customer or other sensitive data, we may
incur substantial costs and suffer other negative consequences, which may
include liability for harms caused to our users from such a breach, or increased
cybersecurity and other insurance premiums.



 

Risks Related to the Securities in this Offering

 

There is no current market for any shares of the Company’s stock.

 

There is no formal marketplace for the resale of the Company’s Class AAA Common
Stock being sold in this Offering. Investors should assume that they may not be
able to liquidate their investment for some time or be able to pledge their
shares as collateral. The Company currently has no plans to list any of its
shares on any OTC or similar exchange. It is also unlikely that the Company will
ever go public or get acquired by a bigger company. That means the money you
paid for these securities could be tied up for a long time.

 

We have not set a minimum offering amount for this Offering.

 

We have not set a minimum offering amount for this Offering and funds received
will not be deposited into a third-party escrow account prior to their release
to the Company. This means that we will accept and have access to funds as they
are received, but we may never raise enough to execute the business plan or even
cover the costs of the Offering.

 

Our Company is controlled by few shareholders.

 

A substantial majority of the Company’s outstanding voting securities are held
by one shareholder, who can therefore exert significant control over the
Company. There are no guarantees that the position of this shareholder will
always coincide with the opinion and interests of the other shareholders of the
Company.

 

Investors in this Offering are purchasing Securities with No Voting Rights.

 

The Class AAA Common Stock that we are offering to investors in this offering
has no voting rights. This means that you will have no rights in dictating on
how the Company will be run. You are trusting in management discretion in making
good business decisions that will grow your investment.

 

7

 

 

The Company has issued and outstanding shares of preferred stock with rights
superior to those of the Class AAA Common Stock being offered in this Offering,
including a liquidation preference.

 

The Company has Series Seed Preferred Stock issued and outstanding that entitles
its holders to a liquidation preference in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company or certain
other events (such as, but not limited to, a merger, reorganization or
consolidation). In such an event, the holders of shares of Series Seed Preferred
Stock then outstanding will be entitled to be paid out of the assets of the
Company available for distribution to its stockholders before any payment will
be made to the holders of any classes of the Company’s Common Stock by reason of
their ownership thereof, an amount per share equal to the greater of (i) the
Series Seed Original Issue Price (which is currently is $0.01345679), plus any
dividends declared but unpaid thereon, or (ii) such amount per share as would
have been payable had all shares of Series Seed Preferred Stock been converted
into Common Stock immediately prior to such event. As such, it is possible that,
in such a liquidation event, investors in this Offering would not receive any
distributions of cash or other assets from the Company. See “Securities Being
Offered” for more information on the liquidation preference.

 

Our potential issuance of Bonus Shares may result in a discounted offering price
being paid by certain investors in this Offering.

 

Certain investors may be entitled to Bonus Shares in this Offering, which
results in an effective discount on any shares purchased. These shares will
immediately dilute the value of your shares. Therefore, the value of shares of
investors who pay the full price in this Offering will be diluted by investments
made by investors entitled to these shares, who will effectively pay less per
share. Investors may also suffer immediate dilution if they qualify for a lesser
amount of Bonus Shares than other investors, who will effectively pay less per
share.

 

There is fixed number of Bonus Shares, and therefore certain investors may not
receive Bonus Shares even if they meet the criteria to receive Bonus Shares.

 

We have authorized up to 150,000,000 shares of Class AAA Common Stock to be
issued as Bonus Shares to investors in this Offering. The Company will not issue
more Bonus Shares than this amount. It is possible that, prior to the Company
raising the maximum offering amount in this offering of $37,500,000, it will
have issued all 150,000,000 Bonus Shares. If that occurs, investors in this
offering that meet the eligibility requirements to receive Bonus Shares will not
receive them.

 

There is no guarantee of return on investment.

 

There is no assurance that a purchaser will realize a return on its investment
or that it will not lose its entire investment. For this reason, you should not
invest in this Offering if you are unable to withstand losing your entire
investment. Each purchaser should read this Offering Circular and all exhibits
carefully and should consult with its own attorney and business advisor prior to
making any investment decision.

 

The Company’s management has discretion as to use of proceeds.

 

The proceeds from this Offering will be used for the purposes described under
“Use of Proceeds.” The Company reserves the right to use the funds obtained from
this Offering for other similar purposes not presently contemplated which it
deems to be in the best interests of the Company and its investors in order to
address changed circumstances or opportunities. As a result of the foregoing,
the success of the Company will be substantially dependent upon the discretion
and judgment of management with respect to application and allocation of the net
proceeds of this Offering. Investors for the Class AAA Common Stock hereby will
be entrusting their funds to the Company’s management, upon whose judgment and
discretion the investors must depend.

 

The Company’s future fundraising may affect the rights of investors.

 

In order to expand, the Company is likely to raise funds again in the future,
either by offerings of securities or through borrowing from banks or other
sources. The terms of future capital raising, such as loan agreements, may
include covenants that give creditors greater rights over the financial
resources of the Company.

 

Our valuation and the offering price of our Class AAA Common Stock have been
established internally and are difficult to assess.

 

The Company has set the price of its Class AAA Common Stock at $0.25 per share,
plus a 2% Investor Transaction Fee, see “Securities Being Offered” for further
details on this fee. Valuations for companies at this stage are generally purely
speculative. Our valuation has not been validated by any independent third party
and may decrease precipitously in the future. It is a question of whether you,
the investor, are willing to pay this price for a percentage ownership of a
start-up company. The issuance of additional shares of Common Stock, or
additional option grants may dilute the value of your holdings. You should not
invest if you disagree with this valuation. See “Dilution” for more information.

 



The Investor Transaction Fee may not count toward your cost basis for tax
purposes.

 

The IRS and/or another relevant tax authority may consider the price of the
share before including the Investor Transaction Fee as the cost basis for
determining any gain or loss at a realization event. You should discuss with
your tax advisor the appropriate way to determine the relevant tax obligation.

 



8

 



 

The Company may fundraise at a price per share lower than offered to investors
in this Offering.

 

The Company may seek to raise additional capital in other offerings of its
equity securities (including, but not limited to, offerings under Rule 506(c) of
Regulation D). In any such offerings, the Company may offer shares of its Class
AAA Common Stock at a price per share lower than what is available to investors
in this Offering, and could also result in additional dilution to investors in
this Offering.

 

The subscription agreement has a forum selection provision that requires
disputes be resolved in state or federal courts in the State of Delaware,
regardless of convenience or cost to you, the investor.

 

In order to invest in this Offering, investors agree to resolve disputes arising
under the subscription agreement in state or federal courts located in the State
of Delaware, for the purpose of any suit, action or other proceeding arising out
of or based upon the agreement. Section 22 of the Securities Act creates
concurrent jurisdiction for federal and state courts over all suits brought to
enforce any duty or liability created by the Securities Act or the rules and
regulations thereunder. We believe that the exclusive forum provision applies to
claims arising under the Securities Act, but there is uncertainty as to whether
a court would enforce such a provision in this context. Section 27 of the
Exchange Act creates exclusive federal jurisdiction over all suits brought to
enforce any duty or liability created by the Exchange Act or the rules and
regulations thereunder. As a result, the exclusive forum provision will not
apply to suits brought to enforce any duty or liability created by the Exchange
Act or any other claim for which the federal courts have exclusive jurisdiction.
You will not be deemed to have waived the Company’s compliance with the federal
securities laws and the rules and regulations thereunder. This forum selection
provision may limit your ability to obtain a favorable judicial forum for
disputes with us. Alternatively, if a court were to find the provision
inapplicable to, or unenforceable in an action, we may incur additional costs
associated with resolving such matters in other jurisdictions, which could
adversely affect our business, financial condition or results of operations.

 

Our Amended and Restated Certificate of Incorporation includes a forum selection
clause, which could limit our stockholders’ ability to obtain a favorable
judicial forum for disputes with us or our directors, officers, employees or
agents.

 

Our Amended and Restated Certificate of Incorporation requires that, unless we
consent in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware will be the sole and exclusive forum for (i)
any derivative action or proceeding brought on our behalf, (ii) any action
asserting a claim for breach of a fiduciary duty owed by any of our directors,
officers, employees or agents to us or our stockholders, (iii) any action
asserting a claim arising pursuant to any provision of the Delaware General
Company Law, our Amended and Restated Certificate of Incorporation, as amended
or (iv) any action asserting a claim governed by the internal affairs doctrine,
in each case subject to said Court of Chancery having personal jurisdiction over
the indispensable parties named as defendants therein.

 

Our Amended and Restated Certificate of Incorporation provides that this
exclusive forum provision will not apply to claims arising under the Securities
Act. Further, this provision will not apply to claims arising under the Exchange
Act, as Section 27 of the Exchange Act creates exclusive federal jurisdiction
over all suits brought to enforce any duty or liability created by the Exchange
Act or the rules and regulations thereunder. This forum selection provision in
our Bylaws may limit our stockholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers, employees or agents,
which may discourage lawsuits against us and such persons. It is also possible
that, notwithstanding the forum selection clause included in our Amended and
Restated Certificate of Incorporation a court could rule that such a provision
is inapplicable or unenforceable.

 

9

 

 

Investors in this Offering may not be entitled to a jury trial with respect to
claims arising under the subscription agreement, which could result in less
favorable outcomes to the plaintiff(s) in any action under the agreement.

 

Investors in this Offering will be bound by the subscription agreement, which
includes a provision under which investors waive the right to a jury trial of
any claim they may have against the Company arising out of or relating to the
agreement, including any claims made under the federal securities laws. By
signing the agreement, the investor warrants that the investor has reviewed this
waiver with his or her legal counsel, and knowingly and voluntarily waives the
investor’s jury trial rights following consultation with the investor’s legal
counsel.

 

If we opposed a jury trial demand based on the waiver, a court would determine
whether the waiver was enforceable based on the facts and circumstances of that
case in accordance with the applicable state and federal law. To our knowledge,
the enforceability of a contractual pre-dispute jury trial waiver in connection
with claims arising under the federal securities laws has not been finally
adjudicated by a federal court. However, we believe that a contractual
pre-dispute jury trial waiver provision is generally enforceable, including
under the laws of the State of Delaware, which governs the agreement, by a
federal or state court in the State of New York. In determining whether to
enforce a contractual pre-dispute jury trial waiver provision, courts will
generally consider whether the visibility of the jury trial waiver provision
within the agreement is sufficiently prominent such that a party knowingly,
intelligently and voluntarily waived the right to a jury trial. We believe that
this is the case with respect to the subscription agreement. You should consult
legal counsel regarding the jury waiver provision before entering into the
subscription agreement.

 

If you bring a claim against the Company in connection with matters arising
under the agreement, including claims under the federal securities laws, you may
not be entitled to a jury trial with respect to those claims, which may have the
effect of limiting and discouraging lawsuits against the Company. If a lawsuit
is brought against the Company under the agreement, it may be heard only by a
judge or justice of the applicable trial court, which would be conducted
according to different civil procedures and may result in different outcomes
than a trial by jury would have had, including results that could be less
favorable to the plaintiff(s) in such an action.

 

Nevertheless, if the jury trial waiver provision is not permitted by applicable
law, an action could proceed under the terms the agreement with a jury trial. No
condition, stipulation or provision of the subscription agreement serves as a
waiver by any holder of the Company’s securities or by the Company of compliance
with any substantive provision of the federal securities laws and the rules and
regulations promulgated under those laws.

 

In addition, when the shares are transferred, the transferee is required to
agree to all the same conditions, obligations and restrictions applicable to the
shares or to the transferor with regard to ownership of the shares, that were in
effect immediately prior to the transfer of the shares, including but not
limited to the subscription agreement.

 

Using a credit card to purchase shares may impact the return on your investment
as well as subject you to other risks inherent in this form of payment.

 

Investors in this Offering have the option of paying for their investment with a
credit card, which is not usual in the traditional investment markets.
Transaction fees charged by your credit card company (which can reach 5% of
transaction value if considered a cash advance) and interest charged on unpaid
card balances (which can reach almost 25% in some states) add to the effective
purchase price of the shares you buy. See “Plan of Distribution and Selling
Securityholders.” The cost of using a credit card may also increase if you do
not make the minimum monthly card payments and incur late fees. Using a credit
card is a relatively new form of payment for securities and will subject you to
other risks inherent in this form of payment, including that, if you fail to
make credit card payments (e.g. minimum monthly payments), you risk damaging
your credit score and payment by credit card may be more susceptible to abuse
than other forms of payment. Moreover, where a third-party payment processor is
used, as in this Offering, your recovery options in the case of disputes may be
limited. The increased costs due to transaction fees and interest may reduce the
return on your investment.

 

The SEC’s Office of Investor Education and Advocacy issued an Investor Alert
dated February 14, 2018 entitled: Credit Cards and Investments – A Risky
Combination, which explains these and other risks you may want to consider
before using a credit card to pay for your investment.

 



10

 

 



DILUTION

 

Dilution means a reduction in value, control or earnings of the shares the
investor owns.

 









Immediate dilution

 

An early-stage company typically sells its shares (or grants options over its
shares) to its founders and early employees at a very low cash cost, because
they are, in effect, putting their “sweat equity” into the Company. When the
Company seeks cash investments from outside investors, like you, the new
investors typically pay a much larger sum for their shares than the founders or
earlier investors, which means that the cash value of your stake is diluted
because each share of the same type is worth the same amount, and you paid more
for your shares than earlier investors did for theirs.

 

The following table compares the price that new investors are paying for their
shares with the effective cash price paid by existing shareholders, giving
effect to full conversion of all outstanding stock options, and assuming that
the shares are sold at $0.25 per share. The schedule presents shares and pricing
as issued and reflects all transactions since inception, which gives investors a
better picture of what they will pay for their investment compared to the
Company’s insiders than just including such transactions for the last 12 months,
which is what the SEC requires.

 

                    Total Issued    

Effective

Cash Price

per Share at Issuance or       Date    Issued      Potential     and Potential  
  Potential       Issued   Shares     Shares     Shares     Conversion   Class A
Common Stock   2021     646,825,014       0       646,825,014     $ -.000  
Class B Common Stock   2021     16,035,520       0       16,035,520     $ -.000
  Class C Common Stock   2023     10,993,629       0       10,993,629     $
0.02600   Series Seed Preferred Stock   2021     353,712,906 (1)     0      
353,712,906     $ 0.00493   Class AAA Common Stock - Regulation CF   2023    
65,413,695       0       65,413,695     $ 0.07460   Class AAA Common Stock -
Regulation D Rule 506(c) & Regulation S   2024     14,272,208 (2)     0      
14,272,208     $ 0.06585                                         Warrants for
Class AAA Common Stock   2023     0       3,375,000       3,375,000     $
0.00690                                         Options for Class B Common Stock
                                    $0.0069 Strike Price   2023-2024     0      
221,542,649       221,542,649     $ 0.00690                                    
    Total Common Share Equivalents         1,107,252,972       224,917,649      
1,332,170,621     $

0.00706

                                        Investors in Class AAA Common Stock,
assuming full amount raised         300,000,000 (3)(4)     0       300,000,000  
  $ 0.10000                                         Total After Inclusion of
this Offering         1,377,252,972 (5)     224,917,649       1,602,170,621    
$ 0.02459  

 

(1) Assumes conversion of all Series Seed Preferred Stock to Class A Common
Stock (2) Includes $939,766 raised via Rule 506(c) and Regulation S from the
issuance of 14,272,208 shares. (3) Includes selling securityholders (4) Assumes
150,000,000 Bonus Shares issued as a part of this Offering (5) Reduces total
shares outstanding prior to this Offering by 30,000,000 to reflect selling
securityholders

 





The following table demonstrates the dilution that new investors will experience
upon investment in the Company. The price per share in this table reflects the
price of Class AAA Common Stock in the Offering of $0.25. This table uses the
Company’s audited net tangible book value as of December 31, 2023 of $4,065,773
which is derived from the net equity of the Company in the December 31, 2023
audited financial statements. This tangible net book value is then adjusted to
contemplate conversion of all other convertible instruments outstanding at
current that would provide proceeds to the Company, which assumes exercise of
all warrants and stock options outstanding. While not every outstanding warrant
or option may be exercised, we believe that it is important to identify the
potential dilution that could occur upon the exercise of all existing securities
issued by the Company. To further illustrate the dilution that investors may
experience, the second and third tables illustrate dilution including
authorized, but unissued stock options, and solely on the basis of outstanding
equity securities, respectively.

 







11

 

 



On Basis of Full Conversion of Issued  $5,000,000   $8,000,000   $30,000,000 
Instruments  Raise   Raise(1)  Raise(1) Price Per Share  $0.25   $0.25  $0.25
Shares Issued   40,000,000 (2)   65,840,000(2)   270,000,000(2) Capital Raised 
$5,000,000   $8,000,000   $30,000,000  Less: Offering Costs  $(210,500)(3) 
$(360,500)(3)  $(1,185,500)(3) Net Offering Proceeds  $4,789,500   $7,639,500  
$28,814,500  Net Tangible Book Value Pre-Financing  $

5,538,077

(4)  $5,538,077(4)  $5,538,077 (4) Net Tangible Book Value Post-Financing  $

10,327,577

   $13,177,577   $34,352,577                   Shares Issued and Outstanding
Pre-Financing   

1,295,851,668

(5)(6)   1,295,851,668(5)(6)   1,295,851,668(5)(6)                 
Post-Financing Shares Issued and Outstanding   

1,335,851,668

 



   1,361,691,668   1,565,851,668                  Net Tangible Book Value Per
Share Prior To Offering  $0.00   $0.00   $0.00  Increase/(Decrease) Per Share
Attributable to New Investors  $0.00   $0.01   $0.02  Net Tangible Book Value
Per Share After Offering  $0.01   $0.01   $0.02  Dilution Per Share To New
Investors ($)  $0.24   $0.24   $0.23  Dilution Per Share to New Investors (%) 
 96.91%   96.13%   91.22%

 

The offering costs assumed in the following table includes up to $1,875,000 in
commissions to Dealmaker Securities, LLC, as well as legal and accounting fees
incurred for this Offering. The table presents three scenarios for the
convenience of the reader: a $5,000,000 raise from this Offering, a $8,000,000
raise from this Offering, and a fully subscribed $30,000,000 raise from this
Offering.

 



(1) Excludes proceeds from selling securityholders (2) Assumes maximum bonus
shares of 100%, including bonus shares issued from the purchase of shares sold
by securityholders (3) Assumes variable costs of 3% which includes 5% broker
commission less 2% investor transaction fee (4) Net Tangible Book Value is
adjusted for conversion proceeds for the outstanding stock options and warrants
discussed in (5). The Net Tangible Book Value without the adjustment is equal to
$4,065,773. (5) Assumes conversion of all issued preferred shares to common
stock and conversion of 212,564,838 outstanding stock options (providing
proceeds of $1,466,697 to net tangible book value) and conversion of 812,500
outstanding warrants (providing $5,606 to net tangible book value). (6) Does not
include 36,318,953 fully diluted shares outstanding that have been issued in
2024





 



12

 

 





The next table is the same as the previous, but adds in consideration of
authorized but unissued stock options, presenting the fully diluted basis. This
adds 20,472,724 pre-financing shares outstanding and is not adjusted for
potential conversion proceeds on the hypothetical exercise of these options.

 

On Basis of Full Conversion of Issued Instruments and Authorized but Unissued
Stock Options 

$5,000,000

Raise

  

$8,000,000

Raise

(1) 

$30,000,000

Raise

(1) Price Per Share  $0.25   $0.25   $0.25  Shares Issued   40,000,000(2) 
 65,840,000(2)   270,000,000(2) Capital Raised  $5,000,000   $8,000,000  
$30,000,000  Less: Offering Costs  $(210,500)(3)  $(360,500)(3)  $(1,185,500)(3)
Net Offering Proceeds  $4,789,500   $7,639,500   $28,814,500  Net Tangible Book
Value Pre-Financing  $

5,538,077

(4)  $

5,538,077

(4)  $5,538,077(4)  Net Tangible Book Value Post-Financing  $

10,327,577

   $

13,177,577

   $34,352,577                   Shares Issued and Outstanding Pre-Financing   

1,316,324,392

(5)(6)   

1,316,324,392

(5)(6)   1,316,324,392(5)(6)                  Post-Financing Shares Issued and
Outstanding   

1,356,324,392

   1,382,164,392   1,586,324,392                  Net Tangible Book Value Per
Share Prior To Offering  $0.00   $0.00   $0.00  Increase/(Decrease) Per Share
Attributable to New Investors  $0.00   $0.01   $0.02  Net Tangible Book Value
Per Share After Offering  $0.01   $0.01   $0.02  Dilution Per Share To New
Investors ($)  $0.24   $0.24   $0.23  Dilution Per Share to New Investors (%)   

96.95

%   96.19%   91.34%

 



(1) Excludes proceeds from selling securityholders (2) Assumes maximum bonus
shares of 100%, including bonus shares issued from the purchase of shares sold
by securityholders (3) Assumes variable costs of 3% which includes 5% broker
commission less 2% investor transaction fee (4) Net Tangible Book Value is
adjusted for conversion proceeds for the outstanding stock options and warrants
discussed in (5). The Net Tangible Book Value without the adjustment is equal to
$4,065,773. (5) Assumes conversion of all issued preferred shares to common
stock and conversion of 212,564,838 outstanding stock options (providing
proceeds of $1,466,697 to net tangible book value) and conversion of 812,500
outstanding warrants (providing $5,606 to net tangible book value) and
conversion of authorized, but unissued stock options of 20,472,724 (no
adjustment for proceeds contemplated in the calculations). (6) Does not include
36,318,953 fully diluted shares outstanding that have been issued in 2024

 







13

 

 





The final table is the same as the previous two, but removes the assumptions of
conversion of options, and warrants and consideration of authorized but unissued
stock options, instead only presenting issued shares (common shares, plus the
assumption of conversion of all issued and outstanding preferred shares).

 







   $5,000,000   $8,000,000   $30,000,000  On Issued and Outstanding Basis 
Raise   Raise(1)  Raise(1) Price Per Share  $0.25   $0.25   $0.25  Shares
Issued   40,000,000 (2)   65,840,000(2)   270,000,000 (2) Capital Raised 
$5,000,000   $8,000,000   $30,000,000  Less: Offering Costs  $(210,500)(3) 
$(360,500)(3)  $(1,185,500)(3) Net Offering Proceeds  $4,789,500   $7,639,500  
$28,814,500  Net Tangible Book Value Pre-Financing  $4,065,773   $4,065,773  
$4,065,773  Net Tangible Book Value Post-Financing  $8,855,273   $11,705,273  
$32,880,273                   Shares Issued and Outstanding Pre-Financing 
 1,082,474,330(4)(5)   1,082,474,330(4)(5)   1,082,474,330(4)(5)             
    Post-Financing Shares Issued and Outstanding   1,122,474,330  
 1,148,314,330    1,352,474,330                   Net Tangible Book Value Per
Share Prior To Offering  $0.00   $0.00   $0.00  Increase/(Decrease) Per Share
Attributable to New Investors  $0.00   $0.01   $0.02  Net Tangible Book Value
Per Share After Offering  $0.01   $0.01   $0.02  Dilution Per Share To New
Investors ($)  $0.24   $0.24   $0.23  Dilution Per Share to New Investors (%) 
 96.84%   95.92%   90.28%

 



(1) Excludes proceeds from selling securityholders (2) Assumes maximum bonus
shares of 100%, including bonus shares issued from the purchase of shares sold
by securityholders (3) Assumes variable costs of 3% which includes 5% broker
commission less 2% investor transaction fee (4) Assumes conversion of all issued
preferred shares to common stock (5) Does not include 36,318,953 fully diluted
shares outstanding that have been issued in 2024

 





14

 



 

Future Dilution

 

Another important way of looking at dilution is the dilution that happens due to
future actions by a company. The investor’s stake in a company could be diluted
due to the company issuing additional shares, whether as part of a
capital-raising event, or issued as compensation to the company’s employees or
marketing partners. In other words, when the company issues more shares, the
percentage of the company that you own will go down, even though the value of
the company may go up. You will own a smaller piece of a larger company. This
increase in number of shares outstanding could result from a stock offering
(such as an initial public offering, another crowdfunding round, a venture
capital round, or an angel investment), employees exercising stock options, or
by conversion of certain instruments (e.g. convertible bonds, preferred shares
or warrants) into stock.

 

If the company decides to issue more shares, an investor could experience value
dilution, with each share being worth less than before, and control dilution,
with the total percentage an investor owns being less than before. There may
also be earnings dilution, with a reduction in the amount earned per share
(though this typically occurs only if the company offers dividends, and most
development stage companies do not pay dividends for some time).

 

The type of dilution that hurts early-stage investors most occurs when the
company sells more shares in a “down round,” meaning at a lower valuation than
in earlier offerings. An example of how this might occur is as follows (numbers
are for illustrative purposes only):

 

  ● In June 2014, Jane invests $20,000 for shares that represent 2% of a company
valued at $1 million.

 

  ● In December, the company is doing very well and sells $5 million in shares
to venture capitalists on a valuation (before the new investment) of $10
million. Jane now owns only 1.3% of the company, but her stake is worth
$200,000.

 

  ● In June 2015, the company has run into serious problems, and in order to
stay afloat, it raises $1 million at a valuation of only $2 million (the “down
round”). Jane now owns only 0.89% of the company, and her stake is worth only
$26,660.

 

If you are making an investment expecting to own a certain percentage of the
company or expecting each share to hold a certain amount of value, it’s
important to realize how the value of those shares can decrease by actions taken
by the company. Dilution can make drastic changes to the value of each share,
ownership percentage, voting control, and earnings per share. In some cases,
dilution can also completely wipe out the value of investments made by early
investors, without any person being at fault.

 

Investors should understand how dilution works and the availability of
anti-dilution protection.

 

15

 

 

USE OF PROCEEDS TO THE ISSUER

 

Please see the table below for a summary our intended use of proceeds from this
Offering under various raise scenarios:

 

           Maximum Offering  Total Gross Cash Proceeds  $5,000,000  
$10,000,000   $37,500,000  To Selling Securityholders  $0   $2,000,000  
$7,500,000  Commissions & Variable Expenses  $250,000   $500,000   $1,875,000 

Transaction Fee Charged To Investors

  $-100,000   $-200,000   $-750,000  Fixed Costs  $60,500   $60,500   $60,500 
                 Total Net Proceeds  $4,789,500   $7,639,500   $28,814,500 

 

Use of Net Proceeds  Amount   %   Amount   %   Amount   %  Payroll  $1,197,375  
 25%  $1,909,875    25%  $7,203,625    25% Product Development  $1,197,375  
 25%  $1,909,875    25%  $7,203,625    25% Marketing & Advertising  $1,197,375  
 25%  $1,909,875    25%  $7,203,625    25% General & Administrative 
$1,197,375    25%  $1,909,875    25%  $7,203,625    25% Total Use of Proceeds 
$4,789,500        $7,639,500        $28,814,500      

 



Because the Offering is a “best efforts,” we may close the Offering without
sufficient funds for all the intended purposes set out above, or even to cover
the costs of this Offering.

 

The Company reserves the right to change the above use of proceeds if management
believes it is in the best interests of the Company.

 

OUR BUSINESS

 

Company Operations & Product Overview

 

Mode Mobile, Inc. was founded in 2015 as a Limited Liability Company by Dan
Novaes, CEO, and Kiran Panesar, CTO, with a mission to provide people around the
world with income and saving opportunities through their everyday mobile
activities. Mode Mobile was previously known as Nativ Mobile, Inc. before a name
change in 2022, and prior to that, was originally founded as Nativ Mobile, LLC
before a name change in 2021. The Company aims to unlock the full potential of
the world’s most accessible income-generating asset, the smartphone, currently
sitting untapped in the pockets of over 7 billion global consumers. These
consumers spend 4 trillion hours per year on their smartphones and we believe
this presents a massive opportunity to turn people’s phones into income streams,
just like Uber and Airbnb did with cars and homes. At Mode, we enable customers
to earn and save money directly from the things they already do – like playing
games, listening to music, watching videos, and even charging and unlocking
their phones.

 

Products

 

The Company’s Mode Earn App enables users the ability to earn rewards on a
single platform for interacting with digital content on their smartphones. Mode
Mobile drives user engagement and monetizes user activity primarily through
digital marketing revenue from advertising partners. The Company shares a
portion of generated revenue with users and also facilitates earnings and
savings for users directly from advertising brands. Since 2019 Mode has
generated nearly $50 million in revenue from advertisers, with 2022 revenue
reflecting more than 150x growth from 2019, even while still in beta.

 

Mode Mobile also offers the Mode EarnPhone which is a smartphone embedded with
the Company’s EarnOS software for a more integrated and enhanced earnings
experience. The ModePhone’s software is similar to the Mode Earn App, but
includes more functionality and lives in the form of an Operating System. The
Mode EarnPhone has all the specs one would want from a phone – like a triple
lens camera, fingerprint and face ID, and a 6.52 inch HD screen, but unlike
other smartphones, it was developed to make money for its user. The Mode
EarnPhone is available at www.modephone.com and a variety of online retailers in
the United States such as Amazon, Walmart, and Best Buy. We are currently
growing our subscription channels, as well as partnerships with major telecom
carriers, while also turning towards international expansion.

 

In 2023, the Company launched a new subscription software product, called the
Mode Earn Club, whereby our users pay a monthly fee for access to our rewards
ecosystem. In this new product, the Company keeps 100% of the subscription
revenue and the user keeps 100% of all rewards they earn. This product is still
in testing phase and may change over time based on its performance with our
existing user base and in the market.

 

16

 

 

Trademarks

 

The Company has protected its Trademarks, which is a key part of its business
operations and overall corporate strategy. A summary of its Trademarks can be
found below:

 

Name   Status   Number   Filing Date Earn As You Go   Live   90072702   July 24,
2020 Earn As You Go: Activate Earn Mode   Live   90072727   July 24, 2020 Earn
OS   Live   97021733   September 10, 2021 Earn UI   Live   97023073   September
21, 2021 Mode Logo   Live   90815642   July 7, 2022 The Phone that Pays   Live  
90823313   July 12, 2021 Earn Mode   Live   97023080   September 21, 2021 Mode
Earn App   Live   97177172   December 17, 2021 Earn App   Live   97177401  
December 17, 2021 Mode Earn Phone   Live   97178560   December 17, 2021 Mode
Earn OS   Live   97181074   December 20, 2021

 

Key Suppliers

 

The Company sources its EarnPhone from Skyworth, a manufacturer based in China.
The Company does not have an exclusive relationship with this supplier and can
easily source new partners to manufacture the EarnPhone.

 





Competition

 

The market for rewards-based mobile apps continues to grow and evolve with
numerous companies offering consumers the ability to earn cash-back and rewards
for various online activities. Competitors include Fetch Rewards, Ibotta,
Rakuten, and Swagbucks. Mode Mobile offers an integrated hardware and software
solution, the Mode EarnPhone, that rewards users for everyday mobile activities
on their smartphones.

 

While the majority of smartphone manufacturers do not offer an integrated
rewards-based operating system like the EarnOS, we do also view smartphone
manufacturers like Apple, Samsung, Nokia, and others as indirect competitors to
the Mode EarnPhone.

 

Customers

 

Our customer base is comprised of over 40,000,000 users spread across over 170
countries, who have downloaded the Mode Earn App or purchased the Mode
EarnPhone. To date, our users and customers have earned over $250,000,000 in
rewards by interacting with our technology. The Company typically acquires
customers by advertising on social media and search channels such as Google and
Meta (Facebook and Instagram).

 

The Company also counts members of its Mode Earn Club as customers, each of
which pay anywhere from $1 to $20 per month to be a member of the Club and earn
additional savings and benefits.

 

The Company also sells its EarnPhone through certain third party retailers,
which then sell the EarnPhone to their customers. These third-party retailers
include BestBuy, Amazon, Walmart, Newegg, Adorama, Groupon, Mason, Dailysteals,
eBay, Reebelo, and UnbeatableSale. The Company uses an in-house business
development team, led by its CEO, to acquire new retailers and distribution
channels.

 

The Company also views its advertising partners as customers. The Company has
agreements with these advertising partners whereby the partners pay the Company
based on how the Company’s customers and users interact with various websites
and mobile applications. No single advertising partner makes up more than 15% of
the Company’s advertising revenue.

 

Current (Gibraltar) Limited & $CRNC Token Issuance

 

The Company also has a subsidiary, Current (Gibraltar) Limited (“CGL”), a
Gibraltar company organized in 2018. The Company owns 100% of the voting shares
of CGL. CGL was organized to develop a rewards network and protocol, the purpose
of which was intended to be used as a rewards distribution mechanism for Mode
Mobile and its user base (the “$CRNC Network”). In order to build out this
network, the Company, via CGL, conducted and completed a security token offering
pursuant utilizing exemptions from registration under the Securities Act
provided by Rule 506(b) of Regulation D and Regulation S to non-US investors. In
that offering, CGL offered $CRNC tokens to investors in consideration for their
investments. The proceeds from the token offering were approximately $26
million, which was to be used to build out the $CRNC Network. Due to a disclosed
delay in delivering tokens to investors resulting from regulatory uncertainties
associated with blockchain and cryptocurrency projects, the investments were
executed pursuant to “Simple Agreement(s) for Future Tokens” (“SAFTs”), which,
among other things, contemplated the Company delivering $CRNC tokens to
investors in advance of the $CRNC Network launch. The obligations to these SAFT
holders are described more fully in the “Securities Being Offered – Simple
Agreement for Future Tokens” section.



 

The further buildout of the $CRNC Network will be carried out by a foundation
established by CGL. The Company expects the foundation to be established, and
the $CRNC Network to be built, by Q3 2024. By virtue of the creation of the
foundation, control over the governance of the $CRNC network will transfer from
the Company to $CRNC token holders and the Company’s management will not be
involved in the foundation’s ongoing operations. At such time, all obligations
due from the Company to $CRNC token holders (including obligations of the
Company set forth in the SAFTs) will cease. The Company will have no financial
responsibility for the operation of the foundation and upon completion and
creation of the foundation, the Company will completely divest its interest and
involvement in the $CRNC Network. As of the date of this Offering Circular, all
of the technology that serves as the backbone of the $CRNC Network has been
developed and is being tested by consumers in an alpha version.

 

For purposes of clarification, while the foundation will be established by CGL,
it will not be a related party once the $CRNC Network has launched with
operations becoming vested in the foundation. The foundation's purpose is to
allow stakeholders of the $CRNC network to govern and direct the ecosystem
without a centralized overseer like CGL. CGL will have some level of oversight
at the foundation's launch, this oversight will cease once $CRNC stakeholders
assume control of foundation governance, which is scheduled to take place as
soon as practically possible after the launch of the $CRNC Network.





















 

The Company may engage with the foundation opportunistically as an advertising
partner – i.e. to advertise Mode Mobile on the $CRNC Network, and vice versa.
However, any relationship between the Company and the foundation (and/or CGL,
the entity that established the foundation) in this capacity would be
substantially the same as other third-party advertising-based partnerships of
the Company. As of the date of this Offering Circular, no written agreement is
in place between the Company and CGL or the foundation to serve as an
advertising partner. Finally, the $CRNC Network is a stand-alone separate
rewards distribution system, and is completely distinct from the Mode Mobile
point-based rewards system.



 

Employees

 

The Company currently has 16 full-time employees, 34 full-time contractors, and
4 part-time contractors. These employees are spread out across 19 countries.
Approximately 40% of the Company’s employees are based in the United States and
all of the Company’s executive officers and directors are based in the United
States.

 

17

 

 

Regulation

 

By virtue of handling our user’s data, we are subject to numerous statutes
related to data privacy, and additional legislation and regulation should be
anticipated in every jurisdiction in which we operate. Example federal (US) and
European statutes we could be subject to are:

 

GDPR

 

The EU-wide General Data Protection Regulation imposes onerous accountability
obligations requiring data controllers and processors to maintain a record of
their data processing and policies. It requires data controllers to implement
more stringent operational requirements for processors and controllers of
personal data, including, for example, transparent and expanded disclosure to
data subjects (in a concise, intelligible and easily accessible form) about how
their personal information is to be used, imposes limitations on retention of
information, increases requirements pertaining to health data and pseudonymized
(i.e., key-coded) data, introduces mandatory data breach notification
requirements, and sets higher standards for data controllers to demonstrate that
they have obtained valid consent for certain data processing activities. Fines
for non-compliance with the GDPR will be significant—the greater of €20 million
or 4% of global turnover.

 

ePrivacy Directive

 

The ePrivacy directive sets out the rules relating to the processing of personal
data across public communications networks. This directive requires business to
ensure consent requests are made and that consent is received from the user
before the use of cookies is made. Businesses must communicate the privacy rules
with accurate and specific information regarding the data contained in the
cookie. Information must be communicated before the consent requests are made,
in plain language. Organizations must ensure that users are able to withdraw
consent in the same simple manner as the initial consent request.

 

CRPA and CCPA

 

The CRPA and CCPA define and establish various rights that consumers residing in
California have over the privacy of their data along with the responsibilities
of businesses when collecting personal information. It requires businesses that
control the collection of consumers’ personal information to inform them of the
category, purpose and duration the business intends to retain such information.
It lists the consumers’ right to correct their data and have their data deleted.
Customers may also exercise their right to limit the sale or sharing of their
personal or sensitive personal information. Fines for non-compliance can range
from $100 to $750 per consumer per incident. Additionally, in certain cases the
California Privacy Protection Agency may impose administrative fines ranging
from $2,500 to $7,500 for each violation.

 



THE COMPANY’S PROPERTY

 

Mode Mobile, Inc. is a fully remote, U.S.-based company and as such, does not
have a central headquarters from which it conducts its operations. The Company
has limited fixed assets consisting mostly of computer hardware used by
employees. The Company’s current mailing address is One East Erie Street, Suite
525, Chicago, IL 60611.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

 

The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes included in this Offering Circular. The following discussion contains
forward-looking statements that reflect our plans, estimates, and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. The audited financials and overall financial
discussion in this Offering cover the consolidated financials for both Mode
Mobile, Inc., which was incorporated in 2015 and Current (Gibraltar) Limited,
which was incorporated in 2018.



 

18

 

 

Operating Results

 

For the Fiscal Years Ending December 31, 2023 and 2022

 



Mode Mobile generated net revenues of $8,226,428 during the fiscal year ending
December 31, 2023 compared to $24,947,043 during the fiscal year ending December
31, 2022, representing a 67% decrease which was related to the Company’s plans
to decrease expenses, increase profit margin, and increase operating income. In
2022, the Company began to see its advertising partners advertise less in
financial services, consumer goods, and gaming, which traditionally had been a
major revenue driver. Therefore, in early 2023, the Company made a concerted
effort to focus on improving unit economics and be more conversative on revenue
growth. As a result of these decisions, the Company spent less money on
advertising and user acquisition, which resulted in less new customers and lower
revenue. The Company also cut out less profitable market segments as a part of
this exercise, which was another reason for the reduction in revenues. The
majority of the revenues the Company did earn in both periods was earned through
the Company’s Mode Earn App, where Mode Mobile gets paid by advertising
partners, brands, and other technology providers when Mode users interact with
digital content on their smartphones. The Company had cost of revenue of
$2,941,561 and $10,249,605, respectively, during the fiscal years ending
December 31, 2023 and 2022. Costs of revenue include rewards that are paid out
to Mode Mobile users, payment processing fees, EarnPhone hardware costs, website
hosting, and revenue share payouts. The majority of costs of revenue for both
the fiscal years ending December 31, 2023 and 2022 were related to reward pay
outs. The Company’s gross margin for the fiscal year ending December 31, 2023
was 64% compared to 59% for the year ended December 31, 2022. The increase in
gross margin was primarily related to the Company decreasing advertising spend
for customer acquisition and the launch of a new product, the Mode EarnClub, a
discussion of which is included above.

 

Operating expenses of the Company for both the years ended December 31, 2023 and
2022 primarily consisted of customer acquisition costs and employee and
contractor compensation related to software development and general and
administrative expenses. Operating expenses during the fiscal year ending
December 31, 2023 amounted to $11,362,928, a 54% decrease from $24,754,480
during the fiscal year ending December 31, 2022. Sales and marketing expenses
consisted primarily of digital advertising costs on social media and search
platforms such as Meta and Google, which totaled $2,077,123 during the fiscal
year ending December 31, 2023 and $12,384,163 during the fiscal year ending
December 31, 2022, or a 83% decrease period over period. The significant
decrease in sales and marketing costs was related to the Company’s decision, as
discussed above, to decrease user acquisition in order to improve unit economics
and profitability. Additionally, the Company recognized research and development
expenses of $5,190,493 for the year ending December 31, 2023 versus $5,434,239
for the year ending December 31, 2022, which was a 4% decrease year over year.
General and administrative expenses consisted primarily of executive and
operational payroll costs, professional services, and overhead expenses, which
totaled $3,244,007 for the year ending December 31, 2023 versus $5,036,078 for
the year ending December 31, 2022, representing a 36% decrease. The decrease
across research and development and general and administrative expenses was
primarily related to payroll cuts and other cost cutting measures that were in
line with the Company’s discussion to decrease operating expenses with the goal
of improving profitability. Finally, during fiscal year 2022, the Company
recognized a non-cash expense of $1,900,000 related to royalty payments to
holders of its $CRNC tokens voluntarily paid out in lieu of the Company
completing a build out of the $CRNC Network, due to the delays described in “The
Company’s Business” section of this Offering Circular, and recognized no
expenses in this category during fiscal year 2023. The overall decrease in
operating expenses during fiscal year 2023 as compared to fiscal year 2022 was
related to the Company’s efforts to decrease user acquisition advertising spend
and overall operating expenses, with the goal of increasing profitability.

 

In addition to the above, the Company recognized total other income of
$2,719,528 during the fiscal year ending 2023, versus $7,682,764 during the
fiscal year ending 2022, which was a decrease of 65% period over period. Of the
total other income recognized, a large driver of the decrease was related to
realized gains on cryptocurrency sales, which was $8,099,516 in 2022, but
decreased by 92% to $623,344 in 2022. The Company also recognized other income
of $2,215,323 in 2023, versus $34,856 in 2022. Most of the increase was related
to approximately $465,000 in Employee Retention Credits and a one-time
$1,600,000 entry that was the result of the Company removing all liability it
has from the issuance of $CRNC tokens as discussed below.

 

As a result of the foregoing, the Company realized a net loss of $3,358,533 for
the fiscal year ending December 31, 2023 – a 41% increase in net loss compared
to a net loss of $2,374,278 during the fiscal year ending December 31, 2022.

 









Liquidity and Capital Resources

 



As of December 31, 2023, the Company had cash on hand of $2,524,045. To date,
the Company has generated minimal net income, and over the past two years, the
Company has operated under losses. As of December 31, 2023 the Company has an
accumulated deficit of $4,318,480. However, the Company has generated
substantial revenue and gross profit over the last two years and expects to
continue to grow revenue by launching new product and onboarding new third-party
retailers. Additionally, given its efforts to decrease marketing spend, improve
unit economics, and reduce operating expenses as discussed above, it still aims
to achieve a positive net income in the next twelve to eighteen months.

 

To date, the Company has been capitalized by equity investments from its
shareholders, primarily from the sale of its Series Seed financing round
Preferred Stock and the sale of its Series AAA Common Stock. Historically, the
Company had received significant income from the sale of crypto assets that it
purchased for investment and has re-sold for profit intermittently. This
includes income of $8,099,516 in fiscal year 2022. However, as of December 31,
2023, the Company held only $26,384 in cryptocurrency assets, therefore it does
not plan to rely on these sales to generate significant income going forward.

 

Going forward, the Company plans to rely on various equity crowdfunding efforts
to sustain operating losses until it can reach profitability. In July 2023, the
Company launched a Regulation CF campaign to fund growth and operations, the
Company has received $4,880,014 in gross proceeds from this fundraise. In
November 2023, the Company launched a fundraise pursuant to Rule 506(c) of
Regulation D, which is only available to accredited investors. This offering is
still ongoing as of the date of this Offering Circular and the Company has
raised approximately $697,425 from this offering as of the date of this Offering
Circular. The Company also launched a fundraise pursuant to Regulation S, which
is only available to international investors. This offering is still ongoing as
of the date of this Offering Circular and the Company has raised approximately
$196,050 in this offering. The Company has also launched fundraises via
FrontFundr in Canada and Seedrs in the United Kingdom and Europe. As of the date
of this Offering Circular, the Company has not yet closed on any proceeds from
these two fundraises.

 

The Company has access to potential debt and lines of credit and it can also
access additional equity capital through its existing shareholder base and
network. The Company expects to continue needing the assistance of outside
capital, whether via debt or equity, later this year as it grows its revenue,
customer base and operating expenses.







 



19

 







 

$CRNC Tokens Royalty

 



In 2018, the Company (via CGL) conducted and completed a security token offering
pursuant to a side-by-side, Regulation D and Regulation S offering where it
offered $CRNC tokens to investors in consideration for their investments, which
were to be used to build the $CRNC Network described elsewhere int this Offering
Circular. Due to a delay in delivering tokens to investors, the investments were
executed pursuant to “Simple Agreement(s) for Future Tokens” (“SAFTs”), which,
among other things, contemplated the Company delivering $CRNC tokens to
investors in advance of the $CRNC Network.

 

On account of the launch of the $CRNC Network being delayed longer than
expected, the Company elected to pay the SAFT holders a royalty based on the
Company’s financial performance in 2021. Based on what each individual investor
elected to receive, the consideration paid to investors on account of the
royalty were either additional $CRNC tokens or shares in the Company. The value
of this one-time royalty was $1,900,000 and the number of $CRNC tokens or
Company shares an investor would receive was based on the original investment
amount paid at the time of the execution of the SAFTs. Approximately 86% of
investors elected to receive additional $CRNC tokens and 14% of investors
elected to receive Company shares. Accordingly, the Company recognized a royalty
liability of $1,900,000 as of December 31, 2022. This liability was released in
fiscal year 2023 and was recognized as $1,600,000 other income as discussed
above.

 

As described elsewhere in this Offering Circular, the buildout and launch of the
$CRNC Network will be carried out by a foundation established by CGL. The
Company expects the foundation to be established, and the $CRNC Network to be
built, in Q3 2024. At such time, all obligations due from the Company to $CRNC
token holders (including obligations of the Company set forth in the SAFTs, such
as the royalty liability described above) will cease. By virtue of the creation
of the foundation, control over the governance of the $CRNC tokens will transfer
from the Company to token holders. The Company will have no financial
responsibility for the operation of the foundation.

 







Plan of Operations

 



The Company has recognized revenue over the past three years, including net
revenues of $8,226,428 and $24,947,043 for the years ended December 31, 2023 and
2022, respectively. As mentioned above, the decrease in revenue from 2022 to
2023 was related to the Company decreasing overhead and advertising expenses
with the goal of attaining profitability earlier. The majority of the revenue
the Company has earned has been through the Company’s Mode Earn App, where Mode
Mobile gets paid by advertising partners, brands, and other technology providers
when Mode users interact with digital content on their smartphones. Mode Mobile
has also generated minimal revenue from sales of the Mode EarnPhone. In the
Company’s opinion, proceeds from this Offering will satisfy its cash
requirements for the next twelve to eighteen months to sustain normal operations
and achieve minimal net profits. However, it does anticipate that it will need
to raise additional capital in 2025 and beyond if it wants to accelerate revenue
and customer growth, with the majority of proceeds going towards advertising and
increasing headcount.





 

20

 

 

Trend Information

 



In 2023, the Company began testing a new product called the “Mode Earn Club”,
which is a subscription service whereby Mode users can pay a monthly fee for
access to more ways to earn cash and rewards within the Mode EarnOS ecosystem.
The Company benefits from this because it is able to earn a more stable and
predictable monthly subscription fee from its users. In return, Mode users can
get access to more cash and non-cash rewards than they would have previously
earned via the Mode EarnOS. The Company plans to roll out this product more
broadly over the coming years. The Company expects this will contribute
meaningful revenue and gross profit to its business over the coming years.

 

In 2023, the Company made certain operational changes, including the reduction
of headcount, to lower its monthly operating losses to approximately $250,000.

 



DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

 

Name  Position  Age  Term in Office  Approximate hours per week for part-time
employees Executive Officers             Dan Novaes  CEO  34  June 2015 to
Present  Full-time Kiran Panesar  CTO  29  June 2015 to Present  Full-time Chip
Correra  CIO  59  February 2023 to Present  Full-time Prakash Ramachandran  CFO 
59  January 2024 to Present  Full-time Justin Hines  General Counsel  54 
December 2018 to Present  Full-time Kathy DeKam  Chief People Officer  62  May
2021 to Present  Full-time Directors             Dan Novaes  Director  34  June
2015 to Present    Ross Holdren  Director  39  February 2021 to Present  1 Mark
Lawrence  Director  37  February 2021 to Present  1

 

Dan Novaes, CEO and Director

 

Dan co-founded Mode Mobile with Kiran Panesar and has been CEO of the Company
since June 2015. During that time, Dan has been responsible for setting the
vision and direction for the Company, leading and inspiring a team of executives
and managers, developing and executing strategic plans, and representing the
organization to stakeholders and the public. Additionally, Dan has played a
vital role in building relationships with key partners and vendors, ensuring the
Mode Mobile brand is well represented, and the organization is compliant with
all applicable laws and regulations. Dan has also been a driving force behind
the culture of excellence that can be found throughout the organization and
inspiring its team members to reach their highest potential. Dan has followed
his entrepreneurial passion throughout his career. From an early age, he used
his skills to establish a variety of businesses across international e-commerce,
consumer products, and media. Dan is one of the youngest members of YPO and the
Chicago Economic Club. He is a graduate of the Indiana Kelley School of
Business. Prior to co-founding Mode Mobile, Dan was the co-founder and CEO of
MobileX Labs, an application design and development company, from 2012 to 2015.
Before then, he spent 10 years as the founder of Elekteks, a consumer
electronics ecommerce retailer, and was the inventor of iFlask, the world’s
first “smart” flask.

 

Kiran Panesar, CTO

 

Kiran co-founded the Company with Dan Novaes and began as CTO in June 2015.
Kiran is responsible for leading the development and implementation of
technology strategies to ensure the success of the organization. He oversees the
development of new technologies and systems that will enhance the users’
experience, supports our engineering and product teams, while also focusing on
costs and efficiency. Kiran has over 10 years software development experience
and is a product and engineering leader with a passion for building
cross-functional teams to solve problems. Kiran has a strong track record of
successful product launches, including Instaliker, a project that helped
millions of people boost their social media following. Before Mode Mobile, Kiran
was the co-founder and CTO of MobileX Labs, an application design and
development company, with tens of millions of monthly online users, where Kiran
oversaw the building and maintenance of infrastructure. Prior to that, Kiran was
a co–founder and Programmer for daptppt Designs, a software development company
for iPhone and gaming applications.

 

21

 

 

Prakash Ramachandran, CFO

 

Prakash Ramachandran currently serves as the CFO at Mode Mobile and is
responsible for overseeing the Company’s financial & business operations
functions, including developing & implementing financial plans, policies, and
procedures, budgeting & forecasting, and overseeing accounting and financial
reporting. Prior to working at Mode Mobile, Prakash served as CFO of Crownpeak
Technology from June 2021 to 2023, a PE funded SaaS business. He helped to grow
the company’s revenue during his tenure, primarily through acquisition
initiatives. Before that, Prakash worked as an EVP and CFO for Digital
Reasoning, an AI and cognitive computing company from December 2015 to June
2021. During that time, he successfully secured two rounds of financing, oversaw
an acquisition of a medium-sized healthcare technology company, and contributed
to Digital Reasoning’s acquisition by Smarsh, Inc. Prakash previously worked as
the CFO for Polyera Corporation from 2011 to 2015, and held various VP and CFO
positions in different organizations prior to that, showcasing diverse financial
expertise. Prakash has a Bachelor of Commerce from Madras University and a
Master of Science in Management from Stanford University Graduate School of
Business. He is a Chartered Accountant from India as well as a Chartered
Management Accountant of the U.K.

 

Francis “Chip” Correra, CIO

 

Chip began as CIO February 1, 2023, and is responsible for leading our product
and engineering teams, including researching innovative new technologies,
developing high-quality products, integrating third parties, and operating our
technology platform and products. This includes researching industry trends and
user needs, managing product roadmaps, and driving product success.
Additionally, he is responsible for identifying and managing technology-related
risks and staying abreast of new technology trends and developments. Chip has
over 30 years’ experience directing all aspects of research and development,
product engineering, project management, and operations. Chip is a graduate of
the University of Massachusetts, where he obtained a BS in Computer System
Engineering. Before joining Mode Mobile, Chip served as the CTO at Pixability,
an ad tech company focusing on YouTube and connected TV advertising. From 20–7 -
2019, Chip was the SVP of Data, Engineering, and Delivery at Label Insight, a
SaaS company providing insights on food label data that was acquired by
NielsenIQ. Chip was also the founder and CTO at Linkable Networks from 2010 to
2017, a digital advertising and loyalty company that was acquired by Collinson
Group.

 

Kathy DeKam, Chief People Officer

 

Kathy joined Mode Mobile as Chief People Officer on May 4, 2021. During her time
in that role, she has been responsible for overall strategic direction and
management of all human resources activities to support the organization’s goals
and objectives. This has included performance management, talent acquisition,
training and development, and team engagement. Additionally, she is responsible
for fostering an open and inclusive culture, and supporting diversity and
inclusion. Kathy leads the Company-wide OKR process and is responsible for
leading the IT function, which includes technical support and maintenance for
computer hardware, software, networks, systems integration, and development and
adherence to IT policies and procedures

 

Before joining the Mode Mobile team, Kathy served from 2020 to 2021 as Chief
People and Culture Officer at Qualifacts, a SaaS and web-based electronic health
record company with 430+ employees in the U.S. and Peru and $70M+ annual
revenue. Her role prior to that ran from 2015 to 2020, when she served as an EVP
and Chief People and Culture Officer (5 ½ years) and Co-COO (1 ½ years) at
Digital Reasoning, an artificial intelligence cognitive computing company with
180+ employees in the U.S., U.K. and Singapore and $38M+ annual revenue. While
with Digital Reasoning, she participated in multiple capital fundraising events
totaling $100M, and Smarsh’s acquisition of the company. From 2011 to 2015,
Kathy was the Director of Human Resources (3 ½ years) and Chief of Staff (6
months) at Video Gaming Technologies, a casino video game developer and
manufacturing company with 650+ employees in the U.S. and Mexico and $65M annual
revenue. She participated in Aristocrat’s acquisition of Video Gaming
Technologies, resulting in a company with a total of 6,000+ employees in 103
countries and $3B annual revenue. Kathy is also a U.S. Navy veteran with six
years of service.

 

Justin Hines, General Counsel & Secretary

 

Judd joined Mode Mobile as General Counsel on December 3, 2018. In this role,
Judd is responsible for corporate governance, corporate compliance, and legal
risk management and ensuring the organization upholds the highest standards of
professional excellence. Additionally, Judd monitors and reviews legal and
regulatory developments to ensure compliance with all applicable laws and
regulations, prepares, reviews, and negotiates contracts, agreements, and other
legal documents, and advises on the Company’s investment initiatives. Judd is an
experienced attorney, with over 24 years of experience in legal, compliance, and
investment advisory roles, including Senior Associate at Katten Muchin Rosenman
, an AmLaw 100, global law firm. He holds a BA in American Studies from
Fairfield University and a Juris Doctorate from Emory University School of Law.
Prior to working at Mode Mobile, Judd served from 2014 to 2018 as General
Counsel and Chief Compliance Officer at Hayden Royal, an investment banking and
finance company with $3B under management. From 2010 to 2014 Judd was the
Managing Director at Majestic Capital Advisors, an investment advisory services
firm. Prior to that, Judd was a director from 2005 to 2010 with the Macquarie
Group, a global financial services company with $600B under management.

 

Ross Holdren, Director

 

Ross has been on the Board of Directors for Mode Mobile since February, 2021. In
addition to his role at Mode Mobile, Ross currently serves as the CEO of Dose, a
position he has held since February 2019. Ross has also been on the Board of
Directors of Dose since August 2018. Ross is also a Principal at Garland Capital
Group, where he has been since July 2013. Ross holds a Bachelor of Science in
Business Administration from College of Charleston and a Master in Business
Administration from INSEAD.

 

Mark Lawrence, Director

 

Mark has been on the Board of Directors for Mode Mobile since February, 2021. In
addition to his role at Mode Mobile, Mark is the Founder and CEO of SpotHero, a
position he has held since October 2010. Mark holds a Bachelor of Science in
Finance and a Bachelor of Arts in Spanish from Bradley University.

 

22

 

 



COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

 

For the year ended December 31, 2023, the Company compensated its executive
officers and directors as follows:

 

Name  Capacities in which compensation was received 

Cash

Compensation

   Other Compensation (1)  

Total

Compensation

  Dan Novaes  CEO, Director  $199,375   $0   $199,375  Kiran Panesar  CTO 
$227,094   $35,415   $262,509  Chip Correra  CIO  $268,314   $85,805   $354,118 
Justin Hines  General Counsel  $199,486   $71,641   $271,127  Kathy DeKam  Chief
People Officer  $234,731   $87,769   $322,500  Prakash Ramachandran  CFO  $0  
     $0  Ross Holdren  Director  $0   $0   $0  Mark Lawrence  Director  $0  
$33,782   $33,782 

 

(1) Includes stock options granted by 2023; the value of which is calculating by
multiplying all granted options by a strike price of $0.0069

 

For the year ended December 31, 2023, the Company’s Board of Directors granted
the following stock options under the Company’s 2021 Plan to its officers:
Justin Hines, 985,770; Kathy DeKam, 3,867,102; Kiran Panesar, 1,008,612, and
Chip Correra, 12,435,444. All of these options are exercisable into shares of
the Company’s Class B Common Stock.

 

The Company’s Chief Financial Officer, Prakash Ramachandran, began his role on
January 15, 2024. In 2024, he was granted 22,260,214 stock options under the
Company’s 2021 Plan, which are exercisable into shares of the Company’s Class B
Common Stock.

 

For the year ended December 31, 2023, none of our Directors received cash
compensation for their services as Directors of the Company.

 

2021 Equity Incentive Plan

 

The Company has adopted the 2021 Equity Incentive Plan (“2021 Plan”), which
provides for the grant of shares of stock options and restricted stock awards to
employees, non-employee directors, and non-employee consultants. The number of
shares authorized by the 2021 Plan was 243,000,000 shares of Class B Common
Stock as of December 31, 2022. The options have a term of ten years. The amounts
granted each calendar year to an employee or non-employee is limited depending
on the type of award. Stock options comprise all of the awards granted since the
2021 Plan’s inception. Stock options granted under the 2021 Plan typically vest
between immediate and four-year periods. As of May 28, 2024, there were
18,353,055 shares of Class B Common Stock available for future issuance under
the 2021 Plan, 214,684,507 options issued and outstanding, and 9,962,438 options
already converted into Class B Common Stock.

 

Employment Agreements with Executive Officers

 

Kiran Panesar Employment Agreement 

 

The Company and Kiran Panesar are each party to an employment agreement dated
April 1, 2019. Pursuant to the employment agreement, in exchange for Mr.
Panesar’s services as CTO, Mr. Panesar is entitled to a starting base salary of
$150,000 per year, which may be increased each year based on his performance, as
well as an annual bonus not to exceed 20% of the base salary then in effect
under the agreement. The agreement renews each year on March 31, unless earlier
terminated. The Company may terminate Mr. Panesar’s employment for cause with 10
days notice, or without cause with 6 months’ notice. If terminated without
cause, Mr. Panesar will be entitled to all compensation otherwise due during
that 6 month period. The agreement also contains customary indemnification
provisions, whereby the Company agrees to indemnify Mr. Panesar against certain
liabilities and expenses that he may become subject to in performance of his
duties, subject to certain limitations.

 

A copy of the employment agreement between Kiran Panesar and the Company is
filed as an exhibit to the offering statement of which this Offering Circular
forms a part.

 



23

 

 

Kathy DeKam Employment Agreement

 

The Company and Kathy DeKam are each party to an employment agreement dated May
4, 2021. Pursuant to the employment agreement, in exchange for Ms. DeKam’s
services as Chief People Officer, Ms. DeKam is entitled to a starting base
salary of $220,000 per year, which may be adjusted each year based on
performance, as well as an annual bonus not to exceed 15% of the base salary
then in effect under the agreement. Ms. DeKam is also eligible to receive
revenue-linked bonuses depending on the revenues generated by the Company. Ms.
DeKam also received a grant of 1,550,000 $CRNC Tokens, which will vest in equal
installments over four years, as well as 52,891 options under the Company’s 2021
Plan. Ms. DeKam’s employment is “at-will”, and either the Company or Ms. DeKam
may terminate the agreement at any time for any reason – but if Ms. DeKam is
terminated without cause, or resigns without “good reason”, she shall be
entitled to severance pay of 3 months’ salary. The agreement contains certain
customary non-disclosure provisions, whereby Ms. DeKam cannot disclose certain
proprietary information of the Company, and also contains non-disparagement
clauses. The agreement also contains customary indemnification provisions,
whereby the Company agrees to indemnify Mr. DeKam against certain liabilities
and expenses that he may become subject to in performance of her duties, subject
to certain limitations.

 

A copy of the employment agreement between Kathy DeKam and the Company is filed
as an exhibit to the offering statement of which this Offering Circular forms a
part.





 

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

 

The following information on the security ownership of management and others is
as of May 28, 2024:

 

Title of Class  Name and address of beneficial owner  Amount and nature of
beneficial ownership   Amount and nature of beneficial ownership acquirable  

Percent of class

(3)

  Officers and Directors                   Class A Common Stock  Dan Novaes(1)
 525,121,542    0    81.2% Class A Common Stock  Kiran Panesar(1)  106,698,870  
 0    16.5% Class B Common Stock  Kiran Panesar(1)  0    5,132,646    1.9% Class
B Common Stock  All Other Officers & Directors(1)  0    62,694,544    23.4%   
                 Other Significant Holders                   Series Seed
Preferred Stock  Garland Fund I LLC(1)(2)  166,115,772    0    47.0%

 

(1) The following address may be used for each holder: One East Erie Street,
Suite 525, Chicago, IL 60611     (2) Garland Fund I LLC is controlled by Ross
Holdren who also serves as a Director of the Company     (3) Based on
646,825,014 shares of Class A Common Stock, 268,000,000 shares of Class B Common
Stock, 10,993,629 shares of Class C Common Stock, 79,685,903 shares of Class AAA
Common Stock, and 353,712,906 shares of Series Seed Preferred Stock outstanding
as of May 28, 2024.

 

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

 

The Company has employment agreements in place with certain of its executive
officers, which are described in the “Compensation of Directors and Executive
Officers” section of this Offering Circular.

 

As of the date of this Offering Circular, other than the agreements described
above, the Company is not aware of any transactions with related parties that
are required to be disclosed.

 

24

 

 

SECURITIES BEING OFFERED

 

General

 

The Company is offering 120,000,000 shares of Class AAA Common Stock directly,
plus up to 150,000,000 additional shares of Class AAA Stock eligible to be
issued as Bonus Shares. 30,000,000 shares of Class AAA Common Stock are being
offered by selling securityholders of the Company.

 

The following description summarizes important terms of our capital stock. This
summary does not purport to be complete and is qualified in its entirety by the
provisions of our Amended and Restated Certificate of Incorporation filed with
the State of Delaware on May 16, 2024 (our “Amended and Restated Certificate of
Incorporation”) and our Bylaws, copies of which have been filed as Exhibits to
the Offering Statement of which this Offering Circular is a part. For a complete
description of our capital stock, you should refer to our Amended and Restated
Certificate of Incorporation, and our Bylaws, and applicable provisions of the
Delaware General Corporation Law.

 

Under our Amended and Restated Certificate of Incorporation, our authorized
capital stock consists of:

 

3,005,150,0000 shares of Common Stock, $0.0001 par value per share

 

  ● 2,125,000,000 shares designated as Class A Common Stock   ● 268,000,000
shares designated as Class B Common Stock   ● 12,150,000 shares designated as
Class C Common Stock   ● 600,000,000 shares designated as Class AAA Common Stock

 

388,800,000 shares of Preferred Stock, $0.0001 par value per share

 

  ● 388,800,000 shares designated as Series Seed Preferred Stock

 

Class AAA Common Stock

 



Voting Rights

 

The shares of Class AAA Common Stock have no voting rights of any kind, except
as may be otherwise required by law.

 

Conversion

 

Each share of Class AAA Common Stock automatically converts into one (1) share
of Class A Common Stock immediately upon the earlier of (x) the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of Common Stock
for the account of the Company or (y) an election by the Board of Directors of
the Company to effect any such conversion. Each share of Class B Common stock is
convertible into one (1) share of Class AAA Common Stock at the option of the
shareholder.



 

Dividend Rights

 

The Company will not declare, pay or set aside any dividends on shares of any
other class or series of capital stock of the Company (other than dividends on
shares of Common Stock payable in shares of Common Stock) unless (in addition to
the obtaining of any consents required elsewhere in the Certificate of
Incorporation) the holders of the Series Seed Preferred Stock then outstanding
will first receive, or simultaneously receive, a dividend on each outstanding
share of Series Seed Preferred Stock in an amount at least equal to (i) in the
case of a dividend on Common Stock or any class or series that is convertible
into Common Stock, that dividend per share of Series Seed Preferred Stock as
would equal the product of (A) the dividend payable on each share of such class
or series determined, if applicable, as if all shares of such class or series
had been converted into Common Stock and (B) the number of shares of Common
Stock issuable upon conversion of a share of Series Seed Preferred Stock, in
each case calculated on the record date for determination of holders entitled to
receive such dividend or (ii) in the case of a dividend on any class or series
that is not convertible into Common Stock, at a rate per share of Series Seed
Preferred Stock determined by (A) dividing the amount of the dividend payable on
each share of such class or series of capital stock by the original issuance
price of such class or series of capital stock (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization with respect to such class or series) and (B)
multiplying such fraction by an amount equal to the Series Seed Original Issue
Price.

 



25

 

 

Liquidation Rights

 

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company or Deemed Liquidation Event, after the payment in full of all
Preferred Liquidation Amounts (which equaled $4,759,840 as of December 31, 2023)
required to be paid to the holders of shares of Series Seed Preferred Stock, the
remaining assets of the Company available for distribution to its stockholders
will be distributed among the holders of shares of Class A, Class B, Class C,
and Class AAA Common Stock, pro rata based on the number of shares held by each
such holder.

 

“Deemed Liquidation Event” is defined as follows:

 

  a) a merger, reorganization or consolidation   b) the sale, lease, transfer,
exclusive license or other disposition by the Company or any subsidiary of the
Company or all or substantially all of the assets or intellectual property of
the Company and its subsidiaries

 

Additional information can be found in the Company’s Amended and Restated
Certificate of Incorporation.

 

Class B Common Stock

 



Voting Rights

 

The shares of Class B Common Stock have no voting rights of any kind, except as
may be otherwise required by law.

 

Conversion

 

Each share of Class B Common Stock automatically converts into one (1) share of
Class A Common Stock immediately upon the earlier of (x) the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company or (y) an election by the Board of Directors of the
Company to effect any such conversion. Each share of Class C Common Stock is
convertible into one (1) share of Class AAA Common Stock at the option of the
shareholder.



 

Dividend Rights

 

The Company will not declare, pay or set aside any dividends on shares of any
other class or series of capital stock of the Company (other than dividends on
shares of Common Stock payable in shares of Common Stock) unless (in addition to
the obtaining of any consents required elsewhere in the Certificate of
Incorporation) the holders of the Series Seed Preferred Stock then outstanding
will first receive, or simultaneously receive, a dividend on each outstanding
share of Series Seed Preferred Stock in an amount at least equal to (i) in the
case of a dividend on Common Stock or any class or series that is convertible
into Common Stock, that dividend per share of Series Seed Preferred Stock as
would equal the product of (A) the dividend payable on each share of such class
or series determined, if applicable, as if all shares of such class or series
had been converted into Common Stock and (B) the number of shares of Common
Stock issuable upon conversion of a share of Series Seed Preferred Stock, in
each case calculated on the record date for determination of holders entitled to
receive such dividend or (ii) in the case of a dividend on any class or series
that is not convertible into Common Stock, at a rate per share of Series Seed
Preferred Stock determined by (A) dividing the amount of the dividend payable on
each share of such class or series of capital stock by the original issuance
price of such class or series of capital stock (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization with respect to such class or series) and (B)
multiplying such fraction by an amount equal to the Series Seed Original Issue
Price.

 



26

 

 

Liquidation Rights

 

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company or Deemed Liquidation Event, after the payment in full of all
Preferred Liquidation Amounts (which equaled $4,759,840 as of December 31, 2023)
required to be paid to the holders of shares of Series Seed Preferred Stock, the
remaining assets of the Company available for distribution to its stockholders
will be distributed among the holders of shares of Class A, Class B, Class C,
and Class AAA Common Stock, pro rata based on the number of shares held by each
such holder.

 

“Deemed Liquidation Event” is defined as follows:

 

  a) a merger, reorganization or consolidation   b) the sale, lease, transfer,
exclusive license or other disposition by the Company or any subsidiary of the
Company or all or substantially all of the assets or intellectual property of
the Company and its subsidiaries

 

Additional information can be found in the Company’s Amended and Restated
Certificate of Incorporation.

 

Class C Common Stock

 

Voting Rights

 

The shares of Class C Common Stock have no voting rights of any kind, except as
may be otherwise required by law.

 

Conversion

 

Each share of Class C Common Stock automatically converts into one (1) share of
Class A Common Stock immediately upon the earlier of (x) the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act covering the offer and sale of Common Stock for the
account of the Company or (y) an election by the Board of Directors of the
Company to effect any such conversion.

 

Dividend Rights

 

The Company will not declare, pay or set aside any dividends on shares of any
other class or series of capital stock of the Company (other than dividends on
shares of Common Stock payable in shares of Common Stock) unless (in addition to
the obtaining of any consents required elsewhere in the Certificate of
Incorporation) the holders of the Series Seed Preferred Stock then outstanding
will first receive, or simultaneously receive, a dividend on each outstanding
share of Series Seed Preferred Stock in an amount at least equal to (i) in the
case of a dividend on Common Stock or any class or series that is convertible
into Common Stock, that dividend per share of Series Seed Preferred Stock as
would equal the product of (A) the dividend payable on each share of such class
or series determined, if applicable, as if all shares of such class or series
had been converted into Common Stock and (B) the number of shares of Common
Stock issuable upon conversion of a share of Series Seed Preferred Stock, in
each case calculated on the record date for determination of holders entitled to
receive such dividend or (ii) in the case of a dividend on any class or series
that is not convertible into Common Stock, at a rate per share of Series Seed
Preferred Stock determined by (A) dividing the amount of the dividend payable on
each share of such class or series of capital stock by the original issuance
price of such class or series of capital stock (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization with respect to such class or series) and (B)
multiplying such fraction by an amount equal to the Series Seed Original Issue
Price.

 

27

 

 

Liquidation Rights

 

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company or Deemed Liquidation Event, after the payment in full of all
Preferred Liquidation Amounts (which equaled $4,759,840 as of December 31, 2023)
required to be paid to the holders of shares of Series Seed Preferred Stock, the
remaining assets of the Company available for distribution to its stockholders
will be distributed among the holders of shares of Class A, Class B, Class C,
and Class AAA Common Stock, pro rata based on the number of shares held by each
such holder.

 

“Deemed Liquidation Event” is defined as follows:

 

  a) a merger, reorganization or consolidation   b) the sale, lease, transfer,
exclusive license or other disposition by the Company or any subsidiary of the
Company or all or substantially all of the assets or intellectual property of
the Company and its subsidiaries

 

Additional information can be found in the Company’s Amended and Restated
Certificate of Incorporation.

 

Class A Common Stock

 

Voting Rights

 

The holders of the Company’s Class A Common Stock are entitled to one vote for
each share of such stock held at all meetings of stockholders (and written
actions in lieu of meetings); provided, however, that, except as otherwise
required by law, holders of Class A Common Stock, as such, will not be entitled
to vote on any amendment to the Certificate of Incorporation that relates solely
to the terms of one or more outstanding series of Preferred Stock if the holders
of such affected series are entitled, either separately or together with the
holders of one or more other such series, to vote thereon pursuant to the
Certificate of Incorporation.

Additionally, holders of Class A Common Stock, exclusively and as a separate
class, will be entitled to elect all directors of the Company.

 



Conversion Rights



 

Each share of Class A Common stock is convertible into one (1) share of Class
AAA Common Stock at the option of the shareholder.

 





Protective Provisions

 

The Company will not, either directly or indirectly by amendment, merger,
consolidation or otherwise, do any of the following without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Preferred Stock and Class A Common Stock, voting together
as a single class on an as-converted to Common Stock basis, given in writing or
by vote at a meeting, consenting or voting together as a class:

 

●purchase or redeem or pay or declare any dividend or make any distribution on,
on any capital stock, other than (i) dividends or other distributions payable on
the Common Stock solely in the form of additional shares of Common Stock, (ii)
redemptions of or dividends or distributions on the Series Seed Preferred Stock
as expressly provided herein and (iii) stock repurchased from former employees,
officers, directors, consultants or other persons who performed services for the
Company or any subsidiary in connection with the cessation of their
employment/services at the lower of the original purchase price or the then
current fair market value thereof, unless otherwise approved by the Board of
Directors;

 

●create or hold capital stock in any subsidiary that is not a wholly-owned
subsidiary (either directly or through one or more other subsidiaries); or

 

●permit any subsidiary of the Company to do any of the foregoing.

 

28

 

 

Dividend Rights

 

The dividend rights of holders of the Company’s Class A Common Stock are
identical to those of the Class AAA, Class B, and Class C Common Stock described
above.

 

Liquidation Rights

 

The liquidation rights of holders of the Company’s Class A Common Stock are
identical to those of the Class AAA, Class B, and Class C Common Stock described
above.

 

Series Seed Preferred Stock

 

Voting Rights

 

On any matter presented to the stockholders of the Company for their action or
consideration at any meeting of stockholders of the Company (or by written
consent of stockholders in lieu of meeting), each holder of outstanding shares
of Preferred Stock will be entitled to cast the number of votes equal to the
number of whole shares of Common Stock into which the shares of Preferred Stock
held by such holder are convertible as of the record date for determining
stockholders entitled to vote on such matter. Except as provided by law or by
the other provisions of the Certificate of Incorporation , holders of Preferred
Stock will vote together with the holders of Common Stock as a single class.

 

Protective Provisions

 

The Company will not, either directly or indirectly by amendment, merger,
consolidation or otherwise, do any of the following without the written consent
or affirmative vote of the holders of at least a majority of the then
outstanding shares of Preferred Stock and Class A Common Stock, voting together
as a single class on an as-converted to Common Stock basis, given in writing or
by vote at a meeting, consenting or voting together as a class:

 

  ● purchase or redeem or pay or declare any dividend or make any distribution
on, on any capital stock, other than (i) dividends or other distributions
payable on the Common Stock solely in the form of additional shares of Common
Stock, (ii) redemptions of or dividends or distributions on the Series Seed
Preferred Stock as expressly provided herein and (iii) stock repurchased from
former employees, officers, directors, consultants or other persons who
performed services for the Company or any subsidiary in connection with the
cessation of their employment/services at the lower of the original purchase
price or the then current fair market value thereof, unless otherwise approved
by the Board of Directors;         ● create or hold capital stock in any
subsidiary that is not a wholly-owned subsidiary (either directly or through one
or more other subsidiaries); or         ● permit any subsidiary of the Company
to do any of the foregoing.

 

Additionally, at any time when at least 70,596,360 shares of Preferred Stock are
outstanding (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization with
respect to the Preferred Stock), the Company will not, either directly or
indirectly by amendment, merger, consolidation or otherwise, without (in
addition to any other vote required by law or the Certificate of Incorporation)
the written consent or affirmative vote of the holders of at least a majority of
the then outstanding shares of Preferred Stock, voting together as a single
class on an as-converted to Common Stock basis, given in writing or by vote at a
meeting, consenting or voting (as the case may be) separately as a class, amend,
alter or repeal any provision of the Certificate of Incorporation in a manner
that substantially and disproportionately adversely affects the powers,
preferences or special rights of the Preferred Stock (in addition to any other
vote required by law or the Certificate of Incorporation) (it being understood
that any increase in the authorized number of shares of Series Seed Preferred
Stock, any authorization of any additional class or series of capital stock or
any Deemed Liquidation Event will not constitute such an adverse effect).

 

29

 

 

Further, holders of Preferred Stock are entitled to certain anti-dilution
rights, whereby the holders of Preferred Stock will be entitled to convert their
shares of Preferred Stock into a greater number of shares of Common Stock if the
Company makes certain dilutive issuances of additional shares of Common Stock of
the Company. However, on May 7, 2024, holders of Preferred Stock agreed to waive
these anti-dilution rights with respect to the sale or issuance of shares of the
Company’s capital stock in this Offering. See the “Conversion Rights” discussion
further below for additional details.

 

Dividend Rights

 

The Company will not declare, pay or set aside any dividends on shares of any
other class or series of capital stock of the Company (other than dividends on
shares of Common Stock payable in shares of Common Stock) unless (in addition to
the obtaining of any consents required elsewhere in the Certificate of
Incorporation) the holders of the Series Seed Preferred Stock then outstanding
will first receive, or simultaneously receive, a dividend on each outstanding
share of Series Seed Preferred Stock in an amount at least equal to (i) in the
case of a dividend on Common Stock or any class or series that is convertible
into Common Stock, that dividend per share of Series Seed Preferred Stock as
would equal the product of (A) the dividend payable on each share of such class
or series determined, if applicable, as if all shares of such class or series
had been converted into Common Stock and (B) the number of shares of Common
Stock issuable upon conversion of a share of Series Seed Preferred Stock, in
each case calculated on the record date for determination of holders entitled to
receive such dividend or (ii) in the case of a dividend on any class or series
that is not convertible into Common Stock, at a rate per share of Series Seed
Preferred Stock determined by (A) dividing the amount of the dividend payable on
each share of such class or series of capital stock by the original issuance
price of such class or series of capital stock (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization with respect to such class or series) and (B)
multiplying such fraction by an amount equal to the Series Seed Original Issue
Price.

 

Liquidation Rights

 

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company or Deemed Liquidation Event (as defined above), the holders of
shares of Series Seed Preferred Stock then outstanding will be entitled to be
paid out of the assets of the Company available for distribution to its
stockholders before any payment will be made to the holders of Common Stock by
reason of their ownership thereof, an amount per share equal to the greater of
(i) the Series Seed Original Issue Price (which is currently is $0.01345679),
plus any dividends declared but unpaid thereon, or (ii) such amount per share as
would have been payable had all shares of Series Seed Preferred Stock been
converted into Common Stock immediately prior to such liquidation, dissolution,
winding up or Deemed Liquidation Event. If upon any such liquidation,
dissolution or winding up of the Company or Deemed Liquidation Event, the assets
of the Company available for distribution to its stockholders will be
insufficient to pay the holders of shares of Series Seed Preferred Stock, the
holders of shares of Series Seed Preferred Stock will share ratably in any
distribution of the assets available for distribution in proportion to the
respective amounts which would otherwise be payable in respect of the shares
held by them upon such distribution if all amounts payable on or with respect to
such shares were paid in full.

 

Conversion Rights

 

Each share of Preferred Stock is convertible at the option of the holder, into
shares of Class A Common Stock or shares of Class AAA Common Stock by dividing
the “Original Issue Price” by the “Conversion Price”, each of which were
initially set at $0.01345679 per share. The Conversion Price is subject to
adjustment in certain circumstances, including, but not limited to (i) the
Company making certain issuances of shares of Common Stock for less per share
than the Conversion Price then in effect; (ii) the Company effecting a stock
split; and/or (iii) distributions or dividends paid in Common Stock to holders
of the Company’s Common Stock. However, on May 7, 2024, holders of a majority of
the outstanding shares of Preferred Stock agreed to waive any rights with
respect to adjustment to the Conversion Price as a result of the sale or
issuance of shares of the Company’s capital stock in this Offering.

 

Additionally, upon the sale by the Company of shares of its Common Stock in a
firm-commitment underwritten public offering at a price per share equal to or
greater than three times the Original Issue Price, or upon the vote of the
majority of the holders of Preferred Stock of the Company and certain other key
holders of the Company’s equity securities, all shares of Preferred Stock must
convert into shares of Common Stock.

 

The above descriptions of the terms of our authorized capital stock are only
summaries, and are qualified by reference to the Company’s Amended and Restated
Certificate of Incorporation filed as an exhibit to the Offering statement of
which this Offering circular forms a part.

 

30

 

 

Warrants

 

The Company has four outstanding warrants exercisable for a total of 3,375,000
shares of Class AAA Common Stock at an exercise price of $0.0069 per share. In
each case, the exercise price of the warrants is subject to adjustment in the
occurrence of certain events, including upon the Company making payments of
dividends, stock splits of the Class AAA Common Stock, and certain business
combination transactions. Each warrant has an exercise period of 10 years from
the date of issuance, and will automatically terminate upon the expiration of
this period. All outstanding warrants will expire in 2034.

 

A form of warrant, which has substantially the same terms of each of the
outstanding warrants described above, has been filed as exhibit 3.5 to the
offering statement of which this Offering Circular forms a part.

 

Simple Agreement for Future Tokens (SAFTs)

 

As discussed above, due to a delay in delivering $CRNC tokens to investors that
purchased these tokens in the Company’s 2018 side-by-side Regulation D and
Regulation S offering of $CRNC tokens (conducted through CGL), the Company
issued Simple Agreements for Future Tokens (SAFTs) to those investors, totaling
approximately $26 million in value (equal to the proceeds from the $CRNC token
offering). The form of SAFT entered into with these investors dictates that upon
launch of the $CRNC Network, the Company will issue a number of $CRNC tokens
based on when the SAFT Purchaser (“Purchaser”) is willing to take receipt of the
$CRNC tokens. This formula, also called a “Bonus Arrangement” in the SAFT, is an
arrangement whereby the Company agrees to issue a larger allocation of $CRNC
tokens to the Purchaser if the Purchaser agrees to accept a deferred delivery or
distribution of the $CRNC tokens following the effective date of the SAFT. The
longer the Purchaser is willing to delay receipt or distribution of $CRNC tokens
after the Effective Date of the SAFT, the larger the Bonus (in the form of $CRNC
tokens) the Purchaser will receive from the Company. For example, if a Purchaser
agrees to a delayed delivery or distribution of: (a) six (6) months following
the Effective Date, the Purchaser will receive a Bonus of 55%, (b) three (3)
months following the Effective Date, the Purchaser will receive a Bonus of 40%
and (c) if there is no delayed delivery or distribution following the Effective
Date, the Purchaser will receive a Bonus of 25%.

 

Between August 2021 and October 2021, all $CRNC tokens due to be issued under
the SAFTs (including any additional “Bonus” tokens) were issued to the
Purchasers. As such, there are no longer any $CRNC tokens issuable pursuant to
the SAFTs.

 

On account of the launch of the $CRNC Network being delayed longer than
expected, the Company elected to pay the SAFT holders a royalty of $1,900,000
based on the Company’s financial performance in 2021, which is described under
“Management’s Discussion And Analysis Of Financial Condition And Results Of
Operations - Liquidity and Capital Resources - $CRNC Tokens Royalty”. The
Company proactively provided this royalty to offset any liability that may
result from delay or an unforeseen failure to successfully launch the $CRNC
Network. Additionally, around the same time as paying this royalty, the Company
and the SAFE holders agreed to assign the SAFTs to CGL and as such, the Company
has no further obligations to the SAFT holders, and would not face any direct
liability if the $CRNC Network failed to launch. There is no also specific
liability stated in the SAFT for CGL in the event the $CRNC Network is not
launched (in fact, the SAFT requires each SAFT holder to expressly assume the
risk that the $CRNC Network may never launch). Nonetheless, it is possible that
SAFT holders could pursue litigation against CGL and/or the Company if the $CRNC
Network is never launched - although it is not possible for the Company to
predict what causes of action may be brought, or what the Company’s or CGL’s
liability may be in such an event.



 

As described elsewhere in this Offering Circular, in connection with planned
launch of the $CRNC Network and the creation of the foundation in Q3 2024, all
obligations due from the Company to the Purchasers under the SAFTs will cease.

 

A copy of the form of SAFT entered into with the Purchasers described above if
filed as exhibit 3.4 to the offering statement of which this Offering Circular
forms a part.

 

31

 



 

Provisions of Note in Our Amended and Restated Certificate of Incorporation

 

Pursuant to our Amended and Restated Certificate of Incorporation, to the
fullest extent permitted by law, the sole and exclusive judicial forum for the
following actions will be the Court of Chancery of the State of Delaware:

 

(1) Any derivative action or proceeding brought on behalf of the Company;

 

(2) Any action asserting a claim of breach of a fiduciary duty owed by any
director, officer or other employee of the Company to the Company or the
Company’s stockholders;

 

(3) Any action asserting a claim against the Company arising pursuant to any
provision of the Delaware General Company Law or the Company’s Amended and
Restated Certificate of Incorporation or Bylaws;

 

(4) Any action to interpret, apply, enforce or determine the validity of the
Company’s Amended and Restated Certificate of Incorporation or the Bylaws; or

 

(5) Any action asserting a claim against the Company governed by the internal
affairs doctrine.

 

Although we believe the provision benefits us by providing increased consistency
in the application of Delaware law in the types of lawsuits to which it applies
and in limiting our litigation costs, the forum selection provision may limit
investors’ ability to bring claims in judicial forums that they find favorable
to such disputes and may discourage lawsuits with respect to such claims. The
Company has adopted the provision to limit the time and expense incurred by its
management to challenge any such claims. As a company with a small management
team, this provision allows its officers to not lose a significant amount of
time travelling to any particular forum so they may continue to focus on
operations of the Company.

 

Investors’ Rights Agreement

 

On February 25, 2021, the Company entered into an Investors’ Rights Agreement
with certain investors in the Company’s Series Seed Preferred Stock and Class A
Common Stock (each, an “Investor”), which was subsequently amended on May 7
2024, the material terms of which are summarized below.

 

Registration Rights

 

The Company agreed to not grant any registration rights to the holders of any
class or series of stock of the Company, other than to the Investors, unless the
Investors are simultaneously granted registration rights that are comparable to
those granted to the holders of such other class or series of stock of the
Company (with appropriate adjustments for economic terms). Upon the granting of
registration rights to the Investors in connection with a bona fide material
transaction by the Company with the principal purpose of raising capital from
investors buying stock of the Company, these registration rights will terminate.

 

Market Stand-Off

 

The Investors agreed not to engage in certain transactions (like selling or
transferring shares) without the managing underwriter’s consent for a period of
time after the commencement of the Company’s first underwritten public offering
of its Common Stock under the Securities Act (an “IPO”) or an offering pursuant
to an alternative registration of the Company’s equities securities under the
Securities Act. This period can last up to 180 days for an IPO and up to 90 days
for other registrations of the Company’s equity securities. These restrictions
will apply to the Investors only if similar restrictions apply to all officers
and directors of the Company. The underwriters have enforcement rights for these
provisions

 

32

 

 

Rights to Future Stock Issuances (Right of First Offer)

 

If the Company proposes to offer or sell any equity securities of the Company
(including rights, options, or warrants to purchase such equity securities, or
securities convertible or exchangeable into such equity securities), it must
first offer them to each “Major Investor”. “Major Investor” means any Investor
that, individually or together with such Investor’s affiliates, holds at least
137,615 shares of Series Seed Preferred Stock and/or Common Stock (as adjusted
for any stock split, stock dividend, combination, or other recapitalization or
reclassification) or any other Investor that the Company has agreed in writing
is a “Major Investor.” Major Investors can elect to purchase such securities
proportional to their existing ownership. This right does apply to shares issued
in an IPO. These rights terminate immediately before an IPO of the Company, or
when the Company becomes subject to Exchange Act reporting requirements.

 



However, on May 7, 2024, the Investors agreed to waive these pre-emptive rights
with respect to the sale or issuance of shares of the Company’s capital stock in
this Offering.

 



The foregoing description of the Investors’ Rights Agreement is intended to be a
summary, and is qualified by reference to the full text of the Investors’ Rights
Agreement, as amended, filed as exhibit 3.2 the offering statement of which this
Offering Circular forms a part.

 

Series Seed Preferred Voting Agreement

 

Also on February 25, 2021, the Company entered into a Voting Agreement with the
same Investors described above, as well all other Series Seed Preferred
Stockholders of the Company (collectively, the “Stockholders”), which was
subsequently amended on May 7 2024, the material terms of which are summarized
below.

 

Board of Directors Votes

 

Each Stockholder agreed to vote their shares to ensure that the size of the
board of directors of the Company remains at three (3) directors. Additionally,
subject to certain conditions, each Stockholder agreed to vote to elect (and
re-elect) certain individuals designated by certain parties to the Company’s
board of directors, as follows:

 

Founder Member Designee. For so long as Dan Novaes owns at least 131,280,386
shares of Class A Common Stock of the Company (subject to appropriate adjustment
for any stock splits, stock dividends, combinations, recapitalizations and the
like), the Stockholders must vote to elect one (1) individual designated by Mr.
Novaes be elected to the Board.

 

Garland Designee. For so long as Garland Fund I, LLC (“Garland”) owns at least
83,057,886 shares of Series Seed Preferred Stock of the Company (subject to
appropriate adjustment for any stock splits, stock dividends, combinations,
recapitalizations and the like), the Stockholders must vote to elect one (1)
individual designated by Garland to the Board.

 

Independent Designee. For so long as the Dan Novaes owns at least 262,560,771
shares of Class A Common Stock of the Company (subject to appropriate adjustment
for any stock splits, stock dividends, combinations, recapitalizations and the
like), the Stockholders must vote to elect one individual to the Board who is an
Independent Director and (i) is mutually designated by Mr. Novaes and Garland or
(ii) if Mr. Novaes and Garland cannot mutually consent to such designation
within 10 days of a vacancy in such seat, such individual may be designated by
the holders of a majority of the voting stock of the Company (other than shares
of Common Stock issued upon the exercise of options), voting together as a
single class on an as-converted basis.

 

Vote to Increase Authorized Common Stock.

 

Each Stockholder agreed to vote to increase the number of authorized shares of
Common Stock from time to time to ensure that there will be sufficient shares of
Common Stock available for conversion of all of the shares of Series Seed
Preferred Stock outstanding at any given time.

 

Drag Along

 

The Stockholders also agreed that, in the event that (i) the holders of at least
a majority of the shares of Common Stock that is then outstanding (other than
shares of Common Stock issued upon the exercise of options) and the shares of
Common Stock then issuable upon conversion of the outstanding shares of Series A
Preferred Stock, Series A-1 Preferred Stock, Series A-2 Preferred Stock and
Series B Preferred Stock, voting together as a single class on an as-converted
basis (the “Selling Investors”); and (ii) the Board of Directors approve a sale
of securities representing more than 50% of the voting power of the Company, and
such a sale requires stockholder approval, the Stockholders vote to approve such
transaction, and will sell shares of the Company’s stock as required to complete
the transaction.

 

33

 

 

The foregoing description of the Voting Agreement is intended to be a summary,
and is qualified by reference to the full text of the Voting Agreement, as
amended, filed as exhibit 5 the offering statement of which this Offering
Circular forms a part.

 

Right of First Refusal and Co-Sale Agreement

 

Also on February 25, 2021, the Company entered into a Right of First Refusal and
Co-Sale Agreement with the same Investors described above, as well all other
Series Seed Preferred Stockholders of the Company (collectively, the
“Stockholders”), which was subsequently amended on May 7 2024, pursuant to which
the Stockholders granted the Company a right of first refusal to purchase all or
any portion of shares of the Company’s capital stock that a Stockholder proposes
to sell or transfer, at the same price and on the same terms and conditions as
those offered to the proposed transferee. Additionally, certain “Major
Investors” (as defined in the agreement) have a secondary right of first
refusal, whereby if the Company declines to purchase the shares, the Major
Investors will have the right to purchase those shares before the proposed
transferee.

 

Additionally, if neither the Company nor the Major Investors exercise their
right of first refusal, and the Stockholder decides to proceed with the sale or
transfer of his or her capital stock to the proposed transferee, each respective
Major Investor may elect to exercise a right of co-sale, and participate on a
pro rata basis in the proposed Stockholder transfer on the same terms and
conditions. The amount of shares that the Major Investor may include will be
equal to the product obtained by multiplying (i) the aggregate number of shares
of Common Stock proposed to be transferred by (ii) a fraction, the numerator of
which is the number of shares of capital stock owned by such Major Investor
immediately before consummation of the proposed transfer and the denominator of
which is the total number of shares of capital stock owned, in the aggregate, by
all participating investors immediately prior to the consummation of the
transfer, plus the number of shares of capital stock held by the selling
Stockholder.

 

Finally, each Stockholder agreed to a lock-up whereby, without the prior written
consent of the managing underwriter, during the period commencing on the date of
the final prospectus relating to the Company’s initial public offering (the
“IPO”) and ending on the date specified by the Company and the managing
underwriter (such period not to exceed 180 days), or such other period as may be
requested by the Company or an underwriter to accommodate regulatory
restrictions, the Stockholder will not sell, otherwise transfer or dispose of,
directly or indirectly, any shares of capital stock held immediately prior to
the effectiveness of the registration statement for the IPO.

 



However, on May 7, 2024, the Stockholders agreed to waive foregoing rights of
first refusal and co-sale and related with respect to the sale and issuance of
capital stock of the Company sold or issued by the Company in this Offering.

 



The foregoing description of the Right of First Refusal and Co-Sale Agreement is
intended to be a summary, and is qualified by reference to the full text of the
Right of First Refusal and Co-Sale Agreement, as amended, filed as exhibit 3.3
the offering statement of which this Offering Circular forms a part.

 

34

 



 



PLAN OF DISTRIBUTION AND SELLING SECURITY HOLDERS

 

Plan of Distribution

 

The Company is directly offering up to 120,000,000 shares of Class AAA Common
Stock, plus up to 150,000,000 additional shares of Class AAA Common Stock for
Bonus Shares.

 

The Company has engaged DealMaker Securities, LLC as the broker-dealer of record
to assist in the offering of its securities. DealMaker Securities is under no
obligation to purchase any securities or arrange for the sale of any specific
number or dollar amount of securities.

 

Commissions and Discounts

 

The following table shows the total discounts and commissions payable to the
agents in connection with this Offering:

 

   Per Share   Maximum  Public Offering Price  $0.2500   $37,500,000 
Commissions  $0.0125   $1,875,000  Ancillary Fee, Paid by Investors  $0.0025  
$375,000  Proceeds, before expenses, to us (or to selling stockholders, as
applicable)  $0.2400   $36,000,000 

 

Bonus Shares for Certain Investors (Up to 100%)

 

Certain investors in this Offering are eligible to receive bonus shares of Class
AAA Common Stock, which effectively gives them a discount on their investment.
Those investors will receive, as part of their investment, additional shares for
their shares purchased (“Bonus Shares”). The amount of Bonus Shares investors in
this offering are eligible to receive and the criteria for receiving such Bonus
Shares is as follows:

 

  (i) “Reserved” Shares. Prior to the qualification by the SEC of the Company’s
offering, the Company will offer investors the opportunity to “reserve” shares
through a reservation process on the DealMaker subscription processing platform.
On our campaign page, the investor may select the “Reserve My Shares” button,
which will bring the investor to a new page where the investor will indicate the
amount of shares (and amount of money) he or she would like to reserve in the
Company. The reservation is finalized by clicking the “Reserve My Shares”
button. Investors who reserve shares in this manner will receive an additional
20% Bonus Shares on their actual investment once this offering is qualified by
the SEC (rounded down to the nearest whole share). For example, if an investor
reserves 4,000 shares, and subsequently confirms this reservation and purchases
the 4,000 shares, such investor will receive an additional 800 shares of the
Company’s Class AAA Common Stock, for a total of 4,800 shares. The 20% is
stackable with the volume bonus tiers outlined in section (v) “Reserving” shares
is simply an indication of interest. There is no binding commitment for
investors that reserve shares in this manner to ultimately invest and purchase
the shares reserved of the Company, or to purchase any shares of the Company
whatsoever.

 

  (ii)

Existing Investors – Mode Mobile. Individuals or entities that are existing
investors of the Company prior to the qualification of this Offering Statement
will be eligible to receive a certain amount of Bonus Shares based on how much
they invest in this Offering.





 

Investment Amount  Bonus %  $1,000.00 to $4,950.00   50% $4,950.25 or more 
 100%

 



35

 



 



  (iii)

Existing Investors – Other Issuers. Individuals or entities that are existing
Investors of certain Companies as of December 31, 2023 will be eligible to
receive up to 100% Bonus Shares if they invest in this Offering. These Companies
include: Boxabl, Miso Robotics, Aptera Motors, StartEngine Crowdfunding,
BrewDog, NowRX, Liquid Piston, EnergyX, Legion M, Rentberry, Substack,
NetCapital, WiGL, Rad, Republic, Knightscope, Monogram Orthopedics, U-Haul
Investors Club, Mercury, Replit, Levels, Elio, JetToken, Flower Turbines,
FanBase, StoreEn, and Wefunder. Investors will be required to submit proof of
their shares in the eligible company. We are offering Bonus Shares to investors
in these companies because they have a large investor base and have previously
raised capital under Regulation A, Regulation CF, and/or Regulation D, Rule
506(c). These companies are not aware that the Mode Mobile is offering bonus
shares to their existing shareholders. There is no arrangement or expectation in
place that these companies will offer similar bonus shares to Mode Mobile
shareholders in the future. Mode Mobile became aware of these companies from
online research conducted by the Mode executive team.





 

Investment Amount  Bonus %  $1,250.00 to $4,999.75   50% $5,000.00 to $9,999.75 
 75% $10,000.00 or more   100%

 



The following table indicates the relationship each of the above companies has
with DealMaker Securities and the Company:



 



Company   Relationship with DealMaker Securities   Relationship with Mode
Mobile, Inc. Boxabl Inc.   Current or former broker & technology provider   No
commercial relationship Miso Robotics, Inc.   Current or former broker &
technology provider   No commercial relationship Aptera Motors Corp   No
commercial relationship   No commercial relationship StartEngine Crowdfunding,
Inc.   No commercial relationship   No commercial relationship BrewDog USA, Inc.
  No commercial relationship   No commercial relationship NowRX, Inc.   No
commercial relationship   No commercial relationship LiquidPiston, Inc.  
Current or former broker & technology provider   No commercial relationship
Energy Exploration Technologies, Inc.   Current or former broker & technology
provider   No commercial relationship Legion M Entertainment, Inc.   No
commercial relationship   No commercial relationship Rentberry, Inc.   No
commercial relationship   No commercial relationship Substack, Inc.   No
commercial relationship   No commercial relationship NetCapital, Inc.   No
commercial relationship   No commercial relationship Wireless Electrical Grid
LAN, d/b/a WiGL Inc   No commercial relationship   No commercial relationship
RAD Diversified REIT, Inc.   Current or former broker & technology provider   No
commercial relationship OpenDeal, Inc.   No commercial relationship   No
commercial relationship Knightscope, Inc.   Current or former broker &
technology provider   No commercial relationship Monogram Orthopaedics, Inc.  
Current or former broker & technology provider   No commercial relationship
U-Haul Holding Co /NV/   No commercial relationship   No commercial relationship
Mercury Technologies, Inc.   No commercial relationship   No commercial
relationship Replit, Inc.   No commercial relationship   No commercial
relationship Elio Motors, Inc.   No commercial relationship   No commercial
relationship Jet Token, Inc.   No commercial relationship   No commercial
relationship Flower Turbines, Inc.   No commercial relationship   No commercial
relationship FanBase Social Media, Inc.   No commercial relationship   No
commercial relationship StorEn Technologies, Inc.   No commercial relationship  
No commercial relationship WeFunder, Inc.   No commercial relationship   No
commercial relationship

 



    At our own discretion, we may add additional third-party companies to the
above list and will file a supplement of this Offering Circular prior to
marketing any future opportunities. To the best of our knowledge, none of the
companies listed above are aware we are offering bonus shares to their existing
shareholders. There is no arrangement or expectation of these companies offering
similar bonus shares to their shareholders in future offerings. Finally, each
company listed above was found by us through our own efforts. We chose these
companies based on our positive opinion of these companies’ efforts in raising
capital in securities offerings through online crowdfunding.



        (iv) Webinar Attendees. Individuals or entities that attend one of the
Company’s pre-announced investment webinars will be eligible to receive 20%
Bonus Shares if they invest in the Offering. The investor is eligible if they
sign up for the webinar and invest with the same email address and if attend the
webinar for more than thirty minutes. The webinars will take place every two
weeks (14 days) while this Offering is open and taking investments.         (v)
Investment Amount. Investors will be eligible to receive one of the below
bonuses based on the amount of their investment in this offering. The below
table indicates the % of bonus shares eligible by tier:

 

Investment Range  Bonus Shares  $1,950.00 - $4,949,75   15% $4,950.00 -
$9,949.75   50% $9,950 or more   80%

 

For example, if an investor invests $10,000 the investor will receive 40,0000
shares of Class AAA Common Stock, and will receive an additional 32,000 Bonus
Shares of Class AAA Common Stock, for a total of 72,000 shares. All bonus shares
are rounded down to the nearest whole share.

 



Certain investors in this offering are eligible to receive Bonus Shares of Class
AAA Common Stock without any cash consideration. The amount of Bonus Shares
investors in this offering are eligible to receive and the criteria for
receiving such Bonus Shares is as follows:

 

  (i)

Mode Users – Point Redemption. The Company will allow Mode Mobile users based in
the United States to redeem their Mode Mobile points for shares of Class AAA
Common Stock. The point redemption ratio will be as follows:





 

Mode Mobile Points Converted 

Bonus Shares

($ Value)

   Bonus Shares (Quantity)  1,500 points  $3.00    12  4,500 points  $10.00  
 40  8,950 points  $25.00    100  16,950 points  $50.00    200  29,950 points 
$100.00    400  99,950 points  $500.00    2,000  169,950 points  $1,000.00  
 4,000 

 

In addition to the above Bonus Shares, every time a Mode User redeems points for
Bonus Shares, they will earn an additional $5.00 or 20 shares of Class AAA
Common Stock (subject to the total Bonus Share limits described below). As of
March 27, 2024, there were a total of 4,306,674,022 Mode Mobile points
outstanding and available to Mode Mobile users for redemption. Based on this
number and the highest point-to-bonus share redemption rate of 169,950 points
for 4,000 Bonus Shares, Mode Mobile users, in aggregate, would have the ability
to convert their outstanding points for up to 101,360,000 Bonus Shares. As a
part of this Offering, the Company will be able to issue a maximum of
150,000,000 Bonus Shares. Because of this restriction, the Company will be
placing internal limits in place so that it does not issue more than the maximum
allowable number of Bonus Shares.

 



  (ii)

New Mode Mobile Users. Every individual will receive $15.00 or 60 shares of
Class AAA Common Stock when they sign up for Mode Mobile as a user.



 

36

 

 



  (iii) Mode Earn Club Members. Individuals who sign up for the Company’s Mode
Earn Club and complete the onboarding process will earn $40 or 160 Bonus Shares
of Class AAA Common Stock.         (iv)

Mode Investor Club Members. Individuals who sign up for the Company’s Mode
Investor Club and complete the onboarding process will earn $25 or 100 Bonus
Shares of Class AAA Common Stock.



        (v)

Mode Mobile Referrals – Existing Investors. Any existing Mode Mobile investor
will be eligible to receive 200 shares of Class AAA Common Stock, or $50.00 in
cash value, every time they sign up for the Company’s Mode Mobile Referral
program and refer new users to the EarnOS app, Mode EarnPhone, or any of the
Company’s other technologies. Each new users referred must not already be a Mode
Mobile user.



        (vi)

Mode Mobile Referrals – Non-Investors. Any existing Mode Mobile users will be
eligible to receive 100 shares of Class AAA Common Stock, or $25 in cash value,
every time they sign up for the Company’s Mode Mobile Referral program and refer
new users to the EarnOS app, Mode EarnPhone, or any of the Company’s other
technologies. Each new users referred must not already be a Mode Mobile user.



       

(vii)

 

Mode Mobile Sweepstakes. Anyone who invests in this Offering will receive 100
entries into the Company’s sweepstakes. There will be only non-equity prizes for
winners in the raffle. There is no cash requirement to enter the raffle and the
raffle is open to all US citizens over the age of 18. Winners in the sweepstakes
will be chosen periodically by the Company and will not have any direct
correlation with the timing of this Offering.



 

Bonus Share Limits

 

Investors in this Offering are eligible to receive any of the above Bonus Shares
in any combination. However, for the categories of Bonus Shares that may only be
received if an investor purchases shares with cash, the maximum amount of Bonus
Shares that any one investor may receive is 100% of their cash investment
amount. This means that investors can only ever receive, cumulatively among cash
investment Bonus Shares (i.e. categories excluding non-payment categories),
Bonus Shares equal to the number of shares they have purchased (i.e. double the
amount of shares purchased for cash).

 

Additional limits are being placed on the categories of Bonus Shares that do not
require any cash consideration. If an individual has not purchased any shares in
the Offering, the individual may only receive only up to 12,000 shares of Class
AAA Common Stock for no cash consideration. If an individual has purchased
shares in this Offering, and that individual is also redeeming Mode Mobile
points for shares of Class AAA Common Stock, such individuals are eligible to
redeem up to 36,000 shares of Class AAA Common Stock through redeeming Mode
Mobile points. For clarity, these shares will not count towards the 100% cash
investment Bonus Shares limit described above.

 

Finally, the maximum number of Bonus Shares that will be issued in this Offering
is 150,000,000, and under no circumstances will the Company issue more than
150,000,000 Bonus Shares. As such, it is possible that, prior to the Company
raising the maximum offering amount in this offering of $37,500,000, it will
have issued all 150,000,000 Bonus Shares. At such time as all 150,000,000 Bonus
Shares have been issues, any new investors in this offering that meet the
eligibility requirements to receive Bonus Shares will not receive them.
Similarly, individuals will not be permitted to redeem Mode Mobile points for
Bonus Shares after such time.

 

The issuance of Bonus Shares for no cash consideration will occur on either
invest.modemobile.com or via the Company’s EarnOS app. All investors who receive
Bonus Shares for no cash consideration will be required to sign a Subscription
Agreement, a form of which is included as exhibit 4.1 to the Offering Statement
of which this Offering Circular forms a part.

 

37

 

 



Other Terms

 

DealMaker Securities, LLC (the “Broker”), a broker-dealer registered with the
Commission and a member of FINRA, has been engaged to provide administrative and
compliance related functions in connection with this offering, and as
broker-dealer of record, but not for underwriting or placement agent services.
Affiliates of Broker have also been engaged to provide technology services and
marketing advisory services, specifically Novation Solutions Inc. O/A DealMaker
and DealMaker Reach, LLC.

 

The aggregate compensation payable to the Broker and its affiliates are
described below.

 

  a.) Administrative and Compliance Related Functions

 

Broker will provide administrative and compliance related functions in
connection with this offering, including

 

  ● Reviewing investor information, including identity verification, performing
Anti-Money Laundering (“AML”) and other compliance background checks, and
providing the Company with information on an investor in order for the Company
to determine whether to accept such investor into the offering;   ● If
necessary, discussions with us regarding additional information or clarification
on a Company-invited investor;   ● Coordinating with third party agents and
vendors in connection with performance of services;   ● Reviewing each
investor’s subscription agreement to confirm such investor’s participation in
the offering and provide a recommendation to us whether or not to accept the
subscription agreement for the investor’s participation;   ● Contacting and/or
notifying us, if needed, to gather additional information or clarification on an
investor;   ● Providing a dedicated account manager;   ● Providing ongoing
advice to us on compliance of marketing material and other communications with
the public, including with respect to applicable legal standards and
requirements;   ● Reviewing and performing due diligence on the Company and the
Company’s management and principals and consulting with the Company regarding
same;   ● Consulting with the Company on best business practices regarding this
raise in light of current market conditions and prior self-directed capital
raises;   ● Providing white labelled platform customization to capture investor
acquisition through the Broker’s platform’s analytic and communication tools   ●
Consulting with the Company on question customization for investor
questionnaire;   ● Consulting with the Company on selection of webhosting
services;   ● Consulting with the Company on completing template for the
offering campaign page;   ● Advising us on compliance of marketing materials and
other communications with the public with applicable legal standards and
requirements;   ● Providing advice to the Company on preparation and completion
of this Offering Circular;   ● Advising the Company on how to configure our
website for the offering working with prospective investors;   ● Providing
extensive review, training and advice to the Company and Company personnel on
how to configure and use the electronic platform for the offering powered by
Novation Solutions Inc. O/A DealMaker (“DealMaker”), an affiliate of the Broker;
  ● Assisting the Company in the preparation of state, Commission and FINRA
filings related to the Offering; and   ● Working with Company personnel and
counsel in providing information to the extent necessary.

 

Such services will not include providing any investment advice or any investment
recommendations to any investor.

 

For these services, we have agreed to pay Broker a cash commission equal to five
percent (5.0%) of the amount raised in the Offering not to exceed $1,912,500, if
fully subscribed and the total from the Investor Fee is included.

 



38

 

 



  b.) Technology Services

 

The Company has also engaged Novation Solutions Inc. O/A DealMaker
(“DealMaker”), an affiliate of Broker, to create and maintain the online
subscription processing platform for the Offering.

 



After the qualification by the Commission of the Offering Statement of which
this Offering Circular is a part, this Offering will be conducted using the
online subscription processing platform of DealMaker through our website at
invest.modemobile.com, whereby investors will receive, review, execute and
deliver subscription agreements electronically as well as make payment of the
purchase price through a third party processor by ACH debit transfer or wire
transfer or credit card to an account we designate. DealMaker is providing the
back-end technology to process investments on our invest.modemobile.com website
through its integrated payment solutions. There is no escrow established for
this offering. We will hold closings upon the receipt of investors’
subscriptions and our acceptance of such subscriptions.

 

Investors who are eligible to receive Bonus Shares through conversion of Mode
Mobile points will be able to initiate this transaction via the Company’s EarnOS
app. Once the conversion is approved by the Company via the app, the investor
will then be directed to DealMaker to sign their subscription agreement and
claim their shares. A form of the Subscription Agreement is included as Exhibit
4.1 to the Offering Statement of which this Offering Circular forms a part.

 

  c.) Marketing and Advisory Services

 

The Company has also engaged DealMaker Reach, LLC (“Reach”), an affiliate of
Broker, for certain marketing advisory and consulting services, including some
supplemental services on a case-by-case basis. Reach will consult and advise on
the design and messaging on creative assets, website design and implementation,
paid media and email campaigns, advise on optimizing the Company’s campaign page
to track investor progress, and advise on strategic planning, implementation,
and execution of Company’s capital raise marketing budget.

 

For these ongoing services, we have agreed to pay Reach compensation prior to
the commencement of the Offering of $5,000 per month of accountable expenses up
to a maximum of $15,000, which will be returned if not incurred. In addition,
after the commencement of the Offering, $5,000 per month (not to exceed $45,000
in aggregate) while the Offering is ongoing.

 

For supplemental marketing services, Reach will receive as compensation a
maximum of $330,000, which will be requested on a case-by-case basis as the
Company requests for the placement of marketing advertisements.

 

The maximum compensation to be paid to Broker and affiliates is $2,302,500
(6.14%) of the Offering proceeds.

 

Subscription Procedures

 

After the Offering Statement has been qualified by the Commission, the Company
will accept tenders of funds to purchase the Common Stock. The Company may close
on investments on a “rolling” basis (so not all investors will receive their
shares on the same date). Investors may subscribe by tendering funds via wire,
credit or debit card, or ACH only, and checks will not be accepted. Investors
will subscribe via the Company’s website and investor funds will be processed
via DealMaker’s integrated payment solutions. Funds will be held in the
Company’s payment processor account until the Broker has reviewed the proposed
subscription, and the Company has accepted the subscription. Funds released to
the Company’s bank account will be net funds (investment less payment for
processing fees and a holdback equivalent to 5% for 90 days).

 

The Company will be responsible for payment processing fees. Upon each closing,
funds tendered by investors will be made available to the Company and the
selling stockholders for their use, as applicable.

 

In order to invest you will be required to subscribe to the offering via the
Company’s website, invest.modemobile.com, integrating DealMaker’s technology and
agree to the terms of the offering, Subscription Agreement, and any other
relevant exhibit attached thereto.

 

Any investor that will be receiving Bonus Shares will also be required to
subscribe to the offering via the Company’s website integrating DealMaker’s
technology or via a separate electronic document signature technology employed
by the Company. All investors that receive Bonus Shares will be required to
agree to the terms of the offering, Subscription Agreement, and any other
relevant exhibit attached thereto.

 

Investors will be required to complete a subscription agreement in order to
invest. The subscription agreement includes a representation by the investor to
the effect that, if the investor is not an “accredited investor” as defined
under securities law, the investor is investing an amount that does not exceed
the greater of 10% of his or her annual income or 10% of their net worth
(excluding the investor’s principal residence).

 

Any potential investor will have ample time to review the subscription
agreement, along with their counsel, prior to making any final investment
decision. Broker will review all subscription agreements completed by the
investor. After Broker has completed its review of a subscription agreement for
an investment in the Company, and the Company has elected to accept the investor
into the offering, the funds may be released to the Company.

 

39

 

 

DealMaker Securities LLC (the “Broker”) has not investigated the desirability or
advisability of investment in the Common Stock, nor approved, endorsed or passed
upon the merits of purchasing the Common Stock. Broker is not participating as
an underwriter and under no circumstance will it recommend the Company’s
securities or provide investment advice to any prospective investor, or make any
securities recommendations to investors. Broker is not distributing any Offering
Circulars or making any oral representations concerning this Offering Circular
or this offering. Based upon Broker’s anticipated limited role in this offering,
it has not and will not conduct extensive due diligence of this offering and no
investor should rely on the involvement of Broker in this offering as any basis
for a belief that it has done extensive due diligence. Broker does not expressly
or impliedly affirm the completeness or accuracy of the Offering Statement
and/or Offering Circular presented to investors by the Company. All inquiries
regarding this offering should be made directly to the Company.

 

Investor Fee

 

Investors will be responsible for a 2.0% transaction fee applicable to the
purchase amount paid by investors at the time of investment, which amounts to
$20.00 for the minimum investment amount (the “Investor Fee”). Commissions are
charged on the Investor Fee. This fee is not considered part of the cost basis
of the subscribed Securities and will be remitted directly to the Company.

 

Selling Securityholders

 

The selling shareholders set forth below will sell up to a maximum of 30,000,000
shares of Class AAA Common Stock.

 

The following table sets forth the names of the selling shareholders, the number
of shares of capital stock (on an as-converted basis to Common Stock basis)
beneficially owned prior to this offering, the number of shares being offered in
this offering and the number of shares of Capital Stock to be beneficially owned
after this offering, assuming that all of the selling shareholder shares are
sold in the offering.

 

After $5,000,000 in gross proceeds has been raised by the Company from the sale
of the Class AAA Common Stock in this Offering, 77% of the shares issued in
subsequent closings to new investors will be newly issued shares by the Company,
and 23% will be shares sold by the selling shareholders until total gross
proceeds of $37,500,000 have been raised in the offering or the offering
terminates. Shares sold by selling securityholders to new investors will be done
on a pro-rata basis. In total, the selling shareholders may sell up to
30,000,000 shares, or 10% of the maximum number of shares being offered in this
Offering.

 

Subscriptions for the Class AAA Common Stock will be applied between the selling
shareholders on a pro rata basis, which means that at each closing in which
selling shareholders are participating, a shareholder will be able to sell its
“Pro Rata Portion” of the shares that the shareholder is offering (as set forth
in the table below) of the number of securities being issued to investors. For
example, if after raising $10,000,000 million, the Company holds a closing for
$1 million in gross proceeds, the Company will issue shares and receive gross
proceeds of $770,000 while each of the selling shareholders will receive their
Pro Rata Portion of the remaining $230,000 in gross proceeds and will transfer
their shares to investors in this Offering. Selling shareholders will not offer
fractional shares and the shares represented by a shareholder’s Pro Rata Portion
will be determined by rounding down to the nearest whole share. At no point will
the selling securityholder shares be greater than 30% of the value of the Class
AAA Common Stock issued in this Offering.

 

The Company’s Amended and Restated Certificate Incorporation allows for the
optional conversion of any outstanding class of capital stock into Class AAA
Common Stock at the sole discretion of the shareholder. As a part of this
Offering, all shareholders listed in the below table have granted a power of
attorney to the Company to convert their stock to Class AAA Common Stock if and
when they sell some or all of their stock as a part of this Offering.

 

40

 

 

Dealmaker Securities will receive a 5% commission on sales of Class AAA Common
Stock of the selling shareholders through the Investment Page prior to
disbursement to the selling shareholder. The Company will not receive any of the
proceeds from the sale of selling shareholder’s shares in the Offering.

 

Selling Securityholder  Class of Stock Owned  Amount of Class AAA Common Stock
Owned Prior to Offering (On An As-Converted Basis)   Amount Offered   Amount
Owned After Offering (Assuming Sale of All Amount Offered)   Selling Security
Holders Pro Rata Portion (1)  Garland Fund I  Series Seed Preferred 
 166,115,772    5,292,193.00    160,823,579.00    17.64% ARG Capital (Palchak) 
Series Seed Preferred   4,500,036    143,364.00    4,356,672.00    0.48% Charlie
Mires  Series Seed Preferred   18,661,752    594,535.00    18,067,217.00  
 1.98% IU Ventures (Jason Whitney)  Series Seed Preferred   18,529,398  
 590,318.00    17,939,080.00    1.97% Alan Matthew  Series Seed Preferred 
 2,382,372    75,899.00    2,306,473.00    0.25% Dave Hoover  Series Seed
Preferred   2,382,372    75,899.00    2,306,473.00    0.25% Seth Boston  Series
Seed Preferred   4,764,744    151,797.00    4,612,947.00    0.51% Lon Chow 
Series Seed Preferred   952,884    30,357.00    922,527.00    0.10% M25 Ventures
(Victor Gutwein)  Series Seed Preferred   3,811,698    121,435.00  
 3,690,263.00    0.40% Pallasite Ventures (Bissonette)  Series Seed Preferred 
 18,529,398    590,318.00    17,939,080.00    1.97% Scott Wald  Series Seed
Preferred   7,147,116    227,696.00    6,919,420.00    0.76% Robert Wald Trust 
Series Seed Preferred   1,191,186    37,949.00    1,153,237.00    0.13% Marin
Wald Trust  Series Seed Preferred   1,191,186    37,949.00    1,153,237.00  
 0.13% Weiland Street Capital  Series Seed Preferred   6,114,690    194,805.00  
 5,919,885.00    0.65% George Colis  Series Seed Preferred   9,529,488  
 303,595.00    9,225,893.00    1.01% Irma Tan  Series Seed Preferred   952,884  
 30,357.00    922,527.00    0.10% Sarah Somers  Series Seed Preferred 
 1,429,326    45,536.00    1,383,790.00    0.15% Chris D’Cruz  Series Seed
Preferred   2,858,814    91,077.00    2,767,737.00    0.30% Kiran Panesar  Class
A Common   106,698,870    3399262    103,299,608.00    11.33% Dan Novaes  Class
A Common   525,121,542    15,893,087.00    509,228,455.00    52.98% Justin
Hines  Options for Class B Common Stock   10,382,800    330,780.00  
 10,052,020.00    1.10% Kathy DeKam  Options for Class B Common Stock 
 9,506,852    302,874.00    9,203,978.00    1.01% Chip Correra  Options for
Class B Common Stock   3,108,861    99,044.00    3,009,817.00    0.33% Nick
McEvily  Options for Class B Common Stock   50,185,818    479653  
 49,706,165.00    1.60% San Phan  Options for Class B Common Stock 
 9,002,202.00    143398    8,858,804.00    0.48% Mark Lawrence  Options for
Class B Common Stock   4,895,964    155978    4,739,986.00    0.52% Tim Wickey 
Class A Common   8,335,872    132784    8,203,088.00    0.44% Michael Israel 
Class A Common   6,668,730    53114    6,615,616.00    0.18% Dan Hoffer  Options
for Class B Common Stock   7,247,440    115446    7,131,994.00    0.38% Josh
Moyer  Options for Class B Common Stock   8,145,444    259501    7,885,943.00  
 0.87%    Total   1,020,345,511    30,000,000.00    990,345,511.00    100.00%

 

  (1) “Pro Rata Portion” represents that portion that a shareholder may sell in
the Offering expressed as a percentage where the numerator is the amount offered
by the shareholder divided by the total number of shares offered by all selling
shareholders.



 

All of the aforementioned selling securityholders will be entering into an
irrevocable power of attorney (“POA”) with an individual, as attorney-in-fact,
in which they will be directing the Company and the attorney-in-fact to take the
actions necessary in connection with the Offering and the sale of shares. This
includes the conversion of any of the above securities into Class AAA Common
Stock and the signature of any required subscription agreements with each
purchaser.

 

Transfer Agent and Registrar

 

Transfer Online, Inc. will serve as transfer agent to maintain shareholder
information on a book-entry basis. We will not issue shares in physical or paper
form. Instead, our shares will be recorded and maintained on our shareholder
register.

 

Provisions of Note in Our Subscription Agreement

 

Forum Selection Provision

 

The subscription agreement that investors will execute in connection with the
Offering includes a forum selection provision that requires any claims against
the Company based on the agreement to be brought in a state or federal court of
competent jurisdiction in the State of Delaware for the purpose of any suit,
action or other proceeding arising out of or based upon the agreement. To the
extent it is enforceable, the forum selection provision may limit investors’
ability to bring claims in judicial forums that they find favorable to such
disputes and may discourage lawsuits with respect to such claims. The Company
has adopted the provision to limit the time and expense incurred by its
management to challenge any such claims. As a company with a small management
team, this provision allows its officers to not lose a significant amount of
time travelling to any particular forum so they may continue to focus on
operations of the Company. Section 22 of the Securities Act creates concurrent
jurisdiction for federal and state courts over all suits brought to enforce any
duty or liability created by the Securities Act or the rules and regulations
thereunder. We believe that the exclusive forum provision applies to claims
arising under the Securities Act, but there is uncertainty as to whether a court
would enforce such a provision in this context. Section 27 of the Exchange Act
creates exclusive federal jurisdiction over all suits brought to enforce any
duty or liability created by the Exchange Act or the rules and regulations
thereunder. As a result, the exclusive forum provision will not apply to suits
brought to enforce any duty or liability created by the Exchange Act or any
other claim for which the federal courts have exclusive jurisdiction. Investors
will not be deemed to have waived the Company’s compliance with the federal
securities laws and the rules and regulations thereunder.

 

41

 





 





MODE MOBILE, INC.

 



AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT

 

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

Index to Financial Statements

Page       Independent Auditor’s Report F-2     Consolidated Balance Sheets as
of the years ended December 31, 2023 and 2022   F-3       Consolidated
Statements of Operations and Comprehensive Income/(Loss) for the years ended
December 31, 2023 and 2022   F-4       Consolidated Statements of Changes in
Stockholders’ Equity for the years ended December 31, 2023 and 2022   F-5      
Consolidated Statements of Cash Flows for the years ended December 31, 2023 and
2022   F-6       Notes to Consolidated Financial Statements   F-7

 

F-1

 





 



 

INDEPENDENT AUDITOR’S REPORT

 

April 23, 2024

 

To: Board of Directors, MODE MOBILE, INC. Re: 2023-2022 Financial Statement
Audit

 

We have audited the accompanying consolidated financial statements of MODE
MOBILE, INC. (a corporation organized in Delaware) (the “Company”), which
comprise the consolidated balance sheets as of December 31, 2023 and 2022, and
the related consolidated statements of income, shareholders’ equity/deficit, and
cash flows for the calendar years ended December 31, 2023 and 2022, and the
related notes to the consolidated financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles generally accepted
in the United States of America; this includes the design, implementation, and
maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement,
whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of the Company’s financial statements in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Accordingly, we express no such
opinion.

 

An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in the notes to
the consolidated financial statements, the Company has suffered recurring losses
from operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. Management’s evaluation of the
events and conditions and management’s plans regarding these matters are also
described in the notes to the financial statements. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. Our opinion is not modified with respect to this matter.

 

Opinion

 

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2023 and 2022, and the consolidated results of its operations,
shareholders’ equity/deficit and cash flows for the calendar years ended
December 31, 2023 and 2022 in accordance with accounting principles generally
accepted in the United States of America.

 

Sincerely,

 



IndigoSpire CPA Group, LLC IndigoSpire CPA Group, LLC Aurora, CO

 

F-2

 

 

MODE MOBILE, INC.

CONSOLIDATED BALANCE SHEETS

As of December 31, 2023 and 2022

 



 

   December 31,     2023   2022  ASSETS           Current assets:           Cash
and cash equivalents  $2,524,045   $2,788,854  Accounts receivable   2,019,220  
 2,665,837  Prepaid expenses and other current assets   353,429    608,418 
Other receivables   79,371    -  Inventory   568,833    266,299  Total current
assets   5,544,898    6,329,408  Deferred offering costs   -    214,506 
Property and equipment, net   8,984    28,739  Intangible assets, net   -  
 37,968  Cryptocurrency assets   26,384    108,583  Nonfungible token assets 
 51,060    170,199  Deposits   -    1,150  Total assets  $5,631,326  
$6,890,553              LIABILITIES AND STOCKHOLDERS’ EQUITY           Current
liabilities:           Accounts payable  $783,483   $587,536  Accrued expenses
and other current liabilities   782,070    90,762  Royalty liability   -  
 1,900,000  Total liabilities   1,565,553    2,578,298              Commitments
and contingencies                       Stockholders’ equity:          
Preferred stock, $0.0001 par value, 388,800,000 shares authorized, 353,712,906
shares issued and outstanding as of both December 31, 2023 and 2022, liquidation
preference of $4,759,840 as of both December 31, 2023 and 2022   35,371  
 35,371  Class A common stock, $0.0001 par value, 2,100,000,000 shares
authorized, 646,825,014 shares issued and outstanding as of both December 31,
2023 and 2022   64,683    64,683  Class B common stock, $0.0001 par value,
243,000,000 shares authorized, 9,962,438 and 9,555,757 shares issued and
outstanding as of December 31, 2023 and 2022, respectively   996    530  Class C
common stock, $0.0001 par value, 12,150,000 shares authorized, 10,993,629 and no
shares issued and outstanding as of December 31, 2023 and 2022, respectively 
 1,099    -  Class AAA common stock, $0.0001 par value, 600,000,000 shares
authorized, 60,980,343 and no shares issued and outstanding as of December 31,
2023 and 2022, respectively   6,098    -  Additional paid-in capital 
 8,426,006    5,321,618  Treasury stock   (150,000)   (150,000) Accumulated
deficit   (4,318,480)   (959,947) Total stockholders’ equity   4,065,773  
 4,312,255  Total liabilities and stockholders’ equity  $5,631,326   $6,890,553 

 

See accompanying independent auditor’s report and notes, which are an integral
part of these consolidated financial statements

 

F-3

 

 

MODE MOBILE, INC.

Consolidated Statements of Operations and Comprehensive Income/(Loss)

As of December 31, 2023 and 2022

 



 

   Year Ended     December 31,     2023   2022  Net revenues  $8,226,428  
$24,947,043  Cost of net revenues   2,941,561    10,249,605  Gross profit 
 5,284,867    14,697,438              Operating expenses:           Sales and
marketing   2,921,336    12,384,163  Research and development   5,190,493  
 5,434,239  General and administrative   3,244,007    5,036,078  Royalty
payments   -    1,900,000  Impairment of long-lived assets   7,092    -  Total
operating expenses   11,362,928    24,754,480              Loss from operations 
 (6,078,061)   (10,057,042)             Other income (expense), net:          
Realized gains (losses) on cryptocurrency sales   623,344    8,099,516 
Impairment of nonfungible token assets   (119,139)   (408,015) Other income 
 2,215,323    34,865  Interest income   -    7,115  Interest expense   -  
 (50,717) Total other income (expense), net   2,719,528    7,682,764         
    Provision for income taxes   -    -  Net loss  $(3,358,533)  $(2,374,278)   
         Weighted average common shares outstanding - basic and diluted 
 694,127,771    939,359,161  Net income (loss) per common share - basic and
diluted  $(0.005)  $(0.003)

 

See accompanying independent auditor’s report and notes, which are an integral
part of these consolidated financial statements

 

F-4

 

 

MODE MOBILE, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the years ended December 31, 2023 and 2022

 



 

   Series Seed   Common Stock   Additional           Total     Preferred Stock  
Class A   Class B   Class C   Class AAA   Paid-in   Treasury   Accumulated  
Stockholders’     Shares   Amount   Shares   Amount   Shares   Amount   Shares  
Amount   Shares   Amount   Capital   Stock   Deficit   Equity                
                                           Balances at December 31, 2021 
 353,712,906   $35,371    646,825,014   $64,683    -   $-    -   $-    -   $-  
$4,830,432   $(150,000)  $1,414,331   $6,194,818  Exercise of options   -    -  
 -    -    5,301,936    530    -    -    -    -    (530)   -    -    - 
Stock-based compensation   -    -    -    -    -    -    -    -    -    -  
 491,716    -    -    491,716  Net loss   -    -    -    -    -    -    -    -  
 -    -    -    -    (2,374,278)   (2,374,278) Balances at December 31, 2022 
 353,712,906    35,371    646,825,014    64,683    5,301,936    530    -    -  
 -    -    5,321,618    (150,000)   (959,947)   4,312,255  Issuance of Class C
common shares pursuant to royalty liability   -    -    -    -    -    -  
 10,993,629    1,099    -    -    285,956    -    -    287,056  Issuance of
Class AAA common stock pursuant to Regulation CF offering   -    -    -    -  
 -    -    -    -    60,980,343    6,098    5,138,492    -    -    5,144,590 
Exercise of options   -    -    -    -    4,660,502    466    -    -    -    -  
 4,270    -    -    4,736  Stock-based compensation   -    -    -    -    -  
 -    -    -    -    -    847,243    -    -    847,243  Offering costs   -  
 -    -    -    -    -    -    -    -    -    (3,171,573)   -    -  
 (3,171,573) Net loss   -    -    -    -    -    -    -    -    -    -    -  
 -    (3,358,533)   (3,358,533) Balances at December 31, 2023   353,712,906  
$35,371    646,825,014   $64,683    9,962,438   $996    10,993,629   $1,099  
 60,980,343   $6,098   $8,426,006   $(150,000)  $(4,318,480)  $4,065,773 

 

See accompanying independent auditor’s report and notes, which are an integral
part of these consolidated financial statements.

 

F-5

 

 

MODE MOBILE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2023 and 2022

 



 

   Year Ended     December 31,     2023   2022  Cash flows from operating
activities:           Net loss  $(3,358,533)  $(2,374,278) Adjustments to
reconcile net loss to net cash provided used in operating activities:          
Depreciation and amortization   50,100    86,995  Loss on disposal of assets 
 17,944    -  Realized gains on cryptocurrency sales   (623,344)   (8,099,516)
Bad debt   219,102    555,000  Impairment of nonfungible token assets 
 119,139    408,015  Impairment expense   7,092    -  Stock-based compensation 
 847,243    491,716  Royalty payments   -    1,900,000  Forgiveness of royalty
liability   (1,612,944)      Changes in operating assets and liabilities:      
    Accounts receivable   427,515    2,937,885  Prepaid expenses and other
current assets   254,989    (150,798) Inventory   (302,534)   (97,895) Other
receivables   (79,371)   -  Accounts payable   195,241    (2,207,304) Accrued
expenses and other current liabilities   691,308    82,951  Deferred revenue 
 -    (600,000) Net cash used in operating activities   (3,147,055) 
 (7,067,229) Cash flows from investing activities:           Proceeds from
cryptocurrency sales   706,250    8,831,694  Purchases of nonfungible token
assets   -    (578,214) Purchase of property and equipment   (17,414)   (6,850)
Deposits   1,150    (1,150) Net cash provided by investing activities 
 689,986    8,245,480  Cash flows from financing activities:           Deferred
offering costs   214,506    (205,586) Issuance of common stock, net of offering
costs   1,973,017    -  Exercise of options   4,736    -  Net cash used in
financing activities   2,192,259    (205,586) Net change in cash and cash
equivalents   (264,809)   972,665  Cash and cash equivalents at beginning of
period   2,788,854    1,816,189  Cash and cash equivalents at end of period 
$2,524,045   $2,788,854              Supplemental disclosure of cash flow
information:           Cash paid for income taxes  $-   $-  Cash paid for
interest  $-   $-              Supplemental disclosure of cash flow
information:           Issuance of Class C common shares pursuant to royalty
liability  $287,056   $-  Issuance of $CRNC tokens pursuant to royalty
liability  $1,612,944   $- 

 

See accompanying independent auditor’s report and notes, which are an integral
part of these consolidated financial statements

 

F-6

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 



 

1. NATURE OF OPERATIONS

 

Mode Mobile, Inc. (collectively, the “Company” or “Mode Mobile”) is a technology
company that operates the Mode EarnOS enabling users the ability to earn rewards
on a single platform for interacting with digital content on their smartphones.
The Company also offers the Mode EarnPhone, a smartphone embedded with the
Company’s EarnOS software for a more integrated and enhanced earnings
experience. The consolidated financial statements consist of the following
entities (each an “Entity”, collectively the “Entities”):

 

●Mode Mobile, Inc., a Delaware Corporation organized on April 23, 2015. Mode
Mobile, Inc. is a holding company which owns 100% of Mode Mobile, LLC’s
membership interests. Mode Mobile, Inc. was previously known as Nativ Mobile
Inc. before a name change on October 25, 2022 and prior to that, was known as
Nativ Mobile, LLC before a name change on February 25, 2021.

 

●Mode Mobile, LLC, a Delaware Limited Liability Company organized on April 25,
2017 and is a 100% wholly owned subsidiary of Mode Mobile, Inc. Mode Mobile, LLC
was organized to develop an earnings ecosystem where users would be rewarded for
their time, attention and data. Mode Mobile, LLC was previously known as Current
Mobile, LLC before a name change on February 4, 2022 and prior to that, was
known as Current Media, LLC before a name change on March 10, 2021.

 

●Mode Phone, LLC, an Illinois Limited Liability Company organized on November
10, 2020 and is a 100% wholly owned subsidiary of Mode Mobile, Inc. Mode Phone,
LLC was organized to build out and support the Company’s smartphone business,
which focuses on the marketing and distribution of the Mode Earn Phone.

 

●Current (Gibraltar) Limited (“CGL”), a Gibraltar Company organized on June 19,
2018. The Entity was organized to develop a rewards protocol, the purpose of
which is intended to be used as a rewards distribution mechanism through a deep
partnership with Mode Mobile and its user base. Mode Mobile, Inc has 100% voting
rights and 0% economic rights to CGL.

 

The above entity structure has been in effect since February 25, 2021, on which
date the Company consummated a corporate reorganization transaction (the
“Reorganization”) where, among other things, Mode Mobile, Inc. converted its
corporate status from a limited liability company to a C-corporation and became
a holding company for the Company’s operating entities. Prior to the
consummation of the corporate reorganization transaction, MobileX Labs, LLC, a
now-defunct Indiana limited liability company formed in 2012, served as the
entity through which all profits and losses ultimately flowed for tax purposes.
On the effective date of the corporate reorganization, MobileX Labs, LLC was
dissolved in accordance with applicable state law. The primary purpose of the
corporate reorganization was to align the investments of the now-existing
preferred stockholders into one single entity.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accounting and reporting policies of the Company conform to accounting
principles generally accepted in the United States of America (“GAAP”). The
Company’s fiscal year is December 31.

 

The consolidated financial statements have been presented to reflect the capital
structure per the Reorganization on a retroactive basis.

 

Principles of Consolidation

 

These consolidated financial statements include the accounts of Mode Mobile and
its subsidiaries Mode Mobile, LLC, Mode Phone, LLC and CGL. All intercompany
transactions and balances have been eliminated in consolidation.

 

The Company evaluates its relationships with other entities to identify whether
they are variable interest entities (“VIE”) as defined by Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810,
Consolidation (“ASC 810”), and to assess whether it is the primary beneficiary
of such entities. If the determination is made that the Company is the primary
beneficiary, then that entity is consolidated.

 

F-7

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Reverse Stock Split

 

On February 28, 2023, the Board of Directors approved a 162-for-1 forward stock
split of its issued and outstanding shares of common and preferred stock.
Accordingly, all share and per share amounts for all periods presented in the
accompanying consolidated financial statements and notes thereto have been
adjusted retroactively, where applicable, to reflect this forward stock split.

 

Use of Estimates

 

The preparation of the Company’s consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the 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.
Significant estimates and assumptions reflected in these consolidated financial
statements include, but are not limited to, the valuations of common stock,
amortization of performance obligation liabilities and valuation of
cryptocurrency assets. The Company bases its estimates on historical experience,
known trends and other market-specific or other relevant factors that it
believes to be reasonable under the circumstances. On an ongoing basis,
management evaluates its estimates when there are changes in circumstances,
facts and experience. Changes in estimates are recorded in the period in which
they become known. Actual results could differ from those estimates.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash accounts in financial institutions, which, at times,
may exceed the Federal Depository Insurance Coverage of $250,000. As of December
31, 2023 and 2022, the Company had not experienced losses on these accounts and
held uninsured deposit amounts of $2,267,616 and $2,538,854 respectively.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three
months or less at the date of purchase to be cash equivalents.

 

Fair Value Measurements

 

Certain assets and liabilities of the Company are carried at fair value under
GAAP. Fair value is defined as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to
measure fair value must maximize the use of observable inputs and minimize the
use of unobservable inputs. Financial assets and liabilities carried at fair
value are to be classified and disclosed in one of the following three levels of
the fair value hierarchy, of which the first two are considered observable and
the last is considered unobservable:

 

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

 

●Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted
prices in active markets for similar assets or liabilities, quoted prices in
markets that are not active for identical or similar assets or liabilities, or
other inputs that are observable or can be corroborated by observable market
data.

 

●Level 3—Unobservable inputs that are supported by little or no market activity
that are significant to determining the fair value of the assets or liabilities,
including pricing models, discounted cash flow methodologies and similar
techniques.

 

The carrying values of the Company’s assets and liabilities approximate their
fair values.

 

F-8

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Accounts Receivable

 

The Company’s account receivables are due from customers primarily due to the
Company’s marketing revenue. The Company also maintains allowances for doubtful
accounts for estimated losses resulting from the inability of the Company’s
customers to make payments. The Company periodically reviews these estimated
allowances, including an analysis of the customers’ payment history and
creditworthiness, the age of the trade receivable balances and current economic
conditions that may affect a customer’s ability to make payments as well as
historical collection trends for its customers as a whole. Based on this review,
the Company specifically reserves for those accounts deemed uncollectible or
likely to become uncollectible. When receivables are determined to be
uncollectible, principal amounts of such receivables outstanding are deducted
from the allowance. As of December 31, 2023 and 2022, there was a $219,102 and
$555,000 respectively, allowance for doubtful accounts.

 

Inventory

 

The Company’s inventory consists of finished goods pertaining to the Company’s
hardware phones. The inventory is valued at the lower of cost (weighted-average)
or estimated net realizable value. As of December 31, 2023 and 2022, the Company
had deposits for future inventory of $0 and $387,620 respectively, which was
included in prepaid expenses and other current assets on the consolidated
balance sheets. Inventory balances are evaluated for excess quantities and
obsolescence on a regular basis by analyzing estimated demand, inventory on
hand, sales levels and other information and reduce inventory balances to net
realizable value for excess and obsolete inventory based on this analysis. At
the point of the write-down recognition, a new, lower cost basis for that
inventory is established, and subsequent changes in facts and circumstances do
not result in the restoration or increase in that newly established cost basis.
Management believes there was no impairment of inventory as of both December 31,
2023 and 2022.

 

Property and Equipment, Net

 

Property and equipment are stated at cost less accumulated depreciation and
amortization. Property and equipment consists of computer equipment, furniture
and fixtures and office equipment, and depreciation expense is recognized using
the straight-line method over the estimated useful life of five years for
computer equipment, seven years for furniture and fixtures, and five to fifteen
years for office equipment.

 

When assets are retired or otherwise disposed of, the cost, accumulated
depreciation and amortization are removed from the accounts and any resulting
gain or loss is reflected in the consolidated statements of operations in the
period realized. Maintenance and repairs that do not enhance or extend the
asset’s useful life are charged to operating expenses as incurred.

 

The following is a summary of property and equipment:

 

   December 31,     2023   2022  Computer equipment  $10,322   $51,460 
Furniture and fixtures   -    6,137  Office equipment   -    57,562  Total 
 10,322    115,159  Less: Accumulated depreciation   (1,338)   (86,420) Property
and equipment, net  $8,984   $28,739 

 

Depreciation expense was $12,132 and $11,059 for the years ended December 31,
2023 and 2022 respectively. During the year ended December 31, 2023, the Company
recorded loss on disposal of assets of $17,944 in the consolidated statement of
operations.

 

F-9

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Impairment of Long-Lived Assets

 

The Company evaluates the recoverability of the carrying value of long-lived
assets held and used in its operations for impairment on at least an annual
basis or whenever events or changes in circumstances indicate that their
carrying value may not be recoverable. When such factors and circumstances
exist, the Company compares the projected undiscounted future net cash flows
associated with the related asset or group of assets over their estimated useful
lives against their respective carrying amount. These projected future cash
flows may vary significantly over time as a result of increased competition,
changes in technology, fluctuations in demand, consolidation of its customers
and reductions in average sales prices. If the carrying value is determined not
to be recoverable from future operating cash flows, the asset is deemed
impaired, and an impairment loss is recognized to the extent the carrying value
exceeds the estimated fair value of the asset. The fair value of the asset or
asset group is based on market value when available, or when unavailable, on
discounted expected cash flows.

 

At December 31, 2023, management determined that certain events and
circumstances occurred that indicated that the carrying value of the Company’s
assets may not be recoverable and as such recorded an impairment expense of
long-lived assets of $7,092.

 

Intangible Assets

 

Intangible assets are amortized over the respective estimated lives, unless the
lives are determined to be indefinite and reviewed for impairment whenever
events or other changes in circumstances indicate that the carrying amount may
not be recoverable. Impairment testing compares carrying values to fair values
and, when appropriate, the carrying value of these assets is reduced to fair
value. Impairment charges, if any, are recorded in the period in which the
impairment is determined.

 

Intellectual Property

 

Intangible assets, with a cost of $227,807, consist of mobile charge screens and
monetization software, pursuant to an asset acquisition. The assets are
amortized over a useful life of three years. During the years ended December 31,
2023 and 2022, amortization expense was $37,968 and $75,936, respectively. As of
December 31, 2023 intangible assets, net of accumulated amortization of
$227,807, was $0.

 

Digital Assets – Cryptocurrencies and Nonfungible Tokens

 

The Company initially records cryptocurrency and nonfungible tokens (“NFTs”)
when received at cost, and subsequently adjusts each reporting period to the
lower of cost or fair value. The Company recognizes an impairment charge on
these assets arising from decreases in market value based upon Level 2 inputs
(see Note 4), being actively traded exchange’s closing prices at each reporting
date, whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Such impairment in the value of
cryptocurrencies and NFTs are recorded in the consolidated statements of
operations.

 

During the years ended December 31, 2023 and 2022, the Company recorded $119,139
and $408,015, respectively on impairment related to its NFTs.

 

The Company realizes gains and losses upon sale or transfer of cryptocurrencies
and NFTs, and are recorded under other income (expense) in the consolidated
statements of operations. The Company uses cryptocurrencies to convert
cryptocurrency holdings to other cryptocurrencies and US dollars as needed to
fund operations. The gains and losses recognized from non-cash 3transactions are
reflected as adjustments to reconcile to operating cash flows in the
consolidated statements of cash flows.

 

Software Development Costs

 

The Company expenses software development costs as incurred. Such software
development costs have been reflected as a reduction to the SAFT performance
obligation.

 

Revenue Recognition

 

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, and its
related amendments (collectively known as “ASC 606”), effective January 1, 2019
using the modified retrospective transition approach applied to all contracts.
Therefore, the reported results for the years ended December 31, 2023 and 2022
reflect the application of ASC 606. Management determined that there were no
retroactive adjustments necessary to revenue recognition upon the adoption of
the ASU 2014-09. The Company determines revenue recognition through the
following steps:

 

●Identification of a contract with a customer; ●Identification of the
performance obligations 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.

 

F-10

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Revenue is recognized when control of the promised goods or services is
transferred to customers, in an amount that reflects the consideration the
Company expects to be entitled to in exchange for those goods or services. As a
practical expedient, the Company does not adjust the transaction price for the
effects of a significant financing component if, at contract inception, the
period between customer payment and the transfer of goods or services is
expected to be one year or less.

 

The Company’s Mode Earn App enables users the ability to earn rewards on a
single platform for interacting with digital content on their smartphones. Mode
Mobile drives user engagement and monetizes user activity primarily through
digital marketing revenue from advertising partners (including ad networks, ad
exchanges, and brand partners). The Company satisfies performance obligations
and recognizes revenue over time.

 

The Company also generates revenue from proof-of-concept phone hardware sales.
Control transfers at a point in time, and as such, revenue is recognized upon
shipment. This includes the transfer of legal title, physical possession, the
risks and rewards of ownership, and customer acceptance. For proof-of-concept
subscriptions, control transfers over time, and as such, revenue is recognized
on a straight-line basis.

 

Revenue by source consisted of the following for the years ended December 31,
2023 and 2022:

 

   Year Ended     December 31,     2023   2022  Advertising  $7,127,559  
 24,411,911  Other (including hardware)   1,098,869    535,132  Net revenues 
$8,226,428   $24,947,043 

 

Contract Balances

 

The Company invoices customers based upon contractual billing schedules, and
accounts receivable are recorded when the right to consideration becomes
unconditional. Contract liabilities represent prepayments received in advance of
performance obligations met.

 

As of December 31, 2023 and 2022, the Company has deferred revenue of $0.

 

Cost of Net Revenues

 

Cost of net revenues consists primarily of user redemptions on the Mode Earn
App. The Company shares a portion of generated revenue with users and also
facilitates earnings and savings for users directly from advertising brands.
Monthly user redemption costs represent the dollar value of rewards redeemed by
users that are paid out by the Company. Cost of net revenues also includes
hosting costs, as well as the product and related fulfillment costs of hardware
products sold.

 

Cost of net revenue by source consisted of the following for the years ended
December 31, 2023 and 2022:

 

   Year Ended     December 31,     2023   2022  Advertising  $2,368,753  
$9,717,889  Other (including hardware)   572,808    531,716  Cost of net
revenues  $2,941,561   $10,249,605 

 

F-11

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Advertising and Promotion

 

Advertising and promotional costs are expensed as incurred. Advertising costs
were approximately $1,769,000 and $9,244,000 for the years ended December 31,
2023 and 2022, respectively, and are included in sales and marketing expenses in
the consolidated statements of operations.

 

Research and Development Costs

 

Costs incurred in the research and development of the Company’s technology and
products are expensed as incurred.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of payroll and
payroll-related benefits and taxes, professional services, administrative
expenditures, and information technology.

 

Accounting for Preferred Stock

 

ASC 480, Distinguishing Liabilities from Equity, includes standards for how an
issuer of equity (including equity shares issued by consolidated entities)
classifies and measures on its consolidated balance sheet certain financial
instruments with characteristics of both liabilities and equity.

 

Management is required to determine the presentation for the preferred stock as
a result of the redemption and conversion provisions, among other provisions in
the agreement. Specifically, management is required to determine whether the
embedded conversion feature in the preferred stock is clearly and closely
related to the host instrument, and whether the bifurcation of the conversion
feature is required and whether the conversion feature should be accounted for
as a derivative instrument. If the host instrument and conversion feature are
determined to be clearly and closely related (both more akin to equity),
derivative liability accounting under ASC 815, Derivatives and Hedging, is not
required. Management determined that the host contract of the preferred stock is
more akin to equity, and accordingly, liability accounting is not required by
the Company. The Company has presented preferred stock within stockholders’
equity.

 

Costs incurred directly for the issuance of the preferred stock are recorded as
a reduction of gross proceeds received by the Company, resulting in a discount
to the preferred stock. The discount is not amortized.

 

Accounting for Equity Units

 

Financial instruments issued by the Company are classified as equity only to the
extent that they do not meet the definition of a financial liability or
financial asset. The Company’s common shares are classified as equity
instruments. Common shares issued for consideration other than cash are valued
at the fair value of the assets received or the services rendered. If the fair
value of the assets received or services rendered cannot be reliably measured,
common shares issued for consideration will be valued at their fair value on the
date of issuance.

 

Stock-Based Compensation

 

The Company measures all stock-based awards granted to employees and directors
based on the fair value on the date of the grant and recognizes compensation
expense for those awards over the requisite service period, which is generally
the vesting period of the respective award. The Company issues stock-based
awards with only service-based vesting conditions and records the expense for
these awards using the straight-line method. For awards with performance-based
vesting conditions, the Company records the expense if and when the Company
concludes that it is probable that the performance condition will be achieved.

 

The Company classifies stock-based compensation expense in its statement of
operations in the same manner in which the award recipient’s payroll costs are
classified or in which the award recipient’s service payments are classified.

 

F-12

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes option-pricing model. The Company historically has been
a private company and lacks company-specific historical and implied volatility
information for its stock. Therefore, it estimates its expected stock price
volatility based on the historical volatility of publicly traded peer companies
and expects to continue to do so until such time as it has adequate historical
data regarding the volatility of its own traded stock price. The expected term
of the Company’s stock options has been determined utilizing the “simplified”
method for awards that qualify as “plain-vanilla” options. The risk-free
interest rate is determined by reference to the U.S. Treasury yield curve in
effect at the time of grant of the award for time periods approximately equal to
the expected term of the award. Expected dividend yield is based on the fact
that the Company has never paid cash dividends on common stock and does not
expect to pay any cash dividends in the foreseeable future. The Company
recognizes forfeitures as they occur as there is insufficient historical data to
accurately determine future forfeitures rates. Determining the appropriate fair
value of stock-based awards requires the input of subjective assumptions. The
assumptions used in calculating the fair value of stock-based awards represent
management’s best estimates and involve inherent uncertainties and the
application of management’s judgment. As a result, if factors change and
management uses different assumptions, stock-based compensation expense could be
materially different for future awards.

 

The Company records an expense for stock issued for services as an expense based
on the number of shares issued and fair value of the underlying stock issued to
the recipient.

 

Deferred Offering Costs

 

The Company complies with the requirements of FASB ASC 340-10-S99-1 with regards
to offering costs. Prior to the completion of an offering, offering costs are
capitalized. The deferred offering costs are charged to additional paid-in
capital or as a discount to debt, as applicable, upon the completion of an
offering or to expense if the offering is not completed.

 

As of December 31, 2023 and 2022, the Company had capitalized $340,704 and
$214,506 in deferred offering costs, respectively.

 

Income Taxes

 

The Company uses the liability method of accounting for income taxes as set
forth in ASC 740, Income Taxes. Under the liability method, deferred taxes are
determined based on the temporary differences between the financial statement
and tax basis of assets and liabilities using tax rates expected to be in effect
during the years in which the basis differences reverse. A valuation allowance
is recorded when it is unlikely that the deferred tax assets will not be
realized. The Company assesses its income tax positions and records tax benefits
for all years subject to examination based upon the evaluation of the facts,
circumstances and information available at the reporting date. In accordance
with ASC 740-10, for those tax positions where there is a greater than 50%
likelihood that a tax benefit will be sustained, the Company’s policy will be to
record the largest amount of tax benefit that is more likely than not to be
realized upon ultimate settlement with a taxing authority that has full
knowledge of all relevant information. For those income tax positions where
there is less than 50% likelihood that a tax benefit will be sustained, no tax
benefit will be recognized.

 

Leases

 

On January 1, 2022, the Company adopted ASC 842, Leases, as amended, which
supersedes the lease accounting guidance under Topic 840, and generally requires
lessees to recognize operating and finance lease liabilities and corresponding
right-of-use (ROU) assets on the balance sheet and to provide enhanced
disclosures surrounding the amount, timing and uncertainty of cash flows arising
from lease arrangements. The Company adopted the new guidance using a modified
retrospective method. Under this method, the Company elected to apply the new
accounting standard only to the most recent period presented, recognizing the
cumulative effect of the accounting change, if any, as an adjustment to the
beginning balance of retained earnings. Accordingly, prior periods have not been
recast to reflect the new accounting standard. The cumulative effect of applying
the provisions of ASC 842 had no material impact on accumulated deficit.

 

The Company elected transitional practical expedients for existing leases which
eliminated the requirements to reassess existing lease classification, initial
direct costs, and whether contracts contain leases. Also, the Company elected to
present the payments associated with short-term leases as an expense in
statements of operations. Short-term leases are leases with a lease term of 12
months or less. The adoption of ASC 842 had no impact on the Company’s balance
sheet.

 

F-13

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Net Loss per Share

 

Net earnings or loss per share is computed by dividing net income or loss by the
weighted-average number of common shares outstanding during the period,
excluding shares subject to redemption or forfeiture. The Company presents basic
and diluted net earnings or loss per share. Diluted net earnings or loss per
share reflect the actual weighted average of common shares issued and
outstanding during the period, adjusted for potentially dilutive securities
outstanding. Potentially dilutive securities are excluded from the computation
of the diluted net loss per share if their inclusion would be anti-dilutive. As
all potentially dilutive securities are anti-dilutive as of December 31, 2023
and 2022, diluted net loss per share is the same as basic net loss per share.
Potentially dilutive items included the following:

 

   December 31,     2023   2022  Series Seed convertible preferred stock 
 353,712,906    353,712,906  Stock options   212,564,838    226,757,718 
Warrants   812,500    -  Total potentially dilutive shares   567,090,244  
 580,470,624 

 

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments (“ASU 2016-13”). This standard establishes an
impairment model (known as the current expected credit loss (“CECL”) model) that
is based on expected losses rather than incurred losses. Under the new guidance,
an entity recognizes as an allowance its estimate of expected credit losses,
which is intended to result in a timelier recognition of losses. Under the CECL
model, entities will estimate credit losses over the entire contractual term of
the instrument (considering estimated prepayments, but not expected extensions
or modifications) from the date of initial recognition of the financial
instrument. Measurement of expected credit losses are to be based on relevant
forecasts that affect collectability. The scope of financial assets within the
CECL methodology is broad and includes trade receivables from certain revenue
transactions and certain off-balance sheet credit exposures. Different
components of the guidance require modified retrospective or prospective
adoption.

 

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic
326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging,
and Topic 825, Financial Instruments, which amends and clarifies several
provisions of Topic 326. In May 2019, the FASB issued ASU 2019-05, Financial
Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which amends
Topic 326 to allow the fair value option to be elected for certain financial
instruments upon adoption. ASU 2019-10 extended the effective date of ASU
2016-13 until December 15, 2022. The Company adopted this new guidance,
including the subsequent updates to Topic 326, on April 1, 2022 and the adoption
did not have a material impact on the Company’s financial statements and related
disclosures.

 

Management does not believe that any other recently issued, but not yet
effective, accounting standards could have a material effect on the accompanying
consolidated financial statements. As new accounting pronouncements are issued,
the Company will adopt those that are applicable under the circumstances.

 

3. GOING CONCERN

 

The Company has evaluated whether there are certain conditions and events,
considered in the aggregate, that raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date that the
consolidated financial statements are issued.

 

The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has net cash used
in operating activities of $3,358,533 and $7,067,229 for the years ended
December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company
had an accumulated deficit of $4,318,480. These factors, among others, raise
substantial doubt about the Company’s ability to continue as a going concern.
The Company’s ability to continue as a going concern for the next twelve months
is dependent upon its ability to generate sufficient cash flows from operations
to meet its obligations, which it has not been able to accomplish to date,
and/or to obtain additional capital financing. No assurance can be given that
the Company will be successful in these efforts. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities.

 

F-14

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

4. CRYPTOCURRENCIES AND NFTs

 

Due to the lack of authoritative guidance under GAAP, the Company accounts for
its holdings in cryptocurrency as intangible assets. As a result, the Company
initially measures the cryptocurrency at cost. Since there is no limit on the
useful life of the cryptocurrencies, they are classified as indefinite-lived
intangible assets.

 

Indefinite-lived intangible assets are not subject to amortization, but rather
are tested for impairment on an annual basis and more frequently if events or
circumstances change that indicate that it is more likely than not that the
asset is impaired. As a result, the Company recognizes decreases in the value of
its holdings in cryptocurrency. Both Bitcoin and Ether are traded on exchanges
in which there are observable prices in an active market. The Company considers
quoted prices below its carrying cost to be an impairment indicator. The quoted
price and observable prices are determined by the Company using a principal
market analysis in accordance with ASC 820, Fair Value Measurement.

 

The Company considers each cryptocurrency as a separate unit of account when
evaluating cryptocurrencies for impairment. The Company tracks the weighted
average unit cost of each cryptocurrency received or purchased, when performing
impairment testing and upon disposition either through sale or exchanged for
goods or services.

 

The Company designates certain cryptocurrency transactions as fair value hedges
to hedge volatility and market value risks for our cryptocurrencies. Fair value
hedge amounts included in the assessment of hedge effectiveness are recognized
in other income (expense), net, along with the offsetting gains and losses of
the related hedged items.

 

Cryptocurrencies

 

Realized gains on cryptocurrency holdings were $623,344 and $8,099,516 for the
years ended December 31, 2023 and 2022, respectively. The Company recorded no
impairment charges against its cryptocurrency holdings in 2023 or 2022.

 

The indefinite lived intangible activity for the year ended December 31, 2023
are as follows:

 

   Cryptocurrency     assets  Balance at December 31, 2021   840,761  Sales of
cryptocurrency   (8,831,694) Realized gains on cryptocurrency sales   8,099,516 
Balance at December 31, 2022  $108,583  Purchase of cryptocurrency   707  Sales
of cryptocurrency   (706,250) Realized gains on cryptocurrency sales   623,344 
Balance at December 31, 2023  $26,384 

 

F-15

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Nonfungible Token Assets

 

The Company owns a portfolio of NFT assets that were first acquired in early
2022. The following is a summary of NFT activity for 2023:

 

   Nonfungible     token assets  Balance at December 31, 2022  $170,199 
Purchases of NFTs   -  Impairment   (119,139) Balance at December 31, 2023 
$51,060 

 

5. SAFT PERFORMANCE OBLIGATION LIABILITY

 

In 2018, the Company (via Nativ Mobile, LLC) conducted and completed a token
offering pursuant to a side-by-side, U.S. Securities Act Regulation D and
Regulation S offering where it offered $CRNC tokens to investors in
consideration for their investments. Due to a disclosed delay in delivering
tokens to investors, the investments were executed pursuant to “Simple
Agreement(s) for Future Tokens” (“SAFTs”), which, among other things,
contemplated the Company delivering $CRNC tokens to investors in advance of a
network launch. The proceeds of this offering were contemplated to be used for
the further buildout of the $CRNC Network, which was designed to serve as a
robust earnings ecosystem for network participants (the “Project”). $CRNC tokens
were designed to serve as the in-network currency for the $CRNC earnings
ecosystem.

 

The initial SAFT proceeds of $26 million for developing the Project was recorded
as a performance obligation liability, net of costs incurred in satisfying the
performance obligations created in the token offering. The SAFTs do not provide
the holder with a security interest in the issuing entity, Current (Gibraltar)
Limited, or establish an economic or ownership right to the performance of
specific assets, nor is there a form of partnership, joint venture, agency or
any similar relationship between a token holder and the Company and/or other
individuals or entities involved with the Project. The tokens do not pay
interest and have no maturity date. The tokens confer only the right to services
in the Project and confer no other rights of any form with respect to us
including, but not limited to, any voting, distribution, redemption,
liquidation, proprietary (including all forms of intellectual property), or
other financial or legal rights.

 

The Company evaluated the terms of the Company’s $CRNC tokens and determined
that, when sold, these tokens represent an obligation by the Company with
counterparties that were determined to not be customers. Therefore, the Company
determined that the tokens, when sold, are similar by analogy to debt securities
under ASC 320, Investments – Debt and Equity Securities (“ASC 320”). ASC 320
applies to all debt securities and defines a debt security as any security
representing a creditor relationship. Based on its terms, the SAFT tokens are
not debt securities in legal form, but are considered an obligation (as defined
by FASB Concepts Statement No. 6, Elements of Financial Statements) of the
Company as issuer, since the Company represented that the proceeds raised would
be used to fund future development of the Project. Therefore, the Company
considers the $CRNC token, when sold, as an obligation in accordance with ASC
320, which effectively creates a creditor relationship to holders of its tokens.

 

The Company has considered the costs to satisfy its performance obligations and
determined that the Project represents a “funded software arrangement”, and the
parties who purchased tokens contributed towards the funding of the Project
represent collaborators and not customers. Therefore, software development costs
related to the Project were applied against the performance obligation.

 

The SAFT performance obligation liability was $0 as of both December 31, 2023
and 2022.

 

During the years ended December 31, 2023 and 2022, payments made on software
development for performance obligations totaled $0 and $0, respectively, which
were credited to operating expenses in the consolidated statements of
operations.

 

On account of the delay in the launch of the Project by introducing $CRNC tokens
into the Project ecosystem, the Company elected to pay investors a royalty based
on the Company’s financial performance in 2021. Based on what each individual
investor elected to receive, the consideration paid to investors on account of
the royalty were either additional $CRNC tokens or shares in the Company. The
value of the royalty was $1,900,000 and the number of $CRNC tokens or Company
shares an investor would receive was based on the original investment amount
paid at the time of the execution of the SAFTs. Approximately 86% of investors
elected to receive additional $CRNC tokens and 14% of investors elected to
receive Company shares. Accordingly, the Company has recognized a royalty
liability of $1,900,000 as of December 31, 2022. The liability will be released
based on the ultimate distribution means, increasing the performance obligation
for token issuances and recording paid-in capital for share issuances, when
distribution occurs in 2023. In the year ended December 31, 2023, a total of
$287,056 of the royalty was released in exchange of the issuance of 10,993,629
of the Company’s shares of Class C common stock. As of December 31, 2023, the
Company determined that no further obligation existed, and as such recorded a
gain on the royalty liability of $1,692,511 to other income in the consolidated
statements of operations and comprehensive loss. As of December 31, 2023, the
remaining balance of the royalty liability was $0.

 

F-16

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

In connection with its expected network launch of the $CRNC token in the second
quarter of 2024, the Company, through its affiliate, Current (Gibraltar)
Limited, will facilitate the creation of a foundation that will be responsible
for the governance of the token and the Project. As part of the creation of the
foundation, all $CRNC treasury tokens shall be transferred to the foundation and
all obligations due from the Company to token holders on account of their
respective investments due from the Company shall cease. By virtue of the
creation of the foundation, control over the governance of the $CRNC token shall
transfer from the Company to token holders.

 

6. STOCKHOLDERS’ EQUITY

 

Convertible Preferred Stock

 

The Company has issued Series Seed convertible preferred stock. The Company’s
certificate of incorporation, as amended and restated, authorized the Company to
issue a total of 388,800,000 shares of Preferred Stock, of which all are
designated as Series Seed Preferred Stock. The Preferred Stock have a par value
of $0.0001 per share.

 

The holders of the Preferred Stock have the following rights and preferences:

 

Voting

 

On any matter presented to the stockholders of the Company for their action or
consideration at any meeting of stockholders of the Company (or by written
consent of stockholders in lieu of a meeting), each holder of outstanding shares
of Preferred Stock shall be entitled to cast the number of votes equal to the
number of whole shares of Common Stock into which the shares of Preferred Stock
held by such holder are convertible as of the record date for determining
stockholders entitled to vote on such matter. Except as provided by law or by
the other provisions of the Company’s Amended and Restated Certificate of
Incorporation, holders of Preferred Stock shall vote together with the holders
of Common Stock as a single class and on an as converted to Common Stock basis.

 

The Company shall not, either directly or indirectly by amendment, merger,
consolidation or otherwise, do any of the following without the written consent
or affirmative vote of at least a majority of the outstanding shares of
Preferred Stock, voting together as a single class on an as-converted to Common
Stock basis:

 

-purchase or pay or declare any dividend on any capital stock other than (i)
dividends payable on the Common Stock solely in the form of additional shares of
Common Stock, (ii) redemptions of dividends or distributions on the Series Seed
Preferred stock and (iii) stock repurchased from former employees, officers,
directors or others who performed services for the Company -create or hold
capital stock in any subsidiary that is not a wholly-owned subsidiary

 

At any time when at least 70,596,360 shares of Series Seed Preferred Stock
remain outstanding, the Company shall not, either directly or indirectly by
amendment, merger, consolidation or otherwise, without the written consent or
affirmative vote of at least a majority of the outstanding shares of Preferred
Stock, voting together as a single class on an as-converted to Common Stock
basis, amend, alter or repeal any provision of the Company’s Amended and
Restated Certificate of Incorporation or Bylaws of the Company in a manner that
substantially and disproportionally adversely affects the powers, preferences or
rights of the Series Seed Preferred Stock.

 

Dividends

 

The Company shall not declare, pay or set aside any dividends on shares of any
other class or series of capital stock of the Company unless (in addition to the
obtaining of any consents required elsewhere in the Company’s Amended and
Restated Certificate of incorporation) the holders of the Preferred Stock then
outstanding shall first receive, or simultaneously receive, a dividend on each
outstanding share of Preferred Stock as defined in the Company’s Amended and
Restated Certificate of Incorporation. The Preferred Stock dividend rates
contain certain dilution protections.

 

F-17

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Liquidation

 

In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of shares of each series of Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Company
available for distribution to its stockholders and, in the event of a deemed
liquidation event, the holders of shares of each series of Preferred Stock then
outstanding shall be entitled to be paid out of the consideration payable to
stockholders in such deemed liquidation event or out of the available proceeds,
as applicable, on a pari passu basis among each other, the greater of (i) an
amount per share equal to one times the applicable Original Issue Price (as
defined below), plus any dividends declared but unpaid thereon, payable before
any payment shall be made to the holders of Common Stock by reason of their
ownership thereof (the amounts payable pursuant to this clause (i) are
hereinafter referred to as the “Preferred Liquidation Amounts”), or (ii) such
amount per share as would have been payable had all shares of such series of
Preferred Stock (and all shares of all other series of Preferred Stock that
would receive a larger distribution per share if such series of Preferred Stock
and all such other series of Preferred Stock were converted into Common Stock)
been converted into Common Stock immediately prior to such liquidation,
dissolution, winding up or deemed liquidation event. If, upon any such
liquidation, dissolution or winding up of the Company or deemed liquidation
event, the assets of the Company available for distribution to its stockholders
shall be insufficient to pay the holders of shares of Preferred Stock the full
amount to which they shall be entitled, the holders of shares of Preferred Stock
shall share ratably in any distribution of the assets available for distribution
in proportion to the respective amounts which would otherwise be payable in
respect of the shares held by them upon such distribution if all amounts payable
on or with respect to such shares were paid in full.

 

The Series Seed Original Issue Price is $0.01345679 per share, subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization with respect to the Series Seed
Preferred Stock. After payment of the Preferred Liquidation Amounts, remaining
assets are distributed ratably to holders of Common Stock.

 

The liquidation preference as of both December 31, 2023 and 2022 was $4,759,840.

 

Anti-Dilution Rights

 

Holders of Series Seed Preferred Stock have the benefit of anti-dilution
protective provisions that will be applied to adjust the number of shares of
Common Stock issuable upon conversion of the shares of the Preferred Stock. If
equity securities are subsequently issued by the Company at a price per share
less than the conversion price of a series of Preferred Stock then in effect,
the conversion price of the affected series of Preferred Stock will be adjusted
using a broad-based, weighted-average adjustment formula as set out in the
Company’s Amended and Restated Certificate of Incorporation. Preferred Stock has
certain protections against additional issuances of Common Stock.

 

Conversion

 

Each share of Series Seed Preferred Stock shall be convertible, at the option of
the holder thereof, at any time and from time to time, and without the payment
of additional consideration by the holder thereof, into such number of fully
paid and non-assessable shares of Class A Common Stock as is determined by
dividing the applicable original issue price by the applicable conversion price
in effect at the time of conversion. The Series Seed conversion price is
$0.01345679 per share.

 

Additionally, each share of Series Seed Preferred Stock will automatically
convert into shares of Class A Common Stock (i) immediately prior to the closing
at a price of at least 3 times the Series Seed Original Issue Price of a firm
commitment underwritten public offering, registered under the Securities Act of
1933, as amended (the “Securities Act”) or (ii) a vote or written consent of a
majority of the outstanding shares of Preferred Stock, voting together as a
single class on an as-converted to Common Stock basis, and a vote of the key
holders of common stock, as defined in the Company’s Amended Articles of
Incorporation.

 

F-18

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Common Stock

 

The Company authorized 2,100,000,000 shares of Class A Common Stock, 243,000,000
shares of Class B Common Stock, 12,150,000 shares of Class C Common Stock and
600,000,000 shares of Class AAA Common Stock at $0.0001 par value as of December
31, 2023.

 

The holders of the Class A common stock are entitled to one vote for each share
of such stock held at all meetings of stockholders. There shall be no cumulative
voting, and the holders of shares of Class B, Class C and Class AAA common stock
shall not be entitled to vote. The holders of record of Class A Common Stock
exclusively shall be entitled to elect all directors of the Company.

 

The Company shall not declare, pay or set aside any dividends on shares of any
other class or series of capital stock of the Company unless (in addition to the
obtaining of any consents required elsewhere in the Company’s Amended and
Restated Certificate of Incorporation) the holders of the Preferred Stock then
outstanding shall first receive, or simultaneously receive, a dividend on each
outstanding share of Preferred Stock as defined in the Company’s Amended and
Restated Certificate of Incorporation.

 

Additionally, each share of Class B Common Stock, Class C Common Stock or Class
AAA Common Stock will automatically convert into shares of Class A Common Stock
(i) immediately prior to the closing of a firm commitment underwritten public
offering, registered under the Securities Act of 1933, as amended (the
“Securities Act”) or (ii) upon election from the Company’s board of directors..

 

During the years ended December 31, 2023 and 2022, option holders exercised
4,086,698 and 5,301,936 options for shares of Class B common stock for no
proceeds, respectively. During the year ended December 31, 2023, the Company
issued 573,804 shares of Class B common stock pursuant to exercises of stock
options for proceeds of $4,736.

 

During the year ended December 31, 2023, the Company issued 10,993,629 shares of
Class C common stock pursuant to the partial release of its royalty liability
for a total value of $270,489 (see Note 5).

 

During the year ended December 31, 2023, the Company issued 60,980,343 shares of
Class AAA common stock for gross proceeds of $5,144,590 pursuant to a Regulation
CF offering. In connection with the offering, the Company incurred $3,171,573 in
offering costs.

 

As of both December 31, 2023 and 2022, there were 646,825,014 shares of Class A
Common Stock issued and outstanding. As of December 31, 2023 and 2022 there were
9,962,438 and 5,301,936 shares of Class B Common Stock issued and outstanding,
respectively. As of December 31, 2023 and 2022 there were 10,993,629 and 0
shares of Class C Common Stock issued and outstanding, respectively. As of
December 31, 2023 and 2022 there were 60,980,343 and 0 shares of Class AAA
Common Stock issued and outstanding, respectively.

 

7. STOCK-BASED COMPENSATION

 

2021 Stock Plan

 

The Company has adopted the 2021 Equity Incentive Plan (“2021 Plan”), which
provides for the grant of shares of stock options and restricted stock awards to
employees, non-employee directors, and non-employee consultants. The number of
shares authorized by the 2021 Plan was 243,000,000 shares as of December 31,
2023. The options have a term of ten years. The amounts granted each calendar
year to an employee or non-employee is limited depending on the type of award.
Stock options comprise all of the awards granted since the 2021 Plan’s
inception. Stock options granted under the 2021 Plan typically vest between
immediate and four-year periods. As of December 31, 2023, there were 20,472,724
shares available for future issuance.

 

F-19

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

A summary of information related to stock options is as follows:

 

   Options   Weighted Average Exercise Price   Intrinsic Value  Outstanding as
of December 31, 2021   221,424,516   $0.01   $-  Granted   50,793,480   $0.01  
    Exercised   (5,301,936)  $0.01       Forfeited   (40,158,342)  $0.01      
Outstanding as of December 31, 2022   226,757,718   $0.02   $2,494,359  Granted 
 230,071,248   $0.03       Exercised   (4,660,502)  $0.01       Forfeited 
 (239,603,626)  $0.01       Outstanding as of December 31, 2023   212,564,838  
$0.03   $5,528,287                   Exercisable as of December 31, 2023 
 154,239,041   $0.02   $3,084,781  Exercisable as of December 31, 2022 
 164,537,528   $0.02   $2,041,574 

 

   Year Ended     December 31,     2023   2022            Weighted average
grant-date fair value of options granted during period  $0.02   $0.02  Weighted
average duration (years) to expiration of outstanding options at period-end 
 9.18    8.45 

 

During the year ended December 31, 2023, option holders exercised 4,086,698
options for shares of Class B common stock for no proceeds.

 

During the year ended December 31, 2023, option holders exercised 573,804
options for shares of Class B common stock for $4,736 in proceeds.

 

The following table presents, on a weighted average basis, the assumptions used
in the Black-Scholes option-pricing model to determine the grant-date fair value
of stock options granted to employees and directors:

 

   Year Ended     December 31,     2023   2022  Risk-free interest rate 
 3.60%-4.67%   1.55%-3.91% Expected term (in years)   5.63    5.80  Expected
volatility   80.00%   80.00% Expected dividend yield   0%   0%

 

The total grant-date fair value of the options granted during the years ended
December 31, 2023 and 2022 was $4,579,425 and $917,571, respectively.
Stock-based compensation expense for stock options of $847,243 and $491,716,
respectively, was recognized under FASB ASC 718 for the years ended December 31,
2023 and 2022, respectively. Total unrecognized compensation cost related to
non-vested stock option awards amounted to $3,820,387 as of December 31, 2023
and will be recognized over a weighted average period of 4.22 years as of
December 31, 2023.

 

F-20

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

Classification

 

Stock-based compensation expense was classified in the consolidated statements
of operations as follows:

 

   Year Ended     December 31,     2023   2022  Sales and marketing  $169,449  
$82,243  Research and development   423,621    245,065  General and
administrative   254,173    164,408     $847,243   $491,716 

 

8. INCOME TAXES

 

Prior to February 25, 2021 (see Note 1), the Company was a limited liability
company. Accordingly, taxable income and losses flowed to the members and the
Company had no tax effects.

 

Deferred taxes are recognized for temporary differences between the basis of
assets and liabilities for financial statements and income tax purposes. The
differences relate primarily to net operating loss carryforwards and cash to
accrual differences. As of December 31, 2023 and 2022, the Company had net
deferred tax assets before valuation allowance of $1,996,554 and $1,103,327,
respectively. The following table presents the deferred tax assets and
liabilities by source:

 

   December 31,     2023   2022  Deferred tax assets:           Net operating
loss carryforwards  $1,785,741   $879,210  Cash to accrual differences 
 210,813    224,117  Valuation allowance   (1,996,554)   (1,103,327) Net
deferred tax assets  $-   $- 

 

The Company recognizes deferred tax assets to the extent that it believes that
these assets are more likely than not to be realized. In making such a
determination, the Company considers all available positive and negative
evidence, including future reversals of existing taxable temporary differences,
projected future taxable income, tax-planning strategies, and results of recent
operations. The Company assessed the need for a valuation allowance against its
net deferred tax assets and determined a full valuation allowance is required
due to cumulative losses through December 31, 2022, and no history of generating
taxable income. Therefore, valuation allowances of $1,996,554 and $1,103,327
were recorded as of December 31, 2023 and 2022, respectively. Valuation
allowance increased by $893,227 and $407,823 during the years ended December 31,
2023 and 2022, respectively. Deferred tax assets were calculated using the
Company’s combined effective tax rate, which it estimated to be 28.0%. The
effective rate is reduced to 0% for 2023 and 2022 due to the full valuation
allowance on its net deferred tax assets.

 

The Company’s ability to utilize net operating loss carryforwards will depend on
its ability to generate adequate future taxable income. At December 31, 2023 and
2022, the Company had net operating loss carryforwards available to offset
future taxable income in the amounts of $6,381,382 and $3,141,878, respectively.
Pursuant to change in control rules associated with the merger, the Company may
be at risk of losing the ability to utilize pre-merger net operating loss
carryforwards.

 

The Company has evaluated its income tax positions and has determined that it
does not have any uncertain tax positions. The Company will recognize interest
and penalties related to any uncertain tax positions through its income tax
expense.

 

The Company may in the future become subject to federal, state and local income
taxation though it has not been since its inception, other than minimum state
tax. The Company is not presently subject to any income tax audit in any taxing
jurisdiction, though its 2022-2023 tax years remain open to examination.

 

F-21

 

 

MODE MOBILE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022

 

 

9. COMMITMENTS AND CONTINGENCIES

 

Contingencies

 

The Company may be subject to pending legal proceedings and regulatory actions
in the ordinary course of business. The results of such proceedings cannot be
predicted with certainty, but the Company does not anticipate that the final
outcome, if any, arising out of any such matters will have a material adverse
effect on its business, financial condition or results of operations.

 

10. SUBSEQUENT EVENTS

 

Regulation A+ Offering

 

The Company intends to offer up to $75,000,000 of securities in an offering
exempt from registration under Regulation A+ pending qualification from the US
Securities and Exchange Commission. On March 28, 2024, the Company filed a Form
1-A Offering Statement for a maximum offering of $75 million. The Company
received one round of comments from the SEC and has responded to those comments
on and anticipates receiving SEC approval within the next few months.

 

Changes in Share Capital

 

In January 2024, the Company amended Article Four of its Amended and Restated
Certificate of Incorporation to update its total authorized stock to the
following: 3,005,150,000 shares of Common Stock, $0.0001 par value per share –
consisting of 2,125,000,000 shares of Class A Common Stock, 268,000,000 shares
of Class B Common Stock, 12,150,000 shares of Class C Common Stock, and
600,000,000 shares of Class AAA Common Stock, and 388,800,000 shares of
Preferred Stock, $0.0001 par value per share.

 

Securities Offering

 

Subsequent to the balance sheet date and through April 23, 2024, the Company has
received an additional $381,671 in proceeds pursuant to the Regulation D
offering, and $170,900 pursuant to a Regulation S offering.

 

Management has evaluated subsequent events through April 23, 2024, the date the
financial statements were available to be issued. Based on this evaluation, no
additional material events were identified which require adjustment or
disclosure in these consolidated financial statements.

 

F-22