June 10, 2019
Adi Sideman
President, Chief Executive Officer and Director
YouNow, Inc.
245 5th Avenue, 6th Floor
New York, New York 10016
Re: YouNow, Inc.
Amendment No. 3 to
Draft Offering Statement on Form 1-A
Submitted May 17, 2019
CIK 0001725129
Dear Mr. Sideman:
We have reviewed your amended offering statement and have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by amending your offering statement and
providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response.
After reviewing any amendment to your offering statement and the
information you
provide in response to these comments, we may have additional comments. Unless
we note
otherwise, our references to prior comments are to comments in our May 2, 2019
letter.
Draft Offering Statement on Form 1-A
General
1. We note your responses to comments 1 and 8. We continue to evaluate your
responses
and may have further comment.
2. We note your responses to comments 4, 5, and 6 with respect to various
issues relating to
the Investment Company Act of 1940. While we do not have any further
comments about
these issues at this time, our decision not to issue additional comments
should not be
interpreted to mean that we either agree or disagree with your responses.
Adi Sideman
FirstNameInc.
YouNow, LastNameAdi Sideman
Comapany NameYouNow, Inc.
June 10, 2019
June 10, 2019 Page 2
Page 2
FirstName LastName
Dilution, page 50
3. We note your response to comment 9. Please disclose why total tokens
purchased of
249,524,060 as presented in your dilution table does not reconcile to
total tokens issued
and issuable of 249,570,459 as disclosed on page 116.
Critical Accounting Policies and Significant Judgments and Estimates, page 62
4. We note your descriptions of the Props Network and Props Live Video
App beginning on
pages 97 and 106 and your reference to the following: 1) the Props
Live Video App, 2) the
Props Network, 3) the Props Blockchain (i.e. a sidechain of the
Ethereum Blockchain), 4)
the Ethereum Blockchain, and 5) the open source software ("Props
Blockchain") and
network infrastructure. Please clarify the nature of each of these
technologies and
distinction between them, including how each technology interacts with
or relies on the
other as well as how Props Tokens are integrated within the
technologies and or (Props)
network infrastructure. If any of the terms are used interchangeably,
please clarify the
same for us.
5. We note your response to comments 14, 15, and 16, including your
reference that token
issuances will be recorded on the Ethereum blockchain. Please clarify
the company's
obligations associated with the delivery of the tokens, including how,
when and to what
distributed ledgers the token issuances are recorded (e.g., are tokens
recorded to the Props
Blockchain or other blockchain in addition to the Ethereum Blockchain)
and how the
company ultimately satisfied its obligation to issue the token. In
this regard, tell us if the
Props Blockchain or other respective distributed network was developed
and functioning
at the time the tokens (or related SAFTs) were sold or issued to token
holders.
6. We note your response that company has no obligation to provide the
future or existing
features of the token as described by the company to the token
holders. Please tell us
whether the company has any obligation to the token holders following
delivery of the
token to provide access to, or minimum level of functionality within
the Props Network,
Props Live Video App, or other technology.
7. We note your disclosure of Props Token transfers in the Secondary
Markets on page 90.
Please clarify when and whether a token holder can transfer their
tokens to another
counterparty outside of your Props Blockchain (e.g., through the
Ethereum network or
some other means) and if so, address the following:
Tell us how the transfer of tokens would be tracked or recorded on
the YouNow
network;
Tell us whether the other counterparty would be able to then
utilize the tokens on your
network; and
Adi Sideman
FirstNameInc.
YouNow, LastNameAdi Sideman
Comapany NameYouNow, Inc.
June 10, 2019
June 10, 2019 Page 3
Page 3
FirstName LastName
To the extent the token purchaser subsequently transfers its
token, describe whether
the rights/features of the token transfer along with the
respective tokens or remain with
the initial token purchaser.
8. We note your response to comment 13 indicating the company is not
obligated to
repurchase Props Tokens delivered to a token holder. Please clarify
whether there are any
scenarios where token holders may require refund of the proceeds paid
to the company,
aside from DPA holders, either in the event the Props Network is not
built out, does not
maintain functionality, or otherwise. If such scenarios exist, please
describe.
Description of Business
Assignment, Decentralization, page 121
9. We note your response to comment 25 and your revised disclosure in
this section,
including the statement that any significant change to the platform
would "require . . . the
substantial support of our community of users and Props Token
holders." Please revise to
clarify whether users and Props Token holders will have any
enforceable rights with
respect to decisions regarding significant changes to the platform. To
the extent that they
have no such rights, please so state.
Exhibits
10. We note that section 10.2 of your Second Amended and Restated
Investors' Rights
Agreement and section 3.4 of the Voting Agreement contain jury trial
waivers, and that
the introductory language and section 17 of the YouNowTerms of Use and
section 18 of
the Props PBC Token Grant Agreement contain mandatory arbitration
provisions. Please
revise your offering statement to:
Further describe each jury trial waiver and mandatory arbitration
provision, including
how it will impact your investors;
Describe any questions as to enforceability under federal and
state law;
Clarify whether each such provision applies to claims under the
federal securities laws
and whether it applies to claims other than in connection with
this offering;
To the extent the provision applies to federal securities law
claims, please revise the
disclosure and each of the agreements to state that by agreeing to
each such provision,
investors will not be deemed to have waived the company's
compliance with the
federal securities laws and the rules and regulations thereunder;
and
Clarify whether purchasers of interests in a secondary transaction
would be subject to
each such provision.
Adi Sideman
YouNow, Inc.
June 10, 2019
Page 4
11. We note that the introductory language and section 8.12 of the YouNow
Terms of Use and
section 5 of the Investment Representation Statement included as
Exhibit B of the Props
PBC Token Grant Agreement contain representations that persons subject
to such
agreements have reviewed the offering circular. Please note that it is
inappropriate to
require investors to represent that they have read or reviewed the
offering materials that
you provided to them and remove these statements.
12. We also note that exhibits 4.1 and 4.2 also contain various
disclaimers and limitations of
liability. Please clarify that none of these provisions constitute
waivers of any right under
the federal securities laws or advise. In addition, we note that these
agreements contain
indemnification provisions. Please revise your offering circular to
highlight the various
applicable indemnification provisions in more detail and explain how
they apply to
investors. For example, please clarify under what circumstances and
for what amount an
investor should expect to indemnify the company and its
representatives. In addition,
please explain how that amount would be determined. Finally, please
include appropriate
risk factor that highlights the indemnification provisions.
You may contact Michelle Miller, Staff Accountant, at (202) 551-3368 or
Marc Thomas,
Staff Accountant, at (202) 551-3452 if you have questions regarding comments on
the financial
statements and related matters. Please contact Sara von Althann, Staff
Attorney, at (202) 551-
3207 or Erin E. Martin, Legal Branch Chief, at (202) 551-3391 with any other
questions.
FirstName LastNameAdi Sideman Sincerely,
Comapany NameYouNow, Inc.
Division of
Corporation Finance
June 10, 2019 Page 4 Office of
Financial Services
FirstName LastName