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Angel Studios, Inc. – ‘10-12G’ on 2/27/24

On:  Tuesday, 2/27/24, at 5:30pm ET   ·   Accession #:  1104659-24-28304   ·   File #:  0-56642

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/27/24  Angel Studios, Inc.               10-12G                 2:1.2M                                   Toppan Merrill/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12G      Registration Statement                              HTML   1.24M 
 2: EX-21.1     Subsidiaries List                                   HTML      5K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

Angel Studios, Inc.

(Exact name of Registrant as specified in its charter)

(760) 933-8437

(Registrant’s telephone number, including area code)

Please send copies of all correspondence to:

T. Rhys James, Esq.
Kathryn A. Lawrence, Esq.
Williams Mullen
200 South 10^th Street, Suite 1600
Richmond, Virginia 23219
(804) 420-6016

Securities to be registered under Section 12(b) of the Act:

None.

Securities to be registered under Section 12(g) of the Act:

Class B Common Stock, $0.001 par value

Class C Common Stock, $0.001 par value

(Title of Class)

Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the Company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

TABLE OF CONTENTS

EXPLANATORY NOTE

Angel Studios, Inc. is filing this Registration Statement on Form 10 (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to register under Section 12(g) of the Exchange Act and comply with applicable requirements thereunder.

When used in this Registration Statement, (i) use of the words “we,” “us,” “the Company,” “Angel Studios,” or “our” refers to Angel Studios, Inc. and its wholly-owned subsidiaries, except where the context otherwise requires; and (ii) “Common Stock” refers collectively to the Company’s Class A Common Stock, $0.001 par value (the “Class A Common Stock”), Class B Common Stock, $0.001 par value (the “Class B Common Stock”), Class C Common Stock, $0.001 par value (the “Class C Common Stock”) and Class F Common Stock, $0.001 par value (the “Class F Common Stock”).

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

This Registration Statement does not constitute an offer of securities of the Company. Once this Registration Statement has been deemed effective, we will be subject to the requirements of Section 13(a) of the Exchange Act, including the rules and regulations promulgated thereunder, which will require us, among other things, to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act. Additionally, we will be subject to the proxy rules in Section 14 of the Exchange Act and the Company, trustees, executive officers, and principal shareholders will be subject to the reporting requirements of Sections 13 and 16 of the Exchange Act.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Registration Statement contains certain forward-looking statements that are subject to various risks and uncertainties.  Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “might,” “will,” “should,” “plan,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information.  Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain.  Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements.  Factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash available for dividends, cash flows, liquidity and prospects include, but are not limited to, the factors referenced in this Registration Statement, including those set forth below.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Registration Statement. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this Registration Statement.  The matters summarized below and elsewhere in this Registration Statement could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements. Accordingly, we cannot guarantee future results or performance.  Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forward-looking statements after the date of this Registration Statement, whether as a result of new information, future events or otherwise.

Item 1. Business.

General

Angel Studios, Inc., a Delaware corporation (“Angel Studios,” “we,” “our,” “us,” or the “Company”), was founded in 2013 by four brothers, Neal, Daniel, Jeffrey, and Jordan Harmon. As fathers of young children, they were searching for high-quality films and TV shows that were true, honest, noble, just, authentic, lovely, admirable, and excellent, or, in other words, stories that amplify light.

Angel Studios’ vision is to be the home of stories that amplify light. Angel Studios is a non-traditional movie studio. We provide filmmakers with the technology to create, fund, and distribute original content without the traditional overhead of a big budget movie studio. Through our ecosystem, thousands of Angel Guild members choose which titles will be selected, refined, funded, and launched, after which the filmmakers and audiences are able to form passionate communities around their creative projects, making the story behind the story as important as the final project itself.

Business Plan

Angel Studios is a community-driven movie studio that empowers audiences to decide which stories get produced and distributed, while creating communities around each project. Filmmakers pitch projects to the Angel Guild, a community of over 250,000 Angel Investors and Angel Guild Subscribers from all over the world who are all on a singular mission: to find stories and filmmakers that amplify light. After passing the Angel Guild, “Angel Investors” fund the projects they are most excited to see (via the Angel Funding Portal). Post-production, films and TV shows are delivered directly to viewers and grow as fans share with others.

The first project launched for distribution was Dry Bar Comedy, a subsidiary and wholly-owned project of Angel Studios. Several hundred episodes later, Dry Bar Comedy is now one of the largest collections of clean stand-up comedy in the world and with over 5 billion views it is being enjoyed by audiences of all ages. Shortly thereafter, we partnered with The Chosen, Inc. (f/k/a The Chosen, LLC) (“The Chosen”) to produce a new type of television series where each season is funded by the audience. The series “The Chosen” went on to become the largest equity crowdfunded media project of all time, amassing an audience of more than 100 million and growing. “David,” another Angel Original scheduled for release in 2025, has since surpassed The Chosen as the largest equity crowdfunded media project of all time.

Building on our early successes, we have launched several new initiatives that focus on films and TV shows in markets currently underserved by the traditional studio system.

During 2023, Angel Studios made headlines with the launch of our new theatrical division and release of “His Only Son,” which debuted at #3 in the U.S. box office. On July 4, 2023, we once again made waves with the theatrical release of “Sound of Freedom,” which debuted at #1 in the U.S. box office. Subsequent release dates for international locations followed, with the film debuting at #1 in many of those locations as well. Our innovative theatrical strategy combines the power of the Angel Guild’s predictive capabilities in identifying movies that deserve a theatrical release with the efficiency of crowdfunding the prints and advertising (“P&A”) funds needed to market the film. In addition, we offer a community-based in-person cinema experience in partnership with renowned theaters such as AMC, Cinemark, Regal and others, and by using our Pay-it-Forward technology, after experiencing a film in the theater, people have the opportunity to share that experience with others by purchasing tickets for those who would not otherwise watch the movie at the theater.

We are regularly testing, introducing, and building new and exciting community-based features to help us achieve the goal of finding and sharing stories with the world that amplify light.

The Company was originally called VidAngel. In March 2021, the Company was renamed to Angel Studios.

History of the Business

Bankruptcy Reorganization

The Company reorganized under Chapter 11 of the Bankruptcy Code, with our reorganization plan becoming effective September 30, 2020, as further described below.

Bankruptcy Proceedings

On October 18, 2017, we filed a voluntary petition for relief under Chapter 11, Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Utah (the “Bankruptcy Court”), case number 17-29073 (the “Bankruptcy Case”). On September 4, 2020, the Bankruptcy Court confirmed the Company’s Joint Plan of Reorganization (the “Reorganization Plan”), which became effective on September 30, 2020 (the “Effective Date”). On November 17, 2020, the Bankruptcy Court issued a final decree closing the Bankruptcy Case.

The following is a summary of certain provisions of the Reorganization Plan and related Settlement Agreement (the “Settlement Agreement”), and is not intended to be a complete description of the Reorganization Plan. Complete versions of the Reorganization Plan and related Settlement Agreement can be found in the section entitled “Exhibits” under Item 2.1 of our Form 1-U filed with the Securities and Exchange Commission (the “SEC”) on September 15, 2020, and are incorporated by reference into this Registration Statement.

Reorganization Plan

The Reorganization Plan contemplates that:

The Company’s Product and/or Services

We currently operate by offering and producing our own original content, distributing original content, consulting with content filmmakers, maintaining engagement with our existing users, conducting research and development to create new intellectual property, and devising new methods to monetize existing intellectual property.

Original Content

We announced the “Angel Studios” concept in December 2016, and immediately began accepting submissions for digital distribution, applications to perform comedy routines for the Dry Bar Comedy series, and applications from filmmakers interested in helping us produce original content.

We have received thousands of inquiries and applications to partner on various projects. As of the date of this filing, we have produced and filmed hundreds of original comedy specials from various up-and-coming comedians. We have also licensed several motion pictures for exclusive theatrical and digital distribution.

Why are we making our own content? - We are not your typical media and entertainment company. We are guided by our “North Star” principle, which is to share stories with the world that amplify light. We do this by aligning our interests with those of the filmmakers and the audience and utilizing the wisdom of crowds, via the Angel Guild, to help guide decisions on which films and TV shows get selected for distribution. Members of the Angel Guild are allowed to vote on filmmaker submissions and are asked to decide whether or not the content amplifies light. If the content passes certain thresholds of the Angel Guild, we then seek to enter into agreements with the filmmakers to assist them in raising capital to fund the production, or release, of their film or TV show, while also securing the rights necessary to license, market and distribute it. We currently film, produce, and distribute all specials for our Dry Bar Comedy series from our own studio and offices in Provo, Utah.

In times of stress and worry, our original content has already helped hundreds of millions of people laugh out loud more than a billion times and provided tens of millions with hope during dark and uncertain times. We believe there has never been a better time to build a different media and entertainment company that allows You to “be part of stories that amplify light.”

Theatrical Distribution

In March 2023, we launched our very first motion picture theatrical release under our newly formed theatrical division, entitled “His Only Son.” The film was produced on a budget of approximately $250,000 before being licensed by Angel Studios for global distribution. Upon release, the film grossed an estimated $12 million domestically and hit #3 in the box office on opening weekend.

In July 2023, we released our second film, “Sound of Freedom.” Sound of Freedom quickly surpassed all industry expectations earning more than $185 million in gross domestic box office sales. Sound of Freedom has subsequently been releasing in various international territories, and has earned more than $250 million in gross worldwide box office sales.

We enter into agreements with exhibitors (theater owners) whereby the exhibitor retains a portion of the “gross box office receipts,” which are the admissions fees and taxes paid at the box office. The balance is remitted to Angel Studios, as the distributor.

Theatrical distribution typically involves significant risk and high upfront marketing costs, which can cause our financial results to vary from time to time. We incur significant marketing and advertising costs before and throughout a theatrical release in an effort to drive public awareness of the film and increase ticket sales. These costs are expensed as they are incurred, including in periods prior to the theatrical release of the film.

With our recent successes in theatrical distribution, we are continuing to see a large influx of filmmakers who are looking to work with us to release their films and/or TV shows into the market. We hope to leverage these opportunities to bring more shows to audiences around the world that amplify light.

Competition

We operate in a highly competitive environment and compete against much larger companies for rights to talent and intellectual property, as well as for the audience to whom we distribute our content to.

Theatrical distribution is an extremely competitive and potentially lucrative market for Angel Studios. We compete against much larger content providers and traditional movie studios with much bigger production and marketing budgets. Our success depends heavily on our ability to choose the right films and TV shows to license and release in theaters, as well as effectively and efficiently marketing that content to the intended audience.

Over-the-top, or OTT, media services has been one of the fastest growing segments in the media and entertainment industry. The market for video entertainment is intensely competitive and subject to rapid change. As the industry continues to evolve, we will continue to face strong competition in every aspect of our business. We compete against other digital content distribution platforms where customers can stream exclusive and non-exclusive content on demand.

A large portion of this competition comes from much larger companies that have resources and brand recognition that pose significant competitive challenges. Our success depends on our ability to differentiate how we identify, fund, and distribute our original content.

We compete against other entertainment video providers, such as multichannel video programming distributors (“MVPDs”), motion picture and television studios, streaming entertainment providers (including those that provide pirated content), and more broadly against other sources of entertainment that our customers could choose in their moments of free time. We also compete against streaming entertainment providers and content producers in obtaining content for our service.

While consumers may maintain simultaneous relationships with multiple entertainment sources, we strive for consumers to choose us in their moments of free time. By aligning the desires of the consumer with that of the creator, we believe that the audience can play a much larger role in shaping the future of content and are working to create better ways for filmmakers to leverage the wisdom of the crowd in their creative process.

Intellectual Property

We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as important to our success. In addition, we rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual documents, to protect our proprietary technologies. We also seek to protect our intellectual property rights by requiring all employees and independent contractors involved in developing intellectual property on our behalf to execute acknowledgments that all intellectual property generated or conceived by them on our behalf or related to the work they perform for us is our property, and assigning to us any rights, title, and interest, including intellectual property rights, they may claim or have in those works or property, to the extent allowable under applicable law.

Despite our best efforts to protect our technology and proprietary rights by enforcing our intellectual property rights, licenses, and other contractual rights, unauthorized parties might still copy or otherwise obtain and use our software and other technology. As we continue to expand our operations, effective intellectual property protection, including copyright, trademark and trade secret protection might not be available or might be limited in foreign countries. Significant impairment of our intellectual property rights could harm our business or our ability to compete. Further, companies in the communications and technology industries frequently own large numbers of patents, copyrights and trademarks and might threaten litigation or sue us based on alleged infringement or other violations of intellectual property laws. We are currently subject to, and expect to face in the future, allegations that we have infringed the intellectual property rights of third parties, including our competitors and non-practicing entities.

Governmental/Regulatory Approval and Compliance

We are not subject to any material governmental/regulatory approval or compliance with respect to the operation of our business.

Upon the effectiveness of this Registration Statement, we will be subject to the requirements of Section 13(a) of the Exchange Act, including the rules and regulations promulgated thereunder, which will require us, among other things, to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act. Additionally, we will be subject to the proxy rules in Section 14 of the Exchange Act and the Company, trustees, executive officers, and principal shareholders will be subject to the reporting requirements of Sections 13 and 16 of the Exchange Act.

Research and Development

During the fiscal years ended December 31, 2022 and 2021, we spent $12,345,518 and $4,939,002, respectively, on research and development activities relating to our technology. During the nine-month periods ended September 30, 2023 and 2022, we spent $9,794,724 and $9,261,812, respectively, on research and development activities relating to our technology.

Human Capital Resources

As of December 31, 2023, we employed 258 persons full time and three (3) persons part time. None of our employees are covered by a collective bargaining agreement. We believe we maintain a good working relationship with our employees, and we have not experienced any labor disputes. To further our long-term stability and financial success by attracting and retaining employees, directors, and consultants, our Stock Incentive Plan provides for the grant to key personnel of options to purchase shares of our Class F Common Stock and other equity-based awards, and our Performance Equity Plan provides for the grant to key personnel of options to purchase shares of our Class C Common Stock and other equity-based awards subject to certain performance vesting criteria.

Litigation

We currently are, and from time to time might again become, involved in litigation. Litigation has the potential to cause us to incur unexpected losses, some of which might not be covered by insurance but can materially affect our financial condition and our ability to continue business operations. See Item 8. Legal Proceedings, for a discussion of past and ongoing litigation.

Other

Our principal address is 295 W Center Street, Provo, Utah 84601. While our primary business operations are conducted and overseen from our principal office in the state of Utah, we have employees and independent contractors in multiple states across the country, and in select countries around the world, and our merchandise is sold from our online store to every state in the U.S.

Reporting Obligations

We will file our annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law. We are filing this Registration Statement with the SEC under the Exchange Act to register under Section 12(g) of the Exchange Act and comply with applicable requirements thereunder.

We intend to make available on our website (forthcoming) our annual reports on Form 10-K, quarterly reports on Form 10-Q and our current reports on Form 8-K when such Forms become available. The SEC also maintains a website (www.sec.gov) that contains such information. Our website will contain additional information about our business, but the contents of the website are not incorporated by reference in or otherwise a part of this Registration Statement.

Emerging Growth Company

We are currently not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because our securities are not registered under the Exchange Act. Rather, we are subject to the more limited reporting requirements under the Regulation A reporting regime until this Registration Statement is declared effective.

When we become subject to the ongoing reporting requirements of the Exchange Act, we will be and we will remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), until the earlier of (a) the last day of the fiscal year (i) following the fifth anniversary of the date of an initial public offering pursuant to an effective registration statement under the Securities Act, (ii) in which we have total annual gross revenue of at least $1.235 billion, or (iii) in which we are deemed to be a large accelerated filer, which means the market value of our shares held by non-affiliates exceeds $700 million as of the date of our most recently completed second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

For so long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including but not limited to the following:

We intend 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. Our election to use the phase-in periods may make it difficult to compare our consolidated 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.

Item 1A. Risk Factors.

General Risks of an Investment in Us

An investment in our Company is a speculative investment, and therefore, no assurance can be given that you will realize your investment objectives.

No assurance can be given that investors will realize a return on their investments in us or that they will not lose their entire investment. There is a risk that we will not be able to continue to successfully implement our business plan which could have an adverse effect on our ability to generate revenue and in turn, provide a return to investors. Further, we filed for bankruptcy in 2017 and as of September 30, 2020, the Reorganization Plan was confirmed and effective. As we obtained a chapter 11 bankruptcy discharge and although the terms of the Reorganization Plan require us to make quarterly payments over a period of 14 years beginning on the Effective Date, we are unable to predict the impact these payments and other terms of the Reorganization Plan and Settlement Agreement may have on our business, cash flow, liquidity, financial condition or capital structure. This includes all payment obligations under the promissory note payable to the Studios pursuant to the Settlement Agreement, which promissory note has a term of 14 years. For these reasons, each prospective investor in our Company should carefully read this Registration Statement. ALL SUCH PERSONS OR ENTITIES SHOULD CONSULT WITH THEIR ATTORNEY OR FINANCIAL ADVISOR PRIOR TO MAKING AN INVESTMENT.

We do not intend to pay dividends for the foreseeable future.

We intend to retain all of our earnings for the future operation and expansion of our business and do not anticipate making any cash distributions at any time in the foreseeable future. Further, we will not be permitted to pay cash distributions to our equity holders until such time as we have made all payments required under the Reorganization Plan, on which the final payment is not due to be made until July 15, 2034.

We are employing a business model with a limited track record, which may make our business difficult to evaluate.

We began as an audiovisual content filtering company. In 2021, in connection with the Reorganization Plan, we fully divested ourselves of the assets related to the content filtering business. Today, we operate by offering and producing our own original content, distributing original content, consulting with content filmmakers, maintaining engagement with our existing users, conducting research and development to create new intellectual property, and devising new methods to monetize existing intellectual property. Few if any peer companies exist, and none have yet established long-term track records that might assist us in predicting whether our business model can be implemented and sustained over an extended period of time. It may be difficult for you to evaluate our potential future performance without the benefit of established long-term track records from companies implementing a similar business model. Our ability to succeed and generate operating profits and positive operating cash flow will depend on our ability, among other things, to continue to:

We cannot be certain that our business strategy will be successful because this strategy is still relatively new and even if successful, we may face difficulty in managing our growth. We may encounter unanticipated problems as we continue to refine our business model, which may adversely affect our results of operations and financial condition.

We have a history of net losses, and the fact that we had positive net income during the years ended December 31, 2021 and December 31, 2020 in no way guarantees that we will be able to maintain profitability.

We recorded net income attributable to noncontrolling interests of $11,167,291 during the first nine months of 2023, a net loss of $13,710,708 in fiscal 2022, net income of $17,118,611 in fiscal 2021 and of $15,610 in fiscal 2020, and a net loss of $1,611,154 in fiscal 2019. Prior to 2020, we recorded a net loss in all prior reporting periods. If our ability to generate positive net income remains inconsistent in the future, the value of our Common Stock would likely be materially and adversely affected.

Our future indebtedness may limit our ability to declare and pay dividends and may affect our operations, including our ability to repay existing debt obligations.

We may seek debt financing to assist with the financing of our future operations. Our ability to make principal and interest payments with respect to any such debt incurred depends on future performance, which performance is subject to many factors, some of which will be outside of our control. In addition, most of such indebtedness will likely be secured by substantially all of our assets and will contain restrictive covenants that limit our ability to repay our existing debt obligations and to incur additional indebtedness. Payment of principal and interest on such indebtedness, as well as compliance with the requirements and covenants of such indebtedness, could limit our ability to repay existing debt obligations in a timely fashion, if at all. Such leverage may also adversely affect our ability to finance future operations and capital needs, or to pursue other business opportunities and make results of operations more susceptible to adverse business conditions. All of the above could limit our ability to declare and pay dividends.

We entered into a Settlement Agreement pursuant to which we issued a $62.4 million promissory note to the Studios, which requires us to pay $9.9 million over 14 years, and under certain circumstances we may be required to pay the entire balance, which could have a material adverse effect on our ability to continue business operations

We entered into a Settlement Agreement with certain parties under which we are subject to a $62.4 million Promissory Note (the “Note”), which requires us to pay $9.9 million over 14 years in 56 quarterly payments of $176,785.72 (with an option to reduce the payment to $7.8 million by paying it off in 3-5 years). Pursuant to the Settlement Agreement and the Note, if we are found to have violated certain conditions of the Settlement Agreement, specifically the unauthorized use of copyrighted works of the Studios, we may be responsible for the unpaid balance of the Note, which will remain outstanding for 14 years from the Effective Date, all of which could have a material adverse effect on us and our ability to continue business operations. If we fail to timely make any payment due under the Note (subject to the lesser settlement amount of $9.9 million), such failure to pay shall constitute a default. If we fail to cure the payment default within five (5) business days after a Notice of Default served by the Studios, the Studios shall be entitled to accelerate payment under the Note and foreclose as set forth in the Security Agreement/Compliance Lien, which would have a material adverse effect on our ability to continue business operations.

Risks Related to Our Business

The Company is in the process of becoming a reporting company with the SEC. The requirements of being a reporting company may strain our resources, divert management’s attention and affect our ability to attract and retain additional executive management and qualified members of our Board of Directors (the “Board”).

Pursuant to this Registration Statement, the Company is registering its Class B Common Stock and Class C Common Stock with the SEC under Section 12(g) of the Exchange Act, and thereby becoming a public reporting company. Becoming a reporting company will subject the Company to the reporting requirements of Section 13 of the Exchange Act, the proxy rules under Section 14 of the Exchange Act, as well as to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and other applicable securities rules and regulations. The costs of compliance with these rules and regulations and the time spent by our management on such compliance will result in a significant increase in our ongoing legal and financial compliance costs, professional fees (legal and accounting), and costs associated with internal staff, which we expect will greatly exceed those previously spent on securities compliance and may have a material adverse impact on our financial condition and results of operations. Therefore, the costs for these functions in previous years are not indicative of future costs.

Changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, increase legal and financial compliance costs and increase time expenditures for internal personnel. These laws, regulations and standards are subject to interpretation, in many cases due to their lack of specificity, and their application in practice may evolve over time as regulators and governing bodies provide new guidance. These changes may result in continued uncertainty regarding compliance matters and may necessitate higher costs due to ongoing revisions to filings, disclosures and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate regulatory or legal proceedings against us and our business may be adversely affected.

As a reporting company under these rules and regulations, we expect that it may also be more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified directors and officers.

A significant amount of our revenue has been derived from our Content License Agreement with The Chosen (the “Chosen Agreement”). The termination of the Chosen Agreement could reduce our revenues and adversely affect our operating results.

Historically, a significant amount of our revenue has been derived from distribution activities related to our Content License Agreement with The Chosen (the “Chosen Agreement”). We have received several notices of termination indicating that The Chosen is seeking to terminate the Chosen Agreement for certain alleged material breaches of contract thereunder. We strongly dispute all such alleged material breaches and intend to vigorously defend our interests in the matter. In addition, we are currently working with several new filmmakers on new projects. However, there is no guarantee that we will be able to continue to earn as much revenue from these new projects or from any upcoming projects as we do from the Chosen Agreement. If we are unable to continue to successfully monetize projects other than those arising under the Chosen Agreement, the termination of the Chosen Agreement would have a material adverse impact on our business, results of operations, and financial condition. See Item 2. Financial Information---Trends and Key Factors Affecting Our Performance for more information.

If our efforts to attract and retain customers are not successful, our business will be adversely affected.

We have experienced positive customer growth since launching our original content in December 2016. Our ability to continue to attract customers will depend, in part, on our ability to consistently provide our customers with compelling content choices and a quality experience for selecting and viewing our original content. Furthermore, the relative service levels, content offerings, pricing, and related features of competitors to our service may adversely impact our ability to attract and retain customers. If consumers do not perceive our service as valuable, including if we introduce new or adjust existing features, adjust pricing or service offerings, or change the mix of content in a manner that is not favorably received by them, we may not be able to attract and retain customers. In addition, many of our customers try our service resulting from word-of-mouth advertising from existing customers. If our efforts to satisfy our existing customers are not successful, we may not be able to attract new customers, and, as a result, our ability to maintain and/or grow our business will be adversely affected. Customers may cease to use our service for many reasons, including the need to cut household expenses, unsatisfactory availability of content, competitive services providing a better value or experience, and customer service issues not being satisfactorily resolved. We must continually add new customers both to replace departed customers and to grow our business beyond our current customer base. If we are unable to compete successfully with current and new competitors in retaining existing customers and attracting new customers, our business will be adversely affected. Further, if excessive numbers of customers cease using our service, we may be required to incur significantly higher marketing costs than we currently anticipate, to replace these customers with new customers.

The popularity of theatrical and streaming video on demand (“SVOD”) releases are difficult to predict and can change rapidly, leading to significant fluctuations in our revenues. A low public acceptance rate of our content may adversely affect our results of operations.

The production and distribution of feature films, SVOD and other content are inherently risky businesses, largely because the revenues derived from the sale or licensing of such content depend primarily on widespread public acceptance, which is difficult to predict. In addition, we must invest substantial amounts in the marketing of feature films and SVOD before we learn whether these feature films and streaming programs and products will reach anticipated levels of popularity and financial return with viewers.

The popularity of our content depends on many factors, only some of which are within our control. Examples include the quality and public acceptance of competing content available or released at or near the same time, the availability of alternative forms of leisure and entertainment activities, and our ability to maintain or develop strong brand awareness and target key audience demographics. If we are not able to create and distribute content that is popular with consumers and affiliates, our revenues may decline or fail to grow to the extent we anticipate when making investment decisions.

The popularity of our content is reflected in:

The underperformance of a feature film, particularly an “event” film (which typically has high production and marketing costs), can have an adverse impact on our results of operations in both the year of release and in the future.

The video industry is subject to rapid technological change. We must continue to enhance and improve our technology.

Our current software and related web-based technology is developed and in use. We must continue to enhance and improve the performance, functionality, and reliability of the systems upon which our business model is built. The development of any software is characterized by rapid technological change, rapid introduction or changes in user requirements and preferences, short development cycles, frequent introduction of new products and services, new technologies, and the emergence of new industry standards and practices that could render our existing technology obsolete. Our success will depend, in part, on our ability to continue to develop new technologies that enhance our existing technology, to address the varied needs of existing and new customers while also responding to technological advances and emerging industry standards and practices on a cost-effective and timely basis. The development of our technology involves significant technical and business risks. We may fail to use new technologies effectively or to adapt our proprietary technology and systems to customer requirements or emerging industry standards. If we are unable to adapt to changing market conditions, strategic partner and customer requirements or emerging industry standards, that will have a material adverse effect on our ability to succeed.

Changes in competitive offerings for entertainment video, including the potential rapid adoption of piracy-based video offerings, could adversely impact our business.

The market for entertainment video is intensely competitive and subject to rapid change. Through new and existing distribution channels, consumers have increasing options to access entertainment video. The various economic models underlying these channels include subscription, transactional, ad-supported, and piracy-based services. All have the potential to capture meaningful segments of the entertainment video market in the future. Piracy, in particular, threatens to damage our business, as its fundamental proposition to consumers is so compelling and difficult to compete against: virtually all content for free. Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth. Traditional providers of entertainment video, including broadcasters and cable network operators, as well as Internet based e-commerce entertainment video providers, are increasing their Internet-based video offerings. Several of these competitors have long operating histories, large customer bases, strong brand recognition and significant financial, marketing, and other resources. They may secure better terms from suppliers, adopt more aggressive pricing, and devote more resources to product development, technology, infrastructure, content acquisitions, and marketing. New competitors may enter the market or existing providers may adjust their services with unique offerings or approaches to providing entertainment video. Companies also may enter into business combinations or alliances that strengthen their competitive positions. If we are unable to successfully, or profitably, compete with current and new competitors, our business will be adversely affected, and we may not be able to increase or maintain market share, revenues, or profitability.

If we are not able to manage change and growth, our business could be adversely affected.

We are expanding our operations and scaling our service to effectively, and reliably, handle anticipated growth in both customers and features related to our service. We are building out crowd-sourcing expertise to help us select content to fund, create and distribute. If we are not able to manage the growing complexity of our business, including improving, refining, or revising our systems and operational practices related to our video operations, our business may be adversely affected.

If we fail to maintain or, in new markets establish, a positive reputation with customers concerning our service, including the content we offer and the way in which we allow the customer to help us choose the content that is ultimately added to the service, we may not be able to attract or retain customers, and our operating results may be adversely affected.

We believe that a positive reputation is important to attract and retain customers who have a number of choices for obtaining entertainment video. To the extent our content is perceived as low quality, or we fail to sufficiently differentiate our content offerings from our competitors, our ability to establish and maintain a positive reputation may be adversely impacted. Furthermore, to the extent our marketing, customer service and public relations efforts are not effective or create a negative consumer reaction, our ability to establish and maintain a positive reputation may be adversely impacted. As we expand into new markets, we need to establish our reputation with new customers. To the extent we are unsuccessful in creating positive impressions, our business in new markets may be adversely impacted.

Changes in how we market our service could adversely affect our marketing expenses and our customer base may be adversely affected.

We utilize a broad mix of marketing and public-relations programs, including social media sites such as Facebook, YouTube, X and Tik Tok, to promote our service to potential customers. We may limit or discontinue the use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that customers or potential customers deem certain marketing practices intrusive or damaging to our brand. If the available marketing channels are curtailed, our ability to attract new customers may be adversely affected.

If companies that promote our service determine that we negatively impact their businesses, decide to compete more directly with our business, enter a similar business, or choose to exclusively support our competitors, we may no longer have access to certain marketing channels. If we are unable to maintain or replace our sources of customers with similarly effective sources, or if the cost of our existing sources increases, our customer base and marketing expenses may be adversely affected.

We face risks, such as unforeseen costs and potential liability, in connection with content we acquire and/or distribute through our service.

As a distributor of content, we face potential liability for negligence, copyright and trademark infringement, or other claims based on the nature and content of the materials that we acquire and/or distribute. We also may face potential liability for content used in promoting our service, including marketing materials and features on our website such as customer reviews. To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately do not make available on our service, or if we become liable for content we acquire and/or distribute, our business may suffer. Litigation to defend such claims could be costly and the expenses and damages arising from any liability or unforeseen production risks could harm our operating results. We may not be indemnified or insured against such claims or costs of these types.

We rely upon a number of partners to make our service available on their devices.

We currently offer customers the ability to receive content through a host of Internet-connected screens, including TVs, digital video players, television set-top boxes and mobile devices. We have agreements with various tech companies and distributors to make our service available through the television set-top boxes of such service providers. We intend to continue to broaden our capability to transmit TV shows and movies to other platforms and partners over time. If we are not successful in maintaining existing and creating new relationships, or if we encounter technological, content licensing, regulatory or other impediments to delivering our content to our customers via those devices, our ability to grow our business could be adversely impacted. Furthermore, the devices are manufactured and sold by entities other than us and while these entities should be responsible for the devices' performance, the connection between us and those devices may nonetheless result in customer dissatisfaction toward the Company and such dissatisfaction could result in claims against us or otherwise adversely impact our business.

Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, could result in a loss or degradation of service, unauthorized disclosure of data, including customer and corporate information, or theft of intellectual property, including digital content assets, which could adversely impact our business.

Our reputation and ability to attract, retain and serve our customers is dependent upon the reliable performance and security of our computer systems and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, and cybersecurity breaches. Interruptions in these systems, or with the Internet in general, could leave our service unavailable or degraded, or otherwise hinder our ability to deliver content to our customers. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our service to existing and potential customers.

Our computer systems and those of third parties we use in our operations are vulnerable to cybersecurity breaches, including cyber-attacks such as computer viruses, denial of service attacks, physical or electronic break-ins and similar disruptions. These systems periodically experience directed attacks intended to lead to interruptions and delays in our service and operations as well as loss, misuse, or theft of data. Any attempt by hackers to obtain our data (including customer and corporate information) or intellectual property (including digital content assets), disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could harm our business, be expensive to remedy and damage our reputation. We have implemented certain systems and processes to thwart hackers and protect our data and systems. To date, hackers have not had a material impact on our service or systems; however, there can be no assurance that hackers may not be successful in the future. Our insurance does not cover expenses related to such disruptions or unauthorized access. Efforts to prevent hackers from disrupting our service or otherwise accessing our systems are expensive to implement and may limit the functionality of or otherwise negatively impact our service offering and systems. Any significant disruption to our service or access to our systems could result in a loss of customers and adversely affect our business and results of operation.

We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party Web hosting provider. In addition, we utilize third-party “cloud” computing services in connection with our business operations. We also utilize our own and third-party content delivery networks to help us deliver TV shows and movies in high volume to our customers over the Internet. Problems faced by us or our third-party Web hosting, "cloud" computing, or other network providers, including technological or business-related disruptions, as well as cybersecurity threats, could adversely impact the experience of our customers.

We rely upon certain third-party cloud computing service providers to operate certain aspects of our service and any disruption of or interference with our use of such services from our providers would impact our operations and our business would be adversely impacted.

Several third-party cloud computing services providers provide us with a distributed computing infrastructure platform for business operations, or what is commonly referred to as a "cloud" computing service. We have designed our software and computer systems to utilize data processing, storage capabilities, and other services provided by such providers. Currently, we run the vast majority of our computing using such third-party cloud computing services. Given this, along with the fact that we cannot easily switch our operations to another cloud provider, any disruption of or interference with our use of such services from our providers would impact our operations and our business would be adversely impacted.

If the technology we use in operating our business fails, becomes unavailable, or does not operate as expected, our business and operating results could be adversely impacted.

We utilize a combination of proprietary and third-party technology to operate our business. We also use technology to recommend and merchandise content to our consumers as well as to enable fast and efficient delivery of content to our customers and their various consumer electronic devices. For example, we have built and deployed our video on a content delivery network (“CDN”). To the extent Internet Service Providers, or ISPs, do not interconnect with our CDN, or if we experience difficulties in its operation, our ability to efficiently, and effectively, deliver our content to our customers could be adversely impacted and our business and results of operation could be adversely affected. We also utilize third party technology to help market our service, process payments, and otherwise manage the daily operations of our business. If our technology or that of third parties we utilize in our operations fails or otherwise operates improperly, our ability to operate our service, retain existing customers and add new customers may be impaired. Also, any harm to our customers’ personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition. See Item 1. Business---Intellectual Property.

If government regulations relating to the Internet or other areas of our business change, we may need to alter the manner in which we conduct our business, or incur greater operating expenses.

The adoption or modification of laws or regulations relating to the Internet or other areas of our business could limit or otherwise adversely affect the manner in which we currently conduct our business. In addition, the continued growth and development of the market for online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on us. If we are required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause us to incur additional expenses or alter our business model.

Changes in laws or regulations that adversely affect the growth, popularity, or use of the Internet, including laws impacting net neutrality, could decrease the demand for our service and increase our cost of doing business. Within such a regulatory environment, coupled with potentially significant political and economic power of local network operators, we may experience discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense or otherwise negatively affect our business.

Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our business.

We rely upon the ability of consumers to access our service through the Internet. If network operators block, restrict or otherwise impair access to our service over their networks, our service and business could be negatively affected. To the extent that network operators implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater operating expenses and our new customer acquisition and retention could be negatively impacted. Furthermore, to the extent network operators create tiers of Internet access service and either charge us for or prohibit us from being available through these tiers, our business could be negatively impacted.

Most network operators that provide consumers with access to the Internet also provide these consumers with multichannel video programming. As such, many network operators have an incentive to use their network infrastructure in a manner adverse to our continued growth and success. While we believe that consumer demand, regulatory oversight and competition will help check these incentives, to the extent that network operators are able to provide preferential treatment to their data as opposed to ours or otherwise implement discriminatory network management practices, our business could be negatively impacted.

Privacy concerns could limit our ability to collect and leverage our customer data and disclosure of customer data could adversely impact our business and reputation.

In the ordinary course of business, and in particular in connection with merchandising our service to our customers, we collect and utilize data supplied by our customers. We must comply with various international, federal, and state laws and regulations related to the handling, use and protection of data, and may become subject to additional legislation in the future. Any actual or perceived failure to comply with data privacy laws or regulations, or related contractual or other obligations, or any perceived privacy rights violation, could lead to investigations, claims, and proceedings by governmental entities and private parties, damages for breach of contract, and other significant costs, penalties, and other liabilities, as well as harm to our reputation and market position.

Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the Internet regarding users' browsing and other habits. Increased regulation of data utilization practices, including self-regulation or findings under existing laws that limit our ability to collect and use data, could have an adverse effect on our business. In addition, if we were to disclose data about our customers in a manner that was objectionable to them, our business reputation could be adversely affected, and we could face potential legal claims that could impact our operating results.

Our reputation and relationships with customers would be harmed if our customer data, particularly billing data, were accessed by unauthorized persons.

We maintain personal data regarding our customers. This data is maintained on our own systems as well as those of third parties we use in our operations. With respect to billing data, such as credit card numbers, we do not store such information on our servers, but rely on third party services that are Payment Card Industry Data Security Standard (“PCI DSS”) compliant for storing and accessing billing information. We take measures to protect against unauthorized intrusion into our customers’ data. Despite those measures, we, our payment processing services and other third-party services we use could experience an unauthorized intrusion into our customers’ data. In the event of such a breach, current and potential customers may become unwilling to provide the information to us necessary for them to become customers. Additionally, we could face legal claims for such a breach. The costs relating to any data breach could be material, and we currently do not carry insurance against the risk of a data breach. For these reasons, should an unauthorized intrusion into our customers’ data occur, our business could be adversely affected.

We are subject to payment processing risk.

Our customers pay for our service using a variety of payment methods, including credit and debit cards. We rely on internal systems as well as those of third parties to process payments. Acceptance and processing of these payment methods are subject to certain rules and regulations and require payment of interchange and other fees. To the extent there are disruptions in our payment processing systems, increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors and/or changes to rules or regulations concerning payment processing, our revenue, operating expenses, and operating results could be adversely impacted. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operation, and, if not adequately controlled and managed, could create negative consumer perceptions of our service.

If our trademarks and other proprietary rights are not adequately protected to prevent use or appropriation by our competitors, the value of our brand and other intangible assets may be diminished, and our business may be adversely affected.

We rely and expect to continue to rely on a combination of proprietary information, invention assignment, non-competition and arbitration agreements with our employees, consultants, and third parties with whom we have relationships, as well as trademark, copyright, patent, and trade secret protection laws, to protect our proprietary rights. We may also seek to enforce our proprietary rights through court proceedings. We have applied and we expect to apply for trademark registrations and the issuance of patents from time to time. Such applications may not be approved, third parties may challenge any copyrights, patents or trademarks issued to or held by us, third parties may knowingly or unknowingly infringe our intellectual property rights, and we may not be able to prevent infringement or misappropriation without substantial expense to us. If the protection of our intellectual property rights is inadequate to prevent use or misappropriation by third parties, the value of our brand and other intangible assets may be diminished, competitors may be able to mimic our service and methods of operations more effectively, the perception of our business and service to customers and potential customers may become confused in the marketplace, and our ability to attract customers may be adversely affected.

We currently hold various domain names relating to our brand. Failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for customers to find our website and our service. We may be unable, without significant cost or at all, to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our website, our recommendation and merchandising technology, and marketing activities.

Trademark, copyright, patent and other intellectual property rights are important to us and other companies. Our intellectual property rights extend to our technology, business processes and the content on our website. From time to time, third parties may allege that we have violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, develop non-infringing technology, or otherwise alter our business practices on a timely basis in response to claims for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business and competitive position may be adversely affected. Many companies are devoting significant resources to developing patents that could potentially affect many aspects of our business. There are numerous patents that broadly claim means and methods of conducting business on the Internet. Defending against intellectual property claims, whether they are with or without merit or are determined in our favor, would result in costly litigation and the diversion of technical and management personnel. It also may result in our inability to use our current website, streaming technology, our recommendation and merchandising technology or inability to market our service and merchandise our products. As a result of such dispute, we may have to develop non-infringing technology, enter into royalty or licensing agreements, adjust our merchandising or marketing activities, or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us which would adversely affect our business operations.

We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management's time and attention.

From time to time, we may be subject to litigation or claims that could negatively affect our business operations and financial position. We have previously been engaged in patent litigation with ClearPlay. On October 12, 2017, the case was stayed until a final decision was rendered in the Disney Litigation. Pursuant to the Reorganization Plan and related Settlement Agreement, we have dropped our appeal of the judgment in the Disney Litigation, and, as a result, ClearPlay has reasserted one or more of its patent claims against us. It is possible that a portion of our working capital could be required to fund expenses in our defense of this and future legal matters. As we grow, we expect the number of litigation matters against us to increase. To date, these matters have included claims of defamation and copyright infringement, litigation that is typically expensive to defend. Litigation disputes could cause us to incur unforeseen expenses, could occupy a significant amount of our management's time and attention and could negatively affect our business operations and financial position. See Item 8. Legal Proceedings.

We may seek additional capital that may result in stockholder dilution or others having rights senior to those of our Common Stockholders.

From time to time, we may seek to obtain additional capital, either through equity, equity-linked or debt securities. The decision to obtain additional capital will depend on many factors, including but not limited to the following,:

If we raise additional funds through the issuance of equity, equity-linked or debt securities, such securities may have rights, preferences or privileges senior to the rights of our Common Stock and our stockholders may experience dilution.

We may lose key employees or may be unable to hire qualified employees.

We rely on the continued service of our senior management, including our CEO and co-founder Neal Harmon, members of our executive team, other key employees, and the hiring of new qualified employees. In our industry, there is substantial and continuous competition for highly skilled business, product development, technical, and other personnel. We may not be successful in recruiting new personnel and in retaining and motivating existing personnel, which may be disruptive to our operations. See Item 5. Directors and Executive Officers.

We are dependent on our management to achieve our objectives, and our loss of, or inability to obtain, key personnel could delay or hinder implementation of our business and growth strategies, which could adversely affect the value of your investment and our ability to pay dividends.

Our success depends on the diligence, experience and skill of our Board and officers. Neal Harmon is a director and our Chief Executive Officer. Jeffrey Harmon is our Chief Content Officer. Jordan Harmon is our President. Elizabeth Ellis is our Chief Operating Officer. Patrick Reilly is our Chief Financial Officer and Secretary. We have neither employment agreements with, nor key man insurance for, any of our officers and the loss of any of them, but particularly Messrs. Harmon, could harm our business, financial condition, cash flow and results of operations. Any such event would likely result in a material adverse effect on your investment.

Our ability to monetize content that we distribute is heavily reliant on factors outside of our control.

Our ability to monetize content that we distribute is heavily reliant on factors outside of our control, including, but not limited to, the potential loss of key talent, the potential for budget overruns, the quality of the content produced, the timeliness of the production and subsequent release schedule, and the relationship of the creator with the audience. If we are unable to find ways to mitigate the risks associated with these external factors, or factors within our control, it may have a material adverse impact on our business, results of operations, and financial condition.

Risks Relating to the Formation and Internal Operation of the Company

Holders of our Common Stock will have only limited rights regarding our management, and will thus not have the ability to actively influence the day-to-day management of our business and affairs.

Our Board will have sole power and authority over the management of the Company, subject only to the requirements of the Delaware General Corporation Law (the “DGCL”). Holders of our Common Stock will not have an active role in the Company’s day-to-day management. The holders of each class of our Common Stock vote together as a single class on each matter to be voted on by our stockholders, including the election of directors. On each such matter, each outstanding share of Class A Common Stock and Class F Common Stock is entitled to five (5) votes, each outstanding share of Class B Common Stock is entitled to fifty-five (55) votes, and each outstanding share of Class C Common Stock is entitled to one (1) vote.

We may change our operational policies and business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future.

Our Board determines our operational policies and our business and growth strategies. Our directors may make changes to, or approve transactions that deviate from, those policies and strategies without a vote of, or notice to, our stockholders or debtholders. This could result in us conducting operational matters or pursuing different business or growth strategies than those contemplated in this Registration Statement. Under any of these circumstances, we may expose ourselves to different and more significant risks in the future, which could materially and adversely affect our business and growth.

Our management will have significant control over our operations by virtue of the equity ownership in us by entities controlled by our director, co-founder and CEO, Neal Harmon.

Mr. Neal Harmon is one of our five directors, our co-founder and our CEO. Further, as of December 31, 2023, Harmon Ventures LLC (“Harmon Ventures”), which is owned by Neal, Jeffrey, and Daniel Harmon, who are brothers, owned 90.04% of the Class F Common Stock of the Company. In addition, through their respective ownership, Messrs. Harmon and their brother, Jordan Harmon, collectively control the voting of 8,908,069 outstanding shares of our Class B Common Stock, Class C Common Stock and Class F Common Stock, which is sufficient to significantly influence the election of our Board. See Item 4. Security Ownership of Certain Beneficial Owners and Management.

The ability of a stockholder to recover all or any portion of such stockholder’s investment in the event of a dissolution or termination may be limited.

In the event of a dissolution or termination of the Company, the proceeds realized from the liquidation of the assets of the Company will be distributed among the stockholders, but only after the satisfaction of the claims of third-party creditors of the Company.  The ability of a stockholder to recover all or any portion of such stockholder’s investment under such circumstances will, accordingly, depend on the amount of net proceeds realized from such liquidation and the number of claims to be satisfied therefrom.   There can be no assurance that the Company will recognize gains on such liquidation, nor is there any assurance that holders of our Common Stock will receive a distribution in such a case.

The Board and our executive officers will have limited liability for, and will be indemnified and held harmless from, the losses of the Company.

The Company will indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of our Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. A successful claim for such indemnification could deplete the Company’s assets by the amount paid.

Our business may be subject to regulatory or legislative changes.

The Company may face government regulation and legal uncertainties in connection with its business. There may be a number of federal, state or local legislative or regulatory proposals under consideration of which the Company is not aware or which may be considered or adopted in the future. Any new legislation or regulation, or the application or interpretation of existing laws or regulations, may negatively impact the Company’s growth, impose additional burden on the Company or alter how the Company does business. This could decrease the demand for our services, increase our cost of doing business or otherwise have a material adverse effect on the Company’s business, results of operations and financial condition.

Members of our Board and our executive officers may have other business interests and obligations to other entities.

Neither our directors nor our executive officers will be required to manage the Company as their sole and exclusive function and they may have other business interests and may engage in other activities in addition to those relating to the Company, provided that such activities do not compete with the business of the Company or otherwise breach their agreements with the Company; provided, that our executive officers and employee directors are all full-time employees of our company and are expected to spend such time fulfilling their duties as is necessary to do so. On the other hand, our non-employee directors are not full-time with our company and must only spend such time managing our company as they deem necessary to fulfill their fiduciary duties to our company. We are dependent on our directors and executive officers to successfully operate the Company. Their other business interests and activities could divert time and attention from operating our business. For more information related to this, see Item 5. Directors and Executive Officers.

Risks Related to Ownership of our Class B and Class C Common Stock and Lack of Liquidity

No active trading market for our Class B or Class C Common Stock exists, and an active trading market may not develop or be sustained, which may adversely impact the market for shares of our Class B and/or Class C Common Stock and, along with the restrictions in our Class B Stockholders Agreement, make it difficult to sell your shares.

There is no active trading market for our Class B or Class C Common Stock. We do not know the extent to which investor interest will lead to the development and maintenance of an active trading market, if at all. No assurance can be given that the market price of shares of our Class B and Class C Common Stock will not fluctuate or decline significantly in the future or that Class B or Class C Common Stockholders will be able to sell their shares when desired on favorable terms, or at all.  Most transfers of the Class B Common Stock are also subject to other restrictions on transfer set forth in our Class B Stockholders Agreement.

If investors successfully seek rescission, we would face severe financial demands that we may not be able to meet.

Our Class B Common Stock has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and has been offered in reliance upon exemptions from registration provided by Section 3(b) of the Securities Act and Regulation A promulgated thereunder. We have represented that the offering circular pursuant to which such offering was made does not contain any untrue statements of material fact or omit to state any material fact necessary to make the statements made, in light of all the circumstances under which they are made, not misleading.  However, if this representation is inaccurate with respect to a material fact, if the offering fails to qualify for exemption from registration under the federal securities laws pursuant to Regulation A, or if we fail to register the Class B Common Stock or find an exemption under the securities laws of each state in which we offer the Class B Common Stock, each investor may have the right to rescind his, her or its purchase of the Class B Common Stock and to receive back from the Company his, her or its purchase price with interest.  Such investors, however, may be unable to collect on any judgment, and the cost of obtaining such judgment may outweigh the benefits.  If investors successfully seek rescission, we would face severe financial demands we may not be able to meet and it may adversely affect any non-rescinding investors.

Risks Related to Our Chapter 11 Reorganization

The Company filed a voluntary petition for relief under chapter 11, title 11 of the United States Bankruptcy Code and was reorganized under the Reorganization Plan confirmed by the Bankruptcy Court on September 4, 2020, which became effective on September 30, 2020. The Reorganization Plan may have a material adverse impact on our business, financial condition, results of operations, and cash flows.

On October 18, 2017, the Company filed a voluntary petition for relief, or the Bankruptcy Filing, under chapter 11, title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Utah, or the Bankruptcy Court, case number 17-29073. On September 4, 2020, the Court confirmed the Reorganization Plan and on September 30, 2020 the Reorganization Plan became effective. Pursuant to the Reorganization Plan and related settlement agreement dated August 26, 2020 (the “Settlement Agreement”), the Company will pay the Studios $9,900,000 over 14 years, without interest, provided, however, that the unpaid balance of the Note ($62,461,456 minus any paid amounts) will remain outstanding for 14 years from the Effective Date.

Pursuant to the Note, the Company will be required to make quarterly payments of $176,785.72, or approximately $707,143 per year, for 14 years, which will reduce the Company’s available cash flow and impair our ability to grow. Further, while the Note will be marked paid and cancelled after 14 years subject to certain conditions, in the event the Company breaches the Settlement Agreement, whether through violation of any of the “Express Covenants” (as that term is defined in the Settlement Agreement), including the No Use Covenant (as defined in the Settlement Agreement), or otherwise, the Company may be required to pay the full outstanding amount of the Note and dispose of the collateral pledged under the Security Agreement, which comprises all of the Company’s assets and all of the equity in Angel Studios owned by Neal and Jeff Harmon, under the Security Agreement and Compliance Lien (as defined herein), which would have a material adverse impact on the Company’s ability to continue business operations.

Unlimited in duration, the No Use Covenant provides that the Company shall be precluded from any actions which directly or indirectly, descramble, decrypt or otherwise bypass a copyrighted work of the Studios or any of their affiliates, reproduce such a copyrighted work, stream, transmit, or publicly perform such a copyrighted work, and distribute such a copyrighted work. Such restrictions will limit the Company’s content offerings and its ability to attract or retain customers. The Company has also agreed not to sue the Studios, and not to use resources to lobby to amend the Family Movie Act of 2005 (the “Family Movie Act”) for a period of fourteen (14) years following the Effective Date of the Plan. The Family Movie Act exempts from copyright and trademark infringement, under certain circumstances: (1) making limited portions of the audio or video content of a motion picture for private home viewing imperceptible; or (2) the creation of technology that enables such editing. These covenants will reduce the Company’s ability to protect itself against future litigation, which may cause the Company to incur unexpected losses, some of which might not be covered by insurance and could materially affect our financial condition and our ability to continue business operations.

Although the Reorganization Plan was confirmed, we may not be able to achieve our stated goals and objectives, which may have a material adverse impact on our business, financial condition, results of operations, and cash flows.

Although the Reorganization Plan was confirmed and effective, we may continue to face a number of risks, such as changes in economic conditions, changes in our industry, and increasing expenses. Although the Reorganization Plan is confirmed and effective and the Company will continue as a going concern pursuant to the Reorganization Plan, these risks are magnified for a Company which has recently obtained a chapter 11 bankruptcy discharge.

Furthermore, although our debts have been restructured through the Reorganization Plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business. Our access to additional financing may be limited, if it is available at all. Therefore, adequate funds may not be available when needed or may not be available on favorable terms, if they are available at all.

As a result of the bankruptcy proceedings, our historical financial information may not be indicative of our future performance, which may be volatile.

During the bankruptcy proceedings, our financial results were volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impacted our consolidated financial statements. In addition, settlement of the Disney Litigation and implementation of the Settlement Agreement and Reorganization Plan will require significant expenditures. As a result, our historical financial performance during that time was likely not indicative of our financial performance after the date of the filing of bankruptcy. In addition, as we emerge from Chapter 11, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to the Reorganization Plan.

We may be found in violation of the Settlement Agreement in relation to the unauthorized use of copyrighted works by a Studio or its affiliates. If a Studio prevails in an Enforcement Action against us, our business would be adversely impacted and this would significantly impair our ability to continue as a going concern.

In accordance with the Settlement Agreement and the No Use Covenant described thereunder, our Company must certify that no copyrighted works of the Studios or their affiliates are stored on our computers or servers in compliance with the list(s) provided by the Studios of their copyrighted works. Thereafter, any unauthorized use (as described in the Settlement Agreement) by the Company of a copyrighted work owned or controlled by a Studio or its affiliate without the express written authorization of a Studio or its affiliate is a “Strike,” regarded as unpermitted conduct in violation of the Settlement Agreement, subject to a Notice of Default. If the Company incurs four strikes within a consecutive five-year period, any Studio may institute an Enforcement Action against us. If a Studio prevails in an Enforcement Action, it shall be entitled to all available remedies, including: (i) acceleration of the Note, if the Note has not been cancelled and (ii) foreclosure on all collateral pledged under the Security Agreement and Compliance Lien, which comprises all of the Company’s assets and all of the equity in VidAngel, owned by Neal Harmon and Jeffrey Harmon and would significantly adversely affect our financial condition and our ability to continue our business operations.

We are subject to liens on our personal property, including our intellectual property, under the Reorganization Plan, which if enforced, would significantly impair our intellectual property rights and our ability to continue as a going concern.

Pursuant to the Reorganization Plan, performance under the Note as well as the “Express Covenants” (as that term is defined in the Settlement Agreement) shall be secured by a first priority fully perfected lien, which was placed on all equity in the Company owned by Neal and Jeff Harmon and all of the Company’s assets currently owned and controlled by the Company, its affiliates and subsidiaries, or acquired, created, owned and controlled by the Company after the Effective Date, including intellectual property, such as patents, patent applications, trademarks, tradenames, copyrights, and copyright applications (the “Compliance Lien”). In the event of a violation of the Express Covenants or uncured default of the payment obligations as described within the Note, the Studios can institute an Enforcement Action in Bankruptcy Court. If the Studios prevail in an Enforcement Action against the Company, the Compliance Lien will be enforced and foreclosed upon, disposing of any collateral that could be used to satisfy the list of claims in accordance with the priorities set forth in the Reorganization Plan. The disposition of equity owned by Neal and Jeff Harmon could lead to a change in control of the Company and investors would have limited rights to determine new management or the direction of the Company. The Compliance Lien shall remain in effect for fourteen (14) years.

Any liens on our intellectual property enforced under the Reorganization Plan would have a material adverse effect on our ability to continue our business operations.

Risks Related to Our Stock Ownership

Provisions in our governing documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Our charter documents may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable because they provide for a right of first refusal on behalf of the Company.

As a Delaware corporation, we are subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our Board could rely on Delaware law to prevent or delay an acquisition of us.

Financial forecasting may differ materially from actual results.

Given the dynamic nature of our business, and the inherent limitations in predicting the future, forecasts of our revenues, contribution margins, net income and number of total customers and other financial and operating data may differ materially from actual results. Such discrepancies could cause a decline in the price of our Class B and/or and Class C Common Stock.

Risks Related to Benefit Plan Investors

Fiduciaries investing the assets of a trust or pension or profit-sharing plan must carefully assess an investment in our Company to ensure compliance with ERISA.

In considering an investment in the Company of a portion of the assets of a trust or a pension or profit-sharing plan qualified under Section 401(a) of the Code and exempt from tax under Section 501(a), a fiduciary should consider (i) whether the investment satisfies the diversification requirements of Section 404 of ERISA; (ii) whether the investment is prudent, since the Class B Common Stock is not freely transferable and there may not be a market created in which the Class B Common Stock may be sold or otherwise disposed; and (iii) whether interests in the Company or the underlying assets owned by the Company constitute “Plan Assets” under ERISA.

Item 2. Financial Information.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information in this section contains forward-looking statements that involve risks and uncertainties. Please see “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the financial statements and related notes and other financial information appearing elsewhere in this registration statement.

Overview

During 2023, Angel Studios made headlines with the launch of our new theatrical division and release of “His Only Son,” which debuted at #3 in the U.S. box office. On July 4, 2023, we once again made waves with the theatrical release of “Sound of Freedom,” which debuted at #1 in the U.S. box office. Subsequent release dates for international locations followed, with the film debuting at #1 in many of those locations as well. Our innovative theatrical strategy combines the power of the Angel Guild’s predictive capabilities in identifying movies that deserve a theatrical release, with the efficiency of crowdfunded prints and advertising (“P&A”) funds to market the film. In addition, we offer a community-based in-person cinema experience in partnership with renowned theaters such as AMC, Cinemark, Regal, and others, and by using our Pay-it-Forward technology, after experiencing a film in the theater, people have the opportunity to share that experience with others by purchasing tickets for those who would not otherwise watch the movie at a theater.

We continue to produce our own original content and seek relationships with artists, and other content filmmakers. We have partnered with several other filmmakers, who are at various stages at either raising capital, creating content, and/or already streaming on the Angel Studios ecosystem.

Results of Operations

The following represents our performance highlights for the nine-month period ended September 30, 2023, as compared to the nine-month period ended September 30, 2022, and should be read in conjunction with our unaudited condensed consolidated financials statements, included herein:

Revenues

Our primary source of revenue is the sale of digital and physical products related to content we either produce ourselves or distribute for third parties. In 2023, the significant increase in revenues was largely related to the launch of our theatrical division and the release of two feature length films, both of which were successful, during the first nine-months of FY 2023.

Operating Expenses

Our cost of revenues increased significantly in 2023 as the increased revenues resulted in higher licensing and royalty costs. The increase in sales and marketing expense was primarily due to the increased advertising costs necessary to launch our theatrical releases. As the Company continues to bring on additional content and promote future theatrical releases, this cost will be expected to continue to rise.

Higher general and administrative costs were related to the increased support staff necessary to manage the continued and expected growth of the business, while higher research and development costs were due to the addition of headcount necessary to continue our focus on improving existing products, optimizing existing services, and developing new technology to better meet the needs of our customers and partners.

In 2021, we invested an aggregate of approximately $10,600,000 in bitcoin to further diversify returns on cash and cash equivalents balances that are not required to maintain adequate operating liquidity. For the period ended September 30, 2022, the current carrying value of the digital assets exceeded the fair value based on open markets and as such we recorded an impairment loss of $4,585,903 on the digital assets. Only minor impairment occurred during the same period in 2023.

The increase in legal expenses was largely a result of increased headcount with the continual growth of the Company.

In 2023, the Company entered into various print and advertising notes related to the film Sound of Freedom and $2,984,216 of related interest expense was recognized in the nine months ended September 30, 2023. No such theatrical print and advertising loans existed in 2022.

The increase in interest income is the result of a more favorable rate environment for cash deposits, and from the Company’s cash reserves being moved to higher interest-bearing accounts in early 2023.

Comparison of the Year Ended December 31, 2022 and 2021 

The following represents our performance highlights for the years ended December 31, 2022 and 2021, and should be read in conjunction with our audited consolidated financial statements, included herein:

Revenues

Our primary source of revenue is the sale of digital and physical products related to content we either produce ourselves or distribute for third parties. In 2022, the significant decrease in revenues was largely related to the delay in release of Season 3 of The Chosen and increased economic uncertainty. Season 2 of The Chosen was released in early 2021, which brought in additional digital and physical media sales revenue, whereas Season 3 of The Chosen was not released until the end of 2022. As a result of this delay, we saw a significant decrease in sales of both digital and physical products.

Operating Expenses

Our cost of revenues decreased significantly in 2022 from 2021 as the decreased revenues resulted in lower licensing and royalty costs, lower cost of goods sold on merchandise, and lower transaction processing costs.

The increase in sales and marketing expense was primarily due to an increase in advertising costs and increased headcount of our sales and marketing team.

Higher general and administrative costs were related to the increased support staff necessary to manage the continued and expected growth of the business, while higher research and development costs were due to the addition of headcount necessary to continue our focus on improving existing products, optimizing existing services, and developing new technology to better meet the needs of our customers and partners.

In 2021, we invested an aggregate of approximately $10,600,000 in bitcoin to further diversify returns on cash and cash equivalents balances that are not required to maintain adequate operating liquidity. As of December 31, 2022 and 2021, the current carrying value of the digital assets exceeded the fair value based on open markets and as such we recorded an impairment loss of $5,065,413 and $2,737,658, respectively, on the digital assets.

The gain on disposal of business in 2021 relates wholly to the sale of VidAngel. No business units were disposed of in 2022.

Legal expenses remained relatively small during the periods ended 2022 and 2021.

The increase in interest expense in 2022 was the result of interest accrued on a $2,000,000 note entered into during 2022 and due in 2023.

The increase in interest income is largely related to the timing of the VidAngel business disposal during 2021. 2022 includes a full year of interest income compared to only a partial year of interest income in 2021.

The change from tax provision to benefit from 2021 to 2022 was largely driven by the decreased revenues leading to a net loss in 2022 after experiencing a net gain in 2021.

Liquidity and Capital Resources

Operating and Capital Expenditure Requirements

Cash and cash equivalents increased $24.96 million in the nine months ended September 30, 2023, primarily due to $7.5 million raised in equity and increased cash flow from operations.

To date, we have funded a significant portion of our operations through private and public offerings of Common Stock. As of September 30, 2023, we had cash on hand of $35,684,293. We have accrued settlement costs in the amount of $7,778,572, payable over forty-four (44) remaining equal quarterly installments of $176,786. The expense was recorded at the present value of the obligation with an imputed interest rate of 10% during 2021. The short-term obligation related to these settlement costs as of December 31, 2023, was $247,690, and the long-term portion is $4,437,812. We also had a notes payable for print and advertising notes in the amount of $105,263 that were fully paid by October 31, 2023. As we continue to grow, we expect to raise additional funds to cover any shortfall in operating needs. We raised $7,500,000 during the first quarter of 2023 through equity raises. We project that our existing capital resources will be sufficient to meet our operating requirements for at least the next 12 months.

We may need to raise additional funds to invest in growth opportunities, product development, sales and marketing, and other purposes. Our future capital requirements will depend on many factors, including our growth rate; the level of investments we make in product development, sales and marketing activities, and other investments to support the growth of our business, and may increase materially from those currently planned.

We may seek to raise additional funds through equity financing. Any additional equity financing likely would be dilutive to existing stockholders. At this time, we have no commitments for additional capital funds.

Discussion of Operating, Investing, Financing Cash Flows

For the nine months ended September 30, 2023, and September 30, 2022, cash and cash equivalents increased by $24.96 million and decreased by $16.4 million, respectively. The components of these changes are discussed below in more detail.

Operating Activities. Cash flows provided by (used in) operating activities for the nine months ended September 30, 2023, and September 30, 2022, were as follow:

Cash flows provided by operating activities for the nine months ended September 30, 2023, were $19.4 million compared to cash flows used in operating activities of $13.9 million for the nine months ended September 30, 2022. The increase in cash provided by operating activities during 2023 is due largely to the net income generated during this period and successful launch of our theatrical division, in particular with the release of the film Sound of Freedom. As of September 30, 2023, the Company expected to collect approximately $36 million in outstanding receipts and pay approximately $38.8 million in royalties and accrued expenses related to the film. This contrasts with 2022, which for the nine months ended September 30 incurred net loss of approximately $13.2 million.

Investing Activities. Cash flows provided by (used in) investing activities for the nine months ended September 30, 2023, and the nine months ended September 30, 2022, were as follow:

Cash flows provided by investing activities for the nine months ended September 30, 2023, were $393,000 compared to cash flows used in investing activities of $2.1 million for the nine months ended September 30, 2022. Both periods saw moderate activity in issuing and collecting repayments on notes receivable, with more collections being the result of several of our current filmmakers paying us back for our crowdfunding services during each period (see “Notes Receivables” under Notes to Consolidated Financial Statements section). During the 2022 period, we incurred additional purchase of property and equity as a result of the buildout of facilities as we continued to grow as well increased investments in affiliates as a result of purchasing an 8% interest in one of our affiliates, the Tuttle Twins Show, LLC.

Financing Activities. Cash flows provided by financing activities for the nine months ended September 30, 2023, and the nine months ended September 30, 2022, were as follow:

Cash flows provided by (used in) financing activities for the nine months ended September 30, 2023, were $5.1 million compared to cash flows used in financing activities of $323,000 for the nine months ended September 30, 2022. During the 2023 period, the Company raised $24.71 million for P&A related activities and had repaid $26.78 million during the same period. The Company also raised $7.5 million in equity during the first quarter of 2023 with no comparable raises occurring during the 2022 period.

For the years ended December 31, 2022, and December 31, 2021, cash and cash equivalents decreased by $13.54 million and increased by $13.24 million, respectively. The components of these changes are discussed below in more detail.

Operating Activities. Cash flows provided by (used in) operating activities for the years ended December 31, 2022, and December 31, 2021, were as follow:

Cash flows used in operating activities for the year ended December 31, 2022, were $11.7 million compared to cash flows provided by operating activities of $15.3 million for the year ended December 31, 2021. The decrease in cash provided by operating activities during 2022 is due largely to the loss in net income as a result of the significant decrease in revenues (see “Revenues” section above).

Investing Activities. Cash flows used in investing activities for the years ended December 31, 2022, and December 31, 2021, were as follow:

Cash flows used in investing activities for the year ended December 31, 2022, were $3.5 million compared to cash flows used in investing activities of $5.6 million for the year ended December 31, 2021. As the Company continues to grow, additional investments are expected. The main investments in these years ended 2022 and 2021 include 1) a significant investment in crypto currency in 2021, and 2) a considerable increase in issuing and collecting repayments in notes receivable, while repayments from current filmmakers, paying us back for our crowdfunding services, continued to remain lower than the amount we issued, and 3) investments made in affiliates which include a purchase of 50% ownership in our corporate headquarters made in 2021 and a purchase of ownership in one of our filmmakers’ entities made in 2022.

Financing Activities. Cash flows provided by financing activities for the years ended December 31, 2022, and December 31, 2021 were as follow:

Cash flows provided by financing activities for the year ended December 31, 2022, were $1.6 million compared to cash flows provided by financing activities of $3.6 million for the year ended December 31, 2021. As of December 31, 2022, the Company received $2 million against a print and advertising loan agreement related to a theatrical release for The Chosen. In 2021, the Company raised $12.5 million in equity throughout the year with no comparable raises occurring during the 2022 period. Of final significance, in October 2021, the Company made a tender offer that resulted in the Company purchasing an aggregate of 948,822 shares of its common stock for a total of $8,444,516 in cash.

Trends and Key Factors Affecting Our Performance

Our business currently generates a large portion of our total revenue from distribution activities related to our Content License Agreement with The Chosen dated October 18, 2022 (the “Chosen Agreement”). The Chosen Agreement outlines the current contractual arrangement between the parties. Revenue from distribution activities related to the Chosen Agreement currently accounts for a large percentage of our revenue. If a material breach of the Chosen Agreement were to ever occur, and if The Chosen was able to terminate the Chosen Agreement as a result of the material breach, it would likely have a material adverse impact on our business, results of operations, and financial condition.

On April 4, 2023, we received a notice of termination (the “Initial Notice of Termination”) from The Chosen, indicating that The Chosen is seeking to terminate the Chosen Agreement for certain alleged material breaches of contract in accordance with Section 14 of the Chosen Agreement. The Initial Notice of Termination indicated that The Chosen would hold the termination of the Chosen Agreement in abeyance pending arbitration on the matter and would continue to perform all of its obligations under the Chosen Agreement until the outcome of the arbitration was determined.

On October 15, 2023, we received an additional notice of termination (the “New Notice of Termination”) from The Chosen stating additional alleged material breaches of contract and a declaration that the Chosen Agreement is hereby terminated, effective October 20, 2023. The New Notice of Termination fails to comply with the Chosen Agreement’s requirements for terminating based on a breach, specifically the notice and cure periods.

We strongly dispute all of the alleged material breaches set forth in the Initial Notice of Termination and the New Notice of Termination (the “Alleged Breaches”). We do not agree we have breached the Chosen Agreement, nor that any Alleged Breaches would be sufficiently “material” to warrant termination of the Chosen Agreement. We intend to vigorously defend our interests in this matter. Unless and until an unfavorable outcome of the arbitration is determined, we will also continue to perform all of our obligations under the Chosen Agreement.

We are currently working with several new filmmakers on new and exciting projects. However, there is no guarantee that we will be able to earn as much revenue from these projects as we do from The Chosen. If we are unable to successfully monetize other projects besides The Chosen, this may have a material adverse impact on our business, results of operations, and financial condition.

Furthermore, our ability to monetize the content we distribute is heavily reliant on factors currently outside of our control, including, but not limited to, the potential loss of key talent, the potential for budget overruns, the quality of the content produced, the timeliness of the production and subsequent release schedule, and the relationship of the creator with the audience. If we are unable to find ways to mitigate the risks associated with these external factors, it may have a material adverse impact on our business, results of operations, and financial condition.

Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. Based on this definition, the Company has identified the critical accounting policies and judgments addressed below. Estimates are based on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Long-lived Assets

Intangible assets with finite lives and property, plant and equipment are amortized or depreciated over their estimated useful life on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period. We test these assets for potential impairment whenever our management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The original estimate of an asset’s useful life and the impact of an event or circumstance on either an asset’s useful life or carrying value involve significant judgment regarding estimates of the future cash flows associated with each asset.

Income Taxes

We account for income taxes under the liability method, whereby deferred tax asset or liability account balances are determined based on the difference between the financial statement and the tax bases of assets and liabilities using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets when we expect the amount of tax benefit to be realized is less than the carrying value of the deferred tax asset.

Accounting for income taxes involves uncertainty and judgment on how to interpret and apply tax laws and regulations within our annual tax filings. Such uncertainties from time to time may result in a tax position that may be challenged and overturned by a tax authority in the future which could result in additional tax liability, interest charges and possibly penalties.

Stock-Based Compensation

We account for stock-based compensation by measuring and recognizing as compensation expense the fair value of all share-based payment awards made to employees based on estimated grant date fair values. The determination of fair value involves a number of significant estimates. We use the Black Scholes option pricing model or the Monte Carlo pricing model to estimate the value of employee stock options which requires a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior which are based on historical data as well as expectations of future developments over the term of the option. As stock-based compensation expense is based on awards ultimately expected to vest it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Management’s estimate of forfeitures is based on historical experience but actual forfeitures could differ materially as a result of voluntary employee actions and involuntary actions which would result in significant change in our stock-based compensation expense amounts in the future.

Other Estimates

See Note 1 to the accompanying audited consolidated financial statements included herein and starting on page F-1 for further discussion.

Quantitative and Qualitative Disclosures About Market Risk

We are subject to market risks in the ordinary course of our business, including changes in interest rates. Historically, fluctuations in interest rates have not had a significant impact on our operating results. As of December 31, 2023, we had no outstanding variable rate indebtedness, and we have not utilized any derivative financial instruments such as futures contracts, options and swaps, forward foreign exchange contracts or interest rate swaps and futures. In addition, any sales we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations.

Off-Balance Sheet Arrangements

As of the period ended September 30, 2023, and the years ended December 31, 2022, and 2021, the Company had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Properties.

DESCRIPTION OF OUR PROPERTIES

As of the date of this Registration Statement, our primary assets are our Intellectual Property and the contracts we have entered into directly.

We lease our corporate office facilities at 295 W. Center St., Provo, Utah, under a lease commencing on December 15, 2016, and ending on February 28, 2024. In May 2023, we entered into a new lease for our corporate office facilities at 295 W Center St. in Provo, Utah that will begin on March 1, 2024 and end on February 28, 2029. In July 2021, we purchased a 50% ownership interest in the building and entity that we lease our office facilities from; we also entered into three new leases to expand our corporate office space at 265 W, 275 W and 285 W Center St., Provo, Utah under leases commencing August 1, 2022, March 1, 2024 and July 1, 2022, respectively, and ending July 31, 2027, February 28, 2029 and September 30, 2027, respectively. On September 28, 2023, we entered into a lease addendum for the leased premises located at 285 W Center St., Provo, Utah to clarify that due to construction delays, the lease began on October 1, 2022 rather than on July 1, 2022, and will end on September 30, 2027. We previously leased our warehouse at 478 S West Frontage Road in Springville, Utah, under a lease commencing on August 1, 2020 and ending July 31, 2022; we have entered into a new warehouse lease at 951 East 1950 North in Spanish Fork, Utah that began on September 1, 2022 and will end September 30, 2027. We currently lease these locations for $31,500, $3,560, $5,305, $11,105, $5,160, and $13,473 per month, respectively. Beginning on March 1, 2024, we will lease our corporate offices for $34,728 per month. We do not currently own or lease any other real property. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table reflects, as of January 5, 2024, the voting securities beneficially owned by (1) each person who is the beneficial owner of 5% or more of any class of our capital stock, (2) our directors and named executive officers, and (3) all of our directors and executive officers as a group. Each person named in the table has sole voting and investment power with respect to all of the shares of Common Stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table.

The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (1) the exercise of any option, warrant or right, (2) the conversion of a security, (3) the power to revoke a trust, discretionary account or similar arrangement or (4) the automatic termination of a trust, discretionary account or similar arrangement. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, our shares of Common Stock subject to options, vesting, or other rights (as set forth above) held by that person that are exercisable or will become exercisable within 60 days thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person.

Item 5. Directors and Executive Officers.

DIRECTORS AND EXECUTIVE OFFICERS

Subject to our stockholders’ rights to consent to certain transactions, our business and affairs are controlled by, and all powers are exercised by, our Board. The Board must consist of not fewer than three (3) nor more than five (5) directors, the exact number of whom is to be set from time to time by the Board. We currently have five (5) directors: Neal Harmon, Paul Ahlstrom, Katie Liljenquist, Dalton Wright and Stephen Oskoui. The Board members are elected each year, at the annual meeting of stockholders, to hold office until the next annual meeting and until their successors are elected and qualified. Any newly created directorships resulting from an increase in the authorized number of directors, and any vacancies occurring in the Board, may be filled by the affirmative vote of a majority of the remaining directors. A director may resign at any time, and the stockholders may remove any director or the entire Board at any time, with or without cause, by the affirmative vote of a majority of stockholders voting in such decision.

The Board has retained our executive officers to manage our day-to-day operations, our intellectual property and other investments, subject to the supervision of the Board. Currently, Neal Harmon is our Chief Executive Officer, Jeffrey Harmon is our Chief Content Officer, Jordan Harmon is our President, Elizabeth Ellis is our Chief Operating Officer, and Patrick Reilly is our Chief Financial Officer and Secretary. Our executive officers have accepted their appointment, or nomination to be appointed, on the basis of the compensation to be paid to them. See Item 6. Executive Compensation for more information. Our executive officers will serve for such period as the Board determines, subject to the terms of any employment agreements we enter into with them, or their earlier death, resignation or removal. The Board may remove our executive officers subject to the terms of any employment agreements we enter into with them.

The following tables and biographical descriptions set forth certain information, as of December 31, 2023, with respect to the individuals who currently serve as our directors and executive officers:

Directors

Executive Officers

*Neal Harmon, Jeffrey Harmon and Jordan Harmon are brothers.

Biographical Information

Biographical information regarding our directors and executive officers is set forth below.

Directors

Neal Harmon, Chief Executive Officer and Class F Representative Director. Neal has served as our Chief Executive Officer since he helped co-found the Company in 2013. Neal is also a member of Harmon Ventures LLC, a Utah limited liability company, our largest stockholder. He is also a managing member of Harmon Brothers, LLC, a Utah limited liability company, a marketing agency he co-founded with his brothers. Neal worked for Orabrush, Inc. from 2009 to 2013, a company he co-founded, where he served in such capacities as Chief Operating Officer and as a member of the board. Since 2005, Neal has also worked for the Neal S Harmon Company, a Utah corporation, as a consultant, entrepreneur and investor, engaging in various activities such as designing and creating a trucking logistics dashboard, to connect shippers and private fleets. Neal received his master’s degree from Brigham Young University in Instructional Psychology and Technology in 2002, and his undergraduate degree from Brigham Young University in American Studies in 2001.

Paul Ahlstrom, Class A Representative Director. Paul joined as our director in 2014. Paul has served as Managing Director of Alta Ventures Mexico Fund I, LP since 2010, where his responsibilities include all aspects of investor relations, evaluating a business’s products or services for potential investment opportunity, creating deal flow, negotiating the terms and conditions in financing rounds, serving as a board member of portfolio companies, and preparing financial statements and financial analysis. Over his career, Paul has directly participated in more than 125 venture capital investments and previously represented vSpring Capital on the boards of Ancestry.com, which was sold in 2007 to a private equity firm and went public in 2009 (NASDAQ:ACOM), Senforce, which was sold to Novell (NASDAQ: NOVL), and Altiris (NASDAQ:ATRS), which went public and was then sold to Symantec (NASDAQ: SYMC), GlobalSim and Aeroprise. Mr. Ahlstrom has also served as an advisor and board to many successful venturebacked startups including Rhomobile sold to Motorola, SpaceMonkey, SendMi, Convert.com and Jott. Paul is the author of the popular book related to business startups, Nail It Then Scale It, and received his B.A. in Communications from Brigham Young University.

Katie Liljenquist, Class B Representative Director. Katie joined as our director in June 2022 and is the designated representative for our Class B stockholders. Katie was an early investor in VidAngel who wanted to promote uplifting entertainment that could be viewed by everyone. Katie currently teaches in the Executive Education program at the University of Utah and is an award-winning professor of negotiations. Katie provides highly customized training in negotiation for business executives across a wide range of industries. Katie studies the psychology of influence and decision making, has authored multiple articles in Harvard’s Negotiation newsletter, and has been published in the premier scientific journal, Science. Katie earned a PhD in Management & Organizations from the Kellogg School of Business.

Dalton Wright, Director. Dalton joined as our director in 2014. Dalton has been a partner at Kickstart Seed Fund, L.P. since 2013, a seed-stage investment fund that develops close relationships with universities, angel groups and entrepreneurs to launch high-growth start-ups in both Utah and the Mountain West. Dalton serves as a director of numerous other corporate boards. From 2009 to 2012, Dalton was Senior Associate and Founding Team Member at Alta Ventures Mexico, a seed, venture, and growth capital fund targeting high growth companies in Mexico. Dalton graduated from the Wharton Business School at the University of Pennsylvania with his M.B.A. in 2014 and holds a B.A. in finance from the University of Utah.

Stephen Oskoui, Director. Stephen joined as our director in 2022. Stephen is Cofounder and Managing Partner of Gigafund. Before cofounding Gigafund, Stephen was a Venture Partner at Founders Fund. Prior to that, Stephen was Founder and CEO of Smiley Media, a performance-based marketing company that drove more than $1 billion in sales for its clients. In his role as Managing Partner of Gigafund, Stephen has made significant investments in SpaceX, Neuralink, and the Boring Company. He is a board member at Lambda School, Veryable, Sana Benefits, and Sunroom Rentals, as well as a board observer at Luminous Computing and Last Energy.

Executive Officers

Neal Harmon, Chief Executive Officer and Class F Representative Director. The background and experience of Mr. Harmon is set forth above.

Jeffrey Harmon, Chief Content Officer. Jeffrey is a co-founder and our Chief Content Officer. Jeffrey is also a member of Harmon Ventures LLC, a Utah limited liability company, our largest stockholder. He is also a managing member of Harmon Brothers, LLC, a Utah limited liability company, which is an online-focused advertising and marketing company he co-founded with his brothers. Jeffrey co-founded Orabrush, Inc. in 2009 and served as its CEO from 2009-2010. He continued to serve as Chief Marketing Officer and Co-Founder of Orabrush from 2010 to 2013. He is currently active with other start-up companies and concepts. He attended Brigham Young University from 2006 to 2008, where he studied business marketing, traditional marketing, internet marketing and business administration.

Jordan Harmon, President. Jordan is a co-founder and was appointed as our President in June 2022. Prior to Angel, Jordan served as co-founder and Head of Marketing at Cove, a home security company. At Cove, Jordan was directly responsible for the marketing initiatives that helped Cove grow into a $100 million business in just four short years. Jordan previously served as Angel’s Chief Marketing Officer in its VidAngel days and was a fractional CMO consultant at Harmon Brothers where he helped grow revenues at multiple companies by more than 300%. Jordan earned a B.S. in Web Development and Design from Brigham Young University–Idaho.

Elizabeth Ellis, Chief of Operations. Liz Ellis is our Chief of Operations. Her duties include overseeing all operating, distribution, domestic and international operations, public relations, and human resources. She is an ICF Professional Certified Coach, and a Gallup-Certified Strengths Coach. From 2009 until she joined us, Liz was the Director of Human Relations and Office Manager at Orabrush, Inc., where she oversaw personnel and was responsible for various operational tasks. Liz holds a B.S. from Brigham Young University.

Patrick Reilly, Chief Financial Officer and Secretary. Patrick began providing consulting services in March 2014 and joined as the Director of Finance in February 2016. Patrick oversees all accounting and finance aspects of the business, including but not limited to budgeting, forecasting, auditing, financial statement preparation and funding. Patrick is a seasoned veteran of tech startups. Prior to joining us, Patrick served as the Financial Controller at Moki Mobility, Inc. a computer software company, from 2013 to February 2016, where he was responsible for all finance and accounting duties. From 2009 to 2013, Patrick was the Vice President of Finance and Financial Controller at Allegiance, Inc. (now Maritz CX), where he was responsible for all finance and accounting duties of the company. Patrick graduated from the University of Utah with his M.B.A in 2020 and holds a B.S. in Business Administration from Utah Valley University.

Involvement in Certain Legal Proceedings

We currently are, and from time to time might again become, involved in litigation. See Item 8. Legal Proceedings, for a discussion of past and ongoing litigation. Notwithstanding such events, to the best of our knowledge, no officer, director or director nominee has been involved in any of the following events occurring during the last ten years that are material to an evaluation of the ability or integrity of such person:

Item 6. Executive Compensation.

EXECUTIVE OFFICER AND DIRECTOR COMPENSATION

Executive Officer Compensation

Messrs. Harmon and Mr. Reilly receive compensation for acting in their capacities as our executive officers. We do not have employment agreements with our named executive officers, and there are no arrangements or plans pursuant to which we provide pension, retirement or similar benefits to our named executive officers.

Summary Compensation Table

The table below summarizes the total compensation paid or earned by our named executive officers in our fiscal years ended December 31, 2023 and December 31, 2022.

Principal Elements of Compensation

The compensation of the Company’s executive officers is comprised of (a) base salary; and (b) long-term equity incentives, consisting of stock options, granted under the Company’s Stock Incentive Plan, and any other equity plan that may be approved by the Board from time to time. These principal elements of compensation are described below.

Base Salaries

Base salary is provided as a fixed source of compensation for our executive officers. Adjustments to base salaries will be reviewed annually and as warranted throughout the year to reflect promotions or other changes in the scope of breadth of an executive officer’s role or responsibilities, as well as to maintain market competitiveness.

Stock Incentive Plan

In an effort to further our long-term stability and financial success by attracting and retaining personnel, including employees, directors, and consultants, we adopted the 2014 Stock Incentive Plan (the “Prior Stock Incentive Plan”) in February 2014. The Prior Stock Incentive Plan was amended and restated in each of August 2016, July 2020, and February 2021. The Prior Stock Incentive Plan reserved a total of 5,775,000 shares of our Class A Common Stock for issuance thereunder, subject to the condition that the total number of shares issued thereunder shall not exceed 16.5% of the fully diluted outstanding. In October 2023, we adopted the 2023 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan reserves a total of 5,775,000 shares of our Class F Common Stock for issuance thereunder, with 3,692,995 shares reserved as either options outstanding or shares exercised from awards granted under the Prior Stock Incentive Plan, and further subject to the condition that the total number of shares issued thereunder shall not exceed 16.5% of the fully diluted outstanding shares of the Company’s Common Stock. Should any of the awards granted under the Prior Stock Incentive Plan be returned thereto in accordance with the applicable terms, such shares would then become available for issuance under the Stock Incentive Plan, reducing the number of shares reserved under the Prior Stock Incentive Plan. As of January 5, 2024, options exercisable for 4,430,385 shares of Class F Common Stock had been issued pursuant to the Prior Stock Incentive Plan, and options exercisable for 1,674,697 shares of Class F Common Stock had been exercised. As of January 5, 2024, no options exercisable for shares of our Class F Common Stock had been granted or are outstanding under the Stock Incentive Plan, with 792,105 shares of Class F Common Stock remaining available for issuance thereunder. Through the use of stock incentives, the Stock Incentive Plan will stimulate the efforts of those persons upon whose judgment, interest and efforts we will largely depend on for the successful conduct of our business and further align those persons’ interests with the interests of our stockholders.

Performance Equity Plan

As an additional measure to further our long-term stability and financial success by attracting and retaining personnel, in October 2023, we adopted the 2023 Performance Equity Plan (the “Performance Equity Plan”) to make awards to certain of our employees, directors, and consultants. Awards made under the Performance Equity Plan are subject to certain performance vesting criteria based on either (i) the Company’s stock price, as quoted on a publicly traded market or stock exchange, being equal to or greater than certain prices (each, a “Vesting Stock Price”) for a minimum of three (3) consecutive months, or (ii) the Company having at least two (2) consecutive independent stock price valuations completed on its common stock (and approved by the Board) that value the Company’s common stock at a price equal to or higher than the Vesting Stock Price applicable to the Award. The Performance Equity Plan reserves a total of 2,797,466 shares of our Class C Common Stock for issuance thereunder. As of January 5, 2024, options exercisable for 924,692 shares of Class C Common Stock had been issued pursuant to the Performance Equity Plan, with 1,872,774 shares of Class C Common Stock remaining available for issuance thereunder.

Each of the Stock Incentive Plan and the Performance Equity Plan is administered by our Board. The Board has the power and sole discretion to grant or award a stock incentive (each, an “Award”) thereunder, to any employee of, director of, or consultant to the Company (each, a “Participant”), who in the sole judgment of the Board has contributed, or can be expected to contribute, to our profits or growth. The Board also has the power and sole discretion to determine the size, terms, conditions and nature of each Award to achieve the objectives of such Award and of the Stock Incentive Plan or Performance Equity Plan (as applicable). This includes, without limitation, the Board’s ability to determine: (i) which eligible persons shall receive an Award and the nature of the Award, (ii) the number of securities to be covered by each Award, (iii) the fair market value of such securities, (iv) the time or times when an Award shall be granted, (v) whether an award shall become vested over a period of time, according to a performance-based or other vesting schedule or otherwise, and when it shall be fully vested, (vi) the terms and conditions under which restrictions imposed upon an Award shall lapse, (vii) whether a change of control exists, (viii) factors relevant to the satisfaction, termination or lapse of restrictions on certain Awards, (ix) when certain Awards may be exercised, (x) whether to approve a Participant’s election with respect to applicable withholding taxes, (xi) conditions relating to the length of time before disposition of securities received in connection with an Award is permitted, (xii) notice provisions relating to the sale of securities acquired under the Stock Incentive Plan or the Performance Equity Plan (as applicable), and (xiii) any additional requirements relating to Awards that the Board deems appropriate.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information with respect to outstanding equity awards held by the named executive officers identified in the Summary Compensation Table as of December 31, 2023:

Compensation Committee Interlocks and Insider Participation

The Company’s compensation committee is comprised of two of our independent directors: Paul Ahlstrom and Dalton Wright. Neither of these individuals has at any time served as an officer or employee of the Company. None of our executive officers has served as a director or member of the compensation committee of any entity that has one or more of its executive officers serving as a member of our Board or compensation committee.

Director Compensation

We reimburse our directors for any expenses incurred while acting in their capacity as a director. However, our directors receive no compensation for their service in such capacity.

Item 7. Certain Relationships and Related Transactions, and Director Independence.

Related Party Transactions

Promotion and Marketing Services Agreement with Harmon Brothers, LLC.

On July 23, 2021, we entered into a Promotion and Marketing Services Agreement (the “HB Marketing Agreement”) with Harmon Brothers, LLC (“HB”), in which Neal Harmon and Jeffrey Harmon own a majority interest.

For the promotion and marketing services provided by HB pursuant to the HB Marketing Agreement, during the fiscal year ended December 31, 2022 we paid HB $1,962,172, and during the fiscal year ended December 31, 2023, we paid HB $1,048,980.

Investment in Tuttle Twins Show, LLC

In July 2022, we purchased an 8.0% interest in the Tuttle Twins Show, LLC (“Tuttle Twins”) for $1,747,980. Daniel Harmon, one of Neal and Jeffrey Harmon’s brothers, is the President and a Director of Tuttle Twins.

Investor Rights and Voting Agreement

On February 27, 2014, we entered into an Investor Rights and Voting Agreement (the “Investor Agreement”) with certain of our investors, including Alta Ventures Mexico Fund I, of which Paul Ahlstrom, one of our directors, is the manager. The Investor Agreement requires us to provide certain information and inspection rights, provides for confidentiality, requires the parties to vote their respective shares of Common Stock in the Company in a manner that maintains the number of directors on our Board at no more than five, and further requires the parties to elect as a director an individual designated by Alta Ventures Mexico Fund I for so long as it owns at least 1,000,000 shares of our Common Stock.

Wholly Owned Subsidiaries

In 2018, we formed VAS Portal, LLC (“VAS Portal”) as a wholly-owned subsidiary. On January 2, 2019, we sold VAS Portal to Harmon Ventures, LLC (“Harmon Ventures”), which is indirectly owned by our CEO, Mr. Neal Harmon, and two of his brothers, Messrs. Jeffrey Harmon and Daniel Harmon, for $1.00. The Company entered into a call option agreement with Harmon Ventures that gives the Company the right to purchase all of the membership interest of VAS Portal for $1.00 at any time beginning upon (i) the occurrence of the confirmation of the Reorganization Plan by the Bankruptcy Court or (ii) the termination of the Disney Litigation and the Bankruptcy proceeding, and ending one year following the latest to occur of the foregoing. As part of the transaction, VAS Portal entered into a Services Agreement with us to provide technology services related to the creation of a website and other assets for VAS Portal.

On September 28, 2020, we exercised our call option to purchase all of the membership interest of VAS Portal from Harmon Ventures. However, we learned in 2021 that the transaction was not approved by the Financial Industry Regulation Authority (“FINRA”), and as such we currently have no ownership interest in VAS Portal. In October 2022, we loaned VAS Portal $60,000 in the form of a promissory note, with interest at 5.89%, and due in full on November 4, 2022. The promissory note was subsequently amended to change the maturity date to April 30, 2023. This note was paid in full in March 2023.

In June 2023, we utilized the services of VAS Portal to facilitate the crowdfunding for our theatrical release, Sound of Freedom. VAS Portal helped us successfully raise $5 million and received a fee of six percent (6%), or $300,000, for their services.

We are permitted to enter into transactions with, including making loans to and loan guarantees on behalf of, our directors, executive officers and their affiliates, so long as the person or persons approving the transaction on behalf of us acts in good faith and in a manner reasonably believed to be in or not opposed to our best interest and/or those of our stockholder’s. We did not have any outstanding loans or loan guarantees with any related party as of December 31, 2023 and 2022.

Director Independence

Our Board currently consists of five members. Our securities are not currently listed on a national securities exchange or in an interdealer quotation system, and we are therefore not required to comply with the director independence requirements of any securities exchange. For purposes of determining whether our directors are independent, the Board has thus chosen to use the listing standards of the NASDAQ Stock Market, Inc. Nasdaq Listing Rule 5605(a)(2) defines an “independent director” generally as a person other than an executive officer or employee of the Company or any other individual having a relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined that four members of the Board are “independent” under such definition. We have not established auditor nominating or governance committees as standing committees. The Board does not have an executive committee or any committees performing a similar function. Our compensation committee is comprised of two of our independent directors: Paul Ahlstrom and Dalton Wright.

Item 8. Legal Proceedings.

Legal Proceedings

We currently are, and from time to time might again become, involved in litigation. Litigation has the potential to cause us to incur unexpected losses, some of which might not be covered by insurance but can materially affect our financial condition and our ability to continue business operations.

Disney Litigation and the Preliminary Injunction

On December 12, 2016, the United States District Court for the Central District of California (the “California Court”), in the matter of Disney Enterprises, Inc.; Lucasfilm Ltd., LLC; Twentieth Century Fox Film Corporation and Warner Bros. Entertainment, Inc., or Plaintiffs, v. VidAngel (the “Disney Litigation”), granted the Plaintiffs’ motion for preliminary injunction, against us. On October 5, 2017, the California Court allowed the Plaintiffs to amend the original complaint to add three (3) of their subsidiaries, MVL Film Finance LLC, New Line Productions, Inc., and Turner Entertainment Co., as additional Plaintiffs (collectively, the “Plaintiffs”), and identify additional motion pictures as having allegedly been infringed. The Plaintiffs claimed that we unlawfully decrypted and infringed 819 titles in total.

On March 6, 2019, the California Court granted the Plaintiffs’ motion for partial summary judgement as to liability. The order found that we were liable for infringing the copyrights, and violating the Digital Millennium Copyright Act, or DMCA, with respect to certain motion pictures of the Plaintiffs’. Damages related to the respective copyright infringements, and DMCA violations, were decided by a jury trial in June 2019. The jury found that we willfully infringed the Plaintiffs’ copyrights and awarded statutory damages of $75,000 for each of the 819 infringed titles, or $61,425,000. The jury also awarded statutory damages of $1,250 for DMCA violations for each of the 819 infringed titles, or $1,023,750. The total award for both counts is $62,448,750. On September 23, 2019, a judgment consistent with the jury’s verdict was entered against us by the California Court. The Plaintiffs also plan to seek an award of costs and attorneys’ fees.

On August 26, 2020, we entered into a Settlement Agreement with the Plaintiffs as part of our Reorganization Plan, effectively ending the litigation. See Item 1. Business---History of the Business---Bankruptcy Reorganization for more information for more information on the Settlement Agreement and Reorganization Plan.

The Permanent Injunction

On September 5, 2019, the California Court issued a permanent injunction against us. The permanent injunction enjoins us, our officers, agents, servants, employees, and attorneys, from: (1) circumventing technological measures protecting Plaintiffs’ copyrighted works on DVDs, Blu-rays, or any other medium; (2) copying Plaintiffs’ copyrighted works, including but not limited to copying the works onto computers or servers; (3) streaming, transmitting or otherwise publicly performing any of Plaintiffs’ copyrighted works over the Internet, via web applications, via portable devices, via streaming devices, or by means of any other device or process; or (4) engaging in any other activity that violates, directly or indirectly, Plaintiffs’ anti-circumvention right, 17 U.S.C. §1201(a), or that infringes by any means, directly or indirectly, any Plaintiffs’ exclusive rights in any copyrighted work under Section 106 of the Copyright Act, 17 U.S.C. §106.

We were required to cease and have ceased filtering and streaming all movies and television programs owned by the Plaintiffs.

The foregoing description of the permanent injunction is a summary and is qualified in its entirety by the California Court’s orders.

Chapter 11 Bankruptcy

On October 18, 2017, we filed a voluntary petition for relief under chapter 11, title 11 of the United States Code in the United States Bankruptcy Court for the District of Utah, or the Bankruptcy Court, case number 17-29073, or the Bankruptcy Case. On November 17, 2020, the Bankruptcy Court issued a final decree closing the Bankruptcy Case. See Item 1. Business---History of the Business---Bankruptcy Reorganization for more information.

ClearPlay Litigation

In 2014, we responded to a contention by ClearPlay that we (VidAngel) infringed on certain ClearPlay patents by suing ClearPlay in the United States District Court for the Central District of California (the case was later transferred to Utah). In doing so, we requested judicial determinations that our technology and service did not infringe eight patents owned by ClearPlay and that the patents were invalid. In turn, ClearPlay counterclaimed against us alleging patent infringement. On February 17, 2015, the case was stayed pending inter partes review by the United States Patent and Trademark Office, or the USPTO, of several of ClearPlay’s patents. We were not party to or involved in the USPTO’s review of those patents. Owing to those proceedings, on May 29, 2015, the Utah trial court closed the case without prejudice to the parties’ rights to reassert any or all claims later. In July and August 2015, many of ClearPlay’s patent claims, including many of the claims asserted against us, were invalidated by the USPTO. Some of ClearPlay’s other patent claims were upheld and still others were never challenged in the USPTO. Following the USPTO’s rulings, ClearPlay appealed some of the USPTO’s invalidity decisions to the United States Court of Appeals for the Federal Circuit. The findings of invalidity were all affirmed by the Federal Circuit on August 16, 2016. On October 31, 2016, the magistrate judge, Brooke C. Wells, conducted telephonic status conferences in this and a related case brought by ClearPlay against DISH Network and ordered that both cases be re-opened. Subsequently, Magistrate Judge Wells granted ClearPlay’s motion to stay the litigation at least until a decision is rendered on the preliminary injunction by the Ninth Circuit. On October 12, 2017, the magistrate judge ordered the case stayed again, this time until a final decision is rendered in the Disney Litigation. On February 14, 2018, ClearPlay filed a claim in our chapter 11 proceeding seeking an unliquidated sum. On April 14, 2020, the trustee appointed in our Bankruptcy Case filed an objection to the claim in the Bankruptcy Court seeking an order to disallow the claim in its entirety. On October 21, 2020, the Bankruptcy Court issued an order converting the trustee’s objection to Clearplay’s claim in the Bankruptcy case to an adversary proceeding. The case was transferred to the United States District Court for the Central District of Utah.

On April 20, 2021, the court lifted the stay as the final decision in the Disney Litigation had been determined and we were no longer in bankruptcy. VidAngel Entertainment assumed responsibility for defense of the ClearPlay litigation, and any settlement discussions thereto, as part of the Asset Purchase Agreement. On November 4, 2021, we informed that court that we sold VidAngel and VidAngel Entertainment is the successor. On January 14, 2022, ClearPlay filed a response stating Angel Studios and VidAngel Entertainment is liable for past infringement as they are the successor to VidAngel. The Court has not yet addressed this issue.

On December 20, 2021, we served non-infringement and invalidity contentions concerning the patents asserted in this case. On January 7, 2022, ClearPlay filed a motion seeking to add additional causes of action under the Digital Millennium Copyright Act and Utah state law for alleged tortious interference, which we opposed on February 4, 2022. On June 23, 2022, the Court granted leave for ClearPlay to amend its complaint to add these claims but deferred to a later stage of the proceedings any ruling on the futility of the claims. We continue to pursue, contest, and defend this case vigorously, but as a result of the stays that have been entered in this case, the case remains in its early stages.

On December 8, 2023, the Court held a Markman hearing to construe the scope and meaning of certain disputed claim terms in the asserted patents. At the conclusion of the hearing, the Court took the matter under submission. The timing and results of the Court’s ruling remain undetermined, and no deadlines or other case activities are scheduled to occur while the parties await the Court’s ruling. We will continue to pursue, contest, and defend this case vigorously. Because no claim construction ruling has been issued yet, the case remains at a relatively early stage.

The Chosen Arbitration

Our business currently generates a significant portion of our total revenue from distribution activities related to our Content License Agreement with The Chosen dated October 18, 2022 (the “Chosen Agreement”). The Chosen Agreement outlines the current contractual arrangement between the parties. Revenue from distribution activities related to the Chosen Agreement currently accounts for a large percentage of our revenue. If a material breach of the Chosen Agreement were to ever occur, and if The Chosen was able to terminate the Chosen Agreement as a result of the material breach, it would likely have a material adverse impact on our business, results of operations, and financial condition.

On April 4, 2023, we received a notice of termination (the “Initial Notice of Termination”) from The Chosen, indicating that The Chosen is seeking to terminate the Chosen Agreement for certain alleged material breaches of contract in accordance with Section 14 of the Chosen Agreement. The Initial Notice of Termination indicated that The Chosen would hold the termination of the Chosen Agreement in abeyance pending arbitration on the matter and would continue to perform all of its obligations under the Chosen Agreement until the outcome of the arbitration was determined.

On October 15, 2023, we received an additional notice of termination (the “New Notice of Termination”) from The Chosen stating additional alleged material breaches of contract and a declaration that the Chosen Agreement is hereby terminated, effective October 20, 2023. The New Notice of Termination fails to comply with the Chosen Agreement’s requirements for terminating based on a breach, specifically the notice and cure periods.

We strongly dispute all of the alleged material breaches set forth in the Initial Notice of Termination and the New Notice of Termination (the “Alleged Breaches”). We do not agree we have breached the Chosen Agreement, nor that any Alleged Breaches would be sufficiently “material” to warrant termination of the Chosen Agreement. We intend to vigorously defend our interests in this matter. Unless and until an unfavorable outcome of the arbitration is determined, we will also continue to perform all of our obligations under the Chosen Agreement.

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.

Market Information

There is no established public trading market for any class of the Company’s capital stock, including its Class B Common Stock or its Class C Common Stock, and we do not expect a public trading market to develop. The Company has not agreed to register any securities of the Company under the Securities Act for sale by stockholders.

Holders

As of January 5, 2024, there were (i) 10,939,165 shares of Class A Common Stock issued and outstanding, which were held by approximately 27 shareholders of record; (ii) 3,346,358 shares of Class B Common Stock outstanding, which were held by approximately 9,940 shareholders of record; (iii) 950,176 shares of Class C Common Stock outstanding, which were held by approximately 6 shareholders of record; and (iv) 9,756,576 shares of Class F Common Stock outstanding, which were held by approximately 51 shareholders of record.

Dividends

We have never paid cash dividends on any of our capital stock, and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. We do not intend to pay cash dividends to holders of our Common Stock in the foreseeable future. Further, we will not be permitted to pay cash distributions to our equity holders until such time as we have made all payments required under the Reorganization Plan. on which the final payment is not due to be made until July 15, 2034.

Equity Compensation Plan Information

The following table reflects the securities authorized for issuance under our Stock Incentive Plan and our Performance Equity Plan as of December 31, 2023. The material features of our Stock Incentive Plan and our Performance Equity Plan are described above under “Executive Officer and Director Compensation--Principal Elements of Compensation.”

Item 10. Recent Sales of Unregistered Securities.

Since December 31, 2020, the Company has issued and sold the following securities without the benefit of registration under the Securities Act of 1933, as amended:

Item 11. Description of Registrant’s Securities to be Registered.

General

We were formed as a corporation under the laws of the State of Delaware. The rights of our stockholders are governed by Delaware law as well as our Amended and Restated Certificate of Incorporation (our “Charter”) and our Amended and Restated Bylaws (our “Bylaws”), and, for holders of shares of our Class B Common Stock, by our Amended and Restated Class B Stockholders Agreement (the “Class B Stockholders Agreement”). 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 Charter, our Bylaws and the Class B Stockholders Agreement. For a complete description of our capital stock, you should refer to our Charter, our Bylaws the Class B Stockholders Agreement, and applicable provisions of the Delaware General Corporation Law (the “DGCL”).

As of January 5, 2024, our authorized capital stock consists of 85,000,000 shares of Common Stock, par value $0.001 per share. Of that amount, as of January 5, 2024, (i) 27,500,000 shares have been designated as Class A Common Stock, with 10,939,165 shares of Class A Common Stock issued and outstanding; (ii) 4,000,000 shares have been designated as Class B Common Stock, with 3,346,358 shares of Class B Common Stock issued and outstanding; (iii) 38,000,000 shares have been designated as Class C Common Stock, with 950,176 shares of Class C Common Stock issued and outstanding; and (iv) 15,500,000 shares have been designated as Class F Common Stock, with 9,756,576 shares of Class F Common Stock issued and outstanding.

Common Stock

Voting Rights

The holders of each class of our Common Stock vote together as a single class on each matter to be voted on by our stockholders, including the election of directors. On each such matter, each outstanding share of Class A Common Stock and Class F Common Stock is entitled to five (5) votes, each outstanding share of Class B Common Stock is entitled to fifty-five (55) votes, and each outstanding share of Class C Common Stock is entitled to one (1) vote. There is no cumulative voting.

The number of authorized shares of Class A Common Stock, Class B Common Stock, Class C Common Stock and Class F Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Common Stock entitled to vote, voting together as a single class. The amendment or repeal of the Charter, or the adoption of any provision thereof, requires the affirmative vote of (i) the holders of the majority of the voting power of the outstanding shares of Common Stock entitled to vote generally in the election of directors, voting together as a single class, and (ii) the holders of a majority of the voting power of the outstanding shares of two of the following classes of Common Stock: the Class A Common Stock, the Class B Common Stock, and the Class F Common Stock, each voting separately as a class.

Meetings

The annual meeting of the stockholders shall be held at such date, time and place, if any, as shall be determined by the Board and stated in the notice of the meeting. Special meetings of the stockholders shall be called by the Board, chairperson of our Board, the Chief Executive Officer or President (in the absence of a Chief Executive Officer), or by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting. The only business that may be conducted at a special meeting shall be the matter or matters set forth in the notice of such meeting.

Dividends

Dividends may be paid on the outstanding shares of our Common Stock as and when declared by the Board, out of funds legally available therefor.

Right to Receive Liquidation Distributions

Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of shares of our Common Stock will be entitled to share ratably in the distributable assets of the Company remaining after satisfaction of the prior preferential rights of any preferred stock, if any, and the satisfaction of all of our debts and liabilities.

Rights and Preferences

Holders of Common Stock shall have the same rights and privileges and shall rank equally with, and have identical rights and privileges as, holders of all other shares of the Common Stock, except with regard to voting rights as described above. Other than the conversion rights described below, holders of the Company’s Common Stock have no preemptive, exchange, sinking fund, redemption or other rights.

Voluntary and Automatic Conversion into Class C Common Stock

Each share of Class A Common Stock, Class B Common Stock and Class F Common Stock shall be convertible into one share of Class C Common Stock at the option of the holder at any time upon written notice to the Company's transfer agent.

In addition, each share of Class A Common Stock, Class B Common Stock and Class F Common Stock shall automatically convert into one share of Class C Common Stock upon the earliest of (i) certain transfers of such shares, (ii) in the case of shares of Class B Common Stock, the date on which a holder owns, together with its affiliates, more than 8,333 shares of Class B Common Stock (the “Class B Cap”), but only the shares the holder owns, together with its affiliates, above the Class B Cap will be so converted, and (iii) the date specified by a written notice and certification request by the Company to the holder of such share(s) requesting a certification verifying such holder’s ownership of such share(s) and confirming that a conversion to Class C Common Stock has not occurred, provided that no automatic conversion shall occur where the holder furnishes a certification satisfactory to the Company prior to the specified date (in each case, as more fully set forth in our Amended and Restated Certificate of Incorporation).

Finally, each share of Class A Common Stock, Class B Common Stock and Class F Common Stock held of record by a natural person shall automatically convert into one share of Class C Common Stock upon the death or permanent incapacity of such holder (as more fully set forth in our Charter).

Conversion of Class A Common Stock into Class F Common Stock

During 2022, current and prior Company employees and contractors with shares of Class A Common Stock elected to convert their Class A Common Stock into shares of Class F Common Stock. Class F Common Stock is exclusively reserved for current and prior employees and contractors of the Company.

The conversion of Class A Common Stock to Class F Common Stock has no impact on the overall number of outstanding shares of the Company's Common Stock. However, any such conversion will affect the ownership and voting rights of the respective shareholders.

Restrictions on Ownership and Transfer

Our Bylaws provide for a right of first refusal on behalf of the Company to purchase a stockholder’s shares of Common Stock prior to any sale, assignment, pledge or transfer thereof, subject to certain exemptions described in our Charter. Such provisions may have the effect of discouraging, delaying or preventing a merger or other transaction that a stockholder may consider favorable.

Description of Charter and Bylaws

The Company is governed by our Charter and our Bylaws. The following summary describes certain material provisions of our Charter and our Bylaws, but does not purport to be a complete description of our Charter, our Bylaws or any combination of the two, and is qualified in its entirety by the provisions of our Charter and our Bylaws, copies of which are filed as exhibits to this Registration Statement.

Board of Directors

Subject to our stockholders’ rights to consent to certain transactions as provided under the DGCL, the business and affairs of the Company are controlled by, and all powers are exercised by, our Board. Our Board is required to consist of a number of directors to be set from time to time by the Board, subject to certain requirements for representation of each class of Common Stock.

As of the date of this Registration Statement, our Board is comprised of Neal Harmon, Paul Ahlstrom, Katie Liljenquist, Steven Oskoui and Dalton Wright. Our Board is elected each year at the annual meeting of stockholders, to hold office until the next annual meeting and until their successors are elected and qualified. Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, or by a sole remaining director. Any other vacancies occurring in our Board may be filled by the affirmative vote of the remaining directors, subject to, in certain scenarios, an overriding vote by the stockholders entitled to vote in such decision. A director may resign at any time, and the stockholders may remove a director at any time, with or without cause, by the affirmative vote of a majority of stockholders entitled to vote in such decision. Additionally, the Board may, pursuant to a resolution adopted by a majority of the Board, provide for one or more additional authorized directors to be elected by all stockholders in order to bring certain subject matter experience or expertise to the Board.

The DGCL provides that stockholders of a Delaware corporation are not entitled to the right to cumulate votes in the election of directors unless its certificate of incorporation provides otherwise. Our Charter does not provide for cumulative voting.

Our Board may designate one or more committees. Such committees must consist of one or more directors. Any such committee, to the extent permitted by applicable law, will have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company.

Officers

The Board has the authority to select the officers of the Company. As of the date of this Registration Statement, the Company’s officers consist of a Chief Executive Officer, a Chief Content Officer, a President, a Chief Operating Officer, and a Chief Financial Officer and Secretary. In addition, the Board may elect a chairperson, one or more vice presidents, one or more assistant vice presidents, one or more assistant treasurers, one or more assistant secretaries, and any such other officers as may be appointed in accordance with the Bylaws. Two or more offices may be held by the same person. Currently, our officers are: (i) Neal Harmon, Chief Executive Officer; (ii) Jeffrey Harmon, Chief Content Officer; (iii) Jordan Harmon, President, (iv) Elizabeth Ellis, Chief Operating Officer; and (v) Patrick Reilly, Chief Financial Officer and Secretary.

At the first meeting of the Board following the annual meeting of stockholders, the Board appoints the officers, however, the Board may also empower the CEO, or the President in the absence of a CEO, to appoint subordinate officers and agents for us. Each officer so elected holds office until such officer’s successor is elected and qualified or until the officer’s earlier resignation or removal. Each officer is required to perform such duties as are provided in the Bylaws or as the Board may from time to time determine.  Subject to the rights, if any, of an officer under any employment agreement, any officer may be removed, with or without cause, by the affirmative vote of a majority of the Board.  An officer may resign at any time on giving notice to the Board. Our CEO is in charge of the general affairs of the Company, subject to the oversight of the Board. In case any officer is absent, or for any other reason the Board may deem sufficient, the CEO or the Board may delegate the powers and duties of such officer to any other officer or to any director.

Indemnification

The Company shall indemnify and hold harmless, to the fullest extent permitted by the DGCL, any director or officer of the Company made or threatened to be made a party to or who is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding. The Company shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board.

The Company has the power to indemnify, to the fullest extent permitted by law, any employee or agent of the Company made or threatened to be made a party to or who is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.

Item 12. Indemnification of Directors and Officers.

Our Charter and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by the DGCL. Our Charter states that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. Pursuant to Section 8.1 of the Bylaws, the Company must indemnify, to the fullest extent permitted by the DGCL, any director or officer of the Company made or threatened to be made a party to or who is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding. The Company is required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized by the Board.

The Company must pay the expenses incurred by any officer or director, and may pay the expenses incurred by any employee or agent, in defending any Proceeding in advance of its final disposition; provided, however, that the payment of expenses incurred by a person in advance of the final disposition of the Proceeding is to be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under the Charter, Bylaws or otherwise.

In addition, we have entered into indemnification agreements with each of our directors that provide our directors with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent permitted by law.

Item 13. Financial Statements and Supplementary Data.

The audited consolidated financial statements of the Company for the years ended December 31, 2022 and 2021 appear at the end of this Registration Statement beginning on page F-1.

The unaudited condensed consolidated financial statements for the nine months ended September 30, 2023 and 2022 appear at the end of this Registration Statement beginning on page F-19. Once available, the audited consolidated financial statements of the Company for the year ended December 31, 2023 will be filed by amendment to this Registration Statement prior to effectiveness.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 15. Financial Statements and Exhibits.

Our audited consolidated financial statements for the years ended December 31, 2022 and 2021 appear at the end of this Registration Statement on pages F-1 through F-18.

Our unaudited condensed consolidated financial statements for the nine months ended September 30, 2023 and 2022 appear at the end of this Registration Statement on pages F-19 through F-32.

The documents listed in the Exhibit Index of this Registration Statement are incorporated by reference or are filed with this Registration Statement, in each case as indicated below.

EXHIBIT INDEX

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized.

INDEX TO FINANCIAL STATEMENTS

Report of Independent Public Accounting Firm

To the Board of Directors and Management of Angel Studios, Inc.

Opinion on the Consolidated Financial Statements

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

Basis for Opinion

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

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

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

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

Consolidated Statements of Operations

See accompanying notes to consolidated financial statements.

Consolidated Statements of Stockholders’ Equity