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To The Stars Inc. – ‘1-SA’ for 6/30/23

On:  Thursday, 9/28/23, at 10:14am ET   ·   For:  6/30/23   ·   Accession #:  1493152-23-34523

Previous ‘1-SA’:  ‘1-SA’ on 9/28/22 for 6/30/22   ·   Latest ‘1-SA’:  This Filing   ·   12 References:   To:  To The Stars Inc. – ‘1-K’ on 4/28/23 for 12/31/22 To:  To The Stars Inc. – ‘1-A’ on 3/16/22 To:  To The Stars Inc. – ‘1-K’ on 4/30/21 for 12/31/20 To:  To The Stars Inc. – ‘1-U’ on 10/15/20 for 6/25/20 To:  To The Stars Inc. – ‘1-A/A’ on 8/3/20 To:  To The Stars Inc. – ‘1-U’ on 7/14/20 for 7/1/20 To:  To The Stars Inc. – ‘1-SA’ on 9/27/19 for 6/30/19 To:  To The Stars Inc. – ‘1-A/A’ on 6/3/19 To:  To The Stars Inc. – ‘1-K’ on 4/30/19 for 12/31/18 To:  To The Stars Inc. – ‘1-SA’ on 9/26/18 for 6/30/18 To:  To The Stars Inc. – ‘1-K’ on 4/30/18 for 12/31/17 To:  To The Stars Inc. – ‘DOS’ on 7/10/17 

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

 9/28/23  To The Stars Inc.                 1-SA        6/30/23    1:392K                                   M2 Compliance LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 1-SA        Semi-Annual Report or Special Financial Report      HTML    374K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-SA

☒ SEMIANNUAL REPORT PURSUANT TO REGULATION A

or

☐ SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A

For the fiscal semiannual period ended: June 30, 2023

To The Stars Inc.

(Exact name of issuer as specified in its charter)

315 S. Coast Hwy 101, Suite U38

Encinitas, California 92024

(Full mailing address of principal executive offices)

(760) 266-5313

(Issuer’s telephone number, including area code)

To The Stars Inc.

Table of Contents

In this semi-annual report, the term “To The Stars,” “TTS,” or “the Company” or “us” or “we” refers to To The Stars Inc. and its consolidated subsidiary To The Stars Media Inc. (“TTSM”).

This report may contain forward-looking statements and information relating to, among other things, the company, its business plan and strategy, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to the company’s management. When used in this report, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements, which constitute forward looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company does not undertake any obligation to revise or update these forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events.

Item 1. Management’s discussion and analysis of financial condition and results of operations

The following discussion of our financial condition and results of operations for the six-month period ended June 30, 2023 (“Interim 2023”) and the six-month period ended June 30, 2022 (“Interim 2022”) should be read in conjunction with our unaudited consolidated financial statements and the related notes included in this semi-annual report. The consolidated financial statements included in this report are those of TTS and represent our entire operation. The financial statements included in this filing as of and for the six months ended June 30, 2023, are unaudited, and may not include year-end adjustments necessary to make those financial statements comparable to audited results, although in the opinion of management all adjustments necessary to make interim statements of operations not misleading have been included.

Except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements included in the company’s Annual Report for the year ended December 31, 2022 filed with its Form 1-K. Operating results for Interim 2023 are not necessarily indicative of the results that can be expected for the year ending December 31, 2023.

Overview

The Company, together with its subsidiary, is a globally diversified media and entertainment company that was established as a public benefit corporation in 2017. We strive to be a revolutionary collaboration between academia, industry and pop culture to advance society’s imagination, curiosity and understanding of scientific phenomena and other mysteries of the universe. Our founders include a next-generation physicist, a career intelligence officer and an award-winning content creator and we specialize in creating, acquiring and commercializing entertainment intellectual property (“IP”) that is informed by the vast knowledge and experience of our own scientific advisory board.

The Company’s primary focus of business is through our subsidiary To The Stars Media Inc. TTSM creates, produces, and distributes original and licensed multi-media content across a variety of media platforms including music, books, movies and television. TTS also manufactures brand-related novelty merchandise, sold direct to consumers primarily through its own e-commerce channel. Existing products may be found at www.tothestars.media. The Company’s e-commerce platform includes a full assortment of the Company’s branded digital products and physical merchandise.

TTS measures performance of that business by profit, profit margin, sell-through rate, daily sales revenue, number of orders/customers, average order value, average value engagement ratios (number of people engaging in content or spending time on site), user conversion ratio, customer acquisition cost, customer satisfaction and retention, repeat purchases, email campaign indicators (e.g., open rate, click-through rate, user conversion), and customer engagement, including social media impressions, interaction, click-through, and time spent on site.

We recognize revenue related to the sales of products and services in an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to our customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance.

The Company’s e-commerce platform includes a full assortment of the Company’s branded digital products and physical merchandise. For e-commerce sales, we recognize revenue at the time the merchandise is shipped from our facility. Customers typically receive goods within four days of shipment. Amounts related to shipping and handling that are billed to customers are reflected in revenues, and the related costs are reflected in cost of revenues. Revenues from the sale of electronic formats of music, books and other media related items are recognized when the consumer receives the product. Taxes collected from customers and remitted to governmental authorities are presented in the consolidated statements of operations on a net basis.

Cost of revenues consists of merchandise costs, shipping costs, consulting and content costs which do not meet the criteria for capitalization.

The Company’s operating expenses consist of general and administrative expenses, sales and marketing expenses, stock-based compensation expense and depreciation and amortization.

RESULTS OF OPERATIONS

Results for the Six Months Ended June 30, 2023 and June 30, 2022.

Revenues

The Company’s revenues increased 91% to $563,407 for the six months ended June 30, 2023 (“Interim 2023”) from $294,585 for the six months ended June 30, 2022 (“Interim 2022”). The 2023 increase in revenues was primarily attributable to higher direct-to-consumer sales on the Company’s own e-commerce platform due to the successful marketing and sales of the To The Stars* logo ‘Package’ t-shirt.

Cost of Revenues

The Company’s cost of revenues was $313,367 for Interim 2023 compared to $196,605 for Interim 2022, a 59% increase. The increase cost of revenues for Interim 2023 compared to Interim 2022 was primarily the result of higher sales volumes.

Gross Profit

For Interim 2023, the Company’s gross profit was $250,040 compared to $97,977 for Interim 2022. Accordingly, our gross margins increased to 44% for Interim 2023 compared to 33% for Interim 2022. The primary reason for the increase in margin was due to an increase in the sales of To The Stars* wholly owned products over licensed merchandise where royalty expense is incurred.

Operating Expenses

Operating expenses overall for Interim 2023 declined 29% to $466,933 from $657,470 for Interim 2022 as result of a large decrease in expenses related to stock-based compensation.

General and Administrative

For Interim 2023, general and administrative expenses decreased to $141,076 from $149,533 for Interim 2022, representing a 6% decrease due to reduced spending on wages and reduced amortization expenses.

Sales and Marketing

The Company’s sales and marketing expenses decreased by 10% to $277,948 for Interim 2023, from $308,055 for Interim 2022, primarily due to a decrease in wages.

Stock-Based Compensation

The Company’s stock-based compensation expense decreased 80% to $36,507 for Interim 2023 from $182,351 for Interim 2022 as the amortization periods for several optionee’s ended in 2022.

Other Expenses

For Interim 2023, other expenses included interest expense of $15,994 predominantly from the convertible notes and $500 interest income. This amount was an increase from Interim 2022, where other expenses were $1,170. The increase was primarily attributable to interest related to the convertible notes.

Net Loss

Accordingly, our net loss for Interim 2023 was reduced to $232,387 compared with a net loss of $560,663 for Interim 2022.

LIQUIDITY AND CAPITAL RESOURCES

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have an accumulated deficit at June 30, 2023 of $58,081,599. We expect to incur substantial expenses and generate continued operating losses until we generate revenues sufficient to meet our ongoing costs. Thus, until we can generate sufficient cash flows to fund operations, we are dependent on raising additional capital through debt and/or equity transactions.

At June 30, 2023, the Company had total current assets of $231,575. Current assets consisted primarily of $82,239 in cash, $37,319 in accounts receivable, $78,238 in inventory, $9,919 in prepaid author royalties, and $23,860 in other current assets.

At June 30, 2023, the Company had total current liabilities of $399,892. Current liabilities consisted primarily of the accounts payable of $207,329 and accrued liabilities of $192,563.

At June 30, 2023, we had a working capital deficit of $168,317 compared with a deficit of $87,644 at December 31, 2022.

Regulation A

The Company’s fourth Regulation A offering was qualified on March 31, 2022 and was terminated on November 3, 2022. The Company sold approximately 97,757 shares with gross proceeds of $488,790 before offering costs. Offering costs paid were $418,245.

Indebtedness

During Interim 2022, the Company incurred a debt of $300,000 comprising a convertible note purchased by our CEO. On December 31, 2022, the note was amended for a total principal sum of $459,581 to include additional capital contributions made by Mr. DeLonge of $150,011 and $9,570 accrued interest during 2022.

The total amount of the convertible note including interest at June 30, 2022 is $473,371 with interest expense accrued for the interim of $13,790.

The note automatically converts into Class A common stock upon the next equity financing made through a transaction in reliance on Regulation D or Section 4(a)(2) of the Securities Act where the gross proceeds are $5 million or more at a 20% discount to the offering price. The note is contingently convertible into common stock upon the occurrence of certain liquidating or financing events. If the note converts pursuant to a change of control or the sale of substantially all of the Company’s assets, licenses or intellectual property, the conversion price will be $1.20 per share or 382,984 shares of Class A common stock. At any time on or after the December 31, 2024 (the “Maturity Date”), at the election of the Holder, this Note will convert into that number of shares of common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing the outstanding principal balance and unpaid accrued interest of this Note on the date of such conversion by the conversion price of $1.20. At issuance and at June 30, 2023, the convertible note cannot be converted by terms of the agreement.

The Note is attached to this report as Exhibit 6.25, and the Amended Note is Exhibit 6.27.

Short-term Loans and Advances

The Company’s majority shareholder, Thomas DeLonge provided $94,903 in cash advances to fund operations in Interim 2023 and has committed to provide additional capital if needed to the Company for a period of at least 12 months from the issuance date of the June 30, 2023 financial statements.

Currently, the Company does not have any commitments or assurances for additional capital, other than disclosed above, nor can the Company provide assurance that such sources of funds will be available to it on favorable terms, or at all. If, after utilizing the existing sources of capital available to the Company, further capital needs are identified and the Company is not successful in obtaining the financing, it could potentially be forced to curtail its existing or planned future operations.

Future Financings.

Since inception, we have financed our cash flow requirements through issuance of common stock and loans by affiliates and third parties. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of revenues. Additionally, we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital. In the future, we will need to generate sufficient revenues from sales in order to eliminate or reduce the need to sell additional stock or obtain additional loans. There can be no assurance we will be successful in raising the necessary funds to execute our business plan.

Cash Flow

The following table summarizes, for the periods indicated, selected items in our condensed Statements of Cash Flows:

Operating Activities

Cash used in operating activities was $72,680 for Interim 2023, compared to cash used in operating activities of $273,181 for Interim 2022. The decrease in cash used in operating activities was primarily due to a reduced operating loss as a result of improved sales and corresponding gross profit during Interim 2023 compared to Interim 2022.

The change in gross margins explains $152,063 of the change. For details, please see Statement of Cash Flows in the accompanying Interim Financial Statements.

Investing Activities

Cash used in investing activities was $0 for Interim 2023 as compared to $9,400 for Interim 2022.

Financing Activities

Cash provided by financing activities decreased to $90,015 for Interim 2023, from $252,600 for Interim 2022. The decrease in cash provided by financing activities was primarily due to decreased advances from related parties.

Trend Information

Management Update

During the Interim 2023:

On May 2, 2023, the Writers Guild of America Strike began and was followed by the American actors’ union SAG-AFTRA Strike on July 14, 2023. The Writers Guild of America (WGA), which represents approximately 11,500 screenwriters, and SAG-AFTRA went on strike over an ongoing labor dispute with the Alliance of Motion Picture and Television Producers (AMPTP). The Company is not a member of the AMPTP, but the specific projects in development with members of the WGA or SAG-AFTRA are currently on hold unless an interim agreement can be reached, or the strikes are resolved. On September 25, 2023 the WGA announced a tentative agreement that could end the strike and suspended picketing. The Company’s projects that fall outside the WGA or SAG-AFTRA strike continue to make progress.

We may need to seek additional funds to complete these projects within the next six to 12 months.

The Company is currently evaluating different funding mechanisms, including additional corporate structuring, to accelerate its progress, scale and expand, including institutional monies, foundations, private equity and angel investment.

Item 2. Other Information

None.

Item 3. Financial Statements

TO THE STARS INC.

CONSOLIDATED FINANCIAL STATEMENTS

As of

June 30, 2023 and 2022

To The Stars Inc.

Index to Consolidated Financial Statements

TO THE STARS INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

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

TO THE STARS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

In the opinion of management all adjustments necessary in order to make the interim financial statements not misleading have been included.

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

TO THE STARS INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

FOR THE PERIOD ENDED JUNE 30, 2023 AND YEAR ENDED DECEMBER 31, 2022

(UNAUDITED)

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

TO THE STARS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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

TO THE STARS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

To The Stars Inc. (which may be referred to as “TTS”, the “Company”, “we”, “us”, or “our”) was incorporated on February 13, 2017 as “To The Stars Academy Of Arts and Science Inc.” as a Delaware public benefit corporation. The Company changed its name to “To The Stars Inc.” on November 30, 2021. TTS has created an entertainment, aerospace and science consortium that inspires and collaborates with global citizens to investigate the outer edges of science and unconventional thinking in order to push human knowledge and capability forward. The Company’s headquarters are located in Encinitas, California.

To The Stars Inc. is the parent company of To The Stars Media, a vertically integrated entertainment company that creates, produces and distributes original and licensed multi-media content, including music, books and film. To the Stars Media has developed several branded media properties, which are included within the consolidated financial statements of the Company.

The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with the instructions to Form 1-SA. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the year ended December 31, 2022 have been omitted. This report should be read in conjunction with the audited financial statements and the footnotes thereto for the fiscal year ended December 31, 2022 included within the Company’s Form 1-K as filed with the Securities and Exchange Commission.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Management’s Plans

The Company is still in the development stage and operates at a loss. To date revenues generated from operations have not been sufficient to fund operations. Thus, until the Company can generate sufficient cash flows to fund operations, the Company remains dependent on raising additional capital through debt and/or equity transactions.

The Company has incurred losses from operations and has an accumulated deficit at June 30, 2023 of $58,081,599.

The Company’s majority shareholder has committed to provide additional capital if needed to the Company for a period of at least 12 months as of June 30, 2023.

During the six months ended June 30, 2023 Gravity Holdings provided $94,903 in cash advances to fund operations.

Currently, the Company does not have any commitments or assurances for additional capital, nor can the Company provide assurance that such sources of funds will be available to it on favorable terms, or at all. If, after utilizing the existing sources of capital available to the Company, further capital needs are identified and the Company is not successful in obtaining the financing, it could potentially be forced to curtail its existing or planned future operations.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of To The Stars Inc. and its subsidiary To The Stars Media Inc. for all periods presented. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and the reported amount of revenues and expenses during the reporting period. Actual results could materially differ from these estimates. Significant estimates include, but are not limited to, sales return allowance, amortization periods of media assets, and recoverability of long-lived assets. It is reasonably possible that changes in estimates will occur in the near term.

Cash and Cash Equivalents

For purposes of the consolidated statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and are non-interest-bearing. Accounts receivable primarily consists of trade receivables. The Company maintains an allowance for doubtful accounts to reserve for potential uncollectible receivables. The Company makes judgments as to its ability to collect outstanding receivables and records allowances against receivables if collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding receivable balances. The Company’s estimates of these allowances ultimately may not be reflective of actual collection results. At June 30, 2023 and December 31, 2022, the reserve was insignificant to the consolidated financial statements.

Inventory

Inventories, which consist primarily of merchandise, are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

Property and Equipment

Property and equipment are stated at cost. The Company’s fixed assets are depreciated using the straight-line method over the estimated useful life of five (5) to seven (7) years. Leasehold improvements are depreciated over the shorter of the useful life or term of the lease. Maintenance and repairs are charged to operations as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations.

Investments in Joint Ventures

On March 24, 2021, the Company officially signed a co-production agreement with Cartel Pictures to bring together the Company’s brand recognition, entertainment contacts and sources of original intellectual property with Cartel’s extensive degree of expertise in the area of film and series production, including contacts and resources for the creation and exploitation of audiovisual products. As part of the deal, the parties will work together to develop, produce and explore productions across all media formats and territories. There are currently approximately 19 projects at various stages of development including feature films and episodic TV series.

Per the co-production agreement, the parties will mutually approve all agreements for the distribution, exhibition or other exploitation of productions, as well as the identity of the licensee/network/studio/distributor. All proceeds from the distribution of productions will be split equally between TTS and Cartel, after recoupment of production costs (and any other costs incurred by either or both parties in connection with the development, production or marketing of any production).

The Company accounts for these investments using the equity method whereby the initial investment is recorded at cost and subsequently adjusted by the Company’s share of income or loss from the joint venture(s). Investments in these joint ventures for the period ended June 30, 2023 and December 31, 2022 were $116,300.

In 2023, the Company made no significant investments as most projects are in the scriptwriting and idea-creation phase. As a result, there is currently no financial activity to report for these Joint Ventures beyond the initial investments listed in the 2022 financial statements. As of December 31, 2022, material assets of the Joint Ventures included approximately $48,500 in cash and $199,100 in capitalized development costs.

Pre-publication Costs (Media Assets)

The Company capitalizes the art, prepress, manuscript, studio time, engineering, production and other costs incurred in the creation of the master copy or final product of a book, music or other media (the “pre-publication costs”). Pre-publication costs related to books and other media are primarily amortized from the date of issuance over a period of five years using the straight-line method as most of these pre-publication costs are spread over multiple products issued within that time frame. For music related cost, the Company uses the sum-of-the-years-digits method, which is an accelerated method for calculating an asset’s amortization. Under this method, the amortization expense recorded for a pre-publication cost asset is approximately 47% (year 1), 25% (year 2), 14% (year 3), 8% (year 4) and 5% (year 5). The amortization methods and periods chosen best reflect the pattern of expected sales generated from individual titles, music and/or programs. The Company periodically evaluates the remaining lives and recoverability of capitalized pre-publication costs, which are often dependent upon program acceptance by state adoption authorities. For the six months ended June 30, 2023 and 2022, there was no impairment of prepublication costs.

Royalty Advances

Royalty advances to authors are capitalized and represent amounts paid in advance of the sale of an author’s product and are recovered as earned. As advances are recorded, a partial reserve may be recorded immediately based primarily upon historical sales experience. Advances are evaluated periodically to determine if they are expected to be recovered. Any portion of a royalty advance that is not expected to be recovered is fully reserved. At June 30, 2023 and December 31, 2022, royalty advances recorded in the accompanying consolidated balance sheets were $84,433 and $86,347, respectively. During the six months ended June 30, 2023 and 2022, there were no reserves recorded against royalty advances.

Impairment of Long-Lived Assets

The long-lived assets held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. There can be no assurance, however, that market conditions will not change or demand for the Company’s products and services will continue, which could result in impairment of long-lived assets in the future.

Revenue Recognition

The Company recognizes revenue pursuant to Accounting Standards Codification 606, which requires revenue to be recognized at an amount that reflects the consideration expected to be received in exchange for transferring goods or services to customers. Revenue is recognized when performance obligations are satisfied through the transfer of control of promised goods to the Company’s customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product. This includes the transfer of title, physical possession, the risks and rewards of ownership and customer acceptance.

Revenue is recognized from the Company’s in-store sales when the customer receives and pays for the merchandise at the register. For e-commerce sales, the Company recognizes revenue at the time the merchandise is shipped from our facility. Customers typically receive goods within four days of shipment. Amounts related to shipping and handling that are billed to customers are reflected in revenues, and the related costs are reflected in cost of revenues. Revenues from the sale of electronic formats of music, books and other media related items are recognized when the consumer receives the product. Taxes collected from customers and remitted to governmental authorities are presented in the consolidated statements of operations on a net basis. The nature of the Company’s business allows for customers to return previously purchased goods for a return or exchange which may result in a reduction of the Company’s revenues. These sales returns have not been significant to the Company’s revenues in the accompanying financial statements.

Cost of Revenues

Cost of revenues consists of merchandise costs, shipping costs, consulting and content costs which do not meet the capitalization criteria, royalties, etc.

General and Administration

General and administrative expenses include general corporate expenditures consisting of rent and facility costs, accounting, and legal fees, insurance expenses, etc.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses were $37,385 and $52,135 for the six months ended June 30, 2023 and June 30, 2022, respectively.

Stock-Based Compensation

The Company uses ASC 718 for stock-based compensation. Compensation for all stock-based awards, including stock options and restricted stock, is measured at fair value on the date of grant and recognized over the associated vesting periods. The fair value of stock options is estimated on the date of grant using a Black-Scholes model. The fair value of restricted stock awards is estimated on the date of the grant based on the fair value of the Company’s underlying common stock. The Company recognizes compensation expense for stock options and restricted stock awards on a straight-line basis over the associated service or vesting periods.

Determining the grant date fair value of options using the Black-Scholes option-pricing model requires management to make assumptions and judgments. These estimates involve inherent uncertainties and, if different assumptions had been used, stock-based compensation expense could have been materially different from the amounts recorded.

Income Taxes

The Company applies ASC 740 Income Taxes. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their consolidated financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities.

ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position is recognized only if it is “more likely than not” that the position is sustainable upon examination by the relevant taxing authority based on its technical merit.

Concentration of Credit Risk

Cash

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits. To date there have been no losses.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2023 and December 31, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, other current assets, accounts payable, accrued liabilities, related party notes payable, etc. Fair values for these items were assumed to approximate carrying values because of their short-term nature or they are payable on demand.

Basic Loss per Common Share

Basic loss per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net loss available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. The Company’s common stock equivalents consist of common stock issuable upon the exercise of options. At June 30, 2023 and 2022, the effect of dilutive securities were anti-dilutive and thus is not included.

Recent Accounting Standards

Changes to accounting principles are established by the FASB in the form of ASU’s to the FASB’s Codification. We consider the applicability and impact of all ASU’s on our financial position, results of operations, stockholders’ equity, cash flows, or presentation thereof. At June 30, 2023, there were no pronouncements that had an effect on the Company’s financial statements.

NOTE 3 – DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

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

Depreciation expense was $2,094 and $2,238 for the six months ended June 30, 2023 and 2022, respectively.

Media assets consisted of the following at June 30, 2023 and December 31, 2022:

Amortization expense was $9,308 and $15,293 for the six months ended June 30, 2023 and 2022, respectively.

NOTE 4 – BORROWINGS

Short-term Loans and Advances

The Company’s President, Thomas DeLonge provided $94,903 in cash advances to fund operations during the six months ended June 30, 2023.

NOTE 5 – COMMITMENTS AND CONTINGENCIES

Litigation

We may from time to time be involved in various claims and legal proceedings of a nature we believe are normal and incidental to our business. These matters may include product liability, intellectual property, employment, personal injury cause by our employees, and other general claims. We are not presently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. As of June 30, 2023 and December 31, 2022, except as previously disclosed, there was no pending or threatened litigation.

Contracts

The Company routinely enters into long-term commitments with writers for the future delivery of book and screenplay related product. Such commitments generally become due only upon delivery and Company acceptance of the product. Additionally, such commitments are typically cancelable at the Company’s discretion, generally without penalty.

NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

The Company is authorized to issue 100,000,000 shares of Class A common stock. As of June 30, 2023 and December 31, 2022, there were 13,909,664 shares of Class A common stock outstanding.

Preferred Stock

The Company is authorized to issue 91,000 shares of preferred stock. No shares of preferred stock were outstanding as of June 30, 2023 and December 31, 2022.

Stock Incentive Plan

In May 2017, the Company established the 2017 Stock Incentive Plan (the “Original Plan”). Under the terms of the Original Plan, the Company was authorized to issue 17,500,000 shares of Class A common stock. On April 23, 2019, the Board approved the Amended and Restated 2017 Stock Incentive Plan (“ANR Plan”) to reduce the maximum number of shares of common stock reserved for issuance under the Original Plan to 2,518,514 shares. This was again amended twice during the year ended December 31, 2021 to increase the number of shares of common stock reserved for issuance under the plan to 3,043,556 and then to 3,791,336 through the Second Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”). As of June 30, 2023 and December 31, 2022, there were 531,730 shares available for issuance under the Equity Incentive Plan.

During the years ended December 31, 2022 and 2021, the Company valued the options using the Black-Scholes pricing model on the date of grant using the following assumptions:

The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Grants to non-employees are expensed at the earlier of (i) the date at which a commitment for performance by the counterparty to earn the equity instrument is reached and (ii) the date at which the counterparty’s performance is complete.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including the fair value of the Company’s common stock, and for stock options, the expected life of the option, and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

The Company uses the following inputs when valuating stock-based awards. The expected life of employee stock options was estimated using the “simplified method,” as the Company has no historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock option grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. The expected life of awards that vest immediately use the contractual maturity since they are vested when issued. For stock price volatility, the Company uses public company compatibles and historical private placement data as a basis for its expected volatility to calculate the fair value of option grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option at the grant-date.

The Company recognizes stock option forfeitures as they occur as there is insufficient historical data to accurately determine future forfeiture rates.

As of June 30, 2023, 2,178,434 stock options were exercisable under the Plan with a remaining weighted average life of 5.3 years.

The Company recognized stock compensation expense of $36,507 and $182,351 during the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, total unrecognized stock compensation expense related to unvested stock units was approximately $48,831 which will be recognized as stock compensation expense over the remaining vesting term. The amount of future stock-based compensation expense could be affected by any future option grants or by any forfeitures.

Warrants

During the year ended December 31, 2022, the Company granted warrants to purchase 348,000 shares of Class A common stock which vested immediately. Of these warrants, 250,000 were attributed to the Reg A offering and charged directly to Additional Paid-in Capital. No warrants were issued or granted during the six months ended June 30, 2023.

The fair value of warrants granted in 2022 were $592,077, of which $156,975 was charged directly to Additional Paid-in Capital and $435,102 was charged to Stock Based Compensation.

During the years ended December 31, 2022, the Company valued the warrants using the Black-Scholes pricing model on the date of grant using the following assumptions:

NOTE 7 – RELATED PARTY TRANSACTIONS

Convertible Note

During Interim 2022, the Company incurred a debt of $300,000 comprising a convertible note purchased by our CEO. On December 31, 2022, the note was amended for a total principal sum of $459,581 to include additional capital contributions made by Mr. DeLonge in the amount of $150,011 plus interest expense accrued for the year ended of $9,570.

The total amount of the convertible note including interest at June 30, 2023 is $473,371 with interest expense accrued for interim 2023 of $13,790.

The note automatically converts into Class A common stock upon the next equity financing made through a transaction in reliance on Regulation D or Section 4(a)(2) of the Securities Act where the gross proceeds are $5 million or more at a 20% discount to the offering price. The note is contingently convertible into common stock upon the occurrence of certain liquidating or financing events. If the note converts pursuant to a change or control or the sale of substantially all of the Company’s assets, licenses or intellectual property, the conversion price will be $1.20 per share or 382,984 shares of Class A common stock. At any time on or after the Maturity Date, at the election of the Holder, this Note will convert into that number of shares of common stock equal to the quotient (rounded down to the nearest whole share) obtained by dividing the outstanding principal balance and unpaid accrued interest of this Note on the date of such conversion by the conversion price of $1.20. At issuance and at June 30, 2023, the convertible note cannot be converted by terms of the agreement.

My Products, LLC – Merchandising and Licensing Agreement with Related Party

The Company entered into a Merchandising Agreement with My Products, LLC (“My Products”) (f/s/o Tom DeLonge p/k/a Angels & Airwaves) (the “Merchandise Agreement”) on June 1, 2021. Under the Merchandise Agreement, the Company acquired the exclusive worldwide e-commerce merchandise rights and non-exclusive worldwide retail rights to sell My Products merchandise. This licensing agreement covers only Angels & Airwaves merchandise and does not include a license to Angels & Airwaves’ music. The Company has a relationship with record labels to purchase music media, like vinyl records, at wholesale. The term of the Merchandise Agreement is one (1) year and shall automatically extend until such time as either party provides thirty (30) day written notice of termination. The Company agrees to pay My Products royalties as laid out in the Merchandise Agreement. The Merchandise Agreement was amended December 1, 2021, to clarify certain terms, including one that increased the royalty rates paid on the sale of merchandise by the Company. Merchandising Agreement expensed under this agreement were $7,368 and $18,470 in Interim 2023 and Interim 2022, respectively.

Accounts Payable

As of June 30, 2023, there is a balance due to My Products LLC and Thomas DeLonge recorded in the company’s accounts payable in the amount of $25,434. The accounts payable consist of $18,066 for legal fees paid by Mr. DeLonge on behalf of To the Stars, Inc., and $7,368 due to My Products, LLC for royalties.

NOTE 8 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events that occurred after June 30, 2023 through September XX, 2023, the issuance date of these consolidated financial statements.

Item 4. Exhibits

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

(1) Incorporated by reference from the Company’s Form 1-A filed with the SEC July 10, 2017.

(2) Incorporated by reference from the Company’s Form 1-A on June 3, 2019.

(3) Incorporated by reference from the Company’s Form 1-U filed July 14, 2020.

(4) Incorporated by reference from the Company’s Form 1-K filed April 30, 2021.

(5) Incorporated by reference from the Company’s Form 1-U filed October 15, 2020.

(6) Incorporated by reference from the Company’s Form 1-SA filed September 26, 2018.

(7) Incorporated by reference from the Company’s Form 1-K filed April 30, 2019.

(8) Incorporated by reference from the Company’s Form 1-SA filed September 27, 2019.

(9) Incorporated by reference from the Company’s Form 1-A filed August 3, 2020.

(10) Incorporated by reference from the Company’s Form 1-A filed March 16, 2022.

(11) Incorporated by reference from the Company’s Form 1-K filed April 28, 2023.

* Portions of the exhibit have been omitted.

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Encinitas, State of California, on September 28, 2023.

Pursuant to the requirements of Regulation A, this report has been signed below by the following person on behalf of the issuer and in the capacities and on the date indicated.

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Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘1-SA’ Filing		Date		Other Filings
		12/31/24
		12/31/23
Filed on:		9/28/23
		9/25/23
		7/14/23
For Period end:		6/30/23
		5/2/23
		4/28/23		1-K
		12/31/22		1-K
		11/3/22
		6/30/22		1-SA
		3/31/22		253G2,  QUALIF
		3/16/22		1-A
		12/31/21		1-K
		12/1/21
		11/30/21
		6/1/21
		4/30/21		1-K
		3/24/21		1-U
		10/15/20		1-U
		8/3/20		1-A/A
		7/14/20		1-U
		9/27/19		1-SA
		6/3/19		1-A/A,  CORRESP
		4/30/19		1-K
		4/23/19
		9/26/18		1-SA
		7/10/17		DOS
		2/13/17
				List all Filings

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12 Previous Filings that this Filing References

As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 4/28/23 To The Stars Inc. 1-K 12/31/22 3:49M M2 Compliance LLC/FA 3/16/22 To The Stars Inc. 1-A 19:19M M2 Compliance LLC/FA 4/30/21 To The Stars Inc. 1-K 12/31/20 4:941K M2 Compliance LLC/FA 10/15/20 To The Stars Inc. 1-U:9 6/25/20 2:18K Toppan Merrill/FA 8/03/20 To The Stars Inc. 1-A/A 7/31/20 10:8.2M Toppan Merrill/FA 7/14/20 To The Stars Inc. 1-U:9 7/01/20 2:24K Toppan Merrill/FA 9/27/19 To The Stars Inc. 1-SA 6/30/19 3:351K Toppan Merrill/FA 6/03/19 To The Stars Inc. 1-A/A 8:1M Toppan Merrill/FA 4/30/19 To The Stars Inc. 1-K 12/31/18 7:669K Toppan Merrill/FA 9/26/18 To The Stars Inc. 1-SA 6/30/18 4:337K Toppan Merrill/FA 4/30/18 To The Stars Inc. 1-K 12/31/17 7:519K Toppan Merrill/FA 7/10/17 To The Stars Inc. DOS¶ 8/15/17 13:1.2M Toppan Merrill/FA

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