Does anyone want this service and will they pay enough for it? The company will only succeed (and you will only make money) if there is sufficient demand for this service, people think it’s a better option than the competition and the company has priced the services at a level that allows the company to make a profit and still attract business.
Technology vulnerabilities. It is possible that company’s servers, software, platforms, websites and hardware may be vulnerable to unauthorized access, system failures and other security problems. Persons who circumvent security measures could wrongfully use its technology incorrectly or cause damage to its operations. It may be necessary for the company to expend significant resources to protect against the threat of security breaches or to alleviate problems caused by any such breaches. Although our plans are to always utilize industry standard security measures, these measures may prove to be inadequate and system failures and delays may occur that could have an adverse effect on the company's financial condition, operating results and cash flow.
Any valuation at this stage is pure speculation. No-one is saying the company is worth a specific amount. They can’t. It’s a question of whether you, the investor, want to pay this price for this security. Don’t think you can make that call? Then don’t invest.
Our people are our most important asset. If we lose our key staff, we may have difficulty continuing our business as anticipated. The company’s future success depends on the continued services and performances of key management, consultants and advisors. Our future success may further depend on the company's ability to attract and retain additional key personnel and third party contractual relationships. If the company is unable to attract and retain key personnel and third party contractors, this could adversely affect our business, financial condition, and operating results.
The company is controlled by Gregory Ari Shohat. Gregory Ari Shohat, the CEO of the company, currently holds approximately 98% of all of the company’s voting stock, and at the conclusion of this offering will continue to hold a majority of the company’s common stock. Investors in this offering will not have the ability to control a vote by the shareholders or the board of directors.
We are competing against larger and more established service providers. We are a small service provider in a market that has many large service providers and will have to compete against companies with large marketing budgets and established distribution channels.
Market and Market size. Our potential market may not be as large or our industry may not grow as rapidly as anticipated. With a smaller market than expected, we may have fewer customers. Moreover, the potential markets for products are characterized by rapidly changing technology, evolving industry standards, frequent enhancements to existing services and products, the introduction of new services and products, and changing customer demands. The company’s success could depend on our ability to respond to changing service and product standards and technologies on a timely and cost-effective basis. In addition, any failure by the company to anticipate or respond adequately to changes in technology and customer preferences could have a material adverse effect on its financial condition, operating results and cash flow.
- Royalties and Licenses. Our business model depends on receiving licenses to stream and disseminate music and copyrighted material of other parties, to whom we must pay royalties. Loss or disruption of licenses or increases in royalty payments would have a direct and adverse impact on the company’s ability to operate. Furthermore, the business model of the company depends on licensing rights in each of sound recordings and compositions under licenses from the applicable collective rights management or societies in each relevant territory. These rights include, chiefly, the so-called “Performing” right (to stream and distribute music online) but may also include the so-called “Mechanical” right to copy music onto digital databases for distribution purposes. The company's service is primarily intended for and available to users in the United States of America, the Netherlands, the United Kingdom and Canada. In each of these countries, all necessary rights in respect of sound recordings and compositions are available on a “blanket” basis from monopoly (or oligopoly) collection societies and the company has either obtained the necessary licenses or is in advanced stages of negotiation with the licensors. Such negotiations that are still ongoing in these countries are expected to conclude in the short-term. Therefore, assuming that the company remains engaged with such licensors and is prepared to pay license fees in future at or near the amount that it has paid to date, the company’s EU-based licensing advisors consider that there is no substantial legal or commercial risk in these territories.
The company’s services, however, are accessible by internet users globally, irrespective of location. For territories where the company has not concluded any music licenses and does not (yet) have an ongoing relationship with applicable licensors, there is a risk that the company may be threatened with demands for license fees and/or legal claims for unauthorized use of sound recordings or compositions. On a practical level, the company’s financial risk in any event is not likely to exceed a “fair and reasonable” license fee for the actual use made of those sound recordings and/or compositions in the applicable territory (plus any legal fees for local assistance with such claims). According to the company's advisors, whilst this risk is made far worse in the U.S. due to claims regularly made for very substantial “statutory damages," no other relevant country has any comparable regime. It should be noted that in some territories claims can be uplifted for “flagrant” unauthorized use but, based on the company’s behavior to date, the chances of receiving any such claim are very low.
The company may choose (now or at some point in future) to mitigate such risk by initiating contact with relevant licensors in certain territories, but this would need to be managed on a case-by-case basis and, due to normal usage fluctuations for a music service of this kind, the risk in each case may vary widely over time. More commonly, music services mitigate such risk simply by accruing funds in the amount of a “fair and reasonable” license fee (as conservatively determined in conjunction with advisors) to account for actual usage in each territory on an ongoing basis. Moreover, licensors in certain territories will from time to time undergo structural or systemic changes which potentially could lead to loss or disruption of licenses, or increased demands for license fees, which could have a direct and adverse impact on the company’s financial position and/or ability to operate. It may be possible for the company to accrue additional amounts to mitigate such potentially-wider risk, but this is impossible to predict with any reasonable measure of certainty and would need to be managed on a case-by-case basis.
The terms of the U.S. compulsory license for webcasting require that a royalty be paid for the transmission of all or any portion of an identifiable sound recording to a transmission recipient. While the company for many years considered a DJ compilation mix or show to be an identifiable sound recording for performance reporting purposes, the company was notified this practice was not acceptable. It is possible that the company could be found liable for additional music royalties in connection with performance of individuals tracks within such mixes/shows. In June 2015, the company began offering a portion of DJ compilation mixes and shows for interactive playback to paying subscribers in the United States and Netherlands. The individual tracks within these mixes and shows were not identified and it is likely that a large portion of the individual tracks are not licensed for interactivity. While this activity represents an insignificant amount of total listening in these countries, copyright violations in the United States especially can be significant.
The independent accountant who performed a review of the company’s consolidated financial statements has issued a going concern opinion. The independent accountant who performed a review of the company’s consolidated financial statements has issued a “going concern” opinion on the company’s financial statements. The company generated profits in recent years; however it has an accumulated deficit of $698,923 and $753,235 as of December 31, 2016 and 2015, respectively, and current liabilities exceeded current assets by $380,513 as of December 31, 2016. The company’s ability to continue as a going concern in the next 12 months after the date of the financial statements were available to be issued is dependent upon its ability to produce revenues and/or obtain financing sufficient to meet current and future obligations and deploy such to produce profitable operating results. Management has evaluated these conditions and plans to generate revenues and raise capital as needed to satisfy its capital needs. No assurance can be given that the company will be successful in these efforts.
The independent accountant observed that these factors, among others, raise substantial doubt about the ability of the company to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the company be unable to continue as a going concern.
The company is going to need more money. The company might not sell enough securities to meet its operating needs and fulfill its plans, in which case it will cease operating and you will get nothing. Even if it sells all the securities it’s offering now, it will probably need to raise more funds in the future, and if it can’t get them, it will fail. Even if it does make a successful offering in the future, the terms of that offering might result in your investment in the company being worth less, because later investors might get better terms
We could close on this offering but still not raise enough money to get us to point where we can carry out our plans. We have set the target amount for this offering at $250,000. This will not be enough to execute all our plans to fund all of the various marketing and operational goals we set for ourselves if we were to raise the maximum net offering amount of $1,070,000. In such event, we will have to raise the balance of the funds we need from other sources, and may find it difficult to do so.
The company has limited working capital and there may not be sufficient financial resources available to carry out planned operations. We depend upon timely availability of adequate working capital in order to meet the objectives of our technology development and business plans. We estimate that the additional externally-generated equity investment will allow for the company to achieve self-sustaining positive cash flow and currently plan that this funding will be provided by the proceeds of this offering, but there can be no assurance that positive cash flow will ever occur. There can be no assurance that the company will sell the maximum number of shares offered in this offering, or that our development and commercial operations will not require additional capital greater than or sooner than currently anticipated. If the company is unable to obtain additional capital if needed, in the amount and at the time needed, this may restrict planned development and/or rate of growth of our sales; limit our ability to take advantage of future opportunities; negatively affect its ability to implement its business strategies and meet its goals; and possibly limit its ability to continue operations. The company’s working capital requirements may significantly vary from those currently anticipated.
Intellectual Property. The company’s profitability may depend in part on its ability to effectively protect its proprietary rights, including obtaining patent and copyright protection for its methods of producing the services, preserving its service and trade marks, maintaining the secrecy of its internal workings and preserving its trade secrets, as well as its ability to operate without inadvertently infringing on the proprietary rights of others. There can be no assurance that (i) any company - related patents or copyrights will be issued from any pending or future patent applications; (ii) the scope of any patent or copyright protection will be sufficient to provide competitive advantages; (iii) any patents or copyrights the company obtains will be held valid if subsequently challenged; or (iv) others will not claim rights in or ownership of the company patents, copyrights and its other proprietary rights. Unauthorized parties may try to copy aspects of services, products and technologies or obtain and use information it considers proprietary. Policing the unauthorized use of proprietary rights is difficult and time-consuming.
The company cannot guarantee that no harm or threat will be made to its intellectual property.
In addition, the laws of certain countries are not expected to protect our intellectual property rights to the same extent as do the laws of the United States. Administrative proceedings or litigation, which could result in substantial costs and uncertainty, would be time-consuming and could have a material adverse effect on our business, operating results and financial condition, may be necessary to enforce our patent or other intellectual property rights or to determine the scope and validity of the proprietary rights of others. There can be no assurance that third parties will not assert patent or copyright infringement claims in the future with respect to its products or technologies. Any such claims could ultimately require us to enter into license arrangements or result in litigation, regardless of the merits of such claims.
Use of proceeds. The company has broad discretion on how to allocate the proceeds received as a result of this stock sale and may use the proceeds in ways that differ from the proposed uses discussed in this Form C. If the company fails to spend the proceeds effectively, its business and financial condition could be harmed and there may be the need to seek additional financing sooner than expected.
You can’t easily resell the securities. The securities are “restricted,” which means you can’t resell them freely (and you might need to pay a lawyer if you do resell them). More importantly, there is no market for these securities, and there might never be one. It’s unlikely that the company will ever go public or get acquired by a bigger company. That means the money you paid for these securities could be tied up for a long time.
Some of the company’s investors have greater voting rights than you do. The terms of the Class B Common Stock include the restriction on the voting rights of the holders thereof. As a holder of Class B Common Stock, you have no voting rights, except as required by law. Aside from the statutory rights you may have, your ability to affect decision-making at the company is significantly limited. Your investment in the company is therefore riskier than the investment made by these investors.
Increasing costs of user acquisition in the digital media ecosystem could have a negative impact on margins. If marketing and other costs necessary in order to gain users increase, our profit merging may be adversely impacted and our financial results may suffer.
Regulatory or licensing contract changes are always a possibility (increased music royalties). Changes in governmental regulation regarding music distribution or our industry could adversely impact our ability to provide the services we historically provided to our users and subscribers. Moreover, changes in the terms of the various licensing and royalty agreements to which we are a party could cause us to modify the types and amount of music and service we can provide to our users and subscribers. Such changes could undermine our business model and affect our ability to earn revenues we historically have been able to earn.
Hacking of software and databases or other electronic disruption of business operations (e.g. denial of service attack). Our services are rendered online. Any software or database or electronic disruption of business operations attack would have a materially adverse impact on our ability to provide any of our services.
Value Added Tax (VAT).
The Company's business qualifies as an “Electronically Supplied Service” under the EU VAT regulations. Until January 1, 2017, the Company had not collected and, thus, had not remitted VAT. As the burden of collection is with the supplier of the Electronically Supplied Service, this could represent unasserted potential claims against the Company that could result in a loss to the Company in a material amount for the years in which the Company sold its subscriptions into the European Union. The Company has taken all steps as of January 1, 2017 to properly collect and remit VAT for sales to European Union customers.