Tom DeLonge’s UFO Organization Is $37.4 Million in Debt

Thomas R. Morrison

Thomas R. Morrison

Meh
wwkirk said:
In the thread you cite is the following link which is what the original article is based on.
https://www.sec.gov/Archives/edgar/data/1710274/000114420418050766/tv503167_1sa.htm
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Yeah I know - this is what happens when somebody with no background in finance or accounting tries to interpret a financial report that they don't understand.

They're basically breaking even, according to that filing. Eric Berger over at Ars Technica didn't understand the "stock-based compensation" line of the report, and thought that it's a debt. It's not. Stock-based compensation is just a book-keeping number for the valuation of the shadow stock for TTSA, which isn't stock in the sense of publicly traded stocks like GE or DuPont. They arbitrarily valued the shadow stock at $50 million to begin with, and then after the offering ended (which was nothing more than a fundraising mechanism for donations and not an investment in the conventional sense), they revalued the total stock offering, resulting in a paper deficit of roughly $37M. But that's not money that anyone owes anybody.

The bottom line is that they reported a gross profit of about $133K, and they paid taxes on that. The "losses"in the report are purely imaginary and meaningless. But the SEC requires handling things this way in the reporting, because technically shadow stock is still a form of stock, even though it's not traded and nobody expects to get their money back, because TTSA is more like a charity than a for-profit corporation, but doing things this way lets them operate without the regulations pertaining to a charity. That stuff is spelled out in the Offering Circular - the "investors" are actually donors who are contributing to the cause of the organization for the public benefit. That's why it's called a "public benefit corporation."

Standingstones said:
How do you find yourself in debt to the tune of $37.4 million after being in business for a year or so?
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They're not in debt; it's just an SEC filing requirement to report it that way. TTSA doesn't owe anyone that money - in fact it was never "money" in the first place; it's just an arbitrary valuation thing.
 
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nivek

nivek

As Above So Below
Here's an update to the story, it's still not good Financials coming from them, a balancing act they need to be careful with...

All the dumb things? UFO project has $37 million deficit [Updated]

A couple of years ago, I received a review copy of a book titled Sekret Machines: Gods, which was billed as an "investigation of the UFO phenomenon." The lead author was Tom DeLonge, a founder of the rock band Blink 182 and its former long-time lead singer.

I'd been a fan of the irreverent band in my younger days, and my now-wife and I had attended a few concerts and enjoyed ourselves. It was difficult for me to imagine that the former lead singer of a band with an album titled Take Off Your Pants and Jackethad engaged in any kind of serious scholarship or research. Queen guitarist Brian May, however, went on to earn a PhD in astrophysics, so you never know.

I made it about half way through the book before I gave up. The authors, DeLonge and Peter Levenda, spent most of the pages I slogged through cherry-picking ancient cultures and religion to find curious or unexplained things. Then, they attribute these experiences to mysterious alien influences.

For example, amid a discussion of alien abductions and "the Titans, the Giants, and the Melians of ancient Greek mythology," the book provides this gem: "If we posit an alien abduction taking place in ancient Israel, for instance, it would have been recorded much the same way that Genesis recorded angels mating with humans and creating monsters." Indeed.

The Phenomenon

All of these enigmas of ancient culture, we are told, provide evidence of something the authors dub "The Phenomenon." And what is this? Well, that's not really clear. This much we know: It's something hidden. something alien, and something just waiting for scholars to unlock. And DeLonge and his gang suggest they've found the key.

The authors finally get around to explaining their intent on page 29: "Our goal is nothing less than a revolution in the hard sciences as well as the social sciences: a reevaluation of what we know about our function, our purpose in the cosmos, and the potential opportunities and possible threats that exist."

If this kind of supernatural revolution is your thing, I can heartily recommend the book to you. If it's not, well, welcome to the club. I decided not to review the book because I felt it unkind to trash something that seemed like a heartfelt effort. (And hey, I liked his music). So I set the book aside.

Only later, much later, did I learn that DeLonge parlayed these books into something called To the Stars Academy of Arts and Science Inc. This unassailable group is a team of former intelligence officials and various other experts along with DeLonge who "believe there are transformative discoveries within our reach that will revolutionize the human experience, but they can only be accomplished through the unrestricted support of breakthrough research, discovery and innovation."

The Financials

In other words, the evil government is covering all kinds of mysterious alien stuff up for its own nefarious purposes. And interested personages were invited to help the good guys. For a few hundred bucks, people could get a piece of an "A+ investment offering" from To the Stars, to assist its efforts to pull back the veil from the government cover-up and bring brilliant new technologies—such as beamed energy propulsion—into public view.

By now, you've probably guessed where this is heading. And it's not a pretty place. A recent filing with the US Securities and Exchange Commission tells the tale in black-and-white numbers.

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. The Company has incurred losses from operations and has an accumulated deficit at June 30, 2018 of $37,432,000. These factors raise doubt about the Company’s ability to continue as a going concern.

Put another way, after a year of fundraising, Tom DeLonge's alien business has raised just over $1 million in outside funding. The company has racked up a $37.4 million deficit, however, largely from a stock incentive plan for its employees. The financial filing states that To the Stars intends to remain in business over the next 12 months by selling additional stock. Their website says they accept credit cards, if you're so inclined to help keep the effort afloat. But bear in mind that any financial returns may be beyond the reach of even The Phenomenon.

I'm not sure what to say about a millionaire who parlays his or her fame into a business that raises funds from people who are not millionaires but desperately want to believe in aliens, or conspiracies, or hidden government technologies. Therefore, I'll let DeLonge say it for me, in Blink 182's hit song Aliens Exist, from 1999's Enema of the State: "We all know conspiracies are dumb."

If only we all did.

Update:

The original story
mischaracterized To the Stars' deficit as debt. This story has been changed to reflect a more accurate picture of the company's finances.

.
 
pigfarmer

pigfarmer

tall, thin, irritable
Thomas R. Morrison said:
Yeah I know - this is what happens when somebody with no background in finance or accounting tries to interpret a financial report that they don't understand.

They're basically breaking even, according to that filing. Eric Berger over at Ars Technica didn't understand the "stock-based compensation" line of the report, and thought that it's a debt. It's not. Stock-based compensation is just a book-keeping number for the valuation of the shadow stock for TTSA, which isn't stock in the sense of publicly traded stocks like GE or DuPont. They arbitrarily valued the shadow stock at $50 million to begin with, and then after the offering ended (which was nothing more than a fundraising mechanism for donations and not an investment in the conventional sense), they revalued the total stock offering, resulting in a paper deficit of roughly $37M. But that's not money that anyone owes anybody.

The bottom line is that they reported a gross profit of about $133K, and they paid taxes on that. The "losses"in the report are purely imaginary and meaningless. But the SEC requires handling things this way in the reporting, because technically shadow stock is still a form of stock, even though it's not traded and nobody expects to get their money back, because TTSA is more like a charity than a for-profit corporation, but doing things this way lets them operate without the regulations pertaining to a charity. That stuff is spelled out in the Offering Circular - the "investors" are actually donors who are contributing to the cause of the organization for the public benefit. That's why it's called a "public benefit corporation."


They're not in debt; it's just an SEC filing requirement to report it that way. TTSA doesn't owe anyone that money - in fact it was never "money" in the first place; it's just an arbitrary valuation thing.
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So what's in your your wallet? Did you personally invest in this?
 
Thomas R. Morrison

Thomas R. Morrison

Meh
nivek said:
Here's an update to the story, it's still not good Financials coming from them, a balancing act they need to be careful with...
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The updated story is still crap. I provided a far better explanation of this stuff in my post above. I'm no expert on public benefit corporations, but I did get my Series 7 and 63 licenses from the SEC when I became a professional stockbroker at the age of 19, so at least I have some background with this kind of thing. Which is more than Eric Berger can say.

As for the arbitrary valuation and this “stock equity deficit” that’s got everyone so worked up, it’s really not that complicated.

When they set up the Offering, the pertinent question was “in your wildest dreams, what’s the most money that you think you might raise?” Apparently they figured that they might raise up to around $20-25M if people went crazy for their idea. So they arbitrarily set a value of $50M for their 10 million shares of shadow stock. That way they could hold on to just over half of the shares to maintain controlling interest of the company, and make the rest a public offering to raise money for the company. So you can see the point in setting a high valuation: if you set the value too low, then you might run out of stock to offer to people who want to give you money – even though it’s not a traded equity, it’s still required to be done this way to conform to the SEC rules. So it’s better to set the valuation at a high level so you don’t end up turning people away if the company garners a lot of financial support from the public.

Naturally they didn’t raise the maximum amount of money they’d set with the arbitrary valuation in the beginning, so the real value of the stock turned out to be much lower. The stock equity deficit is that number: the difference between the arbitrary maximum level of fundraising that they had hoped for in their wildest dreams, and the actual level of fundraising.

So that’s all it is; a paper deficit between an arbitrary high initial valuation so they wouldn’t kneecap their own fundraising objectives, and the actual fundraising numbers. That $37M was never real – it was never actual money, and it’s not owed to anybody. It’s just book-keeping for the SEC report, nothing more.

The real numbers in the report showed a $113K profit, and they paid taxes on that.

pigfarmer said:
So what's in your your wallet? Did you personally invest in this?
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No I didn't, but I may contribute if they produce some interesting lab results on the materials they're studying.

wwkirk said:
I didn't. What are you even supposed to obtain if you invest?
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pigfarmer said:
A warm feeling having done positive work beneficial to humanity. A donation really, their term is investment.
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That's right. People hear the word "stock" and think we're talking about a publicly traded equity, but it's just a book-keeping device for the SEC. The only investment is in their cause, which is to benefit the public through their work.
 
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nivek

nivek

As Above So Below
wwkirk said:
In defense of Tom DeLonge (by one of his critics):
Unfair and misconceived reporting of alleged $37 million “debt” accrued by Tom Delonge’s To The Star’s Academy [“TTSA”]

"Quite simply, TTSA’s filed accounting documents do _not_ show that it owes $37 million to anyone.

Instead, those accounts refer to a “deficit”. This is quite different."

The post is very detailed.
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So they're spending more money than their taking in, like the government does...

...
 
Thomas R. Morrison

Thomas R. Morrison

Meh
nivek said:
So they're spending more money than their taking in, like the government does...
...
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No that's not what this is about. They've only spent about a million dollars, and raised slightly more than a million dollars. This $37M line item is an essentially fictitious valuation of the stock options that the company has given to its employees, which is based on the initial arbitrary valuation of $5/share (at this point the actual value of the stock is only around 13 cents/share).

Isaac Koi did a pretty job getting into the nitty gritty of it all, in way more detail than I would've bothered with, but what it comes down to is that this $37M figure was never real money in the first place, it was never spent or borrowed, and it's not owed to anyone. Like I said, this is about an arbitrary and high initial valuation of the stock, and the paper reporting consequences of that initially high valuation, nothing more. He sums it simply:

"As explained below, however, that SEC filing does:
(1) _NOT_ show that TTSA has a debt of $37 million;
(2) _NOT_ show that TTSA has spent $37 million;
(3) _NOT_ show that TTSA has borrowed $37 million.

Some of those defending Tom DeLonge on the basis that large expenditure is normal for a start-up are implicitly accepting that $37 million has been spent. It hasn’t. Questions about “what has $37 million been spent on” are based on the equally flawed premise that $37 million has been spent. Again, it hasn’t."
 
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