Filed pursuant to Rule 253(g)(2)
File No. 024-10946
To The Stars Academy of Arts and Science Inc.
EXPLANATORY NOTE
This Supplement to the Offering Circular should be read in conjunction with the Offering Circular dated March 30, 2020 and is qualified by reference to the Offering Circular except to the extent that the information contained herein supplements the information contained in the Offering Circular.
The Offering Circular is available here: https://www.sec.gov/Archives/edgar/data/1710274/000110465920040685/tm208241d1_253g2.htm
SUPPLEMENT TO OFFERING CIRCULAR DATED MARCH 30, 2020
THIS SUPPLEMENT IS DATED APRIL 28, 2020
To The Stars Academy of Arts and Science Inc. (the “Company”) will not be able to meet the filing deadline, April 29, 2020, for its annual on Form 1-K due to circumstances related to COVID-19. As a result, the Company intends to take advantage of relief afforded under Rule 257(f) of the Securities Act to file its 1-K as soon as possible prior to June 13, 2020.
Set forth below is the preliminary unaudited 2019 consolidated financial information for the Company and its subsidiaries. The following information includes preliminary data and financial information with respect to the Company’s results for 2019. This information has not been audited or reviewed, and, when such audit or review takes place, we may need to make adjustments, which may be significant. Additionally, these preliminary results do not include footnotes which are an essential part of any complete financial statement.
TO THE STARS ACADEMY OF ARTS AND SCIENCE INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2019 AND 2018
| 2019 | 2018 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 78,096 | $ | 107,041 | ||||
| Accounts receivable, net | 81,085 | 41,204 | ||||||
| Inventory | 146,170 | 120,148 | ||||||
| Prepaid author royalties | 56,757 | 52,628 | ||||||
| Other current assets | 4,750 | 12,185 | ||||||
| Total Current Assets | 366,858 | 333,206 | ||||||
| Prepaid author royalties, net of current portion | 115,234 | 105,892 | ||||||
| Property and equipment, net | 194,507 | 259,124 | ||||||
| Media assets, net | 136,013 | 199,665 | ||||||
| Other Assets | 7,500 | 7,500 | ||||||
| R&D Materials | 32,000 | - | ||||||
| Total assets | $ | 852,112 | $ | 905,387 | ||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 299,385 | $ | 189,109 | ||||
| Revolving line of credit due related party | 463,837 | 335,000 | ||||||
| Amounts due related party | 327,234 | 204,240 | ||||||
| Accrued liabilities | 86,807 | 72,021 | ||||||
| Short-term loans and advances | 240,186 | 87,604 | ||||||
| Capital lease obligations | - | 11,056 | ||||||
| Total current liabilities | 1,417,449 | 899,030 | ||||||
| Noncurrent liabilities | ||||||||
| Amounts due related party | 161,446 | 148,908 | ||||||
| Related party notes payable | - | 600,000 | ||||||
| Total liabilities | 1,578,895 | 1,647,938 | ||||||
| Commitments and contingencies (Note 5) | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock, $0.0001 par value; 91,000 shares authorized; no shares issued and outstanding as of December 31, 2019 and 2018 | - | - | ||||||
| Class A common stock, par value $0.0001; 100,000,000 shares authorized; 13,022,477 and 70,544.879 shares issued and outstanding as of December 31, 2019 and 2018, respectively | 1,257 | 7,054 | ||||||
| Class B common stock, par value $0.0001; 9,000 shares authorized; 5,400 shares issued and outstanding as of December 31, 2019 and 2018 | 1 | 1 | ||||||
| Additional paid-in capital | 48,632,803 | 41,689,412 | ||||||
| Accumulated deficit | (49,360,844 | ) | (42,439,018 | ) | ||||
| Total Stockholders' Deficit | (726,783 | ) | (742,551 | ) | ||||
| Total Liabilities & Stockholders' Deficit | $ | 852,112 | $ | 905,387 | ||||
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TO THE STARS ACADEMY OF ARTS AND SCIENCE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| 2019 | 2018 | |||||||
| Revenues | $ | 1,198,627 | $ | 902,048 | ||||
| Cost of revenues | 531,533 | 514,564 | ||||||
| Gross profit | 667,094 | 387,484 | ||||||
| Operating expenses: | ||||||||
| General and administrative | 616,733 | 820,732 | ||||||
| Sales and marketing | 612,860 | 545,458 | ||||||
| Research and development | 155,085 | 226,681 | ||||||
| Stock-based compensation | 5,922,445 | 9,165,417 | ||||||
| Depreciation and amortization | 166,226 | 182,534 | ||||||
| Total operating expenses | 7,473,349 | 10,940,822 | ||||||
| Operating loss | (6,806,255 | ) | (10,553,338 | ) | ||||
| Other expenses: | ||||||||
| Interest expense | 113,140 | 103,957 | ||||||
| Total other expenses | 113,140 | 103,957 | ||||||
| Loss before provision for income taxes | (6,919,395 | ) | (10,657,295 | ) | ||||
| Provision for income taxes | 2,431 | 3,200 | ||||||
| Net loss | $ | (6,921,826 | ) | $ | (10,660,495 | ) | ||
| Net loss per share: basic and diluted | $ | (0.24 | ) | $ | (0.15 | ) | ||
| Weighted average number of shares outstanding: basic and diluted | 28,835,181 | 69,465,637 | ||||||
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TO THE STARS ACADEMY OF ARTS AND SCIENCE INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| Common Stock | Common Stock | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Total Stockholder's Equity (Deficit) | ||||||||||||||||||||||
| Balance at December 31, 2017 | 70,000,000 | $ | 7,000 | 5,400 | $ | 1 | $ | 31,595,793 | $ | (31,778,523 | ) | $ | (175,729 | ) | ||||||||||||||
| Proceeds from Regulation A offering, net | 274,046 | 27 | - | - | 927,417 | - | 927,444 | |||||||||||||||||||||
| Stock-based compensation | - | - | - | - | 9,165,417 | - | 9,165,417 | |||||||||||||||||||||
| Proceeds from stock option exercise | 270,833 | 27 | - | - | 785 | - | 812 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (10,660,495 | ) | (10,660,495 | ) | |||||||||||||||||||
| Balance at December 31, 2018 | 70,544,879 | 7,054 | 5,400 | $ | 1 | 41,689,412 | (42,439,018 | ) | (742,551 | ) | ||||||||||||||||||
| Proceeds from Regulation A offering, net | 95,021 | - | - | - | 335,809 | - | 335,809 | |||||||||||||||||||||
| Rescission & relinquishment of issued shares | (58,174,203 | ) | (5,797 | ) | - | - | 5,797 | - | - | |||||||||||||||||||
| Stock-based compensation | - | - | - | - | 5,922,445 | - | 5,922,445 | |||||||||||||||||||||
| Contributed Capital - debt forgiveness by related party | - | - | - | - | 679,123 | - | 679,123 | |||||||||||||||||||||
| Issuance of shares to co-founder & advisor | 400,000 | - | - | - | - | - | - | |||||||||||||||||||||
| Proceeds from stock option exercise | 156,780 | - | - | - | 217 | - | 217 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (6,921,826 | ) | (6,921,826 | ) | |||||||||||||||||||
| Balance at December 31, 2019 | 13,022,477 | $ | 1,257 | 5,400 | $ | 1 | $ | 48,632,803 | $ | (49,360,844 | ) | $ | (726,783 | ) | ||||||||||||||
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TO THE STARS ACADEMY OF ARTS AND SCIENCE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (6,921,826 | ) | $ | (10,660,495 | ) | ||
| Adjustments to reconcile net loss to cash flows used in operating activities: | ||||||||
| Depreciation | 79,106 | 78,938 | ||||||
| Amortization | 87,120 | 103,596 | ||||||
| Stock-based compensation | 5,922,445 | 9,165,417 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (39,881 | ) | 12,470 | |||||
| Inventory | (26,022 | ) | 7,268 | |||||
| Prepaid author royalties | (4,129 | ) | (39,334 | ) | ||||
| Other current assets | 7,435 | (8,404 | ) | |||||
| Accounts payable | 110,276 | (205,223 | ) | |||||
| Accrued liabilities | 14,786 | 123,154 | ||||||
| Net cash used in operating activities | (770,690 | ) | (1,422,613 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (14,489 | ) | (6,459 | ) | ||||
| Purchase of media assets | (23,468 | ) | (37,763 | ) | ||||
| Other, net | (41,342 | ) | - | |||||
| Net cash used in investing activities | (79,299 | ) | (44,222 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from Regulation A offering | 477,141 | 1,292,604 | ||||||
| Regulation A offering costs | (141,332 | ) | (120,997 | ) | ||||
| Proceeds from short-term loans & advances, net | 152,582 | 3,404 | ||||||
| Principal payments on capital leases | (11,056 | ) | (29,076 | ) | ||||
| Proceeds from related party revolving line of credit, borrowings and advance | 343,492 | 356,785 | ||||||
| Proceeds from stock option exercise | 217 | 812 | ||||||
| Net cash provided by financing activities | 821,044 | 1,503,532 | ||||||
| Increase (decrease) in cash and cash equivalents | (28,945 | ) | 36,697 | |||||
| Cash and cash equivalents, beginning of year | 107,041 | 70,344 | ||||||
| Cash and cash equivalents, end of year | $ | 78,096 | $ | 107,041 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 24,022 | $ | 63,717 | ||||
| Cash paid for income taxes | $ | 3,200 | $ | 3,200 | ||||
| Non cash investing and financing activities: | ||||||||
| Reclass of related party note payable and accrued interest to contributed capital | $ | 679,123 | $ | - | ||||
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