Not Quite a "UFO IPO": Tom DeLonge Is Seeking Your Investment in "To the Stars" to Give Himself a $700,000 or More Payday
Later today musician and ufologist Tom DeLonge will be making a “major” announcement tied to his ongoing self-promotional quest for UFO disclosure. The announcement is tied to his new faux-academy for fringe science studies, called To the Stars Academy of Arts and Science, which I’d abbreviate as TSA, but which is officially initialed TTS AAS, with “the” inexplicably included while “of” and “and” are not. I want to note that, like other fringe ventures, this one is also begging for cash, but that unlike most it is a remarkably corporate enterprise. In generally glowing fringe media coverage of the company’s launch, no one has followed the money to see where the cash is going. This speaks both to the laziness of journalists—who focus on celebrity and “access” over facts—and to the tacit agreement of fringe types to protect their gravy train at all costs.
DeLonge is soliciting investment by registering TTS AAS as a public benefit corporation—notably not a nonprofit—and he is framing his sale of $5 per share stock in the company as a chance to democratize investment. Under the 2012 JOBS Act, companies may sell stock directly to the public through a crowd funding website without needing to file an IPO with the SEC. DeLonge is taking advantage of this to sell $200 stock packages. The 2015 Title IV Regulation A+ allows companies to raise up to $50 million without a formal IPO.
TTS AAS filed a raft of documents with the SEC over the past few months, and they shed light into the structure and operations of the organization. Spoiler alert: Tom DeLonge stands to make a lot of money, while UFO disclosure is, to put it mildly, not a priority. The company is currently in significant debt relative to earnings.
It's interesting to see the difference between TTS AAS’s public face and what they confess in their financial filings. Publicly, TTS AAS is an educational enterprise divided into a number of units focused on cutting-edge fringe research. The science division is pursuing consciousness research and psychic phenomena. The aerospace division is looking for exotic propulsion technologies. The entertainment division is producing the Sekret Machines books, and a dystopian young adult franchise. Note carefully that space aliens and “disclosure” don’t occur as a research subject or a purpose for the company. And yet, the public protestations about using the company to promote human knowledge are belied by what we see in the financial documents. That’s not to say that there won’t be “educational” material, only that the company’s primary purpose isn’t science and education, as it pretends.
In documents filed with the SEC, TTS AAS describes itself not as an educational institution, as DeLonge deceptively promotes it in the media with the “Academy” name, but rather as one that provides “services aligned to motion picture production.” Heck, TTS AAS even describes itself on its own website as “a vertically integrated entertainment business that develops, produces and distributes multi-media and merchandise world-wide.” It is headquartered in Delaware, which famously serves as home to corporations due to its low taxes and business friendly regulations. In its filings, the corporation describes its purpose this way:
The specific public benefit purpose of the Corporation is to produce a positive effect (or a reduction of negative effects) for society and persons by engaging in scientific and engineering research and development, producing literary, music, film and media content and engaging in entertainment-related activities intended to promote knowledge, stimulate discussion, raise awareness, and generate funds to support research, strategic partnerships, ventures, technology, education, charitable and other activities, as the Board of Directors (as defined below) may from time to time determine to be appropriate and within the Corporation’s overall purpose and mission.
Basically, it sure looks like it’s a media company that sees “disclosure” as the content it’s pursuing only insofar as it provides grist for the entertainment products. This seemed to be confirmed in a promotional article that ran on the Huffington Post in advance of today’s event. In it, the reporter wrote that the company’s ex-government consultants “intend to move into the private sector and to make all declassified information, and any future knowledge, available for all to see.” Note that they only plan to work with material that is already freely available, or that the government will itself make available of its own volition. They don’t seem to hellbent on forcing the matter, though they made vague promises that after generating vast profits from stock sales and merchandise sales (apparently more of the former than the latter, for now), they might be able to use some of the money for UFO research.
Oh, and lest you think that your investment of $200 for 40 shares of stock will give you a significant stake in the company, think again. TTS AAS is authorized to sell more than 100 million shares of stock, though for its current subscription, it is limited to 10 million shares, meaning that the company values itself at $50 million—a laughably large amount for a company whose products are a couple of mediocre books, some accessories, and a pipe dream. The forms state that the company reasonably expects to sell 200,000 shares (a million dollars’ worth), at which time it has the option to close sales, or to offer new sales in the future. Needless to say, the company has a special arrangement, as do most companies, to give a few elite investors controlling voting interest in the company with only an extreme minority of stock shares. Parapsychologist Harold E. Puthoff and ex-CIA agent Jim Semivan are specifically named in the company’s stockholder agreement as, basically, permanent directors of the board. DeLonge is not. It’s an oddity, and I would be curious about the role that these two vice presidents play in the company that afforded them such a prominent role as the only two named individuals in the management charter.
DeLonge, though, is certainly a beneficiary. Documents laying out what he gets paid make pretty clear that this is intended to be a very lucrative investment for him. DeLonge has a constellation of corporate entities that control the intellectual property he creates as a musician and now filmmaker. TSA, which the company abbreviates as TTS AAS, is legally obligated to pay all of DeLonge’s expenses in using his existing intellectual property to develop new TTS AAS multimedia products. Here’s how he’s getting paid once those products go to market:
It’s a pretty good deal overall, though the book royalties are much smaller than one might expect, perhaps because DeLonge doesn’t actually write them, and because he gave his copyrights on the works to the company. But get a load of the most important paragraph:
d. Minimum Royalty Guarantee. Notwithstanding the foregoing, if total Royalty payments in any given calendar year fail to meet one hundred thousand dollars ($100,000.00), as determined by the calculations of the Reporting Period ending in December, then TTS AAS shall pay the DeLonge Parties any shortfall so that the minimum Royalty paid to the DeLonge Parties each calendar year hereunder shall be $100,000.00. Any such payment to the DeLonge Parties shall be made by February 28th of the following calendar year, in accordance with Paragraph 7(c) above.
The company also agrees to take on and pay off DeLonge’s own royalty payments to another entity, and agrees that all of its products using DeLonge’s material are works for hire made for Tom DeLonge, who owns the intellectual property in perpetuity.
So, basically, DeLonge is giving himself a minimum $100,000 annual income just for the use of his music and image. As I read it, he would then be entitled to even more money as president and CEO of the company and possibly still more money for the original TTS AAS products he develops as part of its regular operations—i.e., the movies. That part isn’t spelled out in the documents, so I have no idea what salary DeLonge will pull in, or how he will be paid for the materials he “writes” and produces for the company outside of his own production house.
Given that the payments are supposed to last for at least seven years, don’t expect “disclosure” any time soon.
What is utterly astonishing is that DeLonge is using “disclosure” to sell t-shirts and CDs, and this, in turn, seems designed to create demand for TTS AAS stock. The money taken in through the stock offering—one million dollars or more—is already earmarked to the tune of $700,000 minimum to DeLonge himself.
In short, this is what TTS AAS is all about: Big cash payments in a for-profit entertainment company. This is hardly a nonprofit selflessly pursuing “truth.” “Disclosure” is simply a product sold for profit.
Update: At the noon ET launch event, DeLonge described his company as “a perpetual funding machine,” which seems to confirm exactly my suspicions.
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