AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

PRELIMINARY OFFERING CIRCULAR DATED SEPTEMBER 11, 2020

GATSBY DIGITAL, INC.

28 Liberty St, New York, NY 10005

(203) 842-9729
 

www.trygatsby.com

UP TO 5,434,782 SHARES OF SERIES A PREFERRED STOCK

UP TO 5,434,782 SHARES OF COMMON STOCK INTO WHICH THE SERIES A PREFERRED STOCK MAY CONVERT

PRICE: $0.92 PER SHARE

MINIMUM INVESTMENT: $999.12

SEEDINVEST AUTO INVEST MINIMUM: $199.64

SEE “SECURITIES BEING OFFERED” AT PAGE 29

Holders of our Series A Preferred Stock have limited voting rights compared to holders of our Common Stock pursuant to the investors rights agreement that investors must enter into in order to invest in this offering. For instance, holders of our Series A Preferred Stock must vote to elect two (2) directors designated by the Company’s founders, and (1) director designated by a significant shareholder of the Company, whereas the holders of our Common Stock have no requirement to vote for such designees. In addition, investors in this offering will be granting the Chief Executive Officer of the Company a proxy to vote all of such investor’s shares of stock in the event such an investor fails to vote. See “Securities Being Offered” at page 29 for more information on the rights of our Series A Preferred Stock.

The Series A Preferred Stock is subject to restrictions on transferability pursuant to the provisions in the Company’s Amended and Restated Bylaws. See “Securities Being Offered” on page 29 for more information on these restrictions.

The Series A Preferred Stock is convertible into Common Stock either at the discretion of the investor or automatically upon the occurrence of certain events, like the closing of the sale the Common Stock in an initial public offering or the vote of the majority of the holders of the Series A Preferred Stock to effect such conversion. The total number of shares of Common Stock into which the Series A Preferred Stock may be converted will be determined by dividing the original issue price per share of the Series A Preferred Stock by the conversion price per share of the Series A Preferred Stock. See “Securities Being Offered” at page 29 for additional details.

* The Company has engaged SI Securities, LLC to serve as its sole and exclusive placement agent to assist in the placement of its securities. The Company will pay SI Securities, LLC in accordance with the terms of the Issuer Agreement between the Company and SI Securities, LLC, a copy of which is filed as an exhibit to the Offering Statement of which this Offering Circular is a part. If the placement agent identifies all the investors and the maximum amount of shares is sold, the maximum amount the Company would pay SI Securities, LLC is $425,000.

** This does not include transaction fees paid directly to SI Securities, LLC by investors. See “Plan of Distribution and Selling Securityholders” for details of compensation and transaction fees to be paid to the placement agent on page 12.

The Company expects that the amount of expenses of the offering that it will pay will be approximately $65,000, not including commissions or state filing fees.

The Company is selling shares of Series A Preferred Stock.

The Company has engaged The Bryn Mawr Trust Company of Delaware as an escrow agent (the “Escrow Agent”) to hold funds tendered by investors, and assuming we sell a minimum of $1,000,000 in shares, may hold a series of closings at which we receive the funds from the Escrow Agent and issue the shares to investors.  This offering (the “Offering”) will terminate at the earlier of the date at which the maximum offering amount has been sold, and the date at which the Offering is earlier terminated by the Company, in its sole discretion. At least every 12 months after this Offering has been qualified by the United States Securities and Exchange Commission (the “Commission”), the Company will file a post-qualification amendment to include the Company’s recent financial statements. The Offering is being conducted on a best-efforts basis. The Company may undertake one or more closings on a rolling basis. After each closing, funds tendered by investors will be available to the Company.

INVESTING IN THE SERIES A PREFERRED STOCK OF GATSBY DIGITAL, INC. IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISKS. YOU SHOULD PURCHASE THESE SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE “RISK FACTORS” BEGINNING ON PAGE 3 TO READ ABOUT THE MORE SIGNIFICANT RISKS YOU SHOULD CONSIDER BEFORE BUYING THE SERIES A PREFERRED STOCK OF THE COMPANY.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION

GENERALLY NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO www.investor.gov.

Sales of these securities will commence on approximately                              , 2020.

The Company is following the “Offering Circular” format of disclosure under Regulation A.

In the event that we become a reporting company under the Securities Exchange Act of 1934, we intend to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Implications of Being an Emerging Growth Company.”

In this Offering Circular, the term “Gatsby Digital”, “Gatsby” “we”, “us”, “our” or “the Company” refers to Gatsby Digital, Inc. and its subsidiary on a consolidated basis.

THIS OFFERING CIRCULAR 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 THE OFFERING MATERIALS, 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. INVESTORS 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.

SUMMARY

Overview

Gatsby Digital, Inc. is the owner and creator of “Gatsby” – a simple, commissions-free, easy-to-use options trading platform focused on making options trading accessible to everyone (the “Gatsby Platform”). The Gatsby Platform makes options trading straightforward by removing the commissions and the jargon that has historically made options trading a dauting task for newcomers. The Gatsby Platform, available for free download as a mobile app, allows users to trade options with their friends, earn “Gatsby Rewards” points on every trade, and track breaking news and important alerts. In addition, the Company has recently launched an application programming interface (API) for the Gatsby Platform (the “Gatsby API”), which is a service offered to select partners that want to trade options through Gatsby’s technology using their own proprietary trading interfaces as an alternative to the mobile app interface. Gatsby Digital, Inc. was incorporated under the laws of the State of Delaware on February 8, 2018. Gatsby Securities, LLC, the Company’s wholly-owned subsidiary, was formed on January 22, 2019, and is a FINRA-licensed broker-dealer approved to facilitate customer self-directed retail stocks and options trading.

Implications of Being an Emerging Growth Company

As an issuer with less than $1.07 billion in total annual gross revenues during our last fiscal year, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant if and when we become subject to the ongoing reporting requirements of the Exchange Act upon filing a Form 8-A. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, and hereby elect to do so. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time that we no longer meet the definition of an emerging growth company. Note that this offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our Common Stock held by non-affiliates, or issue more than $1.07 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that we may also qualify, once listed, as a “smaller reporting company” under the Commission’s rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

Selected Risks Associated with Our Business

Our business expects to be subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, but are not limited to, the following:

RISK FACTORS

The SEC requires the Company to identify risks that are specific to its business and its financial condition. The Company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as cyber-attacks and the ability to prevent such attacks). Additionally, early-stage companies are inherently more risky than more developed companies, and the risk of business failure and complete loss of your investment capital is present. You should consider general risks as well as specific risks when deciding whether to invest.

Risks Related to Our Company

We have a limited operating history upon which you can evaluate our performance, and have not yet generated revenues or profits. Accordingly, our prospects must be considered in light of the risks that any new company encounters. The Company was incorporated under the laws of the State of Delaware on February 8, 2018, and we have not yet generated revenue or profits. The likelihood of our creation of a viable business must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the growth of a business, operation in a competitive industry, and the continued development of our technology and platform. We anticipate that our operating expenses will increase in the near future, and there is no assurance that we will generate revenue or become profitable in the near future. You should consider our business, operations and prospects in light of the risks, expenses and challenges faced as an emerging growth company.

The auditor included a “going concern” note in its audit report. We may not have enough funds to sustain the business until it becomes profitable. Even if we raise funds through this offering, we may not accurately anticipate how quickly we may use the funds and whether these funds are sufficient to bring the business to profitability.

We anticipate initially sustaining operating losses. It is anticipated that we will initially sustain operating losses. Our ability to generate revenue and become profitable depends on the Company funding (through Gatsby Securities, LLC) a clearing deposit with a clearing broker (intended to be Apex Clearing, a SEC-registered and FINRA member clearing broker-dealer), which will then allow the Company to collect revenues generated by trade flow on the Gatsby Platform (which will be $0.50 per contract traded). There can be no assurance that this will occur. Unanticipated problems and expenses are often encountered in offering new products and services which may impact whether the Company is successful. Furthermore, we may encounter substantial delays and unexpected expenses related to development, technological changes, marketing, regulatory requirements and changes to such requirements or other unforeseen difficulties. There can be no assurance that we will ever become profitable. If the Company sustains losses over an extended period of time, it may be unable to continue in business.

Extensive regulation of our industry results in ongoing exposure to significant costs and penalties, enhanced oversight and restrictions and limitations on our ability to conduct and grow our business. The financial services industry, including our business, is subject to extensive regulation by governmental and self-regulatory organizations in the jurisdictions in which we operate. These regulators have broad powers to promulgate and interpret laws, rules and regulations that often serve to restrict or limit our business. The requirements imposed by these regulators are designed to safeguard the integrity of the financial markets and to protect public investors generally rather than the interests of our stockholders, and we could become subject to increased governmental and public scrutiny in the future in response to global conditions and events. The SEC, FINRA, and other authorities extensively regulate the U.S. financial services industry, including most of our operations in the United States.

Most aspects of our business, and in particular our wholly-owned subsidiary Gatsby Securities, LLC, a FINRA-licensed broker-dealer, are subject to laws, rules and regulations that cover all aspects of our business, including manner of operation, system integrity, anti-money laundering and financial crimes, handling of material non-public information, safeguarding data, capital requirements, reporting, record retention, market access, licensing of employees and the conduct of officers, employees and other associated persons. See “The Company’s Business — Regulation,” for a further description of the laws, rules and regulations that materially impact our business. There can be no assurance that we and/or our directors, officers and employees (including those of our subsidiary, as applicable) will be able to fully comply with these laws, rules and regulations. Any failure to comply with such legal and regulatory requirements could subject us to increased costs, fines, penalties or other sanctions, including suspensions of, or prohibitions on, certain of our activities, revocations of our subsidiary’s licenses or registrations, such as its membership in FINRA and registration as a broker-dealer, or suspension of personnel.

Gatsby Securities, LLC, our subsidiary, is subject to regulations under FINRA regarding changes in control of their ownership or organizational structure. These regulations generally provide that prior regulatory approval must be obtained in connection with any transaction resulting in a change in control or organizational structure of the subsidiary, such as changes in direct and indirect ownership or changes in the composition of the board of directors or similar body or the appointment of new officers, and, may include similar changes that occur at the Company or any of its stockholders that may be deemed to hold a controlling interest as defined by the applicable regulatory body. As a result of these regulations, our future efforts to sell shares or raise additional capital, or to make changes to our organizational structure, may be delayed or prohibited in circumstances in which such a transaction would give rise to a change in control or organizational structure as defined by the applicable regulatory body.

Our ability to operate our trading platform or offer our solutions in a particular jurisdiction is dependent on continued registration or authorization in that jurisdiction (or the maintenance of a valid exemption from such registration or authorization). In addition, regulatory approval may be required to expand certain of our operations and activities, and we may not be able to obtain the necessary regulatory approvals on a timely or cost-effective basis, or at all. Even if regulatory approvals are obtained, they may limit or impose restrictions on our operations and activities, and we may not be able to continue to comply with the terms of such approvals.

We incur significant costs, and will continue to devote significant financial and operational resources, to develop, implement and maintain policies, systems and processes to comply with our evolving legal and regulatory requirements. Future laws, rules and regulations, or adverse changes to, or more stringent enforcement of, existing laws, rules and regulations, could increase these costs and expose us to significant liabilities.

Our regulators generally require strict compliance with their laws, rules and regulations, and may investigate and enforce compliance and punish non-compliance. Many of our regulators, as well as other governmental authorities, are empowered to bring enforcement actions and to conduct administrative proceedings, examinations, inspections and investigations, which may result in increased compliance costs, penalties, fines, enhanced oversight, increased financial and capital requirements, additional restrictions or limitations, censure, suspension or other sanction, such as disgorgement, restitution or the revocation of regulatory approvals. The risks associated with such actions may be difficult to assess or quantify.

In the normal course of our business, we have been, and continue to be from time to time, a party to various regulatory proceedings related to compliance with applicable laws, rules and regulations, including audits, examinations and investigations of our operations and activities. Legal and regulatory actions, from subpoenas and other requests for information to potential criminal investigations, may divert management’s attention, cause us to incur significant expenses, including fees for legal representation and costs for remediation efforts, and result in fines, penalties or other sanctions. We may also be required to change or cease aspects of our operations or activities if a legal or regulatory authority determines that we have failed to comply with any laws, rules or regulations applicable to our business and/or otherwise determines to prohibit any of our operations or activities or revoke any of our approvals. In addition, regardless of the outcome, such actions may result in substantial costs and negative publicity, which may damage our reputation and impair our ability to attract and retain clients.

Firms in the financial services industry have experienced increased scrutiny in recent years, and penalties, fines and other sanctions sought by governmental and regulatory authorities, including the SEC, the CFTC, the Department of Justice, state securities administrators and state attorneys general in the United States. This trend toward a heightened regulatory oversight and enforcement environment is expected to continue for the foreseeable future, and may create uncertainty and may increase our exposure to scrutiny of our operations and activities, significant penalties and liability and negative publicity.

Our business could be materially adversely affected by new laws, rules or regulations or changes in existing laws, rules or regulations, including the interpretation and enforcement thereof. Our business is subject to extensive regulation. Governmental and regulatory authorities periodically review legislative and regulatory policies and initiatives, and may promulgate new or revised, or adopt changes in the interpretation and enforcement of existing, laws, rules and regulations at any time. Any such changes in laws, rules or regulations or in governmental policies could create additional regulatory exposure for our business, cause us to incur significant additional costs, require us to change or cease aspects of our business or restrict or limit our ability to grow our business, any of which could have a material adverse effect on our business, financial condition or results of operations. There have been in the past, and could be in the future, significant technological, operational and compliance costs associated with the obligations that derive from compliance with evolving laws, rules and regulations.

Changes in legislation and in the rules and regulations promulgated by U.S. domestic regulators, and how they are applied, often directly affect the method of operation and profitability of dealers and other financial services intermediaries, and could result in restrictions in the way conduct business. For example, various rules promulgated since the financial crisis, including under the Dodd-Frank Act, could adversely affect dealers’ ability to make markets in options, thereby negatively impacting the level of liquidity and pricing available on our trading platforms. Our business could also be affected by the monetary policies adopted by the Federal Reserve and foreign central banking authorities, which may affect the credit quality of our clients or increase the cost for our clients to trade options on our trading platform.

Furthermore,. Trading in options has been subject to extensive regulation in the past, and any future regulation could lead to a decline in trading in these markets, which could have a negative impact on our trading volumes and, as a result, our revenues.

We cannot predict how specific aspects of the regulatory developments described above may directly affect our business. Additional changes to the laws, rules and regulations that govern our business and operations, including changes to their interpretation, implementation or enforcement, may occur in the future, and we cannot know the extent to which any such changes will impact our business and operations. In addition, we cannot predict how current proposals that have not yet been finalized and/or that remain subject to ongoing debate will be implemented or in what form. We believe that uncertainty and potential delays around the final form of such new laws, rules and regulations may negatively impact our clients and trading volumes in the options market in which we transact. Additionally, unintended consequences of such new laws, rules and regulations may adversely affect our industry, our clients and us in ways yet to be determined. Any such legal and regulatory changes could affect us in substantial and unpredictable ways, and could have a material adverse effect on our business, financial condition and results of operations.

Our actual or perceived failure to comply with privacy, data protection and information security laws, rules, regulations and obligations could harm our business.

Certain types of information we collect, compile, store, use, transfer and/or publish are subject to numerous federal, state, local and foreign laws and regulations regarding privacy, data protection and information security These laws, rules and regulations govern the storing, sharing, use, processing, transfer, disclosure and protection of personal information and other content. The scope of these laws, rules and regulations are changing, subject to differing interpretations. We are also subject to the terms of our privacy policies and obligations to third parties related to applicable privacy, data protection and information security.

The regulatory framework for privacy, data protection and information security is uncertain, and is likely to remain uncertain for the foreseeable future, and we expect that there will continue to be new laws, rules regulations and industry standards concerning privacy, data protection and information security proposed and enacted in the jurisdictions in which we operate

Our efforts to comply with privacy, data protection and information security laws, rules and regulations could entail substantial expenses, may divert resources from other initiatives and could impact our ability to provide certain solutions. Additionally, if our third-party providers violate any of these laws or regulations, such violations may also put our operations at risk. Any failure or perceived failure by us to comply with any of our obligations relating to privacy, data protection or information security may result in governmental investigations or enforcement actions, litigation, claims or negative publicity and could result in significant liability, increased costs or cause our clients to lose trust in us, which could have an adverse effect on our reputation and business.

Our compliance and risk management programs might not be effective and may result in outcomes that could adversely affect our reputation, business, financial condition and results of operations. Our ability to comply with all applicable laws, rules and regulations is largely dependent on our establishment and maintenance of compliance and risk management programs, including audit and reporting systems, that can quickly adapt and respond, as well as our ability to attract and retain qualified compliance, audit, legal, cybersecurity and other compliance and risk management personnel. While we have policies and procedures in place, as well as third-party compliance firms engaged, to identify, monitor and manage our risks and regulatory obligations, we cannot assure you that ours our compliance firms’ policies and procedures will always be effective or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed. Our risk-management programs may prove to be ineffective because of their design, their implementation and maintenance or the lack of adequate, accurate or timely information. If our risk-management programs and efforts are ineffective, we could suffer losses that could have a material adverse effect on our financial condition and results of operations.

As part of our compliance and risk management programs, we must rely upon ours and our third-party compliance firms’ analysis of laws, rules, regulations and information regarding our industry, market, personnel, clients and other matters that are publicly available or otherwise accessible to us. That information may not in all cases be accurate, complete, up-to-date or properly analyzed. Furthermore, we rely on a combination of technical and human controls and supervision that are subject to error and potential failure, the challenges of which are exacerbated by the 24-hour-a-day, global nature of our business, which is subject to various legal and regulatory requirements of multiple jurisdictions that are constantly evolving and subject to change.

In case of non-compliance or alleged non-compliance with applicable laws, rules or regulations by us or third parties on which we may rely, we could be subject to regulatory investigations and proceedings that may be very expensive to defend against and may result in substantial fines and penalties or civil lawsuits, including by clients, for damages which can be significant. Any of these outcomes would adversely affect our reputation, financial condition and results of operations. Further, the implementation of new legislation or regulations, or changes in or unfavorable interpretations of existing legislation or regulations by courts or regulators, could require us to incur significant compliance costs and impede our ability to operate, expand and enhance our platforms and solutions as necessary to remain competitive and grow our business, which could materially adversely affect our business, financial condition and results of operations.

We are exposed to litigation risk. From time to time, we may be involved in various litigation matters and claims, including lawsuits regarding employment matters, breach of contract matters and other business and commercial matters. See “The Company’s Business — Litigation.” Many aspects of our business involve substantial risks of liability. These risks include, among others, disputes over terms of a trade and claims that a system failure or delay caused monetary loss to a client or that an unauthorized trade occurred. Currently, we do not carry insurance that may limit our risk of damages in some matters. As such, we may be at greater risk to experience uncovered losses, and we could incur significant legal expenses defending claims, even those without merit. Due to the uncertain nature of the litigation process, it is not possible to predict with certainty the outcome of any particular litigation matter or claim, and we could in the future incur judgments or enter into settlements that could have a material adverse effect on our business, financial condition and results of operations. The ultimate outcome of litigation matters and claims against us may require us to change or cease certain operations and may result in higher operating costs. An adverse resolution of any litigation matter or claim could cause damage to our reputation and could have a material adverse effect on our business, financial condition and results of operations.

Our reliance on our computer systems and software could expose us to great financial harm if any of our computer systems or software were subject to any material disruption or corruption. We rely significantly on our computer systems and software to receive and properly process internal and external data and utilize such data to generate orders and other messages. A disruption or corruption of the proper functioning of our computer systems or software could cause us to make erroneous trades, which could result in material losses. We cannot guarantee that our efforts to maintain competitive computer systems and software will be successful. Our computer systems and software may fail or be subject to bugs or other errors, resulting in service interruptions or other unintended consequences. If any of these risks materialize, they could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our failure to protect our systems and network against cybersecurity breaches, or otherwise protect confidential and proprietary information, could damage our reputation and negatively impact our business. Our cybersecurity measures may not detect or prevent all attempts to compromise our systems, including denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in and transmitted by our systems or that we otherwise maintain. Breaches of our cybersecurity measures could result in any of the following: unauthorized access to our systems; unauthorized access to and misappropriation of information or data, including confidential or proprietary information about ourselves, third parties with whom we do business or our proprietary systems; viruses, worms, spyware or other malware being placed in our systems; deletion or modification of client information; or a denial-of-service or other interruptions to our business operations. Because techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate these attacks or to implement adequate preventative measures. While we have not suffered any material breach of our cybersecurity, any actual or perceived breach of our cybersecurity could damage our reputation, expose us to a risk of loss or litigation and possible liability, require us to expend significant capital and other resources to alleviate problems caused by such breaches and otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.

Capacity constraints, systems failures, malfunctions and delays could harm our business. Our business activities are heavily dependent on the integrity and performance of the computer and communications systems supporting them. Our systems and operations are vulnerable to damage or interruption from human error, software bugs and errors, electronic and physical security breaches, natural disasters, power loss, utility or internet outages, computer viruses, intentional acts of vandalism, terrorism and other similar events. Extraordinary trading volumes or other events could cause our computer systems to operate in ways that we did not intend, at an unacceptably low speed or even fail. While we have invested significant amounts of capital to upgrade the capacity, reliability and scalability of our systems, there can be no assurance that our systems will always operate properly or be sufficient to handle such extraordinary trading volumes. Any disruption for any reason in the proper functioning or any corruption of our software or erroneous or corrupted data may cause us to make erroneous trades or suspend our services and could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Although our systems and infrastructure are generally designed to accommodate additional growth without redesign or replacement; we may need to make significant investments in additional hardware and software to accommodate growth. Failure to make necessary expansions and upgrades to our systems and infrastructure could not only limit our growth and business prospects but could also cause substantial losses and have a material adverse effect on our business, financial condition, results of operations and cash flows.

Since the timing and impact of disasters and disruptions are unpredictable, we may not be able to respond to actual events as they occur. Business disruptions can vary in their scope and significance and can affect one or more of our facilities. Further, the severity of the disruption can also vary from minimal to severe. Although we have employed significant effort to develop, implement and maintain reasonable disaster recovery and business continuity plans, we cannot guarantee that our systems will fully recover after a significant business disruption in a timely fashion or at all. If we are prevented from using any of our current trading operations, or if our business continuity operations do not work effectively, we may not have complete business continuity, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Failure or poor performance of third-party software, infrastructure or systems on which we rely could adversely affect our business. We depend on third parties to provide and maintain certain infrastructure that is critical to our business. For example, we rely on third parties to provide software, data center services and dedicated fiber optic, microwave, wireline and wireless communication infrastructure. This infrastructure may malfunction or fail due to events outside of our control, which could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations. Any failure to maintain and renew our relationships with these third parties on commercially favorable terms, or to enter into similar relationships in the future, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We also rely on certain third-party software, third-party computer systems and third-party service providers, including clearing systems, exchange systems, alternate trading systems, order routing systems, internet service providers, communications facilities and other facilities. Any interruption in these third-party services or software, deterioration in their performance, or other improper operation could interfere with our trading activities, cause losses due to erroneous or delayed responses, or otherwise be disruptive to our business. If our arrangements with any third party are terminated, we may not be able to find an alternative source of software or systems support on a timely basis or on commercially reasonable terms. This could also have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our products may not gain market acceptance among our target customer demographic. Gatsby is focused on bringing new options traders to the options trading market, specifically targeting traders of cryptocurrency. A critical element in our commercialization strategy is to persuade this demographic to use our platform and engage in options trading. This demographic may be unwilling to change from the platforms they are currently using, or the types of trading they are engaging in currently. A number of factors may limit the market acceptance of our platform, including the following:

Our inability to successfully commercialize our platform will have a material adverse effect on the value of your investment.

We operate in a highly competitive industry that is dominated by several very large, well-capitalized market leaders and is constantly evolving. New entrants to the market, existing competitor actions, or other changes in market dynamics could adversely impact us. 

The level of competition in the brokerage industry is high, with multiple exceptionally large, well-capitalized competitors holding a majority share of the market, such as Charles Schwab and TD Ameritrade. Specifically, in the commission-free mobile platform brokerage market, platforms such as Robinhood and Webull are significant players, holding a majority of the market. Many of the companies in the brokerage industry have longer operating histories, larger customer bases, significantly greater financial, technological, sales, marketing, and other resources than we do. Further, such companies will be able to respond more quickly than we can to new or changing opportunities, technologies, standards, or client requirements, more quickly develop new products or devote greater resources to the promotion and sale of their products and services than we can. Likewise, their greater capabilities in these areas may enable them to better withstand periodic downturns in the industry and compete more effectively on the basis of price and production. In addition, new companies may enter the markets in which we compete, further increasing competition in the video brokerage industry. If we are unable to effectively compete against current companies and/or new entrants in this space, or business will suffer.

Our company does not currently hold any patents on its products or technology. As of the date of this Offering, the Company has not been issued any patents. There is no guarantee that the Company will ever be issued patents on its products or technology. If we are unable to secure patents for our products and technology, other companies with greater resources may copy our technology and/or products, or improve upon them, putting us at a disadvantage to our competitors.

Our failure to attract and retain highly qualified personnel in the future could harm our business. As the Company grows, it will be required to hire and attract additional qualified professionals such as software engineers, operations personnel , project managers, regulatory professionals, sales and marketing professionals, accounting, legal, and finance experts. The Company may not be able to locate or attract qualified individuals for such positions, which will affect the Company’s ability to grow and expand its business.

We rely on third party service providers. Our third party partners provide a variety of essential business functions, as well as regulatory compliance. In particular, transactions through the Gatsby Platform are currently supported by ViewTrade Securities, Inc., a SEC registered broker-dealer and member of FINRA, pursuant to a brokerage services agreement. It is possible that ViewTrade Securities, Inc. or some of these other third parties will fail to perform their services or will perform them in an unacceptable manner. If we encounter problems with one or more of these parties and they fail to perform to expectations, it could have a material adverse impact on the Company, such as regulatory enforcement and punishment by FINRA, the SEC, or other regulatory bodies.

Our future success is dependent on the continued service of our small management team. Gatsby is managed by three (3) directors and three (3) executive officers. Our success is dependent on their ability to manage all aspects of our business effectively. Because we are relying on our small management team, we lack certain business development resources that may hurt our ability to grow our business. Any loss of key members of our executive team could have a negative impact on our ability to manage and grow our business effectively. We do not maintain a key person life insurance policy on any of the members of our senior management team. As a result, we would have no way to cover the financial loss if we were to lose the services of our directors or officers.

We expect to raise additional capital through equity and/or debt offerings to support our working capital requirements and operating losses. In order to fund future growth and development, the Company will likely need to raise additional funds in the future by offering shares of its Common or Preferred Stock and/or other classes of equity, or debt that convert into shares of common or Preferred Stock, any of which offerings would dilute the ownership percentage of investors in this offering. See “Dilution.” Furthermore, if the Company raises capital through debt, the holders of our debt would have priority over holders of common and Preferred Stock and the Company may be required to accept terms that restrict its ability to incur more debt. We cannot assure you that the necessary funds will be available on a timely basis, on favorable terms, or at all, or that such funds if raised, would be sufficient. The level and timing of future expenditure will depend on a number of factors, many of which are outside our control. If we are not able to obtain additional capital on acceptable terms, or at all, we may be forced to curtail or abandon our growth plans, which could adversely impact the Company, its business, development, financial condition, operating results or prospects.

The Company is controlled by its officers and directors.  The Company’s officers and directors as a group currently hold 78.49% of the Company’s Common Stock and 21.19% of the Company’s Series Seed Preferred Stock, representing the majority of the Company’s voting stock, and will continue to hold the majority of the Company’s voting stock at the conclusion of this Offering. Investors in this offering will not have the ability to control a vote by the stockholders or the board of directors.

Any valuation at this stage is difficult to assess. The valuation for this Offering was established by the Company. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially early-stage companies, is difficult to assess and you may risk overpaying for your investment.

Certain data and information in this offering circular were obtained from third-party sources and were not independently verified by us.

This offering circular contains certain data and information that we obtained from various sources including industry information from government publications and publicly available third-party publications. We have not independently verified the data and information contained in such third-party publications and reports and we did not commission any such third party for collecting or providing the data used in this offering circular. Data and information contained in such third-party publications and reports may be collected using third-party methodologies, which may differ from the data collection methods we would have used. In addition, these industry publications and reports generally indicate that the information contained therein is believed to be reliable, but do not guarantee the accuracy and completeness of such information. Further, none of these sources are incorporated by reference into this offering circular.

We are and may continue to be significantly impacted by the worldwide economic downturn due to the COVID-19 pandemic. In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has spread to many countries, including the United States, and was declared to be a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the U.S., Europe and Asia have implemented severe travel restrictions and social distancing. The impacts of the outbreak are unknown and rapidly evolving. A widespread health crisis has adversely affected and could continue to affect the global economy, resulting in an economic downturn that could negatively impact the value of the Company’s shares and investor demand for shares generally.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. It is possible that the continued spread of COVID-19 could cause a further economic slowdown or recession or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.
 

The extent to which COVID-19 affects our financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others. Moreover, the COVID-19 outbreak has had and may continue to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.

On April 24, 2020, we entered into a Small Business Administration (“SBA”) loan under the Paycheck Protection Program (“PPP”) in the amount of $106,210 with Radius Bank, a member of the Federal Deposit Insurance Corporation. The loan will mature 2 years from the date it was issued (April 24, 2020) and will accrue interest at a rate of 1% per year. The Paycheck Protection Program Flexibility Act of 2020 authorized the Company to apply for forgiveness of the funds utilized over the course of 24 weeks so long as the full-time equivalent staffing level remains the same (or increases) and that at least 60% of the funds are utilized to pay payroll costs. The Company subsequently applied for loan forgiveness, and has received a preliminary opinion from Radius Bank that the Company is eligible for loan forgiveness in the amount of $86,573.28 on July 8, 2020. However, the Company has not yet been granted forgiveness of this amount, and the forgiveness will not granted until a final determination is made that the Company utilized the funds in accordance with defined loan forgiveness guidance issued by the government. As such, it is possible that the Company may have to repay the entire balance of this loan.

If we cannot raise sufficient funds, we will not succeed. We are offering shares of our Series A Preferred Stock in the amount of up to $5,000,000 in this Offering on a best-efforts basis and may not raise the complete amount. Even if the maximum amount is raised, we are likely to need additional funds in the future in order to grow, and if we cannot raise those funds for whatever reason, including reasons relating to the Company itself or to the broader economy, the Company may not survive. If we raise a substantially lesser amount than the Maximum Raise, we will have to find other sources of funding for some of the plans outlined in “Use of Proceeds To Issuer”.

Risks Related to the Securities in this Offering

In certain circumstances investors will not have dissenters’ rights. The subscription agreement that investors will execute in connection with the offering contains a “drag-along” provision whereby investors agree to vote any shares they own in the same manner as the majority holders of our other classes of stock. Specifically, and without limitation, if the majority holders of our other classes of stock determine to sell the Company, depending on the nature of the transaction, investors will be forced to sell their stock in that transaction regardless of whether they believe the transaction is the best or highest value for their shares, and regardless of whether they believe the transaction is in their best interests.

We have previously granted anti-dilution rights in the form of preemptive rights to certain holders of our Series Seed Preferred Stock. The effect of those rights is that at any time we intend to issue additional shares of our stock that would dilute those holders, they would first have the right to acquire additional shares to maintain their pro rata ownership. As a result, upon future issuances of stock by the Company, investors in this offering may experience more substantial dilution than other stockholders. See Exhibit 3.1 and “Securities Being Offered” for further information about the preemptive rights granted to certain holders of our Series Seed Preferred Stock.

This investment is illiquid. There is no currently established market for reselling these securities. If you decide that you want to resell these securities in the future, you may not be able to find a buyer. Although the Company intends to apply in the future for quotation of its Common Stock on an over-the-counter market, or similar, exchange, there are a number of requirements that the Company may or may not be able to satisfy in a timely manner. Even if we obtain that quotation, we do not know the extent to which investor interest will lead to the development and maintenance of a liquid trading market. You should assume that you may not be able to liquidate your investment for some time, or be able to pledge these shares as collateral.

You will need to keep records of your investment for tax purposes. As with all investments in securities, if you sell our Series A Preferred Stock at a profit or loss, you will probably need to pay tax on the long- or short-term capital gains that you realize, or apply the loss to other taxable income. If you do not have a regular brokerage account, or your regular broker will not hold our Series A Preferred Stock for you (and many brokers refuse to hold securities issued under Regulation A) there will be nobody keeping records for you for tax purposes and you will have to keep your own records, and calculate the gain or loss on any sales of the Series A Preferred Stock. 

The value of your investment may be diluted if the Company issues additional options. A pool of unallocated options is typically reserved for future employees, which affects the fully-diluted pre-money valuation for this offering. The price per share of the Series A Preferred Stock has been calculated assuming a 5% post-money unallocated option pool, which may not account for all additional options the Company will issue after the offering and may not provide adequate protection against the dilution investors may face due to such additional issuances. Any option issuances by the Company over the 5% pool will lower the value of your shares.

Investors in this offering will receive stock that is subject to transfer restrictions. The Company’s Amended and Restated Bylaws contains provisions that (i) prohibits the sale or transfer of any shares of the Company’s capital stock by a stockholder without first obtaining the Company’s approval; and (ii) grants the Company a right of first refusal, whereby the Company has the option to purchase any shares proposed to be transferred or sold by a stockholder, in effect replacing the intended purchaser or transferee, so long as the Company matches the consideration the stockholder would have received for such sale or transfer. These provisions will limit your ability to access any liquidity following the purchase of these shares, as well as limit your freedom in choosing when and to whom you wish to sell your shares. As noted above, investors should intend to hold their securities for a significant period of time.

Investors in this offering may not be entitled to a jury trial with respect to claims arising under the subscription agreement, the investors’ rights agreement, which could result in less favorable outcomes to the plaintiff(s) in any action under these agreements. Investors in this offering will be bound by the subscription agreement and investors’ rights agreement both of which include a provision under which investors waive the right to a jury trial of any claim they may have against the Company arising out of or relating to these agreements. By signing these agreements, the investor warrants that the investor has reviewed this waiver with his or her legal counsel, and knowingly and voluntarily waives the investor’s jury trial rights following consultation with the investor’s legal counsel.

If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York and to the jurisdiction of the United States District Court of the Southern District of New York, which governs the subscription agreement and investors’ rights agreement, and in the Court of Chancery in the State of Delaware. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the subscription agreement and investors’ rights agreement. You should consult legal counsel regarding the jury waiver provision before entering into the subscription agreement and investors’ rights agreement. 

If you bring a claim against the Company in connection with matters arising under either the investors’ rights agreement or the subscription agreement, including claims under federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the Company. If a lawsuit is brought against the Company under the either of these agreements, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in such an action. 

Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription agreement or investors’ rights agreement with a jury trial. No condition, stipulation or provision of the subscription agreement or investors’ rights agreement serves as a waiver by any holder of our shares or by us of compliance with any substantive provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when the shares are transferred, the transferee is required to agree to all the same conditions, obligations and restrictions applicable to the shares or to the transferor with regard to ownership of the shares, that were in effect immediately prior to the transfer of the Shares, including but not limited to the investors’ rights agreement or subscription agreement.

Investors in this offering will enter into an Investors’ Rights Agreement that will limit their voting rights compared to those of holders of our Common Stock. Investors in this offering will be required to enter into an investors’ rights agreement. Pursuant to this agreement, holders of Series A Preferred Stock agree to vote for two (2) directors designated by the founders of the Company, Ryan Belanger-Saleh and/or Jeff Myers, and one (1) director designated by SWS Holding Company, LLC, a shareholder of the Company, so long as it holds at least 7.5% of the outstanding shares of the Company’s Series Seed Preferred Stock. In addition, investors will grant the Chief Executive Officer of the Company a proxy to vote all of such investor’s shares of stock on behalf of such investor if such investor fails to vote (or attempts to vote, but does so improperly). Investors in this offering therefore will have no choice as to the election of three members of the Board of Directors of the Company. Therefore, investors in this offering will very likely not be able to exert the same amount of control over the management of the Company as the holders of the Common Stock. See “Securities Being Offered” for more information on the voting rights of our Series A Preferred Stock.

The Investors’ Rights Agreement and Subscription Agreement also includes a forum selection provision, which could result in less favorable outcomes to the plaintiff(s) in any action against our company. Our Investors’ Rights Agreement and subscription agreement include a forum selection provision that requires any claims against the Company by stockholders not arising under the federal securities laws to be brought in the jurisdiction of the state courts of New York and to the jurisdiction of the United States District Court of the Southern District of New York. This forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. 

DILUTION

Dilution means a reduction in value, control or earnings of the shares the investor owns.

Immediate dilution  

An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the Company. When the Company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares. Dilution may also be caused by pricing securities at a value higher than book value or expenses incurred in the offering.

The following table demonstrates the price that new investors are paying for their shares of our Series A Preferred Stock with the effective cash price paid by existing stockholders, including all outstanding stock options and identifying the effective cash price of previously converted instruments. The table presents shares and pricing as issued and reflects all transactions since inception, which gives investors a better picture of what they will pay for their investment compared to existing stockholders than just including such transactions for the last 12 months, which is what the Commission requires. The dilution disclosures contained in this section are based upon the instruments issued and outstanding as of September 1, 2020. 

Another way to look at dilution is by evaluating the dilution that new investors will experience upon investment in the Company based on the net tangible book value of the Company compared to existing holders of our securities. Because this calculation is based on the net tangible assets of the Company, we are calculating based our audited net tangible book value of $(1,331,286) as of December 31, 2019. Note, this evaluation is limited because it does not include shares of our capital stock issued in 2020 to maintain consistency with the audited net tangible book value as of December 31, 2019. Our issuances in 2020 include 721,218 shares of our Common Stock and 11,651,963 shares of our Series Seed Preferred Stock following both direct issuances and conversion of convertible instruments. These issuances increased our outstanding shares from 10,745,748 to 23,118,929.

The offering costs assumed in the following table includes up to $425,000 in commissions to SI Securities, LLC, as well as $65,000 in fixed legal, Edgarization, and accounting fees incurred for this offering.

This table presents three scenarios for the convenience of the reader: a $1,000,000 raise from this offering (the minimum offering), a 2,500,000 raise from this offering, and a fully subscribed $5,000,000 raise from this offering (the maximum offering).

Future dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the Company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when the Company issues more shares, the percentage of the Company that you own will go down, even though the value of the Company may go up. You will own a smaller piece of a larger company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, angel investment), employees exercising stock options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares or warrants) into stock.

If the Company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the Company offers dividends, and most early stage companies are unlikely to offer dividends, preferring to invest any earnings into the Company).

The type of dilution that hurts early-stage investors most occurs when a company sells more shares in a “down round”, meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):

This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round” the holders of the convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the Company has issued (and may issue in the future), and the terms of those notes.

If you are making an investment expecting to own a certain percentage of the Company or expecting each share to hold a certain amount of value, it is important to realize how the value of those shares can decrease by actions taken by the Company. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

Plan of Distribution

The Company is offering a minimum of 1,086,956 (representing $1,000,000 in proceeds) and up to 5,434,782 (representing $5,000,000 in proceeds) of per share. The minimum investment is 1,086 shares, or $999.12. SeedInvest Auto Invest participants have a lower investment minimum of $199.64.

The Company has engaged SI Securities, LLC as its sole and exclusive placement agent to assist in the placement of its securities. SI Securities, LLC is under no obligation to purchase any securities or arrange for the sale of any specific number or dollar amount of securities. SI Securities, LLC currently holds 79,072 shares of Series Seed Preferred Stock of the Company, issued as compensation for placement agent services provided to the Company in connection with previous securities offerings of the Company. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Issuances of Equity, Convertible Notes, and SAFEs”.)

8,695 shares of Series Seed Preferred Stock received by SI Securities, LLC has been deemed compensation (the “Equity Compensation”) by FINRA and is therefore subject to a 180-day lock-up pursuant to FINRA Rule 5110(g)(1). In accordance with FINRA Rule 5110(g)(1), the Equity Compensation may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of such securities by any person for a period of 180 days immediately following the qualification date or commencement of sales of this offering, except to any placement agent and selected dealer participating in the offering and their bona fide officers or partners and except as otherwise provided for in FINRA Rule 5110(g)(2).

(1)       SI Securities, LLC will receive commissions of 8.5% of the offering proceeds.

Other Terms

Except as set forth above, the Company is not under any contractual obligation to engage SI Securities, LLC to provide any services to the Company after this offering, and has no present intent to do so. However, SI Securities, LLC may, among other things, introduce the Company to potential target businesses or assist the Company in raising additional capital, as needs may arise in the future. If SI Securities, LLC provides services to the Company after this offering, the Company may pay SI Securities, LLC fair and reasonable fees that would be determined at that time in an arm’s length negotiation.

SI Securities, LLC intends to use an online platform provided by SeedInvest Technology, LLC, an affiliate of SI Securities, LLC, at the domain name www.seedinvest.com (the “Online Platform”) to provide technology tools to allow for the sales of securities in this offering. SI Securities, LLC will charge you a non-refundable transaction fee equal to 2% of the amount you invest (up to $300) at the time you subscribe for our shares. This fee will be refunded in the event the Company does not reach its minimum fundraising goal. In addition, SI Securities, LLC may engage selling agents in connection with the offering to assist with the placement of securities.

Selling Security holders

No securities are being sold for the account of security holders; all net proceeds of this offering will go to the Company.

Transfer Agent and Registrar 

eShares, Inc. dba Carta, Inc. will serve as transfer agent to maintain stockholder information on a book-entry basis. We will not issue shares in physical or paper form. Instead, our shares will be recorded and maintained on our stockholder register.

Investors’ Tender of Funds and Return of Funds

After the Commission has qualified the Offering Statement, the Company will accept tenders of funds to purchase the Series A Preferred Stock. The Company may close on investments on a “rolling” basis (so not all investors will receive their shares on the same date), provided that the minimum offering amount has been met. Tendered funds will remain in escrow until both the minimum offering amount has been reached and a closing has occurred. However, in the event we have not sold the minimum amount of shares by _____, 2020 or sooner terminated by the Company, any money tendered by potential investors will be promptly returned by the Escrow Agent. Upon closing, funds tendered by investors will be made available to the Company for its use.

In order to invest you will be required to subscribe to the offering via the Company’s website and agree to the terms of the offering and the subscription agreement.

In the event that it takes some time for the Company to raise funds in this offering, the Company may rely on cash on hand, or may seek to raise funds by conducting a new offering of equity or debt securities.

In order to invest you will be required to subscribe to the offering via the Online Platform and agree to the terms of the offering, Series A Preferred Stock Purchase Agreement, and any other relevant exhibit attached thereto.

Provisions of Note in Our Subscription Agreement and Investors’ Rights Agreement

Our subscription agreement and investors’ rights agreement include forum selection provisions that require any claims against the Company based on the subscription agreement and/or investors’ rights agreement not arising under the federal securities laws to be brought in a court of competent jurisdiction in the State of New York and to the jurisdiction of the United States District Court of the Southern District of New York. These forum selection provisions may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The company has adopted these provisions to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so they may continue to focus on operations of the Company.

Jury Trial Waiver 

Our subscription agreement and investors’ rights agreement provide that investors waive the right to a jury trial of any claim they may have against us arising out of or relating to the investors’ rights agreement and subscription agreement. This jury trial waiver applies to claims arising under arising under federal securities laws. Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the subscription agreement or investors’ rights agreement with a jury trial. No condition, stipulation or provision of the subscription agreement or investors’ rights agreement serves as a waiver by any holder of our shares or by us of compliance with any substantive provision of the federal securities laws and the rules and regulations promulgated under those laws. By signing the subscription agreement and investors’ rights agreement, the investor warrants that the investor has reviewed these waivers with the investor’s legal counsel, and knowingly and voluntarily waives his or her jury trial rights following consultation with the investor’s legal counsel. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law.

USE OF PROCEEDS TO ISSUER

Assuming a maximum raise of $5,000,000, the net proceeds of this offering would be approximately $4,510,000 after subtracting estimated offering costs of $425,000 to SI Securities, LLC in commissions, $8,000 in audit fees, $7,000 in Edgarization fees and $50,000 in legal fees.

Assuming a raise of $3,000,000, representing 60% of the maximum offering amount, the net proceeds of this offering would be approximately $2,680,000 after subtracting estimated offering costs of $255,000 to SI Securities, LLC in commissions, $8,000 in audit fees, $7,000 in Edgarization fees and $50,000 in legal fees.

Assuming a raise of the minimum of $1,000,000, representing 20% of the maximum offering amount, the net proceeds of this offering would be approximately $850,000 after subtracting estimated offering costs of $85,000 to SI Securities, LLC in commissions, $8,000 in audit fees, $7,000 in Edgarization fees and $50,000 in legal fees. In such an event, Gatsby would adjust its use of proceeds by not funding the clearing deposit for Gatsby Securities, LLC with Apex Clearing, and would instead put the proceeds towards its operational costs and continue to grow without unlocking the revenue potential that the clearing deposit would provide.

Please see the table below for a summary our intended use of the net proceeds from this offering

Because the offering is a “best efforts”, we may close the offering without sufficient funds for all the intended purposes set out above, or even to cover the costs of this offering.

The Company reserves the right to change the above use of proceeds if management believes it is in the best interests of the Company

THE COMPANY’S BUSINESS

The following discussion of our business includes references to third-party sources which have informed the opinions of management, but have not been independently evaluated by management for accuracy. These sources are not incorporated by reference into this offering circular.

Overview

Gatsby Digital, Inc. is the owner and creator of “Gatsby” – a simple, commissions-free, easy-to-use options trading platform focused on making options trading accessible to everyone (the “Gatsby Platform”). The Gatsby Platform makes options trading straightforward by removing the commissions and the jargon that has historically made options trading a dauting task for newcomers. The Gatsby Platform, available as a mobile app that is free to download, allows users to trade options with their friends, earn “Gatsby Rewards” points on every trade, and track breaking news and important alerts. In addition, the Company has recently launched an application programming interface (API) for the Gatsby Platform (the “Gatsby API”), which is a service offered to select partners that want to trade options through Gatsby’s technology using their own proprietary trading interfaces as an alternative to the mobile app interface. Gatsby Digital, Inc. was incorporated under the laws of the State of Delaware on February 8, 2018. Gatsby Securities, LLC, the Company’s wholly-owned subsidiary, was formed on January 22, 2019, and is a FINRA-licensed broker-dealer approved to facilitate customer self-directed retail stocks and options trading.

Gatsby Digital, Inc. provides the technology and mobile app interfaces for trading options, and Gatsby Securities, LLC., licenses these technologies to be able to provide them to traders. Once Gatsby Securities, LLC has funded a clearing deposit with a clearing broker, it will be introducing trades to that clearing brokerage. Gatsby currently has a relationship with Apex Clearing, who is well known in the industry for having impressive technologies around clearing, routing, and security for retail trading platforms.

Gatsby was in the 2018 Barclays Accelerator powered by Techstars in Spring of 2018. At that time, we had built a waitlist of more 15,000 traders. Today, the Company has over 6,500 sign ups. Through the Gatsby Platform, it is our goal to bring options trading to a new generation of investors, who are often overlooked by brokerages and excluded from important investing tools due to excessive jargon or high account minimums.

Principal Products and Services

The Company’s primary product is the Gatsby Platform – an options trading platform. The Gatsby Platform allows users to trade standardized options contracts on public companies and Exchange Traded Funds (ETFs). Gatsby only allows customers to trade on companies and ETFs that are listed on major US exchanges, including NASDAQ and the NYSE. Gatsby does not allow customers to trade binary options or any other non-standard options products. The Gatsby Platform was launched to the public in December 2019. The Gatsby Platform is currently live and available for download in the Apple App Store and Google Play store (as an application, or app). The application stack consists of a mobile application that users can install on their phone, which communicates to Gatsby’s proprietary server application, that manages all customer information and trades. The server application is reliant on two third-party vendors to function. These include our market data provider who provides price quotes for options trades as well as the custodian for the Gatsby Platform who provides information on customer accounts and balances. Both services need to be available for the Gatsby Platform to function properly. In the event that one or both services is unavailable, the Gatsby Platform will prompt users to contact customer support. In the future, we plan to build in an additional layer of redundancy by engaging a secondary (back up) market data provider to support the application in the event of an outage at. A backup to the Gatsby Platform’s custodian is not possible, as the custodian for the Gatsby Platform holds all client securities on behalf of customers. The custodian for the Gatsby Platform does however have a strong track record and powers industry leading applications like Stash, Ally Invest and Sofi. The Gatsby Platform does not currently include digital asset options trading, or any other digital asset component, and we have no current plans to introduce trading of digital asset options at this time.

When signing up for the Gatsby Platform, a user goes to the Apple App Store or Google Play Store and downloads the Gatsby mobile application. From there, the user will be prompted with a series of onboarding questions regarding things like their trading experience, understanding of risk, affiliations with other broker dealers or public companies, etc. The questions walk through the onboarding application and all responses are passed through automated checks until ultimately being reviewed by the Gatsby Securities, LLC brokerage operations team for approval or rejection. If and when a user is approved, they are able to connect their bank account to the Gatsby Platform, fund their account on the Gatsby Platform, account, and proceed to trading options on the Gatsby Platform

The Company has implemented a rewards program called “Gatsby Rewards”, in which each Gatsby Platform user receives one “Gatsby Rewards Point” for each contract traded on the Gatsby Platform. These Gatsby Rewards Points are collected and tracked in the Gatsby Platform mobile app, and at certain thresholds trigger rewards, such as a gift card to Amazon. The points earned through the Gatsby Rewards program do not expire, and are not transferrable to anyone but the trader to whom the points were issued.

The Company has recently launched the Gatsby API, a new, commissions-free service offered to companies that want to trade options through Gatsby’s technology but not using the mobile app. The Gatsby API is still in early-access stage, and is not fully-developed.

We are currently pre-revenue. While the Gatsby Platform does currently generate revenue by charging users certain transactional fees, several “pass-through” fees are charged to the user. These include the OCC (Options Clearing Corporation) fee of $0.05 per options contract, the OCC’s Options regulatory fee of $0.04 per contract, a FINRA Trading Activity Fee of $0.002 per contract and an SEC regulatory fee of $0.00207 per $100 of principal traded (on sells only), rounded to the nearest penny. We intend to start generating revenue by routing our customer’s orders to market makers who will pay us rebates of $0.50 per contract. Market makers pay brokerages for their order flow because they need liquidity, which is a typical revenue line item for most brokerages in the United States. In order for Gatsby to begin collecting these rebates, we need to fund (through Gatsby Securities, LLC) a clearing deposit with a clearing broker before we are able to establish the direct relationships to market makers. Once a clearing broker is engaged, Gatsby will be able to start collected these rebates immediately, without any changes to the current technology of the Gatsby Platform. The only change will simply be an update to the settings in our order management system, which is back-end update, which is removed from the Gatsby Platform itself.

We have identified Apex Clearing as the clearing broker we wish to utilize for this purpose going forward, and we intend to fund (through Gatsby Securities, LLC) a clearing deposit with Apex Clearing with the funds raised in this offering, assuming we raise at least $1,000,000 in gross proceeds. Apex Clearing is known in the industry for having a world-class technology platform, and a business model that allows them to work with technology-focused startups like Gatsby. Their primary benefit over their competition, is their ability to open accounts without manual intervention or physical paperwork. Gatsby has issued warrants to purchase up to 230,000 shares of Common Stock of the Company to Apex Clearing in connection with the Company’s plan fund a clearing deposit with Apex Clearing in the future (the form of this warrant is included as Exhibit 3.2).

Gatsby’s Order Flow Today

Note: Currently rebates for order flow are paid by the market makers but are kept by the clearing broker (Apex).

Gatsby’s Order Flow After Funding Clearing Deposit with Clearing Broker

Note: Once we deposit the clearing deposit with a clearing broker, we will be allowed by the clearing broker to route orders directly from our order management system to the market makers and keep the order flow rebates described above ourselves.

Organizational Structure

The Gatsby Platform is owned by Gatsby Digital, Inc., the creator of the Gatsby Platform. Gatsby Digital, Inc. operates primarily as a technology holding company. Operation of the Gatsby Platform is supported by ViewTrade Securities, Inc., a SEC registered broker-dealer and FINRA member (“ViewTrade”). The Company currently operates as an Office of Supervisory Jurisdiction (OSJ) of ViewTrade pursuant to a Franchise Branch Office and Management Agreement. Pursuant to this agreement, ViewTrade acts as broker-dealer for the purchase and sale of securities on the Gatsby Platform, in exchange for a monthly fee of the greater of either $15,000 or the total amount of “ticket charges” – variable, flat-rate transaction fees charged by ViewTrade – accrued by the Company, as well as certain other fees. The Company initially entered into this agreement with ViewTrade because it did not have a broker-dealer license with FINRA through which to operate the Gatsby Platform. As of the date of this Offering Circular, the Company’s has formed a wholly-owned subsidiary, Gatsby Securities, LLC, which has been licensed as a broker-dealer by FINRA, and is pursuing licenses in every state. As such, the Company intends to terminate the agreement with ViewTrade, and instead rely on Gatsby Securities, LLC to act as broker-dealer for transactions on the Gatsby Platform, which it plans to do by January 1, 2021.

Market

The options trading market has been growing in recent years. According to a press release published by Options Clearing Corp. in January 2020 titled “OCC Clears Over 4.9 Billion Contracts in 2019”, the total cleared contract volume in 2019 was 4,976,978,704 contracts, the industry's second-highest ever annual volume, down 5.1% compared to 2018's record-breaking pace of 5.24 billion contracts. Gatsby is focused on bringing new options traders to the options trading market, specifically targeting crypto traders, of which there are over 22 million in the United States, according to a 2019 report titled “Geographic Distribution of Crypto Traders” published by DataLight in April 2019.

We believe that, while risky, options trading can make up a powerful tool in a retail investors portfolio and can achieve benefits that are not available by trading stocks or crypto alone. These include the ability to hedge against downside in the markets or in a specific stock, or to increase the yield on their portfolio. With a strong focus on suitability and education, Gatsby aims to help new options traders tap into those benefits while at the same time understanding the inherent risk.

We’re focused on bringing new options traders to the market because we believe this to be an under penetrated segment of the market. We believe that because of the relatively high learning curve to becoming an options trader, users turn to other assets like crypto-currencies, which we believe do not provide the same benefits as options, such as greater flexibility and freedom of execution. We believe crypto-traders are already interested in investing by virtue of their involvement with crypto-currencies, and therefore we believe we would be able to convert them into Gatsby Platform users more easily than individuals that have no experience with investing.

Competition

We face competition from large, well-known companies in the brokerage industry as a whole, such as Charles Schwab (owner of TD Ameritrade) and Morgan Stanley (owner of eTrade). We view our biggest competitors as Robinhood and Webull, as these are large, well-known companies offering commission-free mobile trading platforms, targeting the same young, new generation of investors that we are currently targeting.

Our Advantage

We believe Gatsby’s principal advantages over its competition are threefold: Gatsby is simple, social, and commissions-free.

Simple. Gatsby provides options trading tailored for a new generation of investors. By providing a sleek, simple interface and avoiding use of industry jargon that is so commonly used by our competitors, we believe the Gatsby Platform makes option trading accessible to everyone, and not just professionals.

Social: The Gatsby Platform functions as a social platform, allowing users to trade with their friends. Trades on the Gatsby Platform are visible on a social feed in the app (similar to Venmo) and users can like / copy each other’s trades. The Gatsby Platform also provides a community forum, allowing users to react to breaking news and corporate reports in real time on the platform. (For example, users can comment on trades they make to explain their reasoning for making the trade, which other users on the platform can see and interact with.) Gatsby is unaware of any other similar company providing social features like the ones available on the Gatsby Platform.

Commissions-Free. Gatsby does not charge any commissions or contract fees, and the app is free to download on the App Store (Apple) or Google Play (Android). Traders are only required to deposit a minimum of $10 in order to create an account. (Note: $0 in commissions are charged on self-directed individual cash brokerage accounts that trade U.S. listed securities. SEC & FINRA fees may apply to certain transactions.) Gatsby like most brokers, makes money by directing customer order flow and receiving rebates from market makers (e.g. Citadel, Wolverine, Susquehanna). The Company cannot currently collect the rebates being generated on the platform, but will be able to once it funds a clearing deposit with a clearing broker, such as Apex Clearing.

While other companies do offer commission-free options trading platforms (such as WeBull and Robinhood), Gatsby provides features and functionality that these companies do not provide, including a scenario profit calculator, a social feed, improved customer service, and our Gatsby Rewards Points that customers earn for each trade that can be redeemed for gift cards. We believe our customer service is a significant value add to our customers (compared to that of competitors such as Robinhood and WeBull) as we provide instant chat and on demand phone support. All of our customer service representatives have extensive options experience. As we grow, we plan to continue focusing heavily on providing easy access to experiences customer service representatives.

Distribution

The Gatsby Platform is downloadable as a mobile app for both iOS and Android, and is available for download on both the App Store and Google Play. The Gatsby API is available online at www.trygatsby.com. The Gatsby API is not yet fully-developed, and is available only by request.

Research and Development

Research and development to date has been primarily focused on development of the Gatsby Platform, including technology development, product testing, risk mitigation, suitability, customer identification and education tools for customers. The Gatsby Platform is currently fully functioning, and requires no further technological development to operate. Nonetheless, we intend to improve the app, and R&D initiatives will center on additional development in these aforementioned areas. No additional technology, research or development will be required to begin collecting rebates once we engage a clearing broker.

Employees

The Company currently has 5 full-time employees (consisting of three officers of the Company and two registered representatives). The officers of the Company either work either remotely or at the Company’s headquarters at 28 Liberty St, New York, NY 10005. The registered representatives work from 44 S Broadway, White Plains, NY 10601, which is the Company’s Office of Supervisory Jurisdiction under ViewTrade Securities, Inc. In addition, the Company utilizes third-party contractors for certain technology development work.

The Company has not entered into formal employment agreements with any of its executive officers or directors.

Registered Representatives

Gatsby currently employs two registered securities principals that are each registered representatives of ViewTrade Securities and Gatsby Securities, LLC. Both of these individuals are registered general securities principals and supervisors, and one is a registered options principals. These two individuals manage all regulated functions inside of the Office of Supervisory Jurisdiction Branch Office and within Gatsby’s broker-dealer subsidiary (Gatsby Securities, LLC), each of work from 44 S Broadway, White Plains, NY 10601. This includes client communications, compliance functions, suitability checks, archives, customer support and all other regulated securities activities. These registered representatives are required to be employed pursuant to the Franchise Branch Office and Management Agreement with ViewTrade Securities, Inc, and this agreement governs the terms of these individuals’ employment. The Company has not entered into separate employment agreements with either of these registered representatives.

The Company intends to ultimately migrate its customers from ViewTrade to Gatsby Securities, LLC – at which point, both registered representatives will de-register with ViewTrade, and solely be registered representatives of Gatsby Securities, LLC.

Regulation

As stated above, operation of the Gatsby Platform is currently handled by ViewTrade Securities, Inc., a SEC registered broker-dealer and FINRA member. As of the date of this Offering Circular, the Company’s wholly-owned subsidiary, Gatsby Securities, LLC, is a FINRA-licensed broker-dealer approved to facilitate customer self-directed retail stocks and options trading. In the future, the Company intends for Gatsby Securities, LLC to operate the Gatsby Platform.

Gatsby Securities recently completed the process of registering as a broker-dealer with the SEC and became a member of FINRA. The registration process not only includes registering with the SEC, which we have completed, but also requires membership in a self-regulatory organization (in our case, we are a member of FINRA) and in the Securities Investor Protection Corporation (“SIPC”), compliance with state requirements and making sure that our associate persons satisfy all applicable qualification requirements.

SEC Requirements

Since Gatsby Securities became a broker-dealer, it is required to comply with extensive SEC regulations with respect to its conduct and the processing of transactions. These include requirements related to conduct, financial responsibility, and other requirements such as those that relate to communications, anti-money laundering (AML) and ongoing internal controls and governance.

Conduct Requirements

In general, many of the rules that govern broker-dealers stem from antifraud provisions; these requirements are broad in scope and prohibit misstatements or misleading omissions of material facts, and fraudulent or manipulative acts and practices, in connection with the purchase or sale of securities. Specifically, the following rules apply:

In order to comply with the antifraud specific requirements include those related to:

Finally, broker-dealers are governed by requirements regulating employees and individuals associated with the broker-dealer.

Financial Responsibility Requirements

Financial responsibility and operations requirements include: net capital requirements, margin requirements, customer protection requirements (e.g., reserve account and segregation of customer assets), risk assessment requirements, financial reporting (including an independent audit), and recordkeeping requirements.

Other Requirements

Broker-dealers are subject to a host of other rules and requirements including: mandatory arbitration, submitting for SEC and FINRA examinations, maintain and reporting information on the broker-dealers affiliates (in our case, this includes the parent organization as well as the other subsidiaries), following electronic media and communication guidelines as well as maintaining an AML program.

FINRA Requirements

Since our subsidiary became a broker-dealer member of FINRA, our subsidiary has been subject to its supervisory authority and is required to comply with FINRA’s broker-dealer requirements. Some of those rules are also applicable to the company itself, as an entity associated with the broker-dealer. These requirements include many similar requirements to those of the SEC, and in many cases are broader in scope and provide more specificity. FINRA also has rules regarding conduct, compliance and codes of procedure. For instance, FINRA members must comply with NASD’s Rules of Fair Practice, which broadly speaking requires broker-dealers to observe high standards of commercial honor and just and equitable principles of trade in conducting their business. There are also rules that relate to use of manipulative, deceptive or other fraudulent devices, suitability, payments to unregistered persons, know your customer, supervision of our employees and responsibilities related to associated persons, financial soundness, recordkeeping, maintaining procedures, arbitration for customer disputes, AML and submitting to ongoing supervision.

Liability

Under our arrangements that do not use the services of our broker-dealer subsidiary, Section 12(a)(2) of the Securities Act, which applies to Regulation A, imposes liability for misleading statements not only on the issuers of securities but also on “sellers,” which includes brokers involved in soliciting an offering. Rule 10b-5 under the Exchange Act generally imposes liability on persons who “make” statements. Currently, the information presented on our platform is drafted by the issuers themselves. Additional liability may arise from as-yet untested provisions such as Section 9(a)(4) of the Exchange Act, discussed above.

Broker-dealers are subject to heightened standards of liability. Not only do we have potential liability under Section 12(a)(2) but we also are subject to liability under Rule 10b-5. Broker-dealers may also be subject to liability for failure to comply with SEC and FINRA requirements, including claims that we can be held liable for the behavior of our agents (control person liability), claims regarding unsuitable recommendations, violations of margin rules, breach of contract, common law claims of fraud and various claims under state laws.

Intellectual Property

Gatsby Digital does not currently hold any issued patents. The Company owns a trademark, information for which is summarized in the table below.

Litigation

From time to time, the Company may be involved in a variety of legal matters that arise in the normal course of business. The Company is not currently involved in any litigation, and its management is not aware of any pending or threatened legal actions relating to its intellectual property, conduct of its business activities, or otherwise. See “Risk Factors” for a summary of risks our company may face in relation to litigation against our company.

THE COMPANY’S PROPERTY

The Company leases a shared office space at 28 Liberty St., New York, NY 10005 which serves as its headquarters. The Company also leases offices at 44 S Broadway, White Plains, NY 10601, where the Company operates as an Office of Supervisory Jurisdiction of ViewTrade pursuant to the Franchise Branch Office and Management Agreement. This office also serves as the headquarters of Gatsby Securities, LLC, from which it operates as a broker-dealer.

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 fiscal years ended December 31, 2018 and December 31, 2019 should be read in conjunction with our financial statements and the related notes included in this Offering Circular. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

Gatsby Digital, Inc. is the owner and creator of “Gatsby” – a simple, commissions-free, easy-to-use options trading platform focused on making options trading accessible to everyone (the “Gatsby Platform”). The Gatsby Platform makes options trading straightforward by removing the commissions and the jargon that has historically made options trading a dauting task for newcomers. The Gatsby Platform, available as a mobile app, allows users to trade options with their friends, earn “Gatsby Rewards” points on every trade, and track breaking news and important alerts. In addition, the Company has recently launched an application programming interface (API) for the Gatsby Platform (the “Gatsby API”), which is a service offered to select partners that want to trade options through Gatsby’s technology using their own proprietary trading interfaces as an alternative to the mobile app interface. Gatsby Digital, Inc. was incorporated under the laws of the State of Delaware on February 8, 2018. Gatsby Securities, LLC, the Company’s wholly-owned subsidiary, was formed on January 22, 2019, and is a FINRA-licensed broker-dealer approved to facilitate customer self-directed retail stocks and options trading, licensed May 27, 2020.

Results of Operations

Year ended December 31, 2019 Compared to Year ended December 31, 2018

Gatsby Digital, Inc. is in an early stage of development.  The Company did not generate revenues for the years ended December 31, 2019 and 2018.

Our operating expenses currently consist of general and administrative expenses, sales and marketing expenses, and research and development expenses. It should be noted that the first recorded transactions on the Gatsby mobile platform did not occur until November 2019.

General and Administrative Expenses: General administrative expenses were $689,469 for the year ended December 31, 2019 compared to $54,734 for the year ended December 31, 2018 – an increase of $634,735. Since our inception in February 2018, general and administrative expenses primarily consisted of compensation to software development contractors to build and develop the Gatsby Platform, salaries, business development, data vendors, rent, and payments to necessary software vendors operate the Gatsby app. The increase in general and administrative expenses from 2018 to 2019 is primarily the result of scaling up our business operations as we geared up towards our general launch of the Gatsby app, which occurred in December 2019.

Sales and Marketing Expenses: Sales and marketing expenses were $35,713 for the year ended December 31, 2019 compared to $2,486 for the year ended December 31, 2018 – an increase of $33,227. Sales and marketing expenses have consisted primarily of online advertisements on Facebook, Google, Instagram, and Reddit. The increase in sales and marketing expenses in 2019 is the result of the launch of the Gatsby App, in which we increased our marketing efforts in order to increase our user base.

Research and Development Expenses: Research and development expenses were $292,431 for the year ended December 31, 2019 compared to $85,843 for the year ended December 31, 2018 – an increase of $206,588. Research and development expenses to date have consisted primarily compensation to software development contractors to build and develop the Gatsby Platform, which was launched in December 2019. Development efforts increased up to the launch of the platform, which in turn increased development expenses. In August 2019, the Company also brought on its first full-time developer. As such, these factors resulted in an increase in research and development expenses from 2018 to 2019.

As a result of the foregoing, the Company generated a net loss of $1,085,924 for the period ended December 31, 2019 compared to a net loss of $148,888 for the year ended December 31, 2018, an $937,036 increase in net loss.

Since the end of the period covered by our financial statements, our legal and professional, research and development, payments to contractors, and marketing and advertising expenses are expected to increase in connection with this Offering. Our expenses related to wages and payroll taxes have temporarily decreased due to employees voluntarily deferring wages and temporary reductions in headcount. We expect wages and payroll tax expenses to increase following this Offering.

Liquidity and Capital Resources

At December 31, 2019, the Company’s cash on hand was $1,050,838. The Company is not generating revenues and requires the continued infusion of new capital to continue business operations. The Company has recorded losses since inception. As of December 31, 2019, the Company had working capital of $980,760 and a stockholders’ deficit of ($1,211,286). The Company has historically been capitalized by issuances of convertible notes and Simple Agreements for Future Equity (SAFEs). The Company plans to continue to try to raise additional capital through crowdfunding offerings, equity issuances, or any other method available to the Company. Absent additional capital, the Company may be forced to significantly reduce expenses and could become insolvent.

Issuances of Equity, Convertible Notes, and SAFEs

Equity

During the year ended December 31, 2018, the Company sold 638,298 shares of common stock for gross proceeds of $20,000.

Starting in March 2020, the Company commenced a Regulation D offering for the sale of its Series Seed Preferred Stock. The Company has raised approximately $670,000 through the sale of 1,673,928 shares of Series Seed Preferred Stock as of the date of this Offering Circular as of December 31, 2019. In connection with the offering, the Company issued SI Securities, LLC 8,695 shares of Series Seed Preferred Stock as compensation for placement agent services. The 8,695 shares of Series Seed Preferred Stock issued to SI Securities, LLC have been deemed compensation by FINRA and are subject to certain lock-up restrictions, as described under “Plan of Distribution and Selling Securityholders”. Subsequently to December 31, 2019, the Company sold an additional 217,392 shares for $100,000 in proceeds.

Convertible Notes

During 2019 and 2018, the Company entered into a series of convertible note agreements with third parties and a related party totaling $1,964,630 and $375,000, respectively. A principal amount of $376,790 was issued via the Online Platform affiliated with SI Securities, LLC, which acted as a funding intermediary for a portion of this offering. In connection with the offering, the Company issued SI Securities, LLC a convertible note with a principal amount of $18,839.50 as compensation for placement agent services. In March 2020, all convertible notes issued by the Company converted (totaling approximately $2,430,000 in principal and interest) converted into Series Seed Preferred Stock, resulting in the issuance of 9,638,093 shares of Series Seed Preferred Stock of the Company. As a result of the conversion, the note held by SI Securities, LLC converted into 70,377 shares of Series Seed Preferred Stock.

SAFEs

On March 1, 2018, the Company assumed $20,000 in SAFE agreements from a related party entity (predecessor LLC of the Company that has been dissolved). The proceeds were used to commence the Company’s operations. In March 2020, these $20,000 in SAFE agreements converted into Series Seed Preferred Stock of the Company, resulting in the issuance of 43,478 shares.

Indebtedness

PPP Loan

On April 24, 2020, we entered into a Small Business Administration (“SBA”) loan under the Paycheck Protection Program (“PPP”) in the amount of $106,210 with Radius Bank, a member of the Federal Deposit Insurance Corporation. The loan will mature 2 years from the date it was issued (April 24, 2020) and will accrue interest at a rate of 1% per year. The Paycheck Protection Program Flexibility Act of 2020 authorized the Company to apply for forgiveness of the funds utilized over the course of 24 weeks so long as the full-time equivalent staffing level remains the same (or increases) and that at least 60% of the funds are utilized to pay payroll costs. The Company subsequently applied for loan forgiveness, and has received a preliminary opinion from Radius Bank that the Company is eligible for loan forgiveness in the amount of $86,573.28 on July 8, 2020. However, the Company has not yet been granted forgiveness of this amount, and the forgiveness will not granted until a final determination is made that the Company utilized the funds in accordance with defined loan forgiveness guidance issued by the government. No payments on this loan are due for 6 months from the issuance date. Thereafter, the loan balance must be repaid within 18 months, in monthly installments. .As of the date of this Offering Circular, the entire balance of the $106,210 note is remaining.

Plan of Operations and Milestones

The Company has not yet generated any revenues. We have established the following milestones in our plan of operations for the next 12 months:

Since the net proceeds from the minimum offering amount ($850,000) will not allow us to fund a clearing deposit with a clearing broker ($1,000,000), if we only raise the minimum offering amount, we will not be able to achieve profitability without seeking additional funding, as we cannot generate revenues until we have funded a clearing deposit. In our opinion, it will be necessary to raise additional funds in the next six months to implement the plan of operations set out above, if we only raise the minimum. If we raise $3,000,000 or more, we intend to fund the clearing deposit immediately, and believe we could achieve the plan of operations set out above without raising additional capital in the next six months.

Trend Information

The options industry and particularly retail options have been increasing in volume consistently for the last decade. This growth is anticipated to continue for the foreseeable future as markets become increasingly volatile. We believe there is a huge trend towards young investors joining commission-free options trading apps (such as Robinhood). In the first quarter of 2020, Robinhood users traded 9 times as many shares as E-Trade customers and 40 times as many shares as Charles Schwab customers, per dollar in the average customer account. They also bought and sold 88 times as many risky options contracts as Schwab customers, relative to the average account size, according to an analysis of new filings from nine brokerage firms by the research firm Alphacution for The New York Times, published in a July 2020 article by the New York Times titled “Robinhood Has Lured Young Traders, Sometimes With Devastating Results”. The Company is hoping to capitalize on this growing trend, and attract these young investors to its platform.

The Company is currently pre-revenue, but plans on funding a clearing deposit (through Gatsby Securities, LLC) with a clearing broker by January 2021, which will allow it to begin generating revenues, as described above.

Relaxed Ongoing Reporting Requirements

If we become a public reporting company in the future, we will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company”, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies”, including but not limited to:

If we become a public reporting company in the future, we expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an “emerging growth company” for up to five years, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.

If we do not become a public reporting company under the Exchange Act for any reason, we will be required to publicly report on an ongoing basis under the reporting rules set forth in Regulation A for Tier 2 issuers. The ongoing reporting requirements under Regulation A are more relaxed than for “emerging growth companies” under the Exchange Act. The differences include, but are not limited to, being required to file only annual and semiannual reports, rather than annual and quarterly reports. Annual reports are due within 120 calendar days after the end of the issuer’s fiscal year, and semiannual reports are due within 90 calendar days after the end of the first six months of the issuer’s fiscal year.

In either case, we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies”, and our stockholders could receive less information than they might expect to receive from more mature public companies.

Ryan Belanger-Saleh, Co-Founder, Co-Chief Executive Officer, Director

Ryan Belanger-Saleh is a co-founder and a co-Chief Executive Officer of Gatsby Digital, Inc. Ryan co-founded the Company in February 2018, and has a history of entrepreneurship and executive management in the fintech industry. From June 2014 to March 2016, Ryan acted as Chief Technology Officer for Blue Technologies LLC, a software platform designed to support direct investment within the brokerage and wealth management community. As CTO, Ryan handled all technology development for the company, which provided the first electronic syndication platform in the equity crowdfunding space. In March 2016, Ryan left Blue Technologies to start Dealtable, Inc. with Jeff Myers, a deal management platform that allows users to securely collaborate, market, and close deals faster, where he acted as co-CEO until his departure in February 2018, leaving to co-found the Company with Jeff Myers.

Ryan earned a Bachelor’s of Arts in Economics from Northeastern University.

Jeff Myers, Co-Founder and Co-Chief Executive Officer

Jeff Myers is a co-founder and Co-Chief Executive officer of Gatsby Digital, Inc. Jeff co-founded the Company in February 2018. As Co-Chief Executive Officer, he shares responsibility with Ryan Belanger-Saleh for managing the day-to-day operations of the Company, and plays a key role in managing technology development, marketing and branding strategies, and fundraising / investor relations for Gatsby Digital Inc. Prior to co-founding the Company, beginning in 2014, Jeff served as an Emerging Platforms Lead at NBCUniversal, where he lead a Led a ss team of developers and designers to build and deploy innovative new products for various business units at. NBCUniversal. Jeff left NBCUniversal in October 2015, and subsequently founded DealTable, Inc. with Ryan Belanger-Saleh , where he acted as co-CEO until his departure in February 2018, where he handled development and launch of data room software and oversaw sales strategy and implementation for customers. Jeff left DealTable to co-found the Company in February 2018.

Jeff earned his B.A. in English from Trinity College-Hartford.

Davis Gaynes, Chief Operating Officer

Davis Gaynes serves as the Company’s Chief Operating Officer, a position he has held since its inception in February 2018. As its COO, Davis manages the daily operations of our broker-dealer (currently, ViewTrade, but in the future, this will be Gatsby Securities) and develops and manages relationships with various vendors. Davis is an experienced Chief Operating Officer, and has served in such capacity in a number of noteworthy companies in his career. From February 2013 to December 2015, Davis served as President of Chaikin Analytics, a stock trading idea platform named one of “Two Top Websites for Quantitative Analysis” by Barron’s. There, he was responsible for all day to day aspects of running the company, from sales and marketing to product development and operations. Next, Davis served as Chief Operating Officer of Weiss Analytics from April 2016 to October 2017, a home price analytics company that produces house specific home price indexes, among other things.

Steven Streit, Director

Steven Streit joined our Company as a director in March 2020. In addition to serving as a director of our Company, Steven is a Founder and General Partner of SWS Venture Capital, the Founder and Chief Executive Officer of Green Dot Corporation and the Founder and Chairman of Green Dot Bank. Steve began Green Dot in 1999 and invented the prepaid debit card industry, bringing the first reloadable prepaid debit card to retail stores nearly 20 years ago. Since those early days, Green Dot has grown from a start-up that began at a table in Steve’s bedroom into a financial technology leader with multiple products, services, and millions of customers—including its revolutionary Banking as a Service cloud-based platform. Additionally, Steve serves on the board of the Federal Reserve Bank of San Francisco’s Los Angeles branch, has been named a two-time EY entrepreneur of the Year and is ranked among Bank Innovation’s 10 Most Innovative CEO’s in Banking. Through his family charity, Patti’s Way, a 501(c)(3) charitable foundation, Steve advocates for, and provides grants to children and their single parent or guardian who apply at PattisWay.org.

For the fiscal year ended December 31, 2019, we paid Ryan Belanger-Saleh, our sole director at the time, $80,000. None of this compensation was for his services as a director of the Company.

Other than cash compensation, no other compensation was provided to the executive officers of the Company for their services to the Company in such capacities. In addition, no directors of the Company have received compensation from the Company for their services as directors of the Company.

Stock Option Plan

In 2019, the Board of Directors adopted the Gatsby Digital, Inc. 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of equity awards to eligible award recipients, including stock options, restricted stock, stock appreciation rights, and restricted stock units to purchase shares of common stock. Up to 1,123,050 shares of common stock were initially authorized under the 2019 Plan. In 2020, the number of authorized shares available under the plan was increased to 2,623,050. The 2019 Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board. Grants under the plan vest 1/48^th monthly, with a 1 year cliff. There is no performance bonuses for the Company’s equity incentive options. The Board determines the amount of grants under the 2019 Plan on a case by case basis.

Other than set forth above, there is no proposed compensation to be made in the future pursuant to any ongoing plan or arrangement to the officers or directors of the Company.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets out, as of July 31, 2020, the voting securities of the Company that are owned by executive officers and directors, and other persons holding more than 10% of any class of the Company’s voting securities, or having the right to acquire those securities. The Company’s voting securities include all shares of the Company’s Common Stock, Series Seed Preferred Stock, and Series A Preferred Stock.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

During 2019 and 2018, the Company entered into a series of convertible note agreements with third parties and related parties totaling $1,964,630 and $375,000, respectively. A principal amount of $376,790 was issued via the Online Platform affiliated with SI Securities, LLC, which acted as a funding intermediary for a portion of this offering. In connection with the offering, the Company issued SI Securities, LLC a convertible note with a principal amount of $18,839.50 as compensation for placement agent services. In March 2020, all convertible notes issued by the Company (totaling approximately $2,430,000 in principal and interest) converted into Series Seed Preferred Stock, resulting in the issuance of 9,638,093 shares of Series Seed Preferred Stock of the Company. As a result of the conversion, the note held by SI Securities, LLC converted into 70,377 shares of Series Seed Preferred Stock.

The Company issued a convertible promissory note to a greater than 10% holder of the Company’s Common Stock on December 13, 2018, in the principal amount of $25,000. The note accrued interest at 6% per annum. On March 31, 2020, the note converted into 196,683 shares of the Company’s Series Seed Preferred Stock.

On March 1, 2018, the Company assumed $20,000 in SAFE agreements from a related party entity (a predecessor LLC of the Company that has been dissolved). These were two SAFE Agreements – one with a greater than 10% holder of the Company’s Common Stock ($10,000 in principal) and one with a director of the Company. In March 2020, these in SAFE agreements converted into Series Seed Preferred Stock of the Company, resulting in the issuance of 43,478 shares.

SECURITIES BEING OFFERED

General

The Company is offering shares of Series A Preferred Stock in this offering. The Series A Preferred Stock may be converted into shares of the Common Stock of the Company at the discretion of each investor, or automatically upon the occurrence of certain events, like an initial public offering. The Company is qualifying up to 5,434,782 shares of Series A Preferred Stock, convertible into an additional 5,434,782 shares of Common Stock, under the Offering Statement of which this Offering Circular is a part.

The following description summarizes the most important terms of the Company’s capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of Gatsby’s Amended and Restated Certificate of Incorporation and bylaws, copies of which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of Gatsby’s capital stock, you should refer to the Amended and Restated Certificate of Incorporation and bylaws of the Company and to the applicable provisions of Delaware law.

The authorized capital stock of the Company consists of 26,800,000 shares of Common Stock, par value $0.00001 per share, and 23,669,565 shares of Preferred Stock, par value $0.00001 of which 10,869,565 shares is designated as Series A Preferred Stock 12,800,000 is designated as Series Seed Preferred Stock.

As of July 31, 2020, the outstanding shares of the Company included:

Common Stock

Voting Rights

Each holder of the Company’s Common Stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors.

Dividend Rights

Holders of Common Stock are entitled to receive dividends, as may be declared from time to time by the Board of Directors out of legally available funds as detailed in the Company’s Amended and Restated Certificate of Incorporation. The Company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Liquidation Rights

In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of the Common Stock are entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all debts and other liabilities of the Company. Holders of the Series A Preferred Stock and Series Seed Preferred Stock are entitled to a liquidation preference that is senior to holders of the Common Stock, and therefore would receive dividends and liquidation assets prior to the holders of the Common Stock.

Preferred Stock

Series A Preferred Stock

Voting Rights

Each holder of Series A Preferred Stock will be entitled to one vote for each share of Common Stock into which such share of Series A Preferred Stock could be converted. In addition, pursuant to the investors’ rights agreement to be executed by investors in this offering, and to which holders of the Series Seed Preferred Stock are a party, holders of Series A Preferred Stock agree to vote for two (2) directors designated by the founders of the Company, Ryan Belanger-Saleh and/or Jeff Myers, and one (1) director designated by SWS Holding Company, LLC, so long as it holds at least 7.5% of the outstanding shares of the Company’s Series Seed Preferred Stock.

Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series A Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward).

Additionally, the holders of the Series A Preferred Stock are entitled to certain protective provisions that require the Company to obtain the written consent or affirmative vote of a majority of the outstanding shares of Series A Preferred Stock prior to effecting certain corporate actions, comprised of the following:

On any matter submitted to the preferred stockholders for a vote, the holders of the Series A Preferred Series will vote together with the Seed Preferred Stock as a single class, including the election of directors. As a result, any such vote will be controlled by the Seed Preferred Stockholders, as there are 11,651,963 shares of Series Seed Preferred Stock outstanding as of the date of this offering circular, and a maximum of 5,434,782 shares of Series A Preferred Stock will be outstanding at the termination of this offering.

In addition, pursuant to the investors’ rights agreement, investors will grant the Chief Executive Officer of the Company a proxy to vote all of such investor’s shares of stock on behalf of such investor if such investor fails to vote or attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of the agreement, and does not cure such inconsistency within 10 days.

Dividend Rights

Holders of Series A Preferred Stock will be entitled to receive dividends as may be declared from time to time by the Board of Directors out of legally available funds of the Company. The Company may not pay dividends on shares of Common Stock unless the holders of Series A Preferred Stock and Series Seed Preferred Stock first, or simultaneously, receive dividends on each share of Series A Preferred Stock and Series Seed Preferred Stock held by such holder. The Company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future.

Conversion Rights

Shares of Series A Preferred Stock will be convertible, at the option of the holder, at any time, unless earlier automatically converted as described below, into fully paid and nonassessable shares of the Company’s Common Stock at the then-applicable conversion rate. The conversion rate is determined by dividing the Series A Original Issue Price by the Conversion Price. The “Series A Original Issue Price” shall mean $0.92 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock, as described below. The “Conversion Price” for the Series A Preferred Stock shall initially mean the Series A Original Issue Price, subject to adjustment. The conversion rate is subject to adjustment in the event of stock splits, reverse stock splits or the issuance of a dividend or other distribution payable in additional shares of Common Stock, as described below.

Additionally, each share of Series A Preferred Stock will automatically convert into Common Stock:

In either of these events, the shares will convert in the same manner as a voluntary conversion.

The Conversion Price of the Series A Preferred Stock may be adjusted pursuant to the terms of our Amended and Restated Certificate of Incorporation in a number of scenarios. Such scenarios include:

The foregoing information is qualified entirely by the terms of the Amended and Restated Certificate of Incorporation of the Company, filed as Exhibit 2.1 to our offering statement of which this offering circular forms a part.

Right to Receive Liquidation Distributions

In the event of a liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, or certain other events (each a “Deemed Liquidation Event”) such as the sale or merger of the Company, all holders of Series A Preferred Stock and will be entitled to a liquidation preference that is senior to holders of the Common Stock. Holders of Series A Preferred Stock will receive a liquidation preference equal to the greater of (a) the Series A Original Issue Price (as defined above) for such share of Series A Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event (the “Series A Liquidation Amount”).

If, upon such liquidation, dissolution, or winding up or Deemed Liquidation Event, the assets (or the consideration received in a transaction) that are distributable to the holders of Series A Preferred Stock are insufficient to permit the payment to such holders of the full amount of their respective liquidation preference, then all of such funds will be distributed ratably among the holders of the Series A Preferred Stock in proportion to the full amounts to which they would otherwise be entitled to receive.

After the payment of the full liquidation preference of the Series A Preferred Stock, the remaining assets of the Company legally available for distribution (or the consideration received in a transaction), if any, will be distributed ratably to the holders of the Common Stock in proportion to the number of shares of Common Stock held by each such holder.

Drag Along Right

Investors in this offering will execute an investors’ rights agreement that contains a “drag-along provision” related to the sale of the Company. Investors who purchase Series A Preferred Stock (or who hold Common Stock into which the Series A Preferred Stock may convert) agree that, if the board of directors and the majority of the holders of the Company’s Preferred Stock vote in favor of a sale of the Company, then such holders of Series A Preferred Stock will vote in favor of the transaction if such vote is solicited, refrain from exercising dissenters’ rights with respect to such sale of the Company and deliver any documentation or take other actions reasonably requested by the Company or the other holders in connection with the sale.

Information Rights

The Company also agrees in the investors’ rights agreement to grant certain information rights to investors in this offering, including: (1) annual unaudited financial statements for each fiscal year of the Company, including an unaudited balance sheet as of the end of such fiscal year, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices; and (2) quarterly unaudited financial statements for each fiscal quarter of the Company (except the last quarter of the Company’s fiscal year), including an unaudited balance sheet as of the end of such fiscal quarter, an unaudited income statement, and an unaudited statement of cash flows, all prepared in accordance with generally accepted accounting principles and practices, subject to changes resulting from normal year-end audit adjustments. If the Company has audited records of any of the foregoing, it will provide those in lieu of the unaudited versions.

Restrictions on Transfer - Market Stand Off

Pursuant to the investors’ rights agreement, holders of the Series A Preferred Stock agree not to, sell or otherwise transfer or dispose of any capital stock of the Company owned by such holder for up to one hundred eighty (180) days following the effective date of any registration statement of the Company filed under the Securities Act relating to the registration by the Company for its own behalf of shares of its Common Stock or other equity securities on a registration statement on Form S-1 or S-3. Investors agree to execute any agreements as may be reasonably requested by the underwriters of the IPO to effect the market stand-off.

Series Seed Preferred Stock

The terms of the Series Seed Preferred Stock and Series A Preferred Stock are substantially the same. The following description of the Series Seed Preferred Stock is only intended to highlight terms of the Series Seed Preferred Stock that differ from the Series A Preferred Stock. Unless otherwise noted below, the terms of the Series Seed Preferred Stock are identical to the terms of the Series A Preferred Stock laid out above.

Voting Rights

Identical to Series A Preferred Stock. Series Seed Preferred stockholders are also party to the investors’ rights agreement.

Dividend Rights

Identical to Series A Preferred Stock.

Conversion Rights

Identical to Series A Preferred Stock, except that the “Original Issue Price” for the Series Seed Preferred Stock shall mean $0.46.

Right to Receive Liquidation Distributions

The Series Seed Preferred Stock has identical rights to the Series A Preferred Stock with respect of a liquidation, dissolution or winding up of the Company, and therefore is on parity with the Series A Preferred Stock with respect to distributions outlined above.

Drag Along Right

Identical to Series A Preferred Stock.

Information Rights

Identical to Series A Preferred Stock (pursuant to the investors’ rights agreement).

Right of First Refusal

The investors’ rights agreement executed by holders of the Series Seed Preferred Stock grants “Major Investors” in our Series Seed Preferred Stock (defined as an investor holding 581,395 or more shares of Series Seed Preferred Stock) the right of first refusal to purchase Major Investor’s Pro Rata Share (as defined below) of all (or any part) of any New Securities (as defined below) that the Company may issue in the future.

A Major Investor’s “Pro Rata Share” for purposes of this right of first refusal is the ratio of (a) the number of shares of the Company’s Common Stock issued or issuable upon conversion of the shares owned by such Major Investor, to (b) a number of shares of Common Stock of the Company equal to the sum of (1) the total number of shares of Common Stock of the Company then outstanding plus (2) the total number of shares of Common Stock of the Company into which all then outstanding shares of Preferred Stock of the Company are then convertible plus (3) the number of shares of Common Stock of the Company reserved for issuance under any stock purchase and stock option plans of the Company and outstanding warrants.

“New Securities” are any Common Stock or Preferred Stock of the Company, whether now authorized or not, and rights, options or warrants to purchase such Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into such Common Stock or Preferred Stock, subject to certain exceptions. For example, “New Securities” would not include: (a) shares of Common Stock issued or issuable upon conversion of the outstanding shares of any and all series of Preferred Stock; (b) shares of Common Stock or Preferred Stock issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding as of the date of the investors’ rights agreement was signed, and any securities issuable upon the conversion thereof; (c) shares of Common Stock or Preferred Stock issued in connection with any stock split or stock dividend or similar recapitalization; (d) shares of Common Stock (or options, warrants or rights therefor) granted or issued hereafter to employees, officers, directors, contractors, or consultants of, or advisers to, the Company or any subsidiary of the Company pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts or other arrangements that are approved by the Board; (e) shares of the Company’s Series Seed Preferred Stock issued pursuant to the Series Seed Subscription Agreement; (f) any other New Securities (and/or options or warrants therefor) issued or issuable in connection with the Company’s business other than primarily for equity financing purposes and approved by the Board; and (g) shares of Common Stock issued or issuable by the Company to the public pursuant to a registration statement filed under the Securities Act.

The Company will send Major Investors, or their proxies, if applicable, a notice describing the type of New Securities and the price and the general terms upon which the it proposes to issue the New Securities. An investor will have fourteen (15) days from the date of notice, to agree to purchase a quantity of New Securities, up to their Pro Rata Share. If an investor fails to exercise in full the right of first refusal within the 15-day period, then the Company will have one hundred twenty (90) days after that to sell the New Securities with respect to which the investor’s right of first refusal was not exercised. If the Company has not issued and sold the New Securities within the 90-day period, then the Company will not issue or sell any New Securities without again first offering those New Securities to investors in accordance with the terms of the investors’ rights agreement.

The Company currently has one stockholder that would qualify as a “Major Investor”, and may exercise this right to purchase up to 10% of the shares of Series A Preferred Stock sold in this offering. As of the date of this Offering Circular, this investor has not declared his intention to exercise this right.

Restrictions on Transfer - Market Stand Off

Identical to Series A Preferred Stock.

Provisions of Note in Our Investors’ Rights Agreement

Investors in this offering will be required to enter into an investors’ rights agreement. Pursuant to this agreement, holders of our Preferred Stock agree to vote for two (2) directors designated by the founders of the Company, Ryan Belanger-Saleh and/or Jeff Myers, and one (1) director designated by SWS Holding Company, LLC, a shareholder of the Company, so long as it holds at least 7.5% of the outstanding shares of the Company’s Series Seed Preferred Stock. In addition, investors will grant the Chief Executive Officer of the Company a proxy to vote all of such investor’s shares of stock on behalf of such investor if such investor fails to vote (or attempts to vote, but does so improperly). Our investors’ rights agreement is included as Exhibit 3.1 to our offering statement of which this offering circular forms a part.

Provisions of Note in our Amended and Restated Bylaws – Restrictions on Transfer and Company’s Right of First Refusal

The Company’s Amended and Restated Bylaws contains restrictions on transfer of the capital stock of the Company, including the Series A Preferred Stock being offered by the Company.

No holder of any of the shares of stock of the Company may sell, transfer, assign, pledge, or otherwise dispose of any of the shares of stock of the Company without the prior written consent of the Company. The company may withhold consent for any legitimate corporate purpose, as determined by the Board of Directors. Examples of the basis for the Company to withhold its consent include a proposed sale or transfer to a potential competitor of the Company, or if such sale or transfer increases the risk of the Company having a class of security held of record by 2,000 or more persons, or 500 or more persons who are not accredited investors (as such term is defined by the SEC).

If a stockholder desires to transfer any shares, then the stockholder must first give written notice to the Company. The notice must name the proposed transferee and state the number of shares to be transferred, the proposed consideration, and all other terms and conditions of the proposed transfer. Any shares proposed to be transferred will first be subject to the Company’s right of first refusal, whereby for 30 days following receipt of such notice, the Company has the option to purchase up to all the shares specified in the notice at the price and upon the terms set forth in such notice. In the event the Company does not elect to acquire any or all of the shares specified in the transferring stockholder’s notice, the transferring stockholder may, subject to the Company’s approval, transfer the shares as originally intended within 60 days following the expiration of the 30 day notice period, or from the date the Company informs the stockholder that it does not intend to exercise its right of first refusal. There are certain exemptions, however. A stockholder’s transfer of less than 1,000,000 shares of the Company’s Preferred Stock, transfers to affiliates of the stockholder (if stockholder is an entity), and a transfer of stock from one custodian to another, provided there is no change to the underlying beneficial owner of the shares, are each transactions that are exempt from the right of first refusal laid out above.

GATSBY DIGITAL, INC.

GATSBY DIGITAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019 AND 2018 AND FOR THE YEAR ENDED

DECEMBER 31, 2019 AND THE PERIOD FROM INCEPTION (FEBRUARY 8, 2018) TO DECEMBER 31, 2018

GATSBY DIGITAL, INC.

Index to Consolidated Financial Statements

INDEPENDENT AUDITORS’ REPORT 

To the Board of Directors and Management
of Gatsby Digital, Inc.

We have audited the accompanying consolidated financial statements of Gatsby Digital, Inc. and subsidiaries (“the Company”), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year ended December 31, 2019 and period from February 8, 2018 (inception) to December 31, 2018, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses from inception and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our conclusion is not modified with respect to this matter.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the year ended December 31, 2019 and period from February 8, 2018 (inception) to December 31, 2018 in accordance with accounting principles generally accepted in the United States of America.

/s/ Fruci & Associates II, PLLC

Spokane, Washington

July 21, 2020

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

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

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

The accompanying notes are an integral part of these Consolidated Financial Statements.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – NATURE OF OPERATIONS

Gatsby Digital, Inc., was formed on February 8, 2018 (“Inception”) in the State of Delaware.   The consolidated financial statements of Gatsby Digital, Inc., (which may be referred to as the “Company”, “we,” “us,” or “our” or “Gatsby”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s headquarters are located in New York, New York.

Gatsby has built a mobile application to facilitate zero-commission options trading for new and experienced options traders alike. Gatsby cuts through the jargon and makes options trading simple, social and free.

Management Plans

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred losses from operations and has net cash used in operations since Inception. The Company will require additional capital until revenue from operations are sufficient to cover operational costs. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

During the next 12 months, the Company intends to fund operations through the commencement of revenue generating activities and debt and/or equity financing, including a proposed Regulation A offering and a Regulation D offering described in Note 6. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If it is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its planned operations, which could harm its business, financial condition, and operating results. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform to U.S. GAAP. The consolidated financial statements include the accounts of Gatsby Securities, LLC, a wholly-owned subsidy. All significant intercompany accounts and transactions are eliminated upon consolidation.

Use of Estimates

The preparation of 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 expenses during the reporting periods. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

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:

 GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 2019 and 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values.

Simple Agreements for Future Equity (“SAFEs”) are considered a level 3 liability as there are no observable direct or indirect inputs. Based on management’s estimates as of December 31, 2019 and 2018, the fair value of these instruments is considered to be the carrying value. Management’s estimates are based on the fact that market circumstances have not changed materially since the instruments were originated. Accordingly, there has been no change in valuation during the periods presented.

Risks and Uncertainties

The Company has a limited operating history and has not generated revenue from intended operations. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: changes in technology, competition from larger more well-funded competitors, regulations governing securities trading, and the ability to maintain compliance within a heavily regulated industry. These adverse conditions could affect the Company’s financial condition and the results of its operations.

On January 30, 2019 the World Health Organization declared the COVID-19 coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial effect will be to the company, to date, there has been little disruption to the Company’s operations. The Company is actively monitoring the situation and how it affects the markets in which the Company operates.

Cash and Cash Equivalents

The Company considers all short-term, highly liquid, unrestricted investments with original maturities of three months or less, to be cash equivalents.

Internal Use Software

We incur software development costs to develop software programs to be used solely to meet our internal needs and cloud-based applications used to deliver our services. In accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software, we capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, the software will be used to perform the function intended, and the value will be recoverable. Reengineering costs, minor modifications and enhancements that do not significantly improve the overall functionality of the software are expensed as incurred. The Company has not capitalized any such costs to date.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Long-Lived Assets

The Company reviews its long-lived assets in accordance with Accounting Standards Codification (“ASC”) 360-10-35, Impairment or Disposal of Long-Lived Assets. Under that directive, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Such group is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such factors and circumstances exist, the projected undiscounted future cash flows associated with the related asset or group of assets over their estimated useful lives are compared against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made.

Offering Costs

The Company accounts for offering costs in accordance with Accounting Standards Codification (“ASC”) 340, Other Assets and Deferred Costs. Prior to the completion of an offering, offering costs are capitalized as deferred. The deferred offering costs are netted against the proceeds of the offering in the consolidated statements of changes in stockholders’ deficit or the related debt, as applicable. No costs are capitalized as of December 31, 2019 or 2018.

Accounting for Convertible Notes and Securities with Beneficial Conversion Features

The Company reviews the terms of convertible debt and equity instruments it issues to determine whether there are derivative financial instruments, including an embedded conversion option that is required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where a host instrument contains more than one embedded derivative instrument, including a conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue freestanding warrants that may, depending on their terms, be accounted for as derivative liabilities rather than as equity.

The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the effective interest method.

Simple Agreements for Future Equity (“SAFEs”)

The Company has issued several Simple Agreements for Future Equity (“SAFEs”). These funds have been classified as long-term liabilities. (See Note 3.)

The Company has accounted for its SAFEs as derivative liabilities under the FASB’s ASC section 815-40 and ASC section 815-10. If any changes in the fair value of the SAFEs occur, the Company will record such changes through earnings, under the guidance prescribed by ASC 825-10.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The Company will recognize revenue in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (ASC”) Topic 606, Revenue from Contracts with Customers. The amount of revenue recognized will reflect the consideration to which the Company expects to be entitled to receive in exchange for these goods and services, using the five-step method required by ASC 606 by identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations in the contract, and recognizing revenue when (or as) the Company satisfies a performance obligation. The Company adopted this standard at the beginning of fiscal year 2019, with no material impact to its financial position or results of operations, using the modified retrospective method. To date, the Company has not generated revenue from intended operations.

Research and Development

The Company incurs research and development costs during the process of researching and developing its technologies and future product offerings. Research and development costs consist primarily non-capitalizable costs associated with the Company’s application as well as costs incurred during the testing of the Company’s application. These costs are expensed as incurred until the resulting product has been completed, tested, and made ready for commercial use. Research and development costs expensed were $292,431 and $85,843 for the year ended December 31, 2019 and the period from Inception to December 31, 2018, respectively.

Stock-Based Compensation

The Company accounts for stock awards issued under ASC 718, Compensation – Stock Compensation. Under ASC 718, stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award. Stock-based compensation is recognized as expense over the employee’s requisite vesting period and over the nonemployee’s period of providing goods or services. The fair value of each stock option or warrant award is estimated on the date of grant using the Black-Scholes option valuation model. Restricted shares are measured based on the fair market value of the underlying stock on the grant date.

Income Taxes

The Company applies ASC 740 Income Taxes (“ASC 740”).  Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their 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.

The Company’s net deferred tax asset at December 31, 2019 and 2018 was approximately $306,000 and 33,000, respectively, which primarily consists of net operating loss carry forwards. As of December 31, 2019 and 2018, the Company provided a 100% valuation allowance against the net deferred tax assets, which management could not determine, would more likely than not be realized. During the years ended December 31, 2019 and 2018, the Company recorded an increase to the valuation allowance for approximately $273,000 and $33,000, respectively.

At December 31, 2019, the Company had federal and state net operating loss carry forwards of approximately $1,111,000. The federal and state net operating losses expire on various dates through 2039.

At December 31, 2019, the applicable federal and state rates used in calculating the deferred tax provision was 21% and 6.5%, respectively. The difference between the effective tax rate and the stated tax rate is primarily due to a full valuation allowance on the net deferred tax assets.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is subject to tax in the United States (“U.S.”) and files tax returns in the U.S. Federal jurisdiction and New York state jurisdiction.  The Company is subject to U.S. Federal, state and local income tax examinations by tax authorities for all periods since Inception.  The Company currently is not under examination by any tax authority for the last three years. The Company has filed its tax returns through 2019.

Loss per Common Share

The Company presents basic loss per share (“EPS”) and diluted EPS on the face of the consolidated statements of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. For periods in which we incur a net loss, the effects of potentially dilutive securities would be antidilutive and would be excluded from diluted EPS calculations. For the years ended December 31, 2019 and 2018, there were 1,376,554 and 0 options or warrants excluded, respectively. The Company also has convertible debt and Simple Agreements for Future Equity outstanding, for which the ultimate number of shares for which these instruments will convert into is unknown.

Concentration of Credit Risk

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be creditworthy.  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.

New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of consolidated financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, Topic 842 expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes several practical expedients. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021 for emerging growth companies, with early adoption permitted. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company at the current time.

In June 2016, the FASB issued authoritative guidance regarding Financial Instruments - Credit Losses and has subsequently modified several areas of the standard in order to provide additional clarity and improvements. The new standard requires entities to use a current expected credit loss impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost within the scope of the standard. The entity’s estimate would consider relevant information about past events, current condition and reasonably and supportable forecasts, which all result in recognition of lifetime expected credit losses. The Company is evaluating the impact of adopting the new standard to its financial statement and does not expect a material impact.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions in existing guidance and improves consistency in application by clarifying and amending existing guidance. This guidance is effective for annual periods beginning after December 15, 2020, and interim periods within those annual periods, where the transition method varies depending upon the specific amendment. Early adoption is permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period, and all amendments must be adopted in the same period. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company.

The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

NOTE 3 – DEBT AND OTHER LIABILITIES

Convertible Debts

During 2019 and 2018, to fund operations the Company entered into a series of contingently convertible note agreements with third parties and related parties totaling $1,964,630 and $375,000, respectively.

The 2018 convertible notes (“2018 Notes”) bear interest between 5% and 6%, contains both optional and automatic conversion features, do not allow for prepayment and mature between March and December of 2020. An automatic conversion can be triggered upon a qualified financing, defined as a transaction or series of transactions in which the Company sells Preferred Stock for aggregate proceeds of at least $250,000. In such instance the notes and interest thereon are convertible at the lesser of: 1) 80% (20% discount) of the price paid per share of the preferred stock in the qualified offering and 2) the price equal to the quotient of $3,000,000 divided by the total number of outstanding shares of the Company immediately prior to the qualified financing on a fully diluted basis. If a qualified financing does not occur prior to the maturity date, then at the option of the holder, the note shall be converted into shares of common stock equal to the quotient of $2,000,000 divided by the aggregate number of outstanding shares of the company’s common stock on a fully diluted basis on the election date. Of the 2018 Notes, $25,000 is held by a related party.

The 2019 convertible notes (“2019 Notes”) bear interest of 4%, contain both optional and automatic conversion features, do not allow for prepayment and mature between April and August of 2021. An automatic conversion can be triggered upon a qualified financing, defined as a transaction or series of transactions in which the Company sells Preferred Stock for aggregate proceeds of at least $750,000. In such instance the notes and interest thereon are convertible at the lesser of: 1) 100% of the price paid per share of the preferred stock in the qualified offering and 2) the price equal to the quotient of $6,000,000 divided by the total number of outstanding shares of the Company immediately prior to the qualified financing on a fully diluted basis. The holders of the majority of notes in the series, have the option to convert at the same term as above, if the Company sells Preferred Stock in a financing that is not a qualified financing.

Of the 2019 Notes, $64,000 was for the exchange of advisory services, whereby no cash was received, and $57,099 was for commissions due an intermediary funding platform for assisting in raising the 2019 Notes. The 2019 Notes related to advisory services were for services to be rendered over twelve months following the note date. The value of these notes was recorded as a prepaid and are being amortized over the service period. Accordingly, $26,652 was expensed to general and administrative during 2019 and $37,348 remains in prepaid expenses and other current assets in the accompanying balance sheet as of December 31, 2019. The $57,099 issued to the intermediary funding platform is considered a cost of capital and is being accreted up over the life of the note. During 2019, $9,516 of the discount was amortized with $47,583 remaining to be amortized through 2021.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The 2018 Notes and 2019 Notes are presented as long-term liabilities as they were converted into Series Seed Preferred Stock subsequent to December 31, 2019 as disclosed in Note 6.

Stated interest expense related to these notes for the years ended December 31, 2019 and 2018 was $61,377 and $5,825, respectively. In 2019, additional interest expense of $9,516 was recognized related to the accretion of discounts.

Simple Agreements for Future Equity

On March 1, 2018, the Company assumed $20,000 in SAFE agreements from a related party entity, the proceeds of which were used to commence the Company’s operations. The SAFE’s originated from two related parties.

Under the SAFEs, the funds contributed by the investors will convert to shares of preferred stock in a qualified priced preferred stock financing round of over $250,000, at 100% of the preferred round price.

While the SAFEs remain outstanding, if there is a liquidity event, as defined by the agreements, before expiration or termination of the instrument, the investor will, at its option, either receive a cash payment equal to the purchase amount or automatically receive from the Company a number of shares of common stock equal to the purchase amount divided by the liquidity price if the cash option is not selected.

If the Company dissolves or ceases operations, the SAFE holders, as a class, will have a preferential right to receive cash, up to the amount of their original investments, to the extent such funds are available to be paid. Cash payments to SAFE investors in this situation would hold a preferential position to payments to the holders of Common Stock.

As of December 31, 2019 and 2018, there has not been any priced round of preferred stock financing that would trigger a conversion of the SAFE funds to preferred stock. The SAFEs are marked-to-market each reporting period as described in Note 2. As of December 31, 2019 and 2018, management has determined that the carrying value is considered the fair value as there are no indications that the value has changed.

In 2020, the SAFE’s converted to Series Seed Preferred Stock as described in Note 6.

NOTE 4 – COMMITMENTS AND CONTINGENCIES

Contractual Obligations

In 2019, the Company entered into an agreement with a third-party Broker/Dealer to act as the Broker/Dealer for the purchase and sale of various securities as specified by the agreement. The agreement has an indefinite life, but can be terminated with 90-day notice. The agreement calls for monthly payments for the greater of $15,000 or the aggregate transaction costs based on the terms specified in the agreement. The agreement also called for a $120,000 deposit which is refundable 30 days after the termination of the agreement, which is included in Other Assets within the accompanying consolidated balance sheet.

Lease

In July 2019, the Company entered into a one-year lease for office space for monthly rent of $2,470. Upon expiration in 2020, the Company renewed the one-year lease with the same terms. Rent expense for the year ended December 31, 2019 was $16,290. There was no rent expense during 2018.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cancelled Purchase Agreement

In 2019, the Company entered into an agreement to purchase a third-party broker dealer entity. Under the terms of the agreement, the Company had 30 days to exercise its right to unwind the transactions. Such right was exercised within the specified time period. Prior to cancelling the purchase agreement, the Company had advanced the acquisition target approximately $31,500 for professional and legal services to assist in consummating the transaction. These advances were forgiven up the agreement’s cancelation. As the nature of these advances were related to professional fees procured for the purpose of effectuating this transaction, the amounts advanced were included in general and administrative in the accompanying statements of operations.

Litigation

The Company is not currently involved with, and does not know of any, pending or threatened litigation against the Company or any of its officers.

NOTE 5 – STOCKHOLDERS’ EQUITY

Capital Stock

Upon Inception, the Company authorized the issuance of 10,000,000 shares of common stock with $0.00001 par value.

In March 2020, the Company authorized an increase to 26,800,000 shares of common stock, $0.00001 par value and 12,800,000 shares of Preferred Stock, $0.00001 par value. All of the Preferred Stock authorized was designated Series Seed Preferred Stock. Preferred stock maintains liquidation preferences at the Series Seed original issue price, prior to common stock and are convertible at any time into common stock at the conversion price or automatically converted upon a firm-commitment underwritten public offering.

Upon Inception, the Company issued 10,000,000 Common shares to its founders for $0.00001 per share. Of these, 1,330,000 was returned to the Company in 2019 for no consideration; and was issued to a service provider as described below.

Shares Issued for Cash

During the year ended December 31, 2018, the Company sold 638,298 shares of common stock for gross proceeds of $20,000.

Shares Issued for Services

During the years ended December 31, 2019 and 2018, the Company issued 1,330,000 and 107,450 shares of common stock for services, recognizing stock-based compensation of $2,660, and $107, respectively. Compensation expense related to these issuances was based on managements estimated fair value of the Company’s common stock at the time of issuance.

Stock Options

In 2019, the Board of Directors adopted the Gatsby Digital, Inc. 2019 Equity Incentive Plan (the “2019 Plan”). The 2019 Plan provides for the grant of equity awards to eligible award recipients, including stock options, restricted stock, stock appreciation rights, and restricted stock units to purchase shares of common stock. Up to 1,123,050 shares of common stock were initially authorized under the 2019 Plan. In 2020, the number of authorized shares was increased to 2,623,050. The 2019 Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2019 the board of directors approved the grant of 1,146,554 stock options to various contractors and employees. The 2019 granted options had an exercise prices $0.002, expire in ten years, and had vesting periods ranging from immediate vesting to four years.

The total grant date fair value of options granted in 2019 was $1,040.

A summary of our stock option activity for the year ended December 31, 2019, is as follows:

Stock-based compensation expense for stock options for the years ended December 31, 2019 and 2018 was $659 and $0, respectively.

As of December 31, 2019, the total estimated remaining stock-based compensation expense for unvested stock options is $381 which is expected to be recognized over a weighted average period of 3.5 years.

The Company estimates the fair value of stock options that contain service and/or performance conditions using the Black-Scholes option pricing model. The range of input assumptions used by the Company were as follows:

The Company recognizes stock option forfeitures as they occur. The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s stock options.

The expected term of stock options is calculated using the simplified method which takes into consideration the contractual life and vesting terms of the options.

The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public company’s common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future stock option grants, until such time that the Company’s common stock has enough market history to use historical volatility.

GATSBY DIGITAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The dividend yield assumption for options granted is based on the Company’s history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.  

Warrants

In 2019, the Company granted 230,000 warrants to a service provider. The exercise price was $0.01 and is exercisable at the latter of six months following the termination of the agreement or five years. The Company valued the warrants using a Black-Scholes option pricing model using similar inputs to those described for stock options above. The value of the warrants was determined to be negligible.

NOTE 6 – SUBSEQUENT EVENTS

See Note 5 for changes to authorized common and preferred shares.

In March 2020, the 2018 Notes and 2019 Notes totaling approximately $2,340,000 and interest thereon, converted into Series Seed Preferred Stock, resulting in the issuance of 9,638,093 shares.

In March 2020, the SAFEs totaling $20,000 converted into Series Seed Preferred Stock, resulting in the issuance of 43,478 shares.

Starting in March 2020, the Company commenced a Regulation D offering for the sale of Series Seed Preferred Stock. The Company has raised approximately $670,000 through the sale of 1,673,928 shares of Series Seed Preferred Stock. In connection with the offering, the Company also issued 79,072 shares of Series Seed Preferred Stock to a funding intermediary.

The Company has evaluated subsequent events that occurred after December 31, 2019 through July 21, 2020, the issuance date of these consolidated financial statements, and noted no additional events for disclosure.

PART III

INDEX TO EXHIBITS

*Previously filed

**To be filed by amendment

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York City, State of New York, on, September 11, 2020.

Exhibit 1.2

SI SECURITIES, LLC

AMENDMENT TO ISSUER AGREEMENT

THIS AMENDMENT LETTER (the “Letter”) is entered into as of ________ (the “Effective Date”) by and among Gatsby Digital, Inc. (the “Company”) and SI Securities, LLC (“SI Securities”, and together with Company, the “Parties”).

WHEREAS, the Parties entered into that certain Issuer Agreement (the “Agreement”) dated May 29, 2020 regarding Company’s proposed Offering of Securities.

WHEREAS, the Parties hereby wish to amend the Agreement pursuant to the terms written below.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the sufficiency of which are hereby acknowledged, the Parties agree as follows:

AMENDMENT TO ISSUER AGREEMENT

For a period of twelve (12) months following the Termination Date, Company agrees that it shall provide SI Securities at least 30 days prior written notice of any proposed future offering of Securities made pursuant to Regulation A (the “Future Offering”), and therein shall provide SI Securities the opportunity to serve as Company’s exclusive placement agent in connection with such Future Offering in accordance with the terms set forth in Exhibit A attached herein (the “Right of First Refusal”). The Company shall not be required to provide SI Securities with a Right of First Refusal if the Company exercised its right to terminate this Agreement “for cause”. For the avoidance of doubt, “for cause” termination shall include termination due to any material failure by SI Securities to provide the services contemplated herein. The Company will not be required to retain SI Securities and will not be bound to any fees if, within twelve (12) months of the Termination Date, if it decides to proceed with a capital raise under Regulation D solely from institutional and accredited investors, instead of through Regulation A. However, if SI Securities chooses not to serve as Company’s placement agent for a Future Offering, in its sole discretion, this Agreement shall automatically terminate.

[Signature Pages Follow]

IN WITNESS WHEREOF, the Parties hereto have executed this Letter as of the date first above written.

Company: Gatsby Digital, Inc.

SI Securities, LLC

Exhibit 2.1

GATSBY DIGITAL, INC.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)

Gatsby Digital, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), does hereby certify as follows.

1.             The name of this corporation is Gatsby Digital, Inc. and that this corporation was originally incorporated pursuant to the General Corporation Law on February 8, 2018 under the name Gatsby Digital, Inc.

2.             The Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows.

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as set forth on Exhibit A attached hereto and incorporated herein by this reference.

3.             Exhibit A referred to above is attached hereto as Exhibit A and is hereby incorporated herein by this reference. This Amended and Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

4.             This Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this __ day of July, 2020.

Exhibit A

GATSBY DIGITAL, INC.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I: NAME.

The name of this corporation is Gatsby Digital, Inc. (the “Corporation”).

ARTICLE II: REGISTERED OFFICE.

The address of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle, Zip Code 19808. The name of its registered agent at such address is The Company Corporation.

ARTICLE III: DEFINITIONS.

As used in this Restated Certificate (the “Restated Certificate”), the following terms have the meanings set forth below:

“Requisite Holders” means the holders of at least a majority of the outstanding shares of Preferred Stock (voting as a single class on an as-converted basis).

“Series A Original Issue Price” means $0.92 per share for the Series A Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock.

“Series Seed Original Issue Price” means $0.46 per share for the Series Seed Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series Seed Preferred Stock.

ARTICLE IV: PURPOSE.

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

ARTICLE V: AUTHORIZED SHARES; RIGHTS OF CLASSES AND SERIES OF STOCK

The total number of shares of all classes of stock which the Corporation shall have authority to issue is (a) 39,579,565 shares of Common Stock, with a par value of $0.00001 per share (“Common Stock”), and (b) 23,669,565 shares of Preferred Stock, with a par value of $0.00001 per share (“Preferred Stock”). The Preferred Stock may be issued from time to time in one or more series, each of such series to consist of such number of shares and to have such terms, rights, powers and preferences, and the qualifications and limitations with respect thereto, as stated or expressed herein. 12,800,000 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series Seed Preferred Stock” and 10,869,565 shares of Preferred Stock are hereby designated “Series A Preferred Stock.”

The following is a statement of the voting powers, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation.

A.            COMMON STOCK

1.            General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and privileges of the holders of the Preferred Stock set forth herein.

2.             Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). Unless required by law, there shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Restated Certificate) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.

The following rights, powers and privileges, and restrictions, qualifications and limitations, shall apply to the Preferred Stock. Unless otherwise indicated, references to “Sections” in this Part B of this Article V refer to sections of this Part B of this Article V.

1.             Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

1.1          Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, (i) the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets of the Corporation available for distribution to its stockholders, an amount per share equal to the greater of (a) the Series Seed Original Issue Price for such share of Series Seed Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of Series Seed Preferred Stock been converted into Common Stock pursuant to Section 3 immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event (the “Series Seed Liquidation Amount”); and (ii) the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets of the Corporation available for distribution to its stockholders, an amount per share equal to the greater of (a) the Series A Original Issue Price for such share of Series A Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 3 immediately prior to such liquidation, dissolution or winding up or Deemed Liquidation Event (the “Series A Liquidation Amount”). If upon any such liquidation, dissolution or winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Preferred Stock the full amount to which they are entitled under this Section 1.1, the holders of shares of Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

1.2           Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock as provided in Section 1.1 and the holders of any other shares of Preferred Stock of a different series, the remaining funds and assets available for distribution to the stockholders of the Corporation shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares of Common Stock held by each such holder.

1.3           Deemed Liquidation Events.

1.3.1           Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least a majority of the outstanding shares of Preferred Stock (voting as a single class on an as-converted basis) (the “Requisite Holders”), elect otherwise by written notice sent to the Corporation at least five (5) days prior to the effective date of any such event:

(a)               a merger or consolidation in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for equity securities that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such merger or consolidation, the parent of such surviving or resulting party; provided that, for the purpose of this Section 1.3.1, all shares of Common Stock issuable upon exercise of options outstanding immediately prior to such merger or consolidation and immediately exercisable pursuant to the terms thereof, or upon conversion of any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock outstanding immediately prior to such merger or consolidation, shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, deemed to be converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged; or

(b)               the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or, if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Corporation, except where such sale, lease, transfer, exclusive license or other disposition is to the Corporation or one or more wholly owned subsidiaries of the Corporation.

1.3.2           Effecting a Deemed Liquidation Event. The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Section 1.3.1(a)(i) if the agreement or plan of merger or consolidation for such transaction would prohibit or be inconsistent with the consideration payable to the stockholders of the Corporation being allocated among the holders of capital stock of the Corporation in accordance with Section 1.1 and 1.2. In the event of a Deemed Liquidation Event referred to in Section 1.3.1(a)(ii) or 1.3.1(b), the Corporation shall within 90 days after such Deemed Liquidation Event either effect a dissolution of the Corporation under the General Corporation Law or use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold, licensed or otherwise disposed of, as determined in good faith by the Board of Directors of the Corporation (the “Board”)), together with any other assets of the Corporation legally available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), to redeem (i) all outstanding shares of Series Seed Preferred Stock at a price per share equal to the Series Seed Liquidation Amount, and (ii) all outstanding shares of Series A Preferred Stock at a price per share equal to the Series A Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall ratably redeem each holder’s shares of Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to shareholders. Prior to the distribution or redemption provided for in this Section 1.3.2, the Corporation shall not expend or dissipate the consideration received for the Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or the liquidation, dissolution and winding up of the Corporation.

1.3.3           Allocation of Escrow. In the event of a Deemed Liquidation Event pursuant to Section 1.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is placed into escrow or is payable to the Corporation subject to contingencies, the definitive agreement for such transaction shall provide that the portion of such consideration that is not placed in escrow and not subject to any contingencies (the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Section 1.1 and 1.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event and any additional consideration which becomes payable to the stockholders of the Corporation upon release from escrow or satisfaction of contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Section 1.1 and 1.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction.

1.3.4           Amount Deemed Paid or Distributed. The funds and assets deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer or other disposition described in this Section 1.3 shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board.

2.             Voting.

2.1           General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Except as provided by law or by the other provisions of this Restated Certificate, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted basis, shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation.

2.2           Election of Directors. The holders of record of the Company’s capital stock are entitled to elect directors as described in the Board Composition. Any director elected as provided in the preceding sentence may be removed without cause by the affirmative vote of the holders of the shares of the class, classes, or series of capital stock entitled to elect the director or directors, given either at a special meeting of the stockholders duly called for that purpose or pursuant to a written consent of stockholders. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class, classes, or series entitled to elect the director constitutes a quorum for the purpose of electing the director.

2.3           Preferred Stock Protective Provisions. At any time when at least 25% of the initially issued shares of Preferred Stock remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Restated Certificate) the written consent or affirmative vote of the Requisite Holders, given in writing or by vote at a meeting, consenting, or voting (as the case may be) separately as a single class:

(a)               alter or change the rights, powers or privileges of the Preferred Stock set forth in the Restated Certificate of the Corporation, as then in effect, in a way that adversely affects the Preferred Stock;

(b)              authorize or create (by reclassification or otherwise) any new class or series of capital stock having rights, powers, or privileges set forth in the Restated Certificate of the Corporation, as then in effect, that are senior to or on a parity with the Preferred Stock, or increase or decrease the number of authorized shares of any class or series of capital stock;

(c)               (A) reclassify, alter or amend any existing security of the Company that is pari passu with the Series Seed or Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series Seed Preferred in respect of any such right, preference, or privilege or (B) reclassify, alter or amend any existing security of the Corporation that is junior to the Series Seed Preferred in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series Seed Preferred in respect of any such right, preference or privilege;

(d)               issue any Series Seed Preferred Stock at a price per share that is lower than the Series Seed Original Issue Price, or any Series A Preferred Stock at a price per share that is lower than the Series A Original Issue Price;

(e)              redeem or repurchase any shares of Common Stock or Preferred Stock other than (i) redemption of shares of Common Stock pursuant to agreements with employees, officers, directors, consultants or other service providers approved by the Board in connection with cessation of employment or services or (ii) redemptions of Preferred Stock pursuant to an offer to redeem or repurchase all the shares of Preferred Stock, or an offer to redeem or repurchase the shares of Preferred Stock pro-rata as to each holder (such redemptions and repurchases being subject to the consent of each Preferred Stock Holder whose shares are being redeemed or repurchased);

(f)                declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock; or

(g)                 liquidate, dissolve, or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent, agree or commit to do any of the foregoing without conditioning such consent, agreement or commitment upon obtaining the approval required by this Section 2.3.

3.             Conversion. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

3.1           Right to Convert.

3.1.1           Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Series Seed Original Issue Price or Series A Original Issue price, as applicable, by the Conversion Price (as defined below) for the Series Seed Preferred Stock or Series A Preferred Stock in effect at the time of conversion. The “Conversion Price” for the Series Seed Preferred Stock and Series A Preferred Stock shall initially mean the Series Seed Original Issue Price or Series A Original Issue Price, respectively. Such initial Conversion Price, and the rate at which shares of the applicable series of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

3.1.2           Termination of Conversion Rights. Subject to Section 3.3.1 in the case of a Contingency Event (as defined therein), in the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the first payment of any funds and assets distributable on such event to the holders of Preferred Stock.

3.2           Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of any Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

3.3           Mechanics of Conversion.

3.3.1           Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder (a “Converting Holder”) shall deliver, at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), a written notice of conversion identifying the Converting Holder and specifying the number of shares of Preferred to be converted (the “Converting Shares”) and, if applicable, any event on which such conversion is contingent (a “Contingency Event”), and if the Converting Holder holds certificated shares of Preferred Stock, shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the foregoing office. Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, the Converting Holder shall deliver a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or such holder’s attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice (or, if later, the date on which all Contingency Events have occurred) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the Converting Shares shall be deemed to be outstanding of record as of such time. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such Converting Holder, or to such holder’s nominees, a written notice of issuance specifying the number of full shares of Common Stock issued to such Converting Holder and the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, or to such holder’s nominees, and including the information required by Section 151(f) of the General Corporation Law (each such notice, a “Notice of Issuance”), or if the shares of Common Stock are certificated, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, and (b) pay in cash such amount as provided in Section 3.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion.

3.3.2           Reservation of Shares. The Corporation shall at all times while any share of Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then-outstanding shares of the Preferred Stock, the Corporation shall use its best efforts to cause such corporate action to be taken as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Amended and Restated Certificate. Before taking any action that would cause an adjustment reducing the Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action that may, in the opinion of its counsel, be necessary so that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

3.3.3           Effect of Conversion. All shares of Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including any right to declared but unpaid dividends, shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 3.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued.

3.3.4           No Further Adjustment. Upon any conversion of shares of Preferred Stock, no adjustment to the Conversion Price of the applicable series of Preferred Stock will be made with respect to the converted shares for any declared but unpaid dividends on such series of Preferred Stock or on the Common Stock delivered upon conversion.

3.3.5           Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of Preferred Stock pursuant to this Section 3. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

3.4           Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the date on which the first share of Series Seed Preferred Stock or Series A Preferred Stock, as applicable, was issued (the “Series Seed Original Issue Date” and “Series A Original Issue Date”, respectively) effect a subdivision of the outstanding Common Stock, the applicable Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series Seed Original Issue Date and Series A Original Issuer Date combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this Section 3.4 shall become effective at the close of business on the date the subdivision or combination becomes effective.

3.5          Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series Seed Original Issue Date and Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the applicable Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying such Conversion Price then in effect by a fraction:

(a)               the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(b)               the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, such Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this Section 3.5 as of the time of actual payment of such dividends or distributions; and (ii) no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock that they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

3.6           Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series Seed Original Issue Date or Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock), then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

3.7          Adjustment for Reclassification, Exchange and Substitution. If at any time or from time to time after the Series Seed Original Issue Date or Series A Original Issue Date the Common Stock issuable upon the conversion of such series of Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification, or otherwise (other than by a stock split or combination, dividend, distribution, merger or consolidation covered by Sections 3.4, 3.5, 3.6, 3.8, or by Section 1.3 regarding a Deemed Liquidation Event), then in any such event each holder of Series Seed Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change.

3.8           Adjustment for Merger or Consolidation. Subject to the provisions of Section 1.3, if there shall occur any consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash, or other property (other than a transaction covered by Sections 3.5, 3.6 or 3.7), then, following any such consolidation or merger, provision shall be made that each share of Preferred Stock shall thereafter be convertible, in lieu of the Common Stock into which it was convertible prior to such event, into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of the applicable series of Preferred Stock immediately prior to such consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 3 with respect to the rights and interests thereafter of the holders of Preferred Stock, to the end that the provisions set forth in this Section 3 (including provisions with respect to changes in and other adjustments of the Conversion Price of the applicable series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

3.9          Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of the applicable series of Preferred Stock pursuant to this Section 3, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 15 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the applicable series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of the applicable series of Preferred Stock then in effect and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.

3.10         Mandatory Conversion. Upon either (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the Requisite Holders at the time of such vote or consent, voting as a single class on an as-converted basis (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, with the Series Seed Preferred Stock and Series A Preferred Stock converting at the applicable ratio described in Section 3.1.1 as the same may be adjusted from time to time in accordance with Section 3 and (ii) such shares may not be reissued by the Corporation.

3.11        Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to Section 3.10. Unless otherwise provided in this Restated Certificate, such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock, if it holds certificated shares, shall surrender such holder’s certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice, and shall thereafter receive either a Notice of Issuance or, if the holder holds certificated shares, certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 3. If so required by the Corporation, a holder shall deliver a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or such holder’s attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 3.10, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), and the right to receive any declared and unpaid dividends, will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender, if applicable, the certificates at or prior to such time), except only the rights of the holders thereof, to receive the items provided for in the next sentence of this Section 3.11. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to such holder’s nominee(s), a Notice of Issuance, or if applicable, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 3.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock (and the applicable series thereof) accordingly.

4.            Dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock)) unless (in addition to obtaining any consents required elsewhere in this Restated Certificate) the holders of the Preferred Stock outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series Seed Original Issue Price or Series A Original Issue Price, as applicable; provided that, if the Corporation declares, pays or sets aside on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 4 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Preferred Stock dividend.

5.            Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.

6.            Waiver. Any of the rights, powers, privileges and other terms of the Preferred Stock set forth herein may be waived prospectively or retrospectively on behalf of all holders of Preferred Stock by the affirmative written consent or vote of the holders of the Requisite Holders.

7.             Notice of Record Date. In the event:

(a)           the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(b)           of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(c)           of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least 20 days prior to the earlier of the record date or effective date for the event specified in such notice.

8.             Notices. Except as otherwise provided herein, any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.

ARTICLE VI: PREEMPTIVE RIGHTS.

No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and any stockholder.

ARTICLE VII: STOCK REPURCHASES.

In accordance with Section 500 of the California Corporations Code, a distribution can be made without regard to any preferential dividends arrears amount (as defined in Section 500 of the California Corporations Code) or any preferential rights amount (as defined in Section 500 of the California Corporations Code) in connection with (i) repurchases of Common Stock issued to or held by employees, officers, directors, or consultants of the Corporation or its subsidiaries upon termination of their employment or services pursuant to agreements providing for the right of said repurchase, (ii) repurchases of Common Stock issued to or held by employees, officers, directors or consultants of the Corporation or its subsidiaries pursuant to rights of first refusal contained in agreements providing for such right, (iii) repurchases of Common Stock or Preferred Stock in connection with the settlement of disputes with any stockholder, or (iv) any other repurchase or redemption of Common Stock or Preferred Stock approved by the holders of Preferred Stock of the Corporation.

ARTICLE VIII: BYLAW PROVISIONS.

A.            AMENDMENT OF BYLAWS. In furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

B.            NUMBER OF DIRECTORS. The number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

C.            BALLOT. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

D.            MEETINGS AND BOOKS. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.

ARTICLE IX: DIRECTOR LIABILITY.

A.            LIMITATION. To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article IX to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article IX by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

B.             INDEMNIFICATION. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

C.            MODIFICATION. Any amendment, repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

ARTICLE X: CORPORATE OPPORTUNITIES.

The Corporation renounces any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, or in being informed about, an Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any affiliate, partner, member, director, stockholder, employee, agent or other related person of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.

*       *      *      *      *

Exhibit 2.2 

Amended and Restated

BYLAWS

OF

GATSBY DIGITAL, INC.

(A DELAWARE CORPORATION)

ARTICLE I

Offices

Section 1.       Registered Office. The registered office of the corporation in the State of Delaware is 874 Walker Road, Suite C, City of Dover, County of Kent, 19904 or in such other location as the Board of Directors of the corporation (the “Board of Directors”) may from time to time determine or the business of the corporation may require.

Section 2.       Other Offices. The corporation will also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the corporation may require.

ARTICLE II

Corporate Seal

Section 3.       Corporate Seal. The Board of Directors may adopt a corporate seal. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

ARTICLE III

Stockholders’ Meetings

Section 4.       Place of Meetings. Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting will not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (the “DGCL”).

Section 5.       Annual Meeting.

(a)    The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may lawfully come before it, will be held on such date and at such time as may be designated from time to time by the Board of Directors. Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the corporation’s notice of meeting of stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section.

(b)     At an annual meeting of the stockholders, only such business will be conducted as has been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this Section, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, (ii) such other business must be a proper matter for stockholder action under the DGCL and applicable law, (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice (as defined in this paragraph), such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section. To be timely, a stockholder’s notice will be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 90^th day nor earlier than the close of business on the 120^th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the 120^th day prior to such annual meeting and not later than the close of business on the later of the 90^th day prior to such annual meeting or the 10^th day following the day on which public announcement of the date of such meeting is first made. In no event will the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. Such stockholder’s notice will set forth: (A) as to each person whom the stockholder proposed to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Rule 14a-4(d) thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

(c)     Notwithstanding anything in the second sentence of paragraph (b) of this Section to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the 10^th day following the day on which such public announcement is first made by the corporation.

(d)     Only such persons who are nominated in accordance with the procedures set forth in this Section (or elected or appointed pursuant to Article IV of these Bylaws) will be eligible to serve as directors and only such business will be conducted at a meeting of stockholders as has been brought before the meeting in accordance with the procedures set forth in this Section. Except as otherwise provided by law, the Chairman of the meeting will have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination will not be presented for stockholder action at the meeting and will be disregarded.

(e)     Notwithstanding the foregoing provisions of this Section, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws is deemed to affect any rights of stockholders to request inclusion of proposals in the corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.

(f)      For purposes of this Section, “public announcement” means disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission (the “SEC”) pursuant to Section 13, 14 or 15(d) of the 1934 Act.

Section 6.       Special Meetings.

(a)     Special meetings of the stockholders of the corporation may be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors pursuant to a resolution adopted by directors representing a quorum of the directors then serving on the Board of Directors or (iv) by the holders of shares entitled to cast not less than 20% of the votes at the meeting, and will be held at such place, on such date, and at such time as the Board of Directors will fix.

(b)     If a special meeting is properly called by any person or persons other than the Board of Directors, the request will be in writing, specifying the general nature of the business proposed to be transacted, and will be delivered personally or sent by certified or registered mail, return receipt requested, or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors will determine the time and place of such special meeting, which will be held not less than 35 nor more than 120 days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request will cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. Nothing contained in this paragraph (b) is to be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

Section 7.       Notice of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders will be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at any such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his or her attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting will be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

Section 8.       Quorum. At all meetings of stockholders, except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote will constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business will be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of a majority of shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the subject matter will be the act of the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors will be elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, will constitute a quorum entitled to take action with respect to that vote on that matter. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting will be the act of such class or classes or series.

Section 9.       Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy. When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business that might have been transacted at the original meeting pursuant to the Certificate of Incorporation, these Bylaws or applicable law. If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting.

Section 10.     Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, will be entitled to vote at any meeting of stockholders. Every person entitled to vote or execute consents will have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No proxy will be voted after three years from its date of creation unless the proxy provides for a longer period.

Section 11.     Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship where it is so provided, their acts with respect to voting (including giving consent pursuant to Section 13) will have the following effect: (a) if only one votes, his or her act binds all; (b) if more than one votes and the vote is not evenly split, the act of the majority so voting binds all; (c) if more than one votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of subsection (c) will be a majority or even-split in interest.

Section 12.     List of Stockholders. The Secretary will prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. A stockholder may instruct the Company to record the shares beneficially owned by the stockholder on the books and records of the Company in the name of a custodian as designated by the stockholder, in which case such stockholder will retain all voting rights attached to their shares. Such list will be open to the examination of any stockholder, for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal place of business of the corporation. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. The list will be open to examination of any stockholder during the time of the meeting as provided by law.

Section 13.     Action Without Meeting.

(a)     Unless otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of the stockholders, or any action that may be taken at any annual or special meeting of the stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, or by electronic transmission setting forth the action so taken, will be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

(b)     Every written consent or electronic transmission will bear the date of signature of each stockholder who signs the consent, and no written consent or electronic transmission will be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered to the corporation in the manner herein required, written consents or electronic transmissions signed by a sufficient number of stockholders to take action are delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office will be by hand or by certified or registered mail, return receipt requested.

(c)     Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent will be given to those stockholders who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take action were delivered to the corporation as provided in Section 228(c) of the DGCL. If the action to which the stockholders consented is such as would have required the filing of a certificate under any section of the DGCL if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section must state, in lieu of any statement required by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.

(d)    An electronic mail, facsimile or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, will be deemed to be written, signed and dated for the purposes of this Section, provided that any such electronic mail, facsimile or other electronic transmission sets forth or is delivered with information from which the corporation can determine (i) that the electronic mail, facsimile or other electronic transmission was transmitted by the stockholder or proxyholder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder or proxyholder or authorized person or persons transmitted such electronic mail, facsimile or electronic transmission. The date on which such electronic mail, facsimile or electronic transmission is transmitted will be deemed to be the date on which such consent was signed. No consent given by electronic mail, facsimile or other electronic transmission will be deemed to have been delivered until such consent is reproduced in paper form and until such paper form is delivered to the corporation by delivery to its registered office in the state of Delaware, its principal place of business or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to a corporation’s registered office will be made by hand or by certified or registered mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by electronic mail, facsimile or other electronic transmission may be otherwise delivered to the principal place of business of the corporation or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the manner provided by resolution of the Board of Directors. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction is a complete reproduction of the entire original writing.

Section 14.     Organization.

(a)    At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Chief Executive Officer, or, if the Chief Executive Officer is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, will act as chairman. The Secretary, or, in his or her absence, an Assistant Secretary directed to do so by the Chief Executive Officer, will act as secretary of the meeting.

(b)    The Board of Directors is entitled to make such rules or regulations for the conduct of meetings of stockholders as it deems necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting has the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman permits, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters that are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting will be announced at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders will not be required to be held in accordance with rules of parliamentary procedure.

ARTICLE IV

Directors

Section 15.     Number and Term of Office. The authorized number of directors of the corporation will be fixed by the Board of Directors from time to time. Directors need not be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors have not been elected at an annual meeting, they may be elected as soon thereafter as convenient.

Section 16.     Powers. The business and affairs of the corporation will be managed by or under the direction of the Board of Directors, except as otherwise provided by statute or by the Certificate of Incorporation.

Section 17.     Term of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, directors will be elected at each annual meeting of stockholders to serve until the next annual meeting of stockholders and his or her successor is duly elected and qualified or until his or her death, resignation or removal. No decrease in the number of directors constituting the Board of Directors will shorten the term of any incumbent director.

Section 18.     Vacancies. Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors will, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships will be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director; provided, however, that whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series will, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships will be filled by stockholders, be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Any director elected in accordance with the preceding sentence will hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor has been elected and qualified. A vacancy in the Board of Directors will be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.

Section 19.     Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made, it will be deemed effective at the pleasure of the Board of Directors. When one or more directors resigns from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, will have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations become effective, and each director so chosen will hold office for the unexpired portion of the term of the director whose place is vacated and until his or her successor has been duly elected and qualified.

Section 20.     Removal. Subject to any limitations imposed by applicable law, the Board of Directors or any director may be removed from office at any time (i) with cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors or (ii) without cause by the affirmative vote of the holders of a majority of the voting power of all then-outstanding shares of capital stock of the corporation, entitled to elect such director.

Section 21.     Meetings

(a)     Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware that has been designated by the Board of Directors and publicized among all directors, either orally or in writing, including a voice-messaging system or other system designated to record and communicate messages, facsimile, or by electronic mail or other electronic means. No further notice will be required for a regular meeting of the Board of Directors.

(b)    Special Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board of Directors, the Chief Executive Officer (if a director), the President (if a director) or any director.

(c)     Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means constitutes presence in person at such meeting.

(d)     Notice of Special Meetings. Notice of the time and place of all special meetings of the Board of Directors will be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least 24 hours before the date and time of the meeting. If notice is sent by US mail, it will be sent by first class mail, postage prepaid at least three days before the date of the meeting. Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.