Post-Qualification Offering Circular Amendment No. 7

File No. 024-11018

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 any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our 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.

As filed with the Securities and Exchange Commission on May 11, 2020

PART II – INFORMATION REQUIRED IN OFFERING CIRCULAR

Preliminary Offering Circular dated May 11, 2020

YouNow, Inc.

Address:

161 Bowery, 6^th Floor

New York, New York 10002

https://www.younow.com/

YouNow, Inc. (“YouNow,” “we,” “us,” or “our”), a Delaware corporation, is qualifying the primary distribution of, in total, 135,000,000 of a cryptographic token (the “Props Token”) and the secondary distribution by The Props Foundation Public Benefit Corporation (“Props PBC”), a Delaware public benefit corporation and wholly-owned subsidiary of YouNow, of, in total, 45,000,000 Props Tokens in the following ways:

For further details regarding the Props Tokens, please see “Description of the Props Tokens Being Offered” beginning on page 92 of this offering circular.

The Props Tokens are speculative and involve substantial risks. You should participate in the Props Network (as defined below) or purchase these securities only if you can afford a complete loss of your investment. See “Risk Factors” beginning on page 11 and “Summary of Risk Factors” beginning on page 9 to read about the more significant risks you should consider before purchasing or receiving our Props Tokens.

The offerings will commence within two calendar days after the offering statement in which this offering circular is included has been qualified by the U.S. Securities and Exchange Commission (the “Commission” or the “SEC”) and includes an amount of Props Tokens that we reasonably expect to be offered and sold within two years from the date of initial qualification, unless subsequently amended. The sum of the maximum “aggregate offering price” and “aggregate gross sales”, as those terms are defined in Rule 251(a) of the Securities Act, pursuant to the YouNow Offering and Props PBC Offering combined may not exceed $50,000,000 in any twelve month period. The sum of the maximum “aggregate offering price” and “aggregate gross sales” pursuant to the Props PBC Offering may not exceed $15,000,000 in any twelve month period.

Props Tokens will be offered to reward users of a digital media app it developed; as one-time discretionary grants to users of that app; to reward users of an app created by a third party app developer; as one-time discretionary grants to users of that app; to reward this third party app developer; and to reward validators of the blockchain underlying the rewards. The Props Tokens to be offered to users of the app developed by YouNow will be offered through that app. YouNow operated that app through February 29, 2020, and then transferred its operation to a third party acquirer. See “Description of Business – Recent Developments.” The third party acquirer of that app will be deemed to be a statutory underwriter under Section 2(a)(11) of the Securities Act because the acquirer will be receiving Props Tokens from YouNow with a view to distributing Props Tokens to app users. The Props Tokens to be offered to users of the app created by a third party app developer will be offered through that app. This developer will be deemed to be a statutory underwriter under Section 2(a)(11) of the Securities Act because the app developer will be receiving Props Tokens from YouNow with a view to distributing Props Tokens to app users. The Props Tokens to be offered through the grant offering will be distributed at Props PBC’s direction. Props PBC will be deemed to be a statutory underwriter under Section 2(a)(11) of the Securities Act because it will be receiving Props Tokens from YouNow with a view to distributing Props Tokens to grant recipients. There is no other underwriter or sales agent for the Props Tokens.

There is no minimum number of Props Tokens that we must sell in order to conduct a closing in this offering. We have made no arrangements to place subscription funds in an escrow, trust or similar account. Props Tokens issued under this offering will be issued on a continuous basis under Rule 251(d)(3) under the Securities Act. For further details please see the section of this offering circular captioned “Plan of Distribution.”

The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to 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 under Regulation A 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. We deem this limitation to not apply to non-cash consideration, and therefore we deem this limitation to not limit the number of Props Tokens that may be received through YouNow’s app rewards program or validator rewards program or through Props PBC’s grant program.

For general information on investing, we encourage you to refer to www.investor.gov.

Initially, the Props Tokens will not trade on a stock exchange, securities exchange or other trading market. This means that it may be difficult to sell your Props Tokens.

We are following the “Offering Circular” disclosure format under Regulation A.

The date of this offering circular is                          , 2020

IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR

Please carefully read the information in this offering circular and any accompanying offering circular supplements, which we refer to collectively as the “offering circular”. You should rely only on the information contained in this offering circular. We have not authorized anyone to provide you with different information. This offering circular may only be used where it is legal to sell these securities. You should not assume that the information contained in this offering circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

This offering circular is part of an offering statement that we filed with the SEC, using a continuous offering process. Periodically, as substantive changes from or additions to the information set forth herein occur, we will provide an offering circular supplement that may add, update or change information contained in this offering circular. Any statement that we make in this offering circular will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this offering circular. You should read this offering circular and the related exhibits filed with the SEC and any offering circular supplement, together with additional information contained in our annual reports, semi-annual reports and other reports and information statements that we will file periodically with the SEC. See the section entitled “Where You Can Find Additional Information” below for more details.

The offering statement, including any amendment thereto, and all supplements and reports that we have filed or will file in the future can be read at the SEC website, www.sec.gov.

The Company will be permitted to make a determination that the participants in this offering are “qualified purchasers” in reliance on the information and representations provided by the Holder regarding the Holder’s financial situation. 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.

TABLE OF CONTENTS

Offering Circular

Neither we nor Props PBC has authorized anyone to provide any information or to make any representations other than those contained in this offering circular or in any free writing prospectuses we have prepared. Neither we nor Props PBC takes any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This offering circular is an offer of only the Props Tokens offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this offering circular is current only as of its date.

RISK FACTORS

You should carefully consider the risks described below, together with all of the other information contained in this offering circular, before making a decision to receive Props Tokens for your participation in the Props Network. The occurrence of any of the risks described below could have material adverse effects on the value of Props Tokens, the performance of the Props Network, and our company’s business, financial condition, results of operations and prospects. For these reasons, you should carefully read this offering circular and should consult with your own attorney and financial and tax advisors prior to making any decision to participate in the offering. Additional risks and uncertainties that we do not presently know or that we currently deem immaterial may also have similar material adverse effects.

Risks Related to the Value of Props Tokens

The Props Tokens currently have limited uses.

The Props Tokens will have utility in the Props Apps that are operational on the Props Network. There are currently two apps designed to allow functionality for Props Tokens: the Props Live Video App and the Third Party Developer App. Props Tokens entitle holders to functionalities in these Props Apps. See “Description of the Props Live Video App—The Role of Props Tokens in the Props Live Video App” and “Annex A: PeerStream Plan of Props Token Usage” for additional information. Further, Props Tokens may also be transferable and may be used as a means of sending rewards to other users. The utility of the Props Tokens in each of the Props Apps is subject to change as features and functionalities of the Props Apps change. Additional uses for the Props Tokens may be added in the future within the Props Live Video App and the Props Apps developed by any third party developers, including the Third Party Developer. There is, however, no guarantee that the current functionalities for Props Tokens within the Props Live Video App or other Props Apps will be maintained or that these apps will always exist in the future, that additional functionalities for Props Tokens will be added within these Props Apps or that additional apps will join the Props Network with any functionalities for Props Tokens. Even if additional apps are added to the Props Network, it is possible that Props App developers will allow some additional functions to be performed by other cryptocurrency or traditional fiat currency, at the discretion of these developers.

These limited initial uses for Props Tokens may negatively affect their value, and any increase in the value of the Props Network may be dependent on the further development of the Props Live Video App and, also, additional apps on the Props Network. As a result, users may be less likely to want to receive and use Props Tokens, and Props App developers may become less effective in attracting users to the Props Network, which could have a material adverse effect on the value of the Props Tokens, the Props Network, and our business.

The commercial utility of your Props Tokens on the Props Network in the future may be sensitive to the quality of the integration of Props Tokens in specific Props Apps created by third-party developers, which we cannot guarantee will occur and which we may not fully control.

The value of your Props Tokens may be highly sensitive to the way in which the in-app economies for Props Apps are designed and implemented by any third party app developers, including the Third Party Developer. While we believe we have designed the Props Network to incentivize developers to join apps to the Props Network and include substantial utility for Props within their apps, because each app developer has discretion over how the Props Tokens and their holders are treated within such app developer’s app, we cannot guarantee that any third party app developer seeking to join the Props Network will afford substantial functionalities for Props Tokens in their apps. Even if they design their apps to afford Props Tokens substantial utility, this utility may be similar to existing utility for Props Tokens in Props Apps, and Props App developers may terminate any use for the Props Tokens that they have in the past provided for Props Tokens. Props App developers will also have discretion over how they reward their users with Props Tokens, other cryptocurrencies or fiat currencies, and the criteria for the allocation of such currency. The extent to which these uses and benefits of Props Tokens are built into apps may significantly affect the value of Props Tokens. While we expect that Props PBC will have some control over admitting apps to the network, neither you nor us will be able to control how Props App developers incorporate Props Tokens into their apps, and there can be no guarantee that Props App developers will create any substantial utility for, or benefits to, holding Props Tokens, if at all. In addition, if developers fail to create in-app economies with large user bases and significant demand for digital assets, this may have a material adverse impact on the value of Props Tokens.

The value of the Props Tokens may be volatile. There is no guarantee that the Props Tokens will hold value or increase in value, and we do not fully control many factors affecting their value.

The value of Props Tokens is contingent upon numerous factors, many of which (including legal and regulatory conditions) are beyond our control. Some of these factors are described in these Risk Factors. For example, as described in these Risk Factors under the caption “Risks Related to the Development of the Props Network,” the value of the Props Tokens will depend on our ability to successfully develop the Props Network, including creating a network of app developers and users that will support interest in Props Apps and uses for the Props Tokens, as well as navigating technological and market-based risks, such as popular acceptance of distributed ledger technology. The value of the Props Tokens and other types of cryptoassets will also substantially depend on whether blockchain and other new technologies related to the Props Tokens turn out to be useful and economically viable. See the section of these Risk Factors under the caption “Risks Related to Blockchain Technology” for additional detail.

In addition, if an increasing number of Props Tokens are distributed publicly, the price people are willing to pay for Props Tokens may fall substantially, and if or when a secondary market for the Props Tokens develops, the price may fall further. Because we began distributing Props Tokens to holders of our Simple Agreements for Future Tokens (“SAFTs”) in early March 2019 who confirmed wallet addresses, and, therefore, there may already be Props Token holders who wish to sell Props Tokens, the price of Props Tokens issued to you under this offering circular may be subject to particularly high risks of price volatility or price drops. See “Other Offerings” for additional information regarding the SAFTs. YouNow does not fully control any of these factors, and therefore may not be able to control the long-term success of the Props Tokens as a feature of the Props Network or the ability of the Props Tokens to maintain their value. The value of Props Tokens may decrease and may also experience significant volatility and unpredictability relative to fiat currency. Moreover, YouNow does not plan to maintain any type of bond or trust account designed to protect holders of the Props Tokens, and we do not intend to secure the Props Tokens with any assets.

The value of your Props Tokens will, in part, depend on the supply relative to demand for Props Tokens in the Props Network. Because we anticipate issuing a significant number of Props Tokens in the future, both through the Protocol Rewards Engine and, potentially, through direct issuances, the value of Props Tokens will likely be diluted and demand for Props Tokens from Props Network users will need to increase in order for Props Tokens to maintain their value.

We expect that approximately 50,000,000 tokens will be released by the Protocol Rewards Engine in the first year following its launch, and each year, we expect that the Protocol Rewards Engine will release a decreasing number of Props Tokens (12.5% of the remaining rewards pool per year) until the total number of Props Tokens that will be allocated by the Protocol Rewards Engine, 400,000,000, has been released. We expect to issue up to 33,000,000 Props Tokens in connection with one-time discretionary grants to significant users of the Props Live Video App. See “Description of the Props Live Video App—One-Time Discretionary Grants” for additional information. We expect to also issue up to 2,000,000 Props Tokens in connection with one-time discretionary grants to significant users of the Third Party Developer App. See “Annex A: PeerStream Plan of Props Token Usage” for additional information. Additional Props Tokens may be issued in connection with one-time grandfathering grants to Props Apps added to the Props Network in the future.

In addition, we have reserved: (i) approximately 8.35% of all Props Tokens that we currently anticipate to issue in the future, or 83,500,000 Props Tokens, for discretionary distributions by Props PBC in the form of grants to Props App developers, developers building Props Network infrastructure, or other strategic partners or for cash sales to support Props PBC’s operations, (ii) approximately 1.2% of all Props Tokens that we currently anticipate to issue in the future, or 11,500,000 Props Tokens, for potential issuance pursuant to our agreement with PeerStream, Inc., (iii) approximately 20% of all Props Tokens that we have issued or anticipate to be issued, or 200,000,000 Props Tokens, for issuance to persons who purchased rights to receive Props Tokens in private placements have already been issued) or pursuant to our DPAs, (iii) approximately 22.7% of all Props Tokens that we currently anticipate to issue in the future, or 227,000,000 Props Tokens, for issuance to YouNow equity investors and current and future employees, subject to certain vesting requirements, though we may decide to use these Props Tokens for other purposes in the future, and (iv) approximately 4% of all Props Tokens that we have issued or anticipate to be issued in the future, or 40,000,000 Props Tokens, for issuances to advisors to YouNow. The total number of Props Tokens released, and the amount in existence at any point in time, will affect the value of your Props Tokens and may dilute that value significantly. If the demand for Props Tokens and uses for Props Tokens on the Props Network do not similarly increase, the value of Props Tokens may decline. In addition, if the initial limit to the total number of Props Tokens is increased in the future, this may also have the effect of diluting the value of your Props Tokens.

The value of your Props Tokens may be highly sensitive to decisions made by us to distribute additional Props Tokens.

We anticipate that 400,000,000 Props Tokens will be allocated by the Protocol Rewards Engine as daily rewards intended for rewarding popular Props Apps and for persons responsible for constructing the Props Blockchain and also acting as oracles to the Protocol Rewards Engine (each, a “Validator”). See “Description of the Props Network—The Protocol Rewards Engine.”

Initially, because YouNow operates the Props Live Video App and acts as one of the Validators, the Protocol Rewards Engine will, in part, be rewarding YouNow by making more Props Tokens available for issuance pursuant to the offering statement in which this offering circular is included. This means that YouNow will not only initially control a substantial portion of all Props Tokens, but will, over time, have more Props Tokens available to it. We expect that a substantial majority of these allocated Props Tokens will be issued by YouNow to the Props Live Video App users, but we may distribute a smaller proportion of these allocated Props Tokens in the time period immediately following qualification of this offering circular, as compared to later.

In addition, because we expect that 0.03475% of the Props Tokens remaining from the initial 400,000,000 to be allocated by the Protocol Rewards Engine will be allocated each day to Props Apps as described under “Description of the Props Network—The Protocol Rewards Engine” and 0.001829% of the remaining from the initial 400,000,000 Props Tokens will be allocated each day to Validators, the size of Props Tokens allocations made pursuant to the Protocol Rewards Engine will necessarily decrease over time. As a result, YouNow may initially accumulate significant allocations of Props Tokens and it will then have absolute discretion to distribute such Props Tokens pursuant to this Regulation A offering circular or in other registered or exempt securities offerings. These amounts would be in addition to the approximately 227,000,000 Props Tokens that YouNow intends to separately issue to YouNow equity investors and current and future employees, subject to certain vesting requirements (though we may decide to use these Props Tokens for other purposes in the future), and the 40,000,000 Props Tokens issued or to be issued by YouNow to advisers in registered or exempt securities transactions. See “Other Offerings” for additional information. In addition, Props PBC will have 83,500,000 Props Tokens available for distribution. See “Description of the Props Tokens Being Offered—Token Supply.”

We will have significant discretion in determining how these Props Tokens will be issued. For example, the Props Tokens that YouNow may distribute to users may be issued slowly over a long period of time or, alternatively, more quickly, to the extent that YouNow determines that it could help its apps or the further development of the Props Network. Further, Props PBC may exercise its discretion to change the total number of Props Tokens that may be issued in the future or to change the Protocol Rewards Engine “smart contract,” to the extent that Props PBC determines that such changes could help the further development of the Props Network. As a result, the supply of Props Tokens is substantially within our control—and may change in ways that could adversely affect the value of your Props Tokens and may dilute that value significantly.

The level of functionality that Props Tokens will have in Props Apps, including the Props Live Video App, may depend on the relative holdings of Props Tokens of other users of a Props App.

Props Apps may only afford certain functionalities and benefits of holding Props Tokens to users holding a certain number of Props Tokens. These thresholds may depend on a user’s number of Props Tokens relative to the holdings of other users of the Props App. For example, in the Props Live Video App, the unlocking of virtual goods for purchase functionality for Props Tokens is only available once the user is in the 20^th percentile of Props Token holdings for all Props Live Video App users. As a result, you may not be able to enjoy this functionality unless you have a substantial number of Props Tokens. In addition, your ability to have this functionality may depend, in large part, on the actions of other persons. If these other persons are more active in earning or otherwise collecting Props Tokens, even if you earn or purchase a substantial number of Props Tokens, you may never reach the minimum threshold of Props Token holdings necessary in order to enjoy a particular functionality in a Props App.

Because the Props Tokens have no history, there are significant uncertainties around the evaluation of their utility and their value.

The Props Tokens have little performance history. Moreover, the Props Network and the applications that the Props Network is intended to support together constitute an unproven and novel model for the operation of internet applications for live video applications, and the value of the Props Tokens is likely to depend upon the success of this model. This success may, in turn, be dependent both on demand for an alternative to traditional centralized digital media application infrastructures and the performance of the technology used to create the Props Network and the Props Tokens, which is novel and relatively untested. Further, the price we have set for the Props Tokens of $0.1369 per token was chosen by us in reference to the undiscounted price paid by investors of our SAFTs and was not set pursuant to any third party valuation. In December 2017, we offered SAFTs to certain investors. See “Other Offerings” for additional information regarding the SAFTs; the undiscounted price paid by investors in this offering was $0.1369. Participation in the offering and your decision to acquire Props Tokens should, therefore, be evaluated not only on the basis of the value and prospects of the Props Tokens, taking into account an assessment of the prospects of YouNow and Props PBC in achieving their respective goals for the Props Network, but should also consider the significant uncertainties associated with these assessments given the lack of similar business models and technological systems against which the Props Tokens, the Props Network and Props Apps may be usefully compared.

The deemed offering price of the Props Tokens was not established on an independent basis; the actual value of your Props Tokens may be substantially less than the deemed offering price.

The deemed offering price of the Props Token bears no relationship to our book or asset values or to any other established criteria for valuing securities. The price we have set for the Props Tokens of $0.1369 per token was chosen by us in reference to undiscounted prices paid by investors of our SAFTs. Because this price is not based upon an independent valuation, the price may not be indicative of the proceeds that you could receive upon a commercial sale of the Props Tokens. Further, the deemed offering price may be significantly more than the price at which the Props Tokens would trade if they were to be listed on an exchange or actively traded by broker-dealers. While we explored the possibility of obtaining an independent valuation of the Props Tokens by an independent third party months before Props Tokens had been introduced, this valuation was never obtained, and in any case, because it would have valued the Props Tokens prior to their actual introduction on the Props Network, would have had little bearing on the value of Props Tokens you may receive in this offering.

At issuance, there may be no trading market for the Props Tokens, and a trading market may never develop.

The Props Tokens may only be traded on a very limited range of venues, including U.S. registered exchanges or regulated alternative trading systems for which a Form ATS has been properly submitted to the SEC. There are currently no national securities exchanges or exchanges that have been approved by the Financial Industry Regulatory Authority (“FINRA”) or registered under Form ATS with the SEC to support the trading of Props Tokens on the secondary market. We are aware that several entities are working to develop and launch such an exchange. See “Description of the Props Tokens Being Offered—Secondary Markets.” There is no guarantee that any exchanges capable and willing to support trading in Props Tokens will become functional.

Further, even if any such exchange were to become functional, no such exchange will be required to list the Props Tokens and they may decide not to list the Props Tokens for a number of reasons not under our control, including, but not limited to, a perceived lack of market interest in the Props Tokens, and any other factors relevant to the individual exchanges (for example, if such exchanges are heavily invested in another cryptocurrency). If any such exchange did agree to list the Props Tokens, the market may not offer Props Tokens any significant liquidity for a number of reasons including, for example, a lack of potential buyers. As a result, you should be prepared to hold your Props Tokens indefinitely, as there is no guarantee that holders will be able to sell or exchange their Props Tokens. In the event that the Props Tokens remain illiquid for a significant period of time or indefinitely, the value of the Props Tokens may be materially adversely affected.

We do not expect there to be any market makers to develop a trading market in the Props Tokens.

Most securities that are publicly traded in the United States have one or more broker-dealers acting as “market makers” for the security. A market maker is a firm that stands ready to buy and sell the security on a regular and continuous basis at publicly quoted prices. In the event that a token exchange is created or developed, we do not believe that the tokens will have any market makers, which could contribute to a lack of liquidity in the Props Tokens, and could have a material adverse effect on holders’ ability to trade the tokens.

You and any persons interested in acquiring Props Tokens from you may lack information for monitoring the value of the Props Tokens.

The Props Tokens do not have any information rights attached to them, and holders may not be able to obtain all the information they would want regarding YouNow or the tokens. As a Tier 2 issuer under Regulation A, we will be subject to scaled disclosure and reporting requirements, and we will not be required to make the same level of public reporting required of issuers in traditional public offerings. In addition, we are among the first issuers of tokens to have an offering of tokens qualified under Regulation A. Even though the SEC has qualified our Regulation A offering, individual investors, individual States in which we may offer the Props Tokens, or potentially other participants in the Props Network may disagree with the level or type of disclosure, reporting or other information we are providing, or may otherwise object to the means by which we are offering the Props Tokens, or assert that other state laws may apply to this offering. If any of these persons or entities decide to litigate against YouNow regarding these or similar issues, it could have a material adverse effect on our operations and on the value of the Props Tokens.

Additionally, there is no guarantee that securities or industry analysts will publish research or reports about us or the Props Tokens, and even if they did, we would not have any control over these analysts or their coverage of the Props Tokens. As a result, you and any persons interested in acquiring Props Tokens from you may not be able to receive information regarding the market value of the Props Tokens. As a result of these difficulties, as well as other uncertainties, you may not have accurate or accessible information about us or the value of the Props Tokens.

Additionally, this could negatively affect any secondary trading markets that may exist in the future, and thereby cause the value of the Props Tokens to decline. There are currently no national securities exchanges or exchanges that have been approved by FINRA or registered under Form ATS with the SEC to support the trading of Props Tokens on a secondary market.

In the future, we may not be subject to ongoing reporting requirements.

Following the conclusion of our offering of Props Tokens under Regulation A, we may be eligible to file an exit report to suspend or terminate our ongoing reporting obligations. If we become eligible, and if we make this election in the future, we may choose to not file annual reports, semiannual reports, current reports, financial statements and audited financial statements. As a result, holders of the Props Tokens would receive less information about the current status of our company, and the value of our Props Tokens may be adversely affected. We may also cease to file these reports if the Props Tokens are either deemed to no longer be securities under applicable securities laws or if the sidechain that we are building (the “Props Blockchain”) undergoes such a significant hard fork that we are no longer driving the governance of the network.

In making a decision to participate in the offering and acquire Props Tokens, you should not rely on information in public media that is published by third parties. You should rely only on statements made in this offering circular.

You should carefully evaluate all of the information in this offering circular. We have in the past received, and may continue to receive, media coverage, including coverage that is not directly attributable to statements made by our officers and employees. We cannot confirm the accuracy of this coverage. You should rely only on the information contained in this offering circular in determining whether to participate in the offering and acquire Props Tokens.

Your investment in the Props Tokens will not provide you with any enforceable rights against YouNow, its affiliates, the Third Party Developer, the current owner and operator of the Props Live Video App, or any other third party app developer, including any rights to receive payments, any control rights or any claims on assets.

Holders of Props Tokens will not receive a right to any repayment of principal or interest, any interest in the profits or losses of YouNow, its affiliates, the Third Party Developer, the current owner and operator of the Props Live Video App or any other third party app developer, any rights to distributions from YouNow, its affiliates, the Third Party Developer, the current owner and operator of the Props Live Video App, or any other third party app developer, or any legal or contractual right to exercise control over the operations or continued development of YouNow, its affiliates, the Third Party Developer, the current owner and operator of the Props Live Video App or any other third party app developer. Holders of Props Tokens may not have any right to vote on any matters relating to YouNow, its affiliates, the Third Party Developer, the current owner and operator of the Props Live Video App or any other third party app developer. We anticipate that Props Token holders will only be able to vote on in-app matters both within the Props Live Video App and, potentially, apps developed by third parties in the future and, in the future, we may potentially allow Props Token holders to vote on an advisory basis to help guide Props PBC in making key decisions affecting the Props Network based on their stake of Props Tokens. Further, we are not aware of any binding obligation on YouNow, its affiliates, the Third Party Developer, the current owner and operator of the Props Live Video App or any other third party app developer with respect to the tokens or the holders of the tokens following the tokens’ delivery in this offering. Any profit that you may receive on your holdings of Props Tokens may be based on the commercial utility of the tokens, or on potential capital appreciation associated with the tokens to the extent realizable through trading activity. As a result, information disclosed in this offering circular and elsewhere regarding our company and its ability to build the network may be relevant to the value of your investment, but the relevance may be limited and indirect.

The Props Tokens are not legal tender, are not backed by the government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections.

The Props Tokens are not legal tender, are not backed by any government, and accounts and value balances are not subject to Federal Deposit Insurance Corporation or Securities Investor Protection Corporation protections.

The terms and conditions of each Props App may limit functionality of the Props Tokens for certain users and users may lose functionality of the Props depending on the decisions of third parties, over which we and users have no control.

As described in “Description of the Props Tokens Being Offered—Functionality for Users” and “Description of the Props Live Video App,” Props Tokens have certain functionalities within the Props Live Video App and may have additional functionalities in the future. In addition, as described in “Annex A: PeerStream Plan of Props Token Usage,” Props Tokens have certain functionalities within the Third Party Developer App and may have additional functionalities in the future. These functionalities may include, for example, elevated in-app social status or access to premium in-app virtual goods, and the allocation of a larger daily stipend of in-app currency. See “Description of the Props Live Video App—The Role of Props Tokens in the Props Live Video App” and “Annex A: PeerStream Plan of Props Token Usage” for details regarding the functionality of Props Tokens.

These functionalities may, however, be denied to Props Token holders if a Props Token holder pursuant to the terms and conditions of use of the applicable Props App. For example, the terms and conditions of the Props Live Video App provide for the right to suspend, limit or terminate access, at any time with or without notice and with or without cause, including if the user is determined to pose a threat to the app service or its users. In addition, the provisional accounting entries Props Apps make when users have completed in-app activities necessary to earn rewards (“Pending Props”) may be canceled and never claimed as Props Tokens upon the violation of an app’s terms and conditions, for example. See “Description of the Props Tokens Being Offered—Pending Props.” If you are unable to use the Props Tokens within available Props Apps, you may not be able to derive significant value from holding Props Tokens and you may, in addition, be unable to sell them in secondary markets. See “Description of the Props Tokens Being Offered—Secondary Markets” for additional details. There are currently no national securities exchanges or exchanges that have been approved by FINRA or registered under Form ATS with the SEC to support the trading of Props Tokens on a secondary market.

The functionality and operation of Props Tokens in each Props App and the ability for YouNow or the developer of each Props App to enforce the functionality and operation of each Props App is subject to the ability to enforce the applicable terms and conditions of each such app. Because some of Props Network users will likely be persons under the age of 18 and therefore may be able to repudiate or disaffirm contracts under applicable local law, YouNow and other third party Props Network developers, may not be able to enforce such app terms and conditions against users under the legal age of consent. See “Risk Factors—Some of the Props Network users will likely be under the age of 18, and those users may be able to repudiate or disaffirm the terms of use and other agreements that we enter into with such users.”

The tax treatment of the Props Tokens is uncertain, and there may be adverse tax consequences for you, validators and other holders upon receiving Props Tokens in connection with this offering.

The tax characterization of the Props Tokens is uncertain, and you must seek your own independent legal and tax advice with respect to U.S. and non-U.S. tax treatment, as applicable, of the acquisition of Props Tokens.  Your receipt of Props Tokens may result in adverse tax consequences to you, including withholding taxes, income taxes and tax reporting requirements.  We intend to treat the issuance of Props Tokens to a U.S. holder or non-U.S. holder, for U.S. federal income tax purposes, as compensation for services. Accordingly, a U.S. holder will generally be required to include in gross income the fair market value of the tokens it receives from us, and Props Tokens we issue to a non-U.S. holder may be subject to a 30% withholding tax if the services such holder performs for us are considered to have been performed in the United States and certain other conditions are met. We cannot and do not make any representations or assurances as to individual tax consequences, including the consequences of using Props Tokens as transaction currency.

If the Props Tokens are characterized as a “virtual currency” for U.S. federal income tax purposes, then, under a notice issued by the U.S. Internal Revenue Service in 2014 (the “Notice”), the general rules applicable to property transactions would apply. See “Certain United States Federal Income Tax Considerations,” herein. The Notice indicates that, in certain cases, persons acquiring Props Tokens may be subject to adverse tax consequences upon their receipt of Props Tokens. For example, validators on the Props Blockchain that are not acting in the capacity of an employee and that receive Props Tokens should report the fair market value of such tokens as self-employment income and may be subject to self-employment tax. In addition, a person that receives Props Tokens as compensation, an incentive, or reward will generally be subject to adverse tax consequences and reporting requirements. Furthermore, Revenue Ruling 2019-24 indicates that the receipt of virtual currency by a holder of a Props Token pursuant to an “air drop” following a “hard fork” generally will result in adverse tax consequences to the holder of a Props Token. Finally, you may be required to report gain or loss if you use a token (including a Props Token) as a transaction currency.

The prices of digital assets like the Props Tokens are extremely volatile, and the value of Props Tokens may be materially adversely affected as a result.

The prices of cryptocurrencies, such as Bitcoin, Ether and other digital assets have historically been subject to dramatic fluctuations, and are highly volatile, and the market price of the Props Tokens may also be highly volatile.  Several factors may influence the market price of the Props Tokens, including, but not limited to:

In addition, decreases in the price of even a single other digital asset, whether located on or off of the Props Network, may cause volatility in the entire digital asset and crypto token industry and may affect the value of other digital assets, including the Props Tokens. For example, a security breach or any other incident or set of circumstances that affects purchaser or user confidence in Ethereum or another well-known cryptocurrency such as Bitcoin may affect the industry as a whole and may also cause the price of the Props Tokens and other digital assets to fluctuate.

You may never receive Props Tokens in connection with performing in-app activities unless you are able to complete certain steps within 120 days of receipt of Pending Props and “claim” your Pending Props.

You are not guaranteed to receive Props Tokens for performing in-app activities, including those described under “Description of the Props Live Video App” and “Annex A: PeerStream Plan of Props Token Usage,” or in connection with one-time discretionary grants by YouNow or the Third Party App Developer. Prior to receiving any Props Tokens, you must complete certain minimum steps—including completion of KYC and AML procedures and completion of all tax forms requested by the Third Party App Developer or the current owner and operator of the Props Live Video App, as well as “claim” your Pending Props. See “Description of the Props Tokens Being Offered—Receiving Props Tokens” for a general description of the required steps in Props Apps and “Description of the Props Live Video App—Terms of Receiving Rewards” for a description of the required steps in the Props Live Video App. In the Props Live Video App, we anticipate that the KYC and AML procedures and documentation requirements required of users earning Props Tokens in amounts below a certain threshold set in our discretion will be more basic, in order to minimize unnecessary administrative burdens on users. For example, the current owner and operator of the Props Live Video App may not require tax forms for users receiving small numbers of Props Tokens. Once a user has reached a maximum threshold of total Props Tokens earned, however, the current owner and operator of the Props Live Video App may require that the user complete additional KYC/AML procedures and documentation in order to receive Props Tokens.

Upon completing in-app activities or upon offer of a one-time discretionary grant, there will be indication, in your Props App account, of receipt of Pending Props, which are accounting mechanisms used by the Props Network participants to signify who is provisionally entitled to receive Props Tokens. Generally, if a user that is given Pending Props in connection with in-app activities or in connection with one-time discretionary grants offer fails to complete the above-described required steps within 120 days of receiving them, the Props App user may never obtain the Props Tokens. The Props App, including the Props Live Video App, may cancel any such Pending Props. See “Description of the Props Live Video App—Terms of Receiving Rewards” for additional information. As a result, you should not view the performance of in-app activities or offering of a one-time grant as a guarantee that you will receive Props Tokens. Neither the current owner and operator of the Props Live Video App nor the Third Party Developer anticipates exercising this discretion to revoke Pending Props associated with activities performed in Props Apps except in cases of users apparently abandoning them. If either the current owner and operator of the Props Live Video App or the Third Party Developer were to determine to exercise its discretion to revoke Pending Props, the current owner and operator of the Props Live Video App or the Third Party Developer, as applicable, intend to communicate with any user with such Pending Props prior to revoking them, via in-app communications and via email.

Further, before you receive Props Tokens, Props Apps like the Props Live Video App may also need to complete certain additional steps, including checking for fraud or violation of the Terms of Service, and administrative procedures related to settlement that can delay the issuance or Props Tokens after you have performed in-app activities. Further, issuance by either the current owner and operator of the Props Live Video App or the Third Party App Developer of the Props Tokens and final settlement will only be made once the transfer of Props Tokens from a wallet controlled by either the current owner and operator of the Props Live Video App or the Third Party App Developer to the user’s wallet is confirmed by Validators on the Ethereum blockchain. Prior to settlement, Props App users, Props App developers, Validators, and grantees have no right to receive Props Tokens, and if YouNow or Props PBC, as applicable, were to dissolve or liquidate, or if the operator of the Props Live Video App or the Third Party App Developer would cease to reward users of their respective apps, or if YouNow would cease to reward Validators, or if Props PBC were to cease making grants with Props Tokens, then users, Validators, and grantees will have no right to receive Props Tokens, and they may never receive these Props Tokens.

Risks Related to the Further Development of the Props Network

The Props Network may not be widely used and may never develop as we intend. As a result, there may be limited users and Props App developers on the Props Network, and the value of the Props Tokens may be negatively impacted.

It is possible that the Props Network and Props Tokens will not be used by a large number of application developers or that there will be limited public interest in the Props Network or the Props Tokens, even after qualification of this offering circular. In addition, technological, legal or regulatory developments could render the Props Network obsolete or impermissible. Any such lack of use or interest in the Props Network could negatively impact the Props Network and the value of the Props Tokens.

The success and future growth of the Props Network depend significantly on our successful development of a “two-sided economy” of applications and users, and if we are unable to attract sufficient numbers of applications or users to our network to generate demand for Props Tokens, the Props Network may fail to grow and the value of Props Tokens will be harmed.

The ultimate success of the Props Network may depend upon our ability to attract additional application developers to create additional apps to be joined to the Props Network, which will, in turn, depend in large part on the success of our efforts to develop an ecosystem of application developers and users. We intend to attract application developers and users by engaging in traditional marketing efforts and incentivizing participation in the Props Network with Props Tokens. See “Description of the Props Token’s Role in Helping to Align Incentives of Network Participants” for additional details. If any of our current efforts at attracting and retaining application developers are not effective or become less effective, if we are unable to continue to use any of these methods or marketing channels, or if the cost of using these methods were to significantly increase, we may not be able to attract and retain new application developers and users in a cost-effective manner or convert application developers into active application developers on the Props Network. Further, developing apps with functionality for Ethereum-based tokens may not be attractive to some third party app developers because of costs and regulatory issues. See “Our plans for addressing scalability issues related to the operation of apps dependent on the Ethereum blockchain subject us to a number of technological and regulatory risks that may cause the Props Network to be ineffective or not sufficiently cost-effective to continue operating.” and “We may need to address additional regulatory issues in connection with our plans for the development of the Props Network.” As a result, the growth of our network could be adversely affected, which may impair the value of the Props Tokens.

Incentive structures essential to the Props Network are difficult to design and may not function as intended.

Props Tokens may be distributed in ways intended to incentivize actions essential to the Props Network, including Props App creation, participation in the Props Network online community, the creation of digital media content to be shared on the Props Network, development of premium experiences for Props Token holders across the network and for maintenance of the Props Blockchain. As discussed above in “Description of the Props Token’s Role in Helping to Align Incentives of Network Participants,” Props App creation and operation may be incentivized in the future by rewarding high-quality third party developers of Props Apps with Props Tokens. App developers such as the current owner and operator of the Props Live Video App or the Third Party App Developer may use Props Tokens to incentivize the creation of digital media content on the Props Network.

The success of the Props Network, therefore, will depend on users and developers being incentivized to participate in the Props Network in exchange for Props Tokens. In addition, we incentivize the operation of validators on the Props Blockchain with Props Tokens. Further, we rely on validators of the Ethereum blockchain to record ownership and transfer of Props Tokens to the Ethereum blockchain, which is where ownership of Props Tokens is recorded. See “Description of the Props Network—The Props Blockchain—The Validators” for additional details. Incentive structures like these may not operate as intended, however, and we cannot guarantee that these mechanisms, as designed, will effectively incentivize the behaviors that they are intended to promote and which are necessary for the operation and further development of the Props Network. If these incentive structures fail or are not as effective as intended, the Props Network and the value of the Props Tokens may be adversely affected.

Because, upon qualification of this post-qualification amendment, there will be few Props App developers, the Props Network may be adversely impacted by changes in the business and financial condition of Props App developers, which may negatively impact the value of the Props Tokens.

Upon qualification of this post-qualification amendment, there will be two application developers with apps that are designed to give Props Tokens functionality. Further, there can be no guarantee that additional application developers will create Props Apps or join the Props Network. As a result of the limited number of Props App developers, the Props Network may be adversely impacted by changes in the business and financial condition of, or demand for its services by, these developers. We expect that even to the extent that developers have contractual obligations to us with respect to their development activities, these developers will be able to terminate these obligations at any time, such that any developer may decide at any time to cease development of their application on the Props Network, due to bankruptcy, commercial considerations, or for any other reason. If a number of such developers are unable or unwilling to use the network for development of their applications for any reason, the growth of the network could be impeded, leading to a lack of adoption of the Props Network. This could adversely affect the value of your Props Tokens.

YouNow’s historical performance does not necessarily reflect future performance or the likelihood of the success of the Props Network.

YouNow’s past experience providing consumers with live stream video chat service does not guarantee that it or Props PBC will be able to successfully develop the Props Network. The historical performance of the YouNow live streaming app and our previous business does not necessarily indicate that the Props Network’s future performance or further development will be successful—or the value of Props Tokens with increase or maintain in value. Further we cannot guarantee that Props Live Video App users or users of the Third Party App Developer’s app will continue to use either app, and may a decline may occur may occur in Props Live Video App users or users of the Third Party App Developer’s App in the future.

It is impossible to predict whether the Props Network will have a substantial user base or grow its current user base in a way that will support a “two-sided economy” that includes a population of Props App developers, and we cannot guarantee that the Props Network will maintain its current user base or grow, nor is it possible to predict whether any major security incidents will occur on the network. The growth and stability of the Props Network is affected by a large number of complex and interrelated factors. Past growth and performance of the network are not indicative of the growth and performance of the network in the future.

The Props Network, including the Protocol Rewards Engine, relies on software and programming that is complex, and if it contains undetected errors, the Props Network could be adversely affected.

The Props Network, including significant components like the Protocol Rewards Engine and the Ethereum “smart contract” that creates Props Tokens (the “Token Code”), and our internal systems rely on software and computer programming that is highly complex. In addition, the Props Network and internal systems depend on the ability of this software to store, retrieve, process and manage immense amounts of data and digital media content. While we will take reasonable steps to avoid such issues, including undergoing routine audits, some errors or other bugs or defects may only be discovered after the code has been released for external or internal use. For example, undetected errors in the “smart contracts” we deploy to the Ethereum blockchain may be manipulated so as to allow bad actors to issue themselves Props Tokens or otherwise maliciously affect the Props Network. Errors or other bugs or defects within the software on which we rely may result in a negative experience for application developers and users, delay introductions of new features or enhancements, result in errors or compromise our ability to protect user data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could therefore result in harm to our reputation, loss of developers or users, loss of revenue, or liability for damages, any of which could adversely affect the Props Network and the value of your Props Tokens.

We we will need to continue to develop certain components of the open-source software that will help additional apps to join the Props Network and attract additional developers to the Props Network in order for the Props Network to grow as we anticipate it will.

We are planning to further develop components of the Props Network, including the open-source software and adding third party developers to the Props Network. Consequently, many details about the structure of Props Apps and the Props Network—including, for example, how Props Token holders may be able to vote and on what issues, or other details of our development strategy, and business model—are not known, are uncertain, are subject to regulatory uncertainty or are subject to change, with or without notice to Props Token holders. See “Our plans for addressing scalability issues related to the operation of apps dependent on the Ethereum blockchain subjects us to a number of technological and regulatory risks that may cause the Props Network to be ineffective or not sufficiently cost—effective to continue operating.” and “We may need to address additional regulatory issues in connection with our plans for the development of the Props Network.” There is, as well, no guarantee that the Props Tokens or Props Network will develop as planned, and you should not rely on descriptions of our planned, future development for the Props Network or Props Tokens as a promise or guarantee.

The systems and devices of the Props Network may be the target of malicious cyberattacks, which may result in security breaches and the loss or theft of tokens.  If these attacks occur or security is compromised, this could expose us to liability and reputational harm and could seriously curtail the utilization of the Props Tokens and cause a decline in the market price of the Props Tokens.

The Props Network may be the target of malicious attacks seeking to identify and exploit weaknesses in the software, the Props Network, Props Apps or the Props Tokens, which may result in the loss or theft of tokens.  These attacks may include the following:

Such attacks may materially and adversely affect the Props Network in the ways described above, and any such attacks, or the perception that any has occurred, also may materially and adversely affect the Props Network by reducing trust in the integrity of the Props Network, creating bad publicity, and ultimately decreasing demand for the applications on the Props Network.

In February 2019, YouNow was contacted by a reporter regarding a potential data breach into YouNow’s user data, which allegedly occurred in 2017 and involved the exposure of user records for 40,000,000 users. The information provided by the reporter included a small sample of the data from the alleged breach, and included basic personal information (names), partial email information, and public IP addresses. YouNow considers the impact of the disclosed information on the Props Live Video App’s users to be minimal, as the disclosure of names, partial email information, and public IP addresses of the users in these circumstances is unlikely to cause substantial damage. Following the report, YouNow launched an internal review into the matter, and has not found any conclusive evidence of a data breach into its systems. We believe, however, that it is likely that it occurred. Regardless, YouNow proactively took action to secure its systems by revoking all existing passwords and access keys into any service and system which has access to user data, and introducing Single Sign On (SSO) and 2 Factor Authentication (2FA) across the company.

YouNow disclosed information on the alleged breach to the Information Commissioner’s Office (ICO) of the United Kingdom. The ICO has closed the investigation with no further regulatory action required. We also reported it to Agencia Espanola Proteccion Datos (AEPD), under GDPR regulations, which has also closed the investigation with no further regulatory action required. Various European data protection authorities have announced the protection of data relating to users who are minors to be a focus area in the coming years, which may mean that this data breach may result in a regulatory investigation into the Props Live Video App’s data practices, which may cause enforcement action to be taken in due course. In addition, other jurisdictions may require the filing of reports or other information related to the alleged breach. As of the date of this offering circular, we have made no additional filings or reports, which may also mean that this data breach may result in a regulatory investigation into the Props Live Video App’s data practices that could cause enforcement action to be taken in due course.

This breach is alleged to have occurred with respect to Props Live Video App accounts, which are separate from the blockchain infrastructure of the Props Network, including the Props Network’s Token Code and Protocol Rewards Engine. YouNow does not have access to or store private wallet addresses of any third party Props Token holders (including users) in the databases associated with the Props Live Video App, so that, even if a malicious actor used information from this alleged 2017 breach to access a Props Live Video App user’s account, she would not be able to gain control over the user’s Props Tokens as a result. See “As a holder of Props Tokens, you will be responsible for securing and maintaining your private keys and otherwise following cybersecurity best practices. Failure to do so may result in the loss of all your tokens” for more information about the necessity of keeping private keys safe. It would be possible for a malicious actor to use Props Live Video App or a Third Party App Developer app account information to, for example, maliciously interfere with user experience of the Props Live Video App or a Third Party App Developer app by changing account settings or other information associated with the account, including wallet addresses associated with the account so that, for example, the user’s app experience would not reflect the total Props Tokens she holds unless she undid the change. However, this user’s Props Tokens could not be stolen with only the information obtained in the alleged 2017 breach. As a result, YouNow does not believe that this potential breach poses any significant risks to Props Token holders.

The operation of the Props Tokens and the Props Network depends on ongoing Props Token transaction validation efforts, which are conducted, in large part, by third parties that we do not control on the Ethereum blockchain.

The Props Network depends upon the actions of third party blockchain Validators on the Ethereum blockchain, who operate computers that construct the Ethereum blockchain in exchange for rewards. See “Description of the Props Tokens Being Offered—Token Transfers” for additional information. In addition, the recording of usage data, the performance of certain oracle functions for our “smart contracts,” and the recording of Pending Props all depend, in part, on third party Validators administering the Props Blockchain.

There is no guarantee, however, that a sufficient number of Validators will continue to mine the Ethereum blockchain or perform Validator functions on the Props Blockchain; Validators are not contractually or legally obligated to continue validation operations and may cease transaction validation if they determine that their operations are no longer profitable, if they are prevented from doing so by government or regulatory agencies, or for any other reason. Further, if Validators of our Props Blockchain do not reach the agreement required in order for the Protocol Rewards Engine to make daily rewards allocations, the Protocol Rewards Engine would not make daily rewards allocations for that day, potentially resulting in interruptions to the operations of the Props Network. Further, if Validators maintaining the Ethereum blockchain cease to continue constructing the Ethereum blockchain or if Validators of the Props Blockchain cease constructing the Props Blockchain or otherwise fail to perform Validator functions, then you may lose your Props Tokens, the Props Network may be unable to function, and the value of your tokens may decline.

Misconduct and errors by our employees and third-party service providers, or by users and developers on the Props Network, could harm our network and reputation.

We are exposed to many types of operational risk, including the risk of misconduct and errors by our employees, former employees, and other third-party service providers, third party Validators or by developers or users on the Props Network. Participants on the Props Network such as application developers and third party Validators, who we do not control, could be in a position to handle large amounts of sensitive and potentially proprietary data, whose exposure could result in significant liability. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and we cannot control application developers or users on the Props Network; the precautions we take to detect and prevent this activity, such as encryption of user data, may not be effective in controlling unknown or unmanaged risks or losses. For example, it is possible that a developer would create an application that allows the developer to see unencrypted data. Any of these occurrences could result in our diminished ability to operate our business and develop the Props Network, potential liability to our company, inability to attract future application developers and users, reputational damage to the Props Network, regulatory intervention and financial harm, which could negatively impact the Props Network, the growth of the Props Network and the value of Props Tokens.

Negative publicity could adversely affect the adoption of the Props Network and the value of the Props Tokens.

Negative publicity about us, the Props Network or about the cryptocurrency industry in general, including the quality, security and reliability of the Props Network or the Props Tokens, and the quality, security and reliability of similar technologies employed by other cryptocurrencies, could adversely affect our reputation, the popularity of the Props Network, and the confidence in, and the use of, the Props Network, which could harm the growth of the Props Network and the value of your Props Tokens. This may be true even if such publicity is inaccurate. For example, negative publicity could relate to the utility of cryptocurrency in general, the accuracy and effectiveness of the protocol used in allocating the Props Tokens on the Props Network, changes to the Props Network, our ability to effectively manage and resolve complaints from users and application developers, privacy, data protection and security practices, litigation, regulatory activity, the actions of other third parties on the Props Network, including with respect to use actions in the Props Live Video App or a Third Party App Developer app, or future-created Props Apps, and the experience of users with the Props Network or services and other cryptoassets.

Harm to our reputation could also arise from many other sources, including employee misconduct, misconduct by our partners, including third party app developers, misconduct by application developers and users on the network or third party Validators, outsourced service providers or other counterparties, failure by us or our partners to meet minimum standards of service and quality, inadequate protection of user data, security incidents, data breaches, and compliance failures and claims, or the perception that any of these has occurred. Misinformation about our team members can spread on social media websites like Twitter or Facebook, or on public forums. Accounts owned by our employees might be hacked to potentially spread misinformation. While we plan to take necessary precautionary steps and attempt to address cases of misinformation, there is no guarantee that we will be successful in these efforts. Misinformation or negative publicity can negatively impact the price of the Props Tokens.

Any violation of our policies or YouNow’s terms and conditions of use, including misuse of the Props Live Video App, or other apps on the Props Network, by our customers could also damage our reputation and potentially subject us to liability.

Consumers could misuse Props Apps, including the Props Live Video App or a Third Party App Developer app, by, among other things, transmitting sexually-explicit or violent content, reproducing and distributing copyrighted material without permission, transmitting inaccurate or fraudulent information or otherwise engaging in illegal activity. Similarly, third party app developers or owners operating Props Apps on the Props Network or their users may also engage in illegal activity. Any such use of the Props Network could damage our reputation and could subject us to claims for damages, copyright or trademark infringement, defamation, negligence or fraud. Moreover, users or other network participants may use the Props Network to promote their products and services in violation of federal, state and foreign laws.

We cannot predict whether the use of the Props Network by users or app developers could expose us to liability under applicable laws or subject us to other regulatory action. Even if any claims asserted against us or regulatory actions do not result in liability, we may incur substantial costs in investigating and defending against such claims or actions, or our reputation may be damaged. If we are found liable or to have violated applicable law in connection with these activities, we could be required to pay fines or penalties, redesign components of the Props Network or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability.

YouNow or, in the future, another participant in the Props Network could create another digital asset which could negatively affect the value of the tokens.

The Third Party App Developer or the current owner and operator of the Props Live Video App or, in the future, other Props App developers could create additional tokens or other digital assets or cryptoassets similar to the Props Tokens. These other assets may share certain characteristics with the Props Tokens, and they may compete directly or indirectly with the Props Tokens. Any such additional tokens or cryptoassets could negatively affect the Props Network and the economy in Props Tokens by diluting interest in Props Tokens or otherwise affecting the incentive structures built around Props Tokens, including in ways we cannot predict. These tokens or cryptoassets could also potentially replace some or all of the usage of the Props Tokens in these or other Props Apps. The occurrence of any of these events could negatively affect the value of the Props Tokens.

The technology underlying the Props Network may not function properly.

While the essential components of the Props Network—including the Token Code, the Props Tokens, the Props Blockchain, the Props Live Video App and a Third Party App Developer app—will be operational at the time of qualification of this offering circular, the Props Network remains in development and key elements of the technology are new to our system, including the Props Blockchain, as discussed in “Description of the Props Network—The Props Blockchain.” In March 2019, we began distributing Props Tokens to our SAFT holders, and as a result, Props Tokens have been in use since then. However, we may still experience problems with their functionality in the Props Live Video App or in a Third Party App Developer app. We could also experience other problems, and elements of the Props Network may not function properly when introduced to live users on the network. These features will be important to the growth of the Props Network. There can be no guarantee that the technology required for the operation of the Props Network will function as anticipated or function at all. This technology may malfunction because of internal problems or as a result of cyberattacks or external security breaches or we might not be able to successfully develop the technology. Further, there may be no alternatives available if this technology does not work as anticipated. As a result, failure of this technology to work as intended may adversely affect the operation and growth of the Props Network and may have a material adverse impact on the value of your Props Tokens.

The Props Network has been and will be, as applicable, developed by key technology employees, and the Props Network’s continued operation and further development depend on the continued availability of those key employees.

Key technology supporting the Props Network, including our “smart contracts” and other components of our intellectual property has been and will be developed primarily by a small number of key technology employees of YouNow. For example, we are aware of only four YouNow employees who possess the necessary technological skillset to develop the backend infrastructure for the Props Network. In the future, some of these employees may be transitioned into roles at Props PBC, where they may be dedicated to Props Network-wide development efforts. The loss of the services of any of those key employees could have a material adverse effect on the ability of YouNow or Props PBC, as applicable, to develop, operate or maintain the Props Network or the Props Blockchain. If the Company were to lose the services of any these key employees, it could be very difficult to replace them, and the loss of any of them could have a material adverse effect on our operations and financial conditions. Further, because the skillset required to successfully develop blockchain-related businesses is rare, the loss of key employees could result in us being unable to fill these roles.

We may face litigation or liability in connection with our forward sales of Props Tokens to purchasers of simple agreements for future tokens (SAFTs), which could have a material adverse effect on our company’s operations and financial condition.

We issued SAFTs to investors in November 2017. The Company believes that, under the SAFTs, the research and development services it was obliged to provide were limited to the creation of YouNow’s token platform and the creation and delivery of a functional token. The completion of these research and development services principally required the creation of the Token Code (an ERC-20 “smart contract”); building the distribution mechanism for Props Tokens, including a mechanism for effecting any vesting under SAFTs; developing the Rize app, including basic “wallet” functionality in the Rize app and merging it into the Props Live Video App; and building Props-specific exclusive features in the Props Live Video App. In March 2018, we offered to these investors a rescission of their SAFT purchases or, alternatively, amendments that would extend the deadline for delivery under the agreements to March 4, 2019, in exchange for increasing the number of Props Tokens the purchasers would be entitled to receive under their agreements by 10%. The vast majority of the purchasers chose to amend and affirm their SAFTs. As a result, we were obliged to begin to distribute functional Props Tokens to SAFT holders by March 4, 2019, or be obliged to return these purchasers’ investments in the SAFTs in an amount approximately equal to $20.6 million.

The Company completed its services by March 4, 2019 in connection with the initial delivery of the Props Tokens to SAFT purchasers, and as a result, the company believes that as of March 4, 2019 it had performed all of its research and development obligations owed to SAFT holders under the SAFTs. See “Other Offerings” for additional information. SAFT purchasers could, however, argue that YouNow needed to enable, prior to delivering the Props Tokens to the SAFT holders, additional functionality, such as a fully functioning Protocol Rewards Engine. While YouNow believes it properly delivered the Props Tokens and, in any case, could not be deemed to have failed to perform under a SAFT as a result of the application of law according to the terms of the SAFT, it is possible that our SAFT investors could subject us to private litigation relating to our obligations under the SAFT or argue that we are obliged to return their investments. Any of these proceedings could have a material adverse effect on our business, the Props Network, and the value of the Props Tokens.

The Props Network and the Props Tokens may face the risk that one or more of its competitors, or other third parties, may obtain patents or other protections covering technology critical to the operation of the Props Network and the Props Tokens.

We believe that a number of organizations are or may be working to develop decentralized application systems for digital media platforms or other novel technologies that may be competitive with our own technology. Some or all of these organizations, including organizations that may have technology similar to YouNow or Props PBC, may have substantially greater technological expertise, experience with blockchain technologies and/or financial resources than our company has, and many of them may be attempting to patent technologies that may be competitive with or similar to the technology we have developed, or attempting to reverse engineer our technology, which may be possible as a substantial portion of the software underlying the Props Network is open source software that is generally available to the public and described in our publicly available whitepaper. We do not have access to detailed information about the technologies these organizations may be attempting to patent. The Props Network may ultimately compete with these alternative networks, which could negatively impact the Props Tokens and the Props Network, and may prevent the further development of Props Network. Further, occasionally, YouNow may be targeted with patent infringement lawsuits. These cases may be brought by non-practicing entities that sustain themselves by suing other companies. Currently, YouNow is not aware of any patent infringement suits against it, or contemplated to be brought against it. On June 21, 2019, YouNow received a license offer letter alleging infringement of, and offering a license to, certain patents.  YouNow believes the allegations have no merit and has not responded.

If one or more other persons, companies or organizations obtains a valid patent covering technology critical to the Props Network or the Props Tokens, our company and any other entities that required rights to the relevant technology in order to enable the Props Network and the Props Tokens to operate as intended might be unwilling to license the technology or unable on commercially reasonable terms, and it could become impossible for the Props Network and Props Tokens to operate, which could have a material adverse effect on our business, the Props Network, and the value of the Props Tokens.

The open source portions of the software and underlying technology of the Props Network and Props Tokens could be used by third-parties to develop competing blockchain-based business models and tokens.

Given that a substantial portion of the software necessary for the Props Network to operate, including the majority of the software comprising the PropsKit, and Sidechain Node are released under the terms of various open source software licenses and given that such software is generally available to the public at www.github.com or linked from www.PropsProject.com/offering or other publicly available websites, a person or company could establish software, technology and networks, built using our publicly-available software. It is possible that those products would be substantially similar to and competitive with our software, technology and network. If this were to occur, it is possible that the value of the Props Network and Props Tokens could decline.

If we fail to promote and maintain our brands in a cost-effective manner among both users and application developers, we may lose Props Network users and the value of your tokens may be adversely affected.

We believe that developing and maintaining awareness of our brands in a cost-effective manner is critical to attracting and retaining application developers and users to the Props Network. This also applies to top-tier employee talent. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts, efforts to encourage adoption and further development of the network by application developers and other ecosystem partners, and the experience of application developers and users on the Props Network. Our efforts to build our brands have involved significant expense, and it is likely that our future marketing efforts will require us to incur significant additional expense. These brand promotion activities may not result in increased revenue and, even if they do, any increases may not offset the expenses incurred. If we fail to successfully promote and maintain our brand or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may lose our existing application developers and users to our competitors or be unable to attract new application developers and users, which may adversely affect the value of your Props Tokens.

If Props PBC is unable to continue with its grant program for any reason, including as a result of regulatory issues, we may be forced to change our plans for supporting the further development of the Props Network, which could adversely affect the Props Network or the value of your tokens.

Props PBC may distribute Props Tokens on a discretionary basis in the form of grants or expense reimbursements to developers building either applications on the Props Network or Network infrastructure, strategic content partners, and other entities directly supporting the growth of the Props Network. The distribution of Props Tokens in the form of grants or expense reimbursements to developers, strategic content partners, and other entities supporting the growth of the Props Network is being qualified under this offering circular. We view Props PBC’s operation of this program as a significant benefit to the Props Network, given that Props PBC has a stated public benefit purpose of creating an open, sustainable and equitable media network that fairly rewards all participants in the Props Network for their contributions to the network, by supporting and promoting the growth, research, further development, and adoption of the protocol and token underlying the Props Network.

Because it will be receiving Props Tokens from YouNow with a view to distributing Props Tokens to grant recipients, Props PBC will be deemed to be a statutory underwriter under Section 2(a)(11) of the Securities Act. A statutory underwriter is subject to the prospectus delivery and liability provisions of the Securities Act and may be deemed to be conducting broker-dealer like activities that could in certain circumstances subject Props PBC to additional regulatory obligations. If the distribution of Props Tokens by Props PBC in its grant program becomes unduly expensive or it’s otherwise unable to continue its distributions as a result of regulatory or other reasons, we may need to restructure our plans for supporting the growth of the Props Network, including, for example, by having YouNow issue grants. Any such occurrence could adversely affect the further development of the Props Network and the value of your Props Tokens.

We may need to increase the total number of Props Tokens issuable by the Token Code in order for the Props Network to operate in the future.

Because the initial terms of our Token Code provide for the issuance of a fixed number of 1,000,000,000 Props Tokens, the amount of Props Tokens available to serve as incentives for the undertaking of key functions to be performed by Props Network participants will decrease over time. See “Description of the Props Tokens Being Offered—Token Supply” and “Description of the Props Token’s Role in Helping to Align Incentives of Network Participants.” It is possible that these key functions will only continue to be adequately incentivized as the number of Props Tokens allocated or issued decreases on the condition that the value or of Props Tokens rises in the future. There is, however, no guarantee that the value of Props Tokens will increase in the future. See “Risk Factors—The value of the Props Tokens may be volatile. There is no guarantee that the Props Tokens will hold value or increase in value, and we do not fully control many factors affecting their value.” Props PBC will have the power, as the owner of the account with the ability to effect these changes to a “smart contract” like the Token Code (the “Controller”), to increase the total number of Props Tokens that may be issued, to the extent that Props PBC determines that such an increase could help the further development of the Props Network. See “Description of the Props Network—The Token Code” for additional details. If Props PBC fails to take such action, the Props Network may be unable to continue to operate in the desired manner.

Risks Related to Blockchain Technology

The Ethereum blockchain on which ownership of Props Tokens is recorded, our Props Blockchain, and the Props Tokens themselves may be the target of malicious cyberattacks or may contain exploitable flaws in their underlying code, which may result in security breaches, the loss or theft of Props Tokens, the decline in value of Props Tokens, or liability and reputational harm.

The Props Tokens and the economy in Props Tokens rely on the Ethereum blockchain and the Props Blockchain to operate. As a result, Props Tokens and the Props Network are subject to a number of reliability and security risks attendant to blockchain and distributed ledger technology, including malicious attacks seeking to identify and exploit weaknesses in the software. Some of these known risks include:

Such attacks may materially and adversely affect the Ethereum blockchain, which may in turn materially and adversely affect the creation, transfer or storage of the Props Tokens and the Props Network. As a result of these and other risks of malicious attacks, there can be no assurances that the creation, transfer or storage of Props Tokens or the Props Network itself will be uninterrupted or fully secure. Any such interruption or security failure may result in impermissible transfers of Props Tokens, a complete loss of users’ Props Tokens or an unwillingness of users to access, adopt and utilize the Props Network and/or Props Tokens as a result of reduced trust in the integrity of the Props Network from bad publicity.

The Props Blockchain and the oracle function to the Protocol Rewards Engine are dependent on the efforts of YouNow and third parties acting in their capacity as the Props Network’s Validators, and if YouNow or these third parties fail to successfully perform these functions, the operation of the Props Network could be compromised.

YouNow will be an initial Validator for the Props Blockchain. In addition, as of the date of this offering circular, three persons or entities serve as Validators. See “Description of The Props Network—The Validators” for additional details regarding selection of Validators. In the future, a total of up to seven persons may serve as Validators. The selected entities, collectively, will have the responsibility for maintaining the record of app usage on the Props Blockchain. These entities will also, therefore, have responsibility for communicating this information to the Protocol Rewards Engine, so that the Props Rewards Engine can make daily app rewards. See “Description of the Props Network—The Protocol Rewards Engine” for additional details regarding these rewards. As a result, key functions of the Props Network will depend on YouNow, including receiving accurate accounts of usage data from Props Apps developers and providing the Protocol Rewards Engine with the daily updates necessary so that it may provide its daily allocation of Props Tokens.

As a result, if these entities suffer from cyberattacks or other security incidents (whether from hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, the inadvertent transmission of computer viruses or other malware, other forms of malicious attacks, malfeasance or negligent acts of its personnel, or via other means, including phishing attacks and other forms of social engineering), or their efforts are otherwise compromised the functioning of the Props Network may be jeopardized. In addition, if the Validators for any reason fail to continue to operate as Validators of the Props Blockchain or otherwise cease operations, this may cause a material adverse effect to the Props Network and the value of your Props Tokens.

Our plans for addressing scalability issues related to the operation of apps dependent on the Ethereum blockchain subject us to a number of technological and regulatory risks that may cause the Props Network to be ineffective or not sufficiently cost-effective to continue operating.

As noted above, scalability is a challenge for platforms working with large blockchains like the Ethereum blockchain. YouNow believes that it has addressed some of these problems by recording information about the number of Props a user may be entitled to claim in the future, which we refer to as Pending Props, to the Props Blockchain immediately upon a user’s earning of Props—which may only be converted into Props Tokens once the user has completed the steps described in “Description of the Props Tokens Being Offered—Receiving Props Tokens.” This information improves user experience of Props Apps by allowing users to enjoy the benefits of earned Props Tokens while an app is still performing fraud checks or similar operations that must be completed prior to issuance of Props Tokens on the Ethereum Blockchain. In addition, YouNow is helping to address scalability issues for the YouNow live video app by covering the costs of fees for recording transactions on the Ethereum blockchain for certain Props Tokens transfers.

These solutions may not be successful and may only temporarily help us address scalability issues in a limited way. For example, even if YouNow were to cover such fees in the future, YouNow may cease this practice of covering certain transaction fees in the future and may not undertake to cover the costs of transactions on the Ethereum blockchain for app developers, which may make developing apps for the Props Network less attractive for third party developers. In addition, our solution may subject us to regulatory risks as additional third party application developers seek to join the Props Network, including, for example, with respect to the potential requirement to register as a transfer agent or find a registered transfer agent to act as a validator to the Props Network. See “Description of the Business—Government Regulation” for additional detail.  In general, if scalability issues are not resolved, this could make it uneconomical or unattractive for users to use Props Apps, including for example, because users may not be able to efficiently tip or otherwise transfer small numbers of Props Tokens.

The technology underlying cryptocurrency and blockchain technology is subject to a number of known and unknown technological challenges and risks that may prevent wide adoption and use of the Props Network and the Props Tokens.

The blockchain technology used in connection with cryptocurrencies like Props Tokens, which is sometimes referred to as “distributed ledger technology,” is a relatively new, untested and evolving technology. It represents a novel combination of several concepts, including a publicly available database or ledger that represents the total ownership of the currency at any one time, novel methods of authenticating transactions using cryptography across distributed network nodes that permit decentralization by eliminating the need for a central clearing-house while guaranteeing that transactions are irreversible and consistent, differing methods of incentivizing this authentication by the use of blocks of new tokens issued as rewards for the validator of each new block or transaction fees paid by participants in a transaction to validators, and hard limits on the aggregate amount of currency that may be issued. As a result of the new and untested nature of cryptocurrency and blockchain technology, the Props Network and the Props Tokens are vulnerable to risks and challenges, both foreseen and unforeseen. Examples of these risks and challenges include:

Although there may be solutions that have been proposed and implemented to these and other challenges facing various cryptocurrencies, the effectiveness of these solutions has not been proven. Further, other challenges may arise in the future that we cannot predict. For example, advances in cryptography and/or technical advances, such as the development of quantum computing, could present risks to the Props Tokens and the Props Network by undermining or vitiating the cryptographic consensus mechanism that underpins the Ethereum blockchain protocol. Similarly, legislatures and regulatory agencies could prohibit the use of current and/or future cryptographic protocols which could limit the utility of the Props Tokens, resulting in a significant loss of value or the termination of the tokens and the network. Accordingly, the further development and future viability of cryptocurrency in general or specific cryptocurrencies, such as the Props Tokens, is uncertain, and unknown challenges may prevent their wider adoption.

The technology underlying cryptocurrency and blockchain technology is subject to a number of industry-wide challenges and risks relating to consumer acceptance of blockchain technology. The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets would have an adverse material effect on the successful adoption of the tokens.

The growth of the blockchain industry in general, as well as the blockchain networks on which the Props Tokens will rely, is subject to a high degree of uncertainty regarding consumer adoption and long-term development.  The factors affecting the further development of the cryptocurrency and cryptoasset industry, as well as blockchain networks, include, without limitation:

The digital assets industries as a whole have been characterized by rapid changes and innovations and are constantly evolving.  Although they have experienced significant growth in recent years, the slowing or stopping of the development, general acceptance and adoption and usage of blockchain networks and blockchain assets may deter or delay the acceptance and adoption of the Props Tokens.

The Ethereum blockchain network on which ownership and transfer of Props Tokens will be recorded utilizes code that is subject to change at any time. These changes may have unintended consequences for the Props Network and the Props Tokens.

The Props Tokens are built as an ERC-20 token recorded on the Ethereum blockchain. See “Description of the Props Tokens Being Offered—Terms of the Token Code” for additional information regarding what it means to be an ERC-20 token. In addition to the aforementioned risks regarding development and acceptance of blockchain networks or the price of blockchain assets that may negatively affect the Ethereum network, other changes such as upgrades to Ethereum’s blockchain, a hard fork in Ethereum, or a change in how transactions are confirmed on the Ethereum blockchain may have unintended, adverse effects on all blockchains utilizing the ERC-20 standard, including the Props Network. For example, the proposed change in Ethereum’s consensus mechanism from a proof-of-work to modified proof-of-stake format could affect the issuance or transfer of Props Tokens. These changes may occur at any time and may cause delays in development or may completely foreclose our ability to maintain the Props Network. Any such changes to the Ethereum network could result in a disruption to YouNow and the Props Network—which could negatively affect the value of your Props Tokens.

Forks may be implemented on the Ethereum blockchain or on the Props Blockchain in a manner that may affect the value of your Props Tokens, and may ultimately result in duplicate records of Props Tokens which we have not issued and may not support.

As described under “Description of The Props Tokens Being Offered—Third Party Token Modifications and Changes to Functionality,” third party groups or individuals involved in the network may at any time propose upgrades or changes to the open-source software underlying the Props Tokens that can result in prolonged “forks” in the Ethereum blockchain or the Props Blockchain. While we do not believe that these changes present significant risks to the Props Network or Props Token holders, there is, however, a possibility that these changes could result in disruptions to the Props Network or disagreements in the Props Network community of developers and users regarding which fork of a blockchain should be recognized as legitimate for the Props Network. If other Props Apps exist on the Props Network, they could, for example, determine to treat the competing record of Props Tokens as the legitimate record of Props Tokens. We believe we could exert control and substantially resolve any disagreements by causing Props PBC to terminate the competing record of Props Tokens. Further, with respect to these competing tokens not endorsed by YouNow, YouNow would publicly disclaim its status as issuer of such an altered token and discontinue any plans to upgrade that token code or discontinue development for apps working in that competing environment. See “Description of The Props Tokens Being Offered—Third Party Token Modifications and Changes to Functionality” for additional detail.

In the future, we could assign essential components of the Props Network, including the Protocol Rewards Engine, to Props PBC, which ultimately could negatively affect the Props Network and the value of the Props Tokens, and may ultimately result in us disclaiming our status as the issuer of the Props Tokens.

In the future, we could take a less active role in guiding the further development and administration of the Props Network. This could occur as a result of the assignment of the ownership of the Protocol Rewards Engine or other parts of the Props Network infrastructure to Props PBC or taking other actions that we would deem necessary to assign the operation and maintenance of the Props Network infrastructure to Props PBC. See “Description of Business—Assignment, Decentralization” for additional details. Depending on the actions we take and how completely the essential managerial and entrepreneurial efforts that Props Token holders would be relying upon would become those of Props PBC and not YouNow’s, we believe that this could result in Props PBC becoming the issuer of the Props Tokens. While we believe that this determination could only be made in consultation with counsel and, if appropriate, the SEC or its staff and we would work to ensure Props Token holders are provided with notice, any such assignment could negatively affect the Props Network and the value of the Props Tokens. At the time of any such assignment, Props PBC may not, for example, be able to provide the same level of financial or technical support to the Props Network and any such assignment could disrupt the operation of the Props Network.

Further decentralization of the Props Network could occur in the future, which ultimately could negatively affect the Props Network and the value of the Props Tokens, and may ultimately result in us disclaiming our status as the issuer of the Props Tokens.

In the future, we could take a less active role in guiding the further development and administration of the Props Network. For example, we anticipate that, in the future when there is a healthy ecosystem of Props App developers, content-creators and users on the Props Network, we could entrust the account with the ability to effect changes to the Props Network “smart contract” (the “Controller”) to a decentralized autonomous organization (“DAO”), which would then enable Props Token holders to vote on changes to these “smart contracts.” We don’t believe that decentralization like this will occur at any time in the foreseeable future, and in any case, it would be necessary to both gain substantial community support for these efforts and, also, create additional technological capabilities in order to successfully effect such decentralization. Further, while the law for this is evolving, we believe that, subject to the view of the SEC, it is possible that at some point in the future the Props Network could become so decentralized that Props Tokens would no longer be securities issued by YouNow. See “Description of Business—Assignment, Decentralization” for additional details. You will not have any rights in determining whether or not this has occurred. We believe that the determination that the Props Network is so decentralized that YouNow is no longer the issuer of the Props Tokens likely will turn on whether purchasers or participants reasonably expect YouNow to carry out essential managerial or entrepreneurial efforts. A mix of facts and circumstances may inform whether the efforts of YouNow are no longer a key factor for determining the success of the YouNow network and YouNow may no longer have an informational advantage over others, so that disclosures by YouNow may be less meaningful. We don’t believe, for example, that this will necessarily occur if we simply entrust Controller responsibilities to a DAO, and we believe that this determination could only be made in consultation with counsel and the Securities and Exchange Commission.

As a holder of Props Tokens, you will be responsible for securing and maintaining your private keys and otherwise following cybersecurity best practices. Failure to do so may result in the loss of all your tokens.

Props Token balances are associated in your wallet with your token public key, which is in turn associated with your token private key. You are responsible for knowing your private key and keeping it a secret. Because a private key, or a combination of private keys, is necessary to control and use Props Tokens stored in your digital wallet or vault, the loss of one or more of your private keys associated with your digital wallet or vault storing the tokens will result in the loss of your Props Tokens.

You are responsible for educating yourself on best practices for securely keeping private keys, protecting your personal information and on cybersecurity best practices. While we take steps to prevent or mitigate the impact of cyber-attacks in the Props Network open-source software, there can be no guarantee that we will be successful in preventing all cyber-attacks on this software. Holders of cryptoassets can be targeted by hackers in many ways, most of which are out of our control. Holders’ private keys also can be stolen. Any third party that gains access to one or more of your private keys, including by gaining access to login credentials of a hosted wallet service you use, may be able to misappropriate your Props Tokens. We will use reasonable efforts to make resources regarding best practices for keeping private keys secure to users, but we have no control over this type of attack and cannot directly stop hackers from stealing private keys of users. We accept no liability and will not reimburse you for any theft of private keys or any malfunction of any wallet software. As a result, any loss of your Props Tokens due to theft or unauthorized use of your private key may be final and result in the complete loss of your Props Tokens.

Props Token transactions may be irreversible, and, accordingly, losses due to fraudulent or accidental transactions or technology failures in your wallet software may not be recoverable.

Transactions in the Props Tokens may be irreversible, and, accordingly, you may irreversibly lose all of your Props Tokens in a variety of circumstances, including in connection with fraudulent or accidental transactions, technology failures in wallet software or cyber-security breaches. Losses due to fraudulent or accidental transactions may not be recoverable.

Risks Related to our Business

We have a limited history working with blockchain technology, which makes it hard to evaluate our ability to develop the Props Network.

YouNow was formed in 2011 to develop and operate consumer-facing mass market entertainment apps. Since 2014, we have operated these apps with an “in-app” digital currency, and as we launch the Props Network, we intend to leverage our technology, expertise, user community and other related experience to build the infrastructure for an open, decentralized digital media network reliant on blockchain technology. We do not, however, have experience operating a digital media platform based on blockchain technology. Our company’s limited operating history in this sector may make it difficult to evaluate its current business and future prospects. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly developing and changing industries, including challenges in forecasting accurately, determining appropriate allocation of its limited resources, gaining market acceptance, managing a complex regulatory landscape and developing new products. Our current operating model may require changes in order for us to scale our operations efficiently. You should consider our business and prospects in light of the risks and difficulties we face as an early-stage company in the blockchain industry focused on developing products in the field of digital media network infrastructure. At least initially, the further development of the Props Network and, in turn, the value of the Props Tokens will depend on the success of our business.

YouNow has incurred net losses in the past and we expect to continue to incur net losses in the future.

YouNow seeks to grow its business and the Props Network by attracting users, content creators, application developers and partners and further enhancing and developing the Props Network. These efforts may prove more expensive than currently anticipated, and we expect to continue to incur additional net losses in the future. Further, we may not succeed in financing our operations through the sale of Props Tokens. There can be no assurance that the Company will be successful in securing such financing, on favorable terms or at all. If we are unable to continue operations or are otherwise constrained as a result of incurring net losses or failing to raise finance, this would have a material adverse impact on the Props Network, Props Apps and the value of Props Tokens.

Based on our rate of cash outflows, there is substantial doubt about our ability to continue as a going concern unless additional sources of capital are secured.

The Company incurred losses from operations of approximately $4.9 million and had operating cash outflows of approximately $3.1 million for the six months ended June 30, 2019. As of June 30, 2019, the Company had approximately $3.4 million of cash available. Currently, we believe that our cash and cash equivalents will be sufficient to fund our operations into June 2020. However, our cash forecasts and capital requirements are subject to change as a result of a variety of risks and uncertainties.

Based on our rate of cash outflows, there is substantial doubt about our ability to continue as a going concern, whether for one year from the issuance date of our most recent financial statements or a shorter time, unless additional sources of capital are secured. The Company is currently working with various venture capital firms, cryptocurrency funds and others to secure additional capital through the sale of Props Tokens. However, there can be no assurance that the Company will be successful in securing such financing, on favorable terms or at all. If we are unable to secure additional capital, this would have a material adverse impact on the Props Network, Props Apps and the value of Props Tokens.

If we are unable to generate sufficient cash from the sale of Props Tokens or from other sources of investment finance, we may be unable to fund our operations which would have a material adverse effect on the Props Network and the value of the Props Tokens.

We currently believe that our cash and cash equivalents will be sufficient to fund our operations into June 2020. However, our cash forecasts and capital requirements are subject to change as a result of a variety of risks and uncertainties, including increases in operating costs. In addition, the costs of fully developing the Props Network may be greater than we originally anticipated. We believe, for example, that we will need to spend approximately $2 million over the next year in order to fund our operations and develop the Props Network, including through growing the network’s user base and attracting additional app developers. But, these expenses could be higher than anticipated, and we may in all events be unable to recruit users or app developers. Our ability to fund our development efforts may, ultimately, depend on our ability to raise funds through the sale of Props Tokens, and such financing may not be available on favorable terms or at all, or our ability to develop other sources of revenue.

The reductions in spending, including, in particular, reductions in staffing levels, resulting from our recent sale of the Props Live Video App may have a material adverse effect on the Props Network and the value of the Props Tokens.

Our recent sale of the Props Live Video App allowed us to make reductions in spending and operating expenses, including reductions in staff. These reductions in spending, including, in particular, reductions in staffing levels, may harm our operations and our ability to promote the further development of the Props Network. Further, if we are unable to generate sufficient cash from operations or financing sources, we may be forced to make even further reductions in spending, liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or possibly seek bankruptcy protection, which would have a material adverse effect on our business, the Props Network, and the value of the Props Tokens.

Developers of Props Apps and users of the Props Network will initially rely on third-party platforms such as the Apple iTunes App Store and the Google Play Store to distribute the Props Live Video App, or other applications on the Props Network. If Props App developers or the users of the Props Network are unable to access or otherwise to maintain Props App availability on the platforms, including as a result of changes or violations of terms and conditions, access to and utilization of the Props Network and the Props Tokens may suffer.

We expect that a significant portion of Props Apps users will access Props Apps on the Apple iTunes App Store and the Google Play Store. As a result, Props Apps and the business of Props App developers may be subject to the standard policies and terms of service of these third party platforms, which govern the promotion, distribution and operation generally of applications on the platform. These platforms may have terms that limit the operation of apps that incorporate cryptocurrency like Props Tokens and Ether. In addition, each platform provider has broad discretion to change and interpret its terms of service and other policies with respect to the Props Apps, and those changes may be unfavorable. For example, it is possible that the Apple iTunes App Store or Google Play Store may determine that our business, including the transfer of Props Tokens effected in the Props Live Video App, violates their respective terms of service. We have, however, taken the position that our business, including the transfer of Props Tokens effected in the Props Live Video App, does not violate their respective terms of service, and accordingly, may unilaterally remove the apps from their respective stores. A platform provider may also change its fee structure, add fees associated with access to and use of its platform, change how the personal information of its users is made available to application developers on the platform or restrict how users can share information with other users on its platform or across platforms. Platform providers may also make changes to their platforms that make access to our products more difficult. For example, our Props Apps may receive unfavorable treatment compared to the promotion and placement of competing applications, such as the order in which they appear within the platforms. Such changes could result in decreased downloads of the Props Apps and decreased traffic to the Props Network.

Any of these changes or if a Props App violates, or a platform provider believes that such Props App has violated its terms of service, including by determination that the operation of Props Apps with Props Tokens as we have contemplated violates their terms of service, may result in the removal of Props Apps from these platforms or other adverse consequences—which may have the effect of decreasing the visibility or availability of Props Apps, limiting distribution capabilities, preventing access to the Props Apps, increasing the costs to operate on these platforms or otherwise result in the exclusion or limitation of the Props Apps from or within a platform provider’s platform, which could negatively impact the Props Network, Props Apps, and the value of Props Tokens. In addition, if there is any change or deterioration in the relationship between YouNow, Props PBC, or the Props Apps, on the one hand, and a platform provider, on the other hand, that platform provider could limit or discontinue YouNow or the Props App’s access to its platform.

In the event that YouNow or a Props App is limited or restricted from accessing any platform, including the Apple iTunes App Store or the Google Play Store, YouNow or such Props App may provide certain services, including issuances and transfers of Props Tokens, through alternative venues that may be more difficult to access and which may in turn discourage users from using Props Apps. Any limit of, or discontinuation to, Props Tokens or the Props App’s access to any platform could have a material adverse impact on access to and utilization of the Props Network, our business, our ability to attract additional app developers to create Props Apps, and the value of Props Tokens.

The Props Network, YouNow and Props PBC may be at increased risks of cyberattack or other security incidents—which may result in the loss of Props Tokens and adversely affect the Props Network and the value of Props Tokens.

The nature of our business may lead to an increased risk of fraud, cyberattack or other security incidents. Malicious actors may target the Props Network, including the Token Code and Protocol Rewards Engine, YouNow, or Props PBC, Props Apps, and Props App developers, in order to potentially gain possession of Props Tokens. As a result, the Props Network, YouNow and Props PBC may be subject to cyberattacks, security risks and risks of security breaches. A successful attack or breach of security could result in a loss of private data or unauthorized use or transfer of digital assets, including the loss of Props Tokens. Further, any successful attack or breach could adversely affect the further development and commercialization the Props Network, which could have a material adverse effect on the value of Props Tokens. For example, an attack on YouNow or Props PBC may jeopardize the operation of the Props Blockchain, which could affect the Props Network’s ability to operate. Attacks on the Token Code or Protocol Rewards Engine could also affect the Props Network’s ability to operate and cause the loss or theft of Props Tokens.

In February 2019, YouNow was contacted by a reporter regarding a potential data breach into YouNow’s user data, which allegedly occurred in 2017 and involved the exposure of user records for 40,000,000 users. The information provided by the reporter included a small sample of the data from the alleged breach, and included basic personal information (names), partial email information, and public IP addresses. YouNow considers the impact of the disclosed information on YouNow’s users to be minimal, as the disclosure of names, partial email information, and public IP addresses of the users in these circumstances is unlikely to cause substantial damage. Following the report, YouNow has launched an internal review into the matter, and has not found any conclusive evidence of a data breach into its systems. We believe, however, that it is likely that it occurred. Regardless, YouNow has proactively taken action to secure its systems by revoking all existing passwords and access keys into any service and system which has access to user data, and introducing Single Sign On (SSO) and 2 Factor Authentication (2FA) across the company.

YouNow has disclosed information on the alleged breach to the Information Commissioner’s Office (ICO) of the United Kingdom. The ICO has closed the investigation with no further regulatory action required. We also reported it to Agencia Espanola Proteccion Datos (AEPD), under GDPR regulations, which has also closed the investigation with no further regulatory action required. Various European data protection authorities have announced the protection of data relating to users who are minors to be a focus area in the coming years, which may mean that this data breach may result in a regulatory investigation into YouNow’s data practices, which may cause enforcement action to be taken in due course. In addition, other jurisdictions may require the filing of reports or other information related to the alleged breach. As of the date of this offering circular, we have made no additional filings or reports, which may also mean that this data breach may result in a regulatory investigation into YouNow’s data practices that could cause enforcement action to be taken in due course.

This breach is alleged to have occurred with respect to Props Live Video App accounts, which are separate from the blockchain infrastructure of the Props Network, including the Props Network’s Token Code and Protocol Rewards Engine. YouNow does not have access to or store private wallet addresses of any third party Props Token holders (including users) in the databases associated with the Props Live Video App, so that, even if a malicious actor used information from this alleged 2017 breach to access a Props Live Video App user’s account, she would not be able to gain control over the user’s Props Tokens as a result. See “As a holder of Props Tokens, you will be responsible for securing and maintaining your private keys and otherwise following cybersecurity best practices. Failure to do so may result in the loss of all your tokens” for more information about the necessity of keeping private keys safe. It would be possible for a malicious actor to use Props Live Video App account information to, for example, maliciously interfere with user experience of the Props Live Video App by changing account settings or other information associated with the account, including wallet addresses associated with the account so that, for example, the user’s app experience would not reflect the total Props Tokens she holds unless she undid the change. However, this user’s Props Tokens could not be stolen with only the information obtained in the alleged 2017 breach. As a result, YouNow does not believe that this potential breach poses any significant risks to Props Token holders.

Any of these types of attacks or any other security incidents, or the perception that any have occurred, may, however, also damage our reputation. Any breach of data security that exposes or compromises the security of any of the computers used by our employees or technology utilized by the Props Network could adversely impact the reliability of the network or introduce computer code to our software repositories that was not written by our engineers. These events may cause a material adverse effect to the Props Network and the value of your Props Tokens.

We operate in intensely competitive industries and any failure to attract new app developers or users to the Props Network could diminish or suspend our development and possibly cease our operations.

The consumer application industry is highly competitive and has few barriers to entry, and we expect to face significant competition in the future, including but not limited to social media apps such as Facebook, Instagram and Snapchat, video apps such as YouTube, digital media streaming applications such as Twitch and Houseparty. Many of these current and potential competitors offer similar services and have longer operating histories, significantly greater capital, financial, technical, marketing and other resources and, with respect to our consumer applications, larger user or subscriber bases than we do. These factors may allow our competitors to more quickly respond to new or emerging technologies and changes in client or consumer preferences. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing strategies that may allow them to build larger user bases consisting of greater numbers of clients or paying users. Our competitors may provide services or develop applications that are equal or superior to our services or applications or that achieve greater market or industry acceptance, including for example, similar blockchain or cryptocurrency-based platforms. It is possible that a new product or service developed or offered by one of our competitors or other new market entrants could gain rapid scale at the expense of existing brands through harnessing a new technology or distribution channel, creating a new approach to servicing clients or connecting people, particularly within the mobile application space.

With respect to consumer applications, consumers have a propensity to try new products to connect with new people. As a result, new entrants and business models are likely to continue to emerge in our industry. These activities could attract users and subscribers away from our products and services and reduce our market share. If we are unable to efficiently and effectively attract new users or clients as a result of intense competition or a saturated market, we may not be able to continue the operation of the Props Network.

We may not be able to successfully realize our plans for adding additional Props Apps to the Props Network, and even when additional Props Apps are added to the Props Network, it is possible that any functionalities for Props Tokens in the additional Props Apps would be unattractive to users which could adversely affect YouNow’s business or the Props Network.

We anticipate that upon qualification of this post-qualification amendment, the Third Party Developer will add one Props App to the Props Network and, in the future, additional Props Apps that were developed by third party app developers will be added to the Props Network. The addition of additional Props Apps in the future is a significant component of our plans for the further development of the Props Network. Third party developers, including the Third Party Developer, may, however, ultimately determine not to develop their apps for functionality for Props Token or cease to operate their apps as Props Apps for a number of reasons. For example, if third party developers joining the Props Network in the future perform functions substantially similar to those performed by the Third Party Developer, these future developers likely will be deemed to be statutory underwriters under Section 2(a)(11) of the Securities Act. We recognize, however, that future third party developers may integrate into the Props Network in distinct ways, including in ways that do not involve the distribution of rewards in the same manner as the Third Party Developer, and for these developers, we will need to evaluate the developer’s status as a statutory underwriter on a case-by-case basis. In the future, for example, it is possible that some app developers will have such small roles in the Props Network that they could, depending on factual circumstances, not be deemed to be statutory underwriters. In addition, there may be other regulatory issues related to the operation of Props Apps by third parties that could similarly affect an app developer’s willingness to develop apps for functionality for Props Token. Further, we may not be able to find any additional developers willing to develop Props Apps. If we are not able to achieve our planned further development for the Props Network, this could have an adverse effect on YouNow’s business, the Props Network, and our ability to support the Props Network.

Even if Third Party Developer or other third party app developers do develop Props Apps and functionality for Props Tokens, any functionality these developers create for Props Tokens may be unattractive to users. Any such occurrence could decrease the popularity and use of the Props Network, which could have an adverse effect on YouNow, the Props Network, and our ability to support the Props Network.

We may be subject to litigation or arbitration proceedings and may face liabilities and damage to our reputation as a result of litigation arising out of sales of rights to Props Tokens under SAFTs, DPAs, or other prior agreements to issue Props Tokens.

In the past, YouNow sold rights to receive Props Tokens by entering into SAFTs and entered into other agreements for the issuance of Props Tokens.  Further, a subsidiary of YouNow, YouNow Services, entered into DPAs, which could have been satisfied by YouNow Services’ distribution of Props Tokens to the debtholders or payment in cash.  In some cases, the description of the Props Network provided to purchasers in these agreements may have differed from the currently contemplated Props Network.  For example, YouNow has, in the past, described a role for a nonprofit foundation based in the Seychelles, and while we have formed a nonprofit foundation based in the Seychelles, we have no current plans to use it.  See “Description of Business.”  Further, we continue to develop the Props Network, and as a result, additional differences between past plans for the Props Network and current plans for the Props Network may arise in the future, including changes in token distribution schedules and amounts. See “Risk Factors—While we anticipate launching functionality for Props Tokens within the Props Live Video App shortly after the commencement of this offering, we are still developing the complete set of functionalities for Props Tokens within these apps, and we are, as well, still developing the rest of the Props Network, including certain components of the open-source software that will help additional apps to join the Props Network.”  As a result, it is possible that these differences or other changes to the implementation plan between past descriptions and the currently-contemplated structure for the Props Network may subject us to the risk of third-party litigation with purchasers of our SAFT, DPA, and other agreements for the issuance of Props Tokens.  If any lawsuits were brought against us and resulted in a finding of legal liability, such lawsuits could materially adversely affect our business, the Props Network and the value of Props Tokens or cause significant reputational harm to us, which could materially impact our business.

We may face litigation or liability for certain issuances or agreements to issue Props Tokens in possible violation of federal and state securities laws.

In the past, YouNow entered into agreements with certain of our advisors for the issuance of Props Tokens. These agreements were entered into with these advisers in order to induce them to provide professional services to YouNow, and the form of written agreement governing the majority of these relationships is included as an exhibit to this offering circular.  We may not have received representations necessary from these advisers for us to establish all necessary facts in order for us to rely on an exemption from the registration requirements of the Securities Act, as well as those of various state securities laws. YouNow, however, believes it had a reasonable basis as to as the accredited investor status of 29 out of the total of 33 advisers. See “Other Offerings” for additional information.

Agreements for the issuance of 289,039 Props Tokens to four of the advisers remain outstanding. YouNow has not distributed Props Tokens to these four advisers because YouNow believes that it does not have a reasonable basis as to these advisers’ accredited investor status. For these advisers, YouNow intends to pay advisers in cash, rather than Props Tokens. If any prior offering did not qualify for an exemption, it is possible we could be subject to private litigation or enforcement actions by the SEC or state regulators. Any of these proceedings could have a material adverse effect on our business, the Props Network, and the value of the Props Tokens. The forms of written agreements governing the majority of these relationships are included as an exhibit to this offering circular.

In addition, approximately 6 of these 34 advisers were engaged in late 2017 in order to, among other things, help us introduce our tokens to a wide community of content creators and token enthusiasts, including but not necessarily limited to, communications via YouTube posts or other public communications. As a result, it is possible that these advisers could be deemed to have performed broker-dealer like activity in connection with the offering of our SAFTs in late 2017. Any finding that these advisers were performing broker-dealer activities without registration or otherwise in violation of law could subject us to private litigation or enforcement actions by the SEC or state regulators. Any of these proceedings could have a material adverse effect on our business, the Props Network, and the value of the Props Tokens.

In addition, we may face litigation or liability in connection with the offer of Props Tokens pursuant to our DPAs possibly violating federal and state securities laws. YouNow Services entered into DPAs with investors pursuant to which YouNow Services raised an aggregate of approximately $690,834, net of already-issued refunds, as of June 3, 2019. The total amount raised, prior to already-issued refunds, was $1,070,000. The offering of the DPAs was made pursuant to an exemption from the requirements of Section 5 of the Securities Act provided by Title III of the Jumpstart our Business Startups Act (“Regulation CF”). We have taken the position that an offering of Props Tokens pursuant to the DPAs was also exempt under Regulation CF in connection with the offering of the DPAs, and that we may deliver freely tradeable Props Tokens pursuant to the DPAs. This offering was, however, subject to a number of ambiguities and uncertainties. For example, while the DPAs are each dated June 2018 pursuant to each agreement’s countersignature by YouNow Services, this appears to have been an administrative error; the DPA offering was launched in December 2017 and met its funding goal in December 2017—but there was a delay in appending YouNow Service’s electronic signature to the DPAs. Further, the Form C that was filed in connection with the Regulation CF offering of DPAs did not explicitly address the Props Tokens issuable pursuant to the DPAs as a type of security being offered and instead only referenced “Debt Securities” as the type of securities being offered. If investors, the SEC, or state regulators were to disagree with our position, it is possible we could be subject to private litigation or enforcement actions by the SEC or state regulators. Any of these proceedings could have a material adverse effect on our business, the Props Network, and the value of the Props Tokens.

Some of the Props Network users will likely be under the age of 18, and those users may be able to repudiate or disaffirm the terms of use and other agreements that we enter into with such users.

In certain jurisdictions, persons under the age of 18 have the ability to repudiate or disaffirm contracts entered into by those individuals, and some of the Props Network users and the users of the Props Live Video App are likely to be under the age of eighteen. As a result, we may have difficulty enforcing our terms of service and other agreements that we enter into with such individuals that are under the age of 18 in connection with the operation of our business, the Props App, the Props Network and the distribution of Props Tokens.

A violation of privacy or data protection laws by us or by application developers and users of the Props Network, including applications engaged in the buying and selling of shareable data, could have a material adverse effect on us and the value of the Props Tokens.

We and certain of our advisors and other Props Network participants are subject to applicable privacy and data protection laws and regulations, and it is possible that some of our users or Props App developers on the Props Network will attract buyers and sellers of shareable data. The laws and regulations relating to privacy and data protection are evolving, may impose inconsistent or conflicting standards among jurisdictions, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. We cannot control the conduct of users of the network, or other participants on the Props Network who may engage in businesses that make them subject to and in violation of privacy and data protection laws, and as a result there can be no guarantee that users of the network will not engage in misconduct. We also expect that there will continue to be new proposed laws and regulations relating to privacy and data protection in various jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business. Future restrictions on the collection, use, sharing or disclosure of data, or associated requirements, could require us to incur additional costs or modify our platform, possibly in a material manner, which we may be unable to achieve in a commercially reasonable manner or at all, and which could limit our ability to develop new features.

Any violations of laws and regulations relating to the safeguarding of private information could subject our company or any users to fines, penalties or other regulatory actions, as well as to civil actions by affected parties. Penalties and fines relating to privacy and data protection violations can be significant. The EU General Data Protection Regulation, for example, provides for penalties of up to the greater of €20 million or 4% of an organization’s global annual turnover and various European data protection authorities have announced the protection of data relating to users who are minors to be a focus area in the coming years, including the English, Irish, French and Dutch regulators. Any violations or alleged violations could adversely affect our ability to develop and successfully commercialize the Props Network, which could have a material adverse effect on our operations and financial conditions, and could also negatively impact the Props Tokens and the Props Network, both on a short-term and long-term basis.

We and third party Props App developers may be sued by third parties for alleged infringement of their proprietary rights, which could harm our or these third party Props App developers’ business, the Props Network, our ability to support the Props Network, and the value of the Props Tokens.

Our success, and the success of the Props Network, depends on not infringing on the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. From time to time, third parties may claim that we or the Props Network are infringing on their intellectual property rights, and we may be found to be infringing on these rights. In the future, others may claim that our technology infringes or violates their intellectual property rights. We may be unaware of the intellectual property rights that others may claim cover some or all of our technology or services. Any claims or litigation could cause us or third party developers to incur significant expenses and, if successfully asserted, could require that we or third party developers pay substantial damages or ongoing royalty payments or require that we comply with other unfavorable terms. We may also be obligated to indemnify parties or pay substantial settlement costs, including royalty payments, in connection with any claim of this type or litigation and to obtain licenses, modify applications or refund fees, which could be costly. Even if we were to prevail in this type of dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.

On March 15, 2018, we received a cease and desist letter with respect to the YouNow’s Props trademark. We responded on March 28, 2018 and have not heard anything further. We can provide no assurances on the outcome of this matter. If the other party were to prevail, we may be required to stop using the Props trademark, which could have a material negative impact on the Props Tokens, the Props Network, and our operations.

The popularity of cryptocurrencies and digital assets may decrease in the future, which could have a material impact on the cryptocurrency and digital asset industry and our operations and financial conditions.

In recent years, cryptocurrencies and digital assets have become more widely accepted among the public, investors, and developers, but acceptance of cryptocurrency has also faced increasingly complex legal and regulatory challenges and, to date, have not benefited from widespread adoption by governments, central banks or established financial institutions. Any significant decrease in the acceptance or popularity of cryptocurrency or digital asset offerings may have a material impact on our operations and financial conditions as cryptocurrencies constitute our material assets. The recent prices of digital assets such as cryptocurrencies have been extremely volatile and they are subject to substantial price fluctuations which could result in significant losses. Such losses could have a material adverse effect on our ability to develop the Props Network, and therefore on the value of your Props Tokens.

Our operations involve several risks and hazards, including potential dangers to our employees and to third parties that are inherent in certain aspects of our business. If we do not adequately insure against these risks, unanticipated losses could materially and adversely affect our financial condition and operating results.

Our business includes the storage of large amounts of cryptocurrency that, if widely adopted, may be of significant value. It is possible that certain of our employees, executives, co-founders, office spaces, or key employees could be attacked or become the victims of extortion, which may result in physical injury or kidnappings. We could also encounter unexpected costs for reasons beyond our control in connection with the handling of these situations for our employees or executives. Any of these types of accidents or other incidents could involve significant potential claims of employees, executives and/or third parties who are injured or who may have wrongful death or similar claims against us.

YouNow maintains insurance against risk and potential liabilities related to its operations. We believe we maintain reasonable levels of insurance that limit our likely exposure to unanticipated losses. However, our insurance coverage may not be adequate to cover claims or liabilities, and we could be forced to bear significant costs from an accident or incident. Substantial claims in excess of our related insurance coverage could cause our actual results to differ materially and adversely from those anticipated. Due to future claims or liabilities, or to market conditions, our insurance premiums could increase.

The further development and operation of the Props Network and Props Tokens may require that we protect our technology and intellectual property rights.

Our ability to develop and operate the Props Network and tokens may depend on technology and intellectual property rights that our company may hold or license from unaffiliated third parties, including Amazon Web Services. If for any reason our company were to fail to comply with its obligations under the applicable license agreement or to adequately protect its owned intellectual property, or were unable to provide or were to fail to obtain rights to the technology and intellectual property that the Props Network and tokens require, we would be unable to operate, which would have a material adverse effect on the our operations and financial conditions.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support the growth of the Props Network, and we believe we will require additional funds to respond to business challenges, including the need to develop new services or products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity, debt or other types of financings to secure additional funds. Any financing we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions, or make the necessary capital investments to grow the Props Network. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the Props Network and business growth and to respond to business challenges could be impaired and our business may be harmed.

Our use of Form 1-A and our reliance on Regulation A for this offering may make it more difficult to raise capital as and when we need it, as compared to if we were conducting a traditional initial public offering on Form S-1.

Because of the exemptions from various reporting requirements provided to us under Regulation A and because we are only permitted to raise up to $50 million in any 12-month period under Regulation A (although we may raise capital in other ways), the Props Tokens may be less attractive to purchasers and it may be difficult for us to raise additional capital as and when we need it. If we are unable to raise additional capital as and when we need it, the growth of the network and our financial condition and results of operations may be adversely affected, which may have a material adverse effect on the value your Props Tokens.

Grantees in the Props PBC grant offering and users of the Props Live Video App may be required to submit claims arising under the grant agreement or terms of use to arbitration, which could result in less favorable outcomes to the plaintiff(s) in any action under either agreement.

Grantees in the Props PBC grant offering will be bound by a grant agreement. Grantees agree that disputes arising under or relating to the grant agreement will be resolved by binding arbitration. However, no claims under the federal securities laws shall be subject to the mandatory arbitration provision, and these provisions do not impact the rights of grantees to bring claims under the federal securities laws or the rules and regulations thereunder. Additionally, despite a grantee agreeing to the provisions in the grant agreement, investors will not be deemed to have waived the Company’s compliance with federal securities laws and the rules and regulations thereunder. Persons receiving Props Tokens from grantees via secondary transactions will not be bound by the grant agreement and the corresponding arbitration provision referenced above.

Similarly, users of the Props Live Video App will be bound by terms of use. Participants therein agree that disputes arising in connection with the terms or the use of the service will be resolved by binding arbitration. However, no claims under the federal securities laws shall be subject to the mandatory arbitration provision, and these provisions do not impact the rights of participants to bring claims under the federal securities laws or the rules and regulations thereunder. Additionally, despite a potential participant agreeing to the provisions in the terms of use, participants will not be deemed to have waived the Company’s compliance with federal securities laws and the rules and regulations thereunder.

As a result, if an adversarial proceeding not involving the federal securities laws is brought against the Company under the grant agreement or terms of use, it may be heard only by an arbitrator or arbitrators, which would be conducted according to different procedures and may result in different outcomes than a trial by jury or a trial by judge would have had, including results that could be less favorable to the plaintiff(s) in such an action.

We note that, despite the AT&T Mobility v. Concepcion, 563 U.S. 321 (2011) case in which the U.S. Supreme Court affirmed the enforceability of AT&T’s arbitration agreement’s class action waiver, the enforceability of mandatory arbitration has recently been under review by various state and federal courts, and courts have limited these provisions’ reach in various circumstances (see e.g., Richard E. Scotti v. Tough Mudder, Inc., N.Y. Slip Op No. 29098, 2019 WL 1511148 (N.Y. Sup. Ct., March 29, 2019)). We anticipate, given the history of courts’ close scrutiny of individual-facing arbitration provisions, that future courts will continue to review and consider the enforceability of such provisions and, as courts continue to evolve their thinking on this issue, it is possible that certain state or federal courts may further limit the enforceability of such provisions.

The arbitration provision in the grant agreement and terms of use shall not apply to claims arising under the U.S. federal securities laws.

You may be liable for any inaccurate information you provide in your token grant agreement if you receive Props Tokens through the Props PBC Offering and you may be required to indemnify YouNow in connection with your receipt of Props Tokens through the YouNow Offering.

Recipients of Props Tokens through the Props PBC Offering are required to execute a token grant agreement, in which they agree to be liable for any and all damages and expenses (including investigation and defense costs in connection with third party claims) based on any inaccuracy in the information provided by the recipient in connection with the agreement. Recipients may be liable for the full amount of any such damages, which may include, among other items, rescission costs or governmental fines and penalties levied against YouNow for violations of applicable securities laws, anti-money laundering laws and sanctions administered by the Office of Foreign Assets Control, as determined by a court of competent jurisdiction or by the applicable government agency.

Recipients of Props Tokens through the YouNow Offering are required to indemnify YouNow with respect to certain claims related to recipients’ use of the YouNow Network and any content submitted by recipients to the YouNow Network. Claims under US federal and state securities laws are explicitly excluded from this indemnification, however. For more details on the liability and indemnification described above, see the section of this offering circular captioned “Plan of Distribution-Indemnity and Liability.”

Risks Related to Regulation

There are uncertainties related to the regulatory regimes governing blockchain technologies, cryptocurrencies, digital assets, the Props Network and the Props Tokens, and new regulations, interpretations or policies may materially adversely affect the Props Network, the further development of the Props Network, and the value of the Props Tokens.

Regulation of assets like the Props Tokens and related technologies and actors (such as blockchains and cryptocurrency exchanges) involves uncertainty as to how existing law will apply; is likely to rapidly evolve as government agencies take greater interest and develop new approaches to regulation of these assets and technologies; and varies significantly among international, federal, state and local jurisdictions.

The Props Network and the Props Tokens are novel technologies and relatively untested, and the application of U.S. federal and state securities laws to aspects of the Props Network and the Props Tokens is unclear in certain respects. Because of the differences between the Props Tokens and traditional securities, there is a risk that issues that might easily be resolved by existing law if traditional securities were involved may not be easily resolved for the Props Tokens. In addition, because of the novel risks posed by the Props Tokens, it is possible that securities regulators may interpret laws in a manner that adversely affects the Props Network, including our development plans for the Props Network, and the value of the Prop Tokens.

Various legislative and executive bodies in the United States and in other countries may, in the future, adopt laws, regulations, or guidance, or take other actions that could severely or materially impact the permissibility of the Props Network, including our plans for the further development of the Props Network, the Props Tokens, tokens generally and, in each case, the technology behind them or the means of transacting in or transferring them, as well as YouNow’s accounting policies with respect to the tokens on its balance sheet and transactions related to the tokens in its financial statements.  It is difficult to predict how or whether regulatory agencies may apply existing or new regulation with respect to this technology and its applications, including the Props Network and the Props Tokens. In addition, self-regulatory bodies may be established that set guidelines regarding cryptocurrencies, tokens like the Props Tokens, and platforms like the Props Network, which could have similar effects to new policies adopted by government bodies.

Any future regulatory actions applicable to us, the Props Network, the Props Tokens, and our related activities could severely impact us, the Props Network, including further development of the Props Network, and the value of the Props Tokens. We may need to restructure operations, the Props Network, or our plans for further development of the Props Network, significantly or take other adverse actions to comply with any new regulation or guidance. These efforts could be costly and could involve fundamentally changing core portions of our business, operations and network, or require YouNow to restate its financial statements. They could, in turn negatively affect the value of the Props Tokens. On the other hand, failure to restructure for compliance adequately or quickly enough could result in regulatory action (such as investigations by the government or a self-regulatory organization or government or private litigation or administrative actions) that requires us to spend significant time and effort, which would pull our attention away from the core of our business and potentially deplete our resources. It could also result in negative publicity. Regulatory change could even potentially result in the Props Tokens or certain operations or planned operations of YouNow, Props PBC, or other Props Network participants, including developers of third party apps or Validators, being viewed as impermissible, which could result in a need for dramatic alterations or the termination of these operations or planned operations. Regulatory action could also affect the rights of holders of the Props Tokens, for example by severely limiting the ability of holders to transfer or sell their tokens. Even the relaxation of regulation, permanently or temporarily, could leave us at a competitive disadvantage compared to new market entrants, which would not have to shoulder the legal and accounting costs associated with our early move into the market.

Cryptocurrency networks, blockchain technologies, and coin and token offerings also face an uncertain regulatory landscape in many foreign jurisdictions, including (among others) the European Union, China and Russia.  Various foreign jurisdictions may, in the future, adopt laws, regulations or directives that affect the Props Network, including our plans for the further development of the Props Network, or the Props Tokens.  These laws, regulations or directives may conflict with those of the United States or may directly and negatively impact our business.  The effect of any future regulatory change is impossible to predict, but any change could be substantial and materially adverse to the adoption and value of the Props Tokens.

Because a substantial number of Props Network users will likely be persons under the age of 18, we may be required to modify certain Props Apps or alter our marketing strategies to comply with new and possibly inconsistent regulations, which could be costly or delay the release of our games. For example, the United Kingdom’s Office of Fair Trading issued new principles in January 2014 relating to in-app purchases in free-to-play games that are directed towards children 16 and under, which principles became effective in April 2014. In addition, in response to a request made by the European Commission, Google has announced that it will no longer label free-to-play games as free in European Union countries. The Federal Trade Commission has also indicated that it intends to review issues related to in-app purchases, particularly with respect to games that are marketed primarily to minors; the Federal Trade Commission reached a settlement agreement with Apple on this subject. If the Federal Trade Commission issues rules significantly restricting or even prohibiting in-app purchases, it could significantly impact our business strategy by limiting the products we are able to offer to our customers, by limiting the size of the potential market for our products, or by requiring costly additional differentiation between products for different territories to address varying regulations. Furthermore, the growth and further development of free-to-play gaming and the sale of virtual goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours. We anticipate that scrutiny and regulation of our industry will increase and that we will be required to devote legal and other resources to addressing such regulation.

New or changing laws and regulations or interpretations of existing laws and regulations, in the United States and other jurisdictions, may materially and adversely impact the Props Tokens, including with respect to their value, their liquidity, the ability of Props Token holders have to access marketplaces or exchanges on which to trade the Props Tokens, and the structure, rights and transferability of the Props Tokens.

Because we currently expect our tokens to be treated as securities under applicable law, the work of validators on the Ethereum blockchain and the Props Blockchain and Props App developers will need to comply with securities laws. If compliance with these laws makes the cost of these mechanisms prohibitive, we or these entities may be required to limit or even abandon them, which would adversely affect the Props Network.

For the foreseeable future, YouNow anticipates treating the Props Tokens as securities based on our view that the tokens are “investment contracts” under the recent guidance provided by the SEC “Framework for ‘Investment Contract’ Analysis of Digital Assets,” and the application of the test under SEC v. W. J. Howey Co. (the “Howey test”) to digital assets. As a result, our use of the Ethereum blockchain and Props Blockchain, which involves rewards of tokens to validators and Props App developers in connection with transactions, may potentially subject validators or developers to federal or state broker-dealer laws. See “Description of Business—Government Regulation—Registration of Ethereum and Props Blockchain validators and Props App developers as Broker-Dealers.” In addition, certain activities conducted with respect to the Props Tokens could be viewed as triggering a requirement that YouNow, Props PBC, validators on the Ethereum blockchain or Props Blockchain, or the Ethereum blockchain or Props Blockchain to register as a transfer agent or clearing agency. See “Description of Business—Government Regulation—Registration as Transfer Agents” and “Description of Business—Government Regulation—Registration as Clearing Agencies.”

We do not believe that these types of registration are required, but it is possible that the SEC or another regulator would disagree with that position. If so, we, other participants in the Props Network, the Ethereum blockchain, Props Blockchain could be required to register as broker-dealers, transfer agents, or clearing agencies, and comply with law applicable to broker-dealers, transfer agents, or clearing agencies, which could lead to significant costs to us or other participants in the Props Network, including validators on the Ethereum blockchain or Props Blockchain and Props App developers, and could force us or these parties to change or cease our operation or support of the Props Network or Props Apps. It could also lead to considerable uncertainty as to how we or other Props Network participants, including validators of the Ethereum blockchain or Props Blockchain and Props App developers, would comply with regulation, which would likely result in a need for a relatively long registration process and could ultimately prove prohibitive to the Props Network business model. Any of these developments could adversely affect the Props Network, its further development, and the value of the Props Tokens.

We do not intend to register the Props Network or the Props Live Video App as exchanges or ATSs.

We have taken the position that the Props Network and the Props Live Video App should not be viewed as exchanges or ATSs, primarily because each proposed transaction involving Props Tokens on the network will be individually determined and implemented. For more information, see Description of Business—Government Regulation—Registration of the Props Network and the Props Live Video App as Exchanges or ATSs. It is possible that the SEC or another regulator would disagree with our position. If so, we could be forced to register the network and/or the browser extension as an exchange or ATS and comply with applicable law, which could lead to significant costs to us and could force us to change or cease our operations. Any of these developments could decrease the value of the Props Tokens sold in this offering.

The limitations of and regulatory uncertainty under Regulation A promulgated pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, may negatively affect our ability to develop the Props Network, which could negatively affect the value of the Props Tokens.

For the foreseeable future, YouNow anticipates treating the Props Tokens as securities based on our view that the tokens are “investment contracts” under the recent guidance provided by the SEC “Framework for ‘Investment Contract’ Analysis of Digital Assets,” and the application of the test under SEC v. W. J. Howey Co. (the “Howey test”) to digital assets. As a result, our plans to issue Props Tokens are subject to our ability to register or find a suitable exemption from registration for the issuance of Props Tokens in all applicable jurisdictions. Our current offering relies on an exemption from registration under the federal securities laws of the United States provided by Regulation A, which also provides for preemption of state registration requirements, but also currently limits our issuances to $50 million in tokens each year. We anticipate that this amount will be sufficient to exempt the token issuances we contemplate under this Offering Circular, but there is no guarantee that this Regulation A will remain sufficient for our activities.

Additionally, given the relative lack of regulatory precedent regarding the recent amendments to Regulation A and token offerings under Regulation A, there is a significant amount of regulatory uncertainty in regards to how the SEC or the individual state securities regulators will regulate both the offer and sale of the Props Tokens, as well as any ongoing compliance to which we may be subject under Regulation A. For example, some state regulators may take the position that preemption from state securities laws made available for offerings under Regulation A has no impact on state requirements for issuers to register as issuer-dealers or other types of intermediaries under state laws, or that other state laws may apply to this offering. As a result, these states could bring enforcement actions and impose additional costs, fines, and registration requirements.

This regulatory uncertainty or unfavorable resolution to this uncertainty may have material adverse effects on the value of the Props Tokens and the Props Network. It could make the operations or planned operations of YouNow, Props PBC or other Props Network participants more costly, inefficient or prohibited. Further, it is possible that this regulatory uncertainty or any other uncertainty regarding securities offered pursuant to Regulation A could reduce the availability or attractiveness of Props Tokens to Props Network participants, which could adversely affect our ability to develop and grow the Props Network and the value of the Props Tokens.

We may need to address additional regulatory issues in connection with our plans for the further development of the Props Network.

There may be additional regulatory uncertainty with respect to certain of our planned operations and plans for the further development of the Props Network. For example, it is possible that the addition of third party apps to the Props Network could cause additional regulatory issues for these third party developers or other participants or components of the Props Network. See “By participating in the Props Network as a Props App developer and allowing YouNow to reward users of your app with Props Tokens, you could be subject to regulatory risks” and “Description of the Business—Government Regulation” for additional details. If we or other Props Network participants would face additional regulatory issues, costs or burdens, this could adversely affect our ability to develop and grow the Props Network, as well as the value of the Props Tokens.

By participating in the Props Network as a Props App developer and facilitating YouNow’s rewards to users of the developer’s Prop App with Props Tokens, a developer could be subject to regulatory risks and burdens.

YouNow intends to reward users of Props Apps developed by third parties by issuing Props Tokens to such users, through these Props Apps. Because the developers of these Props Apps will be receiving Props Tokens from YouNow so that they may be distributed to users, each such third party developer will be deemed to be a statutory underwriter under Section 2(a)(11) of the Securities Act. A statutory underwriter is subject to the prospectus delivery and liability provisions of the Securities Act, Regulation M, and may be deemed to be conducting broker-dealer like activities that could in certain circumstances subject the developer to regulatory obligations. See “Description of Business-Government Regulation” for additional information.

We take the position, however, that third party Props App developers are not “engaged in the business” of effecting securities transactions and, in any case, are not effecting such transactions on behalf of others. Moreover, we do not believe that the Props App developers receive transaction-based compensation. For these and other reasons, we take the position that these developers are not “brokers.” We also take the position that Props App developers are not “dealers” because, among other reasons, any securities trading activities conducted by third party Props App developers are sufficiently minor measured against their other activities such that they are not “engaged in the business” of buying and selling securities for their own account. It is possible that the SEC or another regulator would disagree with our position. If so, Props App developers could be forced to register as broker-dealers and comply with applicable law, which would disrupt business significantly, perhaps making it prohibitive to operate and participate on the network, and would likely lead to a decrease or complete loss in the value of the Props Tokens.

We may experience negative reactions to treating the Props Tokens as securities.

It is possible that individuals involved in the cryptocurrency and blockchain communities will disagree with the position that the Props Tokens should be treated as securities at this time. As a result, there may be negative reactions and consequences in the community from which we seek support. For example, people who disagree with the designation of the Props Tokens as securities in their current state may opt to use platforms and networks other than the Props Network. These developments could have a negative effect on the Props Network, including plans for the Props Network’s further development, and the value of the Props Tokens.

Although we believe it is possible that we will eventually be able to treat the Props Tokens as non-securities, we do not have an estimate of when that will be, if ever.

It is possible that the Props Tokens will reasonably no longer be treated as securities at some point in the future, particularly if and when the Props Network has evolved sufficiently, consistent with then-existing guidance. However, it is difficult to predict when this may occur, and there is little guidance as to when federal or state regulators would agree with this type of position with respect to the Props Tokens and a network like ours. There is currently little guidance as to when regulators will view assets like the Props Tokens as assets that are not securities, and without additional guidance, there is considerable uncertainty as to when the Props Tokens may be no longer treated as securities. As a result, we currently plan to treat the Props Tokens as securities for the foreseeable future. Potential acquirers of the Props Tokens should assume the Props Tokens will be treated as securities when making their decision to participate in this offering.

If the tokens are reasonably treated as non-securities in the future, we will no longer qualify them through this offering circular, and persons acquiring Props Tokens may not receive the benefit of protections under the securities laws.

As noted above, at some point in the future we may come to the conclusion that we can reasonably treat the Props Tokens as non-securities for purposes of the securities laws. If so, we will no longer seek to qualify the tokens under this offering circular. If this were to occur, you will therefore no longer receive the benefit of the disclosures and protections provided based on our Regulation A filing. In addition, you and other users of the Prop Network may no longer receive the benefit of the protections provided by other provisions under the federal and state securities.

If the tokens are reasonably treated as non-securities in the future, we or other Props Network participants may become subject to alternative forms of regulation, which could require changes to material aspects of our business, the Props Network, or the business of other Props Network participants.

It is possible that if the tokens are no longer subject to regulation under the securities laws, they will be covered by other regulatory regimes, including potentially the laws governing commodities and money services businesses. If so, we or other Props Network participants may need to modify operations or planned operations or the operation or planned operations of the Props Network to comply with those regulations. This could be costly and may involve changing aspects of the network and the business in ways that adversely affect them and, in turn, the value of the Props Tokens.

It is unclear when and if federal or state regulators will allow registration of a token exchange or Alternative Trading System (“ATS”) to facilitate trading of the tokens.

Holders of the Props Tokens may need to rely on potential sales in the secondary market for liquidity. There are currently no national securities exchanges or exchanges that have been approved by FINRA or registered under Form ATS with the SEC to support the trading of Props Tokens on a secondary market.

There is no guarantee that any potential exchanges or ATSs will become functional or be approved for trading at any point in the future or that, when and if they are operational, they will be successful. In addition, in the event that secondary trading of the Props Tokens is facilitated by third party exchanges, because they will be relatively new, they may be more susceptible to fraud or manipulation. Further, there is no guarantee that any token exchange or ATS would allow trading of the Props Tokens. In fact, we may be required to pay significant and even prohibitive fees to list the Props Tokens, which we could decide not to pay. Any of these developments would negatively affect liquidity and pricing of the Props Tokens in the secondary market.

We are not licensed to conduct a virtual currency business in New York and do not intend to become licensed in any other state that may require licensing in the future. We have taken the position that the New York’s BitLicense Regulatory Framework does not apply to our offer of Props Tokens. It is possible, however, that the New York State Department of Financial Services could disagree with our position.

We are not licensed to conduct a virtual currency business in New York or any other state. We have, however, taken the position that the State of New York’s BitLicense Regulatory Framework does not apply to the offer and sale of securities like the Props Tokens—including issuances pursuant to SAFTs or DPAs personally issued to persons located in New York and offerings pursuant to the offering statement in which this offering circular is included. We are also taking the position that the securities offered pursuant to the offering statement in which this offering circular is included are “covered securities” as that term is used in Section 18 of the Securities Act, and as a result, the BitLicense Regulatory Framework is preempted under federal law with respect to Props Tokens offered under this offering circular. In addition, we believe it is reasonable to conclude that application of the BitLicense Regulatory Framework to the Props Tokens is preempted under New York state law. In 2011, the New York state legislature created the New York Department of Financial Services (“NYDFS”) by transferring the functions of the New York State Banking Department and the New York State Insurance Department into a new, consolidated department. The statute authorizing the NYDFS (the “Financial Services Law”) provides the NYDFS and its superintendent with limited authority to regulate certain banking, insurance, and related financial products and services in the state of New York. The Financial Services Law defines “financial product or service” to specifically exclude from the NYDFS’s authority financial products or services that are “(i) regulated under the exclusive jurisdiction of a federal agency or authority, (ii) regulated for the purpose of consumer or investor protection by any other state agency, state department or state public authority, or (iii) where rules or regulations promulgated by the superintendent on such financial product or service would be preempted by federal law.”

It is possible that the New York State Department of Financial Services could disagree with our position. If we were deemed to be conducting an unlicensed virtual currency business in New York, we could be subject to significant additional regulation and/or regulatory consequences. This could lead to significant changes with respect to the operation or planned operation of the Props Network, how the Props Tokens are structured, how they are purchased and sold, and other issues, and would greatly increase costs in creating and facilitating transactions in the Props Tokens. It could lead to the termination of the Props Tokens or decreases in the value of the tokens. In addition, a regulator could take action adverse to us, other Props Network participants, the Props Network, or the Props Tokens. Any of these outcomes would negatively affect us, the Props Network, including its further development, and the value of the Props Tokens and/or could cause us to cease operations.

Currently, New York is the only state that requires a license to operate a virtual currency business, but it is possible that other states may require licenses in the future. If additional states begin to regulate virtual currency businesses as New York has, or impose other regulatory restrictions, and take the position that we or other Props Network participants are operating regulated virtual currency businesses, it could have a material adverse effect on our ability to operate in those states, or for holders of the tokens to engage in any activities related to the tokens in those states, which could affect the value of the Props Tokens. This could also lead to the potential legal consequences described above with regard to New York.

We are not registered as a money transmitter or money services business, and our business may be adversely affected if we are required to do so.

We believe that we are not money transmitters or money services businesses. If we were deemed to be money transmitters and/or money services businesses, we would be subject to significant additional regulation and costs. This could lead to significant changes with respect to operations of the Props Network, suspensions in the operation of the Props Network or certain of its components, including Props Apps, changes in how the Props Tokens are structured, changes in how they are issued and other regulatory or business consequences, and would greatly increase our costs in creating and facilitating transactions in the Props Tokens. It could also lead to the termination of the Props Tokens or a decrease in their value. In addition, a regulator could take action against us if it views the Props Tokens, and/or the Props Network, as a violation of existing law. Any of these outcomes would negatively affect the value of the Props Tokens and/or could cause YouNow to cease operations. For further details, see the section below captioned “Description of Business—Government Regulation—Money Transmitter and Money Services Business Considerations.”

We could become a “reporting company” with significant additional reporting obligations under the Exchange Act because we are not using a transfer agent for transactions in the tokens.

Under Regulation A, we will have limited ongoing reporting obligations to the public relative to the obligations of companies that are “reporting companies” for purposes of the Exchange Act. We believe we qualify for this more limited reporting regime for several reasons. We are aware, however, that the exemption that allows this lighter reporting is in part dependent on the use of a transfer agent with respect to a company’s securities. We do not intend to engage a transfer agent with respect to the Props Tokens, because among other reasons, the types of activities a transfer agent would normally engage in generally are performed automatically on the blockchain. For further details, see the section below captioned “Description of Business—Government Regulation—Reporting Company Considerations.” It is possible that a regulator would disagree with this position and, as a result, require that we file the full set of reports required of a reporting company. If so, we would need to spend considerable additional time and effort to provide the required reports. This could have a material adverse effect on our operations, and would require significant attention from management, which in turn could negatively affect our business, the Props Network, including its further development, and the value of the Props Tokens.

There may be deficiencies with our internal controls that require improvements, and if we are unable to adequately evaluate internal controls, we may be subject to sanctions.

As a “Tier 2” issuer under Regulation A, we will not need to provide a report on the effectiveness of our internal controls over financial reporting, and we will be exempt from the requirements that an auditor attest to the accuracy of our reports, at least for as long as we remain a Tier 2 issuer. We conducted an evaluation of our internal controls and believe we have the necessary framework in place; that is, we believe that our internal controls are effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles, or GAAP. However, internal controls have inherent limitations. Because of these limitations, there is a risk that we may not prevent or detect material misstatements on a timely basis based on our internal controls.

Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, technology, data protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, increased cost of operations or otherwise harm our business.

We are subject to a variety of additional laws and regulations in the United States and abroad that involve matters central to our business, including user privacy, blockchain technology, data protection, intellectual property, and marketing to persons under the age of 16, among others. Foreign data protection, privacy, and other laws and regulations can be more restrictive or impose different requirements than those in the United States. These U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate.

We have adopted policies and procedures designed to comply with these laws in the United States. The growth of our business and its expansion outside of the United States may increase the potential of violating applicable laws, however, and we could be subject to additional laws and regulations outside the United States that we do not currently know about. The risk of our company being found in violation of these or other laws and regulations (both the United States and abroad) is further increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and are open to a variety of interpretations. Any action brought against us for potential violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of these laws and regulations, we may be subject to any applicable penalty associated with the violation, including civil and criminal penalties, damages and fines, we could be required to refund payments received by us, and we could be required to curtail or cease our operations. Any of these consequences could seriously harm our business and its financial results. Finally, these existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs, require significant management time and attention and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices.

Our company is subject to the risk of possibly becoming an investment company under the Investment Company Act.

The Investment Company Act regulates certain companies that invest in, hold or trade securities. In general, a company with more than 40% of the value of its non-cash assets held in investment securities is an “investment company.” Because a portion of our assets consists of the Props Tokens, and at times the value of those assets may surpass 40% of the value of our non-cash assets, we and our affiliates run the risk of inadvertently becoming investment companies, which would require registration under the Investment Company Act. Registered investment companies are subject to extensive, restrictive and potentially adverse regulations relating to, among other things, operating methods, leverage, management, capital structure, dividends and transactions with affiliates. Registered investment companies are not permitted to operate their business in the manner in which we operate our businesses, nor are registered investment companies permitted to have many of the relationships that we have with our affiliated companies.

We believe we do not meet the definition of an investment company despite our holdings in Props Tokens, because we believe it is reasonable to treat the Props Tokens as non-securities for purposes of the Investment Company Act in our own hands. This is due to the fact that any returns us might receive based on the Props Tokens would be based on its own efforts and not the efforts of others. As a result, the Props Tokens would not be “investment contracts” and not securities in our hands.

It is possible that a regulator could disagree with this position. If so, and we were to inadvertently meet the definition of an investment company as a result, we may need to significantly alter our business, including by changing our strategy for distributing the tokens and other operations in a way that negatively affects the value of the Props Tokens sold in this offering. Becoming an investment company could also result in negative regulatory consequences such as becoming subject to monetary penalties or injunctive relief (or both) in an action brought by the SEC, being unable to enforce contracts with third parties, and having third parties obtain rescission of any contracts entered into by either YouNow or Props PBC during the period that we were an unregistered investment company. As a result, if it were established that we were an investment company, it would have a material adverse effect on our business and financial operations and our ability to continue as a going concern.

A regulator could determine that transactions on the network violate Regulation M under the Exchange Act.

Regulation M under the Exchange Act generally prohibits issuers from buying and selling their securities at the same time, in order to prevent potential price manipulation that could result from those activities. Because in the future we may decide to sell Props Tokens at the same time that YouNow may receive Props Tokens in connection with the purchase by users of other digital goods in a webstore (outside of the app), for example, we may be viewed as receiving Props Tokens at the same time that we are selling them under Regulation A. We have taken the position that selling digital goods for Props Tokens does not constitute a “purchase” of securities by us for purposes of Regulation M. As a result, we do not believe that activities on the Props Network are in violation of Regulation M. It is possible that a regulator would disagree with this position. If so, we may be required to restructure these transactions, which could lead to significant costs to us and could force us to change or cease operations of the network. This could result in a loss or decrease in value of the Props Tokens.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This offering circular contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements in the sections of this offering circular captioned “Offering Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” and elsewhere in this offering circular contain forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “is designed to,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

These statements involve risks, uncertainties, assumptions and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this offering circular, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this offering circular include, but are not limited to, statements about:

In addition, you should refer to the sections of this offering circular captioned “Risk Factors” and “Offering Summary – Summary of Risk Factors” for discussions of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this offering circular will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

USE OF PROCEEDS

We will not receive any cash proceeds from the YouNow Offering or from the Props PBC Offering.

DILUTION

The following table summarizes the differences between the total consideration and the weighted-average price per token paid by existing tokenholders who have acquired Props Tokens prior to the date of this offering circular and participants participating in this offering at the price, or deemed price, to the public of $0.1369 per Props Token, before deducting estimated offering expenses:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

You should read the following discussion and analysis together with the consolidated financial statements and the related notes to those statements included elsewhere in this offering circular. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section of the prospectus captioned “Risk Factors” and elsewhere in this offering circular, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

YouNow, Inc. is a Delaware corporation founded in April 2011 under the name Bnow, Inc. On November 19, 2012 the name was changed to YouNow, Inc. From inception through February 29, 2020, YouNow was in the live streaming video industry and was the first company to popularize social, live video streaming on mobile devices in the United States. Since 2017, YouNow has leveraged its technology, expertise, user community and other assets to build the infrastructure for an open, decentralized digital media network called the Props Network. On February 26, 2020, YouNow sold its app operations to a third party acquirer named YouNow Media, LLC, and at the end of the day on February 29, 2020, it transferred the operation of the app to YouNow Media, LLC. See “Description of Business – Recent Developments.” Since that date, YouNow has been dedicated solely to building the Props Network. Given YouNow’s substantial experience in developing and operating a consumer-facing mass market participatory video app using digital currency, we believe we are uniquely positioned to help develop this next-generation digital media network.

YouNow’s first mobile application, the Props Live Video App, provides a platform on which any user can broadcast to a live audience, watch video content and engage with content creators (broadcasters) and other users. Subsequently, YouNow developed an additional app, the Rize app, which was merged into the Props Live Video App in October 2018. YouNow operated the Props Live Video App through February 29, 2020 and then, pursuant to an asset sale agreement executed February 26, 2020, transferred the operation of the app to a third party acquirer, YouNow Media, LLC. See “Description of Business – Recent Developments.”

To date, YouNow’s operations have been funded by revenue generated from the sale of digital goods purchased by users to support our broadcasters, through advertising services, through a line of credit that has since been repaid, and through proceeds from the sale of SAFT research and development arrangements and DPAs. YouNow discontinued selling advertising in 2017 and no longer earns revenue through advertising. YouNow also raised $7.133 million through the sale of its Series A Preferred Stock, $26.879 million through the sale of its Series B Preferred Stock and $3.0 million from a line of credit loan that has been repaid in full.

As discussed in “Description of the Props Network,” our long-term strategy is to create an increasingly decentralized network and economy for digital media content, where YouNow plays an increasingly smaller role in making key decisions affecting the Props Network and other network participants, in turn, play increasingly larger roles in growing and maintaining the Props Network. Currently, YouNow serves as the entity responsible for constructing the Props Blockchain, and also acts as an oracle to the Protocol Rewards Engine (a “Validator”).

YouNow has generated proceeds from private placements of its SAFTs. We concluded that these agreements are research and development arrangements. For accounting purposes, YouNow intends to recognize proceeds from these arrangements as other income (Token development income). See the section titled “—Critical Accounting Policies and Significant Judgements and Estimates—Income Recognition” below for details. We have not recognized other income from these research and development arrangements in our consolidated financial statements for the years ended December 31, 2018 and 2017 because we did not make initial deliveries of the Props Tokens until March 2019.

In the future, we may receive proceeds through sales of Props Tokens, pursuant to future sales that are registered or exempt from registration under the Securities Act, and may recognize income related to our research and development arrangements under our current accounting policy or under an appropriate future accounting policy. See the section titled “—Critical Accounting Policies and Significant Judgements and Estimates—Income Recognition” below for details. YouNow is not qualifying with this offering circular the distribution of Props Tokens for cash, and has not yet completed any such sales of Props Tokens.

Props PBC is a newly formed entity and, at the time of qualification of the post-qualification amendment of which this offering circular is a part, does not have any revenue.

Recent Developments

On February 26, 2020, we entered into an agreement for the sale of certain of our assets relating to and including the Props Live Video App. The sale was made to YouNow Media, LLC (the “Acquirer”), an unaffiliated entity, on an arm’s-length basis. As of the same date, we and the Acquirer closed the sale and the Acquirer entered into a separate agreement with us to continue to reward Props Live Video App users with the issuance of Props Tokens and to continue to operate the Props Live Video App as part of the Props Network. Thereafter, as of March 1, 2020, the Acquirer became the operator of the Props Live Video App and hired all of our employees whose functions principally involved operation of the Props Live Video App (but not our senior executives). We refer to the foregoing events collectively as the “Transaction”.

We believe that the Transaction may increase the Company’s appeal to investors as a “pure play” token and network propagation business, and thereby facilitate the raising of additional investment, which is critical to our continued operations. Moreover, the Transaction has provided the Company with additional working capital. The Company has long been projecting its need for additional cash and cash equivalents to fund ongoing operations. See, e.g., the Company’s amended Offering Statement on Form 1-A/A filed September 27, 2019, in the Risk Factors section at page 33 (projecting cash availability through May 31, 2020), most recently affirmed in the Company’s amended Offering Statement on Form 1-A/A filed February 10, 2020. In the near term, the Transaction has also reduced the Company’s ongoing monthly operating losses and its cash burn rate, which were higher when the Company’s operations included the App alongside the operations associated with Props Token issuance and the Props Network. As a result of the combined effects of the Transaction, the Company estimates that its cash reserves will now extend into June 2020.

The consummation of the Transaction followed sustained efforts by the Company to identify new investors and potential strategic partners and counterparties; to secure new investments; to enter into strategic transactions; and to take other steps, all with a view to maximizing the Company’s value, including through the continued operation and growth of the Props Network and the continued issuance of Props Tokens, in order to maximize the value of the Props Tokens held by the Company and others.

For additional information concerning the Transaction, see “Description of Business – Recent Developments.”

Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial statements have been provided to show the hypothetical effects of the Transaction on the Company’s financial condition and operating results. The unaudited pro forma condensed combined financial statements are based on the Company’s historical consolidated financial statements, adjusted to give effect to the Transaction. The unaudited pro forma condensed combined balance sheet as of June 30, 2019 gives effect to the Transaction as if it had occurred on June 30, 2019. The unaudited pro forma condensed combined statements of operations and comprehensive loss for the six months ended June 30, 2019 and for the year ended December 31, 2018 give effect to the Transaction as if it had occurred on January 1, 2019 and January 1, 2018, respectively.

These unaudited pro forma condensed combined financial statements are provided for informational purposes only. They do not necessarily reflect what our financial condition or results of operations would have been had the Transaction occurred on the dates indicated. Also, they may not be useful in predicting our future financial condition and results of operations. Our actual financial condition and results of operations in the future may differ significantly from the pro forma amounts reflected herein, due to a variety of factors.

References to the “Asset Purchase Agreement” in the following discussion refer to the Asset Purchase Agreement by and between YouNow Media, LLC and YouNow, Inc., dated as of February 26, 2020, which can be found as Exhibit 6.21 to the offering statement in which this offering circular is included.

The nature of the Transaction was a sale of the Props Live Video App and assets used by the Props Live Video App, and the assumption of associated liabilities, for cash. The assets received by the Acquirer included contracts that related primarily to, or that were used or held for use primarily in connection with, the operation of the Props Live Video App, as described in Paragraph 1.1(a) of the Asset Purchase Agreement; licenses and permits that related primarily to, or that were used or held for use primarily in connection with, the operation of the Props Live Video App, as described in Paragraph 1.1(b) of the Asset Purchase Agreement; specific intellectual property assets, as described in Paragraph 1.1(c) of the Asset Purchase Agreement; specific software and hardware used or held for use primarily in connection with, the operation of the Props Live Video App, as described in Paragraph 1.1(d) of the Asset Purchase Agreement; all information, records, documents, and files of the Company that related in a material way to, or that were used or held for use primarily in connection with, the operation of the Props Live Video App, as described in Paragraph 1.1(e) of the Asset Purchase Agreement; all rights of the Company under warranties, indemnities, and similar rights against third parties to the extent related to any assets acquired by the Acquirer; all prepaid expenses of the Company incurred in connection with the Company’s use or acquisition of any assets acquired by the Acquirer, to the extent that the benefit of such prepaid expenses had not yet been realize as of the date of the closing of the Transaction; as described in Paragraph 1.1(g) of the Asset Purchase Agreement; all source code, as such term is defined Article 11 of the Asset Purchase Agreement; all social media accounts, as such term is defined Article 11 of the Asset Purchase Agreement; any other assets set forth in Paragraph 1.1 (j) of the Asset Purchase Agreement; and accounts receivable, as set forth in Paragraph 1.1(k) of the Asset Purchase Agreement. In addition, the Acquirer assumed certain liabilities of the Company, including any and all liabilities of the Company arising after the closing in connection with any assets acquired by the Acquirer; any and all liabilities of the Company arising after the closing of the Transaction in connection with the operation of the Props Live Video App; any and all liabilities of the Company arising after the closing of the Transaction in connection with employees who were hired by the Acquirer; fifty percent (50%) of any and all sales, use or other transfer taxes and all filing and recording fees applicable to assets transferred from the Company to the Acquirer in connection with the Transaction; liabilities in connection with a financing arrangement, as set forth in Paragraph 1.3(e) of the Agreement; and certain other liabilities, as set forth in Paragraph 1.3 (f) of the Agreement. Cash and a potential purchase price adjustment were the only assets received by the Company in connection with the Transaction. All employees whose functions and responsibilities related primarily to, or were primarily in connection with, the Props Live Video App ceased to be employees of the Company, and each of them simultaneously became an employee of the Acquirer, after the completion of the transfer of the Props Live Video App, on substantially the same terms and conditions (subject to certain salary adjustments), and with the same benefits. The Company and the Acquirer took steps, under Paragraph 6.3(e) of the Asset Purchase Agreement, to ensure that, with respect to each of the Company’s employees who became an employee of the Acquirer, salary and benefits would continue without interruption. The Transaction has been accounted for by recognizing the assets and liabilities conveyed in the Transaction at their book values. The Company has not performed valuation studies to estimate the fair values of the identifiable assets acquired and liabilities assumed.

The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying notes, which should be read together with the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements should be read together with our historical consolidated financial statements included elsewhere in this offering circular.

Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2019

The accompanying notes are an integral part of these Unaudited Pro Forma Condensed Combined Financial Statements.

Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Loss

For the Six Months Ended June 30, 2019

The accompanying notes are an integral part of these Unaudited Pro Forma Condensed Combined Financial Statements.

Unaudited Pro Forma Condensed Combined Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2018

The accompanying notes are an integral part of these Unaudited Pro Forma Condensed Combined Financial Statements.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1 — Basis of presentation

Our historical consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the disposition of the Props Live Video App and related assets, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations and comprehensive loss, expected to have a continuing impact following the disposition. The disposition was accounted for in accordance with ASC Topic 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. The unaudited pro forma condensed combined financial information does not reflect the realization of any future cost savings or other efficiencies that may be expected, intended or planned for as a result of the disposition.

These unaudited pro forma condensed combined financial statements are provided for informational purposes only. They do not necessarily reflect what the Company’s financial condition or results of operations would have been had the disposition occurred on the dates indicated. Also, they may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial condition and results of operations of the Company in the future may differ significantly from the pro forma amounts reflected herein, due to a variety of factors.

Note 2 — Pro forma adjustments

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

Controller

On February 26, 2020, we accepted the resignation, effective February 29, 2020, of Ryan Maxwell, our Controller, who served as our principal accounting officer and principal financial officer. His resignation was not the result of any disagreements concerning any matter relating to our business, finances or reporting. We expect to hire a new employee for the position of principal accounting officer and principal financial officer, in due course. In the meantime, the Company will engage outside accounting service providers as necessary and Mr. Adi Sideman, President and Chief Executive Officer, will serve as the Company’s principal accounting officer and principal financial officer.

Components of Historical Operations

Revenue

Through February 29, 2020, YouNow derived revenue primarily from the sale of in-app digital goods purchased by users to support content creators. In the Props Live Video App we sold an in-app currency called “Bars” that can be used to make purchases within the Props Live Video App, but cannot be transferred out of the app. In our Rize app, which was merged into the Props Live Video App in October 2018, we sold “Coins,” which served the same purpose. At the end of the day on February 29, 2020, YouNow transferred its app operations to a third party acquirer named YouNow Media, LLC. See “ – Recent Developments,” above. In addition to our in-app currency, we also sold subscriptions to certain content within the Props Live Video App. These subscriptions enable users to view content produced by certain Content Creators. See “Description of the Props Live Video App” for additional details regarding Content Creators. The majority of our revenue has been derived from the operation of the Props Live Video App, with a very small percentage of revenue derived from the operation of the Rize app. The Rize app was merged into the Props Live Video App in October 2018 and no longer exists as a separate app. Please see below under “—Trend Information—Revenue Trends” for a discussion of known trends that may affect the type, volume, or price of digital goods sold in the future.

YouNow has recognized revenue upon the sale of digital goods as management has believed that the digital goods are materially consumed within two days after the initial purchase. Revenues have been recorded net of platform fees, applicable taxes and foreign exchange fees. Platform fees differ by platform: Apple and Google platform fees are 30% of gross revenue while PayPal and Braintree platform fees are less than 4% of gross revenue. The revenue we earned from the sale of digital goods has been split between YouNow and popular content creators based on arrangements between YouNow and each content creator. See below under “—Costs of Revenue” for additional details.

YouNow has also, in the past, derived revenue from the sale of advertising services. YouNow sold advertising to companies that promote their brand through in-app branding, displayed in the Props Live Video App. These advertisements were only sold within the Props Live Video App. YouNow discontinued the sale of advertising and advertisements within the Props Live Video App. The revenue was recorded gross and was recognized in the period in which the advertising services occurred.

Operating Expenses

YouNow’s operating expenses are classified as cost of revenue, general and administrative, sales and marketing, and research and development, which are each described below.

Cost of Revenue Expenses

Expenses related to cost of sales have consisted primarily of revenue sharing with our content creators and expenses related to matters related to hosting and bandwidth. As described above, the revenue we have earned from the sale of digital goods has been split between YouNow and popular content creators based on arrangements with each content creator. The percent of this revenue we have shared with content creators has generally been 60% of net revenue spent on the digital goods sent to the content creator. Net revenue in this instance can be defined as gross revenue net of platform fees, taxes and foreign exchange fees charged by the platform providers (i.e., Apple, Google & PayPal). Certain higher value content creators (which we may identify based on higher revenue generated, new registered users (which we may identify based on web and app traffic metrics), concurrent viewers or other important metrics) may, however, have received a higher percentage of this revenue pursuant to contracts we have had with the content creator. The allocation to content providers has been accounted for in costs of revenue on a monthly basis based on a computation of digital goods that were purchased and used in connection with the content the user created.

In addition to revenue share with our content creators, and hosting and bandwidth costs, we have paid music license fees on a quarterly basis to music publishers based on U.S. generated revenue. These fees total less than 0.5% of total expenses in all periods presented. Expenses related to cost of revenue expenses constitute a significant portion of YouNow’s operating expenses. YouNow anticipates that its cost of revenue expenses will decrease for the foreseeable future due to the February 2020 sale of our app operations.

Research and Development Expenses

Research and development expenses represent costs incurred by us for the development of the Props Network and include: employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as consultants; license fees; and other expenses, which include administrative functions.

Research and development activities account for a significant portion of our operating expenses. Our current business strategy includes growing the Props Network and creating an increasingly decentralized economy for digital media content, where YouNow plays an increasingly smaller role in making key decisions affecting the Props Network. There are multiple Props Apps operating on the Props Network. In the future, we intend that other network participants play increasingly larger roles in growing and maintaining the Props Network. Research and Development expenses are expected to decrease due to a decrease in personnel costs related to cost cutting measures taken at YouNow.

Sales and Marketing Expenses

Sales and marketing expenses consist of marketing, public relations, and talent management. YouNow expects its sales and marketing expense to remain consistent for the foreseeable future as we continue to develop and launch the Props Network.

General and Administrative Expenses

General and administrative expenses consist of salaries and personnel-related costs, including non-cash stock-based compensation, for our personnel in executive, legal, finance and accounting, human resources and other administrative functions, non-litigation legal costs, as well as fees paid for accounting and tax services, consulting fees and facility costs not otherwise included in research and development expenses. Non-litigation legal costs include general corporate legal fees and patent prosecution costs. General and administrative expenses account for a significant portion of our operating expenses and we anticipate that our general and administrative expenses will decrease in the future due to lower expenses related to regulatory compliance, and the anticipated decreased costs of complying with reporting requirements under Regulation A. These decreases will likely include lower costs related to outside consultants, attorneys, and accountants, among other expenses. General and Administrative expenses are expected to decrease slightly in 2019 due to personnel decreases which contribute to lower overhead costs, as well as lower monthly rent related to a new office space.

Other Income (Expense)

Other income (expense) consists primarily of gains and losses on cryptocurrencies, mostly related to Ethereum cryptocurrency. Cryptocurrency liquidations were effected through OTC (over the counter) trades. The liquidation value of the cryptocurrencies was based on the traded price of the cryptocurrency. USD was the consideration received in the liquidation. The gains and losses were determined based on the sale price minus the cost basis of the cryptocurrency. The cost basis is determined at the market price of the cryptocurrency at the time that the cryptocurrency was initially received, less impairment charges. For purposes of determining realized gains and losses, the cost of cryptoassets sold is based on specific identification—where, each cryptoasset sold is traced back to the YouNow wallet address where it was held when first acquired, allowing YouNow to determine an original cost basis for the cryptoasset, which, after adjustment for impairment charges, is then subtracted from the price at which YouNow sold the cryptoasset in order to determine gain.  Because of volatility in the price of cryptoassets, YouNow’s realized gain on the sale of digital currencies is subject to significant variability, which may also lead to significant variability in other income.

YouNow will recognize the proceeds of Props Token development arrangements as “Token development income,” within “Other income (expense)” as tokens are delivered to SAFT purchasers. See the section titled “—Critical Accounting Policies and Significant Judgements and Estimates—Other Income” below for details. For the sale of Props Tokens or instruments convertible into Props Tokens, YouNow recognizes income at the time that the functional Props Tokens are distributed to the holder. See the section titled “—Critical Accounting Policies and Significant Judgements and Estimates—Other Income” below for details.

In the future, we may receive proceeds through sales of Props Tokens, and may recognize other income related to our research and development arrangements under our current accounting policy or under an appropriate future accounting policy. See the section titled “—Critical Accounting Policies and Significant Judgements and Estimates—Income Recognition” below for details. As a result, in the future, YouNow’s other income could vary significantly based on demand for Props Tokens and timing of income recognition under ASC 730-20. YouNow believes that there will be additional demand for Props Tokens in the future, as the number of application developers and users on the Props Network increases, and we anticipate that we will be able to sell Props Tokens in the future.

The price we have set for the Props Tokens of $0.1369 per Props Token was chosen by us in reference to prices paid by purchasers of our SAFT research and development arrangements and was not set pursuant to any third party valuation. The undiscounted price per Props Token in the SAFTs was $0.1369. Certain of the SAFT purchasers, however, received discounts from this price in connection with their election for early investment and vesting schedules on Props Tokens, once distributed. Upon election of these terms, the SAFT purchasers were given discounts from the undiscounted price.  As a result, the weighted average sale price of all of the Props Tokens issued and issuable pursuant to the SAFTs as of December 31, 2017 was $0.1206 per Props Token. Although in December 2018 we explored the possibility of obtaining an independent valuation of the Props Tokens by an independent third party, this valuation was never completed, and, because it would have valued the Props Tokens prior to their actual introduction on the Props Network, we do not believe an independent valuation would have had substantial bearing on the value of Props Tokens today.

We anticipate that other income will increase in the future due to the recognition of income from our Token development arrangements upon delivery of Props Tokens to SAFT holders and the anticipated liquidation of our cryptocurrency holdings (Bitcoin and Ethereum) for cash. See the section below titled “Trend Information—Prices of Cryptocurrencies” for more details. In the fiscal year ended December 31, 2017, YouNow also generated additional income by subletting a portion of its office space in New York and recognized rental income of $325,000. YouNow did not sublet any portion of its office space in 2018.

Results of Operations

Six Months ended June 30, 2018 Compared to Six Months ended June 30, 2019

The following table sets forth selected consolidated statements of operations data for each of the periods indicated:

Revenue

Revenue decreased by $4.21 million for the six months ended June 30, 2019, due to a decrease in traffic to the Props Live Video App, which resulted in reduced revenue per user. Traffic to the Props Live Video App declined from an average of 1.96 million monthly unique users during the six months ended June 30, 2018 to an average of 1.25 million monthly unique users during the six months ended June 30, 2019. As a result of the decline in monthly unique users, monthly revenue per unique user declined from $0.31 cents per unique user in the six months ended June 30, 2018 to $0.21 cents per unique user in the six months ended June 30, 2019. The decline in unique users is primarily due to the Company’s product, engineering and management resources’ focus on the development of the Props Network during the six months ended June 30, 2019.

Cost of Revenue

Cost of revenue decreased by $2.63 million for the six months ended June 30, 2019, due to a $2.09 million decrease in partner revenue share expense resulting from a decrease in total revenue and a $0.54 million decrease in hosting and bandwidth cost resulting from a decrease in traffic to the Props Live Video App.

Research and Development Expenses

Research and development expenses increased by $0.02 million for the six months ended June 30, 2019, due to an increase of $0.32 million in research and development expenses related to the development of Props Tokens. This increase was offset by a decrease of $0.34 million resulting from a reduction in headcount.

Sales and Marketing Expenses

Sales and marketing expenses decreased by $0.73 million for the six months ended June 30, 2019, due to a decrease of $0.34 million in marketing expenses for partner marketing, event marketing and user acquisition, and a decrease of $0.30 million in salary expenses resulting from a reduced headcount.

General and Administrative Expenses

General and administrative expenses increased by $0.01 million for the six months ended June 30, 2019, due to an increase of $0.49 million in rent resulting from the lease of new office space. This increase was offset by a decrease of $0.51 million resulting from the reduction of expenses related to recruiting and general office management.

Other Income (Expense)

Other income (expense) increased by $17.81 million for the six months ended June 30, 2019, due to the distribution of Props Tokens to our SAFT purchasers, DPA purchasers and advisors. This distribution increased other income by $18.24 million. This increase was partially offset by additional impairment adjustments made on digital currencies during the six months ended June 30, 2019, as compared to the six months ended June 30, 2018, which resulted in an additional $1.37 increase to other income. These increases were offset by $0.96 million in additional expenses related to the qualification of our Props Tokens and $0.83 million in additional expenses resulting from additional advisor token expenses.

Year ended December 31, 2017 Compared to Year ended December 31, 2018

The following table sets forth selected consolidated statements of operations data for each of the periods indicated:

Revenue

Revenue for the financial year ended December 31, 2018 was $12,377,332, compared to $15,409,155 for the financial year ended December 31, 2017, a decrease of 20%. Revenue generated from the sale of digital goods was $12,358,607 for the financial year ended December 31, 2018 compared to $15,197,055 for the financial year ended December 31, 2017. Revenue generated from advertising and other sources was $18,725 for the financial year ended December 31, 2018 compared to $212,100 for the financial year ended December 31, 2017.

The decrease in total revenue was primarily due to a $2,838,448 decrease in the sale of digital goods due to a decline in user spend on digital goods on the YouNow platform, and a $205,000 decrease in advertising revenue due to the elimination of advertising revenue on the YouNow platform.

Traffic on the Props Live Video App, part of the YouNow platform, declined from 2.614 million monthly unique users on average in the fiscal year ended December 31, 2017 to 1.803 million monthly unique users on average in the fiscal year ended December 31, 2018 due to the company’s product, engineering and management resources being directed to the development of the Props Network and the Rize app. Monthly revenue per unique user in the fiscal year ended December 31, 2017 was $0.49 per unique user and in the fiscal year ended December 31, 2018 was $0.57 per unique user.

Cost of Revenue

Cost of revenue for the financial year ended December 31, 2018 was $7,728,860, compared to $8,550,388 for the financial year ended December 31, 2017, a decrease of 10%. This decrease was primarily due to the decline in revenue on the YouNow platform, which led to a $909,551 decrease in the revenue paid to certain of the platform’s content creators. The remainder of cost of revenue is comprised of platform hosting costs, which increased slightly by $88,023 between the periods discussed.

Research and Development Expenses

Research and development expenses for the financial year ended December 31, 2018 were $5,515,143, compared to $3,570,937 for the financial year ended December 31, 2017, an increase of 54%. This increase was due to the hiring of additional engineers for general company expansion, which resulted in increased salary and benefit expenses of $1,556,345, as well as an additional $392,126 in expenses related to app development, including the development of the Game Show App, which has now been discontinued, and the Rize app, which has now been merged with the Props Live Video App. These expenses were offset by a $4,265 decrease in other research and development costs which includes consultancy fees, travel and software development.

Sales and Marketing Expenses

Sales and marketing expenses for the financial year ended December 31, 2018 were $2,873,329, compared to $3,494,063 for the financial year ended December 31, 2017, a decrease of 18%. This decrease was primarily due to a $589,201 decrease in marketing expenditures paid to certain of the platform’s content creators and a $38,069 decrease in salaries due to a decrease in the number of sales and marketing employees. These expenses were offset by $6,536 in higher expenses related to other sales and marketing expenses, which included event expenses, travel, meals and entertainment.

General and Administrative Expenses

General and administrative expenses for the financial year ended December 31, 2018 were $5,188,628, compared to $4,104,577 for the financial year ended December 31, 2017, an increase of 26%. This increase was primarily due to $303,933 in higher payroll and benefit expenses due to a higher headcount; $223,015 in additional amortization expenses related to the purchase of SwitchRTC; $199,458 in higher professional fees related to higher accounting and other consulting fees; $103,185 in higher recruitment costs due to increased hiring; $101,549 in additional moderation expenses related to business expansion needs; $63,211 in higher computer and software expenses due to increased headcount and upgrading of computer technology; $61,304 in higher fixed hosting costs due to additional application development; $62,563 in higher office expense costs excluding rent due to higher headcount; $21,774 in higher insurance costs due to a higher premium for our directors’ and officers’ insurance; and $92,312 in other general and administrative expenses. These expenses were offset by $148,253 in lower rent expenses due to moving to an office space with lower monthly rent.

Other Income (Expense)

Other income (expense) for the financial year ended December 31, 2018 was an expense of $4,959,793, compared to an income of $2,704,229 for the financial year ended December 31, 2017. This change in expenses was primarily due to $1,102,016 in higher legal and consulting expenses; $1,691,919 in impairment of Bitcoin and Ethereum holdings; $1,105,192 in loss from the sale of Ethereum (the $3,656,957 gain on the sale of Ethereum in 2017 resulted in a difference of $4,762,149) and the loss of $325,000 in rental income due to the expiration of our subtenant’s lease in 2017. These expenses were offset by a $146,473 decrease in interest expenses due to the repayment of the line of credit in 2018 and a $70,589 decrease in acquisition costs since no acquisitions occurred in the financial year ended December 31, 2018.

Trend Information

Revenue Trends

As a result of our transfer of our app operations to a third-party acquirer at the end of the day on February 29, 2020, following that date we will no longer earn revenue from app operations, including from the sale of digital goods. For periods from our last published financial statements through February 29, 2020, the following trend information remains relevant.

A portion of our revenue in 2018 was earned through the sale of digital goods in the Rize app, which was merged with our Props Live Video App in October 2018. As a result, we have not since then earned revenue in connection with the sale of Coins in the Rize app. Until our transfer of the Props Live Video App to a third-party acquirer at the end of the day on February 29, 2020, we continued to earn revenue through the sale of Bars in the Props Live Video App.

For periods from our last published financial statements through February 29, 2020, we expect that digital goods revenue related to the sale of Bars will decrease due to declining traffic trends. Traffic in the Props Live Video App declined from 2.614 million monthly unique users on average in the fiscal year ended December 31, 2017 to 1.803 million monthly unique users on average in the fiscal year ended December 31, 2018 due to the company’s product, engineering and management resources being directed to the development of the Props Network and the Rize app. We expect this decline in traffic to continue until the end of 2019.

Other Income Trends

YouNow began to distribute Props Tokens to purchasers under its SAFT Token development arrangements in March 2019, and has begun to recognize this as “Token development income,” within “Other income (expense),” as tokens are delivered to the SAFT purchasers in 2019 and 2020.

Because YouNow does not recognize as other income any proceeds from our research and development arrangements until the Props Tokens are delivered to the purchasers, we will recognize other income in the future from our research and development arrangements upon the satisfaction of our obligations to deliver the Props Tokens. See the section captioned “—Critical Accounting Policies and Significant Judgements and Estimates—Income Recognition” below for details.

In the future, we may receive proceeds through sales of Props Tokens, and may recognize other income related to our research and development arrangements under our current accounting policy or under an appropriate future accounting policy. See the section titled “—Critical Accounting Policies and Significant Judgements and Estimates—Revenue Recognition” below for details. YouNow is not qualifying with this offering circular the distribution of Props Tokens for cash, and has not yet completed any such sales of Props Tokens. As a result, in the future, YouNow’s other income could vary significantly based on demand for Props Tokens and timing of income recognition under ASC 730-20. YouNow believes that there will be additional demand for Props Tokens in the future, if and when the number of application developers and users on the Props Network continues to increase.

Upon qualification of the offering statement in which this offering circular is included, YouNow began to operate the Props Live Video App with Props Tokens, and as a result, users can obtain Props Tokens by earning them on the Props Live Video App. However, there are no national securities exchanges or exchanges that have been approved by FINRA or registered under Form ATS with the SEC to support the trading of Props Tokens on the secondary market. As a result, we anticipate that this could negatively affect our ability to sell Props Tokens for cash and, therefore, our ability to earn other income in connection with the sale of Props Tokens.

Costs and Expenses Trends

YouNow expects operating expenses to decrease for the fiscal year ending December 31, 2019 primarily due to a decrease in general and administrative costs associated with the decrease of personnel in an effort to cut costs, flat sales and marketing costs primarily due to flat marketing event costs and flat marketing campaigns expenses, and a decrease in research and development costs primarily due to the decrease of personnel and contractors resulting from expense cutting measures. YouNow does not expect any significant increase in amounts of expenses.

Prices of Cryptocurrencies

The market prices of cryptocurrencies, including Ethereum and Bitcoin, have experienced significant volatility over the past several years. As of December 31, 2017, the market price of Ethereum was $756.73 and the market price of Bitcoin was $14,156.44. As of December 31, 2018, the market price of Ethereum was $133.49 and the market price of Bitcoin was $3,747.39. As of June 30, 2019, the market price of Ethereum was $290.70 and the market price of Bitcoin was $10,817.16. The market prices as of June 30, 2019 represent decreases of approximately 38% for Ethereum and 76% for Bitcoin, from their prices as of December 31, 2017. This may have a significant effect on the value of YouNow’s cryptocurrency reserves, as further described below under “Liquidity and Capital Resources.”

Liquidity and Capital Resources

Going Concern Uncertainty

The Company incurred losses from operations of approximately $4.9 million and had operating cash outflows of approximately $3.1 million for the six months ended June 30, 2019. As of June 30, 2019, the Company had approximately $3.4 million of cash available. Currently, we believe that our cash and cash equivalents will be sufficient to fund our operations into June 2020. However, our cash forecasts and capital requirements are subject to change as a result of a variety of risks and uncertainties.

Based on our rate of cash outflows, there is substantial doubt about our ability to continue as a going concern, whether for one year from the issuance date of our most recent financial statements or a shorter time, unless additional sources of capital are secured. The Company is currently working with various venture capital firms, cryptocurrency funds and others to secure additional capital through the sale of Props Tokens. However, there can be no assurance that the Company will be successful in securing such financing, on favorable terms or at all. If we are unable to secure additional capital, this would have a material adverse impact on the Props Network, Props Apps and the value of Props Tokens.

Sources of Funds

YouNow has funded operations through revenue generated through the Props Live Video App, debt financing, and sales of the preferred stock of YouNow from 2011 through 2015 as well as through proceeds received in 2017 from our SAFT research and development arrangements which were each exempt from registration under the Securities Act. YouNow’s cash and cash equivalents on hand as of June 30, 2019 was $3.4 million. YouNow’s cash and cash equivalents on hand as of December 31, 2018 was $7.2 million. YouNow’s cash and cash equivalents on hand as of December 31, 2017 was $20.1 million.

In the future, YouNow may sell portions of its cryptocurrencies in order to finance its activities, depending on market conditions and to the extent such cryptocurrencies are unrestricted. As of June 30, 2019, YouNow had cryptocurrency reserves of 103 Bitcoin having a book value of $384,191 and 118 Ethereum having a book value of $15,788. As of December 31, 2018, YouNow had cryptocurrency reserves of 103 Bitcoin having a book value of $384,191 and 118 Ethereum having a book value of $15,788. As of December 31, 2017, YouNow had cryptocurrency reserves of 103 Bitcoin having a book value of $1,751,839 and 7,321 Ethereum having a book value, net of impairment, of $3,851,185. The value of Ethereum and Bitcoin has declined since December 31, 2017, as referenced above in “—Prices of Cryptocurrencies.” The following table shows the historical volatility, over the twelve months to September 30, 2019, of our Bitcoin and Ethereum holdings.

Because of volatility in the price of cryptocurrencies, YouNow’s ability to raise cash from the sale of its cryptocurrency holdings is subject to significant variability. Further, YouNow may be required to sell increasingly large amounts of its cryptocurrency holdings in order to raise similar amounts of funds as a result of volatility in the market prices of cryptocurrencies, which may lead to significant variability in the amount of cash that may be raised from the sale of all of its cryptocurrency holdings.

We entered into research and development arrangements with “accredited investors” as defined under Regulation D under the Securities Act, in reliance on the exemption from registration it provides (certain of whom are also “qualified purchasers” as such term is defined in the Investment Company Act of 1940), pursuant to simple agreements for future tokens, which we refer to as “SAFTs.” See “Other Offerings” for additional information. Under the SAFTs, up to $20.6 million of the proceeds of these sales were subject to return to the purchasers if the Props Tokens were not delivered pursuant to the terms of the underlying agreements. All of the $20.6 million is attributable to the sale of the SAFTs. For additional information and risks associated with these SAFTs, see “Risk Factors—We may face litigation or liability in connection with our forward sales of Props Tokens to purchasers of simple agreements for future tokens (SAFTs), which could have a material adverse effect on our company’s operations and financial condition.” Our subsidiary, YouNow Services, LLC, entered into DPAs under the exemption provided by Title III of the Jumpstart our Business Startups Act (“Regulation CF”), which agreements may be satisfied by either YouNow Services’ delivery of 7,122,181 Props Tokens or payment in cash.

We plan to continue to fund our operations and capital funding needs through the sale of Props Tokens, principally in private placements. The sale of additional equity would result in dilution to our stockholders. We may also continue to fund our operations and capital funding needs through the sale of additional Props Tokens. The sale of additional Props Tokens may result in dilution of the existing supply of Props Tokens. If we are not able to secure adequate additional funding we may be forced to make additional reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. To the extent that we raise additional capital through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to the Props Network and related software, future revenue streams, research programs or applications or to grant licenses on terms that may not be favorable to us. Any of these actions could harm our business, results of operations and future prospects.

The following table summarizes our cash flows for the periods indicated:

Net Cash Provided By (Used In) Operating Activities

The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities for the six months ended June 30, 2019 was $3,080,394. This primarily consisted of $11.08 million in net income, $1.01 million in accounts payable and accrued expenses and $0.50 million in non-cash items, including depreciation, amortization and stock compensation expenses. These proceeds were offset by a $0.64 million decrease in accounts receivable, prepaid assets and other assets and a $16.3 million expense of non-cash items related to the distribution of a portion of the Company’s token obligations.

Net cash used in operating activities for the six months ended June 30, 2018 was $4,680,099. This primarily consisted of expenses of $5.84 million in net losses and $2.36 million in token refunds. These expenses were offset by proceeds of $2.05 million resulting from the liquidation of certain of our cryptocurrency holdings, an impairment charge of $1.37 million and $1.37 million in proceeds from non-cash items related to the impairment of digital currencies.

Net cash used in operating activities for the financial year ended December 31, 2018 was $10,060,774. This primarily consisted of $13,904,786 in net losses and $2,356,543 paid to investors who accepted the offer of a rescission of their SAFT purchases. These expenses were offset by $2,369,312 in proceeds from the liquidation of Ethereum; non-cash items totaling $3,382,041 which includes the depreciation, amortization and impairment of cryptocurrencies; and $449,202 in other cash items such as prepaid expenses and other such expenses.

Net cash provided by operating activities for the financial year ended December 31, 2017 was approximately $16.4 million. This primarily consisted of proceeds from the liquidation of cryptocurrencies totaling approximately $14.8 million.

Net Cash Used In Investing Activities

Our investing activities have consisted primarily of property and equipment purchases for computer-related equipment, capitalization of software development costs, investments in cryptocurrencies. Capitalized software development costs are related to new applications or improvements to our existing software that expands the functionality of our network.

Net cash provided by investing activities for the six months ended June 30, 2019 was $3,865. This primarily consisted of the sale of computer-related equipment totaling $3,865.

Net cash used in investing activities for the six months ended June 30, 2018 was $11,347. This primarily consisted of the purchase of computer-related equipment totaling $11,347.

Net cash used in investing activities for the financial year ended December 31, 2018 was $103,597. This primarily consisted of $83,606 in acquisition of computer-related equipment and $31,468 in the acquisition of a font license, offset by $11,477 in proceeds from the sale of office furniture.

Net cash used in investing activities for the financial year ended December 31, 2017 was approximately $2.0 million. This primarily consisted of approximately $2.0 million in acquisition costs for SwitchRTC.

Net Cash Provided By (Used In) Financing Activities

Substantially all of the net cash provided by financing activities in all periods presented was the result of proceeds received under a line of credit and sales of our Series A and Series B Preferred Stock, as described further above in the section titled “—Overview.”

Net cash used in financing activities for the six months ended June 30, 2019 was $738,654. This primarily consisted of non-cash items totaling $738,678, resulting from the distribution of Props Tokens to DPA purchasers.

Net cash used in financing activities for the six months ended June 30, 2018 was $2,738,735. This primarily consisted of $2.5 million repayment of the principal of our remaining line of credit and $0.24 million in refunds resulting from the distribution of Props Tokens to our DPA holders.

Net cash used in financing activities for the financial year ended December 31, 2018 was $2,714,064. This primarily consisted of the repayment in principal of the remaining line of credit in the amount of $2,500,000 and the repayments of notes payable in the amount of $331,322. These expenses were offset by the proceeds from notes payable in the amount of $117,258.

Net cash provided by financing activities for the financial year ended December 31, 2017 was approximately $3.5 million. This primarily consisted of proceeds from a line of credit in the amount of approximately $3.0 million and $1.0 million of proceeds from notes payable related to the sale of the DPAs. These amounts were offset by $0.5 million in repayments on the line of credit.

Material Capital Commitments

We currently have no material commitments for capital expenditures.

Current Assets, Liabilities and Stockholders Equity (Deficit)