From rock star to UFO enthusiast, Blink-182 frontman Tom DeLonge launched To The Stars Inc. with a mission to explore the unknown and push the boundaries of science. While the company promised to unravel the mysteries of the universe, a deep dive into its financial records reveals a different kind of enigma. This public referral to the SEC shines a light on To The Stars Inc.’s financial practices, uncovering a constellation of potential conflicts of interest, questionable transactions, and a troubling lack of transparency. Is To The Stars Inc. truly a beacon of beyond-next generation innovation, or is it navigating investors through a financial black hole?
To fuel the company’s ambitious and ill-stated ventures, To The Stars has repeatedly turned to Regulation A offerings to raise capital. Their first foray into Regulation A fundraising, spanning from September 2017 to September 28, 2018, proved successful, bringing in $1,370,230 (Form 1-K, 2018–04–30). However, subsequent offerings, launched in July 2019 and September 2020, failed to generate significant capital and were ultimately terminated. Their most recent attempt, qualified in March 2022 and terminated in November of the same year, also fell short of expectations, netting $70,545 after deducting offering costs (Form 1-K, 2022–05–02).
This pattern of reliance on Regulation A offerings, coupled with the company’s persistent financial struggles, might be of interest to SEC’s Division of Enforcement, given the possible disconnect between the company’s lofty promises and its actual financial performance; a disconnect that could be used to lure in investors based on hype rather than substance.
Further fueling the need for potential regulatory scrutiny are the numerous related party transactions between To The Stars and its CEO, Tom DeLonge, detailed in the company’s filings. These transactions, including licensing agreements, loans, debt forgiveness, and equity issuances, raise the specter of potential conflicts of interest and warrant a closer examination to determine if DeLonge has been enriching himself at the expense of other shareholders, a clear violation of a CEO’s fiduciary duty.
One of the most significant of these transactions is the Licensing Agreement signed on April 26, 2017, granting To The Stars rights to exploit DeLonge’s intellectual property — his name, likeness, trademarks, copyrights, and master recordings (Form 1-K, 2017–04–30, Exhibit 61). Under this agreement, To The Stars was obligated to pay royalties on gross sales, with a minimum annual guarantee of $100,000. While the company did pay out the minimum amount in both 2017 and 2018, as disclosed in their Form 1-K filings, the company also acknowledged that the “initial public offering price for the Shares was determined by negotiations between us and the Selling Agent and may not be indicative of prices that will prevail in the trading market” (Form 253G2, 2020–03–30, p. 10). This admission, in conjunction with the consistent minimum royalty payments to DeLonge, despite limited evidence of robust sales, warrants additional investigation. Was this licensing agreement truly in the best interest of the company and its shareholders, or was it a mechanism for DeLonge to personally profit, regardless of the company’s financial performance?
This question becomes even more pressing when we consider the pattern of loans and advances between DeLonge and To The Stars. In 2017, the company received advances totaling $511,414 from Our Two Dogs Inc. (“OTD”), an entity owned by DeLonge (Form 1-K, 2017–04–30, Note 7). While a portion of these advances was eventually classified as contributed capital, a substantial amount remained as a debt owed to DeLonge’s company, raising questions about the true purpose and terms of these advances. Was this a legitimate loan or a disguised form of self-dealing?
Adding another layer of complexity, the company and OTD entered into a note agreement in 2016 for a $300,000 loan, later increased to $600,000 in 2017 (Form 1-K, 2018–04–30, Note 7). However, in 2019, OTD forgave this entire debt, including accrued interest, totaling a substantial $688,123 (Form 1-K, 2019–04–30, Note 7). This seemingly generous act of debt forgiveness, especially without a clear and compelling justification provided to investors, raises serious red flags. Did this forgiveness serve a genuine business purpose or was it primarily intended to benefit DeLonge?
DeLonge’s control of To The Stars extends beyond loans and debt forgiveness, reaching deeply into the company’s equity structure. When TTS Inc. was contributed to To The Stars Academy, DeLonge, through Gravity Holdings LLC, an entity controlled by the DeLonge Family Trust, received a staggering 55,000,000 shares of Class A common stock (Form 1-A, 2017–07–10). The scale of this equity grant, made in exchange for the entirety of TTS Inc., begs the question: was this transaction truly fair to other shareholders and was TTS Inc. appropriately valued? The SEC may have grounds to scrutinize the methodology used to determine TTS Inc.’s worth and whether this transaction potentially disadvantaged other investors by giving DeLonge a disproportionate level of control.
Furthermore, several of DeLonge’s equity acquisitions appear to have been conducted with a concerning lack of formal documentation. His purchases of 175,000 shares on January 25, 2022, and 151,833 shares in 2021 were reportedly made through oral agreements (Form 1-K, 2021–05–02 and 2022–05–02). The absence of formal documentation for such substantial transactions casts a shadow of doubt over their legitimacy, potentially signaling an attempt to obscure the true nature of these dealings from regulatory scrutiny.
Beyond the potential for self-dealing, To The Stars’ valuation practices, particularly the offering prices set in its multiple Regulation A offerings, may warrant review by the SEC. The company appears has consistently failed to secure independent third-party valuations or fairness opinions to support its offering prices, a practice that raises questions about potential overvaluation and the possibility of misinforming investors as to the true financial health of the company. This apparent lack of external validation opens questions surrounding whether the offering prices was arbitrarily set, resulting in the potential inflation of the company’s value which was simultaneously being driven by investors’ distorted picture of its financial prospects.
Compounding these valuation concerns is the company’s persistent use of tactics that dilute existing publicly held shareholder equity. These include issuing stock options and warrants to insiders at prices below the public offering price and engaging in multiple apparent “down rounds,” where capital is raised at successively lower valuations (Form 253G2, 2020–03–30, p. 20). This pattern of dilution, combined with the questionable valuation practices, raises concerns about whether the company is prioritizing the interests of select individuals, potentially insiders, over the broader shareholder base.
This apparent disregard for the interests of ordinary investors is further reflected in the company’s communication practices. To The Stars’ disclosures to investors are often vague, lacking crucial information about its business model, revenue streams, and research activities. This lack of transparency makes it exceedingly difficult for investors to make informed decisions, putting them at a significant disadvantage.
For example, the company repeatedly uses the term “evolving” to describe its business model, as seen in their 2020 offering circular, but fails to provide any concrete details about the intended evolution or the company’s specific plans for the future (Form 253G2, 2020–03–30, p. 9). This lack of clarity fuels skepticism about whether the company has a defined roadmap for success or is simply relying on vague promises and DeLonge’s celebrity to attract investors.
The Science and Technology Division, shrouded in similar ambiguity, is another area where transparency is sorely lacking. While the company mentions projects with names evoking futuristic technologies like quantum communication and The VAULT, it offers minimal information about their progress, scientific basis, or potential for commercialization. By withholding crucial details, the company deprives investors of the information they need to assess the viability and value of these projects, potentially leading to investment decisions based on speculation rather than factual data.
The company’s partnership with the U.S. Army, touted as a collaboration on cutting-edge research, is also described in vague terms that raise questions about transparency. The 2020 offering circular mentions the existence of a Collaborative Research and Development Agreement but fails to disclose crucial details about financial terms, scope of work, or expected outcomes (Form 253G2, 2020–03–30, p. 20). The absence of such basic information raises concerns about whether the company is deliberately downplaying the risks or exaggerating the potential benefits of this partnership to make its stock seem more attractive to investors.
Finally, the company’s financial performance underscores the seriousness of these concerns. To The Stars’ financial statements reveal a history of substantial losses, culminating in a staggering accumulated deficit of $55,903,566 by the end of 2020, as disclosed in its Form 1-K filing (Form 1-K, 2023–04–28). Despite these persistent losses, the company offers no clear and concrete plan for achieving profitability. Instead, its 2020 offering circular merely states that it “may be forced to curtail its existing or planned future operations” if additional funding cannot be secured (Form 253G2, 2020–03–30, p. 27). This statement not only highlights the company’s precarious financial position but also raises concerns about its ability to protect investor capital and generate returns.
To The Stars’ heavy reliance on short-term and related party loans for operational funding further amplifies these concerns. This practice, while not inherently problematic, suggests potential cash flow issues and limited access to traditional financing sources, indicating a possible lack of confidence from institutional lenders.
Furthermore, the company’s auditor issued a “going concern” opinion in its report on the 2020 financial statements (Form 1-K, 2023–04–28). This opinion, a serious warning flag, explicitly stated that “These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time” (Form 1-K, 2023–04–28). This assessment, coming directly from an independent auditor, should be a major cause for concern for investors and the SEC, as it indicates a significant risk of the company being unable to continue operating as a viable business.
The evidence presented here is derived directly from To The Stars Inc.’s own public filings, reveals a pattern of concerning practices that demand a thorough investigation by the SEC’s Division of Enforcement. The company’s extensive related party transactions with CEO Tom DeLonge, its lack of transparency in valuation and disclosure practices, and its consistent financial struggles raise substantial red flags about potential violations of securities regulations. These issues, taken together, suggest a company navigating treacherous financial waters, potentially putting investor capital at risk, all while engaging in practices that may warrant fulsome inquiry by the SEC to determine the extent of any wrongdoing and, most importantly, to safeguard the interests of investors who have placed their trust in To The Stars.
Legal Disclaimer
This report is made available based on publicly available filings and is intended primarily for the use of the U.S. Securities and Exchange Commission (SEC) and other regulatory bodies to review potential securities law violations. Any analysis or opinions that may be expressed here are based on publicly available information believed to be accurate and reliable at the time of publication. This report does not make, and is not intended to make, any accusations of wrongdoing or legal assertions of any kind.
