I’m often asked to give folks a better understanding on what happened with Honored, and truth be told it’s a hard story to tell in short summary. As such, it’s much easier to refer folks to this summary so that 1: I don’t miss any details and 2: the details are laid out consistently each time due to a bit of drama and contention around them.

In the beginning of early 2014, Honored was more or less out of funds. Up to that point I had self funded the company in 2013 (via my personal savings, 401k, and remainign EA RSUs I sold off) as well as a personal loan to me from my father, to the combined tune of roughly $23,000. All of these funds, in one way or another, came in via myself personally. About 6 months in a personal friend had also later contributed $10,000, in exchange for convertible notes of equity in the company, expressly to send myself and the team to PAX West 2013 to stir up interest and seek investments and partners. My two co-founders contributed no liquid funds, but instead were issued their respective shares in exchange for their Intellectual Property contributions, where their IP was allocated a “value” that was calculated carefully to balance against my own contributions, so that the shares resulted in the 20/30/50% ownership split we desired to hit. (In short, in 2013 I was issued 50% of the founder’s tranche of company shares in return for my ~$23,000 as the CEO, President, and CFO, and the two other co-founders were each issued 30% to the CTO and and 20% CMO/CDO of that tranche in exchange for their intellectual property contributions being reassigned to the company’s ownership. The remaining shares of the company was set aside as future employee equity and for investors.)

However, at this point now in Feb 2014 we had now been in operation for about a year. My co-founders, our part time freelancers, and our volunteer staff all had full time jobs elsewhere with Honored being their “side gig” (with the lone exception of myself), and all were contributing their time in exchange for sweat equity from the employee compensation pool of shares, viaformal contracts. I myself however had been focusing full time on Honored, and was not working another job. So far, I had stretched the 30-some-odd-thousand as far as it would go over the course of that year, between our We-Work membership, some prototype badges, a few company group stuff (team crunch weekends, indiegogo social marketing, a fundraiser campaign brand awareness holiday party, a PAX trip to drum up investors and partners, and most importantly software licensing fees and AWS costs for our dev and demo environments, which is where the bulk of it went)… and so in early 2014 we needed to start thinking about making tough decisions as the funds dwindled up without material progress towards a revenue generating state of affairs.

We had just wrapped up an Indiegogo campaign over the holidays that unfortunately only raised ~$2,500.. A trivial amount and far short of our goal of 75k. While it was, in theory, enough to cover the backer rewards for those select few who backed it based on our early math, anyone who has done a crowdfunding campaign or seen the realities of the crowdfunding world knows that once platform fees and bank fees are removed, usable funds dwindle quickly, and the unknown-unknowns suddenly tank the ability to leverage those funds meaningfully if your dollar amount is that low. (This is a well known reality now but still a hard lesson everyone was learning in the nacent crowdfunding era of 2013) And so, what we were left with was a little under $1,800 cash in hand from the Indiegogo, and logistically speaking that was going to be a challenge to reward the backers without spending twice that, at minimum, to deliver on our plans, due to attrition and the outsized base costs for the low-end funds raised. However I didn’t know this at the time, it wasn’t until conversations began with vendors and providers, and shipping research started, that the reality came into focus. More importantly, half of the rewards were dependent on our platform being launchable in an Alpha state sometime in the coming 4-6 months, which it was nowhere near being ready for, sadly, due to technical/development challenges.

Just then… Riot headhunted me, unexpectedly. I consulted with the co-founders and they both agreed I should seize the opportunity, and would be a fool not to take the offer. The agreement was that they would continue to work on the project to reach our next major milestone that was just over the horizon, with me semi-absent for the next 6-8 weeks and only very slightly engaged at most while I settled in down in LA, acclimated to my new job, and got through my first 90 days of onboarding. (I would like to call out here, there have been ongoing accursations for years I took the Indiegogo funds to pay for my relocation to LA. This is not true, Riot provided me with a most generous 5 figure reloaction package to cover these expenses as part of my offer.)

I would check in periodically on slack on overall progress, but due to ramping up to my new role and messy work nuances, my time as CEO/Managing Director/Product Manager would be heavily diminished for the time being, at least for the next 90 days. The general consensus was that if we managed to hit our major development milestone (which was a purely technical target and quite honestly was not all that dependent on my invovlement as a result of its engineering focus) and subsequently right our ship, then I would make an effort at that time to properly balance both jobs (which I already had Riot’s blessing to do) while we then figured out what the next steps to success were, and then go from there. If we did not hit that milestone, well then the obvious next step meant it was time for another series of major, difficult conversations about the future of the company.

Fast forward 2 months and we were now still very much as out of money as we were before, and also out of momentum. We failed to make progress on the milestones needed to make any marketable headway on the technical pipeline, preventing me from putting it in front of potential investors and show them more than powerpoint slides. Resultingly, the enthusiasm within the team was rapidly dying, and overall momentum was waning. Quite honestly I wasn’t able to properly motivate the volunteer team without further cash infusions or digging deeper into the equity reserves, which I was empathetic to. We 3 founders then mutually agreed to let things sort of sit in an icebox for a few weeks, because while we all knew in our hearts what this meant, we wanted to think things through together at an in-person meeting and plan out what a true sunsetting of Honored might look like at that time. Life being what it is, we all didn’t really bring the subject up in any hurry and went about our lives with our respective new jobs between us 3 founders, and rarely spoke for several months because human nature is one of conflict avoidance.

Several months later, I get an unexpected heads up from the friend noted above who had given money for convertible notes, stating that my co-founders had sent him an email where they implied to him that I had mismanaged his funds and asked him if he would be interested in pursuing any legal action to get to the bottom of what happened to his investment. He politely declined, saying he had written it off as an exciting but knowingly risky endeavor, and that he considered the matter closed on good terms from his end. He then subsequently filled me in on the conversation as a friendly heads up. As I mentioned previously, my family pitched in a little money to me as well to help pad my contributions, and at this time they also sent the same email to my father the next day, who declined to respond at all to their inquiry but also filled me in on the email.

Shocked, I reached out to my two co-foudners asking what was up and if there was something they wished to discuss with me, as I was willing to be an open book and happy to talk about anything. In return it was explained to me that they were under the impression I had mismanaged company funds (the word embezzlement was not used but heavily alluded to), that the fact the company ran out of money was, in their opinion, a result of my own negligence, and they were now wanting full explanations and threatening legal action against me. They asked to have a phone meeting with me, with a lawyer they had retained present (a mutual friend of all of ours, and someone I still to this day hold in high regard and consdier this purely a business issue), and I gladly obliged as I felt I had nothing to hide and wanted an amicable resolution for what I felt was simply a great misunderstanding. After all, I managed to enable us to operate on less than $30,000 over the course of 16 months, a non-trivial feat, and it wasn’t as though hundreds of thousands of dollars had gone into a black hole, and as such I felt it was just a terrible misunderstanding to be hashed out in person.

In preparation for the meeting, I tried to grab up-to-date bank statements of the corporate bank account with SVB to have all my notes in order. In trying to do so however, I learned I was locked out of our accounts. In contacting the banks customer service thinking it was simply a login issue from lack of using it for so long, I was informed I was no longer on file as an authorized representative of the company, and that control of the accounts had been turned over to other parties (bear in mind prior to this, I was the only signatory on the account… I was acting CFO in lieu of one existing and when the bank accounts were created, I did not HAVE co-founders on paper yet, they came along later. The bank had no knowledge or record of the other co-founders due to how the initial paperwork was constructed, and I was the exclusive legal entity with rights to the bank account). The bank quite firmly shut down all of my attempts to gain insight or ask questions about the situation and sent me packing, and our private representative with the bank refused to even take my calls… it took many calls and emails before SVB even admitted not only was I not on the account but there were actually notes in place explicitly baring my access to it citing “pending legal action”. Surprised, I prepared as best as I could with what I had on hand, and I also consulted with a lawyer myself in anxiety, who gave me some reassuring and sound advice regarding the nuances of corporate finance law. He confirmed my understanding around several things, including around the latitude of a CEO (and CFO) in making judgment calls in “good faith”. (All of which, in short he said, I was well seemingly in the clear legally, and I had no reason to worry nor should I feel like I needed to go into this conversation with anything but open honesty and calm expectations, based on what I told him. He covered the fundamentals of piercing the corporate veil in the legal context which, in short, obvious good faith efforts by a CEO to grow the company shield me from having to explain line item expenses or individual expense justifications to any party, even fellow shareholders or co-founders, so long as those expenses were made with an honest intent to serve the company’s interests. )

I showed up for the call, and they requested to go through every… single… bank transaction. Line by line, for virtually the entire year of 2013. In the interests of good faith and still convinced this was a huge misunderstanding, I obliged. Halfway through it became clear they had a specific agenda in motion however. They were beginning to question and demand explanations for some of the most mundane of things. For example, one particular day we had everyone at my house for a hackathon coding session to dog pile a sprint we were weeks behind on, in order to have a demo for potential investors at PAX. I ordered delivery food for the whole team on my company card, very clearly letting everyone there know food was on Honored, as part of the motiviation to participate. They demanded I explain why I had expensed the food to the company and not out of pocket, and wanted me to provide them a form of documented proof they had pre-agreed in writing to that expense before I had made it. At another point, they asked why I had spent X$ on paying for business cards for pax for the 3 of us… questioning the necessity of the cards and why I couldn’t have made some “cheap ones by hand at Kinkos for half the price”, and again challenged me, claiming this expenditure of funds was “unethical” because it did not have their explicit approval in writing before it had been made. I explained that they seemed to have no issue with me doing these things at the time they occurred and were discussed (in fact one of them designed those cards and ordered them on the site using my corporate card number!), in turn they responded they had no idea I had used company funds for it and assumed (and expected) that I was using my own personal money for all of these things at the time. They stated that, as there was no written record of them approving this expense, I was therefore legally responsible for the liability of the funds… It continued like this for almost an hour, transaction by transaction.

Eventually I reached the point of exasperation, but I tried hard not to let it show. I finally informed them that the money I spent was spent in good faith that it would further the overall goal of the growth of the company and establish us in a better position to raise funding and deliver a working demo. As the CEO, the functioning work of our non-existent CFO, and the largest shareholder and chairman of the Board, it was within my rights to make these leadership decisions without their itemized, detailed input each time. Additionally, the Corporation, like all Corporations, is a legal entity in and of itself, and I am just an agent of it. I explained my admittedly limited but guided-by-a-lawyer understanding on how, legally speaking, they cannot challenge individual line items of the funds exercised within my authority without a legal order from a court to pierce the corporate veil and dive into the financials directly. I explained I was more than happy to have any conversations need to allay their fears that I had done something questionable, but that this call felt not like an opportunity to clear the air, but a witch hunt to find an “aha!” moment to establish a way to lay blame on me for the overall failure of the company… something, as the core founder, visionary, and CEO I already took ownership of with great remorse and and heavy heart at every opportunity. They responded in disagreement with my position, and insisted I present to them a cash payment equal to the amount of money they had deemed “spent without their authorization” of a sum tallied up based on the charges they questions (which were virtually all of our non-AWS expenses, nearly).

After the call ended I re-consulted a lawyer. He proposed that I give them a few options based on the fact it was now clear that money was the issue at hand, and that they were seeking a way to obtain more from me. I emailed them back several days later with a few different proposals that I felt were more than fair and equitable, and with any hope might even help put the company in a place to have something productive done with it’s IP down the road with this mess behind us:

1. Option A: Per the formation paperwork, neither of them had put up any funds for their shares, only Intellectual Property. However, that IP had an established dollar value per share in the paperwork that correlated to the shares issued to me for cash to balance it all out by percentages. I offered them each cash, equal in value to 2-times the original declared value of their shares, to buy out their equity and let them walk away with a 100% increase in their share value. In the event they did not find this exchange favorable to their long term prospects, I presented Option 1-B; a plan of buying out their controlling equity for the above value in cash and issuing then each an equal amount of non-controlling shares… this way their investment of time and effort would still have liquidity in the future if an opportunity ever arose for the company to move forward once more, while still giving them some money for their shares, and removing the hurdle of us having directors with controlling interests at odds with each other.

2. Option B: Per corporate finance law, I, as a private entity, could not legally just deposit my own money into the company bank account on a whim, without the company recompensing me with equity in like kind. (As it was outlined to me by legal experts. Private assets going in need to reflect something of comparable value going out.) There are pretty strict rules about this sort of thing, but I said I would be more than willing to buy additional shares in the company at current cap-table values, for a total dollar value they, not I, felt was practical and responsible to make things feel right to them. Additionally, this would help to inject fresh cash in the company to continue finding a way towards success and might actually open some new avenues for us. Now, the unspoken caveat in this option that I did not go into, was that in doing this, the additional shares issued to me would mean my controlling stake would increase. And while I didn’t lay it out explicitly, it would be clear to anyone paying attention that even the smallest investment of any meaningful value would tip the scales into majority control in my favor vs the two of them combined, where they previous patched me 50/50, which I suspect they would not agree with.

3. Option C: We formally declare Honored a failure.. And I, as CEO, was more than ready to own the situation and the responsibility of it entirely as my own leadership failure. We would mutually sign the papers of dissolution, and the company would be no more at that point, and we all walk away having learned from the painful experience.

I sent this email to them and ccd the lawyer they brought to the call, following up on the un-answered thread twice more over the following weeks after not receiving any responses, as well as DMing each one once on social media. That was towards the fall of 2014… and I have heard nothing from any of them since that time. With myself frozen out of all accounts, and having never heard back from those attempts… this is where I sit today as of the time you are reading this. I am not even able to dissolve the company, or even file it’s taxes, as I have been legally locked out of everything, but as far as the state of California and the IRS is concerned, I am still the responsible agent for the business as well… :/