October
25,
2018
VIA EDGAR
Mses.
Anne Parker, Heather Clark and Jean Yu and Mr. John Dana
Brown
United
States Securities and Exchange Commission
Division of
Corporation Finance
Office
of Transportation and Leisure
100 F
Street, NE
Washington, D.C.
20549
Re:
Super
League Gaming, Inc.
Draft
Registration Statement on Form S-1
Submitted
September 14,
2018
Ladies
and Gentlemen:
This
letter is submitted on behalf of Super League Gaming, Inc. (the
“Company”) in
response to the comments from the staff of the Division of
Corporation Finance and the Office of Transportation and Leisure
(the “Staff”)
of the Securities and Exchange Commission (the “Commission”) in a letter to the
Company dated October 10, 2018 with respect to the Draft
Registration Statement on Form S-1 submitted to the Commission on
September 14, 2018 (the “DRS
Submission”). In connection with this letter
responding to the Staff’s comments, the Company is submitting
a revised draft of the DRS Submission (the “Amended DRS”), which will include
corresponding changes in response to Staff’s
comments.
In this
letter, each of the Staff’s comments is indicated in italics,
followed by the Company’s responses thereto. Page number
references in the responses below are to the page numbers of the
Amended DRS. Capitalized terms used but not defined in this letter
have the meanings ascribed thereto in the the Amended
DRS.
Prospectus Summary, page 1
1.
Please define the terms “Application Program
Interface,” “hyper-local level,” “lifestyle
gaming,” “content capture,” and “local area
network center” when first used. In addition disclose how you
calculate “customer acquisition cost” and
“accretive life time value.” Similarly, with respect to
your statement that “According to the Electronic Software
Association, the avid gamer sees gameplay as central to their
social life with 55% playing video games to connect with friends
and 46% to spend time with family members,” please define
what constitutes an “avid gamer” to which these
statistics pertain.
Response: The Company
respectfully acknowledges the Staff’s comment, and advises
the Staff that the terms “Application Program
Interface,” “avid gamer,” “hyper-local
level,” “lifestyle gaming,” “content
capture,” and “local area network center” are now
defined when first used, as found on pages 1, 2, 4 and
55 of the Amended DRS,
respectively.
The
Company further advises the Staff that, with respect to the
Company’s use of the terms “customer acquisition
cost” and “accretive lifetime value,” the Company
has elected to remove these terms from the prospectus contained
within the Amended DRS. Because the Company is still in the
beginning stages of its development, the Company does not yet have
a fixed formula for calculating these values.
Risk Factors, page 9
2.
Please revise your first risk factor to also discuss your
accumulated deficit and your auditor's going concern
opinion.
Response: The Company
respectfully acknowledges the Staff’s comment and advises the
Staff that the first risk factor, appearing on page 9 of the
Amended DRS under the heading “We have incurred significant
losses since our inception and we may continue to experience losses
in the future,” now includes a discussion of the
Company’s accumulated deficit and the going concern opinion
of the Company’s independent registered public accounting
firm.
We may experience outages and disruptions of our infrastructure,
page 15
3.
Please briefly describe the system redundancies you have
implemented so that investors can better understand the risk you
face.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that a
brief description of the Company’s system redundancies is now
included in the risk factor appearing on page 15 of Amended DRS
under the heading “We may experience system failures, outages
and/or disruptions of the functionality of our platform. Such
failures, delays and other problems could harm our reputation and
business, cause us to lose customers and expose us to customer
liability.”
Our business is subject to
regulation, and changes in applicable regulations may
negatively impact
our business., page 16
4.
We note the statement that your “skill-based competitions in
the future could become subject to evolving rules and
regulations.” If you have a particular area of regulation in
mind, please further describe this risk. For example, if this
relates to your players winning prizes and there is a risk that
gambling regulations, or changes thereto, could apply please so
state.
Response: The Company
respectfully acknowledges the Staff’s comment and advises the
Staff that, because the Company
has a practice of offering prizes and/or gifts as incentives to
participate in certain events, those incentives may be subject to
the federal Deceptive Mail Prevention and Enforcement Act and
certain state prize, gift or sweepstakes statutes. Although
these rules and regulations have not, and are not expected to have
a negative impact on the Company’s events, tournaments, or
other skills-based competitions, the Company has elected to include
additional disclosure regarding these regulations in the Business
section of the Amended DRS, beginning on page 74.
We are an emerging growth company and may take advantage of certain
reduced reporting requirements., page 24
5.
According to the risk factor at the top of this page, you have
elected to "opt out" of the extended transition period for
complying with any new or revised financial accounting standards
pursuant to the JOBS Act. However, this appears to contradict
disclosures included elsewhere in the filing such as the cover page
and on pages 52-23 as well as the notes to the financial
statements. Please revise to fix the inconsistencies and affirm to
us whether you have elected to take advantage or have opted out of
the extended transition period provision of the JOBS
Act.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the Company has elected to take advantage of the extended
transition period for complying with any new or revised financial
accounting standards pursuant to the JOBS Act. Accordingly, the
applicable disclosures throughout the prospectus contained within
the Amended DRS have been updated to remove any inconsistencies and
clarify the Company’s decision.
Components of Results of Operations
Brand and Media Partnerships, page 41
6.
Please further describe how brand and media partnerships
“leverag[e] broadcast, social and customer loyalty programs
which... drives more gamers and viewers to [y]our amateur esports
gaming content and technology platform.” If sponsors are
promoting you outside of your events and platform, please explain
how this is done, to what extent, and whether your partners are
contractually obligated to do so.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the disclosure regarding the Company’s brand and media
partnerships has been revised throughout the prospectus included in
the Amended DRS to further describe the relationship between the
Company and its partners.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS
Liquidity and Capital Resources, page 48
7.
It appears from the statement “we expect to incur substantial
expenditures in the foreseeable future for the development of our
esports brand, community and technology platform,” that such
matters may require material capital outlays. In describing these
trends disclose the estimated amounts of capital that will be
required, to the extent known.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the Company expects that the estimated amounts of capital required
in future periods for the the development of its brand, community
and technology platform will be consistent with expenditures
incurred during the first and second quarters of its fiscal year
ending December 31, 2018. The aforementioned statement has been
modified on page 48 of the Amended DRS to reflect this
expectation.
Our Business, page 54
8.
Please revise the text accompanying the bar charts on page 59 to
explain exactly what the Y axis in each chart represents, how it is
calculated, and whether there are differences in the calculations
from different sources or for different services
represented.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the bar charts on page 59 of the Amended DRS have been updated to
include the requested information. The calculations in each chart
are based on viewership, whether it is content viewed online in the
case of YouTube Gaming, Twitch and other streaming services, or TV
viewership in the case of the NFL, NBA and other sports leagues
identified in the applicable graphs.
9.
If the chart on page 60 is denominated in thousands, please revise
to state. In addition, in the accompanying text please reconcile
the revenue amount shown for 2018 with the statement on pages 2 and
58 that according to NewZoo “the global gaming market will
reach approximately $137.9 billion by the end of
2018.”
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the chart under the heading “Revenue potential is not only
very large, but also growing rapidy” on page 60 of the
Amended DRS has been modified to note that the amounts set forth
therein are denominated in millions..
In
addition, the text citing the NewZoo statistic that “the
global gaming market will reach approximately $137.9 billion by the
end of 2018,” appearing on pages 2 and 58 of the Amended DRS
have been updated to reconcile the expected growth within the
esports market by the end of 2018.
10.
Please discuss how the statistics found in the chart on page 61
translate into revenues. For example, explain how many of the 100
million monthly average users/ players for League of Legends would
pay for being a user or player, and provide an estimate of the
revenues derived from these 100 million monthly average users/
players.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the Company believes that the addition of new game titles to its
platform provides several opprotunites to monetize the expanded
audience of monthly average users and/or players that comes with
each respective game title. These opportunities include, but are
not limited to, bringing new members to the platform, increasing
enrollment for the Company’s experiences, expanding
viewership of the Company’s online content and promoting
additional merchandise sales.
Given
the Company’s limited operating history, the Company is
currently unable to accurately calculate the estimated increase in
revenue associated with the monthly average users and/or players of
new game titles.
11.
Please disclose the estimated additional capital you will need, if
any, to reach the 2018 estimated KPIs on page 69. In addition,
disclose your year-to-date 2018 KPIs so that investors can see what
work remains to be done.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the Company believes the capital raised during and subsequent to
the six months ended June 30, 2018 will be sufficient to reach the
2018 KPIs. The table summarizing the Company’s KPIs during
2015, 2016, 2017 and the projected KPIs for 2018 appearing on page
69 of the Amended DRS has been revised to include a column for KPIs
actually achieved by the Company as of September 30, 2018, in
addition to the the Company’s estimated KPIs for the entirety
of 2018.
Management Role of Board in Risk Oversight Process, page
79
12.
Please discuss what role the board has in managing cybersecurity
risk.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that
the disclosure regarding the role of the Board in the
Company’s risk oversight process beginning on page 79 of the
Amended DRS has been updated to include a discussion of the
Board’s current and expected role in managing cybersecurity
risks facing the Company.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS, page
91
13.
Please identify the natural persons with voting and dispositive
power over the shares held by Pu Luo Chung VC Private
Limited.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that a
footnote has been added to the Security Ownership Of Management And Certain
Securityholders table on page 91 of the Amended DRS to
provide the required disclosure.
Exhibits
14.
We note the forum selection provision in Article VIII of your
bylaws. Please include a risk factor to discuss the effects of such
a provision, including the possibility that the exclusive forum
provision may discourage stockholder lawsuits, or limit
stockholders’ ability to bring a claim in a judicial forum
that they find favorable for disputes with the company and its
officers and directors.
Response: The Company respectfully
acknowledges the Staff’s comment and advises the Staff that a
risk factor addressing the risks associated with the exclusive
forum provision in the Company’s Amended and Restated Bylaws
has been added to the prospectus included as a part of the Amended
DRS on page 18 under the heading “Our amended and restated
bylaws designate a state or federal court located within the State
of Delaware as the exclusive forum for certain litigation that may
be initiated by our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum
for disputes with us.”
15.
We note the importance of game publisher agreements to your
business, as discussed on page 70. Please file your agreements with
Epic Games and Supercell, or tell us why you are not substantially
dependent on these agreements pursuant to Item
601(b)(10).
Response: The Company
respectfully acknowledges the Staff’s comment and advises the
Staff that, currently, the Company offers Clash Royale and Fortnite
events under permission granted to the Company by Supercell and
Epic Games, respectively, pending the negotiation of formal
licensing agreements. Once executed, the Company intends to file
the formal licensing agreements as exhibits to the Registration
Statement and/or periodic reports to be filed under the Securities
Exchange Act of 1934, as amended, pursuant to Item
601(b)(10).
We hope
that the foregoing has been responsive to the Staff’s
comments. If you have any questions or would like further
information regarding the foregoing, please do not hesitate to
contact me at (619) 272-7063.
Sincerely,
/s/ Jessica R. Sudweeks
Jessica
R. Sudweeks
Partner
Disclosure Law
Group,
a
Professional Corporation
Chief
Executive Officer
Super
League Gaming, Inc.
Mr.
Daniel R. Rumsey
Managing
Partner
Disclosure Law
Group,
a
Professional Coporation
Messrs.
Jonathan R. Zimmerman, Ben A. Stacke and Ryan R.
Woessner
Faegre
Baker Daniels LLP