As filed with the Securities and Exchange Commission on
August 21, 2020
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
SUPER LEAGUE GAMING, INC.
(Exact name of registrant as specified in its
charter)
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Delaware
(State
or other jurisdiction of
incorporation or organization)
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7374
(Primary
Standard Industrial
Classification
Code Number)
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47-1990734
(I.R.S.
Employer
Identification
Number)
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2912 Colorado Ave., Suite #203
Santa Monica, California 90404
Company: (802) 294-2754; Investor Relations: (949)
574-3860
(Address, including zip code, and telephone number,
including
area code, of registrant's principal executive
offices)
Ann Hand
President and Chief Executive Officer
Super League Gaming, Inc.
2912 Colorado Ave., Suite #203
Santa Monica, California 90404
(802) 294-2754
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copies to:
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Daniel W. Rumsey, Esq.
Jessica R. Sudweeks, Esq.
Disclosure Law Group,
A Professional Corporation
655 West Broadway, Suite 870
San Diego, California 92101
(619) 272-7050
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Stephen E. Older, Esq.
Rakesh Gopalan, Esq.
McGuireWoods LLP
1251 Avenue of the Americas,
20th Floor
New York, New York 10020
(212) 548-2100
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of this
registration statement.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as amended, check
the following box. ☐
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same
offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration number of
the earlier effective registration statement for the same
offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of
"large accelerated filer," "accelerated filer," "smaller reporting
company," and "emerging growth company" in Rule 12b-2 of the
Exchange Act.
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Large
accelerated filer ☐
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Accelerated
filer ☐
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Non-accelerated
filer ☒
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Smaller
reporting company
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☒
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Emerging
growth company
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☒
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If
an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the
Securities Act. ☐
CALCULATION
OF REGISTRATION FEE
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Title of Each Class of
Securities to be Registered
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Proposed
Maximum Aggregate
Offering Price (1)(2)(3)
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Amount of
Registration Fee
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Common
Stock, par value $0.001 per share
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$
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8,050,000
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$
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1,044.89
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(1)
Pursuant
to Rule 416 under the Securities Act, the shares registered hereby
also include an indeterminate number of additional shares as may
from time to time become issuable by reason of share splits, share
dividends, recapitalizations or other similar
transactions.
(2)
Estimated solely for the purpose of calculating
the registration fee in accordance with Rule 457(a) under the
Securities Act of 1933, as amended (the “ Securities
Act”).
(3)
Includes
the offering price of additional shares that the underwriters have
the option to purchase to cover over-allotments, if
any.
The registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration
Statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may
determine.
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The information in this preliminary prospectus is not complete and
may be changed. These securities may not be sold until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED AUGUST 21, 2020
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PRELIMINARY PROSPECTUS
3,111,111 Shares
SUPER LEAGUE GAMING, INC.
Pursuant to this prospectus, we are offering 3,111,111 shares of
our common stock, par value $0.001 per share.
Our common stock is presently traded on the NASDAQ Capital Market
under the symbol “SLGG.” On August 20, 2020, the last
reported sale price of our common stock was $2.25 per share. The
final public offering price will be determined through negotiation
between us and the underwriters in the offering at the time of
pricing and may be at a discount to the current market price.
Accordingly, the recent market price used throughout this
prospectus may not be indicative of the actual offering
price.
We are an “emerging growth company” as the term is used
in the Jumpstart Our Business Startups Act of 2012 and, as such,
have elected to comply with certain reduced public company
reporting requirements for this prospectus and future filings. See
“Prospectus
Summary – Implications of Being an Emerging Growth
Company.”
__________________________________________
Investing in our common stock involves a high degree of risk. You
should carefully consider the matters set forth in "Risk Factors"
beginning on page 7 of this prospectus and under similar headings
in the documents that are incorporated by reference into this
prospectus.
Neither the Securities and Exchange Commission nor any other
regulatory body has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
__________________________________________
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Per Share
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Total
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Public offering price
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$
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$
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Underwriting discount (1)
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$
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$
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Proceeds, before expenses, to us
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$
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$
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(1)
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Does not include additional compensation payable
to the underwriters. We have agreed to reimburse the underwriters
for certain expenses incurred relating to this offering. Please see
the section titled “Underwriting”
beginning on page 25 of this prospectus for additional information
regarding underwriter
compensation.
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This offering is being underwritten on a firm commitment basis. We
have granted the underwriters the option to purchase up to 466,667
additional shares of our common stock from us at the public
offering price, less the underwriting discount, within 30 days
following the date of this prospectus to cover over-allotments, if
any.
The underwriter(s) expect to deliver the shares to the purchasers
on or about , 2020, subject to
customary closing conditions.
__________________________________________
Sole Book-Running Manager
National Securities
Corporation
__________________________________________
The date of this prospectus is ,
2020
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About this Prospectus
Neither we nor the underwriters have authorized anyone to provide
you with information that is different from that contained in, or
incorporated by reference into, this prospectus or in any free
writing prospectus we may authorize to be delivered or made
available to you. We take no responsibility for, and can provide no
assurance as to the reliability of, any other information that
others may give you. We and the underwriters are offering to sell
shares of our common stock and seeking offers to buy shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information contained in, or incorporated by
reference into, this prospectus is accurate only as of its date,
regardless of the time of delivery of this prospectus or any sale
of shares of our common stock. Our business, financial condition,
results of operations and prospects may have changed since that
date.
For investors outside the United States: Neither we nor the
underwriters have done anything that would permit this offering, or
possession or distribution of this prospectus, in any jurisdiction
where action for that purpose is required, other than in the United
States. Persons outside the United States who come into possession
of this prospectus must inform themselves about, and observe any
restrictions relating to, the offering of the shares of common
stock and the distribution of this prospectus outside of the United
States. See "Underwriting"
for additional information on these
restrictions.
Industry and Market Data
Unless otherwise indicated, information in this prospectus
concerning economic conditions, our industry, our markets and our
competitive position is based on a variety of sources, including
information from third-party industry analysts and publications and
our own estimates and research. Some of the industry and market
data contained in this prospectus are based on third-party industry
publications. This information involves a number of assumptions,
estimates and limitations.
The industry publications, surveys and forecasts and other public
information generally indicate or suggest that their information
has been obtained from sources believed to be reliable. Unless
otherwise indicated, none of the third-party industry publications
used in this prospectus were prepared on our behalf. The industry
in which we operate is subject to a high degree of uncertainty and
risk due to a variety of factors, including those described in
"Risk
Factors" in this prospectus and
in Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2019 and our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2020 and June 30, 2020, which are
incorporated by reference into this prospectus. See
"Where You
Can Find More Information" and
"Incorporation of Certain
Documents by Reference." These
and other factors could cause results to differ materially from
those expressed in these publications.
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PROSPECTUS SUMMARY
This summary highlights information contained in this prospectus,
or incorporated by reference into this prospectus, and does not
contain all of the information that you should consider in making
your investment decision. Before investing in our common stock, you
should carefully read this entire prospectus, including the
information set forth under the section "Risk Factors," and our
financial statements and the related notes thereto, in each case
included in this prospectus or incorporated by reference into this
prospectus. Some of the statements in this prospectus constitute
forward-looking statements. See "Cautionary Note Regarding
Forward-Looking Statements."
Unless the context requires otherwise, the words "we," "us," "our,"
the "Company," and "Super League" refer collectively to Super
League Gaming, Inc., a Delaware corporation, and its
subsidiaries.
We are a global leader
in the mission to bring live and digital esports entertainment and
experiences directly to everyday competitive gamers around the
world. Utilizing our proprietary technology platform, Super League
operates physical and digital experiences in partnership with
publishers of top-tier game titles and owners/operators of a
distributed footprint of venues, a network of digital social and
viewing channels, and an association/organization of city-based
amateur gaming clubs and teams. The Super League
Network features multiple forms of content celebrating the
love of play via social media, live streaming and video-on-demand,
along with continuous gameplay and leaderboards. Inside our network
is Framerate, a large independent social video esports network
powered by user-generated highlight reels, and our exclusive
proprietary platform Minehut, providing a social and gameplay
forum for the avid Minecraft community. Super League is committed
to supporting the development of local, grassroots player
communities, while providing a global, scalable infrastructure for
esports competition and engagement. We address a wide range of
gamers across game titles, ages and skill levels, and also a wide
range of content-capture beyond gameplay. This positions Super
League as more than a tournament operator; we are a lifestyle and
media company focused on capturing, generating, aggregating and
distributing content across the genre of all things
esports.
We believe Super League is on the leading edge of the rapidly
growing competitive video gaming industry, which has become an
established and vital part of the entertainment landscape. We
believe there is a significant opportunity for the world of
mainstream competitive players who want their own esports
experience. These amateur gamers are players who enjoy the
competition, the social interaction and community, and the
entertainment value associated with playing and watching others
play.
We also believe that Super League is a critically important
component in providing the infrastructure for mainstream esports
that is synergistic and accretive to the greater esports ecosystem.
Over the past five years, we believe we have become a leading brand
for amateur esports by providing a proprietary software platform
that allows our gamers to compete, socialize and spectate premium
amateur esports gameplay and entertainment, both physically and
digitally online. Not only do we offer premium amateur esports
leagues and community, but we are able to leverage our derivative
gameplay content to become a comprehensive amateur esports content
network.
The fundamental drivers of our business model and monetization
strategy are creating deep community engagement through our highly
contextualized, local experiences that, when coupled with the
critical mass of our large digital audiences, provides the depth
and volume for premium content and offer monetization
differentiated from a more traditional, commoditized advertising
model. The combination of our physical venue network and digital
programming channels, with Super League’s technology platform
at the hub, creates the opportunity for not just a share of the
player’s wallet, but also the advertiser’s wallet. We
do this by offering brand sponsors and advertisers a premium
marketing channel to reach elusive Generation Z and Millennial
gamers and offering players ways to access exclusive tournaments,
rewards and programming through our Super League consumer
subscription offer and other consumer offerings.
In the first half of 2020, management continued to focus on
monetization with respect to our two primary revenue categories:
(1) sponsorships and advertising revenues, or the monetization of
our content, and (2) direct-to-consumer revenues, or gamer
monetization. In addition to the significant increase in engagement
described below, we (i) continued our focus on our premium
advertising model for future monetization of our rapidly growing
advertising inventory and expanded our direct sales team to
facilitate delivery; (ii) continued our focus on monetization of
the gamer through direct-to-consumer offers, including the planned
relaunching of our monthly subscription offer that is purely
digital, due in part to the impact of the ongoing COVID-19 pandemic
and the launch of a micro-transaction marketplace; and (iii) we
began to unlock new ways that our proprietary live content capture
and production technology system can extend beyond esports into
traditional sports and other entertainment formats representing
potential new revenue opportunities in the future.
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Super League Gaming has experienced its strongest period of
audience growth during the challenging time of the COVID-19
pandemic, marked by the reaching of a key 2020 milestone in July
2020; reaching one billion video views and impressions
year-to-date. This represents more than a 700%
increase over the full fiscal year of 2019, during which we
achieved a total of 120 million views.
We believe that the ability to generate one billion views by July
2020 is a key proof point of not only the compelling attractiveness
of Super League’s content, but also the variety of content we
are able to offer. We have established ourselves as a leading
publisher of user-generated gaming highlights within our Framerate
social video network, and we produce 11 general and game
title-specific channels that, together, deliver tens of millions of
video views per month. This includes three original shows on
Snapchat, five TikTok channels, and three Instagram channels, with
more to come.
During the first half of 2020, we also experienced a significant
increase in new users, gamer engagement, and gameplay hours across
all of our platforms. We believe a driver of the increase was, to a
certain extent, the current period of social distancing and
mandatory shelter-in-place orders stemming from the COVID-19
pandemic, during which passionate video gamers around the world are
seeking a competitive outlet, seeking to connect with others around
the games they love and are turning to esports and other online
gaming communities to fill the void. We also believe that a driver
of the increase is the fact that esports is continuing to become
more mainstream, which was the case prior to COVID-19. These
increases are accelerating our growth plans, and are increasing our
opportunities for monetization.
Super League’s video content business is also accelerating on
an additional path through the advancement of Super League’s
proprietary live content capture and broadcast system, which
includes patented technology and fully remote, innovative workflows
operated by SuperLeagueTV, a completely virtual studio. Endemic and
non-endemic brands and partners have sought out Super League to
provide premium, TV-quality production services across a multitude
of live streamed events. During 2020, within gaming alone,
broadcasts have spanned an impressive mix of game titles including
Minecraft, APEX Legends, NBA2K, PUBG Mobile, the World Golf Tour
and more.
In response to the COVID-19 pandemic and the related uncertainty,
advertisers and sponsors across the board inevitably paused to
reset their marketing strategies. The impact on Super League in the
first half of 2020 was the deferral of some of these programs and
related revenues to future periods. We did not experience any
cancellations of existing programs. For example, our partnership
with Tencent and OnePlus, bringing PUBG mobile tournaments to life,
proceeded as planned, just from the comfort and safety of
players’ homes, online, as opposed to in-person. The majority
of our gameplay hours and other engagement occurs digitally,
online, so while our “in real life” gaming is a premium
and important aspect of our brand, the shift away from retail
locations is not expected to have a significant impact on our
overall business model over time, which is largely digitally
focused.
Key Performance Indicators.
We focus on three key performance indicators
(“KPIs”), as outlined below, to assess our
progress and drive revenue growth, which is also a key performance
indicator. As of the end of the second quarter of 2020, we
significantly outperformed several of the KPI goals we established
at the beginning of 2020, as
follows:
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Registered Users: We ended fiscal 2019
with approximately 980,000 registered users. During the six months
ended June 30, 2020, we increased our registered users by
approximately 100%, to 1.96 million registered users. Registered
users represent more gamers from whom we can gather user generated
content and convert into subscribers and/or upsell into other paid
offers.
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Engagement Hours: As of June 30, 2020,
including our live gaming experiences and our expanding digital
gameplay channels, we generated approximately 30.5 million hours of
gameplay and other engagement, as compared to approximately 15.0
million full year 2019 gameplay and other engagement hours. We
continue to focus on ways we can repackage and distribute this
significant derivative content library for further
monetization.
●
Views and Impressions: We generated
808.5 million views and impressions during the six months ended
June 30, 2020, compared to our full-year 2019 views of 120.0
million, representing an approximately 600% increase over full year
2019 views. Additionally, as described above we reached a key 2020
milestone in July 2020, reaching one billion video
views and impressions as of July 2020. This continued growth
in views results in the exponential growth of our monetizable
advertising inventory. Additionally, our growth in views continues
to be achieved largely via user generated content submitted to us
by our community, significantly limiting the production cost and
overall investment required to achieve the continued growth in our
viewership.
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Impact of COVID-19 Pandemic
Actions taken around the world to help mitigate the spread of the
coronavirus include restrictions on travel, and quarantines in
certain areas, and forced closures for certain types of public
places and businesses. The novel coronavirus and actions taken to
mitigate the spread of it have had, and are expected to continue to
have, an adverse impact on the economies and financial markets of
many countries, including the geographical areas in which the
Company operates. On March 27, 2020, the Coronavirus Aid,
Relief, and Economic Security Act (“CARES Act”) was enacted to amongst other provisions,
provide emergency assistance for individuals, families and
businesses affected by the coronavirus pandemic. As previously
disclosed, on May 4, 2020, the Company entered into a potentially
forgivable loan from the U.S. Small Business Administration
resulting in net proceeds of approximately $1.2 million pursuant to
the Paycheck Protection Program created under the CARES Act. It is
unknown how long the adverse conditions associated with the
coronavirus will last and what the complete financial effect will
be to the Company.
Notwithstanding the growth in user engagement metrics discussed
herein, the broader impact of the ongoing
COVID-19 pandemic on our results of operations and
overall financial performance remains
uncertain. The COVID-19 pandemic may continue
to impact our revenue and revenue growth in future periods, and is
likely to continue to adversely impact certain aspects of our
business and our partners, including advertising demand,
retail expansion plans and our in-person esports
experiences. Please see the section titled
"Risk
Factors" in this prospectus and
in Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2019 and our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2020 and June 30, 2020, which are
incorporated by reference into this prospectus, for additional
information on the risks and uncertainties facing our business as a
result of the ongoing COVID-19 pandemic.
Selected Risks Related to our Business
Our
business is subject to numerous risks, including risks that may
prevent us from achieving our business objectives or may adversely
affect our business, financial condition, results of operations,
cash flows and prospects that you should consider before making an
investment decision. Some of the more significant risks and
uncertainties relating to an investment in our company are listed
below. These risks are more fully
described in the section titled "Risk
Factors" in this prospectus and
in Item 1A of our Annual Report on Form 10-K for the year
ended December 31, 2019 and our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2020 and June 30, 2020, which are
incorporated by reference into this prospectus.
●
overall
strength and stability of general economic conditions, and of the
esports industry, both in the United States and
globally;
●
changes
in consumer demand for, and acceptance of, the game titles that we
offer for our tournaments and activities, as well as online
multiplayer competitive amateur gaming in general;
●
changes
in the competitive environment, including new entrants in the
market for online amateur competitive gaming, tournaments and
competitions that compete with our own;
●
competition from new entrants in the amateur esports space, and if
we are unable to compete effectively, we may not be able to achieve
or maintain significant market penetration or improve our results
of operations;
●
our
ability to generate consistent revenue;
●
our
ability to effectively execute our business plan;
●
changes
in the licensing fees charged by the publishers of the most popular
online video games;
●
changes
in laws or regulations governing our business and
operations;
●
our
ability to maintain adequate liquidity and financing sources on
terms favorable to us;
●
our
ability to obtain and protect our existing intellectual property
protections, including patents, trademarks and copyrights;
and
●
other
risks described from time to time in periodic and current reports
that we file with the Securities and Exchange Commission (the
“SEC
”).
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Additional risks and uncertainties not presently known to us or
that we currently deem immaterial may also impair our business
operations. You should be able to bear a complete loss of your
investment.
Implications of Being an Emerging Growth Company
As a
company with less than $1.07 billion in revenue during our most
recently completed fiscal year, we qualify as an “emerging
growth company” as defined in the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”). An emerging growth
company may take advantage of specified reduced reporting and other
burdens that are otherwise applicable generally to public
companies. These provisions include:
●
A requirement to
have only two years of audited financial statements and only two
years of related Management’s Discussion and Analysis of
Financial Condition and Results of Operations;
●
An exemption from
the auditor attestation requirement on the effectiveness of our
internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act of 2002, as amended (the
“Sarbanes-Oxley Act”);
●
An extended
transition period for complying with new or revised accounting
standards;
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Reduced disclosure
about our executive compensation arrangements; and
●
No non-binding
advisory votes on executive compensation or golden parachute
arrangements.
Certain of these reduced reporting requirements and exemptions are
also available to us due to the fact that we also qualify as a
“smaller reporting company” under the SEC’s
rules. For instance, smaller reporting companies are not required
to obtain an auditor attestation and report regarding
management’s assessment of internal control over financial
reporting; are not required to provide a compensation discussion
and analysis; are not required to provide a pay-for-performance
graph or CEO pay ratio disclosure; and may present only two years
of audited financial statements and related MD&A
disclosure.
We may take advantage of these provisions from the JOBS Act until
the end of the fiscal year in which the fifth anniversary of our
initial public offering, or such earlier time when we no longer
qualify as an emerging growth company. We would cease to be an
emerging growth company on the earlier of (i) the last day of the
fiscal year (a) in which we have more than $1.07 billion in annual
revenue or (b) in which we have more than $700 million in market
value of our capital stock held by non-affiliates, or (ii) the date
on which we issue more than $1.0 billion of non-convertible debt
over a three-year period. We may choose to take advantage of some
but not all of these reduced burdens under the JOBS Act. We have
taken advantage of other reduced reporting requirements in this
prospectus, and we may choose to do so in future filings. To the
extent we do, the information that we provide stockholders may be
different than you might get from other public companies in which
you hold equity interests.
Reverse Stock Split
On
February 8, 2019, prior to the completion of the Company’s
initial public offering, the Company filed an amendment to the
Company’s amended and restated certificate of incorporation
to effect a reverse split of shares of the Company’s common
stock on a one-for-three basis (the “Reverse Stock Split”). All
references to common stock, warrants to purchase common stock,
options to purchase common stock, early exercised options,
restricted stock, share data, per share data and related
information contained in the financial statements incorporated by
reference herein have been retrospectively adjusted to reflect the
effect of the Reverse Stock Split for all periods
presented.
Corporate Information
Super
League Gaming, Inc. was incorporated under the laws of the State of
Delaware on October 1, 2014 as Nth Games, Inc. On June 15, 2015, we
changed our corporate name from Nth Games, Inc. to Super League
Gaming, Inc. Our principal executive offices are located at 2912
Colorado Avenue, Suite #203, Santa Monica, California 90404, and
our Company telephone number is (802)
294-2754, and our investor relations contact number is (949)
574-3860.
Our
corporate website address is www.superleague.com. Information contained in, or
accessible through, our website is not a part of this prospectus,
and the inclusion of our website address in this prospectus is an
inactive textual reference only.
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The Offering
The following summary is provided solely for your convenience and
is not intended to be complete. You should read the full text and
more specific details contained elsewhere in this
prospectus.
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Issuer
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Super
League Gaming, Inc.
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Common
stock offered by us
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3,111,111
shares.
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Underwriters’ over-allotment option
|
We have granted the underwriters a 30-day option to purchase, from
time to time, up to an additional shares of our common stock from
us at the price to public less the underwriting discount to cover
over-allotments, if any.
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Common
stock to be outstanding after this offering
|
13,605,020 shares (or 14,071,686 shares if the
underwriters’ option to purchase 466,667 additional shares
from us is exercised in full).
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Use of
proceeds
|
We
estimate that the net proceeds from the sale of our common stock in
this offering will be approximately $6.3 million (or approximately $7.3 million if the underwriters' option to
purchase additional shares from us is exercised in full), based on
an assumed public offering price of $2.25 per share, which was the
last reported sale price of our common stock on August 20, 2020 on
the Nasdaq Capital Market, after deducting the underwriting
discount and estimated offering expenses payable by
us.
We
intend to use the net proceeds of this offering for working capital
and general corporate purposes, including sales and marketing
activities, product development and capital expenditures. See
“Use of
Proceeds” for a more complete description of the
intended use of proceeds from this offering.
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Lock-up
|
We have
agreed with the underwriters, subject to certain exceptions, not to
sell, transfer or dispose of, directly or indirectly, any of our
common stock or securities convertible into or exercisable or
exchangeable for our common stock for a period of 30 days after the
date of the final closing of this offering. In addition, our all of
our directors and officers and directors have agreed to similar
restrictions with respect to any shares of our common stock or
securities convertible into or exercisable or exchangeable for our
common stock held by each individual for a period of 90 days. See
“Underwriting”
for more information.
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Risk
factors
|
You
should read the “Risk
Factors” section in this
prospectus and in Item 1A of our Annual Report on Form
10-K for the year ended December 31, 2019 and our Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2020 and June
30, 2020, which are incorporated by reference into this
prospectus for a discussion of factors to consider carefully
before deciding to invest in shares of our common
stock.
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Nasdaq
symbol
|
Our
common stock is listed on the Nasdaq Capital Market under the
symbol “SLGG.”
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The number of shares of our common
stock to be outstanding after this offering is based on
10,493,909 shares of our common stock
outstanding as of August 21, 2020, and excludes:
●
2,516,152 shares of common stock issuable upon
exercise of common stock purchase warrants, with an average
weighted exercise price of $9.61 per share;
●
1,644,442 shares of common stock issuable upon
exercise of options outstanding; held and 581,910 shares of common
stock reserved for issuance pursuant to our Amended and Restated
2014 Stock Option and Incentive Plan (the
“2014
Plan”); and
●
425,815 shares of
common stock issuable upon vesting of non-vested restricted stock
units outstanding.
Unless
otherwise noted, the information in this prospectus reflects and
assumes no exercise of the underwriters’ over-allotment
option to purchase additional shares.
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SUMMARY FINANCIAL
INFORMATION
The
following tables summarize our historical consolidated financial
data. We have derived the summary consolidated statements of
operations data for the period ended June 30, 2020 and 2019, and
the year ended December 31, 2019 and 2018 from the unaudited and
audited consolidated financial statements incorporated by reference
into this prospectus. The summary consolidated financial data in
this section is not intended to replace our consolidated financial
statements and related notes, and our historical results are not
necessarily indicative of the results we expect in the future. The
following summary of consolidated financial data should be read in
conjunction with the section titled “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our
consolidated financial statements and related notes included in our
Quarterly Report on Form 10-Q for the period ended June 30, 2020
and our Annual Report on Form 10-K for the year ended
December 31, 2019, each of which are incorporated by reference into
this prospectus.
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Six
Months Ended
June
30,
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Statements of Operations Data:
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Revenues
|
$567,000
|
$472,000
|
$1,084,000
|
$1,046,000
|
|
|
|
Cost of
revenues
|
233,000
|
187,000
|
513,000
|
684,000
|
|
|
|
Gross
profit
|
334,000
|
285,000
|
571,000
|
362,000
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, marketing
and advertising
|
2,529,000
|
2,139,000
|
4,488,000
|
4,319,000
|
|
|
|
Technology platform
and infrastructure
|
3,590,000
|
2,453,000
|
4,520,000
|
4,183,000
|
|
|
|
General and
administrative
|
3,922,000
|
7,334,000
|
12,333,000
|
8,020,000
|
|
|
|
Total operating
expenses
|
10,041,000
|
11,926,000
|
21,341,000
|
16,522,000
|
|
|
|
|
|
|
|
|
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Net Operating
Loss
|
(9,707,000)
|
(11,641,000)
|
(20,770,000)
|
(16,160,000)
|
|
|
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Other income
(expense), net
|
13,000
|
(9,933,000)
|
(9,909,000)
|
(4,467,000)
|
|
|
|
Net
loss
|
$(9,694,000)
|
$(21,574,000)
|
$(30,679,000)
|
$(20,627,000)
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Net loss per share
attributable to common stockholders (1)(2)
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|
|
|
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Basic
|
$(1.07)
|
$(3.00)
|
$(3.89)
|
$(4.48)
|
|
|
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Diluted
|
$(1.07)
|
$(3.00)
|
$(3.89)
|
$(4.48)
|
|
|
|
Weighted average
shares outstanding used in computing net income (loss) per share
attributable to common stockholders (1)(2)
|
|
|
|
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|
|
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Basic
|
9,066,000
|
7,199,829
|
7,894,326
|
4,606,961
|
|
|
|
Diluted
|
9,066,000
|
7,199,829
|
7,894,326
|
4,606,961
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(1)
See
Note 1 to our audited and unaudited financial statements included
elsewhere in this prospectus for an explanation of the methods used
to calculate the historical net income (loss) per share, basic and
diluted, and the number of shares used in the computation of the
per share amounts.
(2)
All
share and per share data has been retrospectively adjusted to
reflect the one-for-three Reverse Stock Split, which was effected
on February 8, 2019.
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Balance Sheet Data:
|
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Cash
|
8,442,000
|
6,241,000
|
|
|
|
Working capital
|
8,655,000
|
7,249,000)
|
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|
Total assets
|
14,447,000
|
12,803,000
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|
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|
|
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Accumulated deficit
|
(85,812,000)
|
(95,506,000)
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Total stockholders’ equity
|
13,443,000
|
10,751,000)
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An investment in our common stock involves a high degree of risk.
You should carefully consider the risk factors contained in our
periodic reports filed with the SEC, including the risks,
uncertainties and assumptions discussed in Item 1A of our Annual
Report on Form 10-K for the year ended December 31,
2019 and our Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2020 and June 30, 2020 and in other documents that we
subsequently file with the SEC that update, supersede or supplement
such information, which are incorporated by reference into this
prospectus. Before deciding to invest in our common stock, you
should carefully consider these risks, as well as the other
information we include or incorporate by reference in this
prospectus. See "Where You Can Find More Information" and
"Incorporation of Certain Documents by Reference" of this
prospectus.
If any of the events described in these risk factors actually
occurs, or if additional risks and uncertainties that are not
presently known to us or that we currently deem immaterial later
materialize, then our business, prospects, results of operations
and financial condition could be materially adversely affected. In
that event, the trading price of our common stock could decline,
and you may lose all or part of your investment in our common
stock. The risks discussed below include forward-looking
statements, and our actual results may differ substantially from
those discussed in these forward-looking statements. See
"Cautionary Note Regarding Forward-Looking Statements" of this
prospectus.
Risks Related to the Ongoing COVID-19 Pandemic
Actual or threatened epidemics, pandemics, outbreaks, or other
public health crises may adversely affect certain aspects of our
business.
Certain aspects of our business could be materially and adversely
affected by the risks, or the public perception of the risks,
related to an epidemic, pandemic, outbreak, or other public health
crisis, such as the recent outbreak of novel coronavirus
(COVID-19). The risk, or public perception of the risk, of a
pandemic or media coverage of infectious diseases could cause a
decrease to the attendance of our in person gaming experiences, or
cause certain of our partners, such as Wanda Theaters in China, to
avoid holding in person events. Moreover, an epidemic, pandemic,
outbreak or other public health crisis, such as COVID-19, could
cause members of our team who we rely to manage the logistics of
our in person experiences, or on-site employees of partners to
avoid any involvement with our in person experiences or other
events, which would adversely affect our ability to hold such
events. The ultimate extent of the impact of any epidemic, pandemic
or other health crisis on our those aspects of our business,
financial condition and results of operations, particularly those
arising from in-person events, will depend on future developments,
which are highly uncertain and cannot be predicted, including new
information that may emerge concerning the severity of such
epidemic, pandemic or other health crisis and actions taken to
contain or prevent their further spread, among others. These and
other potential impacts of an epidemic, pandemic or other health
crisis, such as COVID-19, could therefore adversely affect our
business, financial condition and results of
operations.
The increase in our direct-to-consumer offerings resulting from
social distancing measures and shelter-in-place orders implemented
as a result of the ongoing COVID-19 pandemic may not be sustainable
and, ultimately, prove unsuccessful.
During the first half of 2020, we experienced a significant
increase in engagement across our digital and online platforms. We
believe a driver of the increase was, to a certain extent, the
current period of social distancing and mandatory shelter-in-place
orders stemming from the COVID-19 pandemic. Although we have
experienced an increase in activity, we cannot guarantee that these
increases will be sustainable over a long-term period or that we
will experience the same level of growth to revenue related to
online events and our direct-to-consumer subscription program in
the event current social distancing measures are
lifted.
Risks Related to our Common Stock and this Offering
Because our offering price is substantially higher than our net
tangible book value per share, you will experience immediate and
substantial dilution.
If you
purchase common stock in this offering, you will pay more for your
common stock than the amount paid by our existing stockholders for
their common stock on a per share basis. As a result, you will
experience immediate and substantial dilution of $1.32 per share,
representing the difference between the assumed public offering
price of $2.25 per share, which is the last reported closing price
of our common stock on August 20, 2020 on the Nasdaq Capital
Market, and our net tangible book value per share as of June 30,
2020, after giving effect to the net proceeds to us from this
offering. In addition, you may experience further dilution to the
extent that our shares are issued upon the exercise of any share
options or warrants. See “Dilution” for a more complete
description of how the value of your investment in our common stock
will be diluted upon completion of this offering.
Future issuances of our common stock or securities convertible
into, or exercisable or exchangeable for, our common stock, or,
together, our securities, or the expiration of lock-up agreements
that restrict the issuance of new common stock or the trading of
outstanding common stock, could cause the market price of our
common stock to decline and would result in the dilution of your
holdings.
Future
issuances of our securities, or the expiration of lock-up
agreements that restrict the issuance of new common stock or the
trading of outstanding common stock, could cause the market price
of our common stock to decline. We cannot predict the effect, if
any, of future issuances of our securities, or the future
expirations of lock-up agreements, on the price of our common
stock. In all events, future issuances of our common stock would
result in the dilution of your holdings. In addition, the
perception that new issuances of our securities could occur, or the
perception that locked-up parties will sell their securities when
the lock-ups expire, could adversely affect the market price of our
common stock. In connection with this offering, the Company entered
into a lock-up agreement that prevents it, subject to certain
exceptions, from offering additional shares of capital stock of the
Company for up to 30 days after following this offering, as further
described in the section titled “Underwriting.” In addition to any
adverse effects that may arise upon the expiration of these lock-up
agreements, the lock-up provisions in these agreements may be
waived, at any time and without notice. If the restrictions under
the lock-up agreements are waived, our common stock may become
available for resale, subject to applicable law, including without
notice, which could reduce the market price for our common
stock.
In addition, we have in the past issued, and may in the future
issue additional, convertible securities, options and warrants to
purchase shares of our common stock to our officers, directors,
consultants and other stockholders. In the future, we may grant
additional options, warrants and convertible securities. The
exercise or conversion of options, warrants or convertible
securities will dilute the percentage ownership of our
stockholders, which may have a negative effect on the trading price
of our common stock. The dilutive effect of the exercise or
conversion of these securities may adversely affect our ability to
obtain additional capital. The holders of these securities may
exercise or convert such options, warrants and convertible
securities at a time when we would be able to obtain additional
equity capital on terms more favorable than such securities or when
our common stock is trading at a price higher than the exercise or
conversion price of the securities. The exercise or conversion of
outstanding warrants, options and convertible securities will have
a dilutive effect on the securities held by our
stockholders.
We will have broad discretion as to the use of the proceeds from
this offering, and we may not use the proceeds
effectively.
Although
we intend to use the net proceeds in the offering to finance our
growth strategy, and for working capital and general corporate
purposes, we will have broad discretion as to the application of
the net proceeds and could use them for purposes other than those
contemplated at the time of this offering. Our stockholders may not
agree with the manner in which our management chooses to allocate
and spend the net proceeds. Moreover, our management could use the
net proceeds for corporate purposes that may not necessarily
increase our market value or improve our results of
operations.
Although our common stock is listed on the Nasdaq Capital Market,
our shares are likely to be thinly traded for some time and an
active market may never develop.
Although our common stock is listed on the Nasdaq Capital
Market, there is currently
a very limited trading market for our common stock, and we cannot
ensure that a robust trading market will ever develop or be
sustained. Our shares of common stock may be thinly traded, and the
price, if traded, may not reflect our actual or perceived value.
There can be no assurance that there will be an active market for
our shares of common stock in the future. The market liquidity will
be dependent on the perception of our operating business,
competitive forces, state of the esports gaming industry, growth
rate and becoming cash flow profitable on a sustainable basis,
among other things. We may, in the future, take certain steps,
including utilizing investor awareness campaigns, press releases,
road shows, and conferences to increase awareness of our business
and any steps that we might take to bring us to the awareness of
investors may require we compensate financial public relations
firms with cash and/or stock. There can be no assurance that there
will be any awareness generated or the results of any efforts will
result in any impact on our trading volume. Consequently, investors
may not be able to liquidate their investment or liquidate it at a
price that reflects the value of the business and trading may be at
an inflated price relative to the performance of our company due
to, among other things, availability of sellers of our shares. If a
market should develop, the price may be highly volatile. Because
there may be a low price for our shares of common stock, many
brokerage firms or clearing firms may not be willing to effect
transactions in the securities or accept our shares for deposit in
an account. Even if an investor finds a broker willing to effect a
transaction in the shares of our common stock, the combination of
brokerage commissions, transfer fees, taxes, if any, and any other
selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of low-priced shares of common
stock as collateral for any loans.
Our stock price may be volatile, and you could lose all or part of
your investment.
The trading price of our common stock following this offering may
fluctuate substantially and may be higher or lower than the public
offering price. This may be especially true for companies with a
small public float such as ours. The trading price of our common
stock following this offering will depend on several factors,
including those described in this “Risk
Factors” section, many of
which are beyond our control and may not be related to our
operating performance. These fluctuations could cause you to lose
all or part of your investment in our common stock since you might
be unable to sell your shares at or above the price you paid in
this offering. Factors that could cause fluctuations in the trading
price of our common stock include:
●
changes to our industry, including demand and
regulations;
●
we may not be able to compete successfully against current and
future competitors;
●
competitive pricing pressures;
●
our ability to obtain working capital financing as
required;
●
additions or departures of key personnel;
●
sales of our common stock;
●
our ability to execute our business plan;
●
operating results that fall below expectations;
●
loss of any strategic relationship, sponsor or
licensor;
●
any major change in our management;
●
changes in accounting standards, procedures, guidelines,
interpretations or principals; and
●
economic, geo-political and other external factors.
In addition, the stock market in general, and the market for
technology companies in particular, has experienced extreme price
and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of those companies.
Broad market and industry factors, as well as general economic,
political and market conditions such as recessions or interest rate
changes, may seriously affect the market price of our common stock,
regardless of our actual operating performance. These fluctuations
may be even more pronounced in the trading market for our stock
shortly following this offering. If the market price of our common
stock after this offering does not exceed the initial public
offering price, you may not realize any return on your investment
in us and may lose some or all of your investment.
In addition, in the past, following periods of volatility in the
overall market and the market prices of particular companies’
securities, securities class action litigations have often been
instituted against these companies. Litigation of this type, if
instituted against us, could result in substantial costs and a
diversion of our management’s attention and resources. Any
adverse determination in any such litigation or any amounts paid to
settle any such actual or threatened litigation could require that
we make significant payments.
We may not be able to satisfy listing requirements of Nasdaq or
maintain a listing of our common stock on Nasdaq.
Because our common stock is listed on Nasdaq, we must meet certain
financial and liquidity criteria to maintain such listing. If we
violate Nasdaq listing requirements, our common stock may be
delisted. If we fail to meet any of Nasdaq’s listing
standards, our common stock may be delisted. In addition, our board
of directors may determine that the cost of maintaining our listing
on a national securities exchange outweighs the benefits of such
listing. A delisting of our common stock from Nasdaq may materially
impair our stockholders’ ability to buy and sell our common
stock and could have an adverse effect on the market price of, and
the efficiency of the trading market for, our common stock. The
delisting of our common stock could significantly impair our
ability to raise capital and the value of your
investment.
If securities industry analysts do not publish research reports on
us, or publish unfavorable reports on us, then the market price and
market trading volume of our common stock could be negatively
affected.
Any trading market for our common stock will be influenced in part
by any research reports that securities industry analysts publish
about us. We may not obtain any future research coverage by
securities industry analysts. In the event we are covered by
research analysts, and one or more of such analysts downgrade our
securities, or otherwise reports on us unfavorably, or discontinues
coverage of us, the market price and market trading volume of our
common stock could be negatively affected.
We have not paid cash dividends in the past and do not expect to
pay dividends in the future. Any return on investment will likely
be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not
anticipate doing so in the foreseeable future. The payment of
dividends on our common stock will depend on earnings, financial
condition and other business and economic factors affecting us at
such time as our board of directors may consider relevant. If we do
not pay dividends, our common stock may be less valuable because a
return on your investment will only occur if our stock price
appreciates.
Because we do not expect to pay dividends in the foreseeable future
after this offering, you must rely on price appreciation of our
common stock for return on your investment.
We currently intend to retain most, if not all, of our available
funds and any future earnings after this offering to fund the
development and growth of our business. As a result, we do not
expect to pay any cash dividends in the foreseeable future.
Therefore, you should not rely on an investment in our common stock
as a source for any future dividend income.
Our board of directors has complete discretion as to whether to
distribute dividends, subject to certain requirements of Delaware
General Corporation Law. Even if our board of directors decides to
declare and pay dividends, the timing, amount and form of future
dividends, if any, will depend on, among other things, our future
results of operations and cash flow, our capital requirements and
surplus, the amount of distributions, if any, received by us from
our subsidiaries, our financial condition, contractual restrictions
and other factors deemed relevant by our board of directors.
Accordingly, the return on your investment in our common stock will
likely depend entirely upon any future price appreciation of our
common stock. There is no guarantee that our common stock will
appreciate in value after this offering or even maintain the price
at which you purchased the common stock. You may not realize a
return on your investment in our common stock and you may even lose
your entire investment in our common stock.
Future issuances of debt securities, which would rank senior to our
common stock upon our bankruptcy or liquidation, and future
issuances of preferred stock, which could rank senior to our common
stock for the purposes of dividends and liquidating distributions,
may adversely affect the level of return you may be able to achieve
from an investment in our common stock.
In the
future, we may attempt to increase our capital resources by
offering debt securities. Upon bankruptcy or liquidation, holders
of our debt securities, and lenders with respect to other
borrowings we may make, would receive distributions of our
available assets prior to any distributions being made to holders
of our common stock. Moreover, if we issue preferred stock, the
holders of such preferred stock could be entitled to preferences
over holders of common stock in respect of the payment of dividends
and the payment of liquidating distributions. Because our decision
to issue debt or preferred stock in any future offering, or borrow
money from lenders, will depend in part on market conditions and
other factors beyond our control, we cannot predict or estimate
thea mount, timing or nature of any such future offerings or
borrowings. Holders of our common stock must bear the risk that any
future offerings we conduct or borrowings we make may adversely
affect the level of return, if any, they may be able to achieve
from an investment in our common stock.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that involve
substantial risks and uncertainties. The forward-looking statements
are contained principally in the sections of this prospectus titled
“Prospectus
Summary” and “Risk Factors,” in sections of our
Annual Report on Form 10-K for the year ended December 31, 2019 and
our subsequent Quarterly Reports on Form 10-Q titled
“Risk Factors,”
“Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and “Business,” but are also contained
elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these
terms, or other comparable terminology intended to identify
statements about the future. Although we believe that we have a
reasonable basis for each forward-looking statement contained in
this prospectus, we caution you that these statements are based on
a combination of facts and factors currently known by us and our
expectations of the future, about which we cannot be certain. These
statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity,
performance or achievements to be materially different from the
information expressed or implied by these forward-looking
statements. Factors that could cause such difference,
include:
●
overall
strength and stability of general economic conditions and of the
electronic video game sports (“esports ”) industry in the United
States and globally;
●
changes
in consumer demand for, and acceptance of, our services and the
games that we license for our tournaments and other experiences, as
well as online gaming in general;
●
changes
in the competitive environment, including adoption of technologies,
services and products that compete with our own;
●
our
ability to generate consistent revenue;
●
our
ability to effectively execute our business plan;
●
changes
in the price of streaming services, licensing fees, and network
infrastructure, hosting and maintenance;
●
changes
in laws or regulations governing our business and
operations;
●
our
ability to maintain adequate liquidity and financing sources and an
appropriate level of debt on terms favorable to us;
●
our
ability to effectively market our services;
●
costs
and risks associated with litigation;
●
our
ability to obtain and protect our existing intellectual property
protections, including patents, trademarks and
copyrights;
●
our
ability to obtain and enter into new licensing agreements with game
publishers and owners;
●
changes
in accounting principles, or their application or interpretation,
and our ability to make estimates and the assumptions underlying
the estimates, which could have an effect on earnings;
●
interest
rates and the credit markets; and
●
other risks and uncertainties described in the
"Risk
Factors" section of our Annual
Report on Form 10-K for the year ended December 31, 2019
and our Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 2019 and June 30, 2019, which are incorporated by
reference into this prospectus.
This
list of factors that may affect future performance and the accuracy
of forward-looking statements is illustrative, but not exhaustive.
New risk factors and uncertainties not described here or elsewhere
in this prospectus, including in the sections entitled
“Risk Factors,”
may emerge from time to time. Moreover, because we operate in a
competitive and rapidly changing environment, it is not possible
for our management to predict all risk factors and uncertainties,
nor can we assess the impact of all factors on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements we may make. The forward-looking
statements are also subject to the risks and uncertainties specific
to our Company, including but not limited to the fact that we have
only a limited operating history as a public company. In light of
these risks, uncertainties and assumptions, the future events and
trends discussed in this prospectus may not occur, and actual
results could differ materially and adversely from those
anticipated or implied in the forward-looking
statements.
You
should not rely upon forward-looking statements as predictions of
future events. Although we believe the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
that the future results, levels of activity, performance and events
and circumstances reflected in the forward-looking statements will
be achieved or occur. Moreover, neither we nor any other person
assume responsibility for the accuracy and completeness of the
forward-looking statements. Except as
required by applicable law, including the securities laws of the
United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual
results.
You
should read this prospectus, the documents incorporated herein and
those documents filed as exhibits to the registration statement, of
which this prospectus is a part, with the understanding that our
actual future results, levels of activity, performance and
achievements may be materially different from what we
expect.
We estimate that the net proceeds to us from the sale of shares of
our common stock in this offering will be approximately $6.3
million, based on an assumed public offering price of $2.25 per
share, which was the last reported sale price of our common stock
on August 20, 2020 on the Nasdaq Capital Market, after deducting
the estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
Each $0.25 increase (decrease) in the assumed public offering price
of $2.25 per share would increase (decrease) the net proceeds to us
from this offering by approximately $0.7 million, assuming the
number of shares offered by us, as set forth on the cover page of
this prospectus, remains the same, and after deducting underwriting
discounts and commissions and estimated offering expenses payable
by us. We may also increase or decrease the number of shares we are
offering. Each increase (decrease) of 1,000,000 shares in the
number of shares offered by us would increase (decrease) the net
proceeds to us from this offering by approximately $2.1 million,
assuming the assumed public offering price stays the same, and
after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
We currently intend to use the net proceeds we receive from this
offering for working capital and general corporate purposes,
including sales and marketing
activities, product development and capital expenditures. We may
also use a portion of the net proceeds for the acquisition of, or
investment in, technologies, solutions or businesses. Pending these
uses, we may invest the net proceeds from this offering in
short-term, investment-grade interest-bearing securities such as
money market accounts, certificates of deposit, commercial paper
and guaranteed obligations of the U.S.
government.
The intended use of net proceeds from this offering represents our
expectations based upon our present plans and business conditions.
We cannot predict with certainty all of the particular uses for the
proceeds of this offering or the amounts that we will actually
spend on the uses described in this prospectus. Accordingly, our
management will have significant flexibility in applying the net
proceeds of this offering. The timing and amount of our actual
expenditures will be based on many factors, including cash flows
from operations and the anticipated growth of our business. Pending
their use, we intend to invest the net proceeds of this offering in
a variety of capital-preservation investments, including short- and
intermediate-term, interest-bearing, investment-grade
securities.
We have never declared or paid any dividends on our capital stock.
We currently intend to retain all available funds and any future
earnings for the operation and expansion of our business and,
therefore, we do not anticipate declaring or paying cash dividends
in the foreseeable future. The payment of dividends will be at the
discretion of our Board of Directors and will depend on our results
of operations, capital requirements, financial condition,
prospects, contractual arrangements, any limitations on payment of
dividends present in our current and future debt agreements, and
other factors that our board of directors may deem
relevant.
The following table sets forth our cash and capitalization as
of June 30, 2020:
●
on
an as adjusted basis to reflect the sale by us of 3,111,111 shares
of common stock in this offering at an assumed public offering
price of $2.25 per share, which was the last reported closing price
of our common stock on August 20, 2020 on the Nasdaq Capital
Market, after deducting underwriting discounts and commissions and
estimated offering expenses payable by us.
This table should be read with “Use of
Proceeds” in this
prospectus, as well as “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and our
financial statements and related notes included in our Quarterly
Report on Form 10-Q for the period ended June 30, 2020 and our
Annual Report on Form 10-K for the year ended December
31, 2019, each of which are incorporated by reference into this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
$6,241,000
|
$12,572,000
|
|
Long-term note
payable
|
1,202,000
|
1,202,000
|
|
|
|
|
|
Common stock, par value $0.001 per
share, 100,000,000 shares authorized, 10,460,696 shares issued and
outstanding, actual; 13,571,807
shares issued and outstanding, as adjusted
|
20,000
|
23,000
|
|
Additional paid-in
capital
|
106,237,000
|
112,565,000
|
|
Accumulated
deficit
|
(95,506,000)
|
(95,506,000)
|
|
Total stockholders’
equity
|
10,751,000
|
17,082,000
|
|
Total
capitalization
|
$11,973,000
|
$18,284,000
|
_______________
(1)
Each
$0.25
increase (decrease) in the assumed public offering price of $2.25
per share, which is the last reported closing price of our common
stock on August 20, 2020 on the Nasdaq Capital Market, would
increase (decrease) the net proceeds to us from this offering by
approximately $0.7 million, assuming the number of shares offered
by us, as set forth on the cover page of this prospectus, remains
the same, and after deducting underwriting discounts and
commissions and estimated offering expenses payable by us. We may
also increase or decrease the number of shares we are offering.
Each increase (decrease) of 1,000,000 shares in the number of
shares offered by us would increase (decrease) the net proceeds to
us from this offering by approximately $2.1 million, assuming
the assumed public offering price stays the same, and after
deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
The number of shares of common stock that will be outstanding after
this offering is based on 10,460,696 shares of common stock
outstanding as of June 30, 2020, and excludes as of such
date:
●
2,516,152 shares of common stock issuable upon exercise of common
stock purchase warrants, with an average weighted exercise price of
$9.61 per share;
●
1,083,386
shares of common stock issuable upon
exercise of options outstanding; and 532,110 shares of common stock
reserved for issuance pursuant to our 2014 Plan;
and
●
286,671
shares of common stock issuable upon the vesting of non-vested
restricted stock units outstanding.
If you
invest in our common stock, your ownership interest will be diluted
to the extent the public offering price per share of our common
stock exceeds the tangible book value per share of our common stock
immediately following this offering. As of June 30, 2020, the
tangible book value of our common stock was approximately $6.2
million, or $0.60 per share of common stock based on 10,460,696
shares of our common stock issued and outstanding. Tangible book
value per share represents common equity less intangible assets and
goodwill, divided by the number of shares of our common stock
outstanding.
After
giving
effect to the sale of shares of our common stock in this offering
at an assumed public offering price of $2.25 per share, which was
the last reported closing price of our common stock on August 20,
2020 on the Nasdaq Capital Market, after deducting the underwriting
discount and estimated offering expenses payable by us, our as
adjusted net tangible book value as of June 30,
2020 would have been approximately $12.6 million. This
represents an immediate increase in net tangible book value of
$0.33 per share to existing stockholders and an immediate dilution
of $1.32 per share to new investors purchasing shares of our common
stock in this offering at the assumed public offering price. The
following table illustrates this per share
dilution:
|
Assumed
Public offering price per share
|
|
$2.25
|
|
Net
tangible book value per share as of June 30, 2020
|
$0.60
|
|
|
Increase
in net tangible book value per share after giving effect to this
offering
|
$(0.33)
|
|
|
As
adjusted net tangible book value per share after giving effect to
this offering
|
|
$0.93
|
|
Dilution
per share to new investors in this offering
|
|
$1.32
|
The dilution information discussed above is illustrative only and
will change based on the actual public offering price and other
terms of this offering to be determined at pricing. Each $0.25
increase (decrease) in the assumed public offering price of $2.25
per share, which is the latest closing price of our common stock on
August 20, 2020 on the Nasdaq Capital Market, would increase
(decrease) the as adjusted net tangible book value by approximately
$0.7 million, or by approximately $0.05 per share, assuming the
number of shares of common stock offered by us, as set forth on the
cover page of this prospectus, remains the same, after deducting
underwriting discounts and commissions and estimated offering
expenses payable by us. Similarly, each increase (decrease) of
1,000,000 shares in the number of shares of common stock offered by
us would increase (decrease) the as adjusted net tangible book
value per share by approximately $2.1 million, or approximately
$0.08 per share, assuming the assumed public offering price remains
the same, after deducting underwriting discounts and commissions
and estimated offering expenses payable by us.
If the
underwriters’ option to purchase additional shares of our
common stock from us is exercised in full, the as-adjusted net
tangible book value per share of our common stock, as adjusted to
give effect to this offering, would be $0.97 per share, and the
dilution in net tangible book value per share to new investors
purchasing shares of our common stock in this offering would be
$1.29 per share, in each case based on an assumed public offering
price of $2.25 per share, which is the last reported closing
price of our common stock on August 20, 2020 on the Nasdaq Capital
Market.
The
foregoing discussion and table do not take into account further
dilution to new investors that could occur upon the vesting of
outstanding restricted stock units or the exercise of outstanding
stock options or warrants having a per-share exercise price less
than the per share offering price to the public in this offering.
In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe we
have sufficient funds for our current or future operating plans. To
the extent that additional capital is raised through the sale of
equity or equity-linked securities, the issuance of these
securities could result in further dilution to our
stockholders.
The number of shares of common stock that will be outstanding after
this offering is based on 10,460,696 shares of common stock
outstanding as of June 30, 2020, and excludes as of such
date:
●
2,516,152 shares of common stock issuable upon exercise of common
stock purchase warrants, with an average weighted exercise price of
$9.61 per share;
●
1,083,386
shares of common stock issuable upon
exercise of options outstanding; and 532,110 shares of common stock
reserved for issuance pursuant to our 2014 Plan;
and
●
286,671
shares of common stock issuable upon the vesting of non-vested
restricted stock units outstanding.
To the
extent that any of the foregoing are exercised, investors
participating in the offering will experience further
dilution.
DESCRIPTION OF
SECURITIES
The following is a summary of the rights of our capital stock as
provided in our Charter and our Bylaws. For more detailed
information, please see our Charter and Bylaws that will be in
effect upon the completion of this offering, which have been filed
as exhibits to the Registration Statement of which this prospectus
is a part.
Summary of Securities
The
following description summarizes certain terms of our capital
stock. Our Board of Directors approved of a second amendment and
restatement of our Charter (the “Amended and Restated Charter”),
which was subsequently approved by our stockholders and filed with
the State of Delaware on November 19, 2018. The following
description summarizes the provisions of the Amended and Restated
Charter, as amended since its filing, including the number of
shares of common stock that are authorized for issuance under the
Amended and Restated Charter, and the authorization of shares of
preferred stock. Because the foregoing is only a summary, it does
not contain all the information that may be important to you. For a
complete description of the matters set forth in this section you
should refer to our Charter and Bylaws, which are included as
exhibits to this prospectus,
and to the applicable provisions of Delaware law.
Common Stock
Our Amended and Restated Charter currently authorizes 100.0 million
shares of common stock for issuance. As of August 20, 2020, there
were 10,493,909 shares of our common stock issued and outstanding,
which were held by approximately 160 stockholders of record,
approximately 2,516,152 shares of common stock issuable upon
exercise of warrants to purchase our common stock, 1,644,442 shares
of common stock issuable upon exercise of options held, 425,815
shares of our common stock issuable upon the vesting of restricted
stock units held and 581,910 shares of common stock authorized and
available for issuance pursuant to our 2014 Plan. Each holder of
common stock is entitled to one vote for each share of common stock
held on all matters submitted to a vote of the stockholders,
including the election of directors. Neither our Bylaws nor the
Amended and Restated Charter provide for cumulative voting
rights.
In addition to the Amended and Restated Charter, in September 2018
holders of a majority of our issued and outstanding securities
authorized our Board of Directors, acting in its sole discretion
without further approval of our stockholders, to effect a reverse
split of our issued and outstanding common stock, at a ratio of not
less than one-for-two, but not more than one-for-five, at any time
on or before August 15, 2019 (the “Reverse Stock
Split”). On January
31, 2019, our Board of Directors approved of a ratio of one-for
three, and on February 8, 2019, we filed a Certificate of Amendment
to our Charter to implement the Reverse Stock
Split.
Holders of our common stock have no preemptive, conversion or
subscription rights, and there are no redemption or sinking fund
provisions applicable to the common stock. The rights, preferences
and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares
of any series of our preferred stock that we may designate and
issue in the future.
Preferred Stock
Under our Amended and Restated Charter, our Board of Directors has
the authority, without further action by our stockholders, to issue
up to 10.0 million shares of preferred stock in one or more series
and to fix the voting powers, designations, preferences and the
relative participating, optional or other special rights and
qualifications, limitations and restrictions of each series,
including, without limitation, dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, liquidation
preferences and the number of shares constituting any
series.
As of August 20, 2020, no shares of our authorized preferred stock
are outstanding. Because our Board of Directors has the power to
establish the preferences and rights of the shares of any
additional series of preferred stock, it may afford holders of any
preferred stock preferences, powers and rights, including voting
and dividend rights, senior to the rights of holders of our common
stock, which could adversely affect the holders of the common stock
and could delay, discourage or prevent a takeover of us even if a
change of control of our company would be beneficial to the
interests of our stockholders.
Anti-Takeover Matters
Charter and Bylaw Provisions
The
provisions of Delaware law, our Amended and Restated Charter, and
our Bylaws include a number of provisions that may have the effect
of delaying, deferring, or discouraging another person from
acquiring control of our company and discouraging takeover bids.
These provisions may also have the effect of encouraging persons
considering unsolicited tender offers or other unilateral takeover
proposals to negotiate with our Board rather than pursue
non-negotiated takeover attempts. These provisions include the
items described below.
Board Composition and Filling Vacancies
Our
Bylaws provide that any vacancy on our Board may only be filled by
the affirmative vote of a majority of our directors then in office,
even if less than a quorum. Further, any directorship vacancy
resulting from an increase in the size of our Board of Directors,
may be filled by election of the Board of Directors, but only for a
term continuing until the next election of directors by our
stockholders.
No Cumulative Voting
The
DGCL provides that stockholders are not entitled to the right to
cumulate votes in the election of directors unless certificate of
incorporation of the Company in which they own stock provides
otherwise. Neither our Amended and Restated Charter nor our Bylaws
provide that our stockholders shall be entitled to cumulative
voting.
Delaware Anti-Takeover Statute
We are
subject to the provisions of Section 203 of the DGCL. In general,
Section 203 prohibits persons deemed
to be “interested stockholders” from engaging in a
“business combination” with a publicly held Delaware
corporation for three years following the date these persons become
interested stockholders unless the business combination is, or the
transaction in which the person became an interested stockholder
was, approved in a prescribed manner or another prescribed
exception applies. Generally, an “interested
stockholder” is a person who, together with affiliates and
associates, owns, or within three years prior to the determination
of interested stockholder status did own, 15% or more of a
corporation’s voting stock. Generally, a “business
combination” includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested
stockholder. The existence of this provision may have an
anti-takeover effect with respect to transactions not approved in
advance by the Board. A Delaware corporation may “opt
out” of these provisions with an express provision in its
original certificate of incorporation or an express provision in
its certificate of incorporation or bylaws resulting from an
amendment approved by at least a majority of the outstanding voting
shares. We have not opted out of these provisions. As a result,
mergers or other takeover or change in control attempts of us may
be discouraged or prevented.
Choice of Forum
Our
Bylaws provide that Delaware will be the exclusive forum for any
derivative action or proceeding brought on our behalf; any action
asserting a breach of fiduciary duty; any action asserting a claim
against us arising pursuant to the DGCL, our Amended and Restated
Charter or our Bylaws; or any action asserting a claim against us
that is governed by the internal affairs doctrine. The
enforceability of similar choice of forum provisions in other
companies’ certificates of incorporation has been challenged
in legal proceedings, and it is possible that a court could find
these types of provisions to be inapplicable or
unenforceable.
Because the applicability of the exclusive forum provision is
limited to the extent permitted by law, we believe that the
exclusive forum provision would not apply to suits brought to
enforce any duty or liability created by the Securities Exchange
Act of 1934, as amended (the “Exchange
Act”), the
Securities Act of 1933, as amended (the “Securities
Act”), any other
claim for which the federal courts have exclusive jurisdiction
or concurrent
jurisdiction over all suits
brought to enforce any duty or liability created by the Securities
Act. We note that there is uncertainty as to whether a court would
enforce the provision and that investors cannot waive compliance
with the federal securities laws and the rules and regulations
thereunder. Although we believe this provision benefits us by
providing increased consistency in the application of Delaware law
in the types of lawsuits to which it applies, the provision may
have the effect of discouraging lawsuits against our directors and
officers.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
This section summarizes the material U.S. federal income tax
considerations relating to the acquisition, ownership and
disposition of our common stock acquired by “non-U.S.
holders” (as defined below) pursuant to this offering. This
summary does not provide a complete analysis of all potential U.S.
federal income tax considerations relating thereto. The information
provided below is based upon provisions of the U.S. Internal
Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated
thereunder, administrative rulings and judicial decisions currently
in effect. These authorities may change at any time, possibly
retroactively, or the Internal Revenue Service (the
“IRS”), might interpret the existing authorities
differently. In either case, the tax considerations of owning or
disposing of our common stock could differ from those described
below. As a result, we cannot assure you that the tax consequences
described in this discussion will not be challenged by the IRS or
will be sustained by a court if challenged by the
IRS.
This summary does not address the tax considerations arising under
the laws of any non-U.S., state or local jurisdiction, or under
U.S. federal gift and estate tax laws, except to the limited extent
provided below. In addition, this discussion does not address tax
considerations applicable to an investor’s particular
circumstances or to investors that may be subject to special tax
rules, including, without limitation:
●
banks, insurance companies or other financial
institutions;
●
partnerships or entities or arrangements treated
as partnerships or other pass-through entities for U.S. federal tax
purposes (or investors in such entities);
●
corporations that accumulate earnings to avoid
U.S. federal income tax;
●
persons subject to the alternative minimum tax or
Medicare contribution tax on net investment income;
●
tax-exempt organizations or tax-qualified
retirement plans;
●
controlled foreign corporations or passive foreign
investment companies;
●
dealers in securities or currencies;
●
traders in securities that elect to use a
mark-to-market method of accounting for their securities
holdings;
●
persons that own, or are deemed to own, more than
5% of our capital stock (except to the extent specifically set
forth below);
●
certain former citizens or former long-term
residents of the United States;
●
persons who hold our common stock as a position in
a hedging transaction, “straddle,” “conversion
transaction” or other risk reduction transaction;
●
persons who do not hold our common stock as a
capital asset within the meaning of Section 1221 of the Code
(generally, for investment purposes); or
●
persons
deemed to sell our common stock under the constructive sale
provisions of the Code.
In addition, if a partnership or entity classified as a partnership
for U.S. federal income tax purposes is a beneficial owner of our
common stock, the tax treatment of a partner in the partnership or
an owner of the entity will depend upon the status of the partner
or other owner and the activities of the partnership or other
entity. Accordingly, this summary does not address tax
considerations applicable to partnerships that hold our common
stock, and partners in such partnerships should consult their tax
advisors.
INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK SHOULD
CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE
U.S. FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR
SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE OR LOCAL LAWS,
AND TAX TREATIES.
Non-U.S. Holder Defined
For purposes of this summary, a “non-U.S. holder” is
any beneficial owner of our common stock, other than a partnership,
that is not:
●
an individual who is a citizen or resident of the
United States;
●
a corporation, or other entity taxable as a
corporation for U.S. federal income tax purposes, created or
organized under the laws of the United States,
●
any state therein or the District of
Columbia;
●
a trust if it (i) is subject to the primary
supervision of a U.S. court and one of more U.S. persons have
authority to control all substantial decisions of the trust or (ii)
has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person; or
●
an
estate whose income is subject to U.S. income tax regardless of
source.
If you are a non-U.S. citizen that is an individual, you may, in
many cases, be treated as a resident alien, as opposed to a
nonresident alien, by virtue of being present in the United States
for at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current
calendar year. For these purposes, all the days present in the
current year, one-third of the days present in the immediately
preceding year, and one-sixth of the days present in the second
preceding year are counted. Resident aliens are subject to U.S.
federal income tax as if they were U.S. citizens. Such an
individual is urged to consult his or her own tax advisor regarding
the U.S. federal income tax consequences of the ownership or
disposition of our common stock.
Dividends
We do not expect to declare or make any distributions on our common
stock in the foreseeable future. If we do make distributions on
shares of our common stock, however, such distributions will
constitute dividends for U.S. federal income tax purposes to the
extent paid from our current or accumulated earnings and profits,
as determined under U.S. federal income tax principles.
Distributions in excess of our current and accumulated earnings and
profits will constitute a return of capital that is applied against
and reduces, but not below zero, a non-U.S. holder’s adjusted
tax basis in shares of our common stock. Any remaining excess will
be treated as gain realized on the sale or other disposition of our
common stock. See “Sale of Common
Stock”
below.
Any dividend paid to a non-U.S. holder of our common stock that is
not effectively connected with the non-U.S. holder’s conduct
of a trade or business in the United States will generally be
subject to U.S. withholding tax at a 30% rate. The withholding tax
might apply at a reduced rate, however, under the terms of an
applicable income tax treaty between the United States and the
non-U.S. holder’s country of residence. You should consult
your tax advisors regarding your entitlement to benefits under a
relevant income tax treaty. Generally, in order for us or our
paying agent to withhold tax at a lower treaty rate, a non-U.S.
holder must certify its entitlement to treaty benefits. A non-U.S.
holder generally can meet this certification requirement by
providing an IRS Form W-8BEN or Form W-8BEN-E (or any successor of
such forms) or appropriate substitute form to us or our paying
agent. If the non-U.S. holder holds the stock through a financial
institution or other agent acting on the holder’s behalf, the
holder will be required to provide appropriate documentation to the
agent. The holder’s agent will then be required to provide
certification to us or our paying agent, either directly or through
other intermediaries. If you are eligible for a reduced rate of
U.S. federal withholding tax under an income tax treaty, you may
obtain a refund or credit of any excess amounts withheld by filing
an appropriate claim for a refund with the IRS in a timely
manner.
Dividends received by a non-U.S. holder that are effectively
connected with a U.S. trade or business conducted by the non-U.S.
holder, and if required by an applicable income tax treaty between
the United States and the non-U.S. holder’s country of
residence, are attributable to a permanent establishment maintained
by the non-U.S. holder in the United States, are not subject to
U.S. withholding tax. To obtain this exemption, a non-U.S. holder
must provide us or our paying agent with an IRS Form W-8ECI
properly certifying such exemption. Such effectively connected
dividends, although not subject to withholding tax, are taxed at
the same graduated income tax rates applicable to U.S. persons, net
of certain deductions and credits. In addition to being taxed at
graduated tax rates, dividends received by corporate non-U.S.
holders that are effectively connected with a U.S. trade or
business of the corporate non-U.S. holder may also be subject to a
branch profits tax at a rate of 30% or such lower rate as may be
specified by an applicable tax treaty.
Sale of Common Stock
Subject to the discussions below regarding backup withholding and
the Foreign Account Tax Compliance Act, non-U.S. holders will
generally not be subject to U.S. federal income tax on any gains
realized on the sale, exchange or other disposition of our common
stock unless:
●
the
gain (i) is effectively connected with the conduct by the non-U.S.
holder of a U.S. trade or business and (ii) if required by an
applicable income tax treaty between the United States and the
non-U.S. holder’s country of residence, is attributable to a
permanent establishment maintained by the non-U.S. holder in the
United States (in which case the special rules described below
apply);
●
the
non-U.S. holder is an individual who is present in the United
States for 183 days or more in the taxable year of the sale,
exchange or other disposition of our common stock, and certain
other requirements are met (in which case the gain would be subject
to a flat 30% tax, or such reduced rate as may be specified by an
applicable income tax treaty, which may be offset by certain U.S.
source capital losses, even though the individual is not considered
a resident of the United States); or
●
the rules of the Foreign Investment in Real
Property Tax Act (“ FIRPTA”), treat the stock as a “U.S. real
property interest” as defined in Section 897 of the
Code.
The FIRPTA rules may apply to a sale, exchange or other disposition
of our common stock if we are, or were within the shorter of the
five-year period preceding the disposition and the non-U.S.
holder’s holding period, a “U.S. real property holding
corporation” (as defined in Section 897 of the Code)
(“USRPHC”). In general, we would be a USRPHC if
interests in U.S. real estate comprised at least half of the value
of our business assets. We do not believe that we are a USRPHC and
we do not anticipate becoming one in the future. Even if we become
a USRPHC, as long as our common stock is regularly traded on an
established securities market, such common stock will be treated as
U.S. real property interests only if beneficially owned by a
non-U.S. holder that actually or constructively owned more than 5%
of our outstanding common stock at sometime within the five-year
period preceding the disposition.
If any gain from the sale, exchange or other disposition of our
common stock, (1) is effectively connected with a U.S. trade or
business conducted by a non-U.S. holder and (2) if required by an
applicable income tax treaty between the United States and the
non-U.S. holder’s country of residence, is attributable to a
permanent establishment maintained by such non-U.S. holder in the
United States, then the gain generally will be subject to U.S.
federal income tax at the same graduated rates applicable to U.S.
persons, net of certain deductions and credits. If the non-U.S.
holder is a corporation, under certain circumstances, that portion
of its earnings and profits that is effectively connected with its
U.S. trade or business, subject to certain adjustments, generally
would be subject also to a “branch profits tax.” The
branch profits tax rate is 30% unless reduced by applicable income
tax treaty.
U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject
to U.S. federal estate tax on property with a U.S. situs. Because
we are a U.S. corporation, our common stock will be U.S. situs
property and therefore will be included in the taxable estate of a
nonresident alien decedent, unless an applicable estate tax treaty
between the United States and the decedent’s country of
residence provides otherwise.
Backup Withholding and Information Reporting
The Code and the Treasury regulations require those who make
specified payments to report the payments to the IRS. Among the
specified payments are dividends and proceeds paid by brokers to
their customers. The required information returns enable the IRS to
determine whether the recipient properly included the payments in
income. This reporting regime is reinforced by “backup
withholding” rules. These rules require the payors to
withhold tax from payments subject to information reporting if the
recipient fails to cooperate with the reporting regime by failing
to provide his taxpayer identification number to the payor,
furnishing an incorrect identification number, or failing to report
interest or dividends on his returns. The backup withholding tax
rate is currently 28%. The backup withholding rules do not apply to
payments to corporations, whether domestic or foreign, provided
they establish such exemption.
Payments to non-U.S. holders of dividends on common stock generally
will not be subject to backup withholding, and payments of proceeds
made to non-U.S. holders by a broker upon a sale of common stock
will not be subject to information reporting or backup withholding,
in each case so long as the non-U.S. holder certifies its status as
a non-U.S. holder (and we or our paying agent do not have actual
knowledge or reason to know the holder is a U.S. person or that the
conditions of any other exemption are not, in fact, satisfied) or
otherwise establishes an exemption. The certification procedures to
claim treaty benefits described under “Dividends” will
generally satisfy the certification requirements necessary to avoid
the backup withholding tax. We must report annually to the IRS any
dividends paid to each non-U.S. holder and the tax withheld, if
any, with respect to these dividends. Copies of these reports may
be made available to tax authorities in the country where the
non-U.S. holder resides.
Under the Treasury regulations, the payment of proceeds from the
disposition of shares of our common stock by a non-U.S. holder made
to or through a U.S. office of a broker generally will be subject
to information reporting and backup withholding unless the
beneficial owner certifies, under penalties of perjury, among other
things, its status as a non-U.S. holder (and the broker does not
have actual knowledge or reason to know the holder is a U.S.
person) or otherwise establishes an exemption. The payment of
proceeds from the disposition of shares of our common stock by a
non-U.S. holder made to or through a non-U.S. office of a broker
generally will not be subject to backup withholding and information
reporting, except as noted below. Information reporting, but not
backup withholding, will apply to a payment of proceeds, even if
that payment is made outside of the United States, if you sell our
common stock through a non-U.S. office of a broker that
is:
●
a
U.S. person (including a foreign branch or office of such
person);
●
a
“controlled foreign corporation” for U.S. federal
income tax purposes;
●
a foreign person 50% or more of whose gross income
from certain periods is effectively connected with a U.S. trade or
business; or
●
a
foreign partnership if at any time during its tax year (a) one or
more of its partners are U.S. persons who, in the aggregate, hold
more than 50% of the income or capital interests of the partnership
or (b) the foreign partnership is engaged in a U.S. trade or
business, unless the broker has documentary evidence that the
beneficial owner is a non-U.S. holder and certain other conditions
are satisfied, or the beneficial owner otherwise establishes an
exemption (and the broker has no actual knowledge or reason to know
to the contrary).
Backup withholding is not an additional tax. Any amounts withheld
from a payment to a holder of common stock under the backup
withholding rules can be credited against any U.S. federal income
tax liability of the holder and may entitle the holder to a refund,
provided that the required information is furnished to the IRS in a
timely manner.
Foreign Account Tax Compliance Act
A U.S. federal withholding tax of 30% may apply to dividends and
the gross proceeds of a disposition of our common stock paid to a
foreign financial institution (as specifically defined by the
applicable rules) unless such institution enters into an agreement
with the U.S. government to withhold on certain payments and to
collect and provide to the U.S. tax authorities substantial
information regarding U.S. account holders of such institution
(which includes certain equity holders of such institution, as well
as certain account holders that are foreign entities with U.S.
owners). This U.S. federal withholding tax of 30% will also apply
to dividends and the gross proceeds of a disposition of our common
stock paid to a non-financial foreign entity unless such entity
provides the withholding agent with either a certification that it
does not have any substantial direct or indirect U.S. owners or
provides information regarding direct and indirect U.S. owners of
the entity. The 30% federal withholding tax described in this
paragraph cannot be reduced under an income tax treaty with the
United States or by providing an IRS Form W-8BEN or similar
documentation. The withholding tax described above will not apply
if the foreign financial institution or non-financial foreign
entity otherwise qualifies for an exemption from the rules and
certifies as such on a Form W-8BEN-E (or any successor of such
form). Under certain circumstances, a non-U.S. holder might be
eligible for refunds or credits of such taxes. Holders should
consult with their own tax advisors regarding the possible
implications of the withholding described herein.
The withholding provisions described above generally apply to
proceeds from a sale or other disposition of common stock if such
sale or other disposition occurs on or after January 1, 2019
and to payments of dividends on our common stock.
THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX CONSIDERATIONS IS FOR
GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE
PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING
THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE
LAWS.
National Securities Corporation is acting as lead book-running
manager for this offering and acting as representative of the
underwriters named below. Subject to the terms and conditions set
forth in the underwriting agreement between us and the
underwriters, we have agreed to sell to the underwriters, and the
underwriters have agreed to purchase from us, shares of our common
stock. Subject to the terms and conditions set forth in the
underwriting agreement, the underwriters have agreed to purchase
all of the shares of common stock sold under the underwriting
agreement if any of the shares of common stock are
purchased.
|
Underwriters
|
|
|
National
Securities Corporation
|
|
|
|
|
|
Total
|
3,111,111
|
We have agreed to indemnify the underwriters, their affiliates,
their respective officers, directors, employees and agents, and
each person, if any, who controls any underwriter within the
meaning of Section 15 of the Securities Act, against certain
liabilities, including liabilities under the Securities Act, or to
contribute to payments the underwriters may be required to make in
respect of those liabilities.
The underwriters are offering the shares of common stock, subject
to prior sale, when, as and if issued to and accepted by it,
subject to approval of legal matters by their counsel, including
the validity of the shares of our common stock, and other
conditions contained in the underwriting agreement, such as the
receipt by the underwriters of officers’ certificates
and legal opinions.
National Securities Corporation has advised us that it proposes
initially to offer the shares of common stock to the public at the
public offering price set forth on the cover page of this
prospectus and to dealers at a price that represents a concession
not in excess of $ per share. The underwriters
may allow, and these dealers may re-allow, a concession of not more
than $ per share to other dealers. After the
initial offering of the shares of common stock, the public offering
price or any other term of the offering may be changed by National
Securities Corporation.
Underwriting Commissions and Discounts
The following table summarizes the per share underwriting discount
to the public offering price of the shares of our common stock
offered pursuant to this prospectus. These amounts are shown
assuming both no exercise and full exercise of the option to
purchase additional shares of our common stock described below. We
have also agreed to pay up to $70,000 of the out-of-pocket fees and
expenses of the underwriters, which includes the fees and expenses
of counsel to the underwriters. The fees and expenses of the
underwriters that we have agreed to reimburse are not included in
the underwriting discount set forth in the table below. The
underwriting discount was determined through
arms’ length negotiations between us and the
underwriters.
|
|
|
Total without
Exercise of
Over-Allotment
Option
|
Total with
Full
Exercise of Over-Allotment Option
|
|
Public offering
price
|
$
|
$
|
$
|
|
Underwriting
discount for common stock to be paid by us
|
|
|
|
|
Proceeds to us,
before expenses
|
|
|
|
We estimate that the total expenses of this offering, excluding
underwriting discounts, will be approximately $178,000. This
includes $70,000 of fees and expenses of the underwriters. These
expenses are payable by us.
Option to Purchase Additional Shares
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus, to purchase
up to an additional 466,667 shares of our common stock (up to 15%
of the shares firmly committed in this offering) at the public
offering price, less an underwriting discount
of $ per
share. If any additional shares of our common stock are purchased
pursuant to the option, the underwriters will offer these
additional shares of our common stock on the same terms as those on
which the other shares of common stock are being offered
hereby.
No Sales of Similar Securities
Our executive officers and directors have agreed not to sell or
transfer any common stock or securities convertible into or
exchangeable or exercisable for common stock, for 90 days
after the date of this prospectus, subject to specified exceptions,
without first obtaining the written consent of National Securities
Corporation. Specifically, these persons have agreed, with certain
limited exceptions, not to directly or indirectly:
● offer, pledge, sell, contract to sell or lend any
common stock;
● sell any option or contract to purchase any common
stock;
● purchase any option or contract to sell any common
stock;
● grant any option, right or warrant to purchase any
common stock;
● otherwise transfer or dispose of any common
stock;
● make a demand or exercise any right with respect to
the registration of any common stock; or
● enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, the economic
consequences of ownership of common stock, whether any such swap or
transaction is to be settled by delivery of common stock or other
securities, in cash or otherwise; or
● publicly disclose the intention to make any offer,
sale, pledge or disposition, or to enter into any transaction, swap
hedge or other arrangement relating to any common
stock.
This lock-up provision applies to common stock and to securities
convertible into or exchangeable or exercisable for common stock.
It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing
the agreement later acquires the power of disposition.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares of our common stock in this
offering is completed, SEC rules may limit underwriters and selling
group members from bidding for and purchasing our common stock.
However, National Securities Corporation may engage in transactions
that stabilize the price of the common stock, such as bids or
purchases to peg, fix or maintain that price.
In connection with the offering, the underwriters may purchase and
sell our common stock in the open market. These transactions may
include short sales, purchases on the open market to cover
positions created by short sales and stabilizing transactions.
Short sales involve the sale by the underwriters of a greater
number of shares of our common stock than they are required to
purchase in the offering. Stabilizing transactions consist of
various bids for or purchases of shares of our common stock made by
the underwriters in the open market prior to the closing of the
offering.
Similar to other purchase transactions, the
underwriters’ purchases to cover the syndicate short
sales may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in
the market price of our common stock. As a result, the price of our
common stock may be higher than the price that might otherwise
exist in the open market. The underwriters may conduct these
transactions on the Nasdaq Capital Market, in the over-the-counter
market or otherwise.
Neither we nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of our common
stock. In addition, neither we nor the underwriters make any
representation that they will engage in these transactions or that
these transactions, once commenced, will not be discontinued
without notice.
Electronic Distribution
In connection with the offering, the underwriters or certain
securities dealers may distribute prospectuses by electronic means,
such as e-mail.
Other Relationships
The underwriters and their affiliates are full service financial
institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial
advisory, investment management, investment research, principal
investment, hedging, financing and brokerage activities. The
underwriters and certain of their affiliates have in the past, and may in the future, engage in investment
banking and other commercial dealings in the ordinary course of
business with us or our affiliates, for which they
have in the past, and may in the future, receive customary fees,
commissions and expenses.
In the ordinary course of their various business activities, the
underwriters and their affiliates may make or hold a broad array of
investments and actively trade debt and equity securities (or
related derivative securities) and financial instruments (including
bank loans) for their own account and for the accounts of their
customers. Such investments and securities activities may involve
securities and/or instruments of ours or our affiliates. The
underwriters and their affiliates may also make investment
recommendations and/or publish or express independent research
views in respect of such securities or instruments and may at any
time hold, or recommend to clients that it acquires, long and/or
short positions in such securities and instruments.
Listing
Our common stock is listed on the Nasdaq Capital Market under the
symbol “SLGG.”
Transfer Agent and Registrar
Our transfer agent is Issuer Direct whose address is 1981 E. Murray Holladay Rd
#100, Salt Lake City, Utah 84117 and its telephone number is (801)
272-9294.
Selling Restrictions
No action has been taken in any jurisdiction except the United
States that would permit a public offering of our common stock, or
the possession, circulation or distribution of this prospectus or
any other material relating to us or our common stock in any
jurisdiction where action for that purpose is required.
Accordingly, the shares may not be offered or sold, directly or
indirectly, and neither this prospectus nor any other offering
material or advertisements in connection with the shares may be
distributed or published, in or from any country or jurisdiction
except in compliance with any applicable rules and regulations of
any such country or jurisdiction.
The
validity of our shares of our common stock offered by this
prospectus will be passed upon for us by Disclosure Law Group, a
Professional Corporation, of San Diego, California. McGuireWoods
LLP, New York, New York, is acting as counsel for the underwriters
in connection with this offering.
EXPERTS
The
financial statements of Super League Gaming, Inc. as of
December 31, 2019 and 2018 and for each of the years in the
two-year period ended December 31, 2019, incorporated in this
Prospectus by reference from the Super League Gaming, Inc. Annual
Report on Form 10-K for the year ended December 31, 2019 have been
audited by Squar Milner LLP, an independent registered public
accounting firm, as stated in their reports thereon (which report
expresses an unqualified opinion and includes an explanatory
paragraph relating to the Company’s ability to continue as a
going concern), have been incorporated in this Prospectus and
Registration Statement in reliance upon such reports and upon the
authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have
filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to this offering of our common stock.
This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement, some items of which are contained in
exhibits to the registration statement as permitted by the rules
and regulations of the SEC. For further information with respect to
us and our common stock, we refer you to the registration
statement, including the exhibits and the financial statements and
notes filed as a part of the registration statement. Statements
contained in this prospectus concerning the contents of any
contract, or any other document, are not necessarily complete. If a
contract or document has been filed as an exhibit to the
registration statement, please see the copy of the contract or
document that has been filed. Each statement is this prospectus
relating to a contract or document filed as an exhibit is qualified
in all respects by the filed exhibit. The exhibits to the
registration statement should be referenced for the complete
contents of these contracts and documents. The SEC maintains an
internet website that contains reports, proxy statements and other
information about issuers, like us, that file electronically with
the SEC. The address of the SEC’s website is
www.sec.gov.
Our
common stock is registered with the SEC under Section 12 of the
Exchange Act and, accordingly, we are subject to the information
and periodic reporting requirements of the Exchange Act, and we
file periodic reports, proxy statements and other information with
the SEC. These periodic reports, proxy statements and other
information are available at the website of the SEC referred to
above. We maintain a website at http://www.superleague.com. You may
access our annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K and amendments to those reports,
proxy statements and other information filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act with the SEC free of
charge at our website as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the SEC.
The information contained in, or that can be accessed through, our
website is not part of this prospectus.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
following documents filed by us with the SEC are incorporated by
reference in this prospectus:
●
our Annual Report on Form 10-K for the year ended December 31,
2019, filed on March 23, 2020;
●
our Quarterly Report on Form 10-Q for the period ended March 31,
2020, filed on May 15, 2020;
●
our Quarterly Report on Form 10-Q for the period ended June 30,
2020, filed on August 12, 2020;
●
our Current Report on Form 8-K, filed on April 3,
2020;
●
our Current Report on Form 8-K, filed on May 7, 2020;
●
our Current Report on Form 8-K, filed on May 15, 2020;
●
our Current Report on Form 8-K, filed on July 24, 2020;
and
●
the description of our common stock which is registered under
Section 12 of the Exchange Act, in our registration statement
on Form 8-A, filed on February
21, 2019, including any
amendment or reports filed for the purposes of updating this
description.
Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for the purposes of this registration statement to the
extent that a statement contained herein or in any other
subsequently filed document which also is or deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part
of this registration statement.
We
will provide upon request to each person, including any beneficial
owner, to whom a prospectus is delivered, a copy of any or all of
the information that has been incorporated by reference in the
prospectus but not delivered with the prospectus. You may request a
copy of these filings, excluding the exhibits to such filings which
we have not specifically incorporated by reference in such filings,
at no cost, by writing to or calling us at:
Super League Gaming, Inc.
2912 Colorado Ave., Suite #203
Santa Monica, California 90404
(802) 294-2754
This
prospectus is part of a registration statement we filed with the
SEC. You should only rely on the information or representations
contained in this prospectus. We have not authorized anyone to
provide information other than that provided in this prospectus. We
are not making an offer of the securities in any state where the
offer is not permitted. You should not assume that the information
in this prospectus is accurate as of any date other than the date
on the front of the document.
3,111,111 Shares
Super League Gaming, Inc.
PROSPECTUS
The date of this prospectus is ,
2020
Until
,
2020 (25 days after the date of this prospectus), all dealers that
buy, sell or trade shares of our common stock, whether or not
participating in this offering, may be required to deliver a
prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Part II - INFORMATION NOT
REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and
Distribution.
The
following table indicates the expenses to be incurred in connection
with the offering described in this registration statement, other
than underwriting discounts and commissions, all of which will be
paid by us. All amounts are estimated except the Securities and
Exchange Commission (the “SEC”) registration fee and the
Financial Industry Regulatory Authority, Inc. (“FINRA”) filing fee.
|
|
|
|
|
|
|
SEC registration
fee
|
$1,045
|
|
FINRA filing
fee
|
1,708
|
|
Accountants’
fees and expenses
|
25,000
|
|
Legal fees and
expenses
|
65,000
|
|
Transfer
Agent’s fees and expenses
|
5,000
|
|
Printing
expenses
|
5,000
|
|
Underwriters
reimbursable expenses
|
70,000
|
|
Miscellaneous
|
5,000
|
|
|
|
|
Total
expenses
|
$177,753
|
Item 14. Indemnification of Directors and
Officers.
Section 145(a) of the Delaware General Corporation Law
(“DGCL”) provides, in general, that a Delaware
corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the
right of the corporation) because that person is or was a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee
or agent of another corporation or other enterprise. The indemnity
may include expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, so long as
the person acted in good faith and in a manner he or she reasonably
believed was in or not opposed to the corporation’s best
interests, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was
unlawful.
Section 145(b) of the DGCL provides, in general, that a Delaware
corporation may indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the corporation to
obtain a judgment in its favor because the person is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation or other
enterprise. The indemnity may include expenses (including
attorneys’ fees) actually and reasonably incurred by the
person in connection with the defense or settlement of such action,
so long as the person acted in good faith and in a manner the
person reasonably believed was in or not opposed to the
corporation’s best interests, except that no indemnification
shall be permitted without judicial approval if a court has
determined that the person is to be liable to the corporation with
respect to such claim. Section 145(c) of the DGCL provides that, if
a present or former director or officer has been successful in
defense of any action referred to in Sections 145(a) and (b) of the
DGCL, the corporation must indemnify such officer or director
against the expenses (including attorneys’ fees) he or she
actually and reasonably incurred in connection with such
action.
Section 145(g) of the DGCL provides, in general, that a corporation
may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or
other enterprise against any liability asserted against and
incurred by such person, in any such capacity, or arising out of
his or her status as such, whether or not the corporation could
indemnify the person against such liability under Section 145 of
the DGCL.
Our amended and restated certificate of incorporation
(“Charter”), and our amended and restated bylaws
(“Bylaws”) provide for the indemnification of our
directors and officers to the fullest extent permitted under the
DGCL. We
also maintain a directors’ and officers’ insurance
policy pursuant to which our directors and officers are insured
against liability for actions taken in their capacities as
directors and officers.
We have entered into an underwriting agreement in connection with
this offering, which provides for indemnification by the
underwriter of us, our officers and directors, for certain
liabilities, including liabilities arising under the Securities
Act.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions or otherwise, the registrant has been advised that in
the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.
Item 15. Recent Sales of Unregistered Securities.
Set
forth below is information regarding all securities sold by us
within the last three years which were not registered under the
Securities Act. Also included is the consideration received by us
for such securities and information relating to the section of the
Securities Act, or rule of the SEC, under which exemption from
registration was claimed.
Issuances of Capital Stock:
On June 3, 2019, we entered into an agreement and plan of merger
(the “Merger
Agreement”) with
Framerate, Inc., a Delaware corporation (“Framerate”), pursuant to which Framerate merged with
and into SLG Merger Sub, Inc. (“Merger Sub”), with Merger Sub continuing as the
surviving corporation (the “Framerate
Acquisition”). The
Framerate Acquisition was consummated on June 6, 2019 when the
certificate of merger of Merger Sub and Framerate was filed with
the Secretary of State of the State of Delaware (the
“Effective
Date”). As consideration
for the Framerate Acquisition, the Company ratably paid and/or
issued to the former shareholders of Framerate an aggregate of i)
$1.5 million paid in cash and ii) $1.0 million paid by the issuance
of a total of 134,422 shares of the Company’s common stock,
at a price per share of $7.4395 (the “Closing
Shares”).
In addition to the issuance of the Closing Shares, the Merger
Agreement provides for the issuance of up to an additional $980,000
worth of shares of the Company’s common stock at the same
price per share as the Closing Shares (the
“Earn-Out
Shares”) in the event
Framerate achieves certain performance-based milestones during the
two-year period following the closing of the Acquisition, or June
6, 2021 (the “Earn-Out”). Up to one-half of the Earn-Out Shares
were issuable on the one-year anniversary of the Effective Date,
and the remaining one-half will be issuable on the second
anniversary of the Effective Date. The fair value of the Earn-Out
on the Effective Date was estimated to be $454,000. In June 2020,
we issued an additional 32,936 shares of our common stock to the
former shareholders of Framerate in connection with the achievement
of certain components of the year-one earn-out related performance
milestones.
During
the year ended December 31, 2017, we issued 788,280 shares of
common stock at a price of $10.80 per share to certain accredited
investors in private placement transactions, resulting in aggregate
net proceeds of $8,244,883.
Issuances of Warrants to Purchase Common Stock
From
January 1, 2016 to December 31, 2018, we granted five and ten year
warrants to purchase an aggregate of 355,584 shares of our common
stock at an average exercise price of $10.17 per share, to certain
employees, consultants and directors of the Company, including our
Chief Executive Officer Ann Hand, Jeff Gehl, a member of our Board
of Directors, and Robert Stewart, a former member of our Board of
Directors, as consideration for their previous and future services
to the Company.
On
November 15, 2018, we granted an employee a ten-year common stock
purchase warrant to purchase up to 250,000 shares of the
Company’s common stock, at an exercise price of $10.80,
pursuant to an amended employment agreement, subject to the
following vesting schedule: (i) 25% upon issuance; (ii) 50% upon
close of an IPO or an additional private financing (occurring
subsequent to September 1, 2018) of not less than $15,000,000; and
(iii) 25% on the one-year anniversary of an IPO or the one-year
anniversary of an additional private equity financing of not less
than $15,000,000 (occurring subsequent to September 1,
2018).
Sale of Convertible Promissory Notes in Private
Placements
In
February through April 2018, we issued 9.00% secured convertible
promissory notes with a collective face value of $3,000,000 (the
“Initial 2018
Notes”). The Initial 2018 Notes (i) accrued simple
interest at the rate of 9.00% per annum, (ii) matured on the
earlier of December 31, 2018 or the close of a $15,000,000 equity
financing (“Qualifying
Equity Financing”) by us, and (iii) all outstanding
principal and accrued interest was automatically convertible into
equity or equity-linked securities sold in a Qualifying Equity
Financing based upon a conversion rate equal to (x) a 10% discount
to the price per share of a Qualifying Equity Financing, with (y) a
floor of $10.80 per share. In addition, the holders of the Initial
2018 Notes were collectively issued warrants to purchase
approximately 55,559 shares of common stock, at an exercise price
of $10.80 per share and a term of five years (the “Initial 2018
Warrants”).
In May
through August 2018, we issued additional 9.00% secured convertible
promissory notes with a collective face value of $10,000,000 (the
“Additional 2018
Notes”). In May 2018, all of the Initial 2018 Notes
and related accrued interest, totaling $3,056,182, were converted
into the Additional 2018 Notes, resulting in an aggregate principal
amount of $13,056,182 (hereinafter collectively, the “2018
Notes”). The holders of the converted Initial 2018 Notes
retained their respective Initial 2018 Warrants.
The 2018 Notes (i) accrued simple interest at the rate of 9.00% per
annum, (ii) matured on the earlier of the closing of an initial
public offering of the Company’s common stock on a national
securities exchange or April 30, 2019, and (iii) all outstanding
principal and accrued interest was automatically convertible into
shares of common stock upon the closing of an IPO at the lesser of
(x) $10.80 per share or (y) a 15% discount to the price per share
of the IPO. In addition, the holders of the 2018 Notes were
collectively issued 1,396,420 warrants to purchase common stock
equal to 100% of the aggregate principal amount of the 2018 Notes
divided by $9.35 per share (the “2018
Warrants”). The 2018
Warrants are exercisable for a term of five years, commencing on
the close of an IPO, at an exercise price of $9.35 and are callable
at the election of the Company at any time following the closing of
an IPO. The 2018 Notes were secured by a security interest in all
of the assets, tangible and intangible, of the Company. Concurrent
with the closing of the IPO on February 27, 2019, all outstanding
principal and accrued interest outstanding under the 2018 Notes
totaling $13,793,000 was automatically converted into 1,475,164
shares of the Company’s common stock at a conversion price
per share of $9.35.
The
offers, sales and issuances of the securities described in
Item 15 were deemed to be exempt from registration under the
Securities Act under either (i) Rule 701 promulgated
under the Securities Act as offers and sale of securities pursuant
to certain compensatory benefit plans and contracts relating to
compensation in compliance with Rule 701 or
(ii) Section 4(a)(2) of the Securities Act as
transactions by an issuer not involving any public offering. The
recipients of securities in each of these transactions represented
their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the stock
certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with
us, to information about us. The share and per share
information in this Item 15 reflects the one-for-three reverse
stock split of our common stock that was consummated on February 8,
2019.
Item 16. Exhibits and Financial Statement
Schedules.
(a) Exhibits. The list of exhibits is set forth below and is
incorporated by reference herein.
|
Exhibit No.
|
Name
|
|
Incorporation by Reference
|
|
|
Form of
Underwriting Agreement.
|
|
|
|
|
Agreement
and Plan of Merger Agreement and Plan of Merger by and among Super
League Gaming, Inc., SLG Merger Sub, Inc. and Framerate,
Inc.
|
|
Exhibit
2.1 to the Current Report on Form 8-K, filed on June 7,
2019.
|
|
|
Second
Amended and Restated Certificate of Incorporation of Super League
Gaming, Inc., dated November 19, 2018.
|
|
Exhibit
3.1 to the Registration Statement, filed on January 4,
2019
|
|
|
Second
Amended and Restated Bylaws of Super League Gaming,
Inc.
|
|
Exhibit
3.2 to the Registration Statement, filed on January 4,
2019
|
|
|
Certificate
of Amendment to the Second Amended and Restated Certificate of
Incorporation of Super League Gaming, Inc., dated February 8,
2019.
|
|
Exhibit
3.3 to the Amendment No. 2 to the Registration Statement, filed on
February 12, 2019
|
|
|
Certificate
of Amendment to the Certificate of Incorporation of Super League
Gaming, Inc.
|
|
Appendix
A to the Definitive Proxy Statement filed on June 15,
2020.
|
|
|
Certificate
of Amendment to the Certificate of Incorporation of Super League
Gaming, Inc.
|
|
Exhibit
3.1 to the Current Report on Form 8-K filed July 24,
2020.
|
|
|
Form of
Common Stock Certificate.
|
|
Exhibit
4.1 to the Amendment No. 2 to the Registration Statement, filed on
February 12, 2019
|
|
|
Form of
Registration Rights Agreement, among Super League Gaming, Inc. and
certain accredited investors.
|
|
Exhibit
4.2 to the Registration Statement on Form S-1, filed on January 4,
2019
|
|
|
Common
Stock Purchase Warrant dated June 16, 2017 issued to Ann
Hand.
|
|
Exhibit
4.3 to the Registration Statement on Form S-1, filed on January 4,
2019
|
|
|
Form of
9.00% Secured Convertible Promissory Note.
|
|
Exhibit
4.4 to the Registration Statement on Form S-1, filed on January 4,
2019
|
|
|
Form of
Callable Common Stock Purchase Warrant, issued to certain
accredited investors.
|
|
Exhibit
4.5 to the Registration Statement on Form S-1, filed on January 4,
2019
|
|
|
Form of
Representative’s Warrant.
|
|
Exhibit
4.6 to the Amendment No. 2 to the Registration Statement on Form
S-1, filed on February 12, 2019
|
|
|
Opinion
of Disclosure Law Group, a Professional Corporation.
|
|
|
|
|
Super
League Gaming, Inc. Amended and Restated 2014 Stock Option and
Incentive Plan.
|
|
Exhibit
10.1 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Stock Option Agreement under 2014 Stock Option and Incentive
Plan.
|
|
Exhibit
10.2 to the Registration Statement, filed on January 4,
2019
|
|
|
Subscription
Agreement, among Nth Games, Inc. and certain accredited
investors.
|
|
Exhibit
10.3 to the Registration Statement, filed on January 4,
2019
|
|
|
Subscription
Agreement, among Super League Gaming, Inc. and certain accredited
investors.
|
|
Exhibit
10.4 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Theater Agreement, filed herewith.
|
|
Exhibit
10.5 to the Registration Statement, filed on January 4,
2019
|
|
|
Lease
between Super League Gaming, Inc. and Roberts Business Park Santa
Monica LLC, dated June 1, 2016.
|
|
Exhibit
10.6 to the Registration Statement, filed on January 4,
2019
|
|
|
License
Agreement between Super League Gaming, Inc. and Riot Games, Inc.,
dated June 22, 2016.
|
|
Exhibit
10.7 to the Registration Statement, filed on January 4,
2019
|
|
|
Amended
and Restated License Agreement between Super League Gaming, Inc.
and Mojang AB, dated August 1, 2016.
|
|
Exhibit
10.8 to the Registration Statement, filed on January 4,
2019
|
|
|
Master
Agreement between Super League Gaming, Inc. and Viacom Media
Networks, dated June 9, 2017.
|
|
Exhibit
10.9 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Common Stock Purchase Agreement, among Super League Gaming, Inc.
and certain accredited investors.
|
|
Exhibit
10.10 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Investors’ Rights Agreement, among Super League Gaming, Inc.
and certain accredited investors.
|
|
Exhibit
10.11 to the Registration Statement, filed on January 4,
2019
|
|
|
Employment
Agreement, between Super League Gaming, Inc. and Ann Hand, dated
June 16, 2017.
|
|
Exhibit
10.12 to the Registration Statement, filed on January 4,
2019
|
|
|
Employment
Agreement, between Super League Gaming, Inc. and David Steigelfest,
dated October 31, 2017.
|
|
Exhibit
10.13 to the Registration Statement, filed on January 4,
2019
|
|
|
Riot
Games, Inc. Extension Letter, dated November 21, 2017.
|
|
Exhibit
10.14 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Note Purchase Agreement, among Super League Gaming, Inc. and
certain accredited investors.
|
|
Exhibit
10.15 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Security Agreement, between Super League Gaming, Inc. and certain
accredited investors.
|
|
Exhibit
10.16 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Intercreditor and Collateral Agent Agreement, among Super League
Gaming, Inc. and certain accredited investors.
|
|
Exhibit
10.17 to the Registration Statement, filed on January 4,
2019
|
|
|
Form of
Investors’ Rights Agreement (9% Secured Convertible
Promissory Notes), among Super League Gaming, Inc. and certain
accredited investors.
|
|
Exhibit
10.18 to the Registration Statement, filed on January 4,
2019
|
|
|
Master
Service Agreement and Initial Statement of Work between Super
League Gaming, Inc. and Logitech Inc., dated March 1,
2018.
|
|
Exhibit
10.19 to the Registration Statement, filed on January 4,
2019
|
|
|
Asset
Purchase Agreement, between Super League Gaming, Inc. and Minehut,
dated June 22, 2018.
|
|
Exhibit
10.20 to the Registration Statement, filed on January 4,
2019
|
|
|
Amended
and Restated Employment Agreement, between Super League Gaming,
Inc. and Ann Hand, dated November 15, 2018.
|
|
Exhibit
10.21 to the Registration Statement, filed on January 4,
2019
|
|
|
Amended
and Restated Employment Agreement, between Super League Gaming,
Inc. and David Steigelfest, dated November 1, 2018.
|
|
Exhibit
10.22 to the Registration Statement, filed on January 4,
2019
|
|
|
Employment
Agreement, between Super League Gaming, Inc. and Matt Edelman,
dated November 1, 2018.
|
|
Exhibit
10.23 to the Registration Statement, filed on January 4,
2019
|
|
|
Employment
Agreement, between Super League Gaming, Inc. and Clayton Haynes,
dated November 1, 2018.
|
|
Exhibit
10.24 to the Registration Statement, filed on January 4,
2019
|
|
|
Commercial
Partnership Agreement between Super League Gaming, Inc., and
ggCircuit, LLC, dated September 23, 2019.
|
|
Exhibit
10.1 to the Quarterly Report on Form 10-Q for the period ended
September 30, 2019, filed November 14, 2019.
|
|
|
Note
Payable Agreement by and between Super League Gaming, Inc. and
South Porte Bank, dated May 4, 2020.
|
|
Exhibit
10.1 to the Current Report on Form 8-K filed May 7,
2020.
|
|
|
Form of
Restricted Stock Unit Agreement under the Amended and Restated 2014
Stock Option and Incentive Plan
|
|
Exhibit
10.3 to the Registration Statement filed on May 11,
2020.
|
|
|
Placement
Agency Agreement dated May 13, 2020.
|
|
Exhibit
1.1 to the Current Report on Form 8-K filed on May 15,
2020.
|
|
|
Form
of Securities Purchase Agreement dated May 13, 2020
|
|
Exhibit
10.1 to the Current Report on Form 8-K filed on May 15,
2020.
|
|
|
Super
League Gaming, Inc. Code of Business Conduct and
Ethics.
|
|
Exhibit
14.1 to the Registration Statement, filed on January 4,
2019
|
|
|
Consent
of Squar Milner LLP.
|
|
|
|
|
Consent
of Disclosure Law Group, a Professional Corporation (included in
Exhibit 5.1).
|
|
|
|
|
Power
of attorney (included on the signature page
hereto)
|
|
|
|
†
|
Identifies
exhibits that consist of a management contract or compensatory plan
or arrangement.
|
|
+
|
Confidential treatment has been granted for certain confidential
portions of this exhibit pursuant to Rule 406 under the Securities
Act of 1933, as amended, and Rule 24b-2 under the Securities
Exchange Act of 1934, as amended (together, the
“Rules”). In accordance with the Rules, these
confidential portions have been omitted from this exhibit and filed
separately with the Securities and Exchange
Commission.
|
|
++
|
Certain
portions of this exhibit (indicated by “[*****]”) have
been omitted as the Company has determined (i) the omitted
information is not material and (ii) the omitted information would
likely cause harm to the Company if publicly
disclosed.
|
(b)
Financial Statement Schedules. Schedules not listed above
have been omitted because the information required to be set forth
therein is not applicable or is shown in the financial statements
or notes thereto.
Item 17. Undertakings.
The
undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as
required by the underwriters to permit prompt delivery to each
purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The
registrant hereby further undertakes that:
(1) For
purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(2) For
purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant
to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Santa
Monica, State of California, on this 21st day of August,
2020.
|
|
Super League Gaming, Inc.
|
|
|
|
|
|
|
By:
|
/s/ Ann Hand
|
|
|
|
Ann
Hand
Chief Executive Officer, President and
Chair of the Board
|
SIGNATURES
AND POWER OF
ATTORNEY
We, the undersigned officers and directors of Super League Gaming,
Inc., hereby severally constitute and appoint Ann Hand and Clayton
Haynes, and each of them singly (with full power to each of them to
act alone), our true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution in each of them for
him or her and in his or her name, place and stead, and in any and
all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement (or any
other registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933), and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and
perform each and every act and thing requisite or necessary to be
done in and about the premises, as full to all intents and purposes
as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or
their, or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in
the capacities held on the dates indicated.
|
Signature
|
Title
|
Date
|
|
|
|
|
|
/s/ Ann Hand |
Chief
Executive Officer,
|
August
21, 2020
|
|
Ann
Hand
|
President,
Chair of the Board
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
/s/ Clayton Haynes |
Chief
Financial Officer
|
August
21, 2020
|
|
Clayton
Haynes
|
(Principal
Financial and Accounting Officer)
|
|
|
|
|
|
|
/s/ David Steigelfest |
Chief
Product Officer and Director
|
August
21, 2020
|
|
David
Steigelfest
|
|
|
|
|
|
|
|
/s/ Jeff Gehl |
Director
|
August
21, 2020
|
|
Jeff
Gehl
|
|
|
|
|
|
|
|
/s/ Kristin Patrick |
Director
|
August
21, 2020
|
|
Kristin
Patrick
|
|
|
|
|
|
|
|
/s/ Michael Keller |
Director
|
August
21, 2020
|
|
Michael
Keller
|
|
|
|
/s/ Mark Jung |
Director
|
August
21, 2020
|
|
Mark
Jung
|
|
|
