|
Delaware
|
| |
2080
|
| |
45-2988960
|
|
|
(State or other jurisdiction of
incorporation or organization) |
| |
(Primary Standard Industrial
Classification Code Number) |
| |
(I.R.S. Employer
Identification Number) |
|
|
Drew Capurro
Brian Cuneo B. Shayne Kennedy Latham & Watkins LLP 650 Town Center Drive Costa Mesa, CA 92626 Tel: (714) 540-1235 |
| |
Matthew Thelen
Chief Strategy Officer and General Counsel Winc, Inc. 1751 Berkeley St, Studio 3 Santa Monica, CA 90404 Tel: (800) 297-1760 |
| |
Thomas J. Poletti
Katherine J. Blair Manatt, Phelps & Phillips LLP 695 Town Center Drive, 14th Floor Costa Mesa, CA 92626 Tel: (714) 371-2500 |
|
|
Large accelerated filer
☐
|
| |
Accelerated filer
☐
|
|
|
Non-accelerated filer
☒
|
| |
Smaller reporting company
☒
|
|
| | | |
Emerging growth company
☒
|
|
| | ||||||||||||||||
Title of Each Class of Securities To Be Registered
|
| | |
Amount to be
Registered(1)(2) |
| | |
Proposed Maximum
Aggregate Offering Price Per Share |
| | |
Proposed Maximum
Aggregate Offering Price(1)(2) |
| | |
Amount of
Registration Fee(3) |
|
Common Stock, $0.0001 par value per share
|
| | |
1,769,231
|
| | |
$14.00
|
| | |
$24,769,238
|
| | |
$2,296.11
|
|
Representative’s Warrants to purchase Common Stock(4)
|
| | |
53,077
|
| | |
—
|
| | |
—
|
| | |
—
|
|
Common Stock underlying Representative’s Warrants(2)(5)
|
| | |
53,077
|
| | |
$15.40
|
| | |
$817,385
|
| | |
$75.77
|
|
Total | | | | | | | | | | | | | | | |
$2,371.89
|
|
| | |
Per Share
|
| |
Total
|
| ||||||
Public offering price
|
| | | $ | | | | | | $ | | | |
Underwriting discounts(1)
|
| | | $ | | | | | | $ | | | |
Proceeds to Winc, before expenses
|
| | | $ | | | | | | $ | | | |
| | | | | i | | | |
| | | | | i | | | |
| | | | | 1 | | | |
| | | | | 21 | | | |
| | | | | 24 | | | |
| | | | | 28 | | | |
| | | | | 79 | | | |
| | | | | 81 | | | |
| | | | | 82 | | | |
| | | | | 83 | | | |
| | | | | 84 | | | |
| | | | | 86 | | | |
| | | | | 89 | | | |
| | | | | 108 | | | |
| | | | | 110 | | | |
| | | | | 138 | | | |
| | | | | 144 | | | |
| | | | | 157 | | | |
| | | | | 159 | | | |
| | | | | 162 | | | |
| | | | | 167 | | | |
| | | | | 169 | | | |
| | | | | 173 | | | |
| | | | | 179 | | | |
| | | | | 179 | | | |
| | | | | 179 | | | |
| | | | | F-1 | | |
| | |
Three months ended
September 30, 2021 |
| |
Three months ended
September 30, 2020 |
| |
Three months ended
September 30, 2021 vs. Three months ended September 30, 2020 |
| |||||||||||||||||||||
| | |
(Low)
|
| |
(High)
|
| | | | | | | |
(Low)
|
| |
(High)
|
| ||||||||||||
| | |
(estimated)
|
| |
(actual)
|
| |
% Change
|
| |||||||||||||||||||||
| | |
(dollars in thousands)
|
| | | | | | | | | | | | | |||||||||||||||
DTC net revenues
|
| | | $ | 12,550 | | | | | $ | 12,804 | | | | | $ | 14,534 | | | | | | (13.6)% | | | | | | (11.9)% | | |
Wholesale net revenues
|
| | | $ | 5,444 | | | | | $ | 5,554 | | | | | $ | 2,662 | | | | | | 104.5% | | | | | | 108.6% | | |
Other net revenues
|
| | | $ | 273 | | | | | $ | 279 | | | | | $ | 652 | | | | | | (58.1)% | | | | | | (57.2)% | | |
DTC cost of revenues
|
| | | $ | 7,023 | | | | | $ | 7,165 | | | | | $ | 8,214 | | | | | | (14.5)% | | | | | | (12.8)% | | |
Wholesale cost of revenues
|
| | | $ | 3,376 | | | | | $ | 3,444 | | | | | $ | 1,813 | | | | | | 86.2% | | | | | | 90.0% | | |
Other cost of revenues
|
| | | $ | 127 | | | | | $ | 129 | | | | | $ | 274 | | | | | | (53.8)% | | | | | | (52.8)% | | |
DTC gross profit
|
| | | $ | 5,527 | | | | | $ | 5,639 | | | | | $ | 6,320 | | | | | | (12.5)% | | | | | | (10.8)% | | |
Wholesale gross profit
|
| | | $ | 2,068 | | | | | $ | 2,110 | | | | | $ | 849 | | | | | | 143.6% | | | | | | 148.5% | | |
Other gross profit
|
| | | $ | 147 | | | | | $ | 149 | | | | | $ | 378 | | | | | | (61.2)% | | | | | | (60.5)% | | |
Net loss
|
| | | $ | (5,725) | | | | | $ | (6,019) | | | | | $ | (1,324) | | | | | | 332.4% | | | | | | 354.6% | | |
Adjusted EBITDA
|
| | | $ | (1,318) | | | | | $ | (1,386) | | | | | $ | (971) | | | | | | 35.8% | | | | | | 42.7% | | |
| | |
Three months ended
September 30, 2021 |
| |
Three months
ended September 30, 2020 |
| ||||||||||||
| | |
(Low)
|
| |
(High)
|
| | | | | | | ||||||
| | |
(estimated)
|
| |
(actual)
|
| ||||||||||||
| | |
(dollars in thousands)
|
| |||||||||||||||
Net loss
|
| | | $ | (5,725) | | | | | $ | (6,019) | | | | | $ | (1,324) | | |
Interest expense
|
| | | | 124 | | | | | | 130 | | | | | | 145 | | |
Income tax expense
|
| | | | 15 | | | | | | 15 | | | | | | 15 | | |
Depreciation and amortization expense
|
| | | | 220 | | | | | | 232 | | | | | | 127 | | |
EBITDA
|
| | | $ | (5,366) | | | | | $ | (5,642) | | | | | $ | (1,037) | | |
Stock-based compensation expense
|
| | | | 903 | | | | | | 949 | | | | | | 66 | | |
Forgiveness of promissory notes
|
| | | | 3,387 | | | | | | 3,561 | | | | | | — | | |
Change in fair value of warrants(a)
|
| | | | (242) | | | | | | (254) | | | | | | — | | |
Adjusted EBITDA
|
| | | $ | (1,318) | | | | | $ | (1,386) | | | | | $ | (971) | | |
|
Assumed
Initial Public Offering Price |
| |
Shares of Common
Stock Issuable Upon Conversion of Series D Redeemable Convertible Preferred Stock |
| |
Shares of Common
Stock Issuable Upon Conversion of Series E Redeemable Convertible Preferred Stock |
| |
Shares of Common
Stock Issuable Upon Conversion of Series F Redeemable Convertible Preferred Stock |
| |
Total Shares of
Common Stock Outstanding After This Offering |
| ||||||||||||
|
$11.00
|
| |
824,204
|
| |
545,329
|
| |
807,657
|
| |
13,015,415
|
| ||||||||||||
|
$12.00
|
| | | | 822,214 | | | |
540,652
|
| |
800,086
|
| |
13,001,177
|
| |||||||||
|
$13.00
|
| | | | 822,214 | | | |
535,318
|
| |
792,759
|
| |
12,988,516
|
| |||||||||
|
$14.00
|
| | | | 822,214 | | | | | | 532,331 | | | | | | 785,700 | | | | | | 12,978,470 | | |
|
$15.00
|
| | | | 822,214 | | | | | | 532,331 | | | | | | 785,700 | | | | | | 12,978,470 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Assumed Initial Public Offering Price
|
| |
Shares of Common Stock Issuable Upon
Conversion of Warrants to Purchase Series F Redeemable Convertible Preferred Stock |
| |||
|
$11.00
|
| |
293,823
|
| |||
|
$12.00
|
| |
290,975
|
| |||
|
$13.00
|
| |
288,257
|
| |||
|
$14.00
|
| | | | 285,704 | | |
|
$15.00
|
| | | | 285,704 | | |
| | | | | | | | |
| | |
Year Ended
December 31, |
| |
Six Months Ended
June 30, (unaudited) |
| ||||||||||||||||||
|
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||||
|
(in thousands, except share and per share data)
|
| |||||||||||||||||||||||
Statements of operations data: | | | | | | | | | | | | | | | | | | | | | | | | | |
Net revenues(1)
|
| | | $ | 64,707 | | | | | $ | 36,447 | | | | | $ | 35,116 | | | | | $ | 29,166 | | |
Cost of revenues
|
| | | | 38,352 | | | | | | 21,038 | | | | | | 19,953 | | | | | | 18,224 | | |
Gross profit
|
| | | | 26,355 | | | | | | 15,409 | | | | | | 15,163 | | | | | | 10,942 | | |
Operating expenses
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Marketing
|
| | | | 17,388 | | | | | | 8,578 | | | | | | 7,979 | | | | | | 6,948 | | |
Personnel
|
| | | | 7,582 | | | | | | 6,328 | | | | | | 5,387 | | | | | | 3,466 | | |
General and administrative
|
| | | | 7,545 | | | | | | 7,330 | | | | | | 5,567 | | | | | | 3,373 | | |
Production and operations
|
| | | | 169 | | | | | | 88 | | | | | | 54 | | | | | | 89 | | |
Creative development
|
| | | | 83 | | | | | | 177 | | | | | | 156 | | | | | | 54 | | |
Total operating expenses
|
| | | | 32,767 | | | | | | 22,501 | | | | | | 19,143 | | | | | | 13,930 | | |
Loss from operations
|
| | | | (6,412) | | | | | | (7,092) | | | | | | (3,980) | | | | | | (2,988) | | |
Interest expense
|
| | | | (834) | | | | | | (1,364) | | | | | | (421) | | | | | | (531) | | |
Change in fair value of warrants
|
| | | | (208) | | | | | | (137) | | | | | | (893) | | | | | | (229) | | |
Other income
|
| | | | 523 | | | | | | 559 | | | | | | 1,972 | | | | | | 9 | | |
Total other expense, net
|
| | | | (519) | | | | | | (942) | | | | | | 658 | | | | | | (751) | | |
Loss before income taxes
|
| | | | (6,931) | | | | | | (8,034) | | | | | | (3,322) | | | | | | (3,739) | | |
Income tax expense
|
| | | | 27 | | | | | | 15 | | | | | | 15 | | | | | | 7 | | |
Net loss
|
| | | $ | (6,958) | | | | | $ | (8,049) | | | | | $ | (3,337) | | | | | $ | (3,746) | | |
Net loss per common share—basic and diluted
|
| | | $ | (7.80) | | | | | $ | (8.90) | | | | | $ | (1.90) | | | | | $ | (4.21) | | |
Weighted average common shares outstanding—basic and
diluted |
| | | | 892,333 | | | | | | 904,005 | | | | | | 1,754,958 | | | | | | 889,559 | | |
Pro forma net loss per share—basic and diluted (unaudited)(2)
|
| | | $ | (0.90) | | | | | | | | | | | $ | (0.34) | | | | | | | | |
Weighted average shares used to compute pro forma net loss per share, basic and diluted (unaudited)
|
| | | | 7,754,542 | | | | | | | | | | | | 9,717,956 | | | | | | | | |
| | |
As of June 30, 2021
(unaudited) |
| |||||||||||||||
|
Actual
|
| |
Pro forma(1)
|
| |
Pro forma
as adjusted(2) |
| |||||||||||
|
(in thousands)
|
| |||||||||||||||||
Balance Sheet Data:
|
| | | | | | | | | | | | | | | | | | |
Cash
|
| | | $ | 2,396 | | | | | $ | 2,396 | | | | | $ | 18,396 | | |
Working capital(3)
|
| | | | 5,371 | | | | | | 5,371 | | | | | | 21,371 | | |
Total assets
|
| | | | 43,837 | | | | | | 43,837 | | | | | | 59,837 | | |
Borrowings under our Credit Agreements
|
| | | | 2,590 | | | | | | 2,590 | | | | | | 2,590 | | |
Redeemable convertible preferred stock
|
| | | | 68,896 | | | | | | — | | | | | | — | | |
Accumulated deficit
|
| | | | (60,409) | | | | | | (63,862) | | | | | | (63,862) | | |
Total stockholders’ equity (deficit)
|
| | | | (59,834) | | | | | | 9,062 | | | | | | 25,062 | | |
| | |
Year Ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
|
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||||
| | |
(dollars in thousands, except average order value data)
|
| |||||||||||||||||||||
Core brand net revenues(1)
|
| | | $ | 15,409 | | | | | $ | 10,061 | | | | | $ | 10,158 | | | | | $ | 8,895 | | |
Consolidated | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA(2)
|
| | | $ | (5,104) | | | | | $ | (5,678) | | | | | $ | (2,919) | | | | | $ | (2,600) | | |
Adjusted EBITDA margin(2)
|
| | | | (7.9)% | | | | | | (15.6)% | | | | | | (8.3)% | | | | | | (8.9)% | | |
DTC | | | | | | | | | | | | | | | | | | | | | | | | | |
DTC net revenues(4)
|
| | | $ | 54,854 | | | | | $ | 29,628 | | | | | $ | 26,852 | | | | | $ | 24,823 | | |
DTC gross profit(5)
|
| | | $ | 23,055 | | | | | $ | 12,967 | | | | | $ | 11,496 | | | | | $ | 9,421 | | |
Average order value(3)
|
| | | $ | 63.04 | | | | | $ | 60.56 | | | | | $ | 69.20 | | | | | $ | 58.96 | | |
Average monthly consumer retention rate(6)
|
| | | | 89.7% | | | | | | 92.2% | | | | | | 91.8% | | | | | | 88.7% | | |
Wholesale | | | | | | | | | | | | | | | | | | | | | | | | | |
Wholesale net revenues(7)
|
| | | $ | 8,237 | | | | | $ | 6,819 | | | | | $ | 7,624 | | | | | $ | 4,023 | | |
Wholesale gross profit(8)
|
| | | $ | 2,393 | | | | | $ | 2,442 | | | | | $ | 3,301 | | | | | $ | 1,338 | | |
Retail accounts(9)
|
| | | | 7,869 | | | | | | 4,809 | | | | | | 7,839 | | | | | | 5,148 | | |
| | |
Year ended December 31,
|
| |
Six months ended June 30,
|
| ||||||||||||||||||
| | |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
| | |
(dollars in thousands)
|
| |||||||||||||||||||||
Net loss
|
| | | $ | (6,958) | | | | | $ | (8,049) | | | | | $ | (3,337) | | | | | $ | (3,746) | | |
Interest expense
|
| | | $ | 834 | | | | | $ | 1,364 | | | | | $ | 421 | | | | | $ | 531 | | |
Income tax expense
|
| | | $ | 27 | | | | | $ | 15 | | | | | $ | 15 | | | | | $ | 7 | | |
Depreciation and amortization expense
|
| | | $ | 510 | | | | | $ | 633 | | | | | $ | 294 | | | | | $ | 269 | | |
EBITDA
|
| | | $ | (5,587) | | | | | $ | (6,037) | | | | | $ | (2,607) | | | | | $ | (2,939) | | |
Stock based compensation expense
|
| | | $ | 275 | | | | | $ | 222 | | | | | $ | 172 | | | | | $ | 110 | | |
Forgiveness of loan under Paycheck Protection Program
|
| | | | | | | | | | | | | | | $ | (1,377) | | | | | $ | — | | |
Change in fair value of warrants(a)
|
| | | $ | 208 | | | | | $ | 137 | | | | | $ | 893 | | | | | $ | 229 | | |
Adjusted EBITDA
|
| | | $ | (5,104) | | | | | $ | (5,678) | | | | | $ | (2,919) | | | | | $ | (2,600) | | |
Net loss margin
|
| | | | (10.8)% | | | | | | (22.1)% | | | | | | (9.5)% | | | | | | (12.8)% | | |
Adjusted EBITDA margin
|
| | | | (7.9)% | | | | | | (15.6)% | | | | | | (8.3)% | | | | | | (8.9)% | | |
| | |
As of June 30, 2021
(unaudited) |
| | | | |||||||||||||||||||||
|
Actual
|
| |
Pro forma
|
| |
Pro forma as
adjusted(1) |
| | | | |||||||||||||||||
|
(in thousands, except share and per share amounts)
|
| | | | |||||||||||||||||||||||
Cash
|
| | | $ | 2,396 | | | | | $ | 2,396 | | | | | $ | 18,396 | | | | | | ||||||
Current portion of long-term debt
|
| | | | 1,590 | | | | | | 1,590 | | | | | | 1,590 | | | | | | | | ||||
Line of credit
|
| | | | 1,000 | | | | | | 1,000 | | | | | | 1,000 | | | | | | ||||||
Redeemable convertible preferred stock (Series Seed, A, B, B-1, C, D, E, F), $0.0001 par value; 80,083,782 shares authorized, 8,384,906 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma adjusted
|
| | | $ | 68,896 | | | | | $ | — | | | | | $ | — | | | | | | ||||||
Stockholders’ equity (deficit) | | | | | | | | | | | | | | | | | | | | | | | ||||||
Common stock, $0.0001 par value, 115,490,000 shares
authorized, 3,055,102 shares issued and outstanding, actual; 300,000,000 shares authorized, pro forma and pro forma as adjusted; 11,450,054 shares issued and outstanding, pro forma; 300,000,000 shares authorized, 12,988,516 shares issued and outstanding, pro forma as adjusted |
| | | | 2 | | | | | | 3 | | | | | | 4 | | | | | | ||||||
Preferred stock, par value $0.0001 per share; no shares authorized, issued and outstanding, actual; and 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted
|
| | | | — | | | | | | — | | | | | | — | | | | | | ||||||
Employee promissory notes
|
| | | | (3,453) | | | | | | — | | | | | | — | | | | | | | | | | | |
Treasury stock
|
| | | | (7) | | | | | | (7) | | | | | | (7) | | | | | | ||||||
Additional paid-in capital
|
| | | | 4,033 | | | | | | 72,928 | | | | | | 88,928 | | | | | | ||||||
Accumulated deficit
|
| | | | (60,409) | | | | | | (63,862) | | | | | | (63,862) | | | | | | ||||||
Total stockholders’ equity (deficit)
|
| | | | (59,834) | | | | | | 9,062 | | | | | | 25,062 | | | | | | ||||||
Total capitalization
|
| | | $ | 11,652 | | | | | $ | 11,652 | | | | | $ | 59,837 | | | | | |
|
Assumed initial public offering price per share
|
| |
|
| | | $ | 13.00 | | | |||
|
Historical net tangible book value (deficit) per share as of June 30, 2021
|
| | | $ | (23.00) | | | | | | | | |
|
Increase per share attributable to the pro forma adjustments described above
|
| | | | 22.88 | | | | | | | | |
|
Pro forma net tangible book value (deficit) per share as of June 30, 2021 attributable
to the conversion of preferred stock |
| | | | (0.12) | | | | | | | | |
|
Increase in pro forma as adjusted net tangible book value per share attributable to new investors participating in this offering
|
| | | | 1.25 | | | | | | | | |
|
Pro forma as adjusted net tangible book value per share after this offering
|
| | | | | | | | | | 1.13 | | |
|
Dilution per share to new investors purchasing common stock in this offering
|
| | | | | | | | | $ | 11.87 | | |
| | |
Shares Purchased
|
| |
Total Consideration
|
| |
Average Price
Per Share |
| |||||||||||||||||||||
|
Number
|
| |
Percentage
|
| |
Amount
|
| |
Percentage
|
| ||||||||||||||||||||
Existing stockholders
|
| | | | 11,450,054 | | | | | | 88.2% | | | | | $ | 81,622,576 | | | | | | 80.3% | | | | | $ | 7.13 | | |
New investors
|
| | | | 1,538,462 | | | | | | 11.8% | | | | | | 20,000,006 | | | | | | 19.7% | | | | | | 13.00 | | |
Total
|
| | | | 12,988,516 | | | | | | 100% | | | | | $ | 101,622,582 | | | | | | 100% | | | | | $ | 7.82 | | |
| | |
Year ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
| | |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
| | |
(dollars in thousands, except average order value)
|
| |||||||||||||||||||||
Core brand net revenues
|
| | | $ | 15,409 | | | | | $ | 10,061 | | | | | $ | 10,158 | | | | | $ | 8,895 | | |
Consolidated | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA(1)
|
| | | $ | (5,104) | | | | | $ | (5,678) | | | | | $ | (2,919) | | | | | $ | (2,600) | | |
Adjusted EBITDA margin(1)
|
| | | | (7.9)% | | | | | | (15.6)% | | | | | | (8.3)% | | | | | | (8.9)% | | |
DTC | | | | | | | | | | | | | | | | | | | | | | | | | |
DTC net revenues(2)
|
| | | $ | 54,854 | | | | | $ | 29,628 | | | | | $ | 26,852 | | | | | $ | 24,823 | | |
DTC gross profit(2)
|
| | | $ | 23,055 | | | | | $ | 12,967 | | | | | $ | 11,496 | | | | | $ | 9,421 | | |
Average order value
|
| | | $ | 63.04 | | | | | $ | 60.56 | | | | | $ | 69.20 | | | | | $ | 58.96 | | |
Average monthly consumer retention rate
|
| | | | 89.7% | | | | | | 92.2% | | | | | | 91.8% | | | | | | 88.7% | | |
Wholesale | | | | | | | | | | | | | | | | | | | | | | | | | |
Wholesale net revenues(2)
|
| | | $ | 8,237 | | | | | $ | 6,819 | | | | | $ | 7,624 | | | | | $ | 4,023 | | |
Wholesale gross profit(2)
|
| | | $ | 2,393 | | | | | $ | 2,442 | | | | | $ | 3,301 | | | | | $ | 1,338 | | |
Retail accounts
|
| | | | 7,869 | | | | | | 4,809 | | | | | | 7,839 | | | | | | 5,148 | | |
| | |
Year ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
| | |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
DTC Net revenues
|
| | | $ | 54,854 | | | | | $ | 29,628 | | | | | $ | 26,852 | | | | | $ | 24,823 | | |
DTC Cost of revenues
|
| | | | 31,799 | | | | | | 16,661 | | | | | | 15,356 | | | | | | 15,402 | | |
DTC Gross profit
|
| | | $ | 23,055 | | | | | $ | 12,967 | | | | | $ | 11,496 | | | | | $ | 9,421 | | |
| | |
Year ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
| | |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
Wholesale Net revenues
|
| | | $ | 8,237 | | | | | $ | 6,819 | | | | | $ | 7,624 | | | | | $ | 4,023 | | |
Wholesale Cost of revenues
|
| | | | 5,844 | | | | | | 4,377 | | | | | | 4,323 | | | | | | 2,685 | | |
Wholesale Gross profit
|
| | | $ | 2,393 | | | | | $ | 2,442 | | | | | $ | 3,301 | | | | | $ | 1,338 | | |
| | |
Fiscal year ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
| | |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
Other Net revenues
|
| | | $ | 1,616 | | | | | $ | — | | | | | $ | 640 | | | | | $ | 320 | | |
Other Cost of revenues
|
| | | | 709 | | | | | | — | | | | | | 274 | | | | | | 137 | | |
Other Gross profit
|
| | | $ | 907 | | | | | | — | | | | | $ | 366 | | | | | $ | 183 | | |
| | |
Year ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
Other Income and Expense Items
|
| |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
| | |
(in thousands)
|
| |||||||||||||||||||||
Marketing
|
| | | $ | 17,388 | | | | | $ | 8,578 | | | | | $ | 7,979 | | | | | $ | 6,948 | | |
Personnel
|
| | | | 7,582 | | | | | | 6,328 | | | | | | 5,387 | | | | | | 3,466 | | |
General and administrative
|
| | | | 7,545 | | | | | | 7,330 | | | | | | 5,567 | | | | | | 3,373 | | |
Production and operations
|
| | | | 169 | | | | | | 88 | | | | | | 54 | | | | | | 89 | | |
Creative development
|
| | | | 83 | | | | | | 177 | | | | | | 156 | | | | | | 54 | | |
Total operating expenses
|
| | | | 32,767 | | | | | | 22,501 | | | | | | 19,143 | | | | | | 13,930 | | |
Interest expense
|
| | | | 834 | | | | | | 1,364 | | | | | | 420 | | | | | | 531 | | |
Change in fair value of warrants
|
| | | | 208 | | | | | | 137 | | | | | | 894 | | | | | | 229 | | |
Other income
|
| | | | (523) | | | | | | (559) | | | | | | (1,972) | | | | | | (9) | | |
Total other expense, net
|
| | | | 519 | | | | | | (942) | | | | | | 658 | | | | | | 751 | | |
Income tax expense
|
| | | $ | 27 | | | | | $ | 15 | | | | | $ | 15 | | | | | $ | 7 | | |
| | |
Year ended December 31,
|
| |
Six months ended June 30,
(unaudited) |
| ||||||||||||||||||
Cash Flow Activity
|
| |
2020
|
| |
2019
|
| |
2021
|
| |
2020
|
| ||||||||||||
Net cash provided by (used in): | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating activities
|
| | | $ | 419 | | | | | $ | (5,972) | | | | | $ | (9,149) | | | | | $ | 1,509 | | |
Investing activities
|
| | | | (375) | | | | | | (294) | | | | | | (9,009) | | | | | | (175) | | |
Financing activities
|
| | | | 546 | | | | | | 10,781 | | | | | | 13,546 | | | | | | (136) | | |
Net increase (decrease) in cash and cash equivalents
|
| | | $ | 590 | | | | | $ | 4,515 | | | | | $ | (4,612) | | | | | $ | 1,198 | | |
| Geoffrey McFarlane | | | Brian Smith | |
|
Geoffrey McFarlane
Founder, Chief Executive Officer and Director |
| |
Brian Smith
Founder, President and Chairperson of the Board |
|
Name
|
| |
Age
|
| |
Current Position
|
| |||
Executive Officers | | | | | | | | | | |
Geoffrey McFarlane
|
| | | | 38 | | | | Chief Executive Officer, Founder and Director | |
Brian Smith
|
| | | | 47 | | | |
President, Founder and Chairperson of the Board of Directors
|
|
Matthew Thelen
|
| | | | 35 | | | | General Counsel and Chief Strategy Officer | |
Carol Brault
|
| | | | 57 | | | | Chief Financial Officer | |
Erin Green
|
| | | | 37 | | | | Chief Operating Officer | |
Non-Employee Directors | | | | | | | | | | |
Laura Joukovski(2) (3)
|
| | | | 47 | | | | Director | |
Xiangwei Weng(3)
|
| | | | 52 | | | | Director | |
Patrick DeLong(1)
|
| | | | 56 | | | | Director | |
Alesia Pinney(1) (2)
|
| | | | 58 | | | | Director | |
Mary Pat Thompson(1) (2) (3)
|
| | | | 58 | | | | Director | |
Name and Principal Position
|
| |
Salary ($)
|
| |
Bonus
($)(1) |
| |
Option
Awards ($)(2) |
| |
Non-Equity
Incentive Plan Compensation ($) |
| |
All Other
Compensation ($)(3) |
| |
Total
|
| ||||||||||||||||||
Geoffrey McFarlane
|
| | | | 288,000 | | | | | | 115,200 | | | | | | 30,415 | | | | | | 0 | | | | | | 0 | | | | | | 433,615 | | |
Chief Executive Officer
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Brian Smith
|
| | | | 288,000 | | | | | | 117,456 | | | | | | 30,415 | | | | | | 0 | | | | | | 1,339 | | | | | | 437,210 | | |
President
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Matthew Thelen
|
| | | | 215,000 | | | | | | 86,000 | | | | | | 87,400 | | | | | | 0 | | | | | | 1,144 | | | | | | 389,544 | | |
Chief Strategy Officer & General Counsel
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Option Awards
|
| |||||||||||||||||||||||||||||||||
Name
|
| |
Grant Date
|
| |
Vesting
Commencement Date |
| |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
| |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
| |
Equity Incentive
Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
| |
Option
Exercise Price ($) |
| |
Option
Expiration Date |
| |||||||||||||||||||||
Geoffrey McFarlane
|
| | | | 8/29/2013(1) | | | | | | 5/1/2013 | | | | | | 154,883 | | | | | | — | | | | | | — | | | | | | 0.48 | | | | | | 8/27/2023 | | |
| | | | | 12/12/2013(1) | | | | | | 5/1/2013 | | | | | | 39,062 | | | | | | — | | | | | | — | | | | | | 0.48 | | | | | | 12/10/2023 | | |
| | | | | 6/12/2014(1) | | | | | | 4/1/2014 | | | | | | 56,276 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 6/09/2024 | | |
| | | | | 5/2/2018(2)(3) | | | | | | 1/1/2018 | | | | | | 50,000 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 5/1/2028 | | |
| | | | | 2/13/2016(1) | | | | | | 9/1/2015 | | | | | | 31,250 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 2/10/2026 | | |
| | | | | 6/21/2019(2)(3) | | | | | | 4/1/2019 | | | | | | 375,000 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 6/20/2029 | | |
| | | | | 6/21/2019(4) | | | | | | N/A | | | | | | — | | | | | | — | | | | | | 187,500 | | | | | | 1.28 | | | | | | 6/20/2029 | | |
| | | | | 4/28/2020(2)(3) | | | | | | 1/1/2020 | | | | | | 21,750 | | | | | | — | | | | | | — | | | | | | 4.00 | | | | | | 4/27/2030 | | |
Brian Smith
|
| | | | 5/2/2018(2)(3) | | | | | | 1/1/2018 | | | | | | 75,000 | | | | | | | | | | | | — | | | | | | 1.28 | | | | | | 5/1/2028 | | |
| | | | | 6/12/2014(1) | | | | | | 4/1/2014 | | | | | | 25,000 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 6/9/2024 | | |
| | | | | 2/13/2016(1) | | | | | | 9/1/2015 | | | | | | 31,250 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 2/10/2026 | | |
| | | | | 6/21/2019(2)(3) | | | | | | 4/1/2019 | | | | | | 375,000 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 6/20/2029 | | |
| | | | | 6/21/2019(4) | | | | | | N/A | | | | | | — | | | | | | — | | | | | | 187,500 | | | | | | 1.28 | | | | | | 6/20/2029 | | |
| | | | | 4/28/2020(2)(3) | | | | | | 1/1/2020 | | | | | | 21,750 | | | | | | — | | | | | | | | | | | | 4.00 | | | | | | 4/27/2030 | | |
Matthew
Thelen |
| | | | 12/17/2014(1) | | | | | | 10/21/2014 | | | | | | 12,750 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 12/14/2024 | | |
| | | | | 3/7/2016(1) | | | | | | 3/7/2016 | | | | | | 1,250 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 3/5/2026 | | |
| | | | | 12/14/2017(1) | | | | | | 1/1/2017 | | | | | | 2,447 | | | | | | 52 | | | | | | — | | | | | | 1.28 | | | | | | 12/12/2027 | | |
| | | | | 5/2/2018(2)(3) | | | | | | 1/1/2018 | | | | | | 15,625 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 5/1/2028 | | |
| | | | | 6/21/2019(2)(3) | | | | | | 4/1/2019 | | | | | | 87,231 | | | | | | — | | | | | | — | | | | | | 1.28 | | | | | | 6/20/2029 | | |
| | | | | 4/28/2020(2)(3) | | | | | | 1/1/2020 | | | | | | 62,500 | | | | | | — | | | | | | — | | | | | | 4.00 | | | | | | 4/27/2030 | | |
Name
|
| |
Options
Outstanding at Fiscal Year End |
| |||
Patrick DeLong
|
| | | | 24,316 | | |
Laura Joukovski
|
| | | | 30,787 | | |
Non-Employee Director
|
| |
Value of Restricted Stock
Units Granted |
| |
Number of Shares
|
| ||||||||||||||||||
| | | | | | | | |
Price Per Share –
$12.00 |
| |
Price Per Share –
$13.00 |
| |
Price Per Share –
$14.00 |
| |||||||||
Laura Joukovski
|
| | | $ | 166,667 | | | | | | 13,888 | | | | | | 12,820 | | | | | | 11,904 | | |
Xiangwei Weng
|
| | | $ | 166,667 | | | | | | 13,888 | | | | | | 12,820 | | | | | | 11,904 | | |
Patrick DeLong
|
| | | $ | 166,667 | | | | | | 13,888 | | | | | | 12,820 | | | | | | 11,904 | | |
Alesia Pinney
|
| | | $ | 166,667 | | | | | | 13,888 | | | | | | 12,820 | | | | | | 11,904 | | |
Mary Pat Thompson
|
| | | $ | 166,667 | | | | | | 13,888 | | | | | | 12,820 | | | | | | 11,904 | | |
Name of Beneficial Owner(1)
|
| |
Total Shares
Beneficially Owned |
| |
Percentage of Shares
Beneficially Owned |
| ||||||||||||
|
Before the
Offering |
| |
After the
Offering |
| ||||||||||||||
5% Stockholders | | | | | | | | | | | | | | | | | | | |
Entities affiliated with Bessemer Venture Partners(2)
|
| | | | 1,633,905 | | | | | | 14.2% | | | | | | 12.6% | | |
Entities affiliated with Shining Capital(3)
|
| | | | 1,008,159 | | | | | | 8.8% | | | | | | 7.8% | | |
Entities affiliated with Cool Japan Fund(4)
|
| | | | 1,026,198 | | | | | | 8.9% | | | | | | 7.9% | | |
Thomas Wetherald(5)
|
| | | | 603,851 | | | | | | 5.2% | | | | | | 4.6% | | |
Named Executive Officers and Directors | | | | | | | | | | | | | | | | | | | |
Geoffrey McFarlane(6)
|
| | | | 1,090,029 | | | | | | 9.5% | | | | | | 8.4% | | |
Matthew Thelen(7)
|
| | | | 200,606 | | | | | | 1.7% | | | | | | 1.5% | | |
Brian Smith(8)
|
| | | | 740,096 | | | | | | 6.5% | | | | | | 5.7% | | |
Laura Joukovski(9)
|
| | | | 34,845 | | | | | | * | | | | | | * | | |
Xiangwei Weng(10)
|
| | | | 1,008,159 | | | | | | 8.8% | | | | | | 7.8% | | |
Patrick DeLong(11)
|
| | | | 24,316 | | | | | | * | | | | | | * | | |
Alesia Pinney(12)
|
| | | | 32,183 | | | | | | * | | | | | | * | | |
Mary Pat Thompson(13)
|
| | | | 38,947 | | | | | | * | | | | | | * | | |
All Executive Officers and Directors as a Group
(ten individuals) |
| | | | 3,421,477 | | | | | | 27.7% | | | | | | 24.6% | | |
Name
|
| |
Number of Shares
|
| |||
Spartan Capital Securities, LLC
|
| | | | | | |
Revere Securities LLC
|
| |
|
| |||
Total:
|
| | | | 1,538,462 | | |
| | |
Per Share
|
| |
Total
|
| ||||||||||||
|
No Exercise
|
| |
Full Exercise
|
| ||||||||||||||
Public offering price
|
| | | $ | | | | | | $ | | | | | | $ | | | |
Underwriting discounts and commissions to be paid by us
|
| | | | | | | | | | | | | | | | | | |
Proceeds, before expenses, to us
|
| | | | | | | | | | | | | | | | | | |
| | |
Page
No. |
| |||
PART I. FINANCIAL INFORMATION | | | | | | | |
Consolidated Financial Statements: | | | | | | | |
| | | | F-2 | | | |
| | | | F-3 | | | |
| | | | F-4 | | | |
| | | | F-5 | | | |
| | | | F-6 | | | |
| | | | F-7 | | | |
Unaudited Interim Condensed Consolidated Financial Statements: | | | | | | | |
| | | | F-28 | | | |
| | | | F-29 | | | |
| | | | F-30 | | | |
| | | | F-31 | | | |
| | | | F-32 | | |
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Assets | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | |
Cash
|
| | | $ | 7,008 | | | | | $ | 6,418 | | |
Accounts receivable, net of allowance for doubtful accounts and sales returns of $0.2 million and $0.3 million as of December 31, 2020 and 2019, respectively
|
| | | | 1,505 | | | | | | 1,368 | | |
Employee advances
|
| | | | 34 | | | | | | 18 | | |
Inventory
|
| | | | 11,880 | | | | | | 8,489 | | |
Prepaid expenses and other current assets
|
| | | | 3,012 | | | | | | 2,631 | | |
Total current assets
|
| | | | 23,439 | | | | | | 18,924 | | |
Property and equipment, net
|
| | | | 654 | | | | | | 804 | | |
Other assets
|
| | | | 131 | | | | | | 88 | | |
Total assets
|
| | | $ | 24,224 | | | | | $ | 19,816 | | |
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 3,673 | | | | | $ | 3,799 | | |
Accrued liabilities
|
| | | | 4,759 | | | | | | 2,511 | | |
Contract liabilities
|
| | | | 8,691 | | | | | | 1,138 | | |
Current portion of long term debt
|
| | | | 1,526 | | | | | | 1,416 | | |
Line of credit
|
| | | | — | | | | | | 6,000 | | |
Total current liabilities
|
| | | | 18,649 | | | | | | 14,864 | | |
Deferred rent
|
| | | | 223 | | | | | | 309 | | |
Warrant liabilities
|
| | | | 1,067 | | | | | | 859 | | |
Paycheck Protection Program note payable
|
| | | | 1,364 | | | | | | — | | |
Long term debt
|
| | | | 812 | | | | | | 2,339 | | |
Other liabilities
|
| | | | 496 | | | | | | — | | |
Total liabilities
|
| | | | 22,611 | | | | | | 18,371 | | |
Commitments and contingencies (Note 10) | | | | | | | | | | | | | |
Redeemable Convertible Preferred stock, $0.0001 par value, 71,512,354 and 61,512,354 shares authorized as of December 31, 2020 and 2019, respectively, 7,266,986 and 6,401,491 shares issued and outstanding as of December 31, 2020 and 2019, respectively, aggregate liquidation preference of $71,746,475 and $61,407,451 as of December 31, 2020 and 2019, respectively
|
| | | | 56,462 | | | | | | 49,629 | | |
Stockholders’ Deficit | | | | | | | | | | | | | |
Common stock, $0.0001 par value, 106,910,000 shares authorized, 945,794 and 889,544, shares issued and outstanding as of December 31, 2020 and 2019, respectively
|
| | | | 1 | | | | | | 1 | | |
Treasury stock (168,750 shares outstanding as of December 31, 2020 and 2019)
|
| | | | (7) | | | | | | (7) | | |
Additional paid-in capital
|
| | | | 2,229 | | | | | | 1,936 | | |
Accumulated deficit
|
| | | | (57,072) | | | | | | (50,114) | | |
Total stockholders’ deficit
|
| | | | (54,849) | | | | | | (48,184) | | |
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
|
| | | $ | 24,224 | | | | | $ | 19,816 | | |
| | |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Net revenues
|
| | | $ | 64,707 | | | | | $ | 36,447 | | |
Cost of revenues
|
| | | | 38,352 | | | | | | 21,038 | | |
Gross profit
|
| | | | 26,355 | | | | | | 15,409 | | |
Operating expenses | | | | | | | | | | | | | |
Marketing
|
| | | | 17,388 | | | | | | 8,578 | | |
Personnel
|
| | | | 7,582 | | | | | | 6,328 | | |
General and administrative
|
| | | | 7,545 | | | | | | 7,330 | | |
Production and operations
|
| | | | 169 | | | | | | 88 | | |
Creative development
|
| | | | 83 | | | | | | 177 | | |
Total operating expenses
|
| | | | 32,767 | | | | | | 22,501 | | |
Loss from operations
|
| | | | (6,412) | | | | | | (7,092) | | |
Other (expense) income | | | | | | | | | | | | | |
Interest expense
|
| | | | (834) | | | | | | (1,364) | | |
Change in fair value of warrant liabilities
|
| | | | (208) | | | | | | (137) | | |
Other income
|
| | | | 523 | | | | | | 559 | | |
Total other expense, net
|
| | | | (519) | | | | | | (942) | | |
Loss before income taxes
|
| | | | (6,931) | | | | | | (8,034) | | |
Income tax expense
|
| | | | 27 | | | | | | 15 | | |
Net loss
|
| | | $ | (6,958) | | | | | $ | (8,049) | | |
Net loss per common shares – basic and diluted
|
| | | $ | (7.80) | | | | | $ | (8.90) | | |
Weighted average common shares outstanding – basic and diluted
|
| | |
|
892,333
|
| | | |
|
904,005
|
| |
| | |
Redeemable
Convertible Preferred Stock |
| | |
Common Stock
|
| |
Treasury Stock
|
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Deficit |
| ||||||||||||||||||||||||||||||||||||
| | |
Number of
Outstanding Shares |
| |
Amount
|
| | |
Number of
Outstanding Shares |
| |
Amount
|
| |
Number of
Outstanding Shares |
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2018
|
| | | | 5,218,463 | | | | | $ | 39,500 | | | | | | | 911,782 | | | | | $ | 1 | | | | | | (168,750) | | | | | $ | (7) | | | | | $ | 1,804 | | | | | $ | (42,065) | | | | | $ | (40,267) | | |
Repurchase of common stock
|
| | | | — | | | | | | — | | | | | | | (22,238) | | | | | | — | | | | | | — | | | | | | — | | | | | | (90) | | | | | | — | | | | | | (90) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 222 | | | | | | — | | | | | | 222 | | |
Issuance of Series C Preferred Stock, net of $500 of issuance costs
|
| | | | 1,026,198 | | | | | | 9,500 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series D Preferred Stock, net of $1,145 of issuance costs
|
| | | | 156,830 | | | | | | 629 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net loss
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (8,049) | | | | | | (8,049) | | |
Balances as of December 31, 2019
|
| | | | 6,401,491 | | | | | | 49,629 | | | | | | | 889,544 | | | | | | 1 | | | | | | (168,750) | | | | | | (7) | | | | | | 1,936 | | | | | | (50,114) | | | | | | (48,184) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 275 | | | | | | — | | | | | | 275 | | |
Stock option exercises
|
| | | | — | | | | | | — | | | | | | | 56,250 | | | | | | — | | | | | | — | | | | | | — | | | | | | 18 | | | | | | — | | | | | | 18 | | |
Issuance of Series D Preferred Stock, net of $2,285 of issuance costs
|
| | | | 665,384 | | | | | | 5,248 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series E Preferred Stock, net of $1,121 of issuance costs
|
| | | | 200,111 | | | | | | 1,585 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net loss
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (6,958) | | | | | | (6,958) | | |
Balances as of December 31, 2020
|
| | | | 7,266,986 | | | | | $ | 56,462 | | | | | | | 945,794 | | | | | $ | 1 | | | | | | (168,750) | | | | | $ | (7) | | | | | $ | 2,229 | | | | | $ | (57,072) | | | | | $ | (54,849) | | |
| | |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Cash flows from operating activities | | | | | | | | | | | | | |
Net loss
|
| | | $ | (6,958) | | | | | $ | (8,049) | | |
Adjustments to reconcile net loss to net cash provided by (used) in operating activities:
|
| | | | | | | | | | | | |
Depreciation and amortization of property and equipment
|
| | | | 510 | | | | | | 633 | | |
Amortization of debt issuance costs
|
| | | | 251 | | | | | | 338 | | |
Stock-based compensation
|
| | | | 275 | | | | | | 222 | | |
Change in fair value of warrant liabilities
|
| | | | 208 | | | | | | 137 | | |
Changes in operating assets and liabilities:
|
| | | | | | | | | | | | |
Accounts receivable
|
| | | | (137) | | | | | | (321) | | |
Inventory
|
| | | | (3,391) | | | | | | 614 | | |
Prepaid and other current assets
|
| | | | (381) | | | | | | (701) | | |
Other assets
|
| | | | (43) | | | | | | — | | |
Accounts payable
|
| | | | (126) | | | | | | 871 | | |
Accrued liabilities
|
| | | | 2,248 | | | | | | 764 | | |
Contract liabilities
|
| | | | 7,553 | | | | | | (324) | | |
Deferred rent
|
| | | | (86) | | | | | | (55) | | |
Other liabilities
|
| | | | 496 | | | | | | (101) | | |
Net cash provided by (used in) operating activities
|
| | | | 419 | | | | | | (5,972) | | |
Cash flows from investing activities | | | | | | | | | | | | | |
Purchases of property and equipment
|
| | | | (359) | | | | | | (385) | | |
Collections from (loans for) employee advances
|
| | | | (16) | | | | | | 91 | | |
Net cash used in investing activities
|
| | | | (375) | | | | | | (294) | | |
Cash flow from financing activities | | | | | | | | | | | | | |
Repurchase of common stock
|
| | | | — | | | | | | (90) | | |
(Payments) borrowings on line of credit, net
|
| | | | (6,000) | | | | | | 1,575 | | |
Proceeds received for the issuance of common stock
|
| | | | 18 | | | | | | — | | |
Payments on notes payable
|
| | | | — | | | | | | (833) | | |
Proceeds from Paycheck Protection Program note payable
|
| | | | 1,364 | | | | | | — | | |
Repayments of long-term debt
|
| | | | (1,669) | | | | | | — | | |
Proceeds from issuance of preferred stock, net of issuance costs
|
| | | | 6,833 | | | | | | 10,129 | | |
Net cash provided by financing activities
|
| | | | 546 | | | | | | 10,781 | | |
Net increase in cash
|
| | | | 590 | | | | | | 4,515 | | |
Cash – beginning of year
|
| | | | 6,418 | | | | | | 1,903 | | |
Cash – end of year
|
| | | $ | 7,008 | | | | | $ | 6,418 | | |
Supplemental disclosures of cash flow information | | | | | | | | | | | | | |
Cash paid during the year for:
|
| | | | | | | | | | | | |
Interest
|
| | | $ | 597 | | | | | $ | 796 | | |
Income taxes paid
|
| | | $ | 27 | | | | | $ | 15 | | |
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Beginning balance
|
| | | $ | 272 | | | | | $ | 109 | | |
Provision
|
| | | | 2,667 | | | | | | 1,289 | | |
Write-offs, net
|
| | | | (2,701) | | | | | | (1,126) | | |
Ending balance
|
| | | $ | 238 | | | | | $ | 272 | | |
Category
|
| |
Useful Life
|
|
Machinery and equipment | | |
2 – 5 years
|
|
Computers and server equipment | | |
3 – 5 years
|
|
Furniture and fixtures | | |
5 years
|
|
Leasehold improvements | | |
5 years
|
|
Purchased software and licenses | | |
5 years
|
|
Capitalized software | | |
3 – 5 years
|
|
Website development | | |
2 years
|
|
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Raw materials
|
| | | $ | 4,753 | | | | | $ | 3,099 | | |
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Finished goods
|
| | | | 6,980 | | | | | | 5,281 | | |
Packaging
|
| | | | 147 | | | | | | 109 | | |
Total inventory
|
| | | $ | 11,880 | | | | | $ | 8,489 | | |
|
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Prepaid wine crushing services
|
| | | $ | 1,252 | | | | | $ | 1,939 | | |
Prepaid insurance and benefits
|
| | | | 372 | | | | | | 343 | | |
Prepaid software licenses
|
| | | | 151 | | | | | | 130 | | |
Prepaid marketing
|
| | | | 151 | | | | | | 103 | | |
Deposits
|
| | | | 19 | | | | | | 14 | | |
Prepaid other
|
| | | | 1,067 | | | | | | 102 | | |
Total prepaid expenses and other current assets
|
| | | $ | 3,012 | | | | | $ | 2,631 | | |
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Capitalized software
|
| | | $ | 1,966 | | | | | $ | 1,680 | | |
Furnitures and fixtures
|
| | | | 643 | | | | | | 643 | | |
Leasehold improvements
|
| | | | 304 | | | | | | 299 | | |
Machinery and equipment
|
| | | | 262 | | | | | | 211 | | |
Website development
|
| | | | 168 | | | | | | 168 | | |
Computers and server equipment
|
| | | | 153 | | | | | | 135 | | |
Purchased software and licenses
|
| | | | 132 | | | | | | 132 | | |
| | | | | 3,628 | | | | | | 3,268 | | |
Less: accumulated depreciation and amortization
|
| | | | (2,974) | | | | | | (2,464) | | |
Total property and equipment, net
|
| | | $ | 654 | | | | | $ | 804 | | |
Years ending December 31,
|
| | | | | | |
2021
|
| | | $ | 289 | | |
2022
|
| | | | 147 | | |
2023
|
| | | | 52 | | |
Total
|
| | | $ | 488 | | |
| | |
December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Inventory received not billed
|
| | | $ | 1,944 | | | | | $ | 1,086 | | |
Accrued payroll liabilities
|
| | | | 659 | | | | | | 174 | | |
Accrued marketing
|
| | | | 634 | | | | | | 351 | | |
Accrued shipping
|
| | | | 472 | | | | | | 89 | | |
Accrued alcohol and tobacco tax
|
| | | | 318 | | | | | | 111 | | |
Other
|
| | | | 732 | | | | | | 700 | | |
Total accrued liabilities
|
| | | $ | 4,759 | | | | | $ | 2,511 | | |
Years ending December 31,(1)
|
| | | | | | |
2021
|
| | | $ | 1,667 | | |
2022
|
| | | | 833 | | |
Total
|
| | | $ | 2,500 | | |
Date Issued
|
| |
Number of Shares
|
| |
Preferred Stock Series
|
| |
Price per Share
|
| |
Expiration Date
|
| |||
July 3, 2013
|
| |
6,843
|
| | Series Seed | | | | $ | 2.20 | | | | July 3, 2023 | |
April 15, 2016
|
| |
2,862
|
| | Series B | | | | $ | 10.48 | | | | April 15 2026 | |
December 7, 2017
|
| |
834
|
| | Series B-1 | | | | $ | 10.48 | | | |
December 7, 2024
|
|
December 29, 2017
|
| |
107,455
|
| | Series B-1 | | | | $ | 10.48 | | | |
December 29, 2027
|
|
| | |
Year Ended December 31,
|
| |||
|
2020
|
| |
2019
|
| ||
Risk free interest rate
|
| |
0.25%
|
| |
1.36%
|
|
Expected term (in years)
|
| |
2.50 – 6.99
|
| |
3.50 – 7.99
|
|
Dividend yield
|
| |
—
|
| |
—
|
|
Expected volatility
|
| |
60%
|
| |
60%
|
|
Fair value of preferred stock
|
| |
$14.00
|
| |
$11.28
|
|
| | |
Warrant
Liabilities |
| |||
Fair value at December 31, 2018
|
| | | $ | 722 | | |
Change in fair value of warrant liabilities
|
| | | | 137 | | |
Fair value at December 31, 2019
|
| | | | 859 | | |
Change in fair value of warrant liabilities
|
| | | | 208 | | |
Fair value at December 31, 2020
|
| | | $ | 1,067 | | |
Years ending December 31,
|
| | | | | | |
2021
|
| | | $ | 1,081 | | |
2022
|
| | | | 1,069 | | |
2023
|
| | | | 28 | | |
Total
|
| | | $ | 2,178 | | |
Years ending December 31,
|
| | | | | | |
2021
|
| | | $ | 762 | | |
2022
|
| | | | 785 | | |
Total
|
| | | $ | 1,547 | | |
| | |
Year Ended December 31,
|
| |||
|
2020
|
| |
2019
|
| ||
Risk free interest rates
|
| |
0.34% – 0.44%
|
| |
1.69% – 1.87%
|
|
Expected term (in years)
|
| |
5.46 – 6.09
|
| |
5.52 – 6.25
|
|
Dividend yield
|
| |
—
|
| |
—
|
|
Expected volatility
|
| |
36.20% – 36.76%
|
| |
34.80% – 35.55%
|
|
Fair value of common stock
|
| |
$1.36 – $1.92
|
| |
$0.48 – $1.52
|
|
| | |
Number of
Shares |
| |
Weighted
Average Exercise Price per Share |
| |
Weighted
Average Remaining Contract Term (in years) |
| |
Aggregate
Intrinsic Value (in thousands) |
| ||||||||||||
Options outstanding as of December 31, 2018
|
| | | | 942,588 | | | | | $ | 2.80 | | | | | | 6.77 | | | | | | | | |
Exercised
|
| | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Granted
|
| | | | 1,384,235 | | | | | | 1.34 | | | | | | 9.11 | | | | | | 3,694 | | |
Forfeited
|
| | | | (126,267) | | | | | | 2.75 | | | | | | — | | | | | | 158 | | |
Expired
|
| | | | (1,432) | | | | | | 3.97 | | | | | | — | | | | | | 1 | | |
Options outstanding as of December 31, 2019
|
| | | | 2,199,124 | | | | | $ | 1.32 | | | | | | 8.02 | | | | | | | | |
Exercised
|
| | | | (56,250) | | | | | | 1.66 | | | | | | 4.99 | | | | | | 173 | | |
Granted
|
| | | | 356,937 | | | | | | 4.02 | | | | | | 9.42 | | | | | | 252 | | |
Forfeited
|
| | | | (8,244) | | | | | | 3.86 | | | | | | — | | | | | | 7 | | |
Expired
|
| | | | (138,615) | | | | | | 1.66 | | | | | | — | | | | | | 424 | | |
Options outstanding as of December 31, 2020
|
| | | | 2,352,952 | | | | | $ | 1.69 | | | | | | 7.51 | | | | | | | | |
| | |
December 31, 2020
|
| |||||||||||||||||||||||||||
|
Shares
Authorized |
| |
Shares
Issued and Outstanding |
| |
Net
Carrying Value |
| |
Aggregate
Liquidation Preference |
| |
Common
Stock Issuable on Conversion |
| |||||||||||||||||
Series Seed Preferred Stock
|
| | | | 13,296,372 | | | | | | 1,655,186 | | | | | $ | 3,628 | | | | | $ | 3,628 | | | | | | 1,655,186 | | |
Series A Preferred Stock
|
| | | | 8,276,928 | | | | | | 1,034,604 | | | | | | 9,458 | | | | | | 10,006 | | | | | | 1,034,604 | | |
Series B Preferred Stock
|
| | | | 13,381,711 | | | | | | 1,669,848 | | | | | | 17,472 | | | | | | 17,499 | | | | | | 1,669,848 | | |
Series B-1 Preferred Stock
|
| | | | 7,736,552 | | | | | | 858,825 | | | | | | 8,942 | | | | | | 13,501 | | | | | | 858,825 | | |
Series C Preferred Stock
|
| | | | 8,209,586 | | | | | | 1,026,198 | | | | | | 9,500 | | | | | | 15,000 | | | | | | 1,026,198 | | |
Series D Preferred Stock
|
| | | | 10,611,205 | | | | | | 822,214 | | | | | | 5,877 | | | | | | 9,306 | | | | | | 822,214 | | |
Series E Preferred Stock
|
| | | | 10,000,000 | | | | | | 200,111 | | | | | | 1,585 | | | | | | 2,806 | | | | | | 200,111 | | |
Total
|
| | | | 71,512,354 | | | | | | 7,266,986 | | | | | $ | 56,462 | | | | | $ | 71,746 | | | | | | 7,266,986 | | |
| | |
December 31, 2019
|
| |||||||||||||||||||||||||||
|
Shares
Authorized |
| |
Shares
Issued and Outstanding |
| |
Net
Carrying Value |
| |
Aggregate
Liquidation Preference |
| |
Common
Stock Issuable on Conversion |
| |||||||||||||||||
Series Seed Preferred Stock
|
| | | | 13,296,372 | | | | | | 1,655,186 | | | | | $ | 3,628 | | | | | $ | 3,628 | | | | | | 1,655,186 | | |
Series A Preferred Stock
|
| | | | 8,276,928 | | | | | | 1,034,604 | | | | | | 9,458 | | | | | | 10,006 | | | | | | 1,034,604 | | |
Series B Preferred Stock
|
| | | | 13,381,711 | | | | | | 1,669,848 | | | | | | 17,472 | | | | | | 17,499 | | | | | | 1,669,848 | | |
Series B-1 Preferred Stock
|
| | | | 7,736,552 | | | | | | 858,825 | | | | | | 8,942 | | | | | | 13,501 | | | | | | 858,825 | | |
Series C Preferred Stock
|
| | | | 8,209,586 | | | | | | 1,026,198 | | | | | | 9,500 | | | | | | 15,000 | | | | | | 1,026,198 | | |
Series D Preferred Stock
|
| | | | 10,611,205 | | | | | | 156,830 | | | | | | 629 | | | | | | 1,773 | | | | | | 156,830 | | |
Total
|
| | | | 61,512,354 | | | | | | 6,401,491 | | | | | $ | 49,629 | | | | | $ | 61,407 | | | | | | 6,401,491 | | |
| | |
DTC
|
| |
Wholesale
|
| |
Other
non- reportable |
| |
Corporate
non-segment |
| |
Total
|
| |||||||||||||||
Net revenue
|
| | | $ | 54,854 | | | | | $ | 8,237 | | | | | $ | 1,616 | | | | | $ | — | | | | | $ | 64,707 | | |
Cost of revenues
|
| | | | (31,799) | | | | | | (5,844) | | | | | | (709) | | | | | | — | | | | | | (38,352) | | |
Gross profit
|
| | |
|
23,055
|
| | | |
|
2,393
|
| | | |
|
907
|
| | | | | — | | | | |
|
26,355
|
| |
Operating expenses
|
| | | | (18,448) | | | | | | (2,748) | | | | | | (1,257) | | | | | | (10,314) | | | | | | (32,767) | | |
Interest expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | (834) | | | | | | (834) | | |
Change in fair value of warrant liabilities
|
| | | | — | | | | | | — | | | | | | — | | | | | | (208) | | | | | | (208) | | |
Other income
|
| | | | — | | | | | | — | | | | | | — | | | | | | 523 | | | | | | 523 | | |
Income (loss) before income taxes
|
| | | $ | 4,607 | | | | | $ | (355) | | | | | $ | (350) | | | | | $ | (10,833) | | | | | $ | (6,931) | | |
| | |
DTC
|
| |
Wholesale
|
| |
Other
non- reportable |
| |
Corporate
non-segment |
| |
Total
|
| |||||||||||||||
Net revenue
|
| | | $ | 29,628 | | | | | $ | 6,819 | | | | | $ | — | | | | | $ | — | | | | | $ | 36,447 | | |
Cost of revenues
|
| | | | (16,661) | | | | | | (4,377) | | | | | | — | | | | | | — | | | | | | (21,038) | | |
Gross profit
|
| | |
|
12,967
|
| | | |
|
2,442
|
| | | | | — | | | | | | | | | | |
|
15,409
|
| |
Operating expenses
|
| | | | (9,981) | | | | | | (1,121) | | | | | | — | | | | | | (11,399) | | | | | | (22,501) | | |
Interest expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | (1,364) | | | | | | (1,364) | | |
Change in fair value of warrant liabilities
|
| | | | — | | | | | | — | | | | | | — | | | | | | (137) | | | | | | (137) | | |
Other income
|
| | | | — | | | | | | — | | | | | | — | | | | | | 559 | | | | | | 559 | | |
Income (loss) before income taxes
|
| | | $ | 2,986 | | | | | $ | 1,321 | | | | |
$
|
—
|
| | | | $ | (12,341) | | | | | $ | (8,034) | | |
| | |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Stock options
|
| | | | 2,352,952 | | | | | | 2,199,124 | | |
Redeemable convertible preferred stock
|
| | | | 7,266,986 | | | | | | 6,401,491 | | |
Warrants to purchase redeemable convertible preferred stock
|
| | | | 117,994 | | | | | | 117,994 | | |
Total
|
| | | | 9,737,932 | | | | | | 8,718,609 | | |
| | |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Current: | | | | | | | | | | | | | |
Federal
|
| | | $ | — | | | | | $ | — | | |
State
|
| | | | 27 | | | | | | 15 | | |
Total current
|
| | | | 27 | | | | | | 15 | | |
Total provision for income taxes
|
| | | $ | 27 | | | | | $ | 15 | | |
| | |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Deferred tax assets: | | | | | | | | | | | | | |
Net operating loss carry forwards
|
| | | $ | 13,009 | | | | | $ | 11,943 | | |
Interest carryforwards
|
| | | | 736 | | | | | | 592 | | |
Other
|
| | | | 707 | | | | | | 708 | | |
Gross deferred income tax assets
|
| | | | 14,452 | | | | | | 13,243 | | |
Less: Valuation allowance
|
| | | | (14,452) | | | | | | (13,243) | | |
Net deferred tax assets
|
| | | $ | — | | | | | $ | — | | |
| | |
Year Ended December 31,
|
| |||||||||
|
2020
|
| |
2019
|
| ||||||||
Statutory income tax benefit
|
| | | $ | (1,456) | | | | | $ | (1,687) | | |
State and local taxes, net of federal tax benefit
|
| | | | (282) | | | | | | (597) | | |
Nondeductible expenses
|
| | | | 92 | | | | | | 84 | | |
Change in valuation allowance
|
| | | | 1,388 | | | | | | 2,153 | | |
Change in rate (state)
|
| | | | 106 | | | | | | 8 | | |
Other
|
| | | | 179 | | | | | | 54 | | |
Income tax provision
|
| | | $ | 27 | | | | | $ | 15 | | |
| | |
June 30,
2021 (unaudited) |
| |
December 31,
2020 |
| ||||||
Assets | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | |
Cash
|
| | | $ | 2,396 | | | | | $ | 7,008 | | |
Accounts receivable, net of allowance for doubtful accounts and sales returns of $0.5 million and $0.2 million as of June 30, 2021 and December 31, 2020, respectively
|
| | | | 3,790 | | | | | | 1,505 | | |
Employee advances
|
| | | | 35 | | | | | | 34 | | |
Inventory
|
| | | | 22,280 | | | | | | 11,880 | | |
Prepaid expenses and other current assets
|
| | | | 4,065 | | | | | | 3,012 | | |
Total current assets
|
| | | | 32,566 | | | | | | 23,439 | | |
Property and equipment, net
|
| | | | 694 | | | | | | 654 | | |
Intangible assets, net
|
| | | | 9,960 | | | | | | — | | |
Other assets
|
| | | | 617 | | | | | | 131 | | |
Total assets
|
| | | $ | 43,837 | | | | | $ | 24,224 | | |
Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | |
Accounts payable
|
| | | $ | 7,720 | | | | | $ | 3,673 | | |
Accrued liabilities
|
| | | | 6,258 | | | | | | 4,759 | | |
Contract liabilities
|
| | | | 10,627 | | | | | | 8,691 | | |
Current portion of long-term debt
|
| | | | 1,590 | | | | | | 1,526 | | |
Line of credit
|
| | | | 1,000 | | | | | | — | | |
Total current liabilities
|
| | | | 27,195 | | | | | | 18,649 | | |
Deferred rent
|
| | | | 170 | | | | | | 223 | | |
Warrant liabilities
|
| | | | 3,995 | | | | | | 1,067 | | |
Paycheck Protection Program note payable
|
| | | | — | | | | | | 1,364 | | |
Long-term debt, net
|
| | | | — | | | | | | 812 | | |
Early exercise stock option liability
|
| | | | 1,947 | | | | | | — | | |
Other liabilities
|
| | | | 1,468 | | | | | | 496 | | |
Total liabilities
|
| | | | 34,775 | | | | | | 22,611 | | |
Commitments and contingencies (Note 11) | | | | | | | | | | | | | |
Redeemable convertible preferred stock, $0.0001 par value, 80,083,782 and 71,512,354
shares authorized, 8,384,906 and 7,266,986 shares issued and outstanding, aggregate liquidation preference of $87,405,921 and $71,746,475 as of June 30, 2021 and December 31, 2020, respectively |
| | | | 68,896 | | | | | | 56,462 | | |
Stockholders’ deficit | | | | | | | | | | | | | |
Common stock, $0.0001 par value, 115,490,000 and 106,910,000 shares authorized as
of June 30, 2021 and December 31, 2020, respectively, 3,055,102 and 945,794, shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively |
| | | | 2 | | | | | | 1 | | |
Employee promissory notes
|
| | | | (3,453) | | | | | | — | | |
Treasury stock (168,750 shares outstanding as of June 30, 2021 and December 31, 2020)
|
| | | | (7) | | | | | | (7) | | |
Additional paid-in capital
|
| | | | 4,033 | | | | | | 2,229 | | |
Accumulated deficit
|
| | | | (60,409) | | | | | | (57,072) | | |
Total stockholders’ deficit
|
| | | | (59,834) | | | | | | (54,849) | | |
Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit
|
| | | $ | 43,837 | | | | | $ | 24,224 | | |
| | |
Six Months Ended
June 30, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Net revenues
|
| | | $ | 35,116 | | | | | $ | 29,166 | | |
Cost of revenues
|
| | | | 19,953 | | | | | | 18,224 | | |
Gross profit
|
| | | | 15,163 | | | | | | 10,942 | | |
Operating expenses | | | | | | | | | | | | | |
Marketing
|
| | | | 7,979 | | | | | | 6,948 | | |
Personnel
|
| | | | 5,387 | | | | | | 3,466 | | |
General and administrative
|
| | | | 5,567 | | | | | | 3,373 | | |
Production and operations.
|
| | | | 54 | | | | | | 89 | | |
Creative development
|
| | | | 156 | | | | | | 54 | | |
Total operating expenses.
|
| | | | 19,143 | | | | | | 13,930 | | |
Loss from operations
|
| | | | (3,980) | | | | | | (2,988) | | |
Other income (expense) | | | | | | | | | | | | | |
Interest expense
|
| | | | (421) | | | | | | (531) | | |
Change in fair value of warrant liabilities
|
| | | | (893) | | | | | | (229) | | |
Other income, net.
|
| | | | 1,972 | | | | | | 9 | | |
Total other income (expense), net
|
| | | | 658 | | | | | | (751) | | |
Loss before income taxes.
|
| | | | (3,322) | | | | | | (3,739) | | |
Income tax expense
|
| | | | 15 | | | | | | 7 | | |
Net loss
|
| | | $ | (3,337) | | | | | $ | (3,746) | | |
Net loss per common share−basic and diluted.
|
| | | $ | (1.90) | | | | | $ | (4.21) | | |
Weighted-average common shares outstanding−basic and diluted
|
| | | | 1,754,958 | | | | | | 889,559 | | |
| | |
Redeemable Convertible
Preferred Stock |
| | |
Common Stock
|
| |
Treasury Stock
|
| |
Promissory
Notes for Common Stock Issued |
| |
Additional
Paid-in Capital |
| |
Accumulated
Deficit |
| |
Total
Stockholders’ Deficit |
| |||||||||||||||||||||||||||||||||||||||
| | |
Number of
Outstanding Shares |
| |
Amount
|
| | |
Number of
Outstanding Shares |
| |
Amount
|
| |
Number of
Outstanding Shares |
| |
Amount
|
| ||||||||||||||||||||||||||||||||||||||||||
Balance as of December 31, 2020
|
| | | | 7,266,986 | | | | | $ | 56,462 | | | | | | | 945,794 | | | | | $ | 1 | | | | | | (168,750) | | | | | $ | (7) | | | | | $ | — | | | | | $ | 2,229 | | | | | $ | (57,072) | | | | | $ | (54,849) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 172 | | | | | | — | | | | | | 172 | | |
Stock option exercises
|
| | | | — | | | | | | — | | | | | | | 2,109,308 | | | | | | 1 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,627 | | | | | | — | | | | | | 1,628 | | |
Vesting of early exercised stock options
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5 | | | | | | | | | | | | 5 | | |
Employee promissory notes issued for the exercise of stock options
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (3,453) | | | | | | — | | | | | | — | | | | | | (3,453) | | |
Issuance of Series E Preferred Stock, net
of $499 of issuance costs |
| | | | 332,220 | | | | | | 4,162 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series F Preferred Stock, net
of $694 of issuance costs |
| | | | 714,272 | | | | | | 7,272 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Issuance of Series F Preferred Stock in connection with an acquisition
|
| | | | 71,428 | | | | | | 1,000 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
Net loss
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | (3,337) | | | | | | (3,337) | | |
Balances as of June 30, 2021
|
| | | | 8,384,906 | | | | | $ | 68,896 | | | | | | | 3,055,102 | | | | | $ | 2 | | | | | | (168,750) | | | | | $ | (7) | | | | | $ | (3,453) | | | | | $ | 4,033 | | | | | $ | (60,409) | | | | | $ | (59,834) | | |
Balance as of December 31, 2019
|
| | | | 6,401,491 | | | | | $ | 49,629 | | | | | | | 889,544 | | | | | $ | 1 | | | | | | (168,750) | | | | | $ | (7) | | | | | | | | | | | $ | 1,936 | | | | | $ | (50,114) | | | | | $ | (48,184) | | |
Stock-based compensation
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | | | | | 110 | | | | | | — | | | | | | 110 | | |
Issuance of Series D Preferred Stock, net
of $1,831 of issuance costs |
| | | | 632,753 | | | | | | 5,333 | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | | | | | | | — | | | | | | — | | | | | | — | | |
Net loss
|
| | | | — | | | | | | — | | | | | | | — | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3,746) | | | | | | (3,746) | | |
Balances as of June 30, 2020
|
| | | | 7,034,244 | | | | | $ | 54,962 | | | | | | | 889,544 | | | | | $ | 1 | | | | | | (168,750) | | | | | $ | (7) | | | | | | | | | | | $ | 2,046 | | | | | $ | (53,860) | | | | | $ | (51,820) | | |
| | |
Six Months Ended
June 30, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Cash flows from operating activities | | | | | | | | | | | | | |
Net loss
|
| | | $ | (3,337) | | | | | $ | (3,746) | | |
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities |
| | | | | | | | | | | | |
Depreciation and amortization expense
|
| | | | 294 | | | | | | 269 | | |
Amortization of debt issuance costs
|
| | | | 85 | | | | | | 137 | | |
Stock-based compensation
|
| | | | 172 | | | | | | 110 | | |
Change in fair value of warrant liabilities
|
| | | | 893 | | | | | | 229 | | |
Interest income from employee promissory notes
|
| | | | (17) | | | | | | — | | |
Gain on debt forgiveness−Paycheck Protection Program note payable
|
| | | | (1,364) | | | | | | — | | |
Change in operating assets and liabilities
|
| | | | | | | | | | | | |
Accounts receivable
|
| | | | (790) | | | | | | (1,966) | | |
Inventory
|
| | | | (8,271) | | | | | | (126) | | |
Prepaid expenses and other current assets
|
| | | | (1,053) | | | | | | (264) | | |
Other assets
|
| | | | (486) | | | | | | 1 | | |
Accounts payable
|
| | | | 2,296 | | | | | | 3,594 | | |
Accrued liabilities
|
| | | | 499 | | | | | | 125 | | |
Contract liabilities
|
| | | | 1,936 | | | | | | 3,032 | | |
Deferred rent
|
| | | | (53) | | | | | | (40) | | |
Other liabilities
|
| | | | 47 | | | | | | 154 | | |
Net cash (used in) provided by operating activities
|
| | | | (9,149) | | | | | | 1,509 | | |
Cash flows from investing activities | | | | | | | | | | | | | |
Cash paid for asset acquisitions
|
| | | | (8,758) | | | | | | — | | |
Purchase of property and equipment
|
| | | | (251) | | | | | | (156) | | |
Cash paid for Employee Advances
|
| | | | — | | | | | | (19) | | |
Net cash used in investing activities
|
| | | | (9,009) | | | | | | (175) | | |
Cash flows from financing activities | | | | | | | | | | | | | |
Proceeds from Paycheck Protection Program note payable
|
| | | | — | | | | | | 1,364 | | |
Borrowings (payments) on line of credit, net
|
| | | | 1,000 | | | | | | (6,000) | | |
Repayments of long-term debt
|
| | | | (833) | | | | | | (833) | | |
Proceeds from issuance of preferred stock and warrants to purchase preferred stock, net of issuance costs
|
| | | | 13,309 | | | | | | 5,333 | | |
Proceeds from exercise of employee stock options
|
| | | | 70 | | | | | | — | | |
Net cash provided by (used in) financing activities
|
| | | | 13,546 | | | | | | (136) | | |
Net (decrease) increase in cash
|
| | | | (4,612) | | | | | | 1,198 | | |
Cash-beginning of period
|
| | | | 7,008 | | | | | | 6,418 | | |
Cash-end of period
|
| | | $ | 2,396 | | | | | $ | 7,616 | | |
Supplemental disclosures of cash flow information | | | | | | | | | | | | | |
Interest paid
|
| | | $ | 131 | | | | | $ | 431 | | |
Taxes paid
|
| | | $ | 37 | | | | | $ | 7 | | |
Noncash investing and financing activities | | | | | | | | | | | | | |
Deferred offering costs in accounts payable and accrued liabilities
|
| | | $ | 314 | | | | | $ | — | | |
Accrued preferred stock issuance costs
|
| | | $ | 83 | | | | | $ | — | | |
Employee promissory notes issued for stock option exercises
|
| | | $ | 3,453 | | | | | $ | — | | |
Vesting of early exercised stock options
|
| | | $ | 5 | | | | | $ | — | | |
Forgiveness of Paycheck Protection Program note payable
|
| | | $ | 1,364 | | | | | $ | — | | |
Issued shares of redeemable convertible preferred stock in connection with acquisitions
|
| | | $ | 1,000 | | | | | $ | — | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
Beginning balance
|
| | | $ | 238 | | | | | $ | 272 | | |
Provision
|
| | | | 1,786 | | | | | | 2,667 | | |
Write-offs, net
|
| | | | (1,545) | | | | | | (2,701) | | |
Ending balance
|
| | | $ | 479 | | | | | $ | 238 | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
Raw materials
|
| | | $ | 4,220 | | | | | $ | 4,753 | | |
Finished goods
|
| | | | 17,932 | | | | | | 6,980 | | |
Packaging
|
| | | | 128 | | | | | | 147 | | |
Total inventory
|
| | | $ | 22,280 | | | | | $ | 11,880 | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
Prepaid wine crushing services
|
| | | $ | 1,539 | | | | | $ | 1,252 | | |
Prepaid freight
|
| | | | 1,049 | | | | | | 488 | | |
Prepaid software licenses
|
| | | | 242 | | | | | | 151 | | |
Prepaid marketing
|
| | | | 225 | | | | | | 151 | | |
Prepaid insurance and benefits
|
| | | | 186 | | | | | | 372 | | |
Deposits
|
| | | | 65 | | | | | | 19 | | |
Prepaid other
|
| | | | 759 | | | | | | 579 | | |
Total prepaid expenses and other current assets
|
| | | $ | 4,065 | | | | | $ | 3,012 | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
Capitalized software
|
| | | $ | 2,117 | | | | | $ | 1,966 | | |
Furnitures and fixtures
|
| | | | 643 | | | | | | 643 | | |
Machinery and equipment
|
| | | | 318 | | | | | | 262 | | |
Leasehold improvements
|
| | | | 306 | | | | | | 304 | | |
Computers and server equipment
|
| | | | 194 | | | | | | 153 | | |
Website development
|
| | | | 168 | | | | | | 168 | | |
Purchased software and licenses
|
| | | | 132 | | | | | | 132 | | |
| | | | | 3,878 | | | | | | 3,628 | | |
Less: accumulated depreciation and amortization
|
| | | | (3,184) | | | | | | (2,974) | | |
Total property and equipment, net
|
| | | $ | 694 | | | | | $ | 654 | | |
| | |
June 30,
2021 |
| |
December 31,
2020 |
| ||||||
Inventory received not billed
|
| | | $ | 1,955 | | | | | $ | 1,944 | | |
Accrued acquisition consideration
|
| | | | 1,000 | | | | | | — | | |
Accrued payroll liabilities
|
| | | | 708 | | | | | | 659 | | |
Accrued marketing
|
| | | | 384 | | | | | | 634 | | |
Accrued professional fees
|
| | | | 366 | | | | | | 57 | | |
Accrued alcohol and tobacco tax
|
| | | | 312 | | | | | | 318 | | |
Accrued shipping
|
| | | | 278 | | | | | | 472 | | |
Other
|
| | | | 1,255 | | | | | | 675 | | |
Total accrued liabilities
|
| | | $ | 6,258 | | | | | $ | 4,759 | | |
Year ending December 31,(1)
|
| | | | | | |
2021 (six months)
|
| | | $ | 833 | | |
2022
|
| | | | 833 | | |
Total
|
| | | $ | 1,666 | | |
Date Issued
|
| |
Number of Shares
|
| |
Preferred Stock Series
|
| |
Price per Share
|
| |
Expiration Date
|
| ||||||
July 3, 2013
|
| | | | 6,843 | | | | Series Seed | | | | $ | 2.20 | | | | July 3, 2023 | |
April 15, 2016
|
| | | | 2,862 | | | | Series B | | | | $ | 10.48 | | | | April 15 2026 | |
December 7, 2017
|
| | | | 834 | | | | Series B-1 | | | | $ | 10.48 | | | |
December 7, 2024
|
|
December 29, 2017
|
| | | | 107,455 | | | | Series B-1 | | | | $ | 10.48 | | | |
December 29, 2027
|
|
April 6, 2021
|
| | | | 285,704 | | | | Series F | | | | $ | 14.00 | | | | April 6, 2026 | |
| | |
Six Months Ended June 30,
|
| |||
| | |
2021
|
| |
2020
|
|
Risk free interest rates
|
| |
0.87% – 1.45%
|
| |
0.25%
|
|
Expected term (in years)
|
| |
2.01 – 6.50
|
| |
3.01 – 7.50
|
|
Dividend yield
|
| |
—
|
| |
—
|
|
Expected volatility
|
| |
60%
|
| |
60%
|
|
Fair value of preferred stock
|
| |
$16.88
|
| |
$14.00
|
|
| | |
Warrant Liabilities
|
| |||
Fair value at December 31, 2019
|
| | | $ | 859 | | |
Change in fair value of warrant liabilities
|
| | | | 229 | | |
Fair value at June 30, 2020
|
| | | | 1,088 | | |
Change in fair value of warrant liabilities
|
| | | | (21) | | |
Fair value at December 31, 2020
|
| | | | 1,067 | | |
Issuance of Series F warrants
|
| | | | 2,035 | | |
Change in fair value of warrant liabilities
|
| | | | 893 | | |
Fair value at June 30, 2021
|
| | | $ | 3,995 | | |
Years ending December 31,
|
| | | | | | |
2021 (six months)
|
| | | $ | 626 | | |
2022
|
| | | | 1,147 | | |
Total
|
| | | $ | 1,773 | | |
Years ending December 31,
|
| | | | | | |
2021 (six months)
|
| | | $ | 382 | | |
2022
|
| | | | 785 | | |
Total
|
| | | $ | 1,167 | | |
| | |
Six Months Ended June 30,
|
| |||
| | |
2021
|
| |
2020
|
|
Risk free interest rates
|
| |
0.98% – 1.11%
|
| |
0.40% – 0.44%
|
|
Expected term (in years)
|
| |
5.53 – 6.12
|
| |
5.46 – 5.99
|
|
Dividend yield
|
| |
—
|
| |
—
|
|
Expected volatility
|
| |
36.91% – 37.10%
|
| |
36.20% – 36.54%
|
|
Fair value of common stock
|
| |
$1.84 – $2.00
|
| |
$1.36 – $1.44
|
|
| | |
Shares
Available for Grant |
| |
Weighted-
Average Exercise Price |
| |
Weighted-
Average Remaining Contractual Life (in Years) |
| |
Aggregate
Intrinsic Value (in thousands) |
| ||||||||||||
Outstanding as of December 31, 2020
|
| | | | 2,352,952 | | | | | $ | 1.68 | | | | | | 7.52 | | | | | | — | | |
Exercised
|
| | | | (2,109,308) | | | | | | 1.67 | | | | | | 7.07 | | | | | | 7,632 | | |
Granted
|
| | | | 430,750 | | | | | | 5.28 | | | | | | 7.90 | | | | | | — | | |
Forfeited
|
| | | | (110,034) | | | | | | 4.97 | | | | | | — | | | | | | 35 | | |
Expired
|
| | | | (3,281) | | | | | | 3.76 | | | | | | — | | | | | | 25 | | |
Outstanding as of June 30, 2021
|
| | | | 561,079 | | | | | | 3.84 | | | | | | 8.19 | | | | | | — | | |
Vested and exercisable as of June 30, 2021
|
| | | | 184,313 | | | | | $ | 2.12 | | | | | | 5.44 | | | | | $ | 584 | | |
| | |
June 30, 2021
|
| |||||||||||||||||||||||||||
| | |
Shares
Authorized |
| |
Shares
Issued and Outstanding |
| |
Net
Carrying Value |
| |
Aggregate
Liquidation Preference |
| |
Common
Stock Issuable on Conversion |
| |||||||||||||||
Series Seed Preferred Stock
|
| | | | 13,296,372 | | | | | | 1,655,186 | | | | | $ | 3,628 | | | | | $ | 3,628 | | | | | | 1,655,186 | | |
Series A Preferred Stock
|
| | | | 8,276,928 | | | | | | 1,034,604 | | | | | | 9,458 | | | | | | 10,006 | | | | | | 1,034,604 | | |
Series B Preferred Stock
|
| | | | 13,381,711 | | | | | | 1,669,848 | | | | | | 17,472 | | | | | | 17,499 | | | | | | 1,669,848 | | |
Series B-1 Preferred Stock
|
| | | | 7,736,552 | | | | | | 858,825 | | | | | | 8,942 | | | | | | 13,501 | | | | | | 858,825 | | |
Series C Preferred Stock
|
| | | | 8,209,586 | | | | | | 1,026,198 | | | | | | 9,500 | | | | | | 15,000 | | | | | | 1,026,198 | | |
Series D Preferred Stock
|
| | | | 10,611,205 | | | | | | 822,214 | | | | | | 5,877 | | | | | | 9,306 | | | | | | 822,214 | | |
Series E Preferred Stock
|
| | | | 10,000,000 | | | | | | 532,331 | | | | | | 5,747 | | | | | | 7,466 | | | | | | 532,331 | | |
Series F Preferred Stock
|
| | | | 8,571,428 | | | | | | 785,700 | | | | | | 8,272 | | | | | | 11,000 | | | | | | 785,700 | | |
Total
|
| | | | 80,083,782 | | | | | | 8,384,906 | | | | | $ | 68,896 | | | | | $ | 87,406 | | | | | | 8,384,906 | | |
| | |
December 31, 2020
|
| |||||||||||||||||||||||||||
| | |
Shares
Authorized |
| |
Shares
Issued and Outstanding |
| |
Net
Carrying Value |
| |
Aggregate
Liquidation Preference |
| |
Common
Stock Issuable on Conversion |
| |||||||||||||||
Series Seed Preferred Stock
|
| | | | 13,296,372 | | | | | | 1,655,186 | | | | | $ | 3,628 | | | | | $ | 3,628 | | | | | | 1,655,186 | | |
Series A Preferred Stock
|
| | | | 8,276,928 | | | | | | 1,034,604 | | | | | | 9,458 | | | | | | 10,006 | | | | | | 1,034,604 | | |
Series B Preferred Stock
|
| | | | 13,381,711 | | | | | | 1,669,848 | | | | | | 17,472 | | | | | | 17,499 | | | | | | 1,669,848 | | |
Series B-1 Preferred Stock
|
| | | | 7,736,552 | | | | | | 858,825 | | | | | | 8,942 | | | | | | 13,501 | | | | | | 858,825 | | |
Series C Preferred Stock
|
| | | | 8,209,586 | | | | | | 1,026,198 | | | | | | 9,500 | | | | | | 15,000 | | | | | | 1,026,198 | | |
Series D Preferred Stock
|
| | | | 10,611,205 | | | | | | 822,214 | | | | | | 5,877 | | | | | | 9,306 | | | | | | 822,214 | | |
Series E Preferred Stock
|
| | | | 10,000,000 | | | | | | 200,111 | | | | | | 1,585 | | | | | | 2,806 | | | | | | 200,111 | | |
Total
|
| | | | 71,512,354 | | | | | | 7,266,986 | | | | | $ | 56,462 | | | | | $ | 71,746 | | | | | | 7,266,986 | | |
| | |
For the Six Months Ended
June 30, 2021 |
| |||||||||||||||||||||||||||
| | |
DTC
|
| |
Wholesale
|
| |
Other
non-reportable |
| |
Corporate
non-segment |
| |
Total
|
| |||||||||||||||
Net revenues
|
| | | $ | 26,852 | | | | | $ | 7,624 | | | | | $ | 640 | | | | | $ | — | | | | | $ | 35,116 | | |
Cost of revenues
|
| | | | (15,356) | | | | | | (4,323) | | | | | | (274) | | | | | | — | | | | | | (19,953) | | |
Gross profit
|
| | |
|
11,496
|
| | | |
|
3,301
|
| | | |
|
366
|
| | | | | — | | | | |
|
15,163
|
| |
Operating expenses
|
| | | | (10,288) | | | | | | (2,205) | | | | | | (887) | | | | | | (5,763) | | | | | | (19,143) | | |
Interest expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | (421) | | | | | | (421) | | |
Change in fair value of warrant liabilities
|
| | | | — | | | | | | — | | | | | | — | | | | | | (893) | | | | | | (893) | | |
Other income
|
| | | | — | | | | | | — | | | | | | — | | | | | | 1,972 | | | | | | 1,972 | | |
Income (loss) before income taxes
|
| | | $ | 1,208 | | | | | $ | 1,096 | | | | | $ | (521) | | | | | $ | (5,105) | | | | | $ | (3,322) | | |
| | |
For the Six Months Ended
June 30, 2020 |
| |||||||||||||||||||||||||||
| | |
DTC
|
| |
Wholesale
|
| |
Other
non-reportable |
| |
Corporate
non-segment |
| |
Total
|
| |||||||||||||||
Net revenues
|
| | | $ | 24,823 | | | | | $ | 4,023 | | | | | $ | 320 | | | | | $ | — | | | | | $ | 29,166 | | |
Cost of revenues
|
| | | | (15,402) | | | | | | (2,685) | | | | | | (137) | | | | | | — | | | | | | (18,224) | | |
Gross profit
|
| | |
|
9,421
|
| | | |
|
1,338
|
| | | |
|
183
|
| | | | | — | | | | |
|
10,942
|
| |
Operating expenses
|
| | | | (7,743) | | | | | | (1,571) | | | | | | (98) | | | | | | (4,518) | | | | | | (13,930) | | |
Interest expense
|
| | | | — | | | | | | — | | | | | | — | | | | | | (531) | | | | | | (531) | | |
Change in fair value of warrant liabilities
|
| | | | — | | | | | | — | | | | | | — | | | | | | (229) | | | | | | (229) | | |
Other income
|
| | | | — | | | | | | — | | | | | | — | | | | | | 9 | | | | | | 9 | | |
Income (loss) before income taxes
|
| | | $ | 1,678 | | | | | $ | (233) | | | | | $ | 85 | | | | | $ | (5,269) | | | | | $ | (3,739) | | |
| | |
Six Months Ended
June 30, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Stock options outstanding
|
| | | | 561,079 | | | | | | 2,300,160 | | |
Unvested stock options early exercised
|
| | | | 817,974 | | | | | | — | | |
Redeemable convertible preferred stock
|
| | | | 8,384,906 | | | | | | 7,034,244 | | |
Warrants to purchase redeemable convertible preferred stock
|
| | | | 403,698 | | | | | | 117,994 | | |
Total
|
| | | | 10,167,657 | | | | | | 9,452,398 | | |
| | |
Six Months Ended
June 30, |
| |||||||||
| | |
2021
|
| |
2020
|
| ||||||
Current: | | | | | | | | | | | | | |
Federal
|
| | | $ | — | | | | | $ | — | | |
State
|
| | | | 15 | | | | | | 7 | | |
Total current
|
| | | | 15 | | | | | | 7 | | |
Total provision for income taxes
|
| | | $ | 15 | | | | | $ | 7 | | |
| | |
Amount
|
| |||
SEC registration fee
|
| | | $ | 2,372 | | |
FINRA filing fee
|
| | | $ | 14,300 | | |
Initial NYSE American exchange listing fee
|
| | | $ | 50,000 | | |
Accountants’ fees and expenses
|
| | | $ | 690,000 | | |
Legal fees and expenses
|
| | | $ | 1,300,000 | | |
Transfer Agent’s fees and expenses
|
| | | $ | 15,000 | | |
Printing and engraving expenses
|
| | | $ | 105,000 | | |
Miscellaneous
|
| | | $ | 423,328 | | |
Total expenses
|
| | | $ | 2,600,000 | | |
Exhibit
Number |
| |
Description of Exhibit
|
|
1.1* | | | | |
3.1** | | | | |
3.1(a)** | | | | |
3.1(b)* | | | | |
3.2** | | | | |
3.3** | | | | |
3.3(a)** | | | | |
3.4** | | | | |
4.1* | | | | |
5.1* | | | | |
10.1** | | | | |
10.1(a)** | | | | |
10.2** | | | | |
10.3#** | | | | |
10.3(a)#* | | | | |
10.3(b)#** | | | | |
10.4#** | | | | |
10.4(a)#** | | | | |
10.4(b)#** | | | | |
10.5#** | | | | |
10.6** | | | | |
10.7** | | | | |
10.7(a)** | | | | |
10.8#** | | | | |
10.9#** | | | | |
10.10†** | | | | |
21.1** | | | | |
23.1* | | | | |
23.2* | | | |
Exhibit
Number |
| |
Description of Exhibit
|
|
24.1** | | | |
Exhibit 1.1
Winc, Inc.
(a Delaware corporation)
[--] Shares of Common Stock
UNDERWRITING AGREEMENT
Dated: November [--], 2021
WINC, INC.
(a Delaware corporation)
[--] Shares of Common Stock
UNDERWRITING AGREEMENT
November [--], 2021
SPARTAN CAPITAL SECURITIES, LLC
As Representative of the
several Underwriters listed
in Schedule A hereto
c/o Spartan Capital Securities, LLC
45 Broadway, 19th Floor
New York, New York 10006
Ladies and Gentlemen:
Winc, Inc., a Delaware corporation (the “Company”), confirms its agreement with Spartan Capital Securities, LLC (“Spartan”) and each of the other Underwriters named in Schedule A hereto (collectively, the “Underwriters,” which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Spartan is acting as representative (in such capacity, the “Representative”), with respect to (i) the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of Common Stock, par value $0.0001 per share, of the Company (“Common Stock”) set forth in Schedule A hereto and (ii) the grant by the Company to the Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of [--] additional shares of Common Stock. The aforesaid shares of Common Stock (the “Initial Securities”) to be purchased by the Underwriters and all or any part of the [--] shares of Common Stock subject to the option described in Section 2(b) hereof (the “Option Securities”) are herein called, collectively, the “Securities.”
The Company understands that the Underwriters propose to make a public offering of the Securities as soon as the Representative deem advisable after this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement on Form S-1 (No. 333-259828), including the related preliminary prospectus or prospectuses, covering the registration of the sale of the Securities under the Securities Act of 1933, as amended (the “1933 Act”). Promptly after execution and delivery of this Agreement, the Company will prepare and file a prospectus in accordance with the provisions of Rule 430A (“Rule 430A”) of the rules and regulations of the Commission under the 1933 Act (the “1933 Act Regulations”) and Rule 424(b) (“Rule 424(b)”) of the 1933 Act Regulations. The information included in such prospectus that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective pursuant to Rule 430A(b) is herein called the “Rule 430A Information.” Such registration statement, including the amendments thereto, the exhibits thereto and any schedules thereto, at the time it became effective, and including the Rule 430A Information, is herein called the “Registration Statement.” Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein called the “Rule 462(b) Registration Statement” and, after such filing, the term “Registration Statement” shall include the Rule 462(b) Registration Statement. Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “preliminary prospectus.” The final prospectus, in the form first furnished to the Underwriters for use in connection with the offering of the Securities, is herein called the “Prospectus.” For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the Prospectus or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system or any successor system (“EDGAR”).
As used in this Agreement:
“Applicable Time” means [--] P.M., New York City time, on November [--], 2021 or such other time as agreed by the Company and the Representative.
“General Disclosure Package” means any Issuer General Use Free Writing Prospectuses issued at or prior to the Applicable Time, the most recent preliminary prospectus that is distributed to investors prior to the Applicable Time and the information included on Schedule B-1 hereto, all considered together.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the 1933 Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the 1933 Act Regulations (“Rule 405”)) relating to the Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Securities or of the offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433), as evidenced by its being specified in Schedule B-2 hereto.
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the 1933 Act.
“Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the 1933 Act.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Underwriter, as follows:
(i) Registration Statement and Prospectuses. Each of the Registration Statement and any amendment thereto has become effective under the 1933 Act. No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated. The Company has complied with each request (if any) from the Commission for additional information.
2
Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, the Applicable Time, the Closing Time and any Date of Delivery complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus, the Prospectus and any amendment or supplement thereto, at the time each was filed with the Commission, and, in each case, at the Applicable Time, the Closing Time and any Date of Delivery complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. Each preliminary prospectus delivered to the Underwriters for use in connection with this offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Accurate Disclosure. Neither the Registration Statement nor any amendment thereto, at its effective time, at the Closing Time or at any Date of Delivery, contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the Applicable Time and any Date of Delivery, none of (A) the General Disclosure Package, (B) any individual Issuer Limited Use Free Writing Prospectus, when considered together with the General Disclosure Package nor (C) any individual Written Testing-the-Waters Communication, when considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any amendment or supplement thereto, as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Time or at any Date of Delivery, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement (or any amendment thereto), the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representative expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the information in the twelfth paragraph concerning price stabilization, short positions and penalty bids under the heading “Underwriting” and the information in the fourteenth paragraph concerning electronic offer, sale and distribution of shares paragraphs under the heading “Underwriting” in each case contained in the Prospectus (collectively, the “Underwriter Information”).
(iii) Testing-the-Waters Materials. The Company has not engaged in any Testing-the-Waters Communication, other than Testing-the-Waters Communications with entities that the Company reasonably believes to be qualified institutional buyers within the meaning of Rule 144A under the 1933 Act or institutions that are accredited investors within the meaning of Rule 501 under the 1933 Act. The Company reconfirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications, other than those listed on Schedule B-3 hereto.
3
(iv) Issuer Free Writing Prospectuses. No Issuer Free Writing Prospectus conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, and any preliminary or other prospectus deemed to be a part thereof that has not been superseded or modified. The representations and warranties in this subsection shall not apply to statements in or omissions from any Issuer Free Writing Prospectus made in reliance upon and in conformity with the Underwriter Information.
(v) Company Not Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the 1933 Act Regulations) of the Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
(vi) Independent Accountants. Baker Tilly US, LLP, the accountants who certified the financial statements and supporting schedules included in the Registration Statement, the General Disclosure Package and the Prospectus, are independent public accountants as required by the 1933 Act, the 1933 Act Regulations and the Public Company Accounting Oversight Board.
(vii) Financial Statements; Pro Forma Financial Measures; Non-GAAP Financial Measures. The financial statements included in the Registration Statement, the General Disclosure Package and the Prospectus, together with the related schedules and notes, present fairly, in all material respects, the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved. The supporting schedules, if any, present fairly, in all material respects, in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Registration Statement, the General Disclosure Package and the Prospectus present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. Except as included therein, no other historical or pro forma financial statements or supporting schedules are required to be included or incorporated by reference in the Registration Statement, the General Disclosure Package or the Prospectus under the 1933 Act or the 1933 Act Regulations. All disclosures contained in the Registration Statement, the General Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and Item 10 of Regulation S-K of the 1933 Act, to the extent applicable.
(viii) No Material Adverse Change in Business. Except as otherwise stated therein, since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise, and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock.
4
(ix) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and to enter into and perform its obligations under this Agreement and the Underwriter Warrants (as defined below); and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect.
(x) Good Standing of Subsidiaries. Each “significant subsidiary” of the Company (as such term is defined in Rule 1-02 of Regulation S-X) (each, a “Subsidiary” and, collectively, the “Subsidiaries”) has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its incorporation or organization, has corporate or similar power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, the General Disclosure Package and the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not result in a Material Adverse Effect. Except as otherwise disclosed in the Registration Statement, the General Disclosure Package and the Prospectus, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any Subsidiary were issued in violation of any preemptive or similar rights of any securityholder of such Subsidiary. The only subsidiaries of the Company are (A) the subsidiaries listed on Exhibit 21 to the Registration Statement and (B) certain other subsidiaries which, considered in the aggregate as a single subsidiary, do not constitute a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X.
(xi) Capitalization. The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the Registration Statement, the General Disclosure Package and the Prospectus in the column entitled “Actual” under the caption “Capitalization” (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the Registration Statement, the General Disclosure Package and the Prospectus or pursuant to the exercise of convertible securities or options referred to in the Registration Statement, the General Disclosure Package and the Prospectus). The outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable. None of the outstanding shares of capital stock of the Company were issued in violation of any preemptive or other similar rights of any securityholder of the Company that have not been complied with or validly waived.
(xii) Authorization of Agreement. This Agreement and the Underwriter Warrants have been duly authorized, executed and delivered by the Company.
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(xiii) Authorization and Description of Securities. The Securities to be purchased by the Underwriters from the Company have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued and delivered by the Company pursuant to this Agreement against payment of the consideration set forth herein, will be validly issued and fully paid and non-assessable; and the issuance of the Securities is not subject to any preemptive or other similar rights of any securityholder of the Company. The shares of Common Stock issuable upon the exercise of the Underwriter Warrants (the “Underwriter Warrant Shares”), when issued, paid for and delivered upon due exercise of the Underwriter Warrants, as applicable, will be duly authorized and validly issued, fully paid and nonassessable, will be issued in compliance with all applicable securities laws, and will be free of preemptive, registration or similar rights. The Underwriter Warrant Shares have been reserved for issuance. The Underwriter Warrants, when issued, will conform in all material respects to the descriptions thereof set forth in the Registration Statement, the General Disclosure Package and the Final Prospectus. The Common Stock conforms, in all material respects, to all statements relating thereto contained in the Registration Statement, the General Disclosure Package and the Prospectus and such description conforms, in all material respects, to the rights set forth in the instruments defining the same. No holder of Securities will be subject to personal liability solely by reason of being such a holder.
(xiv) Registration Rights. There are no persons with registration rights or other similar rights to have any securities registered for sale pursuant to the Registration Statement or otherwise registered for sale or sold by the Company under the 1933 Act pursuant to this Agreement, other than those rights that have been disclosed in the Registration Statement, the General Disclosure Package and the Prospectus and have been waived.
(xv) Absence of Violations, Defaults and Conflicts. Neither the Company nor any of its subsidiaries is (A) in violation of its charter, by-laws or similar organizational document, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound or to which any of the properties or assets of the Company or any subsidiary is subject (collectively, “Agreements and Instruments”), except for such defaults that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The execution, delivery and performance of this Agreement and the Underwriter Warrants and the consummation of the transactions contemplated herein and therein and in the Registration Statement, the General Disclosure Package and the Prospectus (including the issuance and sale of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect), nor will such action result in any violation of (x) the provisions of the charter, by-laws or similar organizational document of the Company or any of its subsidiaries or (y) any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity, except, in the case of clause (y), for such violations as would not, singly or in the aggregate, reasonably be expected to have a Material Adverse Effect. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries.
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(xvi) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary’s principal suppliers, manufacturers, customers or contractors, which, in either case, would reasonably be expected to result in a Material Adverse Effect.
(xvii) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity now pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, which would reasonably be expected to result in a Material Adverse Effect, or which would reasonably be expected to materially and adversely affect their respective properties or assets or the consummation of the transactions contemplated in this Agreement or the Underwriter Warrants or the performance by the Company of its obligations hereunder and thereunder; and the aggregate of all pending legal or governmental proceedings to which the Company or any such subsidiary is a party or of which any of their respective properties or assets is the subject which are not described in the Registration Statement, the General Disclosure Package and the Prospectus, including ordinary routine litigation incidental to the business, would not reasonably be expected to result in a Material Adverse Effect.
(xviii) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the General Disclosure Package or the Prospectus or to be filed as exhibits to the Registration Statement which have not been so described and filed as required.
(xix) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company of its obligations hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement, except such as have been already obtained or as may be required under the 1933 Act, the 1933 Act Regulations, the rules of the NYSE American, LLC, state securities laws or the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
(xx) Possession of Licenses and Permits. The Company and its subsidiaries possess or qualify for an exemption from any applicable requirement to obtain, such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business now operated by them, except where the failure so to possess would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company and its subsidiaries are in compliance with the terms and conditions of all Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.
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(xxi) Title to Property. The Company and its subsidiaries have good and marketable title to all real property owned by them and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are described in the Registration Statement, the General Disclosure Package and the Prospectus or (B) do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Registration Statement, the General Disclosure Package or the Prospectus, are in full force and effect, and neither the Company nor any such subsidiary is aware of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
(xxii) Intellectual Property. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, the Company and its subsidiaries own, otherwise have, or can acquire on reasonable terms, valid, enforceable and adequate rights to use all patents, patent rights, licenses, inventions, copyrights, software, technology, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names, trade dress, domain names, social media identifiers and accounts, and other intellectual property and proprietary rights of any kind or nature in any and all applicable jurisdictions throughout the world (including all goodwill associated with, and all registrations of and applications for registration of, the foregoing) (collectively, “Intellectual Property”) used or held for use in, or otherwise necessary for or material to the conduct of their respective businesses as currently conducted and as proposed to be conducted as described in the Registration Statement, the General Disclosure Package and the Prospectus. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, the Intellectual Property owned by the Company and its subsidiaries and, to the knowledge of the Company, the Intellectual Property licensed to the Company and its subsidiaries, is valid, subsisting and enforceable. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, neither the Company nor any of its subsidiaries, nor the conduct of their respective businesses, infringes, misappropriates or otherwise violates, or has infringed, misappropriated or violated, any Intellectual Property of others. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, there is no pending or, to the Company’s knowledge, written threat of action, suit, proceeding or claim (A) challenging the Company’s or any subsidiary of the Company’s rights in or to any Intellectual Property owned by or licensed to the Company or any of its subsidiaries, (B) alleging that the Company or any of its subsidiaries has infringed, misappropriated or otherwise violated or conflicted with any Intellectual Property of any third party, or (C) challenging the ownership, validity, scope or enforceability of any Intellectual Property owned by or exclusively licensed to the Company or any of its subsidiaries, and neither the Company nor any of its subsidiaries has received any notice of, or is otherwise aware of any facts that would form the basis for, any such action, suit, proceeding or claim. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, all Intellectual Property owned by the Company or its subsidiaries is owned solely by the Company or its subsidiaries, is owned free and clear of all liens and encumbrances, and to the knowledge of the Company, no third party is infringing, misappropriating or otherwise violating, or has infringed, misappropriated or otherwise violated, any Intellectual Property owned by or exclusively licensed to the Company or any of its subsidiaries. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) all employees or contractors engaged in the development of Intellectual Property on behalf of the Company or any subsidiary of the Company have executed an invention assignment agreement whereby such employees or contractors presently assign all of their right, title and interest in and to such Intellectual Property to the Company or the applicable subsidiary, and (B) to the Company’s knowledge no such agreement has been breached or violated. The Company and its subsidiaries take, and have taken, commercially reasonable steps in accordance with customary industry practice to maintain the confidentiality of all Intellectual Property, the value of which to the Company or any of its subsidiaries is contingent upon maintaining the confidentiality thereof, and, except where the failure to do so would not, singly or in the aggregate, result in a Material Adverse Effect, no such Intellectual Property has been disclosed other than to employees, representatives and agents of the Company or any of its subsidiaries, all of whom are bound by written confidentiality agreements (or substantially equivalent professional obligations of confidentiality).
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(xxiii) Environmental Laws. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus or would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the Company’s knowledge, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) to the Company’s knowledge, there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental Entity, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws.
(xxiv) Accounting Controls. The Company maintains effective internal control over financial reporting (as defined under Rules 13-a15 and 15d-15 under the rules and regulations of the Commission under the 1934 Act (the “1934 Act Regulations”)) and a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially and adversely affected, or is reasonably likely to materially and adversely affect, the Company’s internal control over financial reporting.
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(xxv) Compliance with the Sarbanes-Oxley Act. The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance in all material respects with all provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder or implementing the provisions thereof (the “Sarbanes-Oxley Act”) that are then in effect and with which the Company is required to comply as of the effectiveness of the Registration Statement, and is, or will be, actively taking steps to ensure that it will be in compliance with other provisions of the Sarbanes-Oxley Act not currently in effect, upon the effectiveness of such provisions, or which will become applicable to the Company at all times after the effectiveness of the Registration Statement.
(xxvi) Payment of Taxes. All United States federal income tax returns of the Company and its subsidiaries required by law to be filed have been filed and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided and except insofar as the failure to pay such taxes would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. The Company and its subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other law except insofar as the failure to file such returns would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and its subsidiaries, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been established by the Company and except insofar as the failure to pay such taxes would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect. The charges, accruals and reserves on the books of the Company in respect of any income tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that would not reasonably be expected to, individually or in the aggregate, result in a Material Adverse Effect.
(xxvii) Insurance. The Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar business, and all such insurance is in full force and effect. The Company has no reason to believe that it or any of its subsidiaries will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Effect. Neither of the Company nor any of its subsidiaries has been denied any insurance coverage which it has sought or for which it has applied.
(xxviii) Investment Company Act. The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Registration Statement, the General Disclosure Package and the Prospectus will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).
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(xxix) Absence of Manipulation. None of the Company or any controlled affiliate of the Company, or to the knowledge of the Company, any non-controlled affiliate of the Company has taken, nor will the Company or any controlled affiliate of the Company, or to the knowledge of the Company, any non-controlled affiliate take, directly or indirectly, any action which is designed, or would reasonably be expected, to cause or result in, or which constitutes, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or to result in a violation of Regulation M under the 1934 Act.
(xxx) Foreign Corrupt Practices Act. None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or other person acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge of the Company, its affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.
(xxxi) Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all applicable jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
(xxxii) OFAC. None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or representative of the Company or any of its subsidiaries is an individual or entity (“Person”) currently the subject or target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council (“UNSC”), the European Union, Her Majesty’s Treasury (“HMT”), or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company located, organized or resident in a country or territory that is the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the sale of the Securities, or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.
(xxxiii) [Reserved.]
(xxxiv) Lending Relationship. Except as described in the Registration Statement, the General Disclosure Package and the Prospectus, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Underwriter and (ii) does not intend to use any of the proceeds from the sale of the Securities to repay any outstanding debt owed to any affiliate of any Underwriter.
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(xxxv) Statistical and Market-Related Data. Any statistical and market-related data included in the Registration Statement, the General Disclosure Package or the Prospectus are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate in all material respects and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.
(xxxvi) Emerging Growth Company Status. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any Person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the 1933 Act (an “Emerging Growth Company”).
(xxxvii) IT Systems and Data. Except as would not, singly or in the aggregate, result in a Material Adverse Effect, (i) the Company and its subsidiaries own or have a valid right to access and use all information technology assets and computers, systems, networks, hardware, software, websites, applications, data and databases (including the Protected Data (as defined below) and other data and information of their respective users, customers, employees, suppliers, vendors and any third party data maintained, stored or otherwise processed by the Company and its subsidiaries, and any such data processed or stored by third parties on behalf of the Company and its subsidiaries), equipment and technology used in their respective businesses (collectively, “IT Systems and Data”); (ii) the IT Systems and Data (A) are adequate for, and operate and perform as required in connection with, the operation of the business of the Company and its subsidiaries as currently conducted and as proposed to be conducted in the Registration Statement, the General Disclosure Package and the Prospectus, (B) have not malfunctioned or failed in a manner that has not been fully remediated prior to the date hereof, and (C) are free and clear of all bugs, errors, defects, Trojan horses, time bombs, back doors, drop dead devices, malware and other corruptants, including software or hardware components that are designed to interrupt use of, permit unauthorized access to or disable, damage or erase the IT Systems and Data. To the Company’s knowledge, in the past three years there has been no notice of, and no knowledge of any event or condition that could result in, a material security breach or incident, unauthorized access or disclosure, or other compromise of or relating to the Company, any of its subsidiaries or any of the IT Systems and Data, and neither the Company nor its subsidiaries have been notified of, and each of them have no knowledge of any event or condition that would be reasonably expected to result in, any security breach or incident, unauthorized access or disclosure or other compromise to the IT Systems and Data. The Company and its subsidiaries have established, implemented and maintained controls, policies, procedures, and technological safeguards designed to maintain and protect their confidential information and the integrity, continuous operation, redundancy and security of the IT Systems and Data according to commercially reasonable standards and practices and in compliance with all applicable laws and regulatory standards.
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(xxxviii) Data Protection Compliance. The Company and its subsidiaries are presently in compliance in all material respects with, and at all prior times during the past three years, have been in compliance in all material respects with, all of their internal and external privacy policies and notices, contractual obligations binding upon any of them, and applicable laws, statutes, judgments, orders, rules and regulations of any court or arbitrator or other governmental or regulatory authority, and all other legal obligations applicable to the Company or any of its subsidiaries, in each case, relating to the collection, use, transfer, import, export, storage, protection, disposal, disclosure or other processing by or on behalf of the Company or any of its subsidiaries of personal, personally identifiable, confidential or regulated data or information (collectively, “Data Protection Obligations,” and such data or information, “Protected Data”). Neither the Company nor any of its subsidiaries have received any written notification of or complaint regarding or are otherwise aware of any facts that, individually or in the aggregate, would reasonably indicate non-compliance by the Company or any of its subsidiaries with any Data Protection Obligation. There is no action, suit, investigation or proceeding against the Company or any of its subsidiaries by or before any court or governmental agency, authority or body pending or, to the knowledge of the Company, threatened in writing, against the Company or any of its subsidiaries, alleging non-compliance with any Data Protection Obligations by the Company or any of its subsidiaries.
(xxxix) Open Source. The Company and its subsidiaries use and have used any and all software and other materials distributed under a “free,” “open source,” or similar licensing model (including, but not limited to, the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Affero General Public License) (collectively, “Open Source Software”) in compliance in all material respects with all license terms applicable to such Open Source Software and neither the Company nor any of its subsidiaries have used or distributed any Open Source Software in a manner that requires or has required (i) the Company or any of its subsidiaries to permit reverse engineering of any products or services of the Company or any of its subsidiaries, or any software code or other technology owned by the Company or any of its subsidiaries, or (ii) any products or services of the Company or any of its subsidiaries, or any software code or other technology owned by the Company or any of its subsidiaries, to be (A) disclosed or distributed in source code form, (B) licensed for the purpose of making derivative works, or (C) redistributed at no charge.
(xl) Ratings. Neither the Company nor its subsidiaries have any debt securities or preferred stock that are rated by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the 1934 Act).
(xli) Retail Stockholder Lock-ups. On or prior to the date of this Agreement, the Company has notified holders of its Series D convertible preferred stock and Series E convertible preferred stock of its intent to enforce the “market stand-off” agreement that such stockholders are subject to, pursuant to the Subscription Agreements’ joinders to the Seventh Amended and Restated Investors’ Rights Agreement, dated as of April 6, 2021.
(b) Officer’s Certificates. Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Representative or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, severally and not jointly, and each Underwriter, severally and not jointly, agrees to purchase from the Company, at the price per share set forth in Schedule A, that number of Initial Securities set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Initial Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof, subject, in each case, to such adjustments among the Underwriters as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares.
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(b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase up to an additional [--] shares of Common Stock, at the price per share set forth in Schedule A, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities. The option hereby granted may be exercised for 45 days after the date hereof and may be exercised in whole or in part at any time from time to time upon notice by the Representative to the Company setting forth the number of Option Securities as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time. If the option is exercised as to all or any portion of the Option Securities, each of the Underwriters, acting severally and not jointly, will purchase that proportion of the total number of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Underwriter bears to the total number of Initial Securities, subject, in each case, to such adjustments as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of certificates or security entitlements for, the Initial Securities shall be made at the offices of Manatt, Phelps & Phillips, LLP, 695 Town Center Drive, Costa Mesa, CA 92626, or at such other place as shall be agreed upon by the Representative and the Company, at 9:00 A.M. (New York City time) on the second (third, if the pricing occurs after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Representative and the Company (such time and date of payment and delivery being herein called “Closing Time”).
In addition, in the event that any or all of the Option Securities are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates or security entitlements for, such Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Representative and the Company, on each Date of Delivery as specified in the notice from the Representative to the Company.
Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company against delivery to the Representative for the respective accounts of the Underwriters of certificates or security entitlements for the Securities to be purchased by them. It is understood that each Underwriter has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Spartan, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder.
(d) Underwriter Warrants. At each Date of Delivery, the Company shall issue to the Representative or its designee warrants (the “Underwriter Warrants”), substantially in the form attached hereto as Exhibit C, to purchase that number of shares of Common Stock of the Company, equal to 3.0% of the aggregate number of Initial Securities or Option Securities issued and sold at such time, as applicable. The Underwriter Warrants shall be exercisable, in whole or in part, immediately following their issuance and expire on the five-year anniversary of the date of the Prospectus at an initial exercise price per share of Common Stock of $[●], which is equal to 110% of the public offering price of the Securities.
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SECTION 3. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A, and will notify the Representative promptly, and confirm the notice in writing (which may be by email), (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any preliminary prospectus or the Prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the 1933 Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the 1933 Act in connection with the offering of the Securities. The Company will effect all filings required under Rule 424(b), in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof as soon as practicable.
(b) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement and in the Registration Statement, the General Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172 of the 1933 Act Regulations (“Rule 172”), would be) required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) amend or supplement the General Disclosure Package or the Prospectus in order that the General Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the General Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly (A) give the Representative notice of such event, (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the General Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable Time; the Company will give the Representative notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representative with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object.
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(c) Delivery of Registration Statements. The Company has furnished or will deliver to the Representative and counsel for the Underwriters, if requested, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Representative, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(e) Blue Sky Qualifications. The Company will use its reasonable best efforts, in cooperation with the Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
(f) Rule 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide to the Underwriters the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act.
(g) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the Registration Statement, the General Disclosure Package and the Prospectus under “Use of Proceeds.”
(h) Listing. The Company will use its reasonable best efforts to effect and maintain the listing of the Common Stock (including the Securities) on the NYSE American, LLC.
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(i) Restriction on Sale of Securities. During a period of 180 days from the date of the Prospectus, the Company will not, without the prior written consent of the Representative, (i) offer, issue, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, (ii) file or caused to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company, (iii) complete any offering of debt securities of the Company, other than entering into a line of credit or term facility with a traditional bank or (iv) enter into any swap or other agreement that transfers to another entity, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder and the issuance of the Underwriter Warrants and the shares of Common Stock issuable upon exercise of such Underwriter Warrants, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (C) the reacquisition or withholding of all or a portion of shares of Common Stock subject to a stock award to satisfy a tax withholding obligation of the Company in connection with the vesting or exercise of such stock award or to satisfy the purchase price or exercise price of such stock award, (D) the grant of compensatory equity-based awards, and/or the issuance of shares of Common Stock with respect thereto, made pursuant to compensatory equity-based plans referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (E) the filing of a registration statement on Form S-8 or any successor form thereto with respect to the registration of securities to be offered or granted pursuant to existing employee benefit or equity incentive plans of the Company referred to in the Registration Statement, the General Disclosure Package and the Prospectus, (F) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan referred to in the Registration Statement, the General Disclosure Package and the Prospectus, or (G) the issuance of shares of Common Stock, restricted stock awards or securities convertible into or exercisable or exchangeable for shares of Common Stock in connection with (i) the acquisition of the securities, business, property or other assets of another Person or pursuant to any employee benefit plan assumed in connection with any such acquisition, (ii) joint ventures, (iii) commercial relationships or (iv) other strategic transactions, provided that the aggregate number of shares of Common Stock, restricted stock awards and shares of Common Stock issuable upon the conversion, exercise or exchange of securities (on an as converted or as exercised basis, as the case may be) issued pursuant to this clause (G) shall not exceed 10% of the total number of shares of Common Stock issued and outstanding immediately following the issuance and sale of the Securities at the Closing Time pursuant hereto; and provided, further, that each recipient of shares of Common Stock, restricted stock awards or securities convertible into or exercisable or exchangeable for shares of Common Stock pursuant to this clause agrees to be bound by the terms of the lock-up or shall execute a lock-up agreement substantially in the form of Exhibit A hereto. Notwithstanding anything to the contrary herein, the Company shall cause an option holder who is not a holder of any shares of Common Stock to execute a lock-up agreement in the form of Exhibit A hereto at the time such holder exercises his or her option during a period of 180 days from the date of the Prospectus.
(j) Waiver Press Release. If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in a lock-up agreement described in Section 5(j) hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit B hereto through a major news service at least two business days before the effective date of the release or waiver.
(k) Reporting Requirements. The Company, during the period when a Prospectus relating to the Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the 1933 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and 1934 Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Securities as may be required under Rule 463 under the 1933 Act.
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(l) Issuer Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it will not make any offer relating to the Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative will be deemed to have consented to the Issuer Free Writing Prospectuses listed on Schedule B-2 hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representative. The Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Representative as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, any preliminary prospectus or the Prospectus, which has not been superseded or modified, or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
(m) Certification Regarding Beneficial Owners. The Company will deliver to the Representative, on the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers, together with copies of identifying documentation, and the Company undertakes to provide such additional supporting documentation as the Representative may reasonably request in connection with the verification of the foregoing certification.
(o) [Reserved.]
(p) Testing-the-Waters Materials. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representative and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
(q) Emerging Growth Company Status. The Company will promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Securities within the meaning of the 1933 Act and (ii) completion of the 180-day restricted period referred to in Section 3(i).
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SECTION 4. Payment of Expenses.
(a) Expenses. The Company will pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of copies of each preliminary prospectus, each Issuer Free Writing Prospectus and the Prospectus and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Underwriters to investors, (iii) the preparation, issuance and delivery of the certificates or security entitlements for the Securities to the Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees and disbursements of the Company’s counsel, accountants and other advisors, (v) the filings fees and expenses for the qualification of the Securities under securities laws in accordance with the provisions of Section 3(e) hereof, (vi) the fees and expenses of any transfer agent or registrar for the Securities, (vii) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged by the Company in connection with the road show presentations, travel and lodging expenses of the Representative and officers of the Company and any such consultants, (viii) the filing fees incident to the review by FINRA of the terms of the sale of the Securities, (ix) the fees and expenses incurred in connection with the listing of the Securities on the NYSE American, LLC and (x) the costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability) associated with the reforming of any contracts for sale of the Securities made by the Underwriters caused by a breach of the representation contained in the third sentence of Section 1(a)(ii). Except as provided for by this Agreement, the Underwriters will pay all of their own expenses, provided, that the Company shall reimburse the Representative for up to $200,000 for fees and expense of legal counsel, road show expenses (including any costs associated with the use of a third-party electronic road show service), cost of background check(s), tombstones, out-of-pocket costs of an escrow agent or clearing agent, as applicable, which amount shall not exceed $12,900, marketing-related expenses and other out-of-pocket expenses incurred in connection with the offering.
(b) Termination of Agreement. If this Agreement is terminated by the Representative in accordance with the provisions of Section 5, Section 9(a)(i) or (iii) or Section 10 hereof, the Company shall reimburse the Underwriters for their reasonable and documented out-of-pocket expenses that were actually incurred, including the reasonable and documented fees and disbursements of counsel for the Underwriters; provided that, if this Agreement is terminated by the Representative pursuant to Section 10 hereof, the Company will have no obligation to reimburse any defaulting Underwriter..
SECTION 5. Conditions of Underwriters’ Obligations. The obligations of the several Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company contained herein or in certificates of any officer of the Company or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and, at the Closing Time, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the 1933 Act, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated; and the Company has complied with each request (if any) from the Commission for additional information. A prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) without reliance on Rule 424(b)(8) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
(b) Opinion of Counsel for Company. At the Closing Time, the Representative shall have received the opinion, dated the Closing Time, of Latham & Watkins LLP, counsel for the Company, in form and substance reasonably satisfactory to counsel for the Underwriters.
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(c) Opinion of Counsel for Underwriters. At the Closing Time, the Representative shall have received the opinion, dated the Closing Time, of Manatt, Phelps & Phillips, LLP, counsel for the Underwriters, in form and substance reasonably satisfactory to the underwriters.
(d) Officers’ Certificate. At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representative shall have received a certificate of the Chief Executive Officer or the President of the Company and of the chief financial or chief accounting officer of the Company, dated the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement under the 1933 Act has been issued, no order preventing or suspending the use of any preliminary prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to their knowledge, contemplated.
(e) Chief Financial Officer’s Certificate. At the date of this Agreement and at the Closing Time, the Representative shall have received a certificate, dated as of the applicable time, of the Chief Financial Officer of the Company, in form and substance reasonably satisfactory to the Underwriters, as to the accuracy of certain data contained in the preliminary prospectus and the Prospectus, respectively.
(f) Accountant’s Comfort Letter. At the time of the execution of this Agreement, the Representative shall have received from Baker Tilly US, LLP a letter, dated such date, in form and substance satisfactory to the Representative, together with signed or reproduced copies of such letter for each of the other Underwriters containing statements and information of the type ordinarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the General Disclosure Package and the Prospectus.
(g) Bring-down Comfort Letter. At the Closing Time, the Representative shall have received from Baker Tilly US, LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.
(h) Approval of Listing. At the Closing Time, the Securities shall have been approved for listing on the NYSE American, LLC, subject only to official notice of issuance.
(i) No Objection. FINRA has confirmed that it has not raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements relating to the offering of the Securities.
(j) Lock-up Agreements. At the date of this Agreement, the Representative shall have received lock-up agreements, substantially in the form of Exhibit A hereto, signed respectively by the persons and entities listed on Schedule C hereto. For the avoidance of doubt, the lock-up agreements signed by the retail stockholders shall be effected through the Company sending email notifications to the retail stockholders, with such notifications specifying the end date of the lock-up period (which is 180 days from the date of the Prospectus).
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(k) Conditions to Purchase of Option Securities. In the event that the Underwriters exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company and any of its subsidiaries hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representative shall have received:
(i) Officers’ Certificate. A certificate, dated such Date of Delivery, of the chief executive officer, President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 5(d) hereof remains true and correct as of such Date of Delivery.
(ii) Opinion of Counsel for Company. The opinion of Latham & Watkins LLP, counsel for the Company, in form and substance reasonably satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for Underwriters. The opinion of Manatt, Phelps & Phillips, LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(c) hereof.
(iv) Chief Financial Officer’s Certificate. The certificate of the Chief Financial Officer of the Company, dated such Date of Delivery, to the same effect as the certificate required by Section 5(e) hereof.
(v) Bring-down Comfort Letter. If requested by the Representative, a letter from Baker Tilly US, LLP in form and substance satisfactory to the Representative and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representative pursuant to Section 5(f) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.
(l) Additional Documents. At the Closing Time and at each Date of Delivery (if any) counsel for the Underwriters shall have been furnished with such documents and certificates as they may reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be reasonably satisfactory in form and substance to the Representative and counsel for the Underwriters.
(m) Termination of Agreement. If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Underwriters to purchase the relevant Option Securities, may be terminated by the Representative by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7, 8, 14, 15, 16 and 17 shall survive any such termination and remain in full force and effect.
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SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates (as such term is defined in Rule 501(b) under the 1933 Act (each, an “Affiliate”)), its selling agents and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included (A) in any preliminary prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto), or (B) in any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Securities (“Marketing Materials”), including any roadshow or investor presentations made to investors by the Company (whether in person or electronically), or the omission or alleged omission in any preliminary prospectus, Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, Prospectus or in any Marketing Materials of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 6(d) below) any such settlement is effected with the written consent of the Company;
(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Spartan), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.
(b) Indemnification of Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information, the General Disclosure Package or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with the Underwriter Information.
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(c) Actions against Parties; Notification. Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Spartan, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and of the Underwriters, on the other hand, in connection with the statements or omissions, which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company, on the one hand, and the Underwriters, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Underwriters, on the other hand, in each case as set forth on the cover of the Prospectus, bear to the aggregate initial public offering price of the Securities as set forth on the cover of the Prospectus.
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The relative fault of the Company, on the one hand, and the Underwriters, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the underwriting commissions received by such Underwriter in connection with the Securities underwritten by it and distributed to the public.
No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Underwriter’s Affiliates and selling agents shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Underwriters’ respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.
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SECTION 9. Termination of Agreement.
(a) Termination. The Representative may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representative, since the time of execution of this Agreement or since the respective dates as of which information is given in the Registration Statement, the General Disclosure Package or the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NYSE American, or (iv) if trading generally on the New York Stock Exchange or the Nasdaq stock market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or with respect to Clearstream or Euroclear systems in Europe, or (vi) if a banking moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7, 8, 14, 15, 16 and 17 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representative shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative shall not have completed such arrangements within such 24-hour period, then:
(i) if the number of Defaulted Securities does not exceed 10% of the number of Securities to be purchased on such date, each of the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or
(ii) if the number of Defaulted Securities exceeds 10% of the number of Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Underwriters to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery shall terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Underwriters to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representative or (ii) the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the Registration Statement, the General Disclosure Package or the Prospectus or in any other documents or arrangements. As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 10.
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SECTION 11. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to Spartan Capital Securities LLC, 45 Broadway, 19th Floor, New York, NY, 10006 with copies to Manatt, Phelps & Phillips, LLP, Thomas J. Poletti 695 Town Center Drive, 14th Floor, Costa Mesa, CA 92626. Notices to the Company shall be directed to it at Winc, Inc., 1751 Berkeley St., Studio 3, Santa Monica, California 90404, attention of Matthew Thelen, Chief Strategy Officer and General Counsel, with copies to Latham & Watkins LLP at 650 Town Center Drive, 20th Floor, Costa Mesa, California 92626, attention of Drew Capurro, and 140 Scott Drive, Menlo Park, California 94025, attention of Brian Cuneo.
SECTION 12. No Advisory or Fiduciary Relationship. The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial public offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Underwriters, on the other hand, and does not constitute a recommendation, investment advice, or solicitation of any action by the Underwriters, (b) in connection with the offering of the Securities and the process leading thereto, each Underwriter is and has been acting solely as a principal and is not the agent or fiduciary of the Company, any of its subsidiaries or its respective stockholders, creditors, employees or any other party, (c) no Underwriter has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Underwriter has advised or is currently advising the Company or any of its subsidiaries on other matters) and no Underwriter has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Underwriters and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company, and (e) the Underwriters have not provided any legal, accounting, regulatory, investment or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, financial, regulatory and tax advisors to the extent it deemed appropriate, and (f) none of the activities of the Underwriters in connection with the transactions contemplated herein constitutes a recommendation, investment advice or solicitation of any action by the Underwriters with respect to any entity or natural person.
SECTION 13. Recognition of the U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
For purposes of this Section 13, a “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k). “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
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SECTION 14. Parties. This Agreement shall each inure to the benefit of and be binding upon the Underwriters and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 6 and 7 and their heirs and legal representative, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Underwriters and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representative, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 15. Trial by Jury. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
SECTION 16. GOVERNING LAW. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.
SECTION 17. Consent to Jurisdiction; Waiver of Immunity. Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a “Related Judgment”), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.
SECTION 18. TIME. TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 19. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. Electronic signatures complying with the New York Electronic Signatures and Records Act (N.Y. State Tech. §§301-309), as amended from time to time, or other applicable law will be deemed original signatures for purposes of this Agreement. Transmission by telecopy, electronic mail or other transmission method of an executed counterpart of this Agreement will constitute due and sufficient delivery of such counterpart.
SECTION 20. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.
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If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the Underwriters and the Company in accordance with its terms.
Very truly yours, | ||
WINC, INC. | ||
By | ||
Title: |
28
CONFIRMED AND ACCEPTED,
as of the date first above written: |
||
SPARTAN CAPITAL SECURITIES, LLC | ||
By | ||
Authorized Signatory | ||
For itself and as the Representative of the other Underwriters named in Schedule A hereto.
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SCHEDULE A
The initial public offering price per share for the Securities shall be $[--].
The purchase price per share for the Securities to be paid by the several Underwriters shall be $[--], being an amount equal to the initial public offering price set forth above less $[--] per share, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on the Initial Securities but not payable on the Option Securities.
Name of Underwriter |
Number of
Initial Securities |
|||
Spartan Capital Securities, LLC | ||||
Revere Securities LLC | ||||
Total | [--] |
Sch A-1
SCHEDULE B-1
Pricing Terms
1. | The Company is selling [--] shares of Common Stock. |
2. | The Company has granted an option to the Underwriters, severally and not jointly, to purchase up to an additional [--] shares of Common Stock. |
3. | The initial public offering price per share for the Securities shall be $[--]. |
Sch B-1
SCHEDULE B-2
Free Writing Prospectuses
[None.]
Sch B-2
SCHEDULE B-3
Written Testing-the-Waters Communications
[Winc, Inc. Testing-the-Waters Presentation.]
Sch B-3
SCHEDULE C
List of Persons and Entities Subject to Lock-up
1. | Mary Pat Thompson |
2. | Laura Joukovski |
3. | Alessia Pinney |
4. | Patrick DeLong |
5. | Brian Smith |
6. | Carol Brault |
7. | Erin Green |
8. | Geoffrey McFarlane |
9. | Matthew Thelen |
10. | McFarlane Family Trust (affiliated with Geoffrey McFarlane) |
11. | Dreamer Pathway Limited (affiliated with Xiangwei Weng, Shinning Capital) |
12. | Shinningwine Limited (affiliated with Xiangwei Weng, Shinning Capital) |
13. | Dream Catcher Investments (affiliated with Xiangwei Weng, Shinning Capital) |
14. | Rice Wine Ventures (affiliated with Shuhei Ohashi, Cool Japan Fund) |
15. | Sake Ventures (affiliated with Shuhei Ohashi, Cool Japan Fund) |
16. | CrossCut Ventures 2 L.P. (affiliated with CrossCut Ventures) |
17. | C2 Club W Holdings LLC (affiliated with CrossCut Ventures) |
18. | C2 Club W SPV Holdings LLC (affiliated with CrossCut Ventures) |
19. | 15 Angels II LLC (affiliated with Bessemer Venture Partners) |
20. | Bessemer Venture Partners VIII Institutional L.P. (affiliated with Bessemer Venture Partners) |
21. | Wahoowa Ventures LLC (affiliated with Bessemer Venture Partners) |
22. | GoBlue Ventures LLC (affiliated with Bessemer Venture Partners) |
23. | Retail Shareholders (from Series D and E funding) |
24. | [--] |
Sch C
Exhibit A
FORM OF LOCK-UP
________________, 2021
Spartan Capital Securities, LLC
as Representative of the several Underwriters to be named in the
within-mentioned Underwriting Agreement
c/o Spartan Capital Securities, LLC
45 Broadway, 19th Floor
New York, New York 10006
Re: Proposed Initial Public Offering by Winc, Inc.
Dear Ladies & Gentlemen:
The undersigned, a stockholder and/or an officer and/or director of Winc, Inc., a Delaware corporation (the “Company”), understands that Spartan Capital Securities, LLC (“Spartan”) proposes to enter into an Underwriting Agreement (the “Underwriting Agreement”) with the Company providing for the public offering (the “Public Offering”) of shares of the Company’s common stock, par value $$0.0001 per share (the “Common Stock”). In recognition of the benefit that the Public Offering will confer upon the undersigned as a stockholder and/or an officer and/or director of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each underwriter to be named in the Underwriting Agreement that, during the period beginning on the date hereof and ending on the date that is 180 days from the date of the Underwriting Agreement (the “Lock-Up Period”), the undersigned will not, without the prior written consent of Spartan, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for shares of Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”), or exercise any right with respect to the registration of any of the Lock-up Securities, or file, cause to be filed or cause to be confidentially submitted any registration statement in connection therewith, under the Securities Act of 1933, as amended, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of shares of Common Stock or other securities, in cash or otherwise. If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed securities the undersigned may purchase in the Public Offering.
If the undersigned is an officer or director of the Company, (1) Spartan agrees that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, Spartan will notify the Company of the impending release or waiver, and (2) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by Spartan hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if (i) the release or waiver is effected solely to permit a transfer not for consideration and (ii) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
A-1
Notwithstanding the foregoing, and subject to the conditions below, the undersigned may, without the prior written consent of Spartan:
a) | transfer Lock-Up Securities, provided that (1) Spartan receives a signed lock-up agreement for the balance of the Lock-Up Period from each donee, trustee, distributee, or transferee, as the case may be, (2) any such transfer shall not involve a disposition for value, (3) in the case of clauses (i) through (iv) below, such transfers are not required to be reported during the Lock-Up Period with the Securities and Exchange Commission (the “Commission”) on Form 4 in accordance with Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (4) the undersigned does not otherwise voluntarily effect any public filing or report regarding such transfers during the Lock-Up Period: |
(i) | as a bona fide gift or gifts; or |
(ii) | to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin); or |
(iii) | as a distribution to limited partners, members, stockholders or other equity holders of the undersigned; or |
(iv) | to the undersigned’s affiliates or to any investment fund or other entity that, directly or indirectly, controls or manages, is controlled or managed by, or is under common control or management with, the undersigned; or |
(v) | by will or intestate succession upon the death of the undersigned, provided that, any filing under Section 16 of the Exchange Act made during the Lock-Up Period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described above; or |
(vi) | pursuant to a court or regulatory agency order, a qualified domestic order or in connection with a divorce settlement provided that, any filing under Section 16 of the Exchange Act made during the Lock-Up Period shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described above; |
b) | exercise any rights to purchase, exchange or convert any stock options granted to the undersigned pursuant to the Company’s equity incentive plans referred to in the prospectus relating to the Public Offering, or any warrants or other securities convertible into or exercisable or exchangeable for shares of Common Stock, which warrants or other securities are described in the prospectus relating to the Public Offering, provided that (1) any filing under Section 16 of the Exchange Act made during the Lock-Up Period shall clearly indicate in the footnotes thereto that (A) the filing relates to the circumstances described above and (B) the underlying shares of Common Stock continue to be subject to the restrictions on transfer set forth in this lock-up agreement and (2) the undersigned does not otherwise voluntarily effect any other public filings or reports regarding such exercise during the Lock-Up Period; |
A-2
c) | sell or otherwise transfer Lock-Up Securities to the Company in connection with the termination of the undersigned’s employment or other service with the Company, provided that, (1) any filing under Section 16 of the Exchange Act made during the Lock-Up Period shall clearly indicate in the footnotes thereto that (A) the filing relates to the circumstances described above and (B) no Lock-Up Securities were sold by the reporting person other than such transfers to the Company as described above and (2) the undersigned does not otherwise voluntarily effect any other public filings or reports regarding such transfers during the Lock-Up Period; |
d) | transfer Lock-Up Securities pursuant to a bona fide third-party tender offer, or in connection with a merger, consolidation or other similar transaction approved by the Company’s board of directors, made to all holders of the Company’s capital stock involving a change of control of the Company; provided that, in the event that such tender offer, merger, consolidation or other transaction is not completed, such securities shall remain subject to the restrictions on transfer set forth in this lock-up agreement (for purposes hereof, “change of control” shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons, of shares of capital stock of the Company if, after such transaction or transactions, such person or group of affiliated persons would hold more than 50% of the outstanding voting securities of the Company (or the surviving entity)); |
e) | convert shares of preferred stock of the Company into shares of Common Stock in connection with the consummation of the Public Offering, provided that any shares of Common Stock received upon such conversion shall be subject to the terms of this lock-up agreement; and |
f) | transfer Lock-Up Securities to the Company upon (i) a vesting event of any equity award granted under any equity incentive plan or stock purchase plan of the Company described in the prospectus relating to the Public Offering, or (ii) upon the exercise by the undersigned of options or warrants in accordance with clause (b) above, in each case, on a “net” or “cashless” exercise basis, and/or to cover tax withholding obligations of the undersigned in connection therewith, provided, in each case, that (1) any filing under Section 16 of the Exchange Act made during the Lock-Up Period shall clearly indicate in the footnotes thereto that (A) the filing relates to the circumstances described above, as applicable, and (B) no Lock-Up Securities were sold by the reporting person other than such transfers to the Company as described above and (2) the undersigned does not otherwise voluntarily effect any other public filings or reports regarding such transfers during the Lock-Up Period. |
Notwithstanding anything herein to the contrary, nothing in this lock-up agreement shall prevent the undersigned from establishing a 10b5-l trading plan that complies with Rule 10b5-l under the Exchange Act (“10b5-l Trading Plan”) or from amending an existing 10b5-l Trading Plan so long as there are no sales of Lock-Up Securities under such plan during the Lock-Up Period; and provided that, the establishment of a 10b5-1 Trading Plan or the amendment of a 10b5-l Trading Plan, in either case, providing for sales of Lock-Up Securities shall only be permitted if (i) the establishment or amendment of such plan is not required to be reported in any public report or filing with the Commission or otherwise during the Lock-Up Period, and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding the establishment or amendment of such plan during the Lock-Up Period. Furthermore, the undersigned may sell shares of Common Stock purchased by the undersigned from the underwriters in the Public Offering (other than any issuer-directed shares of Common Stock purchased in the Public Offering by an officer or director of the Company) or on the open market following the Public Offering if and only if (i) such sales are not required to be reported during the Lock-Up Period in any public report or filing with the Commission, or otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding such sales during the Lock-Up Period.
A-3
The undersigned acknowledges and agrees that the underwriters have not provided any recommendation or investment advice nor have the underwriters solicited any action from the undersigned with respect to the Public Offering of the shares and the undersigned has consulted their own legal, accounting, financial, regulatory and tax advisors to the extent deemed appropriate.
The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions.
The undersigned understands that, if (1) the execution of the Underwriting Agreement in connection with the Public Offering shall not have occurred on or before December 31, 2021, (2) the Company files an application to withdraw the registration statement relating to the Public Offering, (3) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Stock to be sold thereunder, (4) Spartan, on behalf of the underwriters, advises the Company, or the Company advises Spartan, in each case in writing, prior to the execution of the Underwriting Agreement, that they have determined not to proceed with the Public Offering, the undersigned shall be released from all obligations under this lock-up agreement; provided, however, that in the case of (1), the Company may, by written notice to the undersigned prior to such date, extend such date for a period of up to three additional months. This lock-up agreement may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or www.echosign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
[Signature page as follows]
A-4
Very truly yours, | ||
Signature: | ||
Print Name: |
Entity Name, if applicable: |
[Winc Lock-Up Signature Page]
A-5
Exhibit B
Form of Press Release
TO BE ISSUED PURSUANT TO SECTION 3(j)
[Date]
Winc, Inc. (the “Company”) announced today that Spartan Capital Securities, LLC, the lead book-running manager in the Company’s recent public sale of [--] shares of common stock, is [waiving] [releasing] a lock-up restriction with respect to [--] shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on [--], 20[--], and the shares may be sold on or after such date.
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.
B-1
Exhibit 3.1b
SECOND Certificate of amendment
to THE
NINTH amended and restated
CERTIFICATE OF INCORPORATION
OF
WINC, INC.,
a Delaware corporation
Winc, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify:
FIRST: The name of the Corporation is Winc, Inc. The original Certificate of Incorporation of the corporation was filed with the Office of the Secretary of State of the State of Delaware on August 11, 2011 under the name “Club W, Inc.”
SECOND: That (a) the board of directors of the Corporation has duly adopted a resolution pursuant to Sections 141 and 242 of the General Corporation Law of the State of Delaware proposing that the Corporation’s Ninth Amended and Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) be further amended as set forth below (the “Second Amendment to the Amended and Restated Certificate of Incorporation”) and (b) the stockholders of the Corporation duly approved and adopted the Second Amendment to the Amended and Restated Certificate of Incorporation by written consent in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware.
THIRD: That Section 5.1 of Article VI of the Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows:
“5.1 Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least a majority of the then outstanding shares of Preferred Stock (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock (including, without limitation, Series A Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series Seed Preferred Stock) shall automatically be converted into shares of Common Stock, at the then effective conversion rate as calculated pursuant to Subsection 4.1.1 and (ii) such shares may not be reissued by the Corporation.”
IN WITNESS WHEREOF, the Corporation has caused this Second Certificate of Amendment to the Amended and Restated Certificate of Incorporation to be executed this 25th day of October, 2021, in its name and on its behalf by its Chief Executive Officer pursuant to Section 103 of the General Corporation Law of the State of Delaware.
WINC, INC. | |
/s/ Geoffrey McFarlane | |
Geoffrey McFarlane | |
Chief Executive Officer |
Exhibit 4.1
Form of Representative’s Warrant Agreement
COMMON STOCK PURCHASE WARRANT
For the Purchase of [_____] Shares of Common Stock
of
WINC, INC.
1. Purchase Warrant. THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of Spartan Capital Securities, LLC (“Holder”), as registered owner of this Purchase Warrant, Winc, Inc., a Delaware corporation (the “Company”), Holder is entitled, at any time or from time to time at or before 5:00 p.m., Eastern time, [____________] [DATE THAT IS FIVE YEARS FROM THE EFFECTIVE DATE OF THE REGISTRATION STATEMENT] (the ”Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up to [____]1 shares of common stock of the Company, par value $0.0001 per share (the “Shares”), subject to adjustment as provided in Section 6 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. This Purchase Warrant is initially exercisable at $[___] per Share [110% of the public offering price of the Initial Securities sold in the Offering]; provided, however, that upon the occurrence of any of the events specified in Section 6 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, depending on the context. The term “Effective Date” shall mean [_________], 2021, the date on which the Registration Statement on Form S-1 (File No. 333-259828) (the “IPO Registration Statement”) of the Company was declared effective by the Securities and Exchange Commission.
2. Exercise.
2.1. Exercise Form. In order to exercise this Purchase Warrant, the exercise form attached hereto must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
2.2. Cashless Exercise. In lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 2.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:
X | = | Y(A-B) | |
A |
Where, | |||
X | = | The number of Shares to be issued to Holder; | |
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | |
A | = | The fair market value of one Share; and | |
B | = | The Exercise Price. |
1 3.0% of shares sold in Offering.
1
For purposes of this Section 2.2, the fair market value of a Share is defined as follows:
(i) | if the Company’s common stock is traded on a securities exchange, the value shall be deemed to be the closing price on such exchange on the trading day immediately prior to the date on which the exercise form is submitted in connection with the exercise of the Purchase Warrant; |
(ii) | if the Company’s common stock is actively traded over-the-counter, the value shall be deemed to be the closing bid price on the trading day immediately prior to the date on which the exercise form is submitted in connection with the exercise of the Purchase Warrant; or |
(iii) | if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors. |
3. | Transfer. |
3.1. General Restrictions. The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant or the Shares issuable hereunder for a period of one hundred eighty (180) days following the Effective Date to anyone other than: (i) Spartan Capital Securities, LLC (“Spartan”) or an underwriter or a selected dealer participating in the offering made pursuant to the IPO Registration Statement, or (ii) a bona fide officer or partner of Spartan or of any such underwriter or selected dealer, in each case in accordance with FINRA Conduct Rule 5110(e)(1), or (b) cause this Purchase Warrant or the Shares issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(e)(2). On and after 180 days after the Effective Date, transfers to others may be made subject to compliance with or exemptions from applicable securities laws. In order to make any permitted assignment, the Holder must deliver to the Company the assignment form attached hereto duly executed and completed, together with the Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) business days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new Purchase Warrant or Purchase Warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
3.2. Ownership of Warrants The Company may treat the registered holder of this Warrant in the books of the Company as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, except that, if and when any Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer thereof as the owner of such Warrant for all purposes, notwithstanding any notice to the contrary.
4. | Registration Rights. |
4.1. | “Piggy-Back” Registration. |
4.1.1. Grant of Right. Subject to Section 4.1.3, the Holder shall have the right, for a period of no more than seven (7) years from the Effective Date in accordance with FINRA Rule 5110(g)(8)(D), to include all or any portion of the Shares underlying the Purchase Warrants (excluding any Shares which have been transferred and the subsequent disposition thereof no longer requires registration or qualification under the Securities Act or any similar state law then in force) (collectively, the “Registrable Securities”) as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any underwritten public offering involving the offer and sale of the Company’s common stock, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of common stock which may be included in the registration statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such registration statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made in a manner consistent with the exclusion of securities as set forth in the Company’s amended and restated investor’s rights agreement.
2
4.1.2. Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 4.1.1 hereof, but the Holders shall pay any and all underwriting commissions and fees and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days’ written notice prior to the anticipated effective date of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of the anticipated effective date of the registration statement. Except as otherwise provided in this Purchase Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 4.1.2; provided, however, that such registration rights shall terminate on the seventh anniversary of the Commencement Date.
4.1.3. Expiration. Notwithstanding anything herein to the contrary, Shares acquired following an exercise of the Purchase Warrants shall cease to constitute Registrable Securities if the Holder holds less than 1% of the Company’s outstanding common stock and all common stock held by the Holder (and its affiliates) may be sold pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, during any ninety (90) day period.
4.2. | General Terms. |
4.2.1. Indemnification. The Company shall indemnify the Holders of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 6(a) of the Underwriting Agreement between the Underwriters and the Company, dated as of [___________], 2021. The Holders of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 6(b) of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
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4.2.2. Exercise of Purchase Warrants. Nothing contained in this Purchase Warrant shall be construed as requiring the Holders to exercise their Purchase Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
4.2.3. Documents Delivered to Holders. In the sale by the Holders is an underwritten offering, the Company shall furnish to Holder participating in such offering and each underwriter of any such offering, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the Company dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
4.2.4. Underwriting Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 4, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.
4.2.5. Documents to be Delivered by Holders. Each of the Holders participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
4.2.6. Damages. Should the registration or the effectiveness thereof required by Sections 4.1 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holders shall, in addition to any other legal or other relief available to the Holders, be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
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5. | New Purchase Warrants to be Issued. |
5.1. Partial Exercise or Transfer. Subject to the restrictions in Section 3 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 2.1 hereto, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
5.2. Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
6. | Adjustments. |
6.1. Adjustments to Exercise Price and Number of Securities. The Exercise Price and the number of Shares underlying the Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:
6.1.1. Share Dividends; Split Ups. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a split up of Shares or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding Shares, and the Exercise Price shall be proportionately decreased.
6.1.2. Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 6.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of Shares or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding Shares, and the Exercise Price shall be proportionately increased.
6.1.3. Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding Shares other than a change covered by Section 6.1.1 or 6.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the outstanding Shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a holder of the number of Shares of the Company issuable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 6.1.1 or 6.1.2, then such adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section 6.1.3. The provisions of this Section 6.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
6.1.4. Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 6.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued pursuant to this Agreement. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
5
6.2. Substitute Purchase Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 6. The above provision of this Section shall similarly apply to successive consolidations or share reconstructions or amalgamations.
6.3. Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of the Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
7. Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of the Purchase Warrants, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Purchase Warrants and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as the Purchase Warrants shall be outstanding, the Company shall use its commercially reasonable efforts to cause all Shares issuable upon exercise of the Purchase Warrants to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the Shares issued to the public in the Offering may then be listed and/or quoted.
8. Certain Notice Requirements.
8.1. No Rights as Stockholder. No Holder shall be entitled to vote or receive dividends or distributions or be deemed the holder of any equity securities which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or distributions, or to share in the assets of the Company in the event of a liquidation, dissolution or the winding up of the Company, until the Purchase Warrant shall have been exercised and the Shares shall have become deliverable, as provided herein.
6
8.2. Certain Notices. If at any time prior to the expiration of the Purchase Warrants and their exercise, any of the events described in Section 8.3 shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in the same manner that such notice is given to the stockholders.
8.3. Events Requiring Notice. The Company shall be required to give the notice described in this Section 8 upon one or more of the following events: (i) if the Company shall take a record of the holders of its Shares for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; (ii) the Company shall offer to all the holders of its Shares any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
8.4. Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 6 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.
8.5. Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made when hand delivered or mailed by express mail or private courier service: (i) if to the registered Holder of the Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:
If to the Holder:
Spartan Capital Securities, LLC
45 Broadway, 19th Floor
New York, New York 10006
Attn:
Fax No.:
with a copy (which shall not constitute notice) to:
Manatt, Phelps & Phillips, LLP
695 Town Center Drive, 14th Floor
Costa Mesa, CA 92626
Attn: Thomas J. Poletti
Fax No.: (714) 371-2551
7
If to the Company:
Winc, Inc.
1751 Berkeley St., Studio 3
Santa Monica, California 90404
Attn: Matthew Thelen, Chief Strategy Officer and General Counsel
with a copy (which shall not constitute notice) to:
Latham & Watkins LLP
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attn: Drew Capurro
and
140 Scott Drive,
Menlo Park, California 94025
Attn: Brian Cuneo
9. | Miscellaneous. |
9.1. Amendments. The Company and Spartan may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Spartan may deem necessary or desirable and that the Company and Spartan deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.
9.2. Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
9.3. Entire Agreement. This Purchase Warrant (together with the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
9.4. Binding Effect. This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
9.5. Governing Law; Submission to Jurisdiction; Trial by Jury. This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
8
9.6. Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
9.7. Execution in Counterparts. This Purchase Warrant or any amendment hereto may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.
[Signature Page Follows]
9
IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the ____ day of _______, 2021.
WINC, INC.
By: | ||
Name: | ||
Title: |
[Form to be used to exercise Purchase Warrant]
Date: __________, 20___
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for ______ shares of common stock, par value $0.0001 per share (the “Shares”), of Winc, Inc., a Delaware corporation (the “Company”), and hereby makes payment of $____ (at the rate of $____ per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
Or
The undersigned is entitled to pursuant to Section 2.2 of the Purchase Warrant, and hereby elects irrevocably, to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
X | = | Y(A-B) | ||||
A | ||||||
Where, | ||||||
X | = | The number of Shares to be issued to Holder; | ||||
Y | = | The number of Shares for which the Purchase Warrant is being exercised; | ||||
A | = | The fair market value of one Share which is equal to $_____; and | ||||
B | = | The Exercise Price which is equal to $______ per share | ||||
The undersigned agrees and acknowledges that the calculation and its ability set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been converted.
Signature |
Signature Guaranteed |
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name: | ||
(Print in Block Letters) |
Address: | ||
NOTICE: The signature to this form must correspond with the name as written upon the face of the Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
[Form to be used to assign Purchase Warrant]
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto ___________________the right to purchase shares of common stock, par value $0.0001 per share, of Winc, Inc., a Delaware corporation (the “Company”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right on the books of the Company.
Dated: __________, 20__
Signature |
Signature Guaranteed |
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
Exhibit 5.1
650 Town Center Drive, 20th Floor | ||
Costa Mesa, California 92626-1925 | ||
Tel: +1.714.540.1235 Fax: +1.714.755.8290 | ||
www.lw.com | ||
|
FIRM / AFFILIATE OFFICES | |
Austin | Milan | |
Beijing | Moscow | |
Boston | Munich | |
Brussels | New York | |
Century City | Orange County | |
Chicago | Paris | |
Dubai | Riyadh | |
November 2, 2021 | Düsseldorf | San Diego |
Frankfurt | San Francisco | |
Hamburg | Seoul | |
Hong Kong | Shanghai | |
Houston | Silicon Valley | |
London | Singapore | |
Los Angeles | Tokyo | |
Madrid | Washington, D.C. |
Winc, Inc.
1751 Berkeley St, Studio 3
Santa Monica, CA 90404
Re: | Form S-1 Registration Statement (File No. 333-259828) of Winc, Inc. |
Ladies and Gentlemen:
We have acted as special counsel to Winc, Inc., a Delaware corporation (the “Company”), in connection with the proposed issuance of (i) up to 1,769,231 shares of common stock, $0.0001 par value per share (the “Shares”) and (ii) warrants to purchase up to 53,077 shares of Common Stock (the “Warrants”). The Shares and the Warrants are included in a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”), filed with the Securities and Exchange Commission (the “Commission”) on September 27, 2021 (Registration No. 333-259828) (as amended, the “Registration Statement”). The terms “Shares” and “Warrants” shall include any additional securities registered by the Company pursuant to Rule 462(b) under the Act in connection with the offering contemplated by the Registration Statement. This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related prospectus (the “Prospectus”), other than as expressly stated herein with respect to the issue of the Shares and the Warrants.
As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to the internal laws of the State of New York and the General Corporation Law of the State of Delaware (the “DGCL”), and we express no opinion with respect to any other laws.
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof:
1. | When the Shares shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the purchasers and have been issued by the Company against payment therefor in the circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the DGCL. |
November 2, 2021 Page 2 |
2. | When the Warrants shall have been duly registered on the records maintained by the Company for that purpose in the name or on behalf of the purchasers, and have been issued by the Company against payment therefor in the circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Warrants will have been duly authorized by all necessary corporate action of the Company, and the Warrants will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. |
3. | When the shares of Common Stock initially issuable upon exercise of the Warrants shall have been duly registered on the books of the transfer agent and registrar therefor in the name of or on behalf of the Warrant holders, and have been issued by the Company against payment therefor (not less than par value) in the circumstances contemplated by the Warrants, such shares of Common Stock will have been duly authorized by all necessary corporate action of the Company, and will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the DGCL. |
Our opinions set forth in numbered paragraph are subject to: (i) the effect of bankruptcy, insolvency, reorganization, preference, fraudulent transfer, moratorium or other similar laws relating to or affecting the rights and remedies of creditors; (ii) (a) the effect of general principles of equity, whether considered in a proceeding in equity or at law (including the possible unavailability of specific performance or injunctive relief), (b) concepts of materiality, reasonableness, good faith and fair dealing, and (c) the discretion of the court before which a proceeding is brought; and (iii) the invalidity under certain circumstances under law or court decisions of provisions providing for the indemnification of or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. We express no opinion as to (a) any provision for liquidated damages, default interest, late charges, monetary penalties, make-whole premiums or other economic remedies to the extent such provisions are deemed to constitute a penalty, (b) consents to, or restrictions upon, governing law, jurisdiction, venue, arbitration, remedies, or judicial relief, (c) waivers of rights or defenses, (d) any provision requiring the payment of attorneys’ fees, where such payment is contrary to law or public policy, (e) the creation, validity, attachment, perfection, or priority of any lien or security interest, (f) advance waivers of claims, defenses, rights granted by law, or notice, opportunity for hearing, evidentiary requirements, statutes of limitation, trial by jury or at law, or other procedural rights, (g) waivers of broadly or vaguely stated rights, (h) provisions for exclusivity, election or cumulation of rights or remedies, (i) provisions authorizing or validating conclusive or discretionary determinations, (j) grants of setoff rights, (k) proxies, powers and trusts, (l) provisions prohibiting, restricting, or requiring consent to assignment or transfer of any right or property, (m) any provision to the extent it requires that a claim with respect to a security denominated in other than U.S. dollars (or a judgment in respect of such a claim) be converted into U.S. dollars at a rate of exchange at a particular date, to the extent applicable law otherwise provides, and (n) the severability, if invalid, of provisions to the foregoing effect.
November 2, 2021 Page 3 |
With your consent, we have assumed (a) that the Warrants have been or will be duly authorized, executed and delivered by the parties thereto other than the Company, (b) that such securities constitute or will constitute legally valid and binding obligations of the parties thereto other than the Company, enforceable against each of them in accordance with their respective terms, and (c) that the status of the Warrants as legally valid and binding obligations of the parties will not be affected by any (i) breaches of, or defaults under, agreements or instruments, (ii) violations of statutes, rules, regulations or court or governmental orders, or (iii) failures to obtain required consents, approvals or authorizations from, or to make required registrations, declarations or filings with, governmental authorities.
This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.” We further consent to the incorporation by reference of this letter and consent into any registration statement filed pursuant to Rule 462(b) with respect to the Shares and the Warrants. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
Very truly yours, | |
/s/ Latham & Watkins LLP |
Exhibit 10.3(a)
AMENDMENT TO
Winc, Inc. 2013 STOCK PLAN
This Amendment (“Amendment”) to the Winc, Inc. 2013 Stock Plan, as amended (the “Plan”) is adopted by the Board of Directors (the “Board”) of Winc, Inc., a Delaware corporation (the “Company”), effective as of October 25, 2021 (the “Effective Date”). Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to such terms in the Plan.
RECITALS
A. | The Company currently maintains the Plan. |
B. | Pursuant to Section 11 of the Plan, the Board has the authority to at any time amend the Plan, subject to approval of the Company’s stockholders to the extent required by applicable law (including an increase in the number of Shares (as defined in the Plan) available for issuance under the Plan). |
C. | The Board believes it is in the best interests of the Company and its stockholders to amend the Plan to increase the aggregate number of Shares reserved and available for issuance under the Plan. |
AMENDMENT
The Plan is hereby amended as follows, effective as of the date on which the Company’s stockholders approve this Amendment, except as otherwise provided below:
1. | Section 4(a). The first sentence of Section 4(a) of the Plan is hereby deleted and replaced in its entirety with the following: |
“Not more than 3,256,906 Shares may be issued under the Plan, subject to Subsection (b) below and Section 8(a).”
2. | This Amendment shall be and, as of the date on which the Company’s stockholders approve this Amendment, is hereby incorporated in and forms a part of the Plan. |
3. | Except as expressly provided herein, all terms and conditions of the Plan shall remain in full force and effect. |
*****
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Registration Statement (No. 333-259828) on Amendment No. 2 to Form S-1 of Winc, Inc. of our report dated June 18, 2021, except for the effects of the reverse stock split described in Note 2 as to which the date is October 13, 2021, relating to the consolidated financial statements of Winc, Inc., appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our firm under the heading “Experts” in such Prospectus.
/s/ Baker Tilly US, LLP
Los Angeles, CA
November 2, 2021