Item 2.01. Completion of Acquisition or Disposition of
Assets.
On December 16, 2020,
FEAC held a Special Meeting at which the FEAC stockholders considered and adopted, among other matters, the Merger Agreement. On
December 16, 2020, the parties to the Merger Agreement consummated the Transactions. Pursuant to the Merger Agreement, FEAC has
acquired all of the outstanding equity interests of Old Skillz for cash and/or stock in New Skillz calculated based on the per
share merger consideration value formula as set forth in the Merger Agreement and, in the case of the shares of common stock of
New Skillz, calculated based on a price of $10 per share.
Holders of shares
of Old Skillz received the merger consideration in the form of shares of New Skillz common stock as consideration for
359,518,849 shares of Old Skillz including shares with respect to which no election for cash or stock was received
(“Stock Election Shares”) and holders of shares of Old Skillz received cash consideration as consideration
for 75,786,931 shares of Old Skillz (“Cash Election Shares”).
The aggregate value
of the consideration paid to Old Skillz stockholders in the Business Combination was approximately $3.5 billion, of which $566,204,151.81
was paid for Cash Election Shares and an aggregate of 268,596,411 shares were issued in consideration for Stock Election Shares.
In connection
with the Closing, (i) each option exercisable for Old Skillz equity that was outstanding and unexercised immediately prior to
the effective time of the Business Combination was converted into a newly issued option exercisable for Class A common stock
of New Skillz (other than in the case of the Founder, who will receive options exercisable for Class B common stock of New
Skillz, subject to the same terms and conditions as the Old Skillz awards), (ii) each warrant to purchase shares of Old
Skillz capital stock that was issued and outstanding immediately prior to the effective time of the Business Combination and
has not been terminated pursuant to its terms will have been converted into a warrant exercisable for Class A common stock of
New Skillz on the same terms and conditions as applied to the existing warrants to purchase Old Skillz capital stock, and
(iii) in respect of each unvested share of restricted stock that was unvested immediately prior to the effective time of the
Business Combination, (A) each share of restricted stock (other than those held by an individual who has waived the right to
accelerate the vesting of such stock) became immediately vested and the holder entitled to receive the applicable per share
merger consideration, less applicable tax withholding, if any, and (B) each share of restricted stock held by an individual
who has waived the right to accelerate the vesting of such stock has been cancelled and converted into restricted shares of
New Skillz stock, subject to the same terms and conditions as the Old Skillz awards.
Pursuant to the
Merger Agreement, Sponsor delivered 10,000,000 of its shares of FEAC Class B common stock into escrow that are subject to
forfeiture if certain earnout conditions described more fully in the Merger Agreement are not satisfied. If the earnout
conditions are fully satisfied, 5,000,000 of such shares will be released to the Sponsor in the form of shares of Class A
common stock of New Skillz, and the other 5,000,000 shares will be released to the Old Skillz stockholders, who will receive
shares of New Skillz common stock as a result of the Business Combination in the form of shares of Class A common stock of
New Skillz (other than the Founder and a trust for the benefit of his family members, who will receive shares of Class B
common stock of New Skillz), in each case as further described in the Merger Agreement.
The shares of Class
B common stock of New Skillz have the same economic terms as the shares of Class A common stock of New Skillz, but the shares of
Class B common stock of New Skillz have 20 votes per share. The outstanding shares of Class B common stock of New Skillz are subject
to a “sunset” provision if the Founder and other permitted holders of Class B common stock collectively cease to beneficially
own at least 20% of the number of shares of Class B common stock of New Skillz collectively held by the Founder and the Founder’s
permitted transferees as of the effective date of the Business Combination.
Prior to the
Special Meeting, holders of 2,140 shares of FEAC’s Class A common stock sold in FEAC’s initial public offering
(“Public Shares”) exercised their right to redeem those shares for cash at a price of approximately $10.00
per share, for an aggregate of $21,400.00. Immediately after giving effect to the Business Combination (including as a result
of the redemptions described above), there were 291,706,860 issued and outstanding shares of New Skillz Class A common stock
and 78,090,663 shares of New Skillz Class B common stock issued and outstanding.
Upon the Closing, FEAC’s
Class A common stock and warrants ceased trading, and New Skillz’s Class A common stock and warrants began trading on The
New York Stock Exchange LLC (the “NYSE”). FEAC’s public units automatically separated into their component
securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted
from the NYSE. As of the Closing Date, our directors and executive officers and affiliated entities beneficially owned approximately
29% of the outstanding shares of Skillz common stock, and the former securityholders of FEAC beneficially owned approximately 26%
of the outstanding shares of New Skillz common stock.
Forward-Looking Statements
This Current
Report on Form 8-K, or some of the information incorporated herein by reference, contains statements that are forward-looking
and as such are not historical facts. This includes, without limitation, statements regarding the financial position,
business strategy and the plans and objectives of management for future operations. These statements constitute projections,
forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the
fact that they do not relate strictly to historical or current facts. When used in this Current Report on Form 8-K, words
such as “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,”
“possible,” “potential,” “predict,” “project,” “should,”
“strive,” “would” and similar expressions may identify forward-looking statements, but the absence of
these words does not mean that a statement is not forward-looking. When the Company discusses its strategies or plans, it is
making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as
assumptions made by and information currently available to, New Skillz’s management. Forward-looking statements in this
Current Report on Form 8-K and in any document incorporated by reference in this Report may include, for example, statements
about:
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·
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our rapid growth may not be sustainable and depends on our ability to attract and retain end-users;
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·
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our business could be harmed if we fail to manage our growth effectively;
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we have a history of losses and we may be unable to achieve profitability;
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our projections are subject to risks, assumptions, estimates and uncertainties;
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·
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we rely on our third-party developer partners to continue to offer the competitive experience in existing and new games on
our platform;
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·
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a limited number of games account for a substantial portion of our revenue;
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·
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we rely on third-party service providers including cloud computing services, payment processors, and infrastructure service
providers, and if we cannot manage our relationships or lose access to such third parties, our business, financial condition, results
of operations and prospects could be adversely affected;
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·
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failure to maintain our brand and reputation could harm our business, financial condition and results of operations;
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·
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the broader entertainment industry is highly competitive and our existing and potential users may be attracted to competing
forms of entertainment;
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our business is subject to a variety of U.S. and foreign laws, which are subject to change and could adversely affect our business;
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·
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failure to protect or enforce our intellectual property rights could harm our business, results of operations and financial
condition;
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·
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economic downturns and political and market conditions beyond our control could adversely affect our business, financial condition
and results of operations; and
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·
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failure to properly contain COVID-19 or another global pandemic in a timely manner could materially affect how we and our business
partners are operating.
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The forward-looking
statements contained in this Current Report on Form 8-K and in any document incorporated by reference are based on current expectations
and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments
affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these forward-looking statements.
These risks and uncertainties
include, but are not limited to, those factors described in the Proxy in the section titled “Risk Factors”,
which is incorporated herein by reference. Should one or more of these risks or uncertainties materialize, or should any of our
assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required under applicable securities laws.
Business
The business of FEAC
prior to the Business Combination is described in the Proxy in the section titled “Other Information Related to FEAC”
and that information is incorporated herein by reference. The business of New Skillz is described in the Proxy in the section titled
“Business of New Skillz” and that information is incorporated herein by reference.
Risk Factors
The risk factors related
to the Company’s business and operations are set forth in the Proxy in the section titled “Risk Factors—Risks
Related to Skillz’s Business and Industry” and that information is incorporated herein by reference.
Financial Information
Reference is made to
the disclosure set forth in Item 9.01 of this Current Report on Form 8-K concerning the financial information of FEAC. Reference
is further made to the disclosure contained in the Proxy in the sections titled “Selected Historical Consolidated Financial
Information of FEAC,” “Selected Historical Consolidated Financial Information of Skillz”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations of FEAC”, and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations of Skillz”, which are incorporated herein by reference.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Reference is made to the disclosure contained in the Proxy in
the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of FEAC”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Skillz”,
which are incorporated herein by reference.
Quantitative and Qualitative Disclosures about Market
Risk
Reference is made to
the disclosure contained in the Proxy in the sections titled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations of Skillz —Quantitative and Qualitative Disclosures About Market Risk”, which
is incorporated herein by reference.
Properties
The properties of New
Skillz are described in the Proxy in the section titled “Business of New Skillz—Property” and that information
is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners
and Management
The following table
sets forth information known to the Company regarding the beneficial ownership of Company common stock as of the Closing Date by:
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each person known to the Company to be the beneficial owner of more than 5% of outstanding Company common stock;
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·
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each of the Company’s executive officers and directors; and
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all executive officers and directors of the Company as a group.
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Beneficial ownership
is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if
he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently
exercisable or exercisable within 60 days. Company stock issuable upon exercise of options and warrants currently exercisable within
60 days are deemed outstanding solely for purposes of calculating the percentage of total voting power of the beneficial owner
thereof.
The beneficial
ownership of Company common stock is based on 291,709,860 shares of New Skillz Class A common stock and 78,090,663 shares of
New Skillz Class B common stock issued and outstanding as of the Closing Date.
Unless otherwise indicated,
the Company believes that each person named in the table below has sole voting and investment power with respect to all shares
of New Skillz common stock beneficially owned by them.
Name and Address of
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Number of
shares of Class
A Common
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Number of
shares Class B
Common
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% of Total
Voting
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Beneficial Owner
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stock
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%
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stock
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%
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Power**
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Andrew Paradise(1)(3)
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3,572,888
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1.0
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%
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84,048,478
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22.3
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%
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84.3
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%
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Casey Chafkin(1)(2)
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16,410,957
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4.4
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%
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—
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—
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—
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Harry Sloan(1)
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—
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—
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—
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—
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—
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Kent Wakeford(1)(2)
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1,651,905
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*
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—
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—
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*
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Vandana Mehta-Krantz(1)
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—
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—
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—
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—
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—
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Miriam Aguirre(1)(2)
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2,741,564
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*
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—
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—
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*
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Scott Henry(1)
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—
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—
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—
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—
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—
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All Directors and Executive Officers of New Skillz as a Group (Seven Individuals)
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24,377,314
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6.6
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%
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84,048,478
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22.3
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%
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84.5
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%
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Five Percent Holders:
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Atlas Venture Fund, IX L.P. (4)
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23,980,289
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6.5
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%
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—
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—
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1.2
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%
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Entities Affiliated with WestCap Management LLC(5)
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21,743,740
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5.9
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%
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—
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—
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1.1
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%
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Bonderman Family Limited Partnership(6)
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21,433,040
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5.8
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%
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—
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—
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1.1
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%
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*
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Denotes less than 1%
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**
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Percentage of total voting power represents voting power with
respect to all shares of New Skillz Class A common stock and New Skillz Class B common stock, as a single class.
Each share of New Skillz Class B common stock is entitled to 20 votes per share and each share of New Skillz
Class A common stock is entitled to one vote per share.
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(1)
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The business address of each of these stockholders is P.O. Box 445, San Francisco, CA 94104.
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(2)
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Amounts exclude such holder’s pro rata share of 5,000,000 shares of New Skillz Class A common stock placed in escrow for the benefit of the Old Skillz stockholders pursuant to the terms of the Earnout Escrow Agreement.
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(3)
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Includes 3,572,888 shares of New Skillz Class A
common stock held in escrow pursuant to the terms of the Earnout Escrow Agreement. Founder, as representative of the Old
Skillz stockholders, has voting control over, but no pecuniary interest in, such shares. Also includes 1,427,112 shares of
New Skillz Class B common stock held in escrow pursuant to the terms of the Earnout Escrow Agreement as to which Founder
has voting control, as representative of the Old Skillz stockholders, and a pecuniary interest as a result of his ownership
of shares of Old Skillz common stock.
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(4)
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Atlas Venture Fund IX, L.P. (“Atlas IX”)
holds shares directly in New Skillz. Atlas Venture Associates IX, L.P. (“AVA IX LP”) is the sole general partner
of Atlas IX. Atlas Venture Associates IX, LLC (“AVA IX LLC”) is the sole general partner of AVA IX LP.
Each of Atlas IX, AVA IX LP and AVA IX LLC disclaims beneficial ownership of all shares except to the extent of its pecuniary
interest, if any, therein. The business address of each of Atlas IX, AVA IX LP and AVA IX LLC is c/o Accomplice, 56 Wareham
Street, Floor 3, Boston, MA 02118.
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(5)
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Includes shares held by WestCap Skillz 2020 Co-Invest, LLC, WestCap Skillz, LLC, WestCap Skillz 2020-A, LLC, WestCap Skillz 2020-A1, LLC and WestCap Skillz 2020, LLC. WestCap Management, LLC is the managing member of each of WestCap Skillz 2020 Co-Invest, LLC, WestCap Skillz, LLC, WestCap Skillz 2020-A1, LLC and WestCap Skillz 2020, LLC. Laurence A. Tosi is the sole owner of WestCap Management, LLC. Each of Mr. Tosi and WestCap Management, LLC has voting and dispositive power over, and may be deemed to beneficially own, the shares held by WestCap Skillz 2020 Co-Invest, LLC, WestCap Skillz, LLC, WestCap Skillz 2020-A1, LLC and WestCap Skillz 2020, LLC. Each of Mr. Tosi and WestCap Management, LLC expressly disclaims beneficial ownership of such shares except to the extent of its pecuniary interest therein. The business address of each of Mr. Tosi and WestCap Management, LLC is 590 Pacific Avenue, San Francisco, California 94133.
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(6)
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Wildcat Capital Management, LLC (“Wildcat”)
has voting and dispositive power over the shares held by Bonderman Family Limited Partnership (“BFLP”)
pursuant to BFLP’s limited partnership agreement and an investment management agreement to which Wildcat and BFLP are
parties. Leonard Potter is the sole member of, and is an officer of, Wildcat. Each of Wildcat and Mr. Potter may be deemed to
be beneficially own the shares held by BFLP and expressly disclaims beneficial ownership of such shares except to the extent
of any pecuniary interest therein. The address for BFLP is 301 Commerce Street, Suite 3150, Fort Worth, Texas 76102.
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Directors and Executive Officers
The Company’s
directors and executive officers after the consummation of the Transactions are described in the Proxy in the section titled “Directors
and Executive Officers of New Skillz After the Business Combination” and that information is incorporated herein by reference.
Director Independence
Information with respect
to the independence of the Company’s directors is set forth in the Proxy in the section titled “New Skillz Management
After the Business Combination—Independence of the Board of Directors; Summary of the Proxy Statement/Prospectus—Controlled
Company Exemption” and that information is incorporated herein by reference.
Committees of the Board of Directors
Information with respect
to the composition of the committees of the Board immediately after the Closing is set forth in the Proxy in the section titled
“New Skillz Management After the Business Combination” and that information is incorporated herein by reference.
Executive Compensation
A description of the
compensation of the named executive officers of FEAC before the consummation of the Business Combination and the named executive
officers of New Skillz after the consummation of the Business Combination is set forth in the Proxy in the sections titled “Other
Information Related to FEAC—Executive Compensation and Director Compensation” and “New Skillz Management
After the Business Combination”, respectively, and that information is incorporated herein by reference.
At the Special Meeting,
the FEAC stockholders approved the Incentive Plan. The description of the Incentive Plan is set forth in the Proxy section titled
“The Incentive Award Plan Proposal”, which is incorporated herein by reference. A copy of the full text of the
Incentive Plan is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. Following the
consummation of the Business Combination, the Company expects that the Board or the Compensation Committee will make grants of
awards under the Incentive Plan to eligible participants.
At the Special Meeting,
the FEAC stockholders considered and approved the ESPP. The description of the ESPP is set forth in the Proxy in the section titled
“The ESPP Proposal,” which is incorporated herein by reference. A copy of the full text of the ESPP is filed
as Exhibit 10.2 hereto and incorporated herein by reference.
Director Compensation
A description of the
compensation of the directors of FEAC before the consummation of the Business Combination and is set forth in the Proxy in the
sections titled “Other Information Related to FEAC—Executive Compensation and Director Compensation,”
“Skillz’s Executive and Director Compensation,” and “New Skillz Management After the Business
Combination”, respectively, and that information is incorporated herein by reference.
Certain Relationships and Related Party Transactions
Certain relationships
and related party transactions of the Company are described in the Proxy in the section titled “Certain Relationships
and Related Person Transactions” and that information is incorporated herein by reference.
In connection with
the closing of the Business Combination, Skillz entered into note cancellation agreements (the “Note Cancellation Agreements”)
with each of Founder and Casey Chafkin. Pursuant to the Note Cancellation Agreements, certain promissory notes issued by Founder
and Mr. Chafkin to Old Skillz were repaid and satisfied in full through the surrender of shares of capital stock of Old Skillz.
The foregoing description
of the Note Cancellation Agreements does not purport to be complete and is qualified in its entirety by reference to the full text
of the Note Cancellation Agreements, which are filed as Exhibits 10.8 and 10.9 hereto and incorporated herein by reference.
Legal Proceedings
Reference is made to
the disclosure regarding legal proceedings in the section of the Proxy titled “Other Information Related to FEAC—Legal
Proceedings” and “Business of New Skillz —Legal Proceedings” and that information is incorporated
herein by reference.
Market Price of and Dividends on the Registrant’s
Common Equity and Related Stockholder Matters
Information about the
ticker symbol, number of stockholders and dividends for FEAC’s securities is set forth in the Proxy in the section titled
“Market Price, Ticker Symbol and Dividend Information” and such information is incorporated herein by reference.
As of the Closing Date,
there were approximately 313 holders of record of the Company’s Class A common stock and approximately nine holders of record
of the Company’s warrants to purchase Class A common stock.
New Skillz’s
Class A common stock and warrants began trading on the NYSE under the symbols “SKLZ” and “SKLZ.WS”, respectively,
on December 17, 2020. FEAC’s public units automatically separated into their component securities upon consummation of the
Business Combination and, as a result, no longer trade as a separate security and were delisted from the NYSE.
New Skillz has not
paid any cash dividends on shares of its Class A common stock to date. The payment of cash dividends in the future will be dependent
upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any dividends will
be within the discretion of the Board.
Recent Sales of Unregistered Securities
Reference is made to
the disclosure set forth below under Item 3.02 of this Current Report on Form 8-K concerning the issuance and sale by the Company
of certain unregistered securities, which is incorporated herein by reference.
Description of Registrant’s Securities to
Be Registered
The description of
the Company’s securities is contained in the Proxy in the section titled “Description of New Skillz Securities”
and that information is incorporated herein by reference.
Immediately
following the Closing, there were 291,706,860 shares of the Company’s Class A common stock issued and outstanding, held
of record by 313 holders, 78,090,663 shares of the Company’s Class B common stock issued and outstanding, held of
record by two holders, no shares of preferred stock outstanding, and 22,314,801 warrants outstanding held of record by nine
holders. Such amounts do not include DTC participants or beneficial owners holding shares through nominee names.
Indemnification of Directors and Officers
New Skillz has
entered into indemnification agreements with each of its directors and executive officers. Each indemnification agreement
provides for indemnification and advancements by New Skillz of certain expenses and costs relating to claims, suits or
proceedings arising from his or her service to New Skillz or, at our request, service to other entities, as officers or
directors to the maximum extent permitted by applicable law.
Further information
about the indemnification of New Skillz’s directors and officers is set forth in the Proxy in the section titled “Indemnification
of Directors and Officers” and that information is incorporated herein by reference.