As filed with the Securities and Exchange Commission on April 20, 2023
Registration No. 333-
SBIG Holdings, Inc S-1, filed Apr 20, 2023
SBIG Holdings, Inc. (SBIG)
S-1
2023-04-20
View Original
Added on
October 24, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SPRINGBIG HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
|
| |
7371
|
| |
88-2789488
|
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
| |
(Primary Standard Industrial
Classification Code Number)
|
| |
(I.R.S. Employer
Identification Number)
|
621 NW 53rd Street
Suite 260
Boca Raton, Florida 33487
(800) 772-9172
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
Jeffrey Harris
Chief Executive Officer
621 NW 53rd Street
Suite 260
Boca Raton, Florida 33487
(800) 772-9172
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of agent for service)
Copies to:
|
William E. Doran
Aslam A. Rawoof
Benesch, Friedlander, Coplan & Aronoff LLP
71 South Wacker Drive, Suite 1600
Chicago, Illinois 60606
Telephone: (312) 212-4949
|
| |
Charles Phillips
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105
Telephone: (212) 370-1300
|
Approximate date of commencement of proposed sale
to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in
Rule 12b-2of the Exchange Act.
|
Large accelerated filer
|
| |
☐
|
| |
|
| |
|
| |
Accelerated filer
|
| |
☐
|
|
Non-accelerated filer
|
| |
☒
|
| |
|
| |
|
| |
Smaller reporting company
|
| |
☒
|
|
|
| |
|
| |
|
| |
|
| |
Emerging growth company
|
| |
☒
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not
permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL 20, 2023
Shares of Common Stock
Series A Warrants to Purchase up to Shares of Common Stock
(and up to Shares of Common Stock Underlying the Series A Warrants)
Series B Warrants to Purchase up to Shares of Common Stock
(and up to Shares of Common Stock Underlying the Series B Warrants)
Pre-Funded Warrants to Purchase up to Shares of Common Stock
(and up to Shares of Common Stock Underlying the Pre-Funded Warrants)
This is a best efforts public offering of shares of our common
stock, Series A Warrants to purchase up to shares of our common stock (the “Series A Warrants”), Series B Warrants to purchase up to shares of our common stock (the “Series B Warrants”, collectively with the Series A Warrants, the “Common
Stock Warrants”), and the shares of common stock underlying the Common Stock Warrants, at a combined public offering price of $ per share of common stock and accompanying Common Stock Warrants. Each Series A Warrant is exercisable immediately
for one share of common stock at an exercise price of $ share and will expire five years from the initial exercise date. Each Series B Warrant is exercisable immediately for one share of common stock at an exercise price of $ share and will
expire years from the initial exercise date. Additionally, each Series B Warrant will also have an alternative cashless exercise option (beginning on the date of issuance), to receive an aggregate number of shares equal to the product of
(x) the aggregate number of shares of common stock that would be issuable upon a cash exercise and (y) .
We are also offering to those purchasers, if any, whose purchase
of common stock in this offering would otherwise result in any such purchaser, together with its affiliates, beneficially owning more than 4.99% (or, at the election of such purchaser, 9.99%) of our outstanding common stock immediately
following the consummation of this offering, the opportunity to purchase pre-funded warrants in lieu of shares of our common stock that would otherwise result in such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of such
purchaser, 9.99%) of our outstanding common stock. The purchase price for each pre-funded warrant will equal the per share public offering price for the common stock in this offering less the $0.0001 per share exercise price of each such
pre-funded warrant. Each pre-funded warrant will be exercisable upon issuance and will not expire prior to exercise. For each pre-funded warrant that we sell, the number of shares of common stock that we are selling will be decreased on a
one-for-one basis.
Our common stock is quoted for trading on the Nasdaq Global
Market under the symbol “SBIG.” On , 2023, the last reported sales price for our common stock was $ per share. The actual public offering price per share and accompanying Common Stock Warrants will be determined between us, the Placement
Agent (as defined below) and the investors in the offering, and may be at a discount to then current market price of our common stock. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the
final public offering price. There is no established trading market for the Common Stock Warrants or pre-funded warrants and we do not expect a market to develop. We do not intend to apply for listing of the Common Stock Warrants or pre-funded
warrants on any national securities exchange or trading system. Without an active trading market, the liquidity of the Common Stock Warrants and the pre-funded warrants will be limited.
We are an “emerging growth company” under the
federal securities laws and are subject to reduced public company reporting requirements. Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk
Factors” beginning on page 10 of this prospectus, and under similar headings in any amendment or supplements to this prospectus.
We have engaged Roth Capital Partners, LLC as our exclusive
placement agent (“Roth” or the “Placement Agent”) to use its reasonable best efforts to solicit offers to purchase our securities in this offering. The Placement Agent has no obligation to purchase any of the securities from us or to arrange
for the purchase or sale of any specific number or dollar amount of the securities. Because there is no minimum offering amount required as a condition to closing in this offering the actual public amount, placement agent’s fee, and proceeds to
us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above and throughout this prospectus. We have agreed to pay the Placement Agent the placement agent fees set forth in the
table below and to provide certain other compensation to the Placement Agent. See “Plan of Distribution” beginning on page 93 of this prospectus for more information regarding these arrangements.
This offering will terminate on December , 2023, unless we
decide to terminate the offering (which we may do at any time in our discretion) prior to that date. We will have one closing for all the securities purchased in this offering. The combined public offering price per share, or pre-funded
warrant, and Common Stock Warrants will be fixed for the duration of this offering.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
|
|
| |
Per Share and related
Common Stock Warrants(3)
|
| |
Per Pre-Funded
Warrant and related
Common Stock Warrants(3)
|
| |
Total
|
|
Public offering price(1)
|
| |
$
|
| |
$
|
| |
$
|
|
Placement Agent fees(2)
|
| |
$
|
| |
$
|
| |
$
|
|
Proceeds to use before offering expenses(4)
|
| |
$
|
| |
$
|
| |
$
|
|
(1)
|
The public offering price corresponds to (x)(i) a public offering price per share of $ and (ii) a public offering price
per Common Stock Warrant of $0.0001, and (y)(i) a public offering price per pre-funded warrant of $ and (ii) a public offering price per Common Stock Warrant of $0.0001.
|
|
(2)
|
Does not reflect additional compensation to the Placement Agent in the form of warrants to purchase up to shares of common
stock at an exercise price equal to 100% of the public offering price. We have also agreed to reimburse the Placement Agent for certain expenses. See “Plan of Distribution” on page 93 of this prospectus for a
description of these arrangements.
|
|
(3)
|
Based on an assumed public offering price of $ per share of common stock and associated Common Stock Warrants, or in the
case of pre-funded warrants, $ per pre-funded warrant to purchase one share of common stock and associated Common Stock Warrants. The final public offering price per share and associated Common Stock Warrants or pre-funded warrant to
purchase one share of common stock and associated Common Stock Warrants, as the case may be, will be determined by the Company, Placement Agent and the investors in this offering and may be a discount to the market price of the
Company’s common stock.
|
|
(4)
|
Because there is no minimum number of securities or amount of proceeds required as a condition to closing in this offering,
the actual public offering amount, placement agent fees, and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above. For more information, see “Plan
of Distribution.” We estimate the total expenses of this offering will be approximately $ .
|
We expect this offering to be completed within two business days
following the commencement of this offering and we will deliver all securities to be issued in connection with this offering delivery versus payment upon receipt of investor funds received by us. Accordingly, there is no arrangement to receive
or place investor funds in an escrow, trust or any similar account.
We expect to deliver our shares, Common Stock Warrants and
pre-funded warrants, if any, to purchasers in the offering on or about , 2023.
Roth Capital Partners
The date of this prospectus is , 2023.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-1
that we filed with the U.S. Securities and Exchange Commission (the “SEC”). You should read this prospectus and any prospectus supplements we may file carefully. Such documents contain important information you should consider when making your
investment decision. See “Where You Can Find Additional Information” in this prospectus.
You should rely only on the information
contained in this prospectus or in any prospectus supplements we may file. We have not authorized anyone to provide you with information different from, or in addition to, that contained in this prospectus or in any prospectus supplements we
may file. The information contained in this prospectus or in any prospectus supplements we may file is current only as of their respective dates or on the date or dates that are specified in those documents. Our business, financial condition,
results of operations and prospects may have changed since those dates.
We are not offering to sell or seeking offers to purchase these
securities in any jurisdiction where the offer or sale is not permitted. We have not done anything that would permit this offering (the “Offering”) or possession or distribution of this prospectus in any jurisdiction where action for that
purpose is required, other than in the United States. Persons outside the jurisdiction of the United States who come into possession of this prospectus are required to inform themselves about and to observe any restrictions relating to this
Offering and the distribution of this prospectus applicable to that jurisdiction.
We may also use a prospectus supplement and any related free
writing prospectus to add, update or change any of the information contained in this prospectus. This prospectus, together with any applicable prospectus supplements and any related free writing prospectuses, includes all material information
relating to this offering. To the extent that any statement that we make in a prospectus supplement is inconsistent with statements made in this prospectus, the statements made in this prospectus will be deemed modified or superseded by those
made in a prospectus supplement.
Unless the context indicates otherwise, references in this
prospectus to the “Company,” “SpringBig,” “we,” “us,” “our” and similar terms refer to SpringBig Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries.
Unless otherwise indicated, information contained in this
prospectus concerning our industry and the markets in which we operate is based on information from independent industry and research organizations, other third-party sources (including industry publications, surveys and forecasts), and
management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us
upon reviewing such data and our knowledge of such industry and markets, which we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information.
In addition, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk
Factors” and “Cautionary Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
i
As used in this document, references to:
“amended and restated merger agreement” are to the agreement and
plan of merger, dated as of April 14, 2022,by and among Tuatara, Merger Sub and Legacy SpringBig, as amended and restated by Amendment No. 1, dated as of May 4, 2022;
“amended and restated registration rights agreement” are to the
Amended and Restated Registration Rights Agreement entered into, by and among Tuatara, Sponsor, Legacy SpringBig, and the other signatories thereto;
“business combination” are to the transactions contemplated by the
merger agreement;
“Canadian CRTC” are to the Canadian Radio-Television and
Telecommunications Commission;
“Cannabis Act” are to the Cannabis Act (Canada);
“Cantor” or “Holder” are to CF Principal Investments LLC;
“Cantor Equity Facility” are to the Common Stock Purchase
Agreement and Cantor Registration Rights Agreement, related to a committed equity facility by which SpringBig has the right to sell to CF Principal Investments LLC up to $50,000,000 of newly issued Common Stock;
“Cantor Registration Rights Agreement” are to the registration
rights agreement, dated as of April 29, 2022, by and between Tuatara and Cantor;
“Code” are to the Internal Revenue Code of 1986, as amended;
“Common Stock” or “Shares” are to the shares of Common Stock of
SpringBig Holdings, Inc., par value $0.0001 per share;
“Common Stock Purchase Agreement” are to the Common Stock Purchase
Agreement, dated as of April 29, 2022, by and between Tuatara and the Holder, as amended by Amendment No. 1, dated July 20, 2022;
“Company,” “SpringBig,” “we,” “us,” “our” and similar terms are to
SpringBig Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries;
“COVID-19” are to SARS-Cov-2 or COVID-19, and any evolutions
thereof or related or associated epidemics, pandemics or disease outbreaks;
“CSA” are to the U.S. Controlled Substances Act of 1970, as
amended;
“DGCL” are to the Delaware General Corporation Law, as amended;
“effective time” are to the effective time of the certificate of
merger effecting the merger contemplated by the amended and restated merger agreement;
“Exchange Act” are to the Securities Exchange Act of 1934, as
amended;
“FCC” are to the United States Federal Communications Commission;
“GAAP” are to United States generally accepted accounting
principles;
“Legacy SpringBig” are to SpringBig, Inc., a Delaware corporation,
prior to the business combination, and a wholly-owned subsidiary of SpringBig following the business combination;
“merger” are to the merger evidenced by a certificate of merger
between Merger Sub and Legacy SpringBig pursuant to which Merger Sub merged with and into Legacy SpringBig, with Legacy SpringBig continuing as the surviving entity and a subsidiary of SpringBig;
“merger agreement” are to the original merger agreement and the
amended and restated merger agreement, collectively, as amended or modified from time to time, by and among Tuatara, Merger Sub and Legacy SpringBig;
“Merger Sub” are to HighJump Merger Sub, Inc., a Delaware
corporation and a wholly owned direct subsidiary of Tuatara;
“Nasdaq” are to The Nasdaq Stock Market LLC;
ii
“Notes and Warrants Purchase Agreement” are to that certain
securities purchase agreement, dated April 29, 2022, as amended by the Amendment to Purchase Agreement, dated December 1, 2022, and Amendment No. 2 to the Purchase Agreement, dated December 28, 2022, between the Company and L1 Capital Global
Opportunities Master Fund (the “Investor”), pursuant to which the Company agreed to sell up to (i) a total of up to $16 million of 6% Senior Secured Original Issue Discount Convertible Notes due 2024 (the “L1 Notes”) and (ii) a number of
warrants equal to one-half of the principal of the Notes actually issued, divided by the volume weighted average price (“VWAP”) on the trading day prior to such Note issuance date (the “Investor Warrants”), in a private placement.
“original merger agreement” are to the agreement and plan of
merger, dated as of November 8, 2021, by and among Tuatara, Merger Sub and SpringBig;
“PIPE subscription financing” are to the aggregate $13,100,000 of
proceeds from the issuance of the subscription shares;
“Public Warrants” means warrants issued to holders of the public
Tuatara Class A ordinary shares upon conversion of warrants to purchase Tuatara Class A ordinary shares in connection with the business combination.
“SaaS” are to software-as-a-service;
“Securities Act” are to the Securities Act of 1933, as amended;
“Sponsor” are to TCAC Sponsor, LLC a Delaware limited liability
company;
“TCPA” are to the United States Telephone Consumer Protection Act
of 1991, as amended;
“transfer agent” are to Continental Stock Transfer & Trust
Company, as transfer agent;
“Tuatara,” “we,” “our” or “us” are to Tuatara Capital Acquisition
Corporation, an exempted company incorporated under the laws of the Cayman Islands, the predecessor entity to SpringBig; and
“$,” “US$” and “U.S. dollar” each refer to the United States
dollar.
iii
This prospectus contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or
strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words
“anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “become,” “potential,” “predict,” “project,” “should,” “would,” “opportunity,” “mission,” “goal,” “positioned” and similar
expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this prospectus are
based on our current expectations and beliefs concerning future developments and their potential effects on us taking into account information currently available to us. There can be no assurance that future developments affecting us will be
those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our 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 include, but are not limited to:
|
•
|
trends in the cannabis industry and SpringBig’s market size, including with respect to the potential total addressable market
in the industry;
|
|
•
|
SpringBig’s growth prospects;
|
|
•
|
new product and service offerings SpringBig may introduce in the future;
|
|
•
|
the price of SpringBig’s securities, including volatility resulting from changes in the competitive and highly regulated
industry in which SpringBig operates and plans to operate, variations in performance across competitors, changes in laws and regulations affecting SpringBig’s business and changes in the combined capital structure;
|
|
•
|
the ability to implement business plans, forecasts, and other expectations as well as identify and realize additional
opportunities; and
|
|
•
|
other risks and uncertainties indicated from time to time in filings made with the SEC.
|
These risks are not exhaustive. New risk factors emerge from time
to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements. Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. Except as required
by law, we undertake no obligation to update or revise any forward looking statements whether as a result of new information, future events or otherwise. You should not take any statement regarding past trends or activities as a representation
that the trends or activities will continue in the future.
iv
This summary highlights selected information
appearing elsewhere in this prospectus. Because it is a summary, it may not contain all of the information that may be important to you. To understand this offering fully, you should read this entire prospectus and the registration statement
of which this prospectus is a part carefully, including the information set forth under the heading “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements.
Overview of the Company
SpringBig is a market-leading software platform providing
customer loyalty and marketing automation solutions to cannabis retailers and brands in the U.S. and Canada. SpringBig’s platform connects consumers with retailers and brands, through SMS marketing, emails, customer feedback system, and
loyalty programs, to support retailers’ and brands’ customer engagement and retention. SpringBig offers marketing automation solutions that provide for consistency of customer communication, which retailers and brands can use to drive
customer retention and retail foot traffic. Additionally, SpringBig’s reporting and analytics offerings deliver valuable insights that clients utilize to better understand their customer base, purchasing habits and trends.
SpringBig’s services and products support cannabis retailers and
brand marketing as described below:
Retail Offering
|
•
|
SpringBig’s platform offers retailers text message marketing, which allows clients to send promotions to existing
customers. This text messaging platform offers a variety of features, including multiple customer segmentations, which automatically groups customers into segments based on their preferences and purchase behavior. Retailers also have
access to the “autoconnects” feature, which allows them to easily leverage customer data and send messages directly to consumers based on certain actions and also includes functionality to help clients identify opportunities to send
text messages. SpringBig also provides an e-signature app, designed to accommodate proper ‘double opt-in’ procedure, through both implied and expressed consent to facilitate compliance with the TCPA, FCC, and Canadian CRTC.
|
|
•
|
The consumer application (or wallet) offered by SpringBig allows customers to access and check their points, redeem
rewards, and view upcoming offers. The wallet fully integrates with cannabis e-commerce providers, allowing customers to place orders directly from their wallet. Retailers can customize this application with a distinct icon, name,
layout, and color scheme, thus allowing for brand consistency and a higher-quality and frictionless customer experience.
|
|
•
|
Retailers can use the SpringBig platform to compile marketing campaigns based on consumer profiles and preferences. Once a
campaign launches, retailers are able to analyze in-depth data in order to measure campaign success. Enterprise Resource Planning (or ERP)-level customer data management and analysis also allow retailers to organize their sales funnel
and provide a personalized, targeted approach to marketing campaigns.
|
|
•
|
SpringBig’s platform integrates with many point of sale (“POS”) systems used in the cannabis industry, allowing retailers
to automatically collect additional data on consumers.
|
Brand Marketing Platform
|
•
|
SpringBig has a brand marketing platform that offers a direct-to-consumer marketing automation platform specifically for
cannabis brands. This direct-to-consumer marketing engine allows brands to target and measure the complete transaction cycle from initial engagement through point of sale.
|
|
•
|
SpringBig provides brands with the opportunity to provide content that, in turn, SpringBig’s retail clients can utilize in
their targeted consumer marketing campaigns. This provides the brand with access to the consumer and that can be leveraged through the brand and retailer cooperating in a promotional campaign on the SpringBig platform. The SpringBig
platform can be used by brands to increase their brand awareness, expand retail partnerships, and acquire and retain new customers. The SpringBig brands platform also provides brand clients with access to detailed reports regarding
campaign attribution metrics.
|
1
Background and Recent Developments
Concurrent Offerings and Resales
In addition to this prospectus covering the best efforts public
offering of shares of Common Stock, Common Stock Warrants and the shares of Common Stock underlying the Common Stock Warrants, and pre-funded warrants to purchase up to shares of Common Stock, at a combined public offering price
of $ per share of Common Stock and accompanying Common Stock Warrants, the Company has filed a (a) registration statement registering the offer and resale from time to time by certain selling securityholders, or their permitted
transferees, of up to 4,510,940 shares of Common Stock underlying the L1 Notes and Investor Warrants, (b) registration statement registering the offer and resale from time to time by Cantor of up to 5,055,524 shares of Common Stock issued
pursuant to the Common Stock Purchase Agreement and (c) registration statement registering the offer and resale from time to time by certain selling securityholders, or their permitted transferees, of up to (A) 21,590,291 shares of Common
Stock, which includes (i) 1,341,356 PIPE Shares, (ii) 4,000,000 shares of Common Stock (the “Founder Shares”) originally issued in a private placement to the Sponsor, and (iii) 16,248,935 shares of Common Stock issued in connection with the
business combination for which holders have registration rights, (B) the 16,000,000 shares of our Common Stock issuable upon the exercise of the public and private warrants and (C) 6,000,000 private placement warrants. The shares of Common
Stock being offered for sale pursuant to this prospectus and being offered for resale pursuant to the other prospectuses described above represent approximately % of the shares of Common Stock outstanding of the Company as of March 28,
2023 (assuming all shares of Common Stock under the Cantor Equity Facility are issued, as well as the issuance of shares of Common Stock upon exercise of all warrants and the conversion of the L1 Notes); such shares of Common Stock being
offered for resale collectively would constitute % of the resulting outstanding shares of Common Stock of the Company on a diluted basis after giving effect to all such issuances (including the exercise of all warrants and conversion of
the L1 Notes).
See “Risk Factors—Risks Related to the Offering—We are engaged
in multiple transactions and offerings of Company securities. Future resales and/or issuances of shares of Common Stock, including pursuant to this prospectus may cause the market price of our shares to drop significantly.”
Preliminary Proxy Statement
On April 18, 2023, the Company filed a preliminary proxy
statement on Schedule 14A with the SEC in advance of its scheduled 2023 annual meeting to be held on Tuesday, June 13, 2023, at 10:00 a.m. Eastern Time (the “Annual Meeting”). There are four matters scheduled for a vote at the Annual Meeting:
|
•
|
Proposal No. 1 – To elect two directors to hold office until the 2024 Annual Meeting of Stockholders and until their
successors have been duly elected and qualified;
|
|
•
|
Proposal No. 2 – To ratify the selection by the Audit Committee of the Board of Directors of the Company (the “Board”) of
Marcum LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023; and
|
|
•
|
Proposal No. 3 – To amend the Company’s 2022 Long-Term Incentive Plan to add an automatic annual increase in the number of
shares authorized for issuance of up to 5% of the number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding calendar year, beginning with the fiscal year ending December 31, 2023; provided
that the annual increase with respect to the fiscal year ending December 31, 2023, which is 1,332,986 shares of Common Stock, will take effect on the first business day following the date of stockholder approval of this Proposal No. 3
(also known as an “evergreen feature”) (the “Equity Incentive Plan Proposal”); and
|
|
•
|
Proposal No. 4 – To approve the adoption of an amendment to the Company’s Certificate of Incorporation, to be filed not
later than June 11, 2024, to effect a reverse stock split of our Common Stock at a ratio in the range of 5-for-1 to 30-for-1 (the “Reverse Split”), with such ratio to be determined in the discretion of the Board and publicly disclosed
prior to the effectiveness of the Reverse Split.
|
Upon the recommendation of the Nominating and Corporate
Governance Committee, the Board has considered and nominated Amanda Lannert and Jon Trauben to serve as Class I Directors for a three-year term expiring at the 2026 annual meeting.
2
The information in this prospectus does not assume the
approval the Incentive Plan Proposal or any effectiveness of any Reverse Split. The Board has unanimously recommended that the stockholders of the Company vote “For” each of the proposals described above but there can be no assurance as to
the outcome of any vote.
Summary Risk Factors
The following is a summary of select risks and uncertainties
that could materially adversely affect us and our business, financial condition and results of operations. Before you invest in our Common Stock, you should carefully consider all the information in this prospectus, including matters set
forth under the heading “Risk Factors,” immediately following this prospectus summary. These risks include the following, among others:
Risks Related to this Offering
|
•
|
We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
|
|
•
|
You will experience immediate and substantial dilution in the net tangible book value of the shares you purchase in this
offering and may experience additional dilution in the future.
|
|
•
|
There is no public market for the Common Stock Warrants or pre-funded warrants being offered by us in this offering.
|
|
•
|
The Common Stock Warrants and pre-funded warrants are speculative in nature.
|
|
•
|
Holders of the warrants offered hereby will have no rights as common stockholders with respect to the shares of our Common
Stock underlying the warrants until such holders exercise their warrants and acquire our Common Stock, except as otherwise provided in the warrants.
|
|
•
|
This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the amount of
capital we believe is required for our business plans, including our near-term business plans.
|
Risks Related to Our Business and Industry
|
•
|
We have a relatively short operating history in a rapidly evolving industry, which makes it difficult to evaluate our
future prospects and may increase the risk that we will not be successful. As our costs increase, we may not be able to generate sufficient revenue to become profitable or maintain profitability in the future.
|
|
•
|
If we do not successfully develop and deploy new software, platform features or services to address the needs of our
clients, if we fail to retain our existing clients or acquire new clients, and/or if we fail to expand effectively into new markets, our revenue may decrease and our business may be harmed.
|
|
•
|
We have a significant working capital deficiency and a history of losses, may need to raise additional funds to meet our
obligations and sustain our operations, and may not achieve profitability in the future. There is substantial doubt as to our ability to continue as a going concern.
|
|
•
|
Federal law enforcement may deem our clients to be in violation of U.S. federal law, and, in particular the CSA. A change
in U.S. federal policy on cannabis enforcement and strict enforcement of federal cannabis laws against our clients would undermine our business model and materially affect our business and operations.
|
|
•
|
Some of our clients currently and in the future may not be in compliance with licensing and related requirements under
applicable laws and regulations. We further cannot ensure that our clients will conduct their business in a way that complies with all laws. Allowing unlicensed or noncompliant businesses to access our platform and services, or
allowing businesses to use our solutions in a noncompliant manner, may subject us to legal or regulatory enforcement and negative publicity, which could adversely impact our business, operating results, financial condition, brand and
reputation.
|
|
•
|
Our business is dependent on U.S. state laws and regulations and Canadian federal and provincial laws and regulations
pertaining to the cannabis industry, its continued legalization, and the rapid changes in applicable laws and regulations may increase the risk that we will not be successful. We are subject to various standards, laws and regulations
and any actual or perceived failure to comply with such obligations could harm our business.
|
3
|
•
|
Our business is dependent on the market acceptance of cannabis consumers and negative trends could adversely affect our
business operations.
|
|
•
|
Our business is highly dependent upon our brand recognition and reputation, and any erosion or degradation of our brand
recognition or reputation would likely adversely affect our business and operating results.
|
|
•
|
We currently face intense competition in marketing and advertising services available to our clients, and we expect
competition to further intensify as the cannabis industry continues to evolve.
|
|
•
|
If we fail to predict and/or manage our growth effectively, our brand, business and operating results could be harmed.
|
|
•
|
If we are unable to recruit, train, retain and motivate key personnel, we may not achieve our business objectives.
|
|
•
|
If our current marketing model is not effective in attracting new clients, we may need to employ higher-cost sales and
marketing methods to attract and retain clients, which could adversely affect our profitability.
|
|
•
|
We may be unable to scale and adapt our existing technology and network infrastructure in a timely or effective manner to
ensure that our platform is accessible, which would harm our reputation, business and operating results.
|
|
•
|
Real or perceived errors, failures, or bugs in our platform or cyber security breaches, unauthorized access or other events
could adversely affect our operating results and growth prospects and/or subject us to significant liability.
|
|
•
|
The impact of global, regional or local economic and market conditions or events may adversely affect our business,
operating results and financial condition.
|
|
•
|
Investors should not rely on outdated financial projections.
|
|
•
|
We may improve our products and solutions in ways that forego short-term gains.
|
|
•
|
Future investments in our growth strategy, including acquisitions, could disrupt our business and adversely affect our
operating results, financial condition and cash flows.
|
|
•
|
We may need to raise additional capital, which may not be available on favorable terms, if at all, causing dilution to our
stockholders, restricting our operations or adversely affecting our ability to operate our business. Further, we may be unable to obtain such financing.
|
|
•
|
Our obligations to the holder of the L1 Notes are secured by a security interest in substantially all of our assets, so if
we default on those obligations, the noteholders could foreclose on, liquidate and/or take possession of our assets. If that were to happen, we could be forced to curtail, or even to cease, our operations. The L1 Notes also restricts
our ability obtain additional debt and equity financing, which may restrict our ability to grow and finance our operations.
|
|
•
|
We may be subject to potential adverse tax consequences.
|
|
•
|
Changes in accounting standards or other factors could negatively impact our future effective tax rate.
|
Additional Risks Related to the Cannabis Industry
|
•
|
Cannabis remains illegal under federal law, and therefore, strict enforcement of federal laws regarding cannabis would
likely result in our inability to execute our business plan.
|
|
•
|
Our business and our clients are subject to a variety of U.S. and foreign laws regarding financial transactions related to
cannabis, which could subject our clients to legal claims or otherwise adversely affect our business.
|
|
•
|
We are dependent on our banking relations, and we may have difficulty accessing or consistently maintaining banking or
other financial services due to our connection with the cannabis industry.
|
|
•
|
Due to our involvement in the cannabis industry, we may have a difficult time obtaining the various insurances that are
desired to operate our business and/or in enforcing certain of our commercial contracts, which may expose us to additional risk and financial liability.
|
4
Risks Related to Our Intellectual Property
|
•
|
We may in the future be, subject to disputes and assertions by third parties with respect to alleged violations of
intellectual property rights. These disputes could be costly to defend and could harm our business and operating results.
|
|
•
|
Some of our solutions contain open source software, which may pose particular risks to our proprietary software and
solutions.
|
|
•
|
The success of our business heavily depends on our ability to protect and enforce our intellectual property rights.
|
Risks Related to Our Securities and Certain Tax Matters
|
•
|
If we fail to meet all applicable requirements of the Nasdaq, and Nasdaq determines to delist our Common Stock, the
delisting could adversely affect the market liquidity of our Common Stock and the market price of our Common Stock could decrease.
|
|
•
|
We do not intend to pay cash dividends for the foreseeable future.
|
|
•
|
We may be subject to securities litigation, which is expensive and could divert management attention.
|
|
•
|
A significant portion of our total outstanding shares may be issued and/or sold into the market in the near future. This
would result in dilution to existing shareholders and could cause the market price of our shares of Common Stock to drop significantly, even if our business is doing well.
|
|
•
|
We may amend the terms of our public and private warrants in a manner that may be adverse to holders with the approval by
the holders of at least 65% of then outstanding Public Warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of shares of Common Stock purchasable upon
exercise of a warrant could be decreased, all without the approval of all security holders.
|
|
•
|
We have and will continue to incur increased costs as a result of operating as a public company and our management has and
will continue to devote a substantial amount of time to new compliance initiatives.
|
Corporate Information
We were originally formed on January 24, 2020 under the name
“Tuatara Capital Acquisition Corporation,” as a blank check company incorporated as a Cayman Islands exempted company, incorporated for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses. On June 13, 2022, in anticipation of the consummation of the previously announced business combination among Tuatara, Merger Sub and Legacy SpringBig, Tuatara changed
its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware and it then changed its name to SpringBig Holdings,
Inc.
Our principal executive office is located at 621 NW 53rd Street,
Suite 260, Boca Raton, Florida 33487. Our telephone number is (800) 772-9172. Our website address is www.springbig.com. Information contained on our website is not a part of this prospectus, and the inclusion of our website address in this
prospectus is an inactive textual reference only.
Legal Proceedings
From time to time, we may become involved in legal or regulatory
proceedings arising in the ordinary course of our business. We do not currently, however, expect such legal proceedings to have a material adverse effect on our business, operating results or financial condition. However, depending on the
nature and timing of a given dispute, an unfavorable resolution could materially affect our current or future results of operations or cash flows.
Smaller Reporting Company
We are a “smaller reporting company” and will remain a smaller
reporting company if either (i) the market value of our stock held by non-affiliates was less than $250 million as of the last business day of our most recently completed second fiscal quarter, or (ii) our annual revenue was less than
$100 million during our most recently
5
completed fiscal year and the market value of our stock held by non-affiliates
was less than $700 million as of the last business day of our most recently completed second fiscal quarter. We intend to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies, such as
reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from
certain disclosure and other requirements that are applicable to other public companies that are not smaller reporting companies.
Emerging Growth Company
Section 102(b)(1) of the Jumpstart Our Business Startups Act of
2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities
Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the
extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition periods which means that
when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised
standard. This may make comparison of SpringBig’s financial statements with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period
difficult or impossible because of the potential differences in accounting standards used.
6
SUMMARY OF THE OFFERING
Shares of Common Stock Offered by Us
Shares of Common Stock.
Common Stock Warrants Offered by Us
Series A Warrants to purchase up to shares of our Common Stock, which will
be exercisable immediately and ending five years from the initial exercise date at an exercise price of $ per share of Common Stock. Series B Warrants to purchase up to shares of our Common Stock, which will be exercisable immediately
and ending years from the initial exercise date at an exercise price of $ per share of Common Stock.
Pre-funded Warrants Offered by Us
We are also offering to certain purchasers whose purchase of our Common Stock
in this offering would otherwise result in the purchaser, together with its affiliates, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding shares of Common Stock immediately following the
consummation of this offering, the opportunity to purchase pre-funded warrants in lieu of Common Stock that would otherwise result in any such purchaser’s beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of
our outstanding shares of Common Stock. Each pre-funded warrant will be exercisable for one share of Common Stock. The purchase price of each pre-funded warrant and the accompanying Common Stock Warrants will equal the price at which the
Common Stock and the accompanying Common Stock Warrants is being sold to the public in this offering, minus $0.0001, and the exercise price of each pre-funded warrant will be $0.0001 per share. The pre-funded warrants will be exercisable
immediately and may be exercised at any time until exercised in full. For each pre-funded warrant we sell, the number of shares of Common Stock we are offering will be decreased on a one-for-one basis. Because we will issue one Series A
Warrant and one Series B Warrant for each share of Common Stock and for each pre-funded warrant to purchase one share of Common Stock sold in this offering, the number of Common Stock Warrants sold in this offering will not change as a result
of a change in the mix of the shares of our Common Stock and pre-funded warrants sold.
Public Offering Price
$ per share of Common Stock and accompanying Common Stock Warrants, or
pre-funded warrants and accompanying Common Stock Warrants, as applicable.
Common Stock outstanding after this offering
Shares (assuming we sell only shares of Common Stock and no pre-funded
warrants, and none of the Common Stock Warrants issued in this offering are exercised).
7
Except as otherwise indicated, all information in this
prospectus is based on 26,940,841 shares of Common Stock outstanding as of March 28, 2023 and excludes the following: (i) options to purchase an aggregate of 3,394,753 shares of our Common Stock, (ii) warrants to purchase an aggregate of
16,586,980 shares of our Common Stock, (iii) 1,314,000 shares of our Common Stock underlying unvested restricted stock units and (iv) 211,175 shares of our Common Stock reserved for future issuance under our 2022 Plan. Unless otherwise
indicated, all information in this prospectus assumes no exercise of the outstanding options or warrants described above and no exercise of any pre-funded warrants, Common Stock Warrants or Placement Agent Warrants offered hereby.
Use of proceeds
We estimate that we will receive net proceeds from this offering of
approximately $ based upon an assumed offering price of $ per share of Common Stock and accompanying Common Stock Warrant, or pre-funded warrant and accompanying Common Stock Warrant, as applicable, which was also the last reported
trading price of our Common Stock on The Nasdaq Global Market on , 2023, after deducting Placement Agent fees and estimated offering expenses payable by us. We currently intend to use the net proceeds we receive from this offering for
working capital and general corporate purposes, which may include, among other purposes, servicing our ongoing debt obligations under our 6% Senior Secured Original Issue Discount Convertible Notes due 2024. We will have broad discretion in
the way we use these proceeds. See “Risk Factors—Risks Related to the Offering—We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.” Because this is a best efforts offering with no
minimum amount as a condition to closing, we may not sell all or any of the securities offered hereby. As a result, we may receive significantly less in net proceeds than we currently estimate. See “Use of Proceeds” on page 44.
Placement Agent Warrants
The registration statement of which this prospectus is a part also registers
for sale Placement Agent warrants to purchase shares of Common Stock to the Placement Agent as a portion of the compensation payable to the Placement Agent in connection with this offering. The Placement Agent warrants will have a term of
five years from the commencement of sales pursuant to this offering and an exercise price per share equal to $ per share, which represents 100% of the public offering price for the shares of Common Stock and accompanying Common Stock
Warrants sold in this offering and shall be substantially in the form of the Series A Warrant issued to the investors in this offering, except as required by FINRA. See “Plan of Distribution” on page 93.
Risk Factors
You should carefully read the “Risk Factors” section of this prospectus
beginning on page 10 for a discussion of factors that you should consider before deciding to invest in our securities.
Nasdaq Trading Symbols
Our Common Stock is listed on The Nasdaq Global Market under the symbol “SBIG.”
Our Public Warrants are listed on The Nasdaq Global Market under the
8
symbol “SBIGW.” There is no established trading market for the Common Stock
Warrants or pre-funded warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the Common Stock Warrants or pre-funded warrants on any national securities exchange or other trading market.
Without an active trading market, the liquidity of the Common Stock Warrants and pre-funded warrants will be limited.
Lock-up
We and each of our officers and directors have agreed with the Placement Agent
to be subject to a lock-up period of days following the closing date of this offering. This means that, during the applicable lock-up period, we may not offer for sale, contract to sell, or sell any shares of our Common Stock or any
securities convertible into, or exercisable or exchangeable for, shares of our Common Stock subject to certain customary exceptions. The Placement Agent may, in its sole discretion and without notice, waive the terms of any of these lock-up
agreements. See “Plan of Distribution” on page 93.
9
Our business involves a high degree of risk.
You should carefully consider the risks described below, together with the other information contained in this prospectus, including our condensed consolidated financial statements and the related notes appearing elsewhere in this prospectus,
as well as the risks, uncertainties and other information set forth in the reports and other materials filed or furnished by us with the SEC. We cannot assure you that any of the events discussed in the risk factors below will not occur. These
risks could have a material and adverse impact on our business, prospects, results of operations, financial condition and cash flows. If any such events were to happen, the trading shares of our Common Stock could decline, and you could lose
all or part of your investment.
Risks Related to the Offering
We have broad discretion in the use of the net
proceeds from this offering and may not use them effectively.
Our management will have broad discretion in the application of
the net proceeds, including for any of the purposes described in the section of this prospectus entitled “Use of Proceeds.” You will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not
have the opportunity, as part of your investment decision, to assess whether the net proceeds are being used appropriately. The failure by our management to apply these funds effectively could result in financial losses that could have a
material adverse effect on our business and cause the price of our securities to decline. Pending the application of these funds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
You will experience immediate and
substantial dilution in the net tangible book value of the shares you purchase in this offering and may experience additional dilution in the future.
The combined public offering price per share of Common Stock and
accompanying Common Stock Warrants, and the combined public offering price of each pre-funded warrant and accompanying Common Stock Warrants, will be substantially higher than the pro forma as adjusted net tangible book value per share of our
Common Stock after giving effect to this offering. Assuming the sale of shares of our Common Stock and Common Stock Warrants to purchase up to shares of Common Stock at an assumed combined public offering price of $ per share and
accompanying Common Stock Warrants, the closing sale price per share of our Common Stock on the Nasdaq on , 2023, assuming no sale of any pre-funded warrants in this offering, no exercise of the Common Stock Warrants being offered in this
offering and after deducting the placement agent fees and commissions and estimated offering expenses payable by us, you will incur immediate dilution of approximately $ per share. As a result of the dilution to investors purchasing securities
in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of the liquidation of our company. See the section entitled “Dilution” below for a more detailed discussion of
the dilution you will incur if you participate in this offering. To the extent shares are issued under outstanding options and warrants at exercise prices lower than the public offering price of our Common Stock in this offering, you will incur
further dilution.
There is no public market for the Common
Stock Warrants or pre-funded warrants being offered by us in this offering.
There is no established public trading market for the Common Stock
Warrants or the pre-funded warrants, and we do not expect a market to develop. In addition, we do not intend to apply to list the Common Stock Warrants or pre-funded warrants on any national securities exchange or other nationally recognized
trading system. Without an active market, the liquidity of the Common Stock Warrants and pre-funded warrants will be limited.
The Common Stock Warrants and pre-funded
warrants are speculative in nature.
The Common Stock Warrants and pre-funded warrants offered hereby
do not confer any rights of share of Common Stock ownership on their holders, such as voting rights or the right to receive dividends, but rather merely represent the right to acquire shares of Common Stock at a fixed price. Specifically,
commencing on the date of issuance, holders of the Common Stock Warrants may acquire the shares of Common Stock issuable upon exercise of such warrants at an exercise price of $ per share of Common Stock, and holders of the pre-funded
warrants may acquire the shares of Common Stock issuable upon exercise of such warrants at an exercise price of $0.0001 per share of Common Stock. Moreover, following this offering, the market value of the Common Stock Warrants and pre-funded
warrants is uncertain and there can be no assurance that the market value of the Common Stock Warrants or pre-funded warrants will equal or exceed their respective public offering prices. There can be no assurance that
10
the market price of the shares of Common Stock will ever equal or exceed the
exercise price of the Common Stock Warrants or pre-funded warrants, and consequently, whether it will ever be profitable for holders of Common Stock Warrants to exercise the Common Stock Warrants or for holders of the pre-funded warrants to
exercise the pre-funded warrants.
Holders of the warrants offered hereby will
have no rights as common stockholders with respect to the shares of our Common Stock underlying the warrants until such holders exercise their warrants and acquire our Common Stock, except as otherwise provided in the warrants.
Until holders of the Common Stock Warrants and the pre-funded
warrants acquire shares of our Common Stock upon exercise thereof, such holders will have no rights with respect to the shares of our Common Stock underlying such warrants, except to the extent that holders of such warrants will have certain
rights to participate in distributions or dividends paid on our Common Stock as set forth in the warrants. Upon exercise of the Common Stock Warrants and the pre-funded warrants, the holders will be entitled to exercise the rights of a common
stockholder only as to matters for which the record date occurs after the exercise date.
We will likely not receive any additional
funds upon the exercise of the Series B Warrants.
The Series B Warrants may be exercised by way of an alternative
cashless exercise, meaning that the holder may not pay a cash purchase price upon exercise, but instead would receive upon such exercise the net number of shares of our Common Stock determined according to the formula set forth in the
applicable Series B Warrants. Accordingly, we will likely not receive any additional funds upon the exercise of the Series B Warrants.
This is a best efforts offering, no minimum
amount of securities is required to be sold, and we may not raise the amount of capital we believe is required for our business plans, including our near-term business plans.
The Placement Agent has agreed to use its reasonable best efforts
to solicit offers to purchase the securities in this offering. The Placement Agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is
no required minimum number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, Placement
Agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of
proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to support our continued operations, including our near-term continued operations. Thus, we
may not raise the amount of capital we believe is required for our operations in the short-term and may need to raise additional funds, which may not be available or available on terms acceptable to us.
Purchasers who purchase our securities in
this offering pursuant to a securities purchase agreement may have rights not available to purchasers that purchase without the benefit of a securities purchase agreement.
In addition to rights and remedies available to all purchasers in
this offering under federal securities and state law, the purchasers that enter into a securities purchase agreement will also be able to bring claims of breach of contract against us. The ability to pursue a claim for breach of contract
provides those investors with the means to enforce the covenants uniquely available to them under the securities purchase agreement including, but not limited to: (i) timely delivery of securities; (ii) agreement to not enter into variable rate
financings for from closing, subject to certain exceptions; (iii) agreement to not enter into any financings for from closing; and (iv) indemnification for breach of contract.
We are engaged in multiple transactions and
offerings of Company securities. Future resales and/or issuances of shares of Common Stock, including pursuant to this prospectus may cause the market price of our shares to drop significantly.
To the extent the Company sells shares of Common Stock, warrants
to purchase shares of Common Stock and/or pre-funded warrants to purchase shares of Common Stock pursuant to this offering or the Company sells shares of Common Stock under the Cantor Equity Facility, substantial amounts of shares of Common
Stock will be issued and available for resale, which would cause dilution and represent a significant portion of our public float and may result in substantial decreases to the Company’s stock price. After purchasers in this offering acquire
shares of Common Stock, warrants to purchase shares of Common Stock and/or pre-funded warrants to purchase shares of Common
11
Stock, such purchasers may resell all, some or none of such shares of Common
Stock, warrants to purchase shares of Common Stock and/or pre-funded warrants to purchase shares of Common Stock at any time or from time to time in their discretion and at different prices. After Cantor has acquired shares under the Cantor
Equity Facility, Cantor may resell all, some or none of such shares of Common Stock at any time or from time to time in its discretion and at different prices. If all of the shares of Common Stock offered for resale by Cantor under this
prospectus were issued and outstanding as of March 28, 2023, such shares of Common Stock would represent approximately 15.8% of the total number of our shares of Common Stock outstanding, after giving effect to such issuance.
Further, similar dilution and potentially depressive effects may
occur to the extent that the L1 Notes and Investor Warrants are converted into shares of Common Stock. Additionally, there are 10,000,000 outstanding Public Warrants to purchase 10,000,000 shares of Common Stock at an exercise price of $11.50
per share, which warrants became exercisable on July 14, 2022. In addition, there are 6,000,000 private placement warrants outstanding exercisable for 6,000,000 shares of Common Stock at an exercise price of $11.50 per share. To the extent such
warrants are exercised, additional shares of Common Stock will be issued, which, along with the shares of Common Stock being registered for resale under this prospectus, will result in dilution to the holders of our Common Stock and increase
the number of shares of Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares of Common Stock in the public market could adversely affect the market price of our Common Stock.
In addition to this prospectus covering the best efforts public
offering of shares of Common Stock, Common Stock Warrants and the shares of Common Stock underlying the Common Stock Warrants, and pre-funded warrants to purchase up to shares of Common Stock, at a combined public offering price of $
per share of Common Stock and accompanying Common Stock Warrant, the Company has filed a (a) registration statement registering the offer and resale from time to time by certain selling securityholders, or their permitted transferees, of up to
shares of Common Stock underlying the L1 Notes and Investor Warrants, (b) registration statement registering the offer and resale from time to time by Cantor of up to shares of Common Stock issued pursuant to the Common Stock Purchase
Agreement and (c) registration statement registering the offer and resale from time to time by certain selling securityholders, or their permitted transferees, of up to (A) shares of Common Stock, which includes (i) PIPE Shares, (ii)
Founder Shares originally issued in a private placement to the Sponsor, and (iii) shares of Common Stock issued in connection with the business combination for which holders have registration rights, (B) the 16,000,000 shares of our Common
Stock issuable upon the exercise of the public and private warrants and (C) 6,000,000 private placement warrants. The shares of Common Stock being offered for sale pursuant to this prospectus and offered for resale pursuant to the other
prospectuses described above represent approximately % of the shares of Common Stock outstanding of the Company as of March 28, 2023 (assuming all shares of Common Stock under the Cantor Equity Facility are issued, as well as the issuance of
shares of Common Stock upon exercise of all warrants and the conversion of the L1 Notes); such shares of Common Stock being offered for resale collectively would constitute % of the resulting outstanding shares of Common Stock of the Company
on a diluted basis after giving effect to all such issuances (including the exercise of all warrants and conversion of the L1 Notes).
Given the substantial number of shares of Common Stock being
registered for potential resale, the sale—or the perception of such sales—of a large number of shares by selling securityholders, could result in an increase in the volatility of the market price of our Common Stock and a significant decline in
the public trading price of our Common Stock. Such decline in market price could be substantial.
Even if our trading price is significantly below $10.00, the
offering price for the units offered in Tuatara’s IPO, certain selling securityholders, including the Sponsor, may still have an incentive to sell shares of Common Stock of our Common Stock even if the trading price of our Common Stock
declines, because they purchased the shares at prices lower than the public investors or the current trading price of our Common Stock. For example, based on the closing price of our Common Stock of $ as of , 2023, the Sponsor and other
holders of the former Founder Shares (assuming all shares are fully vested) would experience a potential profit of up to approximately $ per share, or up to approximately $ million in the aggregate. The public securityholders may not
experience a similar rate of return on the securities they purchase or have previously purchased due to differences in the purchase prices and the current trading price.
See also “—Risks Related to Our Securities and Certain Tax
Matters— The issuance of our shares of Common Stock in connection with the Notes and Warrants Purchase Agreement or that may otherwise be issued and/or sold by the Company or selling securityholders, could cause substantial dilution, which
could materially affect the trading
12
price of our shares of Common Stock” and “—Risks Related to Our Securities and
Certain Tax Matters— Future sales and issuances of our shares of Common Stock, including pursuant to our equity incentive and other compensatory plans, will result in additional dilution of the percentage ownership of our shareholders and could
cause our share price to fall.”
Risks Related to Our Business and Industry
We have a relatively short operating history
in a rapidly evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful. As our costs increase, we may not be able to generate sufficient revenue to maintain
profitability in the future.
We have a relatively short operating history in a quickly evolving
industry that may not develop as we anticipate, if at all. Both our relatively short operating history and the pace of dramatic change in the cannabis industry, and the complex, multiple and sometimes conflicting regulatory regimes applicable
to it, makes it difficult to assess our future prospects, and you should evaluate our business in light of the risks and difficulties we may encounter as the industry continues to evolve. While our revenue has grown in recent periods, this
growth may not be sustainable due to a number of factors, including the maturation of our business, increased competition and the eventual decline in the number of new major geographic markets in which the sale of cannabis is permitted and to
which we have not already expanded. We may not be able to generate sufficient revenue to achieve and sustain profitability. Additionally, we expect our costs to increase in future periods as we expend substantial financial and other resources
on, among other things:
|
•
|
sales and marketing, including continued investment in our current marketing efforts and future marketing initiatives;
|
|
•
|
successfully compete with existing and future providers of other forms of marketing and customer engagement;
|
|
•
|
managing complex, disparate and rapidly evolving regulatory regimes imposed by U.S. and Canadian federal, state and
provincial, local and other non-U.S. governments around the world applicable to cannabis and cannabis-related businesses;
|
|
•
|
executing our growth strategy;
|
|
•
|
hiring, integrating and retaining talented sales and other personnel;
|
|
•
|
expansion domestically and internationally in an effort to increase our client usage, client base, retail locations we serve,
and our sales to our clients;
|
|
•
|
development of new products and services, and increased investment in the ongoing development of our existing products and
services;
|
|
•
|
continuing to invest in scaling our business, particularly around client success and engineering;
|
|
•
|
avoiding interruptions or disruptions in our platform or services; and
|
|
•
|
general administration, including a significant increase in legal and accounting expenses related to public company
compliance, continued compliance with various regulations applicable to cannabis industry businesses and other work arising from the growth and maturity of our company.
|
These expenditures may not result in additional revenue or the
growth of our business. If we fail to continue to grow revenue or to sustain profitability, the market price of our securities could decline, and our business, operating results and financial condition could be adversely affected.
If we do not successfully develop and deploy
new software, platform features or services to address the needs of our clients, our business, financial condition, and results of operations could suffer.
Our success has been based on our ability to design software,
platform features and services that address the needs of our clients. We spend substantial amounts of time and money researching and developing new technologies and enhanced versions of existing platform features, as well as new features, to
meet our clients’ rapidly evolving needs. As consumers and clients demand comprehensive data analysis from platforms such as us, in conjunction with their point-of-sale providers, our ability to integrate with a client’s POS system and other
third party technology integrations may become increasingly important. If we are unable to arrange or complete new integrations, or
13
improve our existing integrations, we may lose market share to competitors. There
is no assurance that enhancements to our software, platform features or new services or capabilities will be compelling to our clients or gain market acceptance. If our research and development investments do not accurately anticipate market
demand or if we fail to develop our software, platform features or services in a manner that satisfies client preferences in a timely and cost-effective manner, we may fail to retain our existing clients or increase demand for our services.
The introduction of new products and services by competitors or
the development of entirely new technologies to replace existing service offerings could make our platforms obsolete or adversely affect our business, financial condition, and results of operations. We may experience difficulties with software
development, design, or marketing that delay or prevent our development, introduction or implementation of new platforms, platform features or capabilities, or cause errors to arise with our existing software. We have in the past experienced
delays in our internally planned release dates of new features and capabilities, and there can be no assurance that new platforms, platform features, or capabilities will be released according to schedule. Any delays or other disruptions could
result in adverse publicity, loss of revenue or market acceptance, or claims by consumers or suppliers brought against us, any of which could harm our business. Moreover, the design and development of new platforms or new platform features and
capabilities to our existing platform may require substantial investment, and we have no assurance that such investments will be successful. If consumers in the market do not widely adopt our new platforms, platform features, and capabilities,
we may not be able to realize a return on our investment and our business, financial condition, and results of operations may be adversely affected.
If we fail to retain our existing clients
and consumers or to acquire new clients and consumers in a cost-effective manner, our revenue may decrease and our business may be harmed.
We compete in a dynamic, innovative, and fairly new market, which
we expect will continue to evolve rapidly. We believe that our success is dependent on our ability to continue identifying and anticipating the needs of our clients and, in turn, their consumers, and retaining our existing clients and adding
new clients. While we have historically been able to grow and retain our client base, we may grow more slowly than we expect or than we have grown in the past. Our ability to retain clients depends in part on our ability to create and maintain
high levels of client satisfaction, which we may not always be capable of providing, including for reasons outside of our control. Any decrease in client satisfaction or other change negatively affecting our ability to retain clients could
result in a rapid, concentrated impact to our results going forward. Therefore, our failure to retain existing clients, even if such losses are offset by an increase in revenue resulting from the acquisition of new clients, could have an
adverse effect on our business and operating results.
If we fail to expand effectively into new
markets, our revenue and business will be adversely affected.
While a key part of our business strategy is to add clients in our
existing geographic markets, we intend to expand our operations into new markets if and as cannabis continues to be legalized in new markets. Any such expansion places us in competitive markets with which we may be unfamiliar, requires us to
analyze the potential applicability of new and potentially complicated regulations regarding the usage, sale and marketing of cannabis, and involves various risks, including the need to invest significant time and resources and the possibility
that returns on such investments will not be achieved for several years, if at all. As a result of such expansion, we may incur losses or otherwise fail to enter new markets successfully. In attempting to establish a presence in new markets, we
expect to incur significant expenses and face various other challenges, such as expanding our compliance efforts to cover those new markets. These efforts may prove more expensive than we currently anticipate, and we may not succeed in
increasing our revenues sufficiently to offset these expenses. Our current and any future expansion plans will require significant resources and management attention.
We have a significant working capital
deficiency and a history of losses, may need to raise additional funds to meet our obligations and sustain our operations and may not achieve profitability in the future. There is substantial doubt as to our ability to continue as a going
concern.
SpringBig is an early-stage company with a history of losses. We
incurred net losses of $13.1 million and $5.8 million for the years ended December 31, 2022 and December 31, 2021, respectively. In addition, as of December 31, 2022, we had a working capital deficiency of $1.5 million and we may need to raise
additional funds to meet our obligations and sustain our operations. In their report for the year ended December 31, 2022, our auditors have expressed substantial doubt about our ability to continue as a going concern. In addition, based on the
factors described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations -
14
Liquidity & Capital Resources,” as of December 31, 2022, we concluded that
there was substantial doubt about our ability to continue to operate as a going concern for the 12 months following the issuance of the financial statements in this prospectus. SpringBig may not achieve or maintain profitability in the future.
We may continue to incur net losses in the future, and such losses may fluctuate significantly from quarter to quarter. We will need to generate and sustain higher revenue for our business generally, and achieve greater scale and generate
greater operating cash flows in future periods in order to achieve and maintain profitability.
Our efforts to grow our business may be more costly than we
expect, and we may not be able to increase our revenue sufficiently to offset our higher operating expenses. We may continue to incur significant losses, and we may not achieve or maintain future profitability, due to a number of reasons,
including the risks described in this prospectus, unforeseen expenses, difficulties, complications and delays, and other unknown events. Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations,
or if we have future negative cash flow or losses resulting from our investment in acquiring customers or expanding our operations, this could make it difficult for you to evaluate our current business and our future prospects and may have a
material adverse effect on our business, financial condition and results of operations.
Federal law enforcement may deem our clients
to be in violation of U.S. federal law, and, in particular the CSA. A change in U.S. federal policy on cannabis enforcement and strict enforcement of federal cannabis laws against our clients would undermine our business model and materially
affect our business and operations.
U.S. federal law, and more specifically the CSA, proscribes the
cultivation, processing, distribution, sale, advertisement and possession of cannabis. As a result, U.S. federal law enforcement authorities, in their attempt to regulate the illegal or unauthorized production, distribution, promotion, sale,
possession, or use of cannabis, may seek to bring criminal actions against our clients under the CSA. If our clients are found to be violating U.S. federal law relating to cannabis, they may be subject not only to criminal charges and
convictions, but also to forfeiture of property, significant fines and penalties, disgorgement of profits, administrative sanctions, cessation of business activities, or civil liabilities arising from proceedings initiated by either the U.S.
government or private citizens. Any of these actions or consequences on our clients could have a material adverse effect on our business, operating results or financial condition, or could force us to cease operations, and as a result, our
investors could lose their entire investment.
Further, to the extent any law enforcement actions require us to
respond to subpoenas, or undergo search warrants, for client records, cannabis businesses could elect to cease using our products and services. Until the U.S. federal government changes the laws with respect to cannabis, and particularly if the
U.S. Congress does not extend the omnibus spending bill’s protection of state medical cannabis programs, described below under the caption “Cannabis remains illegal under federal law, and therefore, strict enforcement of federal laws regarding
cannabis would likely result in our inability to execute our business plan,” to apply to all state cannabis programs, U.S. federal authorities could more strictly enforce current federal prohibitions and restrictions. An increase in federal
enforcement against companies licensed under state cannabis laws could negatively impact the state cannabis industries and, in turn, our business, operating results, financial condition, brand and reputation.
Some of our clients currently and in the
future may not be in compliance with licensing and related requirements under applicable laws and regulations. Allowing unlicensed or noncompliant businesses to access our platform and services, or allowing businesses to use our solutions in a
noncompliant manner, may subject us to legal or regulatory enforcement and negative publicity, which could adversely impact our business, operating results, financial condition, brand and reputation. In addition, allowing businesses that engage
in false or deceptive advertising practices to use our solutions may subject us to negative publicity, which could have similar adverse impacts on us.
While we have instituted policies and procedures in connection
with the verification and periodic screening of the licensing status of our clients operating cannabis retail businesses (and our contracts with clients generally provide for client representations relating to compliance, termination of
services in the case of client noncompliance, and client indemnification obligations), some of our clients currently and in the future may not be in compliance with licensing and related requirements under applicable state laws and regulations.
There could be legal enforcement actions against unlicensed or insufficiently licensed entities selling cannabis, which could negatively impact us.
Any legal or regulatory enforcement against us based on our
platform, the content provided by clients, the marketing campaigns created by clients on our platform or noncompliance by our clients with licensing and other legal requirements, could subject us to various risks, including monetary penalties
and/or required changes to our
15
platform or business model, and would likely cause us to experience negative
publicity. Any of these developments could materially and adversely impact our business, operating results, financial condition, brand, and reputation.
We generally do not, and cannot, ensure that
our clients will conduct their business activities in a manner compliant with the complex, disparate and constantly evolving regulations and requirements affecting the legal cannabis industry. As a result, federal, state, provincial or local
government authorities may seek to bring criminal, administrative or regulatory enforcement actions against our clients, which could have a material adverse effect on our business, operating results or financial conditions, or could force us to
cease operations.
While our solutions provide features to support our clients’
compliance with certain regulations and other legal requirements applicable to the cannabis industry, and we have policies and procedures regarding the verification and periodic screening of the licensing status of our clients, we generally do
not, and cannot, ensure that at all times our clients will conduct their business activities in a manner compliant with such regulations and requirements, in whole or in part. Their legal noncompliance could result in regulatory and even
criminal actions against them, which could lead to a material adverse impact on our business and operating results or financial condition, and as a result, our investors could lose their entire investment. For additional information, see the
other risk factors in this section, including “Some of our clients currently and in the future may not be in compliance with licensing and related requirements under applicable laws and regulations. Allowing unlicensed or noncompliant
businesses to access our platform and services, or allowing businesses to use our solutions in a noncompliant manner, may subject us to legal or regulatory enforcement and negative publicity, which could adversely impact our business, operating
results, financial condition, brand and reputation. In addition, allowing businesses that engage in false or deceptive advertising practices to use our solutions may subject us to negative publicity, which could have similar adverse impacts on
us.”
Our business is dependent on U.S. state laws
and regulations and Canadian federal and provincial laws and regulations pertaining to the cannabis industry.
Although the federal CSA classifies cannabis as a Schedule I
controlled substance, many U.S. states have legalized cannabis to varying degrees. In addition, the enactment of the Cannabis Act legalized the commercial cultivation and processing of cannabis for medical and adult-use purposes in Canada and
created a federal legal framework for controlling the production, distribution, promotion, sale and possession of cannabis. The Cannabis Act also provides the provinces and territories of Canada with the authority to regulate other aspects of
adult-use cannabis, such as distribution, sale, minimum age requirements (subject to the minimum set forth in the Cannabis Act), places where cannabis can be consumed, and a range of other matters. The governments of every Canadian province and
territory have implemented regulatory regimes for the distribution and sale of cannabis for recreational purposes. In addition, subsection 23(1) of the Cannabis Act provides that it is prohibited to publish, broadcast or otherwise disseminate,
on behalf of another person, with or without consideration, any promotion that is prohibited by a number of sections of the Cannabis Act. The Cannabis Act therefore includes provisions that could apply to certain aspects of our business, both
directly to the solutions we provide and indirectly on account of any noncompliance by those who use our offerings. However, as the Cannabis Act has been recently enacted, there is a lack of available interpretation, application and enforcement
of the provisions that may be relevant to digital platforms such as ours, and as a result, it is difficult to assess our potential exposure under the Cannabis Act.
Laws and regulations affecting the cannabis industry in U.S.
states and Canada are continually changing. Any change or even the speed of changes could require us to incur substantial costs associated with compliance or alter our business plan, and could detrimentally affect our operations, revenue, and
profitability. The commercial cannabis industry is still a young industry, and we cannot predict the impact of the compliance regime to which it may be subject. We will incur ongoing costs and obligations related to regulatory compliance, and
such costs may prove to be material. Failure to comply with regulations may result in additional costs for corrective measures, penalties or restrictions on our operations. In addition, changes in regulations, more vigorous enforcement thereof,
or other unanticipated events could require extensive changes to our operations or increased compliance costs or give rise to material liabilities, which could have a material adverse effect on us.
Given the concentration of our revenue from the sale of access to
our platforms and services, any increase in the stringency of any applicable laws, including U.S. state, or Canadian federal, provincial or territorial, laws and regulations relating to cannabis, or any escalation in the enforcement of such
existing laws and regulations against the current or putative cannabis industry within any jurisdiction, could negatively impact the profitability or viability of cannabis businesses in such affected jurisdictions, which in turn could
materially adversely affect our business and operating results.
16
In addition, although we have not yet been required to obtain
any cannabis license as a result of existing cannabis regulations, it is possible that cannabis regulations may be enacted in the future that will require us to obtain such a cannabis license or otherwise seek to substantially regulate our
business. U.S. and Canadian federal, state, provincial, local and other non-U.S. jurisdictions’ cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs
associated with compliance or alter our business plan. Our failure to adequately manage the risk associated with future regulations and adequately manage future compliance requirements may adversely affect our business, our status as a
reporting company and our public listing. Further, any adverse pronouncements from political leaders or regulators about businesses related to the legal cannabis industry could adversely affect the price of our securities.
Because our business is dependent, in part,
upon continued market acceptance of cannabis by consumers, any negative trends in the market could adversely affect our business operations.
We are dependent on public support, continued market acceptance
and the proliferation of consumers in the state-level and Canadian legal cannabis markets. While we believe that the market and opportunities in the space will continue to grow, we cannot predict the future growth rate or size of the market.
Any downturns in, or negative outlooks on, the cannabis industry may adversely affect our business and financial condition.
Expansion of our business is dependent on the
continued legalization of cannabis.
Expansion of our business is, in part, dependent upon continued
legislative authorization, including by voter initiatives and referenda, of cannabis in various jurisdictions worldwide, including the legalization of recreational and medical use cannabis. Any number of factors could slow, halt, or even
reverse progress in this area. Progress for the industry, while encouraging, is not assured. While there may be ample public support for legislative action in a particular jurisdiction, numerous factors could impact the legislative process,
including lobbying efforts by opposing stakeholders as well as legislators’ disagreements about how to legalize cannabis as well as the interpretation, implementation, and enforcement of applicable laws or regulations.
Any one of these factors could slow or halt the legalization of
cannabis, which would negatively impact our ability to expand our business. Additionally, the expansion of our business also depends on jurisdictions in which cannabis is currently legalized not narrowing, limiting or repealing existing laws
legalizing and regulating cannabis, or altering the regulatory landscape in a way that diminishes the viability of cannabis businesses in those jurisdictions.
Our business is highly dependent upon our
brand recognition and reputation, and any erosion or degradation of our brand recognition or reputation would likely adversely affect our business and operating results.
We believe that our business is highly dependent on the SpringBig
brand identity and our reputation, which is critical to our ability to attract and retain clients and consumers. We also believe that the importance of our brand recognition and reputation will continue to increase as competition in the markets
in which we operate continues to develop. Our success in this area will depend on a wide range of factors, some of which are within our control and some of which are not. The factors affecting our brand recognition and reputation that are
within our control include the following:
|
•
|
the efficacy of our marketing efforts;
|
|
•
|
our ability to maintain a high-quality, innovative, and error- and bug-free platform and similarly high quality client
service;
|
|
•
|
our ability to maintain high satisfaction among clients (and our clients’ consumers);
|
|
•
|
the quality and perceived value of our platforms and services;
|
|
•
|
successfully implementing and developing new features and revenue streams;
|
|
•
|
our ability to obtain, maintain and enforce trademarks and other indicia of origin that are valuable to our brand;
|
|
•
|
our ability to successfully differentiate our platforms and services from competitors’ offerings;
|
|
•
|
our ability to continue to integrate with POS systems;
|
17
|
•
|
our ability to provide our clients with accurate and actionable insights from the consumer data and feedback collected
through our platform;
|
|
•
|
our compliance with laws and regulations;
|
|
•
|
our ability to address any environmental, social, and governance expectations of our various stakeholders;
|
|
•
|
our ability to provide client support; and
|
|
•
|
any actual or perceived data breach or data loss, or misuse or perceived misuse of our platforms.
|
In addition, our brand recognition and reputation may be affected
by factors that are outside our control, such as:
|
•
|
actions of competitors or other third parties;
|
|
•
|
consumers’ experiences with retailers or brands using our platform;
|
|
•
|
public perception of cannabis and cannabis-related businesses;
|
|
•
|
positive or negative publicity, including with respect to events or activities attributed to us, our employees, partners or
others associated with any of these parties;
|
|
•
|
interruptions, delays or attacks on our platforms; and
|
|
•
|
litigation or regulatory developments.
|
Damage to our reputation and loss of brand equity from one or more
of the factors listed above may reduce demand for our platform and have an adverse effect on our business, operating results and financial condition. Moreover, any attempts to rebuild our reputation and restore the value of our brand may be
costly and time-consuming, and such efforts may not ultimately be successful.
We currently face intense competition in
marketing and advertising services available to our clients, and we expect competition to further intensify as the cannabis industry continues to evolve.
The cannabis marketing and software services market is rapidly
evolving and is currently characterized by intense competition, due in part to relatively low barriers to entry. We expect competition to further intensify in the future as cannabis continues to be legalized and regulated, new technologies are
developed and new participants enter the cannabis CRM and marketing solutions market. Competitors for individual components of our service platforms include businesses both within and outside of the cannabis industry. These include businesses
focused on marketing and customer engagement, commerce and POS solutions, and SaaS or other technology solutions for brands and retailers. In addition, if legal market for cannabis becomes more accepted and/or the regulatory regime for cannabis
evolves, it may eliminate existing barriers preventing our clients from using traditional marketing and advertising channels. This could result in increased competition in our industry from both products and solutions offered by internet search
engines and advertising networks, like Google, social media platforms, like Instagram and Facebook, various other newspaper, television, media companies, outdoor billboard advertising, and online merchant platforms, as well as new participants
entering into the cannabis CRM and marketing services market. Such potential competitors may have substantially greater financial, technical, and other resources than existing market participants. Additionally, as consumers and cannabis
industry clients demand richer data, integrations with other cannabis industry participants such as point-of-sale providers may become increasingly important. If we are unable to complete such new integrations as quickly as our competitors, or
improve our existing integrations based on legacy systems, we may lose market share to such competitors. Our current and future competitors may also enjoy other competitive advantages, such as greater name recognition, more varied or more
focused offerings, better market acceptance, and larger marketing budgets.
Additionally, as the legalization of cannabis continues, cannabis
cultivators, product manufacturers and distributors could experience consolidation as existing cannabis businesses seek to obtain greater market share and purchasing power and new entrants seek to establish a significant market presence.
Consolidation of the cannabis markets could reduce the size of our potential client base and give remaining clients greater bargaining or purchasing power. This may in turn erode the prices for access to our services and platform and result in
decreased margins. Further, heightened competition between cannabis businesses could ultimately have a negative impact on the viability of individual market participants, which could reduce or eliminate their ability to purchase our services
and solutions.
18
If we are unable to compete effectively for any of these
reasons, we may be unable to maintain our operations or develop our products and solutions, and as a result our business and operating results may be adversely affected.
If we fail to manage our growth effectively,
our brand, business and operating results could be harmed.
We have experienced rapid organic growth in our operations, which
places substantial demands on management and our operational infrastructure. To manage the expected growth of our operations and personnel, we expect we will be required to improve existing, and implement new systems, procedures and controls
including, among others, financial and operational systems. We will also be required to expand our finance, administrative and operations staff. We intend to continue making substantial investments in our sales, service and marketing workforce.
As we continue to grow, we must effectively integrate, develop and motivate a significant number of new employees, while maintaining the beneficial aspects of our existing corporate culture, which we believe fosters innovation, teamwork and a
passion for our products and clients. In addition, our revenue may not grow at the same rate as the expansion of our business. There can be no assurance that our current and planned personnel, systems, procedures and controls will be adequate
to support our future operations or that management will be able to hire, train, retrain, motivate and manage required personnel. If we are unable to manage our growth effectively, the quality of our platform, efficiency of our operations, and
management of our expenses could suffer, which could negatively impact our brand, business, profitability and operating results.
The growth of our business depends on our
ability to accurately predict consumer trends, successfully offer new services, improve existing services and expand into new markets.
Our growth depends, in part, on our ability to successfully offer
new platforms, products and services and improve and reposition our existing platforms and services to meet the requirements of our clients and their customers. This, in turn, depends on our ability to predict and respond to evolving consumer
trends, demands and preferences. Our strategy is based on certain key trends and the projected growth of our key markets. However, historical trends may not be indicative of future trends and forecasts or estimated growth rates may not be
accurate, in whole or part, or ever materialize. Further, underlying markets could decline, overall growth rates in our product categories could be slower than anticipated.
The offering of innovative new platforms, products and services
and expansion into new offerings involves considerable costs. Any new platform, product or service offering may not generate sufficient consumer interest and sales to become profitable or to cover the costs of its development and promotion and,
as a result, may reduce our operating income. In addition, any such unsuccessful effort may adversely affect our brand and reputation. If we are unable to anticipate, identify, develop or market new offerings, that respond to changes in
consumer requirements and preferences, or if our new offerings fail to gain consumer acceptance, we may be unable to grow our business as anticipated, our sales may decline and our margins and profitability may decline or not improve. As a
result, our business, financial condition, and results of operations may be materially and adversely affected.
If we are unable to recruit, train, retain
and motivate key personnel, we may not achieve our business objectives.
Our future success depends on our ability to recruit, train,
retain and motivate key personnel, including our CEO, Jeffrey Harris, our CFO, Paul Sykes, our CTO, Navin Anand, and certain other key members of management. Competition for qualified personnel in the technology industry is intense.
Additionally, we face challenges in attracting, retaining and motivating highly qualified personnel due to our relationship to the cannabis industry, which is rapidly evolving and has varying levels of social acceptance. Any failure to attract,
train, retain and motivate qualified personnel could materially harm our operating results and growth prospects.
If our current marketing model is not
effective in attracting new clients, we may need to employ higher-cost sales and marketing methods to attract and retain clients, which could adversely affect our profitability.
We use our sales team to build relationships with our client base.
Our sales team builds and maintains relationships with clients primarily through phone, email and other virtual contact, which is typically designed to allow us to cost-effectively service a large number of clients. We may need to employ more
resource-intensive sales methods, such as increasing sales teams, to continue to attract and retain clients, particularly as we increase the number of our clients and our client base employs more sophisticated marketing operations, strategies
and processes.
We have experience increased spending in connection with growing
our sales, service and marketing operation and we expect to incur higher sales and marketing expenses, which could adversely affect our business and operating results.
19
We may be unable to scale and adapt our
existing technology and network infrastructure in a timely or effective manner to ensure that our platform is accessible, which would harm our reputation, business and operating results.
It is critical to our success that clients and consumers within
our geographic markets be able to access our platform at all times. We may experience service disruptions, outages or other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity
constraints, and distributed denial of service, or “DdoS,” fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. It may become
increasingly difficult to maintain and improve the availability of our platform, especially during peak usage times and as our products become more complex or dependent on integration with third parties, or as usage or traffic increases. If our
platform is unavailable when our clients (or their consumers) attempt to access it or it does not load as quickly as they expect, they may seek other solutions and may seek to cancel and not renew subscriptions for our services. We expect to
continue to make significant investments to maintain and improve the availability of our platform and to enable rapid releases of new features and products. To the extent that we do not effectively address capacity constraints, respond
adequately to service disruptions, upgrade our systems as needed or continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results would be harmed.
We expect to continue making significant investments in the
functionality, performance, reliability, design, security and scalability of our platform. We may experience difficulties with the development of our platform that could delay or prevent the implementation of new solutions and enhancements.
Software development involves a significant amount of time and resources for our product development team, and we may not be able to continue making those investments in the future.
To the extent we are not able to continue successfully improving
and enhancing our platform, our business could be adversely affected.
Real or perceived errors, failures, or bugs
in our platform could adversely affect our operating results and growth prospects.
We update our platform on a frequent basis. Despite efforts to
test our updates, errors, failures or bugs may not be found in our platform until after it is deployed to our clients. We have discovered and expect we will continue to discover errors, failures and bugs in our platform and anticipate that
certain of these errors, failures and bugs will only be discovered and remediated after deployment to clients. Real or perceived errors, failures or bugs in our platform could result in negative publicity, security incidents, such as data
breaches, government inquiries, loss of or delay in market acceptance of our platform, loss of competitive position, or claims by clients for losses sustained by them. In such an event, we may be required, or may choose, for client relations or
other reasons, to expend additional resources in order to help correct the problem.
We implement bug fixes and upgrades as part of our regular system
maintenance, which may lead to system downtime. Even if we are able to implement the bug fixes and upgrades in a timely manner, any history of inaccuracies in the data we collect for our clients, or unauthorized access or damage to, or the
loss, acquisition, or inadvertent release or exposure of confidential or other sensitive data could cause our reputation to be harmed and result in claims against us, and cannabis businesses may elect not to purchase our products or, in the
case of existing clients, renew their agreements with us or we may incur increased insurance costs. The costs associated with any material defects or errors in our software or other performance problems may be substantial and could harm our
operating results and growth prospects.
A distributed denial of service attack,
ransomware attack, security breach or unauthorized data access could impair or incapacitate our information technology systems and delay or interrupt service to our clients and consumers, harm our reputation, or subject us to significant
liability.
We may become subject to DdoS attacks, a technique used by hackers
to take an internet service offline by overloading its servers. In addition, ransomware attacks against businesses of all sizes are becoming increasingly common. Further, as a result of the COVID-19 pandemic, we may face increased cybersecurity
risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Our platform may be subject to DdoS, ransomware
or other cybersecurity attacks in the future and we cannot guarantee that applicable recovery systems, security protocols, network protection mechanisms and other procedures are or will be adequate to prevent network
20
and service interruption, system failure or data loss. Moreover, our platform
could be breached if vulnerabilities in our platform are exploited by unauthorized third parties or others. Techniques used to obtain unauthorized access change frequently, and the size of DdoS attacks and the number and types of ransomware
attacks are increasing. As a result, we may be unable to implement adequate preventative measures or stop such attacks while they are occurring. A DdoS attack, ransomware attack or security breach could delay or interrupt service to our clients
and consumers and may deter the utilization of our platform.
We also use information technology and security systems to
maintain the physical security of our facilities and to protect our proprietary and confidential information, including that of our clients, consumers, and employees. Accidental or willful security breaches or other unauthorized access to our
facilities or information systems, or viruses, loggers, malware, ransomware, or other malfeasant code in our data or software, could compromise this information or render our systems and data unusable. Additionally, we rely on third-party
“cloud-based” providers and we are therefore dependent on the security systems of these providers. Any security breaches or other unauthorized access to our service providers’ facilities or systems, or viruses, loggers, malware, ransomware or
other malfeasant code in their data or software, could expose us to information loss, and misappropriation of confidential information, and other security breaches. In addition, our employees, contractors, or other third parties with whom we do
business may attempt to circumvent security measures in order to misappropriate personal information, confidential information or other data, or may inadvertently release or compromise such data. Because the techniques used to obtain
unauthorized access to or sabotage security systems, or to obtain unauthorized access to data we or our contractors maintain, change frequently and are often not recognized until after an attack, we and our service providers may be unable to
anticipate the techniques or implement adequate preventative measures.
Any actual or perceived DdoS attack, ransomware attack, security
breach or other unauthorized access could damage our reputation and brand, result in decreased utilization of our platform, expose us to fines and penalties, government investigations, and a risk of litigation and possible liability, require us
to expend significant capital and other resources to alleviate any resulting problems and otherwise to remediate the incident, and require us to expend increased cybersecurity protection costs. We expect to incur significant costs in an effort
to detect and prevent security breaches and other security-related incidents. Numerous state, federal and foreign laws and regulations require companies to notify individuals and/or regulatory authorities of data security breaches involving
certain types of personal data. Any disclosures of security breaches, pursuant to these laws or regulations or otherwise, could lead to regulatory investigations and enforcement and negative publicity, and may cause our clients and consumers to
lose confidence in the effectiveness of our data security measures.
Additionally, our discovery of any security breach or other
security-related incident, or our provision of any related notice, may be delayed or be perceived to have been delayed. Any of these impacts or circumstances arising from an actual or perceived attack, breach or other unauthorized access could
materially and adversely affect our business, financial condition, reputation and relationships with clients and consumers.
Furthermore, while our errors and omissions insurance policies
include liability coverage for certain of these matters, if we experienced a significant security incident, we could be subject to claims or damages that exceed our insurance coverage. We also cannot be certain that our insurance coverage will
be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The
successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance
requirements, could have a material and adverse effect on our business, including our financial condition, operating results, and reputation.
We rely upon cloud-based technologies
provided by third parties, and technology systems and electronic networks supplied and managed by third parties, to operate our business, and interruptions or performance problems with these systems, technologies and networks may adversely
affect our business and operating results.
We rely on technologies and services provided by third parties in
order to host our cloud-based infrastructure that operates our business. If any of these services becomes unavailable or otherwise is unable to serve our requirements due to extended outages, interruptions, or facility closure, or because it is
no longer available on commercially reasonable terms, our expenses could increase, our ability to manage finances could be interrupted and our operations otherwise could be disrupted or otherwise impacted until appropriate substitute services,
if available, are identified, obtained, and implemented.
21
We do not control, or in some cases have limited control over,
the operation of the data center facilities and infrastructure we use, and they are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures, cyberattack, terrorism and similar other events.
They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct, to adverse events caused by operator error, and to interruptions, data loss or corruption, and other performance problems due to various
factors, including introductions of new capabilities, technology errors, infrastructure changes, DdoS attacks, or other security-related incidents. Changes in law or regulations applicable to data centers in various jurisdictions could also
cause a disruption in service. Despite precautions taken at these facilities, the occurrence of a natural disaster, an act of terrorism or other act of malfeasance, a decision to close the facilities without adequate notice or other
unanticipated problems at these facilities could result in lengthy interruptions in our platform operations and the loss, corruption of, unauthorized access to or acquisition of client or consumer data.
Our platform also depends on our ability to communicate through
the public internet and electronic networks that are owned and operated by third parties. In addition, in order to provide our solutions on-demand and promptly, our computer equipment and network servers must be functional 24 hours per day,
which requires access to telecommunications facilities managed by third parties and the availability of electricity, which we do not control. A severe disruption of one or more of these networks or facilities, including as a result of utility
or third-party system interruptions, could impair our ability to process information and provide our solutions to our clients and consumers.
Any unavailability of, or failure to meet our requirements by,
third-party data centers or other third-party technologies or services, or any disruption of the internet, utilities or the third-party networks or facilities that we rely upon, could impede our ability to make our platform accessible, harm our
reputation, result in reduced traffic from consumers, cause us to issue refunds or credits to our clients, and subject us to potential liabilities. Any of these circumstances could adversely affect our business, reputation and operating
results.
The impact of global, regional or local
economic and market conditions may adversely affect our business, operating results and financial condition.
Our performance is subject to global economic conditions and
economic conditions in one or more of our key markets, which impact spending by our clients and consumers. A majority of our clients’ access to capital, liquidity and other financial resources is constrained due to the regulatory restrictions
applicable to cannabis businesses. As a result, these clients may be disproportionately affected by economic downturns. Clients may choose to allocate their spending to items other than our platform, especially during economic downturns.
Economic conditions may also adversely impact retail sales of
cannabis. Declining retail sales of cannabis could result in our clients going out of business or deciding, to stop using our platform to conserve financial resources or move to different marketing solutions. Negative economic conditions may
also affect third parties with whom we have entered into relationships and upon whom we depend in order to grow our business.
Furthermore, economic downturns could also lead to limitations on
our ability to obtain debt or equity financing on favorable terms or at all, reduced liquidity, decreases in the market price of SpringBig’s securities, decreases in the fair market value of our financial or other assets, and write-downs of and
increased credit and collectability risk on our trade receivables, any of which could have a material adverse effect on our business, operating results or financial condition.
Negative economic conditions may be created or exacerbated by
catastrophic events or health crises, including, among others, re-occurrence of the COVID-19 pandemic or similar wide-spread public health crises.
Catastrophic events may disrupt our business
and impair our ability to provide our platform to clients and consumers, resulting in costs for remediation, client and consumer dissatisfaction, and other business or financial losses.
Our operations depend, in part, on our ability to protect our
operations against damage or interruption from natural disasters, power or telecommunications failures, criminal acts and similar events. Despite precautions taken at our facilities, the occurrence of a natural disaster, an act of terrorism,
vandalism or sabotage, spikes in usage volume or other unanticipated problems could result in lengthy interruptions in the availability of our platform. Even with current and planned disaster recovery arrangements, our business could be harmed.
Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce revenue, subject us to liability and lead to decreased usage of
our platform and decrease sales of our marketing services, any of which could harm our business.
22
SpringBig’s operations and employees face
risks related to health crises, such as the recent COVID-19 pandemic, that could adversely affect SpringBig’s financial condition and operating results. These widespread public health events such as a pandemic could materially affect
SpringBig’s operations, including at SpringBig’s headquarters or anywhere else SpringBig operates, and the business or operations of SpringBig’s clients, consumers, partners or other third parties with whom SpringBig conducts business.
In connection with the recent COVID-19 pandemic, governments have,
at various times, implemented significant measures intended to control the spread of the virus, including closures, quarantines, travel restrictions, health mandates and social distancing directives, and fiscal stimulus, and legislation
designed to deliver monetary aid and other relief. In response to the risks posed by events like the COVID-19 pandemic and to comply with applicable governmental orders, SpringBig has taken active measures to promote the health and safety of
our employees. These and other operational changes SpringBig has implemented or may implement in the future may negatively impact productivity and disrupt SpringBig’s business.
To the extent that these restrictions are reinstated and/or remain
in place, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19 or other human public health contagions or
hazards, there is likely to be an adverse impact on global economic conditions and consumer confidence and spending, which could materially and adversely affect SpringBig’s operations as well as SpringBig’s relationships with clients and
consumers.
Reinstating shelter-in-place orders and similar regulations
promulgated in response to pandemics or other public health crises could impact the ability of SpringBig’s clients to operate their businesses. Such events have in the past caused, and may in the future cause, a temporary closure or disruption
of SpringBig’s clients’ businesses, either due to government mandate or voluntary preventative measures. In the event of mandated business operations limitations, clients may not be able to withstand prolonged interruptions to their businesses,
and may be forced to go out of business. Even if SpringBig’s clients are able to continue to operate their businesses, many may operate with limited hours and capacity and other limitations. Any limitations on or disruptions or closures of
SpringBig’s clients’ businesses could in turn adversely affect SpringBig’s business. Further, we may experience a decrease in new clients due to a lack of financial resources or a decline in new markets as businesses and financial markets deal
with the impact of and efforts to curb pandemic events. Further, these conditions may impact our ability to access financial markets to obtain the necessary funding to expand our business as currently contemplated, which may adversely affect
our liquidity and working capital.
The extent of COVID-19’s ultimate effects on SpringBig’s
operational and financial performance will depend on future developments, including the steps taken to prevent its resurgence or further spread, all of which are still uncertain and difficult to predict considering the rapidly evolving
landscape. Given the continuing uncertainty about the pandemic’s continued effects, it is not currently possible to fully ascertain the overall ultimate impact of COVID-19 on SpringBig’s business. However, if the pandemic reemerges and/or
persists as a severe worldwide health crisis, the disease may harm SpringBig’s business, and may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Fluctuations in our quarterly and annual
operating results may adversely affect our business and prospects.
You should consider our business and prospects in light of the
risks and difficulties we encounter in the uncertain and rapidly evolving market for our solutions. Because the cannabis CRM, marketing services and technology markets are new and evolving, predicting their future growth rate and size is
difficult. This reduces our ability to accurately evaluate our future prospects and forecast quarterly or annual performance. In addition to the other risk factors discussed in this section, factors that may contribute to the variability of our
quarterly and annual results include:
|
•
|
our ability to attract new clients and retain existing clients;
|
|
•
|
our ability to accurately forecast revenue and appropriately plan our expenses;
|
|
•
|
the effects of increased competition on our business;
|
|
•
|
our ability to successfully expand in existing markets and successfully enter new markets;
|
|
•
|
the impact of global, regional or economic conditions;
|
|
•
|
the ability of licensed cannabis markets to successfully grow and outcompete illegal cannabis markets;
|
23
|
•
|
our ability to protect our intellectual property;
|
|
•
|
our ability to maintain and effectively manage an adequate rate of growth;
|
|
•
|
our ability to maintain and increase traffic to our platform;
|
|
•
|
costs associated with defending claims, including intellectual property infringement claims and related judgments or
settlements;
|
|
•
|
changes in governmental or other regulation affecting our business;
|
|
•
|
interruptions in platform availability and any related impact on our business, reputation or brand;
|
|
•
|
the attraction and retention of qualified personnel;
|
|
•
|
the effects of natural or man-made catastrophic events and/or health crises (including COVID-19); and
|
|
•
|
the effectiveness of our internal controls.
|
Investors should not rely on outdated financial
projections.
In connection with the business combination, we disclosed certain
projections of SpringBig’s potential financial performance in future years. As previously disclosed, in connection with the sale process, certain financial forecasts for fiscal years through 2024 were prepared by Legacy SpringBig’s management
and made available to Tuatara. Also, as previously disclosed, the projections were not prepared with a view toward public disclosure or with a view toward complying with U.S. GAAP, the published guidelines of the SEC or the guidelines
established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Readers were cautioned not to rely on the prospective financial information because actual results are
likely to differ materially from the prospective financial information. We reiterate our prior caution not to rely on the previously published and now outdated financial projections. We have not undertaken any obligation to publish any
financial projections.
We may improve our products and solutions in
ways that forego short-term gains.
We seek to provide the best experience for the clients who use our
platform. Some of our changes may have the effect of reducing our short-term revenue or profitability if we believe that the benefits will ultimately improve our business and financial performance over the long term. Any short-term reductions
in revenue or profitability could be greater than planned or the changes mentioned above may not produce the long-term benefits that we expect, in which case our business and operating results could be adversely affected.
We currently have clients across the United States and Canada
using our platform. We anticipate growing our business, in part, by continuing to expand our foreign operations. As we continue our expansion, we may enter new foreign markets where we have limited or no experience marketing and deploying our
platform. If we fail to launch or manage our foreign operations successfully, our business may suffer.
We are subject to industry standards,
governmental laws, regulations and other legal obligations, particularly related to privacy, data protection and information security, and any actual or perceived failure to comply with such obligations could harm our business.
We are subject to regulation by various federal, state,
provincial, local and foreign governmental authorities, including those responsible for monitoring and enforcing employment and labor laws, anti-bribery laws, lobbying and election laws, securities laws and tax laws. These laws and regulations
are subject to change over time and thus we must continue to monitor and dedicate resources to ensure continued compliance.
In addition, our business is subject to regulation by various
federal, state, provincial and foreign governmental agencies responsible for monitoring and enforcing privacy and data protection laws and regulations. Numerous foreign, federal and state laws and regulations govern collection, dissemination,
use and confidentiality of personally identifiable health information, including state privacy and confidentiality laws (including state laws requiring disclosure of breaches); federal and state consumer protection and employment laws; the
Health Insurance Portability and Accountability Act of 1996, or HIPAA; and European and other foreign data protection laws.
We receive, store, process, and use personal information and other
user content. The regulatory framework for privacy issues worldwide, including in the United States, is rapidly evolving and is likely to remain uncertain for the
24
foreseeable future, as many new laws and regulations regarding the collection, use
and disclosure of personally identifiable information, or PII, and other data have been adopted or are under consideration and existing laws and regulations may be subject to new and changing interpretations. In the United States, the Federal
Trade Commission (the “FTC”) and many state attorneys general are applying federal and state consumer protection laws to impose standards for the online collection, use and dissemination of data. The California Consumer Privacy Act of 2018, or
CCPA imposes significant additional requirements with respect to the collection of personal information from California residents. The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy
rights to California residents, including the right to opt out of certain disclosures of their information. The CCPA also creates a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks
associated with a data breach. It remains unclear what, if any, modifications will be made to this legislation or how it will be interpreted. Additionally, a new privacy law, the California Privacy Rights Act, or CPRA, significantly modified
the CCPA, which has resulted in further uncertainty and requiring us to incur additional costs and expenses. The CPRA created a new California state agency charged with enforcing state privacy laws, and there is uncertainty about potential
enforcement actions that the new agency may take in the future. The effects of the CCPA and the CPRA remain far-reaching, and depending on final regulatory guidance and related developments, may require us to modify our data processing
practices and policies and to incur substantial costs and expenses in an effort to comply.
We are also currently subject to a variety of, and may in the
future become subject to additional U.S. federal, state and local laws and regulations on advertising that are continuously evolving and developing, including the Telephone Consumer Protection Act, or the TCPA, the Telemarketing Sales Rule, the
Controlling the Assault of Non-Solicited Pornography and Marketing Act, or the CAN-SPAM Act, and, at the state level, the CCPA (as described above), the Virginia Consumer Data Protection Act of 2021, or VCDPA, and the Colorado Privacy Act, or
CPA. Many states are discussing potentially adopting similar comprehensive privacy legislation and we expect many of these will be implemented over the course of the next few years. These laws and regulations directly impact our business and
require ongoing compliance, monitoring and internal and external audits as they continue to evolve, and may result in ever-increasing public and regulatory scrutiny and escalating levels of enforcement and sanctions. Subsequent changes to data
protection and privacy laws and regulations could also impact how we process personal information and, therefore, limit the effectiveness of our product offerings or our ability to operate or expand our business, including limiting strategic
relationships that may involve the sharing of personal information.
Many foreign countries and governmental bodies, including Canada
and other relevant jurisdictions where we conduct or may, in the future, conduct business, have laws and regulations concerning the collection and use of PII and other data obtained from their residents or by businesses operating within their
jurisdiction. These laws and regulations often are more restrictive than those in the United States Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or
may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, internet protocol addresses and other types of data. In Canada, the federal Personal Information Protection and Electronic Documents
Act, or PIPEDA, governs the collection, use and disclosure of PII in many provinces in Canada, and though it is silent with respect to territorial reach, the Federal Court of Canada has found that PIPEDA will apply to businesses established in
other jurisdictions if there is a “real and substantial connection” between the organization’s activities and Canada. Provincial privacy commissioners take a similar approach to the interpretation and application of provincial private-sector
privacy laws equivalent to PIPEDA. Further, Canada has robust anti-spam legislation. Organizations sending commercial electronic messages to individuals must either have express consent from the individual in the prescribed form or the
situation must qualify as an instance of implied consent or other authorization set out in Canada’s Anti-Spam Legislation, or CASL. The penalties for non-compliance under CASL are significant and the regulator, the Canadian Radio- Television
and Telecommunications Commission, is active with respect to enforcement.
Although we are working to comply with those federal, state,
provincial and foreign laws and regulations, industry standards, governmental standards, contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and obligations are evolving and may be modified,
interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or the features of our applications or platform. Any failure or
perceived failure by us or our contractors to comply with federal, state, provincial or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether
or not resulting in loss of, unauthorized access to, or acquisition, alteration, destruction, release or transfer of PII or other data, may result
25
in governmental enforcement actions and prosecutions, private litigation, fines
and penalties or adverse publicity and could cause employees, clients and consumers to lose trust in us, which could have an adverse effect on our reputation and business. Any inability or perceived inability (even if unfounded) on our part to
adequately address privacy, data protection, and information security concerns, or comply with applicable laws, regulations, policies, industry standards, governmental standards, contractual obligations, or other legal obligations, could result
in additional cost and liability to us, damage our reputation, inhibit sales, restrict our ability to utilize collected personal information, and adversely affect our business.
We also expect that there will continue to be new proposed laws,
regulations and industry standards concerning privacy, data protection and information security in the United States, Canada and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on
our business. Future laws, regulations, standards and other obligations, or amendments or changes in the interpretation of existing laws, regulations, standards and other obligations, could impair our or our clients’ ability to collect, use,
disclose or otherwise process information relating to employees or consumers, which could decrease demand for our applications, increase our costs and impair our ability to maintain and grow our client and consumer bases and increase revenue.
Such laws and regulations may require us to implement privacy and security policies, permit users to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect
their personal information, and, in some cases, obtain individuals’ consent to use PII or other data for certain purposes. In addition, a foreign government could require that any data collected in a country not be transferred or disseminated
outside of that country, or impose restrictions or conditions upon such dissemination, and we may face difficulty in complying with any such requirements for certain geographic regions. Indeed, many privacy laws, such as those in force in
Canada, already impose these requirements. If we fail to comply with federal, state, provincial and foreign data privacy laws and regulations, our ability to successfully operate our business and pursue our business goals could be harmed.
Furthermore, due to our acceptance of credit cards, we are subject to the Payment Card Industry Data Security Standard (also known as the “PCI-DSS”), which is designed to protect the information of credit card users.
In the event our determinations are challenged and found to have
been incorrect, we may be subject to unfavorable publicity or claims by one or more state attorneys general, federal regulators, or private plaintiffs, any of which could damage our reputation, inhibit sales and adversely affect our business.
Governmental regulation of the internet
continues to develop, and unfavorable changes could substantially harm our business and operating results.
We are subject to general business regulations and laws as well as
federal, state, provincial and foreign laws specifically governing the internet. Existing and future laws and regulations, narrowing of any existing legal safe harbors, or previous or future court decisions may impede the growth of the internet
or online products and solutions, and increase the cost of providing online products and solutions. These laws may govern, among other issues, taxation, tariffs, user privacy, data protection, pricing, content, copyrights, distribution,
electronic contracts and other communications, consumer protection, broadband residential internet access and the characteristics and quality of offerings. It is not clear how existing laws governing issues such as property ownership, sales,
use and other taxes, libel and personal privacy apply to the internet or online services. There is also a risk that these laws may be interpreted and applied in conflicting ways across jurisdictions, and in a manner that is not consistent with
our current practices. Unfavorable resolution of these issues may limit our business activities, expose us to potential legal claims or cause us to spend significant resources on ensuring compliance, any of which could harm our business and
operating results.
Future investments in our growth strategy,
including acquisitions, could disrupt our business and adversely affect our operating results, financial condition and cash flows.
We are seeking to expand using both organic and M&A growth
strategies in keeping with the changing regulatory landscape in the U.S. Expanding accounts with existing clients, adding new clients, entering new markets, adding new features and functionality to our platform and/or acquisitions may involve
significant investments of capital, time, resources and managerial attention. There can be no assurance that we will successfully implement any new products or solutions. External factors, such as additional regulatory compliance obligations,
may also affect the successful implementation of new products and solutions through our platform.
26
Additionally, we may make acquisitions that could be material
to our business, operating results, financial condition and cash flows. Our ability as an organization to successfully acquire and integrate technologies, services, platforms or businesses is unproven. Acquisitions involve many risks, including
the following:
|
•
|
an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to
incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and
disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
|
|
•
|
we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or
operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us, and potentially across different cultures and languages in the event of a foreign acquisition;
|
|
•
|
the acquired business may not perform at levels and on the timelines anticipated by our management and/or we may not be able
to achieve expected synergies;
|
|
•
|
an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
|
|
•
|
an acquisition may result in a delay or reduction of sales for both us and the company we acquire due to uncertainty about
continuity and effectiveness of products or support from either company;
|
|
•
|
we may encounter difficulties in, or may be unable to, successfully sell any acquired products or services;
|
|
•
|
an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or
where competitors have stronger market positions;
|
|
•
|
potential strain on our financial and managerial controls and reporting systems and procedures;
|
|
•
|
potential known and unknown liabilities associated with an acquired company;
|
|
•
|
if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our
business as well as financial maintenance covenants;
|
|
•
|
the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions;
|
|
•
|
to the extent that we issue a significant amount of equity or convertible debt securities in connection with future
acquisitions, existing equity holders may be diluted and earnings per share may decrease; and
|
|
•
|
managing the varying intellectual property protection strategies and other activities of an acquired company.
|
We may not succeed in addressing these or other risks or any other
problems encountered in connection with the integration of any acquired business. The inability to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in
achieving integration, could have a material adverse effect on our business, operating results, financial condition and cash flows.
We may need to raise additional capital,
which may not be available on favorable terms, if at all, causing dilution to our stockholders, restricting our operations or adversely affecting our ability to operate our business.
SpringBig may require additional financing to fund its operations
or growth. In addition, we have substantial fixed expenses including rent and monthly principal and interests payments on the L1 Notes. The failure to secure additional financing could have a material adverse effect on the continued development
or growth of SpringBig. We may need to raise additional capital and the funding provided by the L1 Notes and potentially available under the Cantor Equity Facility may not be sufficient or available in full. Such additional capital may cause
dilution to our stockholders. Further, the likelihood that our warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our shares of Common Stock,
which is currently below the applicable exercise price. If the trading price for our shares of Common Stock remains less than the applicable exercise price, we believe the warrant holders will be unlikely to exercise their warrants. If our need
is due to unforeseen circumstances or material expenditures or if our operating results are worse than expected, then we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all, and these
27
additional financings could cause further dilution to our stockholders. Any funds
we raise may not be sufficient to enable us to continue to implement our long-term business strategy. Further, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions, increasing
interest rates and the recent disruptions to and volatility in the credit and financial markets in the United States. Due to the current legal status of cannabis under U.S. federal law, we have experienced, and may in the future experience,
difficulty attracting additional debt or equity financing. In addition, the current legal status of cannabis may increase the cost of capital now and in the future. Debt financing, if available, may involve agreements that include equity
conversion rights, covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, expending capital, or declaring dividends, or that impose financial covenants on us that limit our ability to achieve
our business objectives. Debt financings may contain provisions, which, if breached, may entitle lenders to accelerate repayment of loans, and there is no assurance that we would be able to repay such loans in such an event or prevent the
foreclosure of security interests granted pursuant to such debt financing. If we need but cannot raise additional capital on acceptable terms, then we may not be able to meet our business objectives and satisfy our financial obligations, our
stock price may fall, and you may lose your investment.
Our obligations to the holder of the L1
Notes are secured by a security interest in substantially all of our assets, so if we default on those obligations, the noteholder could foreclose on, liquidate and/or take possession of our assets. If that were to happen, we could be forced to
curtail, or even to cease, our operations.
On April 29, 2022, the Company entered into the Notes and Warrants
Purchase Agreement with the Investor, pursuant to which the Company, on June 14, 2022, issued the L1 Notes and the Investor Warrants exercisable for shares of Common Stock of the Company at an exercise price of $12 per share. Simultaneously,
Legacy SpringBig entered into a guaranty agreement to guarantee the Company’s obligations under the L1 Notes and the Company and Legacy SpringBig entered into a security agreement, pursuant to which the Investor was granted a security interest
in all of the assets of the Company and Legacy SpringBig to secure repayment of amounts due under the L1 Notes. As a result, if we default on our obligations under the L1 Note, the Investor could foreclose on its security interests and
liquidate or take possession of some or all of the assets of the Company, Legacy SpringBig and its subsidiaries, which would harm our business, financial condition and results of operations and could require us to curtail, or even to cease our
operations.
Our notes and related agreements restrict
our ability to obtain additional debt and equity financing which may restrict our ability to grow and finance our operations and, further, no assurances can be made that we will receive additional cash proceeds from the exercise of the Investor
Warrants.
The agreements related to the sale of the L1 Notes and Investor
Warrants contain a number of restrictive covenants that may impose significant operating and financial restrictions on us while L1 Notes remain outstanding or unless the restrictions are waived by consent of each noteholder, including
restrictions on our ability to incur additional indebtedness and guarantee indebtedness; incur liens or allow mortgages or other encumbrances; prepay, redeem, or repurchase certain other debt; pay dividends or make other distributions or
repurchase or redeem our capital stock; sell assets or enter into or effect certain other transactions (including a reorganization, consolidation, dissolution or similar transaction or selling, leasing, licensing, transferring or otherwise
disposing of assets of the Company or its subsidiaries); enter into variable rate transactions (exclusive of the Cantor Equity Facility); and adopt certain amendments to our governing documents, among other restrictions. In addition, the terms
of the L1 Notes restrict our ability to issue additional equity capital under certain circumstances. A breach of the covenants or restrictions under the agreements governing our indebtedness could result in an event of default under these
agreements. As a result of these restrictions, we may be limited in how we conduct our business, unable to raise additional debt or equity financing to operate during general economic or business downturns and/or unable to compete effectively
or to take advantage of new business opportunities. The Company may not have the ability to prepay the L1 Notes prior to maturity except to the limited extent of proceeds from the Cantor Equity Facility to the extent available.
Further, while we could potentially receive substantial gross
proceeds from the exercise of the Investor Warrants, assuming the exercise in full of all of the Investor Warrants, no assurances can be made that the Investor will elect to exercise any or all of such Investor Warrants and, accordingly, no
assurance that we will receive any proceeds from the exercise of the Investor Warrants. We believe the likelihood that the Investor will exercise the Investor Warrants, and therefore the amount of cash proceeds that we would receive, is
dependent upon the trading price of our shares of Common Stock, which is currently substantially below the $12.00 exercise price. If the trading price for our shares
28
of Common Stock remains less than $12.00 per share (or the adjusted exercise price
in the event of dilutive issuances), we believe the Investor will be unlikely to exercise its warrants. Accordingly, we may not receive cash proceeds with respect to the Investor Warrants and we are restricted in our ability to raise additional
debt or equity financing.
Changes in laws or regulations, or a failure
to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws, regulations and rules enacted by national,
regional and local governments and the Nasdaq stock exchange. In particular, we are required to comply with certain SEC, Nasdaq and other legal or regulatory requirements. Compliance with, and monitoring of, applicable laws, regulations and
rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments
and results of operations. In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on our business and results of operations.
We may be subject to potential adverse tax
consequences both domestically and in Canada.
We are a Delaware corporation that is treated as a C-corporation
for U.S. federal and most applicable state and local income tax purposes. We are subject to taxes, such as income, payroll, sales, use, value-added, property and goods and services taxes, in both the United States and various foreign
jurisdictions. Our domestic and foreign tax liabilities are subject to various jurisdictional rules regarding the timing and allocation of revenue and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of
applicable tax laws in the jurisdictions in which we file and to changes in tax laws. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. From time to time, we may be subject to
income and non-income tax audits. While we believe we have complied, and will continue to comply, with all applicable income tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law
and assess us with additional taxes. Should we be assessed with additional taxes, there could be a material adverse effect on our business, results of operations, and financial condition. In addition, audits may require ongoing time and
attention from our management, which could limit their ability to focus on other aspects of our business and impact our business in the future.
The ability of SpringBig to utilize net
operating loss and tax credit carryforwards is conditioned upon SpringBig attaining profitability and generating taxable income. SpringBig has incurred significant net losses since inception and it is anticipated that SpringBig will continue to
incur significant losses. Additionally, SpringBig’s ability to utilize net operating loss and tax credit carryforwards to offset future taxable income may be limited.
As of December 31, 2022, SpringBig had approximately $26.4 million
of U.S. federal net operating loss carryforwards available to reduce future taxable income, which can be carried forward indefinitely. The Tax Cuts and Jobs Act (the “Tax Act”) included a reduction to the maximum deduction allowed for net
operating losses generated in tax years after December 31, 2017 and the elimination of carrybacks of net operating losses. In addition, net operating loss carryforwards and certain tax credits may be subject to significant limitations under
Section 382 and Section 383 of the Code, respectively, and similar provisions of state law. Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss
carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income or tax may be limited. In general, an “ownership change” will occur if there is a cumulative change in ownership by “5% shareholders”
that exceeds 50 percentage points over a rolling three-year period. If SpringBig has experienced an ownership change at any time since its incorporation, SpringBig may already be subject to limitations on its ability to utilize its existing net
operating loss carryforwards and other tax attributes to offset taxable income or tax liability. In addition, the business combination, and future changes in SpringBig’s stock ownership, which may be outside of SpringBig’s control, may trigger
an ownership change. Similar provisions of state tax law may also apply to limit SpringBig’s use of accumulated state tax attributes. As a result, even if SpringBig earns net taxable income in the future, its ability to use its pre-change net
operating loss carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to SpringBig.
Changes in accounting standards or other
factors could negatively impact our future effective tax rate.
Our future effective tax rate may be affected by such factors as
changing interpretation of existing laws or regulations, the impact of accounting for equity-based compensation, the impact of accounting for business
29
combinations, changes in our international organization, and changes in overall
levels of income before tax. In addition, in the ordinary course of our global business, there are many intercompany transactions and calculations where the ultimate tax determination is uncertain.
Although we believe that our tax estimates are reasonable, we
cannot ensure that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals.
Changes in tax laws or regulations and
compliance in multiple jurisdictions may have a material adverse effect on our business, cash flow, financial condition or operating results.
We are subject to the income tax laws of the United States and
Canada. New income, sales, use or other tax laws, statutes, rules, regulations, or ordinances could be enacted at any time, which could affect the tax treatment of our U.S. and foreign earnings. Any new taxes could adversely affect our domestic
and foreign business operations, and our business and financial performance. In addition, existing tax laws, statutes, rules, regulations, or ordinances, such as Section 280E of the Code, discussed below, could be interpreted, changed, modified
or applied adversely to us. Furthermore, changes to the taxation of undistributed foreign earnings could change our future intentions regarding reinvestment of such earnings. The foregoing items could have a material adverse effect on our
business, cash flow, financial condition or operating results. Requirements as to taxation vary substantially among jurisdictions. Complying with the tax laws of these jurisdictions can be time consuming and expensive and could potentially
subject us to penalties and fees in the future if we were to inadvertently fail to comply. If we were to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on our business, results of operations and
financial condition.
Certain taxing authorities may successfully
assert that SpringBig should have collected or that in the future SpringBig should collect sales and use or similar taxes for certain services which could adversely affect our results of operations.
We do not collect sales and use or similar taxes in the United
States or Canada based on our determination that such taxes are not applicable to our platform. Based on the U.S. Supreme Court’s ruling in South Dakota v. Wayfair, certain state taxing authorities may
assert that SpringBig had economic nexus with their state and was required to collect sales and use or similar taxes with respect to certain past services that SpringBig has provided (or with respect to future services that SpringBig will
provide), which could result in tax assessments and penalties and interest. A successful assertion that SpringBig should be collecting additional sales and use or similar taxes or remitting such sales and use or similar taxes directly to states
or other jurisdictions could have an adverse effect on SpringBig and its business.
Additional Risks Related to the Cannabis Industry
Cannabis remains illegal under federal law,
and therefore, strict enforcement of federal laws regarding cannabis would likely result in our inability to execute our business plan.
Cannabis, other than hemp (defined by the U.S. government as
Cannabis sativa L. with a THC concentration of not more than 0.3% on a dry weight basis), is a Schedule I controlled substance under the CSA. Even in states or territories that have legalized cannabis to some extent, the cultivation,
possession, and sale of cannabis all violate the CSA and are punishable by imprisonment, substantial fines and forfeiture. Moreover, individuals and entities may violate federal law if they aid and abet another in violating the CSA, or conspire
with another to violate the law, and violating the CSA is a predicate for certain other crimes, including money laundering laws and the Racketeer Influenced and Corrupt Organizations Act. The U.S. Supreme Court has ruled that the federal
government has the authority to regulate and criminalize the sale, possession and use of cannabis, even for individual medical purposes, regardless of whether it is legal under state law. For many years, however, the U.S. government has not
prioritized the enforcement of those laws against cannabis companies complying with state law and their vendors. No reversal of that policy of prosecutorial discretion is expected under the Biden administration, although prosecutions against
state-legal entities cannot be ruled out.
On January 4, 2018, then U.S. Attorney General Jeff Sessions
issued a memorandum for all U.S. Attorneys (the “Sessions Memo”) rescinding certain past DOJ memoranda on cannabis law enforcement, including the Memorandum by former Deputy Attorney General James Michael Cole (the “Cole Memo”) issued on
August 29, 2013, under the Obama administration. Describing the criminal enforcement of federal cannabis prohibitions against those complying with state cannabis regulatory systems as an inefficient use of federal investigative and
prosecutorial
30
resources, the Cole Memo gave federal prosecutors discretion not to prosecute
state law compliant cannabis companies in states that were regulating cannabis, unless one or more of eight federal priorities were implicated, including use of cannabis by minors, violence, or the use of federal lands for cultivation. The
Sessions Memo, which remains in effect, states that each U.S. Attorney’s Office should follow established principles that govern all federal prosecutions when deciding which cannabis activities to prosecute. As a result, federal prosecutors
could and still can use their prosecutorial discretion to decide to prosecute even state-legal cannabis activities. Since the Sessions Memo was issued nearly three years ago, however, U.S. Attorneys have generally not prioritized the targeting
of state law compliant entities.
Attorney General William Barr testified in his confirmation
hearing on January 15, 2019, that he would not upset “settled expectations,” “investments,” or other “reliance interest[s]” arising as a result of the Cole Memo, and that he did not intend to devote federal resources to enforce federal cannabis
laws in states that have legalized cannabis “to the extent people are complying with the state laws.” He stated: “My approach to this would be not to upset settled expectations and the reliance interests that have arisen as a result of the Cole
Memorandum and investments have been made and so there has been reliance on it, so I don’t think it’s appropriate to upset those interests.” He also implied that the CSA’s prohibitions of cannabis may be implicitly nullified in states that have
legalized cannabis: “[T]he current situation … is almost like a back-door nullification of federal law.” Industry observers generally have not interpreted Attorney General Barr’s comments to suggest that the DOJ would proceed with cases against
participants who entered the state-legal industry after the Cole Memo’s rescission.
As such, we cannot assure that each U.S. Attorney’s Office in each
judicial district where we operate will not choose to enforce federal laws governing cannabis sales against state-legal companies like our business clients. The basis for the federal government’s lack of recent enforcement with respect to the
cannabis industry extends beyond the strong public sentiment and ongoing prosecutorial discretion. Since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ, which includes the Drug Enforcement
Administration, from using appropriated funds to prevent states from implementing their medical-use cannabis laws. In USA vs. McIntosh, the U.S. Court of Appeals for the Ninth Circuit held that the
provision prohibits the DOJ from spending funds to prosecute individuals who engage in conduct permitted by state medical-use cannabis laws and who strictly comply with such laws. The court noted that, if the spending bill provision were not
continued, prosecutors could enforce against conduct occurring during the statute of limitations even while the provision was previously in force. Other courts that have considered the issue have ruled similarly, although courts disagree about
which party bears the burden of proof of showing compliance or noncompliance with state law. Certain of our clients that are retailers currently (and may in the future) sell adult-use cannabis, if permitted by such state and local laws now or
in the future, and therefore may be outside any protections extended to medical-use cannabis under the spending bill provision. This could subject such retailer clients to greater and/or different federal legal and other risks as compared to
businesses where cannabis is sold exclusively for medical use, which could in turn materially adversely affect our business. Furthermore, any change in the federal government’s enforcement posture with respect to state-licensed cannabis sales,
including the enforcement postures of individual federal prosecutors in judicial districts where we operate, would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to client base,
which would adversely affect our operations, cash flow and financial condition.
On March 11, 2021, Merrick Garland was sworn in as the U.S.
Attorney General. During his campaign, President Biden stated a policy goal to decriminalize possession of cannabis at the federal level, but he has not publicly supported the full legalization of cannabis. In response to questions posed by
Senator Cory Booker, Merrick Garland stated during February 2021 congressional testimony that he would reinstitute a version of the Cole Memorandum. He reiterated the statement that the Justice Department under his leadership would not pursue
cases against Americans “complying with the laws in states that have legalized and are effectively regulating marijuana,” in written responses to the Senate Judiciary Committee provided around March 1. It is not yet known whether the Department
of Justice under President Biden and Attorney General Garland, will re-adopt the Cole Memorandum or announce a substantive marijuana enforcement policy. Justice Garland indicated at a confirmation hearing before the United States Senate that it
did not seem to him to be a useful use of limited resources to pursue prosecutions in states that have legalized and that are regulating the use of marijuana, either medically or otherwise. It is unclear what impact, if any, the current or any
new administration will or would have on U.S. federal government enforcement policy on cannabis. Nonetheless, there is no guarantee that the position of the Department of Justice will not change.
Industry observers are hopeful that the current U.S. political
environment will increase the chances of federal cannabis policy reform. However, we cannot provide assurances about the content, timing or chances of passage of
31
a bill legalizing cannabis or liberalizing cannabis regulations. Accordingly, we
cannot predict the timing of any change in federal law or possible changes in federal enforcement. In the event that the federal government were to reverse its long-standing hands-off approach to the state legal cannabis markets and start more
broadly enforcing federal law regarding cannabis, we would likely be unable to execute our business plan, and our business and financial results would be adversely affected.
Our business and our clients are subject to
a variety of U.S. and foreign laws regarding financial transactions related to cannabis, which could subject our clients to legal claims or otherwise adversely affect our business.
We and our clients are subject to a variety of laws and
regulations in the United States regarding financial transactions. Violations of the U.S. anti-money laundering (AML) laws require proceeds from enumerated criminal activity, which includes trafficking in cannabis in violation of the CSA.
Financial institutions that both we and our clients rely on are subject to the Bank Secrecy Act, as amended by Title III of the USA Patriot Act. In Canada, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), as
amended and the rules and regulations thereunder and the Criminal Code (Canada) apply. The penalties for violation of these laws include imprisonment, substantial fines and forfeiture.
In 2014, the DOJ under the Obama administration directed federal
prosecutors to exercise restraint in prosecuting AML violations arising in the state legal cannabis programs and to consider the federal enforcement priorities enumerated in the Cole Memo when determining whether to charge institutions or
individuals based upon cannabis-related activity. Around the same time, the Treasury Department issued guidance that clarified how financial institutions can provide services to cannabis-related businesses, consistent with financial
institutions’ obligations under the Bank Secrecy Act. Then-Attorney General Sessions’s rescission of the DOJ’s guidance on the state cannabis programs in early 2018 increased uncertainty and heightened the risk that federal law enforcement
authorities could seek to pursue money laundering charges against entities, or individuals, engaged in supporting the cannabis industry. On January 31, 2018, the Treasury Department issued additional guidance that the 2014 Guidance would remain
in place until further notice, despite the rescission of the DOJ’s earlier guidance memoranda.
We are subject to a variety of laws and regulations in the United
States, Canada and elsewhere that prohibit money laundering, including the Proceeds of Crime and Terrorist Financing Act (Canada) and the Money Laundering Control Act (U.S.), as amended, and the rules and regulations thereunder and any related
or similar rules, regulations or guidelines issued, administered or enforced by governmental authorities in the United States, Canada or any other jurisdiction in which we have business operations or to which we export our offerings. If any of
our clients’ business activities, any dividends or distributions therefrom, or any profits or revenue accruing thereby are found to be in violation of money laundering statutes, our clients could be subject to criminal liability and significant
penalties and fines. Any violations of these laws, or allegations of such violations, by our clients could disrupt our operations and involve significant management distraction and expenses. As a result, a significant number of our clients
facing money laundering charges could materially affect our business, operations and financial condition. Additionally, proceeds from our clients’ business activities, including payments we have received from those clients, could be subject to
seizure or forfeiture if they are found to be illegal proceeds of a crime transmitted in violation of anti-money laundering laws, which could have a material adverse effect on our business. Finally, if any of our clients are found to be
violating the above statutes, this could have a material adverse effect on their ability to access or maintain financial services, as discussed in detail below, which could, in turn, have a material adverse effect on our business.
We are dependent on our banking relations,
and we may have difficulty accessing or consistently maintaining banking or other financial services due to our connection with the cannabis industry.
Although we do not grow or sell cannabis products, our general
connection with the cannabis industry may hamper our efforts to do business or establish collaborative relationships with others that may fear disruption or increased regulatory scrutiny of their own activities.
We are dependent on the banking industry to support the financial
functions of our products and solutions. Our business operating functions including payroll for our employees, real estate leases, and other expenses are handled and reliant on traditional banking. We require access to banking services for both
us and our clients to receive payments in a timely manner. Lastly, to the extent we rely on any lines of credit, these could be affected by our relationships with financial institutions and could be jeopardized if we lose access to a bank
account. Important components of our offerings depend on client accounts and relationships, which in turn depend on banking functions.
32
Most federal and federally-insured state banks currently do not serve businesses
that grow and sell cannabis products on the stated ground that growing and selling cannabis is illegal under federal law, even though the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, issued guidelines to banks in
February 2014 that clarified how financial institutions can provide services to cannabis-related businesses, consistent with financial institutions’ obligations under the Bank Secrecy Act. While the federal government has generally not
initiated financial crimes prosecutions against state-law compliant cannabis companies or their vendors, the government theoretically could, at least against companies in the adult-use markets. The continued uncertainty surrounding financial
transactions related to cannabis activities and the subsequent risks this uncertainty presents to financial institutions may result in their discontinuing services to the cannabis industry or limit their ability to provide services to the
cannabis industry or ancillary businesses providing services to the cannabis industry.
As a result of federal-level illegality and the risk that
providing services to state-licensed cannabis businesses poses to banks, cannabis-related businesses face difficulties accessing banks that will provide services to them. When cannabis businesses are able to find a bank that will provide
services, they face extensive client due diligence in light of complex state regulatory requirements and guidance from FinCEN, and these reviews may be time-consuming and costly, potentially creating additional barriers to financial services
for, and imposing additional compliance requirements on, us and our clients. FinCEN requires a party in trade or business to file with the U.S. Internal Revenue Service, or the IRS, a Form 8300 report within 15 days of receiving a cash payment
of over $10,000. While we do not receive cash payments for the products we sell, if we fail to comply with these laws and regulations, the imposition of a substantial penalty could have a material adverse effect on our business, results of
operations and financial condition. We cannot assure that our strategies and techniques for designing our products and solutions for our clients will operate effectively and efficiently and not be adversely impacted by any refusal or reluctance
of banks to serve businesses that grow and sell cannabis products. A change in banking regulations or a change in the position of the banking industry that permits banks to serve businesses that grow and sell cannabis products may increase
competition for us, facilitate new entrants into the industry offering platforms, products or solutions similar to those that we offer, or otherwise adversely affect our results of operations. Also, the inability of potential clients in our
target market to open accounts and otherwise use the services of banks or other financial institutions may make it difficult for us to conduct business, including receiving payments in a timely manner.
We do not sell cannabis, or products that contain cannabis;
accordingly, our company is not part of the cannabis industry that would be restricted from using federal and federally insured banks. However, because of the fact that our revenue is generated largely from companies licensed as operators in
the cannabis industry, banks have and may continue to consider us to be part of the cannabis industry that is subject to banking restrictions. If we were to lose any of our banking relationships or fail to secure additional banking
relationships in the future, we could experience difficulty and incur increased costs in the administration of our business, paying our employees, accepting payments from clients, each of which may adversely affect our reputation or results of
operations. Additionally, the closure of many or one of our bank accounts due to a bank’s reluctance to provide services to a business working with state legal cannabis businesses would require significant management attention from SpringBig
and could materially adversely affect our business and operations. In addition to banks and financial institutions, merchant processors may take a similar view of the risks of working with SpringBig since we provide services to cannabis
businesses, and loss of any of our merchant processor relationships could have similar results. Moreover, Visa reportedly prohibits processing of transactions involving cannabis on its network, and Mastercard has reportedly stated that it is
evaluating the inconsistency between U.S. state and federal cannabis law.
We may have difficulty using bankruptcy
courts due to our involvement in the regulated cannabis industry.
We currently have no need or plans to seek bankruptcy protection.
U.S. courts have held that debtors whose income is derived from cannabis or cannabis assets in violation of the CSA cannot seek federal bankruptcy protections. Although we are not in the business of growing or processing cannabis or selling or
even possessing cannabis or cannabis products, a U.S. court could determine that our revenue is derived from cannabis or cannabis assets and prevent us from obtaining bankruptcy protections if necessary.
The conduct of third parties may jeopardize
our business.
We cannot guarantee that our systems, protocols, and practices
will prevent all unauthorized or illegal activities by our clients. Our success depends in part on our clients’ ability to operate consistently with the regulatory and licensing requirements of each state, local, and regional jurisdiction in
which they operate. We have policies and procedures to review cannabis license information for operational cannabis retail clients to ensure validity and
33
accuracy of such license information. We cannot ensure that the conduct of our
clients, who are third parties, and their actions could expose them to legal sanctions and costs, which would in turn, adversely affect our business and operations.
A failure to comply with laws and
regulations regarding our use of telemarketing, including the TCPA, could increase our operating costs and materially and adversely impact our business, financial condition, results of operations, and prospects.
Our technology allows dispensaries to send outbound text
communications to their customers. While we believe that it is each dispensary’s responsibility for compliance with state and federal laws regulating outbound communications, we recognize that SpringBig may be named in actions alleging
violations of these laws or otherwise have to be involved in demands and actions stemming from alleged violations of these laws (e.g., through subpoenas). There are a number of state and federal laws regulating outbound telephonic
communications, including the TCPA and Telemarketing Sales Rule. The U.S. Federal Communications Commission, or the FCC, and the FTC have responsibility for regulating various aspects of these laws. Individual states, like Washington and
Florida, also separately regulate outbound telephonic communications. Among other requirements, the TCPA and other laws require the sender of the message to obtain prior express written consent for telemarketing calls and to adhere to state and
national “do-not-call” registry requirements and implement various compliance procedures. These laws impact dispensary customers’ ability to communicate with their customers and can impact effectiveness of our marketing programs. These laws
also raise the risk that SpringBig could be named directly or involved indirectly in litigation. The TCPA and other similar laws do not distinguish between voice and data communications, and, as such, SMS/MMS messages are also “calls” for the
purpose of these outbound telephonic communication statutes.
The TCPA and similar state laws provide for a private right of
action under which a plaintiff may bring suit and, oftentimes, allow the recovery of statutory damages. The TCPA, by way of example, imposes statutory damages of between $500 and $1,500 per violation. There is no statutory cap on maximum
aggregate exposure (although some courts have applied in TCPA class actions constitutional limits on excessive penalties). An action may be brought by the FCC, a state attorney general, an individual on behalf of the individual or a class of
individuals. Like other companies that play an intermediary role between the sender (the dispensary) and the recipient (the dispensary customer) of telephonic communications, we have been sued under the TCPA and have received a number of
subpoenas in TCPA cases brought against dispensaries. If in the future we are found to have violated the TCPA or any similar state law, particularly on a class-wide basis, the amount of damages and potential liability could be extensive and
materially and adversely impact our business, financial condition, results of operations, and prospects.
We may continue to be subject to constraints
on marketing our products.
Certain of the states in which we operate have enacted strict
regulations regarding marketing and sales activities on cannabis products, which could affect our cannabis retail clients’ demand for our platform and marketing services. There may be restrictions on sales and marketing activities of cannabis
businesses imposed by government regulatory bodies that can hinder the development of our business and operating results because of the restrictions our clients face. If our clients are unable to effectively market our products and compete for
market share, or if the costs of compliance with government legislation and regulation cannot be absorbed through increased selling prices for our products for our clients, this could hamper demand for our products and services from licensed
cannabis retailers, which could result in a loss of revenue.
Cannabis businesses are subject to
unfavorable U.S. tax treatment.
Section 280E of the Code does not allow any deduction or credit
for any amount paid or incurred during the taxable year in carrying on business, other than costs of goods sold, if the business (or the activities which comprise the trade or business) consists of trafficking in controlled substances (within
the meaning of Schedules I and II of the CSA). The IRS has applied this provision to cannabis operations, prohibiting them from deducting expenses associated with cannabis businesses beyond costs of goods sold and asserting assessments and
penalties for additional taxes owed. Section 280E of the Code may have a lesser impact on cannabis cultivation and manufacturing operations than on sales operations, which directly affects our suppliers, who are cannabis retailers and brands.
However, Section 280E of the Code and related IRS enforcement activity have had a significant impact on the operations of all cannabis companies. While Section 280E of the Code does not directly affect SpringBig, it lowers SpringBig’s clients’
profitability, and could result in decreased demand or higher price sensitivity for SpringBig’s listing, marketing, and customer loyalty services. An otherwise profitable cannabis business may operate at a loss after taking
34
into account its U.S. income tax expenses. This affects SpringBig because
SpringBig’s sales and operating results could be adversely affected if SpringBig’s clients decrease their marketing budgets and are operating on lower profit margins as a result of unfavorable treatment by the Code.
Service providers to cannabis businesses may
also be subject to unfavorable U.S. tax treatment.
As discussed above, under Section 280E of the Code, no deduction
or credit is allowed for any amount paid or incurred during the taxable year in carrying on business, other than costs of goods sold, if the business (or the activities which comprise the trade or business) consists of trafficking in controlled
substances (within the meaning of Schedules I and II of the CSA). The IRS has applied this provision to cannabis operations, prohibiting them from deducting expenses associated with cannabis businesses and asserting assessments and penalties
for additional taxes owed. While we do not believe that Section 280E of the Code applies to our business, and, generally, ancillary service providers who work with state-licensed cannabis businesses have not been subject to Section 280E of the
Code, because they are providing services or products other than cannabis, if the IRS interprets the section to apply, it would significantly and materially affect our profitability and financial condition.
The MORE Act, which was passed by the House of Representatives in
2020 and reintroduced in the Senate for consideration on September 30, 2021, would remove marijuana from the CSA, which would effectively carve out state-legal cannabis businesses from Section 280E of the Code. However, the MORE Act would
impose two new taxes on cannabis businesses: an excise tax measured by the value of certain cannabis products and an occupational tax assessed on the enterprises engaging in cannabis production and sales. Although these novel tax provisions are
included in the MORE Act passed by the House of Representatives, it is challenging to predict whether, when and in what form the MORE Act could be enacted into law and how any such legislation would affect the activities of SpringBig.
Similarly, the recently introduced States Reform Act would also effectively carve out state-legal cannabis businesses from Section 280E of the Code but at the same time impose a new excise tax on cannabis businesses (albeit at a lower rate than
the proposed MORE Act).
Cannabis businesses may be subject to civil
asset forfeiture.
Any property owned by participants in the cannabis industry used
in the course of conducting such business, or that represents proceeds of such business or is traceable to proceeds of such business, could be subject to seizure by law enforcement and subsequent civil asset forfeiture because of the illegality
of the cannabis industry under federal law. Even if the owner of the property is never charged with a crime, the property in question could still be seized and subject to an administrative proceeding by which, with minimal due process, it could
be subject to forfeiture. Forfeiture of assets of our cannabis business clients could adversely affect our revenues if it impedes their profitability or operations and our clients’ ability to continue to subscribe to our services.
Due to our involvement in the cannabis
industry, we may have a difficult time obtaining the various insurances that are desired to operate our business, which may expose us to additional risk and financial liability.
Insurance that is otherwise readily available, such as general
liability and directors’ and officers’ insurance, is more difficult for us to find and is more expensive or contains significant exclusions because our clients are cannabis industry participants. There are no guarantees that we will be able to
find such insurance coverage in the future or that the cost will be affordable to us. If we are forced to operate our business without such insurance coverage, it may prevent us from entering into certain business sectors, may inhibit our
growth, and may expose us to additional risk and financial liabilities. If we experience an uninsured loss, it may result in loss of anticipated cash flow and could materially adversely affect our results of operations, financial condition, and
business.
There may be difficulty enforcing certain of
our commercial agreements and contracts.
Courts will not enforce a contract deemed to involve a violation
of law or public policy. Because cannabis remains illegal under U.S. federal law, certain parties to contracts involving the state-legal cannabis industry have argued that the agreement was void as federally illegal or against public policy.
Some courts have accepted this argument in certain cases, usually against the company trafficking in cannabis. While courts have enforced contracts related to activities by state-legal cannabis companies, and the trend is generally to enforce
contracts with state-legal cannabis companies and their vendors, there remains doubt and uncertainty that we will be able to enforce all of our commercial agreements in court for this reason. We cannot be assured that we will have a remedy for
breach of contract, which would have a material adverse effect on our business.
35
Risks Related to Our Intellectual Property
We may in the future be, subject to disputes
and assertions by third parties with respect to alleged violations of intellectual property rights. These disputes could be costly to defend and could harm our business and operating results.
We may, from time to time in the future, face allegations that we
have violated the intellectual property rights of third parties, including patent, trademark, copyright and other intellectual property rights. Even if the claims are without merit, defending these types of claims may result in substantial
costs, the diversion of the attention of management, and the disruption of our operations. In particular, patent and other intellectual property litigation may be protracted and expensive, and the results are difficult to predict. We may be
required to stop offering certain features, purchase licenses or modify our products and features while we develop non-infringing substitutes, or become subject to significant settlement costs. These claims also could subject us to significant
liability for damages and could result in our having to stop using or hosting technology, content, branding or business methods found to be in violation of another party’s rights. We do not own any patents and, therefore, may be unable to deter
competitors or others from pursuing patent or other intellectual property infringement claims against us through the threat of counter-suit.
Companies in the software-as-a-service (SaaS) vertical in which we
operate and other industries may own large numbers of patents, copyrights, and trademarks and may frequently request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of
intellectual property rights. Our platform features third-party brands, which may themselves infringe third party intellectual property rights and could bring us into litigation between the parties. Further, although we contractually seek
indemnification protection from our clients, clients may not be solvent or financially able to indemnify us. We may be required or may opt to seek a license of intellectual property rights held by others, which may not be available on
commercially reasonable terms, or at all. Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology,
content, branding, or business methods, which could require significant effort and expense and which we may not be able to accomplish efficiently, or at all. If we cannot use, license, or develop technology, content, branding, or business
methods for any allegedly infringing aspect of our business, we may be unable to compete effectively. Further, as we face increasing competition and as our business grows, we will face an increasing likelihood of claims of infringement.
The results of litigation and claims to which we may be subject
cannot be predicted with certainty. Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could
harm our business, reputation and operating results.
Some of our solutions contain open source
software, which may pose particular risks to our proprietary software and solutions.
We use open source software that we have obtained from third
parties or is included in software packages in our solutions and will continue to use open source software in the future. Open source software is generally freely accessible, usable and modifiable, and is made available to the general public on
an “as-is” basis under the terms of a non-negotiable license. From time to time, we may face claims from third parties claiming ownership of, or demanding release of, the open source software and/or derivative works that we developed using such
software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to purchase a costly license or cease
offering the implicated solutions unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional research and development resources. In addition to risks related to license
requirements, use of certain open source software can lead to greater risks than use of third party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. Any of these risks
could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on our business and operating results.
The success of our business heavily depends
on our ability to protect and enforce our intellectual property rights.
Our business depends on our intellectual property, the protection
of which is crucial to the success of our business. We rely on a combination of trademark, trade secret and other intellectual property rights and laws and contractual restrictions to protect our intellectual property. As examples of such
restrictions, we attempt to protect our
36
intellectual property, technology and confidential information by entering into
confidentiality and inventions assignment agreements and non-competition agreements with employees, contractors, consultants and business partners who develop intellectual property on our behalf, and entering into non-disclosure agreements with
our business partners. These agreements may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or
disclosure of our confidential information, intellectual property or technology. Despite our efforts to protect our proprietary rights, unauthorized parties, as examples, may copy aspects of our website features, software and functionality or
obtain and use information that we consider proprietary.
Despite our efforts to protect our intellectual property rights,
including trademarks, they may not be recognized in the future, or may be invalidated, circumvented or challenged. For example, we have registered, among numerous other trademarks, “SpringBig” as a trademark in the U.S. Competitors have and may
continue to adopt service names similar to ours, thereby harming our ability to build brand identity and possibly leading to consumer confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners
of other trademarks that are similar to our trademarks. Litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the U.S. and abroad may be necessary in the future to
enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective and could result in substantial costs and
diversion of resources, which could harm our business and operating results.
Further, we may be subject, from time-to-time, to claims that
former employees, collaborators or other third parties have an interest in our intellectual property as an inventor or co-inventor. We generally enter into confidentiality and intellectual property assignment agreements with our employees,
consultants, and contractors. These agreements generally provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, those agreements may not be honored and may not
effectively assign intellectual property rights to us. Moreover, there may be some circumstances, where we are unable to negotiate for such ownership rights. If we are subject to a dispute challenging our rights in or to patents or other
intellectual property, such a dispute could be expensive and time consuming. If we were unsuccessful, we could lose valuable rights in intellectual property that we regard as our own, which could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Risks Related to Our Securities and Certain Tax Matters
If we fail to meet all applicable
requirements of Nasdaq, and Nasdaq determines to delist our Common Stock, the delisting could adversely affect the market liquidity of our Common Stock and the market price of our Common Stock could decrease.
On September 7, 2022, we received a letter from the listing
qualifications department staff of Nasdaq (the “Nasdaq Staff”) notifying us that for the last 30 consecutive business days, our minimum Market Value of Listed Securities (“MVLS”) was below the minimum of $50 million required for continued
listing on The Nasdaq Global Market pursuant to Nasdaq listing rule 5450(b)(2)(A). The notice had no immediate effect on the listing of our Common Stock or warrants. In accordance with Nasdaq listing rule 5810(c)(3)(C), the Company has 180
calendar days, or until March 6, 2023, to regain compliance. The notice states that to regain compliance, the Company’s MVLS must close at $50 million or more for a minimum of ten consecutive business days during the compliance period ending
March 6, 2023. On March 7, 2023, we received formal notice from the Nasdaq Staff indicating that we continued to be non-compliant with the MVLS requirement and that our Common Stock and Public Warrants were subject to delisting unless the
Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company has timely requested a hearing before the Panel, which request will stay any further action by Nasdaq at least pending the issuance of a decision by
the Panel and the expiration of any extension that the Panel may grant to the Company following the hearing. If the Company is unable to satisfy the MVLS requirement, the Company may be eligible to transfer the listing of its Common Stock and
Public Warrants to the Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market).
On December 20, 2022, we received a letter from the Nasdaq Staff
providing notification that, for the previous 30 consecutive business days, the bid price for the Company’s Common Stock had closed below the $1.00 per share minimum bid price requirement for continued listing under Nasdaq Listing Rule
5450(a)(1). The notice had no immediate effect on the listing of the Company’s Common Stock or Public Warrants. In accordance with Nasdaq Listing Rule 5810(c)(3)(A) the Company has been provided an initial period of 180 calendar days, or until
June 19, 2023 to regain compliance with the minimum bid requirement. To regain compliance, the closing bid price of the
37
Company’s Common Stock must be $1.00 per share or higher for a minimum of 10
consecutive business days any time before June 19, 2023, unless Nasdaq exercises its discretion to extend this 10-day period pursuant to Nasdaq Listing Rule 5810(c)(3)(H). If the Company does not regain compliance by June 19, 2023, the Company
may be eligible for an additional 180 calendar days compliance period. To qualify, the Company would need to transfer the listing of its Common Stock to the Nasdaq Capital Market, provided that it meets the continued listing requirement for
market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and would need to provide written notice of its intention to cure the
deficiency during the second compliance period by effecting a reverse stock split if necessary.
There can be no assurance that we will regain compliance with the
requirements for listing our Common Stock and/or Public Warrants on Nasdaq. If we are unable to satisfy the Nasdaq criteria for continued listing, our Common Stock and/or Public Warrants would be subject to delisting. A delisting of our Common
Stock could negatively impact us by, among other things, reducing the liquidity and market price of our Common Stock and/or Public Warrants; reducing the number of investors willing to hold or acquire our Common Stock and/or Public Warrants,
which could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage of us; and limiting our ability to issue additional securities or obtain additional financing in the future. In addition,
delisting from Nasdaq may negatively impact our reputation and, consequently, our business.
If our performance does not meet market
expectations, the price of our securities may decline and the market for our securities may be volatile.
If our performance does not meet market expectations, the price of
our shares of Common Stock may decline. In addition, even if an active market for our shares of Common Stock develops and continues, the trading price of our shares of Common Stock could be volatile and subject to wide fluctuations in response
to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on the price of our shares of Common Stock.
Factors affecting the trading price of our shares of Common Stock
may include:
|
•
|
actual or anticipated fluctuations in our quarterly and annual financial results or the quarterly and annual financial
results of companies perceived to be similar to us;
|
|
•
|
changes in the market’s expectations about operating results;
|
|
•
|
operating results failing to meet market expectations in a particular period, which could impact the market price our shares
of Common Stock;
|
|
•
|
operating and stock price performance of other companies that investors deem comparable to us;
|
|
•
|
changes in laws and regulations affecting our businesses;
|
|
•
|
commencement of, or involvement in, litigation involving the Company;
|
|
•
|
changes in our capital structure, such as future issuances of securities or the incurrence of debt;
|
|
•
|
any significant change in our Board of Directors or management;
|
|
•
|
sales of substantial amounts of our shares of Common Stock by the Company, Cantor, the Investor or our directors, executive
officers or significant shareholders or the perception that such sales could occur; and
|
|
•
|
general economic and political conditions such as recessions, interest rates, fuel prices, inflation, international currency
fluctuations and acts of war or terrorism.
|
Broad market and industry factors may depress the market price of
our shares of Common Stock irrespective of our operating performance. The stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular
companies affected. The trading prices and valuations of these shares, and of our securities, may not be predictable. A loss of investor confidence in the market for companies engaging in digital payments or the shares of other companies which
investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our shares of Common Stock also could adversely affect
our ability to issue additional securities and our ability to obtain additional financing in the future.
38
Because there are no current plans to pay
cash dividends on our shares of Common Stock for the foreseeable future, you may not receive any return on investment unless you sell our shares of Common Stock for a price greater than that which you paid for it; furthermore, there is no
guarantee that the value of the shares of Common Stock will increase to a price greater than that which you paid for it.
We may retain future earnings, if any, for future operations,
expansion, and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of our Board of Directors
and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions, applicable law and other factors that our Board of Directors may deem relevant. In addition, our ability to pay
dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our shares of Common Stock unless you sell your shares of
for a price greater than that which you paid for them; provided, however, that there is no guarantee that the value of the shares of Common Stock will increase to a price greater than the price for which such shares were purchased.
We may be subject to securities litigation,
which is expensive and could divert management attention.
The market price of our Common Stock may be volatile and, in the
past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could
result in substantial costs and divert management’s attention from other business concerns, which could seriously harm our business.
The issuance of our shares of Common Stock
in connection with the Notes and Warrants Purchase Agreement or that may otherwise be issued and/or sold by the Company or selling securityholders, could cause substantial dilution, which could materially affect the trading price of our shares
of Common Stock.
To the extent that the L1 Notes and/or Investor Warrants are
converted into or exercised for shares of Common Stock, substantial amounts of our shares of Common Stock will be issued. Under certain default circumstances the L1 Notes and Investor Warrants may become exercisable at prevailing prices or
discounts to prevailing prices, and the original $12 conversion price of the L1 Notes and $12 exercise price of the Investor Warrants will be adjusted in the event that the Company issues additional equity securities under certain issuances
below the original conversion/exercise price. In addition, we have the ability under certain circumstances to make payments on the L1 Notes in shares of Common Stock at then prevailing market prices. We are required to reserve three times the
original number of shares obtainable under the L1 Notes and Investor Warrants to provide for these circumstances. Although we cannot predict the number of our shares of Common Stock that will actually be issued in connection with any such
conversions and/or sales, such issuances could result in substantial decreases to our stock price.
Further, substantial amounts of our shares of Common Stock may
also be issued, sold and/or resold under Cantor Equity Facility and pursuant to the Company’s equity incentive plan, which could cause further substantial dilution of our shares of Common Stock and materially impact the trading price of our
shares of Common Stock.
In addition, the way we account for the L1 Notes and the Investor
Warrants may impact our reported or future financial results and the market price of our shares of Common Stock. For example, we have adopted ASU 2020-06, Accounting for Convertible Instruments and Contracts
in an Entity's Own Equity and elected to carry the L1 Notes and Investor Warrants at amortized cost. See the section titled “Effective Accounting Pronouncements” in Note 2 “Summary of Significant Accounting Policies,” and Note 11
“Senior Secured Convertible Notes” in our audited consolidated financial statements included in this prospectus for more information.
A significant portion of our total
outstanding shares may be sold into the market in the near future. This could cause the market price of our shares of Common Stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of Common Stock in the
public market could occur at any time as a result of issuances and resales of shares of Common Stock under the Cantor Equity Facility along with other issuances and resales of shares of Common Stock including shares subject to the L1 Notes, the
Investor Warrants and our other public and private warrants, as well as the resale of shares of Common Stock by other holders, and pursuant to the Company’s equity incentive plan. These sales, or the perception in the market that the holders of
a large number of shares intend to sell shares, could reduce the market price of our shares of Common Stock.
39
Sales of our shares of Common Stock, or
the perception of such sales, including by selling securityholders in the public market or otherwise could cause the market price for our shares of Common Stock to decline the securityholders selling such securities may still receive
significant proceeds.
The sale of our shares of Common Stock in the public market or
otherwise, or the perception that such sales could occur, could harm the prevailing market price of our shares of Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity
securities in the future at a time and at a price that it deems appropriate (which ability to sell equity securities is also subject to restrictions under the terms of the L1 Notes and related agreements). Institutional investors and our
founder that collectively beneficially own in excess of 50% of the Company’s outstanding shares in the aggregate will be able to resell their shares for so long as a registration statement is available for use. Resales of our shares of Common
Stock may cause the market price of our securities to drop significantly, regardless of the performance of our business.
We have filed registration statements relating to the resale of a
large number of shares of Common Stock representing a large percentage of our public float pursuant to the Notes and Warrants Purchase Agreement, the Cantor Equity Facility, and securities held by certain existing shareholders for which such
securityholders have registration rights. As such, sales of a substantial number of shares of Common Stock in the public market could occur at any time. Given the substantial number of shares of Common Stock being registered for potential
resale or the perception in the market that the stockholders of a large number of shares intend to sell shares, could increase the volatility of the market price of our Common Stock or result in a significant decline in the public trading price
of our Common Stock. Further, certain shares of our Common Stock that are being registered for resale include shares that were purchased at prices that may be significantly below the trading price of our shares of Common Stock and the sale of
which would result in such selling securityholders realizing a significant gain. Even if our trading price remains low, certain selling securityholders may still have an incentive to sell shares of our Common Stock because they purchased the
shares at prices lower than the public investors or the current trading price of our Common Stock. Public holders of our shares of Common Stock may not experience a similar rate of return on their shares.
If securities or industry analysts do not
publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our Common Stock adversely, the price and trading volume of our Common Stock could decline.
The trading market for our Common Stock will be influenced by the
research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If any of the analysts who may cover SpringBig change their recommendation regarding our stock adversely, or provide
more favorable relative recommendations about our competitors, the price of our Common Stock would likely decline. If any analyst who may cover SpringBig were to cease their coverage or fail to regularly publish reports on us, we could lose
visibility in the financial markets, which could cause our stock price or trading volume to decline.
We may amend the terms of our public and
private warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of then outstanding Public Warrants. As a result, the exercise price of your warrants could be increased, the exercise period could be
shortened and the number of Common Stock purchasable upon exercise of a warrant could be decreased, all without the approval of all securityholders.
Our Public Warrants were issued in registered form under the
warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder for the purpose of
curing any ambiguity or curing, correcting or supplementing any defective provision or adding or changing any other provisions with respect to matters or questions arising under the warrant agreement, but requires the approval by the holders of
at least 65% of then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at
least 65% of then outstanding Public Warrants approve of such amendment. Examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of
shares of Common Stock purchasable upon the exercise of a warrant.
We are an emerging growth company within the
meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to
compare our performance with other public companies.
We are an emerging growth company within the meaning of the
Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other
40
public companies that are not emerging growth companies including, but not limited
to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions
from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, our shareholders may not have access to certain information
they may deem important. We could remain an emerging growth company for up to five years from the date of our IPO, although circumstances could cause us to lose that status earlier, including if the market value of our shares of Common Stock
held by non-affiliates exceeds $700,000,000 as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. We cannot predict whether investors will find our securities less
attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there
may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth
companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities
registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that
apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application
dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another
public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.
We have and will continue to incur increased
costs as a result of operating as a public company and our management has and will continue to devote a substantial amount of time to new compliance initiatives.
As a public company, we have and will continue to incur
significant legal, accounting and other expenses that we did not incur as a private company, and these expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a) of the Securities Act. In
addition, we expect to record incremental share-based compensation expense in connection with the consummation of the business combination.
As a public company, we are subject to the reporting requirements
of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules adopted, and to be adopted, by the SEC and the Nasdaq Stock Market LLC. Our management and other personnel have and will continue to devote a substantial
amount of time to these compliance initiatives. Moreover, these rules and regulations have substantially increased our legal and financial compliance costs and made some activities more time-consuming and costly. For example, these rules and
regulations have made it more difficult and more expensive for us to obtain director and officer liability insurance and forced us to accept reduced policy limits. We cannot predict or estimate the amount or timing of additional costs we have
and will continue to incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as
executive officers.
Our failure to timely and effectively
implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act could have a material adverse effect on our business.
As a public company, we are required to provide management’s
attestation on internal controls as required under Section 404(a) of the Sarbanes-Oxley Act. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of us
as a privately-held company. If we are not successful in implementing the additional requirements of Section 404(a) in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial
reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities.
As discussed elsewhere in this prospectus, we completed the
business combination on June 14, 2022. Prior to the business combination, Legacy SpringBig was a private company and, therefore, its controls were not required to
41
be designed or maintained in accordance with Rules 13a-15 and 15d-15 under the
Exchange Act. The design and implementation of internal control over financial reporting for the Company post-business combination has required and will continue to require significant time and resources from management and other personnel.
Because of this, the design and ongoing development of our framework for implementation and evaluation of internal control over financial reporting is in its preliminary stages. As a result, management was unable, without incurring unreasonable
effort or expense to conduct a comprehensive assessment of our internal control over financial reporting as of December 31, 2022. Accordingly, we are excluding management's report on internal control over financial reporting pursuant to Section
215.02 of the SEC Division of Corporation Finance's Regulation S-K Compliance & Disclosure Interpretations. However, management concluded that as of December 31, 2022, the Company had a material weakness.
A “material weakness” is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is more than a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely
basis. Management concluded that we did not have accounting personnel with adequate expertise in GAAP to ensure that complex material and/or non-routine transactions are properly reflected in our consolidated financial statements. We also noted
that we did not perform adequate independent reviews and maintain effective controls related to the preparation of consolidated financial statements, related notes thereto, account analyses, account summaries and account reconciliations. We
have taken and are continuing to take additional steps to remedy this material weakness.
Failure to properly implement internal controls on a timely basis
may lead to the identification of one or more additional material weaknesses or control deficiencies in the future, which may prevent us from being able to report our financial results accurately on a timely basis or help prevent fraud, and
could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause the market price of our shares of Common Stock to decline. If we have additional material weaknesses in
the future, it could affect the financial results that we report or create a perception that those financial results do not fairly state our financial position or results of operations. Either of those events could have an adverse effect on the
value of our shares of Common Stock.
Further, even if we conclude that our internal control over
financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, because of its inherent limitations, internal
control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to
fail to meet our future reporting obligations.
Changes in laws or regulations, or a failure
to comply with any laws and regulations, may adversely affect our business, investments and results of operations.
We are subject to laws and regulations enacted by national,
regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those
laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with
applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.
Anti-takeover provisions in our certificate
of incorporation and bylaws and under Delaware law could delay or prevent a change in control, limit the price investors may be willing to pay in the future for our shares of Common Stock and could entrench management.
Our certificate of incorporation and bylaws contain provisions
that could make it more difficult for a third-party to acquire us without the consent of our Board of Directors. These provisions provide for:
|
•
|
a classified Board of Directors with staggered three-year terms;
|
|
•
|
the ability of our Board of Directors to determine the powers, preferences and rights of preference shares and to cause us to
issue the preference shares without shareholder approval; and
|
|
•
|
requiring advance notice for shareholder proposals and nominations and placing limitations on convening shareholder meetings.
|
42
These provisions may make more difficult the removal of
management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions could also discourage proxy contests and make it more difficult shareholders to
elect directors of their choosing and cause us to take corporate actions other than those shareholders may desire, any of which could harm our share price.
Our largest shareholders and certain
members of our management own a significant percentage of our shares of Common Stock and are able to exert significant control over matters subject to shareholder approval.
Our founder and certain of our largest shareholders hold a
significant percentage of our shares of Common Stock. As a result, these holders have the ability to substantially influence us and exert significant control through this ownership position and, in the case of certain holders, service on our
Board of Directors. For example, these holders may be able to control elections of directors, issuance of equity, including to our employees under equity incentive plans, amendments of our organizational documents, or approval of any merger,
amalgamation, sale of assets or other major corporate transaction. These holders’ interests may not always coincide with our corporate interests or the interests of other shareholders, and it may exercise its voting and other rights in a manner
with which you may not agree or that may not be in the best interests of our other shareholders. So long as these holders continue to own a significant amount of our equity, they will continue to be able to strongly influence and effectively
control our decisions.
Future sales and issuances of our shares
of Common Stock, including pursuant to our equity incentive and other compensatory plans, will result in additional dilution of the percentage ownership of our shareholders and could cause our share price to fall.
We may need additional capital in the future to continue our
planned operations. To the extent we raise additional capital by issuing equity securities, our shareholders may experience substantial dilution. We may sell shares of Common Stock, convertible securities or other equity securities in one or
more transactions at prices and in a manner we determine from time to time. If we sell shares of Common Stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent
sales. In addition, new investors could gain rights superior to our existing shareholders.
Pursuant to SpringBig Holdings, Inc. 2022 Long-Term Incentive Plan
(the “Incentive Plan”), we are authorized to grant options and other share-based awards to our employees, directors and consultants. The number of shares of our Common Stock initially reserved for issuance under the Incentive Plan was
1,525,175, but we may seek shareholder approval to increase this amount from time to time. Shares subject to stock awards granted under the Incentive Plan that expire or terminate without being exercised in full, or that are paid out in cash
rather than in shares, will not reduce the number of shares available for issuance under the Incentive Plan.
43
We estimate that the net proceeds from this offering will be
approximately $ based on an assumed public offering price, based on the last reported sale price on , 2023, of $ per share of Common Stock and accompanying Common Stock Warrants, after deducting estimated Placement Agent fees and
estimated offering expenses payable by us and excluding the proceeds, if any, from the cash exercise of the Common Stock Warrants issued in this offering. However, because this is a best efforts offering and there is no minimum offering amount
required as a condition to the closing of this offering, the actual offering amount, Placement Agent’s fees and net proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth on the cover page
of this prospectus.
We currently intend to use the net proceeds we receive from this
offering for working capital and general corporate purposes, which may include, among other purposes, servicing our ongoing debt obligations under our 6% Senior Secured Original Issue Discount Convertible Notes due 2024. We will have broad
discretion in the way we use these proceeds. See “Risk Factors—Risks Related to the Offering—We have broad discretion in the use of the net proceeds from this offering and may not use them effectively” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Liquidity & Capital Resources.”
The expected use of the net proceeds from the offering represents
our intentions based upon our current plans and business conditions. The amounts we actually expend in these areas, and the timing thereof, may vary significantly from our current intentions and will depend on a number of factors, including
cash generated from future operations and actual expenses to operate our business.
44
Market Information
Our Common Stock and Public Warrants, each exercisable for one
share of our Common Stock at an exercise price of $11.50 per share, are listed on The Nasdaq Global Market under the symbols “SBIG” and SBIGW,” respectively. As of March 28, 2023, there were 39 holders of record of our Common Stock, and this
number was derived from our shareholder records and does not include The Depository Trust Company participants or beneficial owners holding shares through nominee names.
Dividend Policy
We have not declared or paid any dividends on our Common Stock to
date. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any decision to declare and pay dividends
in the future will be made at the sole discretion of our Board of Directors and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board of
Directors may deem relevant.
45
The following table sets forth our cash and cash equivalents, debt
obligations, and capitalization as of December 31, 2022 (i) on an actual basis; and (ii) on a pro forma as adjusted basis to give effect to the issuance and sale of shares of our Common Stock and Common Stock Warrants based on an assumed public
offering price, based on the last reported sale price on , 2023, of $ per share, for total net proceeds of approximately $ (assuming no sale of pre-funded warrants).
|
|
| |
As of December 31, 2022
(In thousands)
|
|||
|
|
| |
Actual
|
| |
Pro
Forma
|
|
Cash and cash equivalents
|
| |
$3,546
|
| |
$
|
|
Stockholders’ Equity (Deficit):
|
| |
|
| |
|
|
Common stock par value $0.0001 per share, 300,000,000
authorized at December 31, 2022; 26,659,711 issued and outstanding as of December 31, 2022
|
| |
$3
|
| |
$
|
|
Additional paid-in capital
|
| |
$22,701
|
| |
$
|
|
Accumulated deficit
|
| |
$(26,332)
|
| |
$
|
|
Total stockholders’ equity (deficit)
|
| |
$(3,628)
|
| |
$
|
|
Total capitalization
|
| |
$9,657
|
| |
$
|
The foregoing pro forma as adjusted information is illustrative
only, and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read this table together with our financial
statements and the related notes appearing elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.
The above discussion and table is based on 26,659,711 shares of
Common Stock outstanding as of December 31, 2022, and excludes the following: (i) options to purchase an aggregate of 3,394,753 shares of our Common Stock, (ii) warrants to purchase an aggregate of 16,586,980 shares of our Common Stock, (iii)
725,000 shares of our Common Stock underlying unvested restricted stock units and (iv) 800,175 shares of our Common Stock reserved for future issuance under our 2022 Plan. The above discussion and table assume no exercise of the outstanding
options or warrants described above and no exercise of any pre-funded warrants, Common Stock Warrants or Placement Agent Warrants offered hereby.
46
If you invest in our securities in this offering, your interest
will be diluted to the extent of the difference between the public offering price per share of Common Stock and accompanying Common Stock Warrants and the pro forma as adjusted net tangible book value per share of Common Stock immediately after
this offering.
Our net tangible book value is the amount of our total tangible
assets less our total liabilities. We had a net tangible book (deficit) as of December 31, 2022 of $(3,628), or $(0.14) share of Common Stock.
Pro forma as adjusted net tangible book value is our pro forma net
tangible book value, plus the effect of the sale of our securities in this offering at the public offering price of $ per share of Common Stock and accompanying Common Stock Warrants and after deducting the Placement Agent fees and
commissions and other estimated offering expenses payable by us. Our pro forma as adjusted net tangible book (deficit) as of December 31, 2022 would have been approximately $ , or $ per share. This amount represents an immediate increase in
pro forma as adjusted net tangible book value of approximately $ per share to our existing stockholders, and an immediate dilution of $ per share to new investors participating in this offering. Dilution per share to new investors is
determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the public offering price per share paid by new investors. The final public offering price will be determined through negotiation between
us and the underwriters in the offering and may be at a discount to the current market price. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final public offering price.
The following table illustrates this per share dilution:
|
Assumed public offering price per share (attributing no value to the Common
Stock Warrants)
|
| |
|
|
Net tangible book value per share as of December 31, 2022
|
| |
$(0.14)
|
|
Increase in pro forma as adjusted net tangible book value per share after this
offering
|
| |
|
|
Pro forma as adjusted net tangible book value per share after giving effect to
this offering
|
| |
|
|
Dilution in pro forma as adjusted net tangible book value per share to new
investors
|
| |
|
Each $0.50 increase (decrease) in the public offering price of
$ per share and accompanying Common Stock Warrants would increase (decrease) the pro forma as adjusted net tangible book value per share by $ , and the dilution per share to new investors in this offering by $ , assuming the number of
shares of Common Stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the Placement Agent fees and commissions and estimated offering expenses payable by us. Each increase of 500,000 in
the number of shares of Common Stock and accompanying Common Stock Warrants sold in this offering would increase (decrease) our pro forma as adjusted net tangible book value by approximately $ and the dilution per share to new investors in
this offering by $ , assuming that the public offering price per share and accompanying Common Stock Warrants remains the same and after deducting Placement Agent fees and commissions and estimated offering expenses payable by us.
The above discussion and table is based on 26,659,711 shares of
Common Stock outstanding as of December 31, 2022, and excludes the following: (i) options to purchase an aggregate of 3,394,753 shares of our Common Stock, (ii) warrants to purchase an aggregate of 16,586,980 shares of our Common Stock, (iii)
725,000 shares of our Common Stock underlying unvested restricted stock units and (iv) 800,175 shares of our Common Stock reserved for future issuance under our 2022 Plan. The above discussion and table assume no exercise of the outstanding
options or warrants described above and no exercise of any pre-funded warrants, Common Stock Warrants or Placement Agent Warrants offered hereby.
47
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of
SpringBig’s financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to those statements. The discussion should be read together with the historical audited annual
statements for SpringBig for the years ended December 31, 2022 and 2021, and the related notes that are included elsewhere in this prospectus. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties. SpringBig’s actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see “Cautionary Note Regarding Forward-Looking
Statements” and “Risk Factors” in other parts of this prospectus.
“SpringBig,” “the Company,” “we,” “us” or
“our” refer to SpringBig Holdings, Inc. and its subsidiaries, unless the context otherwise requires.
Forward Looking Statements
All statements other than statements of
historical facts contained in this prospectus, including statements regarding future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as “believe,” “may,” “will,” “estimate,”
“continue,” “anticipate,” “intend,” “could,” “would,” “expect,” “objective,” “plan,” “potential,” “seek,” “grow,” “target,” “if,” and similar expressions intended to identify forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations,
objectives, and financial needs.
Overview
SpringBig Holdings, Inc. (the “Company” or “SpringBig”) is a
market-leading software platform providing customer loyalty and marketing automation solutions to retailers and brands. We have leveraged our deep expertise in loyalty marketing to develop solutions that address the key challenges faced by
retailers and brands, including those in the cannabis industry. Stringent, complex, and rapidly evolving regulations have resulted in restricted access to traditional marketing and advertising channels for cannabis retailers and brands,
preventing them from utilizing many traditional methods for effectively accessing and engaging with consumers. In addition, the lack of industry-specific data and market intelligence solutions limit cannabis retailers' and brands' ability to
efficiently market their products, thereby hindering their growth. Our platform enables our clients to increase brand awareness, engage customers, improve retention, and access actionable consumer feedback data to improve marketing. Our clients
can use our loyalty marketing, digital communications, and text/email marketing solutions to drive new customer acquisition, customer spend and retail foot traffic. Our proven B2B2C software platform creates powerful network effects between
retailers and brands and provides an ability for both to connect directly with consumers. As retailers and brand scale, a virtuous cycle amplifies growth, ultimately expanding SpringBig's reach and strengthening our value proposition.
SpringBig serves approximately 1,300 brand and retailer clients
across more than 3,000 distinct retail locations in North America. Our clients distribute more than 2.0 billion messages annually, and in the last year more than $7.5 billion of gross merchandise value was accounted for by clients utilizing our
platform.
Business Combination and Public Company Cost
On June 14, 2022, SpringBig Holdings, Inc., a Delaware corporation
(formerly known as Tuatara Capital Acquisition Corporation), consummated the previously announced business combination of Tuatara and Legacy SpringBig. Pursuant to the merger agreement, prior to the closing of the business combination, Tuatara
changed its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. Prior to the closing date, and in connection
with the Closing, Tuatara changed its name to SpringBig Holdings, Inc. Legacy SpringBig was deemed to be the accounting acquirer in the business combination based on an analysis of the criteria outlined in Accounting Standards Codification 805.
While Tuatara was the legal acquirer in the business combination, because Legacy SpringBig was deemed the accounting acquirer, the historical financial statements of Legacy SpringBig became the historical financial statements of the combined
company, upon the Closing.
48
The business combination was accounted for as a “reverse
recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Legacy SpringBig in many respects. Under
this method of accounting, Tuatara was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Legacy SpringBig was deemed to be the accounting acquirer in the transaction and, consequently, the transaction
was treated as a recapitalization of Legacy SpringBig (i.e., a capital transaction involving the issuance of stock by Tuatara for stock of Legacy SpringBig). Accordingly, the consolidated assets, liabilities and results of operations of Legacy
SpringBig became the historical financial statements of the combined company, and Tuatara’s assets, liabilities and results of operations were consolidated with Legacy SpringBig beginning on the acquisition date. Operations prior to the
business combination are presented as those of Legacy SpringBig. The net assets of Tuatara were recognized at historical cost (which are consistent with carrying value), with no goodwill or other intangible assets recorded.
As a consequence of the business combination, Legacy SpringBig
became the successor to an SEC-registered and Nasdaq-listed company, which requires us to incur additional expenses and implement procedures and processes to address public company regulatory requirements and customary practices. We have and
expect to continue to incur additional annual expenses as a public company for, amongst other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative
resources, including increased audit and legal fees.
Key Operating and Financial Metrics
We monitor the following key financial and operational metrics to
evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. The following is our analysis for the years ended December 31, 2022 and 2021, in thousands:
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Revenue
|
| |
$26,629
|
| |
$23,362
|
|
Net loss
|
| |
(13,076)
|
| |
(5,750)
|
|
Adjusted EBITDA
|
| |
(12,603)
|
| |
(5,548)
|
|
|
| |
|
| |
|
|
Number of retail clients
|
| |
1,319
|
| |
1,240
|
|
Net revenue retention
|
| |
105%
|
| |
110%
|
|
Number of messages (million)
|
| |
2,099
|
| |
1,861
|
For a reconciliation of net loss to Adjusted EBITDA see “EBITDA and
Adjusted EBITDA,” below.
Revenue
We generate revenue from the sale of monthly subscriptions that
provide retail clients with access to an integrated platform through which they can manage loyalty programs and communications with their consumers. We also generate additional revenue from these retail clients when the quantum of messages sent
to consumers exceeds the amounts in the subscription package. The subscriptions generally have twelve-month terms (which typically are not subject to early termination without a cancellation fee payable by the client), are payable monthly, and
automatically renew for subsequent and recurring 12-month periods unless notice of cancellation is provided in advance.
The Company's revenue growth is generally achieved through a mix
of new clients, clients upgrading their subscriptions (as new clients will frequently enter into a relatively low level of subscription (with respect to the size of such client's database and the number of their customers on such database)
and/or the number of pre-determined communication credits), which frequently occurs shortly after such a client initially becomes a client, and the excess use element of revenues. “Excess use” revenues are revenues derived from amounts charged
to clients for exceeding the pre-determined credit volume set forth in the applicable client’s subscription agreement. Given this combination, and particularly the tendency for clients to upgrade soon after becoming a client, the Company does
not actively monitor revenue split between new and existing clients, preferring to use the split between subscription and excess use in combination with net dollar retention and the number of clients as key metrics, as described below.
49
Other Key Operating Metrics
The growth in our revenues is a key metric at this stage in our
development as a Company and therefore to provide investors with additional information, we have disclosed in the table above the number of our retail clients, our net revenue retention rate and the number of standardized messages distributed
through the SpringBig platform by our clients. We regularly review the key operating and financial metrics set forth above to evaluate our business, our growth, assess our performance and make decisions regarding our business. We believe these
key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making, and they may be helpful in evaluating the state and growth of
our business.
Number of Retail Clients. We disclose in the table above the number of discrete SpringBig platforms used by clients of the business at the end of the relevant period. We view this number as an important metric to
assess the performance of our business because an increased number of clients drives growth, increases brand awareness and helps contribute to our reach and strengthening our value proposition.
Net Revenue Retention. We believe that the growth in the use of our platform by our clients is an important metric in evaluating our business and growth. We monitor our dollar-based net revenue retention rate on a
rolling basis to track the maintenance of revenue and revenue-increasing activity growth. “Net revenue retention rate” (also referred to as “net dollar retention rate”) does not have a standardized meaning and is therefore unlikely to be
comparable to similarly titled measures presented by other companies, and further, investors should not consider it in isolation. When evaluating our retention rates and calculating our net revenue retention rate, SpringBig calculates the
average recurring monthly revenue from retail clients, adjusted for losses, increases and decreases in monthly subscriptions during the prior twelve months divided by the average recurring monthly subscription revenue over the same trailing
twelve-month period.
We view a net revenue retention rate exceeding 100% as positive
because this is indicative of increasing subscription revenue without including the impact of the initial recurring revenue from new clients during the month in which they are on-boarded. We believe that we can drive this metric by continuing
to focus on existing clients and by revenue-increasing activities, such as client upgrades. Net revenue retention is measured over the twelve-month ending at the reporting date and if the ratio exceeds 100% this is an indication of upgrades
from clients exceeding the value of any lost clients and downgrades in subscriptions. The net revenue retention is calculated based on subscription revenues only and does not include the impact of excess use revenue.
Number of Messages Sent. We believe that the volume of messages sent, measured in standardized message size, is important as it indicates the frequency of use and level of engagement of our platform by our clients.
Messages are distributed by text, email, and direct push notifications to mobile applications.
EBITDA and Adjusted EBITDA
To provide investors with additional information regarding our
financial results, we have disclosed EBITDA, which is a non-GAAP financial measure that we calculate as net income before interest, taxes, depreciation and amortization and Adjusted EBITDA, which represents EBITDA adjusted for certain unusual,
infrequent items, or non-cash items (such as bad debt expense and stock-based compensation).
We present EBITDA and Adjusted EBITDA because they are key
measures used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of investment capacity. Accordingly, we believe that EBITDA and
Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors, and is widely used by analysts, investors and competitors to
measure a company's operating performance.
50
EBITDA and Adjusted EBITDA have limitations, and you should not
consider these in isolation or as a substitute for analysis of our results as reported under GAAP, including net loss, which we consider to be the most directly comparable GAAP financial measure. Some of these limitations are:
|
•
|
although depreciation and amortization are non-cash charges, the assets being depreciated may have to be replaced in the
future, and neither EBITDA nor Adjusted EBITDA reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
|
•
|
EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and
|
|
•
|
EBITDA and Adjusted EBITDA do not reflect tax payments that may represent a reduction in cash available.
|
Because of these limitations, you should consider EBITDA and
Adjusted EBITDA alongside other financial performance measures, including net loss and our other GAAP results.
A reconciliation of net loss before taxes to non-GAAP EBITDA and
Adjusted EBITDA is as follows (in thousands):
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Net loss
|
| |
$(13,076)
|
| |
$(5,750)
|
|
Interest income
|
| |
(18)
|
| |
(3)
|
|
Interest expense
|
| |
949
|
| |
—
|
|
Income tax expense
|
| |
3
|
| |
2
|
|
Depreciation and amortization expense
|
| |
259
|
| |
173
|
|
EBITDA
|
| |
(11,883)
|
| |
(5,578)
|
|
Stock based compensation
|
| |
1,226
|
| |
595
|
|
PPP loan forgiveness
|
| |
—
|
| |
(781)
|
|
Bad debt expense
|
| |
1,474
|
| |
216
|
|
Severance payments
|
| |
188
|
| |
—
|
|
Business combination related bonus
|
| |
550
|
| |
—
|
|
Change in fair value of warrants
|
| |
(4,158)
|
| |
—
|
|
Adjusted EBITDA
|
| |
$(12,603)
|
| |
$(5,548)
|
Factors Affecting Our Performance
Overall Economic Trends
The overall economic environment and related changes to consumer
behavior have a significant impact on our business. Overall, positive conditions in the broader economy promote consumer spending on marketplaces and our customers’ products, while economic weakness, which generally results in reduced consumer
spending, may have a negative impact on our customers’ sales, which in turn may impact our revenue.
Growth and Retention of Customers
Our revenue grows primarily through acquiring and retaining
customers and expanding relationships with customers over time, increasing the revenue per customer. We have historically been able to attract, retain and grow relationships with customers as a result of the Company’s comprehensive product
suite, differentiated loyalty programs, consistent communications with customers, and reliable customer service.
Regulation and Maturation of Cannabis Markets
We believe that we will have significant opportunities for growth
as more jurisdictions legalize cannabis for medical and/or adult use and the regulatory environment continues to develop. We intend to explore new expansion opportunities as additional jurisdictions legalize cannabis for medical or adult use
and leverage our existing business model to enter new markets. We believe our understanding of the space coupled with our experienced sales force will
51
enable us to quickly enter and execute in new markets and capture new business,
which we sustain via our best-in-class product offerings. Further, a change in U.S. federal regulations could result in our ability to engage in additional outlets, including the fintech, payments and e-commerce space.
We expect competition to intensify in the future as the regulatory
regime for cannabis becomes more settled and the legal market for cannabis becomes more accepted, which may encourage new participants to enter the market, including established companies with substantially greater financial, technical and
other resources than existing market participants.
We believe that maintaining and enhancing our brand identity and
our reputation is critical to maintaining and growing our relationships with customers and to our ability to attract new customers.
We believe our platform’s scale and strong customer loyalty market
themselves; however, we implement a variety of marketing efforts to attract the remaining retailers and brands not yet on our platform. Marketing efforts include multiple strategies designed to attract and retain both retail and brands
subscribers.
Negative publicity, whether or not justified, relating to events
or activities attributed to us, our employees, customers or others associated with any of these parties, may tarnish our reputation and reduce the value of our brand. Given our high visibility, we may be more susceptible to the risk of negative
publicity. Damage to our reputation and loss of brand equity may reduce demand for our platform and have an adverse effect on our business, operating results and financial condition. Moreover, any attempts to rebuild our reputation and restore
value of our brand may be costly and time consuming, and such efforts may not ultimately be successful.
We also believe that the importance of our brand recognition and
reputation will continue to increase as competition in our market continues to develop. If our brand promotion activities are not successful, our operating results and growth may be adversely impacted.
Components of Our Results of Operations
Revenue
SpringBig provides its retail customers with access to an
integrated platform that provides all the functions of the Company’s proprietary software, which uses proprietary technology to send text, email, and push messages to the customer’s contacts. This access is provided to customers under a
contract, with revenue generated from monthly fixed fees for credits (up to pre-contracted amount) and optional purchases of additional credits.
Cost of Revenue
Cost of revenue consists primarily of amounts payable to
distributors of messages on behalf of the Company’s customers across cellular networks and integrations.
Selling, Servicing and Marketing Expenses
Selling, servicing and marketing expenses consist of salaries,
benefits, travel expense and incentive compensation for our sales, servicing and marketing employees. In addition, sales, servicing and marketing expenses include business acquisition marketing, events cost, and branding and advertising costs.
Technology and Software Development Expenses
Technology and software development costs consist of salaries and
benefits for employees, including engineering and technical teams who are responsible for building new products, as well as maintaining and improving existing products. We capitalize certain costs associated with technology and software
development in accordance with ACS 350-40, Intangibles - Goodwill and Other - Internal Use Software, but these are limited in quantum as we are constantly and regularly making enhancements to our technology platform and do not consider
appropriate to be capitalized. Capitalized costs are generally amortized over a three-year period commencing on the date that the specific software product is placed in service. We believe that continued investment in our platform is important
for our growth.
52
General and Administrative Expenses
General and administrative expenses consist primarily of payroll
and related benefits costs for our employees involved in general corporate functions including finance, human resources and investor relations, as well as costs associated with the use by these functions of software and equipment. All rent,
insurance and other occupancy costs are also included in general and administrative expenses as are professional and outside services related to legal, audit and other services, and stock compensation expenses.
Results of Operations
The following tables set forth our results of operations for the
periods indicated:
|
|
| |
Years Ended December 31,
|
|||||||||
|
|
| |
2022
|
| |
2021
|
| |
Increase (decrease)
|
| |
%
|
|
|
| |
(in thousands)
|
| |
(in thousands)
|
| |
(in thousands)
|
| |
|
|
Revenue
|
| |
$26,629
|
| |
$23,362
|
| |
$3,267
|
| |
14%
|
|
Cost of revenues
|
| |
6,701
|
| |
6,267
|
| |
434
|
| |
7%
|
|
Gross profit
|
| |
19,928
|
| |
17,095
|
| |
2,833
|
| |
17%
|
|
Operating expenses:
|
| |
|
| |
|
| |
|
| |
|
|
Selling, servicing and marketing
|
| |
12,333
|
| |
10,185
|
| |
2,148
|
| |
21%
|
|
Technology and software development
|
| |
11,353
|
| |
8,410
|
| |
2,943
|
| |
35%
|
|
General and administrative
|
| |
12,542
|
| |
5,032
|
| |
7,510
|
| |
149%
|
|
Total operating expenses
|
| |
36,228
|
| |
23,627
|
| |
12,601
|
| |
53%
|
|
Loss from operations
|
| |
(16,300)
|
| |
(6,532)
|
| |
(9,768)
|
| |
150%
|
|
Interest income
|
| |
18
|
| |
3
|
| |
15
|
| |
nm
|
|
Interest expense
|
| |
(949)
|
| |
—
|
| |
(949)
|
| |
nm
|
|
Change in fair value of warrants
|
| |
4,158
|
| |
—
|
| |
4,158
|
| |
nm
|
|
Forgiveness of PPP loan
|
| |
—
|
| |
781
|
| |
(781)
|
| |
nm
|
|
Loss before income tax
|
| |
(13,073)
|
| |
(5,748)
|
| |
(7,325)
|
| |
127%
|
|
Income tax expense
|
| |
3
|
| |
2
|
| |
1
|
| |
nm
|
|
Net loss
|
| |
$(13,076)
|
| |
$(5,750)
|
| |
$(7,326)
|
| |
127%
|
nm - not meaningful
Revenues. Revenues increased by $3.3 million for the year ended December 31, 2022, a 14% increase compared with the year ended December 31, 2021. Our
subscription revenue was $20.4 million for the year ended December 31, 2022 compared with $14.8 million in for the year ended December 31, 2021, representing 38% year over year growth. The excess use revenue declined by 29% year over year
from $8.3 million for the year ended December 31, 2021 to $5.9 million for the year ended December 31, 2022. This decrease was due in part to the weaker economy and more significantly to the fact that some prior year excess use revenue has
now converted into recurring subscription revenues due to clients upgrading their subscriptions. Our revenue from Brands clients increased by 44% year over year and was $940,000 for the year ended December 31, 2022, as compared to
$654,000 for the year ended December 31, 2021.
Gross Profit. Gross profit increased to $19.9 million for the year ended December 31, 2022 from $17.1 million for the year ended December 31, 2021, representing a
17% increase. The cost of revenue increased by $0.4 million, representing a 7% increase, for the year ended December 31, 2022. The increase was primarily due to the increasing volume of messages distributed by clients, with a total of
approximately 2.1 billion messages during the year ended December 31, 2022, representing an increase of 238 million, or 13.0% higher, than in the same period last year. The percentage increase in cost of revenue is lower than our revenue
growth over the same period and therefore our gross margin percentage increased by 1.7% compared with the same period in 2021 to 74.8% for the year ended December 31, 2022.
Operating Expenses. SpringBig continues to prioritize revenue growth while ensuring expenses are managed in an appropriate manner to ensure we are able to handle the
growth with appropriate personnel, infrastructure and processes and also ensuring net loss is maintained within an acceptable range.
53
Our operating expenses increased by $12.6 million, or 53%, for
the year ended December 31, 2022 compared with the year ended December 31, 2021.
Selling, servicing and marketing expenses increased by
$2.1 million, or 21%, for the year ended December 31, 2022, compared to the year ended December 31, 2021. The increase in expenses is primarily due to the full year effect of expanding the size of our operations during the latter half of 2021
in response to growth in the business and increased travel and conference activity in the year ended December 31, 2022 after this had been curtailed in the prior year due to the Covid-19 pandemic.
Technology and software development expenses increased by
$2.9 million, or 35%, for year ended December 31, 2022, compared to the year ended December 31, 2021, with the increase being attributable to higher headcount primarily through using offshore contract engineering resources to enable an
acceleration in the pace of developing and enhancing our software platform.
General and administrative expenses increased by $7.5 million, or
149%, for the year ended December 31, 2022, compared to the year ended December 31, 2021 due to higher personnel-related costs as we increased headcount and additional expenses related to preparing for and becoming a publicly listed company,
specifically relating to legal, accounting and auditing fees and directors’ and officers’ liability insurance premiums. In addition, higher stock compensation and bad debt expenses in the year ended December 31, 2022 compared with the prior
year are included in this category. The increase in bad debt expense from $0.2 million for the year ended December 31, 2021 to $1.5 million for the year ended December 31, 2022 was due to the deterioration of the macroeconomy which resulted in
many smaller clients closing their businesses.
Interest Income (Expense). Interest expense was $949,000 for the year ended December 31, 2022 due to interest on the 15% Convertible Notes and the 6% Convertible Notes issued in
connection with the business combination consummated on June 14, 2022. Interest expense was immaterial for the year ended December 31, 2021.
Change in fair value of
warrants. The liability relating to warrants issued by SpringBig is included on the balance sheet at the value prevailing at the end of the
accounting period and any change in value is reported in the income statement. As at December 31, 2022, the value of the Public Warrants, which are listed on the Nasdaq stock exchange, was $0.0211 per warrant. These warrants did not exist at
December 31, 2021, and were recorded in connection with accounting related to the June 14, 2022 business combination. As of the business combination date, the fair value per warrant was $0.2810. The liability relating to warrants issued by
SpringBig is included on the balance sheet at the value prevailing at the end of the accounting period. During the year ended December 31, 2022, a $4.2 million gain related to the change in value of the warrants is reported in the income
statement.
Liquidity & Capital Resources
We have incurred net losses since inception, and experienced
negative cash flows from operations. Prior to the business combination, we financed our operations and capital expenditures primarily through the private sales of equity securities and revenue. Our primary uses of cash in the short-term are to
fund our operations as we continue to grow our business.
In connection with the execution of the merger agreement in
November 2021, Legacy SpringBig and TCAC entered into subscription agreements, pursuant to which certain investors (the “PIPE Investors”) agreed to purchase an aggregate of 1,310,000 shares of Common Stock of the combined company, for $10.00
per share, for an aggregate purchase price of $13,100,000. On February 25, 2022, SpringBig entered into convertible notes (the “Convertible Notes”) with certain of the PIPE Investors for a principal sum of $7.0 million in aggregate. On the
consummation of the business combination, closing of the merger, the outstanding principal balance of the Convertible Notes became due and payable and was satisfied, along with the interest due on such notes, by the issuance to holders of such
notes shares of Common Stock and the remainder of the investment from the PIPE Investors was funded and paid to the Company.
Additionally, following the execution of the merger agreement, we
entered into two incremental financing agreements. An institutional investor through the Notes and Warrants Purchase Agreement agreed to purchase $11.0 million of 6% Senior Secured Original Issue Discount Convertible Notes due in 2024 and a
number of warrants equal to one-half of the principal amount of notes divided by the volume weighted average price on the trading day prior to closing. This financing closed immediately after the business combination.
The Company also entered into the Cantor Equity Facility for up to
$50.0 million in aggregate gross purchase price of newly issued shares of our Common Stock after the closing of the business combination.
54
The Company may, from time to time at its option, sell to
Cantor newly issued shares of Common Stock pursuant to the terms of the Cantor Equity Facility. The use of the Cantor Equity Facility is subject to certain conditions, including the effectiveness of a registration statement relating to the
resale of the Common Stock issuable under the Cantor Equity Facility. Therefore, funds from the $50.0 million gross purchase price will not be immediately available, if at all, to SpringBig, and there can be no assurances that the Cantor Equity
Facility will be available to the Company at all times during its terms or that such purchase price will ever become available.
The following table summarizes our cash, accounts receivable and
working capital at December 31, 2022 and December 31, 2021 (in thousands):
|
|
| |
December 31,
2022
|
| |
December 31,
2021
|
|
Cash and cash equivalents
|
| |
$3,546
|
| |
$2,227
|
|
Accounts receivable, net
|
| |
2,889
|
| |
3,045
|
|
Working capital
|
| |
(1,544)
|
| |
3,979
|
We are committed to ensuring our balance sheet supports the
business and our growth objectives and are considering a supplemental capital raise. As of December 31, 2022, based on the factors described in this sub-section, we concluded that there was substantial doubt about our ability to continue to
operate as a going concern for the 12 months following the issuance of the financial statements in this prospectus. This estimate is based on our current business plan and expectations and assumptions in light of current macroeconomic
conditions. We have based these estimates on assumptions that may prove to be wrong and could use our available capital resources sooner than we currently expect, and future capital requirements and the adequacy of available funds will depend
on many factors, including those described in the section entitled “Risk Factors” in this prospectus. Although we are not currently a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of,
complementary businesses, services or technologies, we may enter into these types of arrangements in the future, which could also require us to seek additional equity financing, incur indebtedness, or use cash resources. We have no present
understandings, commitments or agreements to enter into any such acquisitions.
To the extent existing cash and investments and cash from
operations are not sufficient to fund future activities, we may need to raise additional funds. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds by incurring indebtedness, such
indebtedness may have rights that are senior to holders of our equity securities and could contain covenants that restrict operations. Any additional equity financing may be dilutive to stockholders. Further, the Secured Convertible Notes also
contain a number of restrictive covenants that may impose significant restrictions on obtaining future financings, including restrictions on SpringBig’s ability to do any of each following while the Secured Convertible Notes remain outstanding:
(i) incurring additional indebtedness and guaranteeing indebtedness; (ii) incurring liens or allowing mortgages or other encumbrances; (iii) prepaying, redeeming, or repurchasing certain other debt; (iv) paying dividends or making other
distributions or repurchasing or redeeming its capital stock; (v) selling assets or entering into or effecting certain other transactions (including a reorganization, consolidation, dissolution or similar transaction or selling, leasing,
licensing, transferring or otherwise disposing of assets of the Company or its subsidiaries); (vi) issuing additional equity (outside of the equity facility, issuances under our equity compensation plan and other limited exceptions until a
resale registration statement registering all of the Common Stock underlying the notes and warrants with the Investor is declared effective by the SEC); (vii) entering into variable rate transactions (exclusive of the equity facility); and
(viii) adopting certain amendments to our governing documents, among other restrictions. In addition, the noteholders have the right, for 18 months following the first closing of the notes and warrants with the Investor, to purchase up to 30%
of the securities we may offer in subsequent financings. Accordingly, we may be limited in our ability to raise additional capital on acceptable terms or at all within such limitations. Such restrictions may be waived by consent of the
noteholder.
SpringBig’s ability to continue as a going concern is dependent on
its ability to meet its liquidity needs through a combination of factors including, but not limited to, cash and cash equivalents, the ongoing increase in revenue through increased usage by customers and new customers, its Common Stock Purchase
Agreement and strategic capital raises. The ultimate success of these plans is not guaranteed. See the section titled “Going Concern and Liquidity” in Note 2 of the notes to our audited consolidated financial statements included in this report
for more information.
55
Cash Flows
The following table summarizes our cash flows from operating,
investing and financing activities for the years ended December 31, 2022 and 2021 (in thousands):
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Statement of Cash Flows Data:
|
| |
|
| |
|
|
Total cash (used in) provided by:
|
| |
|
| |
|
|
Operating activities
|
| |
$(14,518)
|
| |
$(7,884)
|
|
Investing activities
|
| |
(413)
|
| |
(374)
|
|
Financing activities
|
| |
16,250
|
| |
38
|
|
Increase (decrease) in cash and cash equivalents
|
| |
$1,319
|
| |
$(8,220)
|
Operating Activities
Cash used in operating activities consists primarily of net loss
adjusted for certain non-cash items, including depreciation and amortization, non-cash stock compensation expenses, changes in the fair value of financial instruments and the effect of changes in working capital and other activities.
For the year ended December 31, 2022, the net loss was
$13.1 million and the cash used in operating activities was $14.5 million. The difference of $1.4 million is due to $2.0 million in non-cash items comprising a $4.2 million change in the value of warrants offset by $2.6 million relating to
stock compensation expense and depreciation and amortization, and a $0.6 million reduction in working capital.
For the year ended December 31, 2021, the net loss and loss from
operations was $5.8 million and cash used in operating activities was $7.9 million, with the difference of $2.1 million being due to an increase in accounts receivable.
Investing Activities
SpringBig has low capital investment requirements, with our needs
comprising primarily computer equipment and office furniture and related items. Cash used in investing activities was $0.4 million for the year ended December 31, 2022 and $0.4 million for the year ended December 31, 2021.
Financing Activities
During the year ended December 31, 2022, the net cash provided by
financing activities was $16.3 million, comprising $8.8 million from TCAC non-redeeming shareholders, $13.1 million from the issuance of new Common Stock pursuant to the PIPE financing and $10.0 million from the Secured Convertible Note less
merger related expenses of $14.8 million to provide net cash of $17.1 million associated with the closing of the business combination with Tuatara. Subsequent to the business combination $1.0 million of the Secured Convertible Note has been
repaid prior to December 31, 2022 and during the year ended December 31, 2022, $0.1 million was received due to the exercise of employee stock options.
Cash flows from financing activities were immaterial during the year
ended December 31, 2021.
Off-Balance Sheet Arrangements
At December 31, 2022, there were no off-balance sheet arrangements
between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to shareholders.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance
with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates
and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
56
We believe that the assumptions and estimates associated with
revenue recognition, software development costs, income taxes, and equity-based compensation have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and
estimates. For further information on all of our significant accounting policies, see the Company's audited consolidated financial statements and accompanying notes included in this report.
Revenue Recognition
The Company has adopted ASC 606, Revenue from Contracts with
Customers, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. The Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the
consideration the Company expects to receive in exchange for those services.
Software Development Costs
We capitalize certain costs associated with technology and
software development in accordance with ASC 350-40, Intangibles - Goodwill and Other - Internal Use Software. Capitalized costs are generally amortized over a three-year period commencing on the date that the specific software product is placed
in service. In practice, we have not capitalized any material software development costs since expenditures are deemed to be outside of the scope of those required to be capitalized in accordance with ASC 350-40.
Income Taxes
We record current income taxes based on our estimates of current
taxable income and provide for deferred income taxes to reflect estimated future income tax payments and receipts. We are subject to federal income taxes as well as state taxes. In addition, we are subject to taxes in the foreign jurisdictions
where we operate.
The Company records a deferred tax asset or liability based on the
difference between financial statement and tax basis of assets and liabilities as measured by the anticipated tax rates which will be in effect when these differences reverse. The measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available evidence, are not expected to be realized. The Company adopted ASU 2016-17, Balance Sheet Classification of Deferred Taxes. The guidance requires
that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will only have one net noncurrent deferred tax asset or liability.
The Company has evaluated its tax positions for any uncertainties
based on the technical merits of the positions taken. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be upheld on examination by taxing authorities. The
Company has analyzed the tax positions taken and has concluded that as of December 31, 2022 and 2021, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or disclosure in the
financial statements.
Stock-Based Compensation
ASC 718, Compensation - Stock Compensation, addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrant. Stock-based compensation for stock options to employees and non-employees is based upon the
fair value of the award on the date of grant. We record forfeitures as they occur. The compensation cost is recognized over the requisite service period, which is generally the vesting period, and is included in general and administrative
expenses in the consolidated statements of operations.
The Company estimates the fair value of stock options using the
Black-Scholes valuation model. The expected life represents the term the options granted are expected to be outstanding. The expected volatility was determined using the historical volatility of similar publicly traded companies. The risk-free
interest rate is based on the U.S. Treasury rate in effect at the time of grant.
Recent Accounting Pronouncements
See the section titled “Summary of Significant Accounting
Policies” in Note 2 of the notes to our audited consolidated financial statements included in this report for more information.
57
Emerging Growth Company and Smaller Reporting Company Status
Section 107 of the JOBS Act provides that an “emerging growth
company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of
certain accounting standards until those standards would otherwise apply to private companies. Section 107 of the JOBS Act provides that any decision to opt out of the extended transition period for complying with new or revised accounting
standards is irrevocable. We have elected to use this extended transition period under the JOBS Act.
We are also a “smaller reporting company” as defined in the
Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take
advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual
revenue is less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second
fiscal quarter.
Quantitative and Qualitative Disclosures About Market Risk
We have operations within the United States and limited operations
with customers located in Canada, and we are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes, inflation and exchange rate charges. Information relating to quantitative and
qualitative disclosures about these market risks is set forth below.
Interest Rate Fluctuation Risk
We consider all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
The primary objective of our investment activities is to preserve
principal while maximizing income without significantly increasing risk. Because our cash and cash equivalents have a relatively short maturity, our portfolio's fair value is relatively insensitive to interest rate changes. In future periods,
we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.
Inflation
We do not believe that inflation has had a material effect on our
business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become
subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
Exchange Rate Risk
We have operations in Toronto, Canada and customers located in
Canada. Given our reporting currency is US dollars, this results in exchange rate translation risk. The effect is minimized by matching our Canadian income and expense with our Canadian customers being invoiced in their local currency. The
exchange rate risk to our financial statements is immaterial.
58
Our Mission
We provide our clients with an easy-to-use loyalty, digital
communications platform that drives their consumers to action. SpringBig empowers our clients to effectively communicate with, increase the loyalty of, and expand their consumer population through the provision of an integrated technology
platform supported by robust analytics. Our goal is to become the leading SaaS software platform to cannabis retailers and brands, providing data-driven loyalty, marketing and consumer buying experience solutions throughout the U.S. and Canada,
and ultimately expanding internationally and into other regulated markets.
Summary of Our Business
SpringBig is a market-leading software platform providing customer
loyalty and marketing automation solutions to retailers and brands. SpringBig believes that it is a market leader in its product categories for a number of factors including, among others, (i) the number of SpringBig customers and consumers
enrolled on SpringBig’s platform (and the percentage of known licensed cannabis retailers enrolled in SpringBig’s product service); (ii) scale (SpringBig has operations and clients in all states that have legalized cannabis); (iii) the
comprehensive services offered by SpringBig; (iv) the technology offered by SpringBig that, among other things, connects the three categories of participants in the cannabis ecosystem (customers, retailers, and brands) and provides effective
communications and marketing to end-consumers; (v) SpringBig’s expertise in loyalty programs and marketing automation; (vi) the quality of SpringBig’s client services; and (vii) SpringBig’s ability to provide data analytics.
Since our inception in 2016, we have leveraged our deep expertise
in loyalty marketing to develop solutions that address the key challenges faced by retailers and brands, including those in the cannabis industry. Stringent, complex, and rapidly evolving regulations have resulted in restricted access to
traditional marketing channels for cannabis retailers and brands, preventing them from utilizing many traditional methods for effectively accessing and engaging with consumers. In addition, the lack of industry-specific data and market
intelligence solutions limit cannabis retailers’ and brands’ ability to efficiently market their products, thereby hindering their growth. Our platform enables our clients to increase brand awareness, engage customers, improve retention, and
access actionable consumer feedback data to improve marketing. Our clients can use our loyalty marketing, digital communications, and text/email marketing solutions drive new customer acquisition, customer spend and retail foot traffic. Our
proven business-to-business-to-customer (“B2B2C”) software platform creates powerful network effects between retailers and brands and provides an ability for both to connect directly with consumers. As retailers and brand scale, a virtuous
cycle is created, ultimately expanding SpringBig’s reach, strengthening our value proposition:
59
Today, we serve approximately 1,300 brand and retailer clients
across approximately 3,000 distinct retail locations in North America. Our clients distribute in excess of 2 billion messages annually, and in the last year more than $7.5 billion of gross merchandise value (“GMV”) was accounted for by our
clients utilizing our platform. SpringBig has successfully grown its revenue at a rapid pace, from $5.7 million in 2019 to $26.6 million in 2022. We have an excellent track record of securing and retaining our clients with our value
proposition, which we measure by our “net revenue retention rate.” When evaluating our retention rates and calculating our net revenue retention rate, SpringBig calculates the average recurring monthly revenue from retail clients, adjusted for
losses, increases and decreases in monthly subscriptions during the prior twelve months divided by the average recurring monthly subscription revenue over the same trailing twelve-month period. To determine the average recurring monthly
revenue, SpringBig calculates monthly subscription revenue (derived from the monthly recurring subscription fees paid by retail clients, excluding the initial monthly contract amount of any new client subscriptions) from all retail clients,
averaged over the previous twelve month period. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Operating and Financial Metrics” for a further discussion of net revenue retention rate.
We believe SpringBig is well positioned to become the leading
software platform for cannabis retailers and brands by providing data-driven loyalty and marketing solutions to enhance a frictionless consumer buying experience.
What SpringBig Does
We have developed and commercialized a comprehensive suite of
Software-as-a-Service (“SaaS”) solutions for our retailer and brand clients (who we refer to as “clients” and their end-user customers as “customers” or “consumers”).
Through their subscriptions, our retail clients have access to
in-depth campaign data, robust analytics, and actionable feedback and summaries to help inform their business decisions and maximize customer engagement and retention. When a client subscribes to our platform, we charge affordable initial
set-up fees and the majority of our revenue is derived from a monthly recurring subscription fee. Typically, our subscription agreements extend for twelve months, and unless terminated in accordance with their terms, generally renew for
subsequent and recurring 12-month periods. Our client subscriptions cover access to our platform as well as messaging services.
Within the terms of a subscription, a client receives a
pre-determined quantum of communication credits per month, and we invoice the client additional amounts if the pre-determined credit volume is exceeded in any month (though the subscription agreements do not stipulate the volume of messages the
client must cause to be sent during a month). The fees for such excess use are set forth in the client’s subscription agreement. In some cases, a client has separate subscriptions relating to the use of the software platform and the
communications and, in other cases, these are bundled into a single subscription.
The monthly subscription fee charged to SpringBig’s clients is set
forth in such client’s subscription agreement and is based on the scope of the subscription, which is determined based on (1) the number of customers on a client’s database (e.g., use of the SpringBig platform) and/or (2) the pre-determined
quantum of communication credits that such client may use per month. As noted above, if this pre-determined credit volume is exceeded in any month, SpringBig will invoice the client for such excess use by the client. Excess use revenue has
historically accounted for up to 30% of revenue. We expect excess use revenue as a percentage of recurring subscription revenue to decrease as customers scale and progress to higher subscription tiers over their lifetime. SpringBig’s revenue is
not based on the success or effectiveness of any marketing campaign communications.
We also generate revenue by empowering brands with direct access
to consumers via our brands platform. Our recently introduced brands platform allows brands to advertise and engage cannabis consumers, drive brand awareness, acquire VIP customers with high lifetime value, and access detailed reporting
insights into essential campaign attribution metrics. Pricing for the brands platform is either structured on a bulk-pay basis or as a monthly subscription.
Industry Overview
We operate within the large and expanding cannabis retail market
in the United States and Canada. Cannabis is one of the fastest emerging consumer end markets in the U.S, and it is expected to grow from $20 billion in 2020 to in excess of $40 billion by 2025, representing a compound annual growth in excess
of 15%. Currently, 37 states plus the District of Columbia have legalized medical cannabis, and 21 states plus the District of Columbia have
60
legalized adult-use cannabis. While there is generally a lag period between the
time a market adopts legislation permitting either medical or adult cannabis use and significant revenue generation by SpringBig, states that have recently enacted legalization measures, such as New York and New Jersey, are expected to
contribute significant additional sales growth to the market by 2025 when they are expected to be fully operational. Further momentum from the legislative and regulatory changes is expected to drive expansion of the total addressable market as
more states continue to legalize cannabis for adult-use and medical use. We operate in all states that have legalized cannabis in some form (be it adult-use or medical), and we plan to be a first-mover in future new markets. Additional
tailwinds such as a decrease in raw material costs, intensifying competition amongst cannabis retailers and brands, and increased marketing spends by clients are also expected to contribute to the expansion of our total addressable market as
customer engagement and retention will become ever more critical for cannabis retailers and brands to succeed.
Current technology offerings to cannabis retailers and brands are
rudimentary, and the technology landscape offers a highly fragmented environment with lots of competition within a pool of small players. We believe that SpringBig is the leading loyalty and marketing software platform of scale to the cannabis
industry and that we are best positioned to capture the significant uptick expected in marketing spend. There are only a few cannabis-specific companies that provide products similar to our offering, and SpringBig currently does not face
competition from traditional loyalty marketing providers due to legal restrictions for cannabis at the federal level; however, as described in “Key Challenges,” below, SpringBig believes it is well-positioned to provide differentiated value as
the competitive landscape evolves.
Key Challenges
The stringent and evolving regulations, which also vary
state-by-state, restrict retailers’ and brands’ abilities to engage with customers, currently present significant challenges to their marketing efforts. In addition, these retailers and brands lack access to actionable data and analytics tools
to market their products to customers efficiently.
Customer Engagement Needs
The cannabis industry is a highly fragmented and competitive
industry where price and promotions are key drivers of sales. Further, traditional marketing channels restrict cannabis marketing, preventing businesses from marketing their products and reaching consumers. Google, Facebook, and other social
media platforms serve as an outlet for businesses to market their products in most other industries, but they restrict cannabis companies from operating on their platforms. Some SMS providers also restrict licensed cannabis businesses from
accessing networks, and these barriers currently make it challenging for cannabis retailers and brands to drive customer acquisition, retention, engagement, and loyalty. Furthermore, the continued penetration by cannabis focused e-commerce
providers have increased competition and decreased customer loyalty for bricks and mortar cannabis retailers.
61
SpringBig has developed and commercialized a comprehensive
suite of SaaS solutions to address the challenges that cannabis retailers and brands face in this industry. Further, while cannabis clients do not currently have access to certain traditional marketing channels, including social media
platforms, we believe that our platform’s products and services, in particular our data and analytics capabilities, position us well to provide significant value to cannabis retailers and brands whenever these social media platforms become
available, by enabling these businesses to determine the effective targeting and focus of their marketing solutions and loyalty programs.
As state-by-state legalization continues, we expect cannabis
retailers and brands to look to expand and seek new ways to reach and engage customers efficiently.
Data and Analytics Needs
In our experience, many cannabis retailers and brands lack access
to customer feedback data that is essential to reach customers and build relationships with them efficiently. Additionally, we have found that cannabis retailers and brands do not currently have the technological infrastructure and analytical
tools necessary to process the data they collect from customers into actionable data for marketing purposes. Unlike most other industries, the cannabis sector requires market intelligence and data solutions that are tailored to the specific
needs of individual retailers, brands and consumers considering the current restrictive and evolving regulatory and legal environment. The current federal regulatory status of cannabis poses barriers of entry for large communication and data
solution providers, representing a significant unmet need.
How SpringBig Addresses These Challenges
Our solutions are designed to address the key challenges faced by
cannabis retailers and brands. Today’s industry participants lack sufficient visibility into customer behavior and need a solution that bridges communication between consumers, retailers and brands. We believe our solutions foster valuable
connections and interactions that improve clarity, trust and satisfaction between these stakeholders.
Although carrier-imposed restrictions limit the use of blatant
cannabis content being sent directly via SMS, SpringBig has developed a proprietary solution, compliant with TCPA, FCC, and Canadian CRTC, that helps cannabis retailers and brands communicate directly with their consumers, offering a direct
communication and engagement channel, using text, images and other forms of media.
We believe our platform empowers our clients to improve and
analyze customer acquisition, retention, basket spend and retail foot traffic. Retailers and brands can use SpringBig’s platform to connect with consumers, thus driving improvements in customer engagement and retention and increasing brand
exposure. Once customers are engaged, the SpringBig platform enables businesses to amplify consumer spend through differentiated marketing solutions which target the consumer directly in an industry where doing so has been challenging in the
past. While brand loyalty in the cannabis market has historically proven challenging, our offerings effectively connect the consumer with brands and drive loyalty.
We provide retailers with the analytics infrastructure to make
data actionable. Our data solutions are purpose-built for the cannabis industry and enable our clients to leverage data to more effectively market their products to consumers. Through our integrations with 19 point of sale (“POS”) providers, 4
major cannabis e-commerce providers and other data providers, our platform offers robust consumer purchasing and marketing feedback data to allow our customers to take direct marketing and promotional actions. These commercial relationships
take varying forms, depending on the relationship, including licensing and referral arrangements.
Furthermore, our proprietary auto-connect module supports further
automation of marketing campaigns based on data. We also offer marketing automation solutions that provide for consistency of customer communication, which retailers and brands can use to drive customer retention and retail foot traffic. Our
platform offers functionality to help build brand loyalty through loyalty programs that offer various rewards and offers. Our reporting and analytics offerings deliver valuable insights that our clients utilize to better understand their
customer base, purchasing habits and trends. Consumer actions become measurable, thus providing our clients with data that can be leveraged to make better informed business decisions and more targeted marketing campaigns.
In the cannabis industry, the retailer maintains the relationship
with the consumer, and it is challenging in the current regulatory environment for brands to directly interact with those consumers. The SpringBig brands platform enables brands to directly interact with consumers in a manner that is otherwise
not feasible, short of such brand independently compiling and maintaining a separate consumer database.
62
Through SMS marketing, emails, customer feedback system and
loyalty programs, we believe our solutions are crucial in managing customer relationships in this emerging industry. In time, as legislation permits, our product offerings will likely be enhanced to incorporate other aspects of the customer
experience, including further enhanced data analytics and, when legally permissible, online ordering and payments.
Our Retail Offering
We serve in excess of 1,300 retailers in approximately 3,000
distinct locations providing them with a comprehensive suite of tools needed to attract customers, market products, and analyze key data. We are entrenched with most of the leading multi-state operators which allows us to capture the
“enterprise” customer base, while also being equally suited to the smaller cannabis retail operators.
The anticipated growth of the cannabis retail market presents an
opportunity to reach additional retailers as cannabis becomes more widely used and states continue to legalize. The tools that we provide allow retailers to engage and better communicate with their consumers. Further, SpringBig offers retailers
robust reporting and analytics tools, which help them understand product and sales trends, track consumer activity, and gain insights that can be leveraged to drive sales.
On the consumer side, we offer a suite of elegant consumer-facing
products. The enrollment process is streamlined and designed to provide for compliance and clarity. Once enrolled, consumers can develop their profile, will receive appropriate messages and offers and access their retailer’s specific rewards
wallet application, where multiple images, videos, and links can be added for the consumer to explore.
An important component of our platform is text message marketing,
which allows clients to send promotions to existing customers. Our text messaging platform offers a variety of features, including multiple customer segmentations, which automatically groups customers into segments based on their preferences
and purchase behavior. Retailers also have access to the “autoconnects” feature, which allows them to easily leverage customer data and send messages directly to consumers based on certain actions and also includes functionality to help clients
avoid missed opportunities to send text messages. We also provide an e-signature app, designed to accommodate a proper ‘double opt-in’ procedure, through both implied and expressed consent, to facilitate compliance with the TCPA, FCC, and
Canadian CRTC. Finally, campaign performance analytics provide transparency on deliverability and message opening rates. We utilize proprietary technology to filter out fake phone numbers, burner phones, and landlines. In an environment where
communication with cannabis consumers is constrained, text messaging is extremely effective in influencing purchase behavior, while also driving foot traffic and continuing to reach new customers and target markets.
Retailers compile highly-targeted marketing campaigns based on the
consumer profiles and preferences and are provided with detailed campaign metrics that enable further refinement and enhanced targeting of future campaigns. The consumer application (wallet) itself can easily be customized with a distinct icon,
name, layout, and color scheme, thus allowing for brand consistency and a higher-quality and frictionless customer experience. Here, customers can access and check their points, redeem rewards, and view upcoming offers. The wallet fully
integrates with cannabis e-commerce providers, allowing customers to place orders directly from their wallet. The features and ease of use that comes with the SpringBig rewards wallet creates customer loyalty and establishes a relationship
between the client and the consumer. Customer relationships are a crucial component in retail that has been restricted as a result of the complexities of the cannabis industry. Nonetheless, we have designed our platform to make this connection
easy.
The SpringBig platform also provides support for consumer feedback
with robust dashboards that track key survey performance indicators that allow clients to measure customer satisfaction. The “Feedback by SpringBig” offering allows businesses to survey customers post-purchase, track and analyze feedback, and
then take action based on this information. From the initial online search to in-store purchase, clients possess the ability to track the entire customer experience. Comprehensive reports give clients the tools to better understand customer
trends, and allows the retailer to analyze specific operational, product, and promotional opportunities. By identifying key trends, our users are able to improve customer loyalty and increase retention.
SpringBig offers retailers powerful insight dashboards that
provide comprehensive data that can be used to make informed business decisions. Our platform also allows retailers to create marketing campaigns, ensuring that consumers receive all relevant promotions. Once a campaign launches, retailers are
able to analyze in-depth data in order to measure campaign success. ERP-level customer data management and analysis also allow retailers to organize their sales funnel and provide a personalized, targeted approach to marketing campaigns.
63
Our platform integrates with many of the leading POS systems in the cannabis
industry, which allows retailers to simplify workstreams by automatically collecting a plethora of data on consumers. Integrating our marketing automation software with the retailer’s POS system makes for more efficient management of customer
relationships and facilitates using specific POS data in design and implementation of marketing campaigns. With integrations, in real-time retailers can review performance results and the return on investment (“ROI”) for each marketing
campaign. Additionally, the SpringBig clients are also able to ascertain which cannabis brands and products perform the best, thus allowing retailers to customize meaningful messaging and offers for their customer base.
Our Brand Marketing Platform
Our brand marketing platform offers a leading direct-to-consumer
marketing automation platform in the cannabis industry. The data-rich direct-to-consumer marketing engine allows brands to target and measure the complete transaction cycle from initial engagement through point of sale.
We provide cannabis brands with the opportunity to provide content
that, in turn, our retail clients can utilize in their targeted consumer marketing campaigns. This provides the brand with differentiated access to the consumer and that can be effectively leveraged through the brand and retailer cooperating in
a promotional campaign on our platform.
Brands aim to materially increase their brand awareness, expand
retail partnerships and acquire and retain new customers. The SpringBig brands platform provides brand clients with access to detailed reports that offer valuable insights into essential campaign attribution metrics. There are approximately
5,000 existing cannabis brands in the U.S., and this early-stage initiative represents a significant future growth opportunity for us. Our marketing database with over 40 million consumers is a highly-differentiated SpringBig asset that powers
cannabis brands in driving brand recognition and promoting awareness.
Our Platform and Data Assets
We have created a distinct B2B2C platform supported by a wealth of
data assets to effectively monetize our large and growing base of cannabis consumers. Currently, the cannabis industry falls significantly short of market intelligence and data solutions that would typically be found in other industries:
retailers lack analytics infrastructure to make data actionable for marketing, and lack of feedback data poses challenges for brands to reach and establish relationships with consumers directly. Our leading messaging, loyalty, and customer
experience platform recognizes powerful network effects among brands, retailers, and cannabis consumers to enable our clients to make better business decisions. We retain retailers as paying SaaS subscription customers, who then acquire
consumers. Brands target retailers that successfully acquire loyal consumers, which drives increased retailer interest and recurring revenue.
The SpringBig platform is also supported by large data assets
created by our fully integrated cannabis technology ecosystem. We partner with industry leading data analytics, e-commerce, and POS providers to monetize our base of over 40 million consumers and generate revenue for our clients.
We intend to continue to invest in our platform to enhance its
functionality and the value of our data assets so that both we and our clients can continue to grow. We anticipate building on our existing platform infrastructure so that we are well positioned to benefit from the further emergence of the
burgeoning cannabis and cannabis-tech markets.
Certain Regulatory Considerations and How We Adapt to Changing
Regulatory Landscape
SpringBig helps drive regulatory compliance. We pride ourselves on
being ahead of the curve when it comes to changes to regulations to both SMS and to the overall cannabis landscape.
The TCPA prohibits autodialed text messages, unless made with the
prior express, written consent of the receiving party, to any telephone number assigned to a cell phone. Additionally, mobile carriers act as gatekeepers between businesses and consumers. The Cellular Telecommunications Industry Association
(“CTIA”), a trade organization for mobile carriers (including SpringBig’s messaging distributors), periodically issues industry best practice guidance which currently includes prohibiting messaging content that contains or promotes sex, hate,
alcohol, firearms, or tobacco (referred to as “SHAFT”), and interpretation of this guidance includes cannabis within the tobacco category. SpringBig’s platform (including, in particular, its text message marketing) is designed to ensure
compliance with TCPA, SHAFT guidelines, and other applicable CTIA guidance; SpringBig proactively monitors
64
and, as necessary, adapts its platform and services to comply with these
guidelines and standards. Further, as part of its proactive monitoring of mobile carriers’ guidelines, SpringBig endeavors to maintain close relationships with our messaging distributors, and as such, have been made well aware of any
carrier-implemented restrictions that may impact the way cannabis retailers and brands communicate with their consumers via SMS. These relationships have allowed us to continue servicing our customers in a rapidly changing environment, with no
disruption of service or restrictions from sending messages from major carriers.
SpringBig’s customers can utilize the platform consent interface
or other means to obtain the consumer’s consent that is required to receive messages, and, as an integral part of its services, SpringBig creates templates for its retail customers that are in compliance with SHAFT guidelines to use in
promotional messaging. The approved templates do not explicitly discuss or promote cannabis, but rather provide general information about the retailer, the consumer’s reward status and can also incorporate a link that directs opted-in consumers
to additional promotional material created by the retailer customers.
As a third-party provider of a software platform, state cannabis
regulatory marketing rules generally do not apply to SpringBig. SpringBig’s retail customers are responsible for ensuring that their marketing materials comply with state law.
Additionally, SpringBig has instituted policies and procedures to
verify the licensing status of our clients (which are utilized in on-boarding both retail and brand clients in addition to other client diligence) and to conduct periodic screening to confirm the continued licensing status of our clients.
Further, SpringBig is constantly monitoring proposed and pending legislative changes on the state and federal level. We have an emerging markets-focused sales team that is designed to ensure SpringBig is developing relationships with retailers,
brands, and partners in emerging markets, so when the legalization status changes, those retailers, brands and potential partners already have a deep partnership formed with SpringBig. One of the primary ways we do this is through our
“Greenhouse” program. This program allows licensed retailers who have not yet opened their doors to build their potential consumer list, design their loyalty program, and meet our extensive partnership network to help inform their tech stack
decisions as they move towards being fully operational. We have found that this program has helped us make headway in the emerging cannabis markets and sets up the foundation for a strong partnership in the future.
Our Competitive Strengths
We believe that we are a leading provider of customer loyalty and
marketing automation solutions to cannabis retailers and brands, and our key competitive strengths are the following:
We are a leading
direct-to-consumer marketing and customer loyalty platform in the cannabis industry. We are the largest loyalty & marketing automation provider in the cannabis space with over
40 million consumers enrolled in our platform, and over 1,300 retailer and brand customers with approximately 3,000 discrete retail locations. We started serving the cannabis market in 2016 and were a pioneer in providing SMS marketing
solutions to cannabis retailers. As we expanded our customer base, platform and solutions, we now serve approximately one-third of all retail locations in the United States. We partner with the majority of the leading multi-state-operators
(“MSOs”). We believe that our differentiated suite of solutions and deep understanding of customer needs will enable us to expand our leadership position as we grow into existing and new markets and expand our offering.
We have a diverse geographic footprint, with operations in all
states that have legalized cannabis in some form. We believe that our broader geographic footprint, scope of operations, and established position in the industry all support our efforts to be a first mover in future new markets and also may
make it more difficult, time-intensive and costly for competitors to replicate.
We provide critical value
to our customers demonstrated by leading net retention. Loyalty and messaging are critical for cannabis retailers and brands to directly engage, connect, and retain their customer base.
Our suite of solutions is designed to enable our customers to engage with their consumers in an efficient way, sustainably driving customer retention, acquisition, spend and foot-traffic. On average, our clients are able to recover the cost
of their monthly subscription for the SpringBig platform within a couple of days of utilizing our offerings each month. In addition, we have successfully integrated with 19 of the industry’s leading POS systems, which enables us to collect
and analyze consumer data and feedback, providing our clients with actionable insights for marketing purposes, and we have also completed our initial POS system integration outside of the cannabis industry. Our ability to expand our
relationships with customers, and their satisfaction in our product offerings and client service, are demonstrated by our category leading net revenue retention rate being consistently above 100% and having averaged in excess of
65
110% over the past three years. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations - Key Operating and Financial Metrics” for a further discussion of net revenue retention rate.
In addition to the value provided through our platform, we believe
that the quality of our client service and our responsiveness to clients provides us with a competitive advantage. Management believes that our established presence in the industry and personal one-on-one service philosophy enhances our ability
to compete favorably in attracting and retaining clients.
We have a deep expertise of marketing
regulation in the cannabis industry and the challenges faced by our clients. We entered the cannabis market in 2016 and have leveraged our management’s expertise in loyalty programs and
marketing automation from other sectors to solve the challenges faced by cannabis retailers and brands to engage with their customers and increase retention. We have designed specific campaign and communication solutions that comply with
cannabis regulation and are rapidly implementable by our clients as they expand in the high growth and highly competitive cannabis industry. We are highly differentiated from our competitors in several ways. We have integrations with 19 POS
providers in the cannabis market, and these integrations allow our clients to offer their consumers a seamless experience for points redemption and loyalty program enrollment. Additionally, we have invested, and continue to invest
significantly in ensuring we have a robust, scalable business, with a particular emphasis on client success and engineering. While SpringBig does not obtain customers on behalf of our clients, our client success organization services each
client from contract signing throughout their life with SpringBig, providing onboarding services, and on-going education and support. This team is also responsible for guiding our clients through the ever-changing regulatory environment. Our
engineering team, primarily based in the U.S., makes up the largest percentage of our staff. The team is constantly working to enhance the platform with the addition of new features and functionality at a regular cadence to ensure we remain
significantly ahead of our competitors in this regard. Additionally, after completing the onboarding process, SpringBig customers are assigned a dedicated client success manager who is responsible for overall account management, including
monitoring campaign deliverability and providing information on strategic campaign and auto-connect usage. Our client support team is available for all inbound requests from 8am-8pm ET and services all North American time zones.
We are the highly regarded
platform of choice to consolidate the highly fragmented cannabis technology ecosystem. As a leading provider of customer loyalty and marketing automation solutions to cannabis retailer and
brands, we are well positioned to be a consolidator of a highly fragmented technology ecosystem. Our growth strategy is informed by our clients’ needs, and we have meaningful visibility into such needs as a result of the wealth of data our
platform provides. We plan to create significant value by leveraging consumer purchasing and feedback data across multiple new vertical software offerings across loyalty, data analytics, and, when legally permissible, online ordering and
payments.
We assembled a highly
experienced senior management team to execute on our strategy. Our Chief Executive Officer and Founder, Jeffrey Harris, has over 35 years of deep industry experience and has successfully
founded loyalty marketing businesses in the past. Our Chief Financial Officer, Paul Sykes, has over 20 years of experience as CFO of high-growth SaaS businesses in a public company environment. Our Chief Technology Officer, Navin Anand, has
over 10 years of experience in leading large technology groups in SaaS and telecom organizations.
66
Our Growth Strategies
Our goal is to become the leading SaaS software platform to
cannabis retailers and brands, providing data-driven loyalty, marketing and consumer buying experience solutions. In order to achieve our goal, we plan to implement the following organic and M&A growth strategies along with expanding in
keeping with the changing regulatory landscape in the U.S.
Expansion Within Existing Retailers and Brand Customers
As of today, we service approximately 1,300 retailer and brand
clients with approximately 3,000 retail locations, which is comprised of most of the largest multi-state cannabis companies and a significant number of single-state operators. Our excellent reputation in the cannabis market and comprehensive
solutions offering provide us with the opportunity to expand our footprint and grow these accounts via up-selling and cross-selling. We grow alongside our clients via a “flywheel” effect as we benefit from the growth of their businesses and
expansion of their customer base, which is, in turn, enabled by their use of our platform. We have a track record of using our comprehensive product offerings and results-driven proposition to grow our relationships with clients and drive
revenue.
We also plan to grow our business by expanding accounts with
existing clients that may not have initially leveraged our platform for all of their locations. Our clients realize significant returns on investment and increased customer engagement, which has historically driven the success of our land and
expand strategy. In addition, we expect to further our penetration with existing clients as they enter new markets, as our platform will touch more end-customers and gather more actionable data.
Further Penetrate Existing Markets
We plan to leverage and expand our existing sales force and
marketing strategy to acquire additional cannabis retailers and brands as new clients. We have a successful track record of consistently adding new clients. As existing markets in legalized states expand and cannabis becomes more widely used,
we believe our existing presence positions us to continue to gain market share. We believe that the continued growth of the cannabis market and evolution of regulation, both in terms of legalizing recreational and medical use cannabis (as
described below) as well as regarding communications and advertisements, will drive further adoption of our platform.
New Medical and Recreational Markets
As an increasing number of states in the U.S. legalize medical
cannabis use or transition from medical to recreational cannabis use, a significant growth opportunity presents itself as the number of retailers, the consumer base and total spend all increase. We have historically been responsive as a
first-mover into new medical and
67
adult-use markets as they become legal, which gives us a significant competitive
advantage to grow as state by state legalization evolves. We believe our deep understanding of the space coupled with our experienced sales force will enable us to quickly enter and execute in new markets and capture new business, which we can
sustain via our exceptional product offerings. SpringBig entered the Canadian market in February 2021 through acquiring a Canadian business and we now provide full-servicing of our Canadian clients through our Toronto office. Although the
revenues derived from the Canadian market in 2022 were immaterial, we are experiencing significant growth in the number of clients as the market continues to develop in Canada.
New Features and Functionality
We intend to continue investing in and developing our technology
capabilities to offer our clients more advanced and comprehensive solutions. This will help enable us to extend our platform beyond our core offering which presents significant upsell opportunities. Some of these future offerings may include
e-commerce, data and analytics, programmatic advertising, budtender education, payments (when legally permissible), product referral automation, and commerce automation (in-store kiosks).
Monetization of GMV
Approximately $7.5 billion of GMV is currently processed by the
retailers that are on our platform. Through our entrenched position with retailers delivering mission critical messaging and loyalty solutions, we believe we are well-positioned to monetize a portion of GMV through payments and reward points.
We plan to capture a portion of this spend through the SpringBig rewards wallet solution that our current clients utilize to manage their rewards program. Additionally, with over 40 million consumers and 19 POS integrations, we have access to a
wealth of data that drive our proprietary insights. While these integrations assist in our ability to offer feedback to our customers, these commercial relationships do not represent a material amount of SpringBig’s revenues, constitute a
material amount of shared revenue, or constitute a material distribution source for SpringBig. However, we believe there is a path to monetize this data and create new revenue opportunities.
Brands
We expect brand revenue to drive a significant part of our growth
going forward, and we are focused on capturing a portion of the over 5,000 brands that are in the cannabis space today. We rolled out the SpringBig brands offering in 2020, which has allowed us to grow spend across our client base. As the
cannabis industry matures, we believe the continued proliferation of branded products will meaningfully drive their sales and marketing spend to the cannabis industry, with a trajectory that will surpass that of retailers in the future. As
brands grow in scale and become nationally recognizable, we are well positioned to capture a significant share of the communication, engagement and loyalty dollars spent by brands and therefore Brands clients will start to represent a more
significant proportion of SpringBig’s total revenue.
M&A
As a leading provider of customer loyalty and marketing automation
solutions to cannabis retailer and brands, we have differentiated insights into the critical needs of the cannabis industry. Our M&A strategy is informed by our client feedback, and we have identified the following needs that guide our
M&A strategic focus:
|
•
|
Cannabis retailers and brands lack actionable data and need better insight and recommendation technology.
|
|
•
|
Purpose-built marketing technology and targeting is necessary to improve consumer acquisition and retention.
|
|
•
|
The cannabis industry lacks robust fintech solutions, including processing of payments and consumer credit.
|
The cannabis technology space is highly fragmented, and we believe
that we are well positioned to be a leading consolidator. We intend to explore M&A opportunities in adjacencies that address our client’s critical needs, and enable us to expand our product and service offerings, expand our geographic
reach, increase our scale and realize material revenue and cost synergies. We are well positioned to consolidate the technology ecosystem with clear strategic rationale and value creation across loyalty, data analytics, online ordering, and,
when legally permissible, POS/payment opportunities.
68
Sales
Our sales team is primarily based out of our Boca Raton, Florida
headquarters with additional team members in our Canadian office in Toronto, Ontario and client services support staff at both these locations and in Seattle, Washington to assist new and existing clients. As of December 31, 2022, of the 126
people we employed, 64 individuals focused exclusively on selling and client service. Our sales force is well versed in our offerings, including consumer facing, retailer platform, and brand platform products.
As we continue to scale, we expect to continue to recognize
significant efficiencies with our sales effort. Currently, our primary focus revolves around converting inbound leads, as cannabis retailers and brands look to join our platform upon beginning their operations. We also utilize state cannabis
regulators’ lists of licensees to internally generate client leads.
Marketing
Similar to our sales efforts, we expect to continue to achieve
marketing efficiency as we scale our business. We believe our platform’s scale and strong customer loyalty market themselves, however we still intend to implement a variety of marketing efforts to attract additional retailers and brands not yet
on our platform. Marketing efforts include multiple strategies designed to attract and retain both retail and brands subscribers.
Technology
We invested significantly to create a fully integrated technology
stack that connects the three categories of participants in the cannabis ecosystem, namely the customers, retailers, and brands. By partnering with other industry leaders through various data analytics, e-commerce and POS platforms, we help to
enhance engagement, analytics, and create a truly omni-channel experience for our clients and their customers.
Our suite of SaaS-based solutions provides cutting-edge
technologies, and we continue to be the database of record for over a thousand cannabis businesses, with customer profiles being created first through our loyalty platform, and through integration of our platform with POS systems, where we can
collect crucial data points through POS transactions. Below is a summary of how our technology supports our clients:
|
•
|
Powerful POS Integration Sync: Powerful POS integrations allow us to provide real-time redemptions for both loyalty rewards
and promotional offers, real-time campaign analytics, and deep transaction data.
|
|
•
|
Customizable Permission Settings: Our platform enables clients to establish their own levels of user permissions for their
retail and marketing staff to ensure the correct people have the correct access to data and marketing tools.
|
|
•
|
Datahub: The robust data warehouse provides clients with access to all of their data and allows them to create their own
insights.
|
|
•
|
Insight Data Dashboards: Our customizable dashboards help clients conveniently visualize the most meaningful data and
organize it for easy review.
|
|
•
|
Budz: Our customer referral engine, allows retailers’ best customers to become brand ambassadors by referring new customers
to their favorite stores.
|
|
•
|
Feedback by SpringBig: Our customer feedback tool allows retailers to capture post-transaction feedback about their store,
products, and staff.
|
|
•
|
Autoconnect: Allow retailers to reach their consumers at critical stages during the consumer buying journey including
win-back, abandon cart, and purchase behavior messaging.
|
Revenue Concentration
We have a diversified client base of approximately 1,300 clients
with approximately 3,000 retail locations. No single client accounted for more than 11% of revenue for the year ended December 31, 2022, and 11% of revenue for the year ended December 31, 2021. Our top 10 clients accounted for 27% and 24% of
total revenue over the same periods. In addition, our revenue is well-diversified across the U.S. and Canada. No single state or province generated more than 15% our revenue for the years ended December 31, 2022 and December 31, 2021. We do not
currently generate a material amount of revenue in Canada.
69
Research & Development
We conduct concerted product development efforts focused on
implementing new, value-add features to our platform, as well as developing new solutions that increase functionality, data-driven actionable insights and enhance ease of use throughout the customer journey. We expect our research and
development expenses to remain consistent as a percentage of total revenue with increased growth continuing to support product enhancements.
Seasonality
We have not experienced a significant impact on our results due to
seasonality. However, our clients may experience seasonality in their businesses that, in turn, can impact the revenue generated from them. Our business may become more seasonal in the future and historical patterns in our business may not be a
reliable indicator of future performance.
Competition
Our direct competitors for various elements of our offerings and
services include businesses both within and outside of the cannabis industry that are specifically focused on marketing and customer engagement, commerce and POS solutions or SaaS software, as well as companies focused on technology solutions
focused on the cannabis industry.
We believe that the principal competitive factors in our market
include: the scale of our operations in all states that have legalized cannabis in some form and the ability to be a first mover in future new markets, the ability to offer comprehensive services across customer relationship management (“CRM”)
and marketing software, the ability to support client promotions and the building of loyalty with end-consumers and increase retention, the ability to collect and analyze consumer data and feedback (and providing clients with actionable
insights for marketing purposes), and effective communications and marketing to end-customers. We believe we compete favorably based on these factors.
For additional information about the risks to our business related
to competition, see the section captioned “Risk Factors-Risks Related to SpringBig’s Business and Industry—We currently face intense competition in marketing and advertising services available to our clients, and we expect competition to
further intensify as the cannabis industry continues to evolve.”
Intellectual Property
Our intellectual property and proprietary rights are valuable
assets that are important to our business. In our efforts to safeguard our copyrights, trade secrets, trademarks and other intellectual property rights worldwide, we rely on a combination of federal, state, common law and international rights
in the jurisdictions in which we operate.
We have an ongoing trademark and service mark registration program
pursuant to which we register our brand names in the United States. As of December 31, 2022, we have been issued trademark registrations in the United States, covering among other marks, “SpringBig.”
We also rely on non-disclosure agreements, invention assignment
agreements, intellectual property assignment agreements, or license agreements with employees, independent contractors, consumers, software providers and other third parties, which protect and limit access to and use of our proprietary
intellectual property.
Though we rely, in part, upon these legal and contractual
protections, we believe that factors such as the skills and ingenuity of our employees, as well as the functionality and frequent enhancements to our platform are larger contributors to our success in the marketplace.
Circumstances outside our control could pose a threat to our
intellectual property rights. For more information, see the section entitled “Risk Factors-Risks Related to SpringBig’s Intellectual Property.”
Employees and Human Capital Resources
As of December 31, 2022, we had 126 full-time employees, including
employees focused on engineering, client success, corporate development, brands, digital message and general and administrative and professional services. We also engage independent contractors to supplement our permanent workforce. 114
employees are located in the United States and 12 employees are located in Canada.
70
We believe that being able to attract and retain top talent is
both a strategic advantage for SpringBig and necessary to realize our objectives for our business. We consider our relations with our employees to be good. None of our employees are represented by a labor union or covered by collective
bargaining agreements, and we have not experienced any work stoppages.
Corporate Information
We were originally formed on January 24, 2020 under the name
“Tuatara Capital Acquisition Corporation,” as a blank check company incorporated as a Cayman Islands exempted company, incorporated for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase,
reorganization or similar business combination with one or more businesses. On June 13, 2022, in anticipation of the consummation of the previously announced business combination among Tuatara, Merger Sub and Legacy SpringBig, Tuatara changed
its jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware and it then changed its name to SpringBig Holdings,
Inc.
Our principal executive office is located at 621 NW 53rd Street,
Suite 260, Boca Raton, Florida 33487. Our telephone number is (800) 772-9172. Our website address is www.springbig.com. Information contained on our website is not a part of this prospectus, and the inclusion of our website address in this
prospectus is an inactive textual reference only.
71
Executive Officers and Directors
The following table sets forth the names, ages and positions (as
of March 28, 2023) of our directors and executive officers:
|
Name
|
| |
Age
|
| |
Position
|
|
Executive Officers
|
| |
|
| |
|
|
Jeffrey Harris
|
| |
59
|
| |
Chief Executive Officer and Director
|
|
Paul Sykes
|
| |
57
|
| |
Chief Financial Officer
|
|
Navin Anand
|
| |
48
|
| |
Chief Technology Officer
|
|
Non-Employee Directors
|
| |
|
| |
|
|
Steven Bernstein
|
| |
62
|
| |
Director
|
|
Patricia Glassford
|
| |
59
|
| |
Director
|
|
Amanda Lannert
|
| |
50
|
| |
Director
|
|
Phil Schwarz
|
| |
45
|
| |
Director
|
|
Sergey Sherman
|
| |
53
|
| |
Director
|
|
Jon Trauben
|
| |
57
|
| |
Director
|
Executive Officers
Jeffrey Harris. Jeff Harris is the Chief Executive Officer and Chairman of the Board of Directors of SpringBig. Mr. Harris has been the CEO of Legacy SpringBig since founding the company and became CEO of SpringBig in connection with the closing
of the merger. Prior to founding SpringBig, Mr. Harris also founded InteQ (formally SHC Direct LLC) in 1997, a leading customer relationship marketing company offering specialized expertise in the planning, implementation and ongoing
execution of strategic loyalty programs.
Mr. Harris is qualified to serve on the Board of Directors of
SpringBig based on his substantial business, leadership and management experience as SpringBig’s Chief Executive Officer as well as his significant experience in the industry.
Paul Sykes.
Paul Sykes is the Chief Financial Officer of SpringBig. Mr. Sykes has been the CFO of Legacy SpringBig since April 2021 and became CFO of SpringBig in connection with the closing of the merger. Prior to joining SpringBig, Mr. Sykes was Chief
Financial Officer of dmg information, the U.S. based business information group of London stock exchange listed DMGT plc, from 1997 to 2017; and from 2018 through 2020 was CFO and COO of Nordis Technologies. Particularly from his tenure at
dmg information, Mr. Sykes has substantial experience of executing acquisition transactions and operating in a public environment. Mr. Sykes started his career with KPMG in the United Kingdom.
Navin Anand.
Navin Anand is the Chief Technology Officer of SpringBig. Mr. Anand has been the CTO of Legacy SpringBig since April 2021 and became CTO of SpringBig in connection with the closing of the merger. Prior to joining SpringBig, Mr. Anand was Vice
President of Engineering of Verifone, from 2018 to 2021; from 2017 to 2018, Mr. Anand was Head of the Embedded Systems Department of SRT Group, and prior to that, Mr. Anand held various positions of increasing responsibility at Pace Americas
Limited, starting in 2009.
Board of Directors
Jeffrey Harris. Jeff Harris also serves as a member and Chairman of the Board of Directors of SpringBig.
Steven Bernstein. Steven Bernstein has served as a member of the Board of Directors of SpringBig since the closing of the merger on June 14, 2022. Mr. Bernstein is the Chairman of the Board of SBA Communications Corp. (Nasdaq: SBAC), a leading
independent owner and operator of wireless communications infrastructure including towers, buildings, rooftops, distributed antenna systems (DAS) and small cells, which he founded in 1989. From 1989 through 2001, Mr. Bernstein was CEO and
President of SBA Communications Corp. Mr. Bernstein has a Bachelor of Science in Business Administration with a major in Real Estate from the University of Florida.
We believe that Mr. Bernstein’s extensive senior management and
operational background, including as a founder, chief executive officer and director of a publicly-listed company and experience in the wireless communications industry, make him well qualified to serve on SpringBig’s Board of Directors.
72
Patricia Glassford. Patricia Glassford has served as a member of the Board of Directors of SpringBig since the closing of the merger on June 14, 2022. Ms. Glassford is the former Chief Financial Officer of numerous businesses in the
General Electric Company (“General Electric”). Ms. Glassford joined General Electric in 1985, where she most recently served as Vice President & Strategic Project Implementation Leader of General Electric in 2019. Prior to that, she
served in various roles at General Electric, including as VP Cash Initiatives of GE Company from 2016 to 2017, VP & Chief Financial Officer, GE Energy Connections from 2014 to 2016, VP & Chief Financial Officer, GE Capital Treasury
from 2011 to 2014, VP & Chief Financial Officer, GE Capital Restructuring Operations from 2010 to 2011, and VP & Chief Financial Officer, GE Industrial/GE Enterprise Solutions from 2007 to 2010. Prior to that, Ms. Glassford served in
various finance and audit roles at General Electric, including as Chief Financial Officer & EVP of NBC Universal Studios & Parks from 2004 to 2007. Ms. Glassford has a B.S. in Finance from Fairfield University.
We believe that Ms. Glassford’s extensive finance and financial
oversight experience, background in strategic project leadership, and other senior management positions at a large, global public company make her well qualified to serve on SpringBig’s Board of Directors.
Amanda Lannert. Amanda Lannert has served as a member of the Board of Directors of SpringBig since the closing of the merger on June 14, 2022. Ms. Lannert is the Chief Executive Officer of The Jellyvision Lab, Inc. (“Jellyvision”), a privately held,
innovative SaaS business providing an employee benefits guidance platform, a position she has held since 2011. Prior to that, Ms. Lannert served as President of Jellyvision from 2000 to 2011 and, prior to joining Jellyvision, served as
Account Supervisor at Leo Burnett from 1994 to 2000. Ms. Lannert also serves on the boards of directors of several start-up companies. Ms. Lannert has a B.A. in English literature from Haverford College.
We believe that Ms. Lannert’s experience with high growth software
and services companies, with specific expertise in SaaS businesses, along with her deep marketing (including digital and interactive marketing) experience, make her well qualified to serve on SpringBig’s Board of Directors.
Phil Schwarz. Phil Schwarz has served as a member of the Board of Directors of SpringBig since the closing of the merger on June 14, 2022. Mr. Schwarz has been involved with Legacy SpringBig since 2018, has served on its Board of Directors since
2019, and as the Chairman of Legacy SpringBig from 2020 until the closing of the merger. Mr. Schwarz is a Partner at Corazon Capital, a Chicago-based venture capital fund, with which he has been involved since 2016. Mr. Schwarz is also the
Chief Strategy Officer of Corazon Monoceros (Nasdaq: CRZN). From 2014 to 2016, Mr. Schwarz served as the Chief Marketing Officer of Tinder, the world’s leading dating business, up to and through its IPO as part of Match Group (Nasdaq: MTCH).
Mr. Schwarz’s prior roles include Vice President of Growth Initiatives at Match Group, which he held in 2014, as well as Executive Director at Kaplan and Kaplan Ventures (then part of the Washington Post Company), which he held from 2010 to
2014 (where he co-founded the Kaplan/Techstars EdTech Accelerator), Associate Director at UBS Investment Bank from 2008 to 2010. Prior to that, Mr. Schwarz led numerous technology product development efforts for the Blue Cross Blue Shield
Association, Vitria Technology, and BP Amoco, and served as a Management Consultant at PricewaterhouseCoopers. Mr. Schwarz holds an M.B.A. with honors from the University of Chicago Booth School of Business and a B.B.A., cum laude, from Ohio
University’s College of Business.
We believe that Mr. Schwarz’s extensive expertise and leadership
experience in technology and venture capital, and his business-building experience with startup and growth companies, as well as experience and institutional knowledge as a prior director of Legacy SpringBig, make him well qualified to serve on
SpringBig’s Board of Directors.
Sergey Sherman. Sergey Sherman has served as a member of the Board of Directors of SpringBig since the closing of the merger on June 14, 2022. He has served as Tuatara’s Chief Financial Officer since its inception until June 2022 and brings over
20 years of professional experience across investment banking and finance with expertise in private equity, mergers and acquisitions, leveraged finance and credit. Mr. Sherman joined Tuatara Capital in 2019 and as Managing Director -
Investments is responsible for all aspects of the investment process including origination, transaction structuring, due diligence, financing and portfolio management. Prior to Tuatara Capital, Mr. Sherman was a Managing Director at Société
Générale’s investment banking group in the U.S. and was previously in the financial sponsors groups at RBC Capital Markets and J.P. Morgan. Prior to investment banking, he was an executive in the business development/mergers and acquisitions
group at GE Capital. Mr. Sherman started his career as a nuclear submarine officer in the U.S. Navy. Mr. Sherman has a B.S. in Electrical Engineering from Carnegie Mellon University and holds an MBA from The George Washington University.
73
We believe Mr. Sherman’s experience in transaction execution,
investment banking and the investing in the cannabis sector makes him well qualified to serve on SpringBig’s Board of Directors.
Jon Trauben. Jon Trauben has served as a member of the Board of Directors of SpringBig since the closing of the merger on June 14, 2022. Mr. Trauben is a Partner at Altitude Investment Management, a position he has held since 2017, and a member
and principal of JRC Capital Partners, LLC, Altitude’s management company. Prior to that, Mr. Trauben served as Senior Managing Director of Hunt Mortgage Group from 2015 to 2016 and also a Managing Director at Barclays from 2011 to 2015.
Mr. Trauben also held senior positions on Wall Street while at Credit Suisse and Cantor Fitzgerald. Mr. Trauben started his career at Ernst & Young. Mr. Trauben has a B.A. in Political Science from Rutgers University and attended the
Masters of Science in Real Estate program from New York University.
We believe Mr. Trauben’s experience investing in the cannabis
sector, as well as his substantial business management, capital markets, finance, and strategic growth experience, as well as experience and institutional knowledge as a prior director of Legacy SpringBig, make him well qualified to serve on
SpringBig’s Board of Directors.
Family Relationships
There are no family relationships between the members of our Board
of Directors and our executive officers.
Board of Directors
Our business and affairs are managed under the direction of our
Board of Directors. Our Board of Directors consists of seven members, with Jeff Harris serving as Chair. Our bylaws provide for a classified Board of Directors divided into three classes serving staggered three-year terms as follows:
|
•
|
Class I, which consists of Amanda Lannert and Jon Trauben, whose terms will expire at SpringBig’s 2023 annual meeting of
shareholders;
|
|
•
|
Class II, which consists of Patricia Glassford and Phil Schwarz, whose terms will expire at SpringBig’s 2024 annual meeting
of shareholders; and
|
|
•
|
Class III, which consists of Steven Bernstein, Jeffrey Harris, and Sergey Sherman, whose terms will expire at SpringBig’s
2025 annual meeting of shareholders.
|
At each annual meeting of shareholders, directors will be elected
to succeed the class of directors whose terms have expired. This classification of our Board of Directors could have the effect of increasing the length of time necessary to change the composition of a majority of the Board of Directors. Our
charter provides that the Board of Directors shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the Board.
Director Independence
The Board of Directors of SpringBig has determined that each of
the directors on the Board of Directors of SpringBig other than Mr. Harris will qualify as independent directors, as defined under the listing rules of The Nasdaq Stock Market LLC (the “Nasdaq listing rules”), and the Board of Directors of
SpringBig consists of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq listing rules relating to director independence requirements.
Board Committees
The Board of Directors of SpringBig maintains an audit committee,
a compensation committee and a nominating and corporate governance committee. The Board of Directors of SpringBig has adopted a charter for each of these committees, which comply with the applicable requirements of current Nasdaq rules. Copies
of the charters for each committee are available on the investor relations portion of SpringBig’s website.
Audit Committee
SpringBig’s audit committee consists of Patricia Glassford, Phil
Schwarz and Sergey Sherman. Patricia Glassford serves as chair of the audit committee. The Board of Directors has determined that each of the members of the audit committee satisfies the independence and other requirements of Nasdaq and Rule
10A-3 under the Exchange Act, including that each member of the audit committee can read and understand fundamental financial statements in accordance with Nasdaq audit committee requirements. In arriving at this determination, the Board of
Directors of SpringBig examined each audit committee member’s scope of experience and the nature of their prior and/or current employment.
74
The Board of Directors of SpringBig has determined that the
chair of the audit committee qualifies as an audit committee financial expert within the meaning of SEC regulations and meets the financial sophistication requirements of Nasdaq listing rules. In making this determination, the Board of
Directors of SpringBig considered Ms. Glassford’s formal education and previous experience in financial roles. Both SpringBig’s independent registered public accounting firm and management periodically meet privately with SpringBig’s audit
committee.
The functions of this committee include, among other things:
|
•
|
approve the hiring, discharging and compensation of SpringBig’s independent auditors;
|
|
•
|
oversee the work of SpringBig’s independent auditors;
|
|
•
|
approve engagements of the independent auditors to render any audit or permissible non-audit services;
|
|
•
|
review the qualifications, independence and performance of the independent auditors;
|
|
•
|
review SpringBig’s financial statements and review SpringBig’s critical accounting policies and estimates;
|
|
•
|
review the adequacy and effectiveness of SpringBig’s internal controls; and
|
|
•
|
review and discuss with management and the independent auditors the results of SpringBig’s annual audit, SpringBig’s
quarterly financial statements and SpringBig’s publicly filed reports.
|
Compensation Committee
SpringBig’s compensation committee consists of Steven Bernstein,
Amanda Lannert, and Jon Trauben. Steven Bernstein serves as chair of the compensation committee. The Board of Directors of SpringBig has determined that each of the members of the compensation committee satisfies the independence requirements
of Nasdaq and is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act.
The functions of the committee include, among other things:
|
•
|
review and approve, or make recommendations to the Board regarding, policies relating to compensation and benefits of
SpringBig’s officers and employees;
|
|
•
|
review and approve corporate goals and objectives relevant to compensation of SpringBig’s chief executive officer and other
senior officers;
|
|
•
|
evaluate the performance of SpringBig’s officers in light of established goals and objectives;
|
|
•
|
review and approve, or make recommendations to the Board regarding, compensation of SpringBig’s officers based on its
evaluations;
|
|
•
|
review director compensation and benefits for service to the Board and Board committees and recommend any changes to the
Board; and
|
|
•
|
administer the issuance of stock options and other awards under SpringBig’s stock plans.
|
Nominating and Governance Committee
SpringBig’s nominating and corporate governance committee consists
of Amanda Lannert, Steven Bernstein, and Phil Schwarz. Amanda Lannert serves as chair of the nominating and corporate governance committee. The Board of Directors of SpringBig has determined that each of the members of the nominating and
corporate governance committee satisfies the independence requirements of Nasdaq.
The functions of this committee include, among other things:
|
•
|
evaluate and make recommendations regarding the organization and governance of the Board of Directors and its committees;
|
|
•
|
assess the performance of members of the Board of Directors and make recommendations regarding committee and chair
assignments;
|
|
•
|
recommend desired qualifications for Board of Directors membership and conduct searches for potential members of the Board of
Directors; and
|
|
•
|
review and make recommendations with regard to SpringBig’s corporate governance guidelines.
|
75
Code of Business Conduct and Ethics for Employees, Executive
Officers and Directors
Our Board of Directors has adopted a Code of Ethics and Business
Conduct (the “Code of Conduct”) that is applicable to all of our employees, executive officers and directors. The Code of Conduct is available on our website at www.springbig.com. The nominating and corporate governance committee of our Board
of Directors is responsible for overseeing the Code of Conduct and the Board of Directors must approve any waivers of the Code of Conduct for executive officers and directors.
Compensation Committee Interlocks and Insider Participation
None of our directors who serve as a member of our compensation
committee is, or has at any time during the past year been, one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the Board of Directors or compensation committee of
any other entity that has one or more executive officers serving on our Board of Directors or compensation committee.
Director Compensation
See “Executive and Director Compensation” for information regarding
compensation paid to our directors.
76
Unless the context otherwise requires, all
references in this “Executive and Director Compensation” section to “we,” “us,” “our,” “SpringBig,” or the “Company” refer to SpringBig, Inc. prior to the consummation of the business combination.
This discussion may contain forward-looking
statements that are based on SpringBig’s current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that it adopts following the completion of the business combination may
differ materially from the currently planned programs summarized in this discussion. All equity amounts in this section are shown on a pre-business combination basis.
SpringBig’s named executive officers, including its principal
executive officer and the next two most highly compensated executive officers, as of December 31, 2022, were:
|
•
|
Jeffrey Harris, SpringBig’s Chief Executive Officer;
|
|
•
|
Paul Sykes, SpringBig’s Chief Financial Officer; and
|
|
•
|
Navin Anand, SpringBig’s Chief Technology Officer.
|
Table
The following table provides information regarding the
compensation earned by or paid to SpringBig’s named executive officers.
|
Name and Principal Position
|
| |
Year
|
| |
Salary
($)
|
| |
Bonus
($)(3)
|
| |
Stock
Awards
($)(4)
|
| |
Option
Awards
($)(5)
|
| |
Non-Equity
Incentive Plan
Compensation
($)
|
| |
All Other
Compensation
($)
|
| |
Total
($)
|
|
Jeffrey Harris
Chief Executive Officer
|
| |
2022
|
| |
$371,731
|
| |
$609,375
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$981,106
|
| |
2021
|
| |
$265,000
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$265,000
|
||
|
Paul Sykes
Chief Financial Officer(1)
|
| |
2022
|
| |
$324,615
|
| |
$425,000
|
| |
$88,650
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$838,265
|
| |
2021
|
| |
$172,944
|
| |
$90,000
|
| |
$—
|
| |
$281,250
|
| |
$—
|
| |
$—
|
| |
$544,194
|
||
|
Navin Anand
Chief Technology Officer(2)
|
| |
2022
|
| |
$228,116
|
| |
$60,000
|
| |
$88,650
|
| |
$—
|
| |
$—
|
| |
$—
|
| |
$376,766
|
| |
2021
|
| |
$139,838
|
| |
$40,000
|
| |
$—
|
| |
$206,250
|
| |
$—
|
| |
$—
|
| |
$386,088
|
|
(1)
|
Mr. Sykes was appointed Chief Financial Officer of Legacy SpringBig effective April 7, 2021.
|
|
(2)
|
Mr. Anand was appointed Chief Technology Officer of Legacy SpringBig effective April 12, 2021.
|
|
(3)
|
The amount reported in this column for Mr. Harris consists of (i) $300,000 paid in connection with the closing of the business
combination and (ii) $309,375 in expected aggregate grant date fair value of restricted stock to be granted in connection with the performance of the Company during 2022 pursuant to the Executive Employment Agreement, dated November 8,
2021 by and between SpringBig and Mr. Harris. The Company and Mr. Harris have agreed that the aggregate number of shares underlying such restricted stock award will be 300,000 to be granted conditioned on and following the approval of
the Equity Incentive Plan Proposal. The amount reported in this column for Mr. Sykes consists of (i) $250,000 paid in connection with the closing of the business combination and (ii) $175,000 paid in connection with the performance of
the Company during 2022 pursuant to the Executive Employment Agreement, dated November 8, 2021 by and between SpringBig and Mr. Sykes.
|
|
(4)
|
Amounts represent the aggregate grant date fair value of restricted stock granted to our named executive officers computed in
accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the restricted stock units (“RSUs”) reported in this column are set forth in Note 16 — Stock Based Compensation to our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 28, 2023. These amounts do not reflect the actual economic value that may be realized by the named
executive officer. The aggregate number of shares underlying each stock award in this column was 45,000.
|
|
(5)
|
Amounts represent the aggregate grant date fair value of stock options granted to our named executive officers computed in
accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the stock options reported in this column are set forth in Note 16—Stock Based Compensation to our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 28, 2023. These amounts do not reflect the actual economic value that may be realized by the named executive officers.
|
Narrative Disclosure to Summary Compensation Table
For 2021, the compensation programs for SpringBig’s named
executive officers consisted of base salary, cash bonuses and incentive compensation delivered in the form of stock options. For 2022, the compensation programs for SpringBig’s named executive officers consisted of base salary, cash bonuses,
non-equity incentive plan compensation and incentive compensation delivered in the form of RSU awards.
77
Base Salary
Base salary is set at a level that is intended to reflect the
executive’s duties, authorities, contributions, prior experience and performance.
Cash Bonus
Prior to the business combination, SpringBig did not maintain
formal arrangement with its named executive officers providing for annual cash bonus awards. See “Executive Employment Agreements,” below, for a description of the terms of the employment agreements with Messrs. Harris and Sykes that became
effective as of the business combination.
Equity-Based Incentive Awards
SpringBig’s equity award program is the primary vehicle for
offering long-term incentives to its executives. SpringBig believes that equity awards provide its executives with a strong link to long-term performance, create an ownership culture and help to align the interests of SpringBig’s executives and
members. To date, SpringBig has used stock options and RSUs for this purpose. SpringBig believes that its equity awards are an important retention tool for its executive officers, as well as for its other employees. SpringBig awards equity
awards broadly to its employees, including to its non-executive employees.
Prior to the business combination, all of the equity awards
SpringBig has granted were made pursuant to the SpringBig, Inc. 2017 Equity Incentive Plan (as amended and restated) (the “SpringBig Plan”). The terms of the SpringBig Plan are described under the section titled “—Employee Benefit Plans” below.
Following the business combination, all of the equity awards SpringBig has granted were made pursuant to the Plan. The terms of the Plan are described under the section titled “—Employee Benefit Plans” below.
Benefits and Perquisites
SpringBig provides benefits to its named executive officers on the
same basis as provided to all of its employees, including medical, vision and dental insurance; life insurance; short and long-term disability insurance; and a 401(k) plan. SpringBig does not maintain any executive-specific benefit or executive
perquisite programs.
Retirement Plans
SpringBig maintains a tax-qualified retirement plan that provides
its employees, including its named executive officers, who satisfy certain eligibility requirements with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to participate in the 401(k) plan as of the
first day of a new quarter after six (6) months of employment with SpringBig. Under the 401(k) plan, SpringBig may make discretionary matching contributions.
Executive Employment Arrangements
In connection with entering into the merger agreement, SpringBig
entered into employment agreements with each of Messrs. Harris and Sykes, which became effective upon the closing of the business combination. The employment agreements with Messrs. Harris and Sykes provide for an annual base salary of $450,000
and $350,000 respectively, subject to increase from time to time, and an annual target bonus opportunity of up to 137.50% and 100% of base salary, respectively. Each of Messrs. Harris and Sykes will continue to be eligible to participate in any
executive benefit plans in effect from time to time. In the event of the termination of Mr. Harris’s or Mr. Sykes’s employment without cause or for good reason within 18 months following a change in control, he will be entitled to severance
equal to the sum of his base salary (paid in a lump sum within 60 days of the termination) and target annual cash incentive; continued health benefits for 12 months; and accelerated vesting of outstanding time-based equity awards, with
performance awards vested based on target performance. In the event of a termination without cause or for good reason not in connection with a change in control, he will be entitled to severance equal to the sum of his base salary and target
annual cash incentive; continued health benefits for 12 months; and accelerated vesting of outstanding time-based equity awards, with performance awards vested based on target performance. Severance benefits will be subject to Messrs. Harris’s
and Sykes’s execution of a release of claims and compliance with restrictive covenants, including a non-solicitation and non-disparagement covenant.
78
The agreements described in this section are filed as exhibits
to the registration statement of which this prospectus forms a part, and the following descriptions are qualified by reference thereto.
Outstanding Equity Awards at December 31, 2022
The following table presents estimated information regarding
outstanding equity awards held by SpringBig’s named executive officers as of December 31, 2022.
|
|
| |
|
| |
Option Awards
|
||||||||||||
|
|
| |
Grant Date
|
| |
Vesting
Commencement
Date
|
| |
Number of
securities
underlying
unexercised
options
(#) exercisable
|
| |
Number of
securities
underlying
unexercised
options
(#) unexercisable
|
| |
Option
exercise
price
($)
|
| |
Option
expiration
date
|
|
Jeffrey Harris
|
| |
3/17/2019
|
| |
3/17/2019(1)
|
| |
415,023
|
| |
|
| |
$0.52
|
| |
3/17/2029
|
|
|
| |
12/2/2020
|
| |
12/2/2020(1)
|
| |
74,111
|
| |
|
| |
$1.26
|
| |
12/2/2030
|
|
Paul Sykes
|
| |
6/21/2021
|
| |
4/7/2021(2)
|
| |
27,792
|
| |
|
| |
$1.26
|
| |
6/21/2031
|
|
Navin Anand
|
| |
6/21/2021
|
| |
4/12/2021(2)
|
| |
101,903
|
| |
|
| |
$1.26
|
| |
6/21/2031
|
|
(1)
|
Represents an option vesting fully as of the closing of the business combination on June 14, 2022.
|
|
(2)
|
Represents an option vesting with respect to (a) 35% of the shares subject to the option on December 31, 2021, (b) 15% of the
shares subject to the option as of the closing of the business combination and (c) 50% of the shares subject to the option ratably over 24 months following the business combination.
|
|
|
| |
|
| |
|
| |
Stock Awards
|
|||
|
|
| |
Grant Date
|
| |
Vesting
Commencement
Date
|
| |
Number of
shares or units
of stock
that
have not
(#) vested
|
| |
Market value
of shares or
units of stock
that
have not
($) vested(1)
|
|
Paul Sykes
|
| |
7/7/2022(2)
|
| |
7/7/2022(2)
|
| |
45,000
|
| |
29,250
|
|
Navin Anand
|
| |
7/7/2022(2)
|
| |
7/7/2022(2)
|
| |
45,000
|
| |
29,250
|
|
(1)
|
The amounts in this column are determined by multiplying (i) the number of RSUs shown in the previous column by (ii) $0.65
(the closing price of the Company’s Common Stock on December 31, 2022).
|
|
(2)
|
Restricted stock units vest one-third per year beginning on the first anniversary of the date of grant.
|
Employee Benefit Plans
SpringBig, Inc. 2017 Equity Incentive Plan
Prior to the closing of the merger, SpringBig maintained the
SpringBig Plan, which was originally established effective December 1, 2017. The SpringBig Plan was subsequently amended on January 30, 2018 and November 30, 2018 and the amended and restated SpringBig Plan was approved by the Board of
Directors of SpringBig on April 10, 2019. The SpringBig Plan permits the grant of incentive stock options, non-qualified stock options, restricted stock awards, and restricted stock unit awards to SpringBig and its affiliates’ employees,
consultants and directors. SpringBig will not grant any additional awards under the SpringBig Plan following the business combination; see “SpringBig Holdings, Inc. 2022 Long-Term Incentive Plan,” below for a discussion of the equity incentive
plan that was adopted in connection with the closing of the business combination.
Authorized Shares. 7,495,594 shares of common stock of SpringBig were authorized under the SpringBig Plan. Awards granted under the SpringBig Plan that are canceled, forfeited or expired prior to exercise or realization will become available for
future grant while the SpringBig Plan remains in effect. As of October 7, 2021, 2,317 shares of common stock of SpringBig were available for issuance under the SpringBig Plan.
Plan Administration. The SpringBig Plan is administered by SpringBig’s Board of Directors or a committee of one or more members of the Board of Directors appointed by the board to administer the SpringBig Plan. Subject to the provisions of the SpringBig
Plan, the administrator has the power to determine the terms of each award, such as the form of awards and vesting schedule of awards. The administrator is authorized to interpret the SpringBig Plan, prescribe the terms and conditions of the
awards granted thereunder, and make all other determinations necessary or advisable for administering the SpringBig Plan.
79
Plan Awards. Awards to be granted under the SpringBig Plan may be subject to various restrictions, including restrictions on transferability and forfeiture provisions, as determined by the administrator and consistent with the SpringBig Plan
terms. Subject to the terms of the SpringBig Plan, the administrator will determine the number of awards granted and other terms and conditions of such awards. The administrator may impose whatever conditions to vesting it determines to be
appropriate. Awards that have not vested are subject to SpringBig’s right of repurchase or forfeiture. The economic and other rights associated with awards granted under the SpringBig Plan are governed by the SpringBig certificate of
incorporation, as may be amended and in effect from time to time.
Non-Transferability of Awards. The awards are subject to certain transferability restrictions and requirements.
Certain Adjustments. The outstanding awards may be subject to adjustment, substitution, exchange or, to the extent then unvested, cancellation by SpringBig’s Board of Directors so as to proportionately reflect any unit splits, reverse splits, dividends
or distributions, recapitalizations, reclassifications, or other relevant changes in SpringBig’s capitalization or corporate structure.
Amendment, Termination. SpringBig’s Board of Directors has the authority to amend, suspend or terminate all or any part of the SpringBig Plan in its sole discretion. Awards outstanding following the business combination will be assumed
by SpringBig.
SpringBig Holdings, Inc. 2022 Long-Term Incentive Plan
At the special meeting of shareholders of Tuatara held on June 9,
2022, the shareholders of Tuatara adopted and approved the SpringBig Holdings, Inc. 2022 Long-Term Incentive Plan (the “Incentive Plan”).
The purpose of the incentive plan is to secure and retain the
services of employees, directors and consultants, to provide incentives for such persons to exert maximum efforts for our success and to provide a means by which such persons may be given an opportunity to benefit from increases in value of the
Common Stock through the granting of awards thereunder.
Summary of the Incentive Plan
This section summarizes certain principal features of the
incentive plan. The summary is qualified in its entirety by reference to the complete text of the incentive plan.
Eligibility. SpringBig’s employees, consultants and directors, and employees and consultants of its affiliates, may be eligible to receive awards under the incentive plan.
Award Types. The incentive plan provides for the grant of incentive stock options (“ISOs”) to employees and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock
awards, restricted stock unit awards, performance awards and other forms of stock awards to employees, directors and consultants.
Share Reserve. The number of shares of Common Stock initially reserved for issuance under the incentive plan is 1,525,175 (the amount of shares of Common Stock equal to 5% of the sum of (i) the number of
shares of our Common Stock outstanding as of the consummation of the business combination and (ii) the number of shares of our Common Stock underlying stock options issued under the SpringBig, Inc. 2017 Equity Incentive Plan (as amended and
restated) that were outstanding as of the consummation of the transactions contemplated by the merger agreement). Shares subject to stock awards granted under the incentive plan that expire or terminate without being exercised in full, or
that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the incentive plan.
Plan Administration. The board of directors of SpringBig, or a duly authorized committee thereof, will have the authority to administer the incentive plan. The board of directors of SpringBig may also delegate to
one or more officers the authority to (i) designate employees other than officers to receive specified stock awards and (ii) determine the number of shares to be subject to such stock awards. Subject to the terms of the incentive plan, the
plan administrator has the authority to determine the terms of awards, including recipients, the exercise price or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share, the
vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the stock award and the terms and conditions of the award agreements for use under
the incentive plan. The plan administrator has the power to modify outstanding awards under the incentive plan. Subject to the terms of the incentive plan, the plan administrator also has the authority to reprice any outstanding option or
stock award, cancel and re-grant any outstanding option or stock award in exchange for new stock awards,
80
cash or other consideration, or take any other action that is treated as a
repricing under generally accepted accounting principles, with the consent of any materially adversely affected participant.
Stock Options. ISOs and NSOs are granted under stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and
conditions of the incentive plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of a share of Common Stock on the date of grant (however, a stock option may be granted with an
exercise or strike price lower than 100% of the fair market value on the date of grant of such award if such award is granted pursuant to an assumption of or substitution for another option pursuant to a corporate transaction, as such term is
defined in the incentive plan, and in a manner consistent with the provisions of Sections 409A and, if applicable, 424(a) of the Code). Options granted under the incentive plan vest at the rate specified in the stock option agreement as
determined by the plan administrator. The plan administrator determines the term of stock options granted under the incentive plan, up to a maximum of ten years. Unless the terms of an optionholder’s stock option agreement provide otherwise,
if an optionholder’s service relationship ceases for any reason other than cause, the optionholder may generally exercise any vested options for a period of three (3) months following the cessation of service, but only within three (3) months
following such termination, unless another period of time is provided in the applicable award agreement or other agreement, subject to the limitations in the incentive plan. The option term may be extended in the event that the exercise of
the option following such a termination of service is prohibited by applicable securities laws or SpringBig’s insider trading policy. Options generally terminate immediately upon the termination of an optionholder’s service for cause. In no
event may an option be exercised beyond the expiration of its term. Acceptable consideration for the purchase of Common Stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (i) cash,
check, bank draft, or money order, (ii) a broker-assisted cashless exercise, (iii) the tender of shares of Common Stock previously owned by the optionholder, (iv) a net exercise of the option if it is an NSO and (v) other legal consideration
approved by the plan administrator.
Tax Limitations on ISOs. The aggregate fair market value, determined at the time of grant, of Common Stock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under
all stock plans maintained by SpringBig may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own
stock possessing more than 10% of SpringBig’s total combined voting power or that of any of SpringBig’s affiliates unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date
of grant, and (2) the option is not exercisable after the expiration of five years from the date of grant.
Restricted Stock Awards. Restricted stock awards are granted under restricted stock award agreements adopted by the plan administrator. A restricted stock award may be awarded in consideration for cash, check, bank
draft or money order, past services, or any other form of legal consideration that may be acceptable to the plan administrator and permissible under applicable law. The plan administrator determines the terms and conditions of restricted
stock awards, including vesting and forfeiture terms. Except as provided otherwise in the applicable award agreement, if a participant’s service relationship ends for any reason, SpringBig may receive through a forfeiture condition or a
repurchase right any or all of the shares held by the participant under his or her restricted stock award that have not vested as of the date the participant terminates service.
Restricted Stock Unit
Awards. Restricted stock units are granted under restricted stock unit award agreements adopted by the plan administrator. Restricted stock units may be granted in consideration for any
form of legal consideration that may be acceptable to the plan administrator and permissible under applicable law. A restricted stock unit may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the
plan administrator, or in any other form of consideration set forth in the restricted stock unit agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit. Except as otherwise
provided in the applicable award agreement, restricted stock units that have not vested will be forfeited once the participant’s continuous service ends for any reason.
Stock Appreciation Rights. Stock appreciation rights are granted under stock appreciation grant agreements adopted by the plan administrator. The plan administrator determines the purchase price or strike price for a
stock appreciation right, which generally cannot be less than 100% of the fair market value of Common Stock on the date of grant (however, a stock appreciation right may be granted with an exercise or strike price lower than 100% of the fair
market value on the date of grant of such award if such award is granted pursuant to an assumption of or
81
substitution for another option pursuant to a corporate transaction, as such term
is defined in the incentive plan, and in a manner consistent with the provisions of Sections 409A). A stock appreciation right granted under the incentive plan vests at the rate specified in the stock appreciation right agreement as determined
by the plan administrator.
Performance Awards. The incentive plan permits the grant of performance-based stock and cash awards. The plan administrator may structure awards so that the shares of Common Stock, cash, or other property will be
issued or paid only following the achievement of certain pre-established performance goals during a designated performance period. The performance criteria that will be used to establish such performance goals may be based on any measure of
performance selected by the plan administrator. The performance goals may be based on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to
the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the
performance goals at the time the goals are established, the plan administrator will appropriately make adjustments in the method of calculating the attainment of performance goals as follows: (1) to exclude restructuring and/or other
nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the
effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business
divested by SpringBig achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of Common Stock by reason of any
stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to shareholders other than regular cash
dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under SpringBig’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to expense
under generally accepted accounting principles; and (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles. In addition, the plan administrator
retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of the performance goals. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of
achievement as specified in the applicable award agreement or the written terms of a performance cash award. The performance goals may differ from participant to participant and from award to award.
Other Stock Awards. The plan administrator may grant other awards based in whole or in part by reference to Common Stock. The plan administrator will set the number of shares under the stock award and all other
terms and conditions of such awards.
Non-Employee Director
Compensation Limit. The aggregate value of all compensation granted or paid by SpringBig to any individual for service as a non-employee director with respect to any calendar year (such
period, the “annual period”), including stock awards and cash fees paid by SpringBig to such non-employee director, will not exceed (i) $750,000 in total value or (ii) in the event such non-employee director is first appointed or elected to
the board of directors of SpringBig during such annual period, $1,000,000 in total value. For purposes of these limitations, the value of any such stock awards is calculated based on the grant date fair value of such stock awards for
financial reporting purposes.
Changes to Capital
Structure. In the event there is a specified type of change in SpringBig’s capital structure, such as a merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity
restructuring transaction, appropriate adjustments will be made to (i) the class(es) and maximum number of shares of Common Stock subject to the incentive plan and the maximum number of shares by which the share reserve may annually increase;
(ii) the class(es) and maximum number of shares that may be issued pursuant to the exercise of ISOs; and (iii) the class(es) and number of securities and exercise price, strike price or purchase price of Common Stock subject to outstanding
awards.
Corporate Transactions. The following applies to stock awards under the incentive plan in the event of a corporate transaction, as defined in the incentive plan, unless otherwise provided in a participant’s stock
award agreement or other written agreement with SpringBig or unless otherwise expressly provided by the plan administrator at the time of grant. In the event of a corporate transaction, any stock awards outstanding under the
82
incentive plan may be assumed, continued or substituted by any surviving or
acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by SpringBig with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or
its parent company) does not assume, continue or substitute such stock awards, then with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the transaction,
or current participants, the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the transaction (contingent upon the effectiveness of the transaction), and such
stock awards will terminate for no consideration if not exercised (if applicable) at or prior to the effective time of the transaction, and any reacquisition or repurchase rights held by SpringBig with respect to such stock awards will lapse
(contingent upon the effectiveness of the transaction). With respect to performance awards with multiple vesting levels depending on performance level, unless otherwise provided by an award agreement or by the plan administrator, the award will
accelerate at 100% of target. If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute such stock awards, then with respect to any such stock awards that are held by persons other than current
participants, such awards will terminate for no consideration if not exercised (if applicable) prior to the effective time of the transaction, except that any reacquisition or repurchase rights held by SpringBig with respect to such stock
awards will not terminate and may continue to be exercised notwithstanding the transaction. The plan administrator is not obligated to treat all stock awards or portions of stock awards in the same manner and is not obligated to take the same
actions with respect to all participants. In the event a stock award will terminate if not exercised prior to the effective time of a transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award
may not exercise such stock award but instead will receive a payment equal in value, at the effective time, to the excess (if any) of (1) the value of the property the participant would have received upon the exercise of the stock award over
(2) any exercise price payable by such holder in connection with such exercise.
Change in Control. In the event of a change in control, as defined under the incentive plan, awards granted under the incentive plan will not receive automatic acceleration of vesting and exercisability,
although this treatment may be provided for in an award agreement.
Plan Amendment or
Termination. The board of directors of SpringBig has the authority to amend, suspend, or terminate the incentive plan, provided that such action does not materially impair the existing
rights of any participant without such participant’s written consent. No ISOs may be granted after the tenth anniversary of the date the board of directors of Tuatara adopts the incentive plan.
Incentive Plan Benefits. Grants of awards under the incentive plan are subject to the discretion of the plan administrator. Therefore, it is not possible to determine the future benefits that will be received by
participants under the incentive plan.
SpringBig Executive Officer and Director Compensation Following the
Merger
Executive Officer Compensation
Following the closing of the merger, employment agreements with
Jeffrey Harris, CEO of SpringBig Holdings, Inc. (referred to in this section as “New SpringBig”), and Paul Sykes, CFO of New SpringBig, became effective. Pursuant to his employment agreement, Mr. Harris will receive an annual salary of
$450,000, will be eligible for a target cash incentive opportunity of up to 137.50% of his annual base salary, and will be eligible to receive equity incentive awards under New SpringBig’s long-term incentive plan as in effect from time to
time. If Mr. Harris’s employment is terminated by the Company without Cause (as defined in the employment agreement), other than as a result of his death or disability or by Mr. Harris for Good Reason (as defined in the employment agreement),
Mr. Harris will be entitled to receive: (i) any annual salary then in effect, earned but unpaid as of the termination date (“Earned Salary”), and subject to the Company’s receipt from Mr. Harris of a release of any claims against the Company,
(A) if the termination is in connection with a “change in control” (as defined in the employment agreement), an amount equal to the sum of (I) his annual salary and (II) his target annual cash incentive, plus accelerated and continued vesting
of certain equity awards; or (B) if the termination is not in connection with a change in control, an amount equal to the sum of (I) his annual salary and (II) a prorated portion of his annual cash incentive, plus accelerated and continued
vesting of certain equity awards which are then-outstanding and unvested. If Mr. Harris’s employment is terminated by the Company with Cause, by Mr. Harris for any reason at any time, as a result of Mr. Harris’s death, or for any reason other
than by the Company without Cause, Mr. Harris will receive only the Earned Salary.
83
Pursuant to his employment agreement, Mr. Sykes will receive an
annual salary of $350,000, will be eligible for a target cash incentive opportunity of up to 100% of his annual base salary, and will be eligible to receive equity incentive awards under New SpringBig’s long-term incentive plan as in effect
from time to time. If Mr. Sykes’s employment is terminated by the Company without Cause (as defined in the employment agreement), other than as a result of his death or disability or by Mr. Sykes for Good Reason (as defined in the employment
agreement), Mr. Sykes will be entitled to receive: (i) any Earned Salary, and subject to the Company’s receipt from Mr. Sykes of a release of any claims against the Company, (A) if the termination is in connection with a “change in control” (as
defined in the employment agreement), an amount equal to the sum of (I) his annual salary and (II) his target annual cash incentive, plus accelerated and continued vesting of certain equity awards; or (B) if the termination is not in connection
with a change in control, an amount equal to the sum of (I) his annual salary and (II) a prorated portion of his annual cash incentive, plus accelerated and continued vesting of certain equity awards which are then-outstanding and unvested. If
Mr. Sykes’s employment is terminated by the Company with Cause, by Mr. Sykes for any reason at any time, as a result of Mr. Sykes’s death, or for any reason other than by the Company without Cause, Mr. Sykes will receive only the Earned Salary.
In addition, the Legacy SpringBig board of directors awarded each
of Mr. Harris and Mr. Sykes a one-time cash bonus in the amount of $300,000 and $250,000, respectively, which was awarded as of the Closing.
Director Compensation
Prior to the closing of the business combination, Legacy SpringBig
did not maintain formal arrangements under which its directors received compensation for their service on the board or its committees. From time to time, directors were awarded stock options under the SpringBig Plan. In 2021, directors did not
receive any cash or equity compensation.
For the post-business combination Board of Directors, the Company
will compensate the members of the Board of Directors, other than Mr. Harris, who will not be compensated for his role on the Board, through a combination of cash and equity as outlined below:
|
•
|
an annual grant of 25,000 RSUs for each Board member;
|
|
•
|
an annual cash retainer of $75,000 for each Board member;
|
|
•
|
an annual cash committee retainer for each committee chair:
|
|
○
|
Audit: $17,000
|
|
○
|
Compensation: $10,000
|
|
○
|
Nominating and Corporate Governance: $9,000
|
|
•
|
an annual cash committee retainer for each committee member:
|
|
○
|
Audit: $6,000
|
|
○
|
Compensation: $3,500
|
|
○
|
Nominating and Corporate Governance: $3,000
|
The RSU grants to each Board member will vest annually over three
years. The RSU grants will be subject to the limitations set forth under “—Non-Employee Director Compensation Limit,” above.
84
The following tables set forth information regarding the
compensation earned by or paid to non-employee directors for service on our Board during the fiscal year ended December 31, 2022. Mr. Harris did not receive any additional compensation for his service as director.
|
Name
|
| |
Fees Earned or
Paid in Cash(1)
|
| |
Restricted
Stock Awards(2)(3)
|
| |
Total
|
|
Steven Bernstein
|
| |
$44,000
|
| |
$49,250
|
| |
$93,250
|
|
Patricia Glassford
|
| |
46,000
|
| |
49,250
|
| |
95,250
|
|
Amanda Lannert
|
| |
43,750
|
| |
49,250
|
| |
93,000
|
|
Phil Schwarz
|
| |
42,000
|
| |
49,250
|
| |
91,250
|
|
Sergey Sherman(4)
|
| |
40,500
|
| |
49,250
|
| |
89,750
|
|
Jon Trauben(5)
|
| |
39,250
|
| |
49,250
|
| |
88,500
|
|
(1)
|
Includes annual fees paid to all directors for their service on the Board.
|
|
(2)
|
Amounts reported represent the aggregate grant date fair value of RSUs granted to such non-executive director during 2022
under the 2022 Plan, computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the RSUs reported in this column are set forth in Note 16 — Stock Based Compensation to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed
with the SEC on March 28, 2023. This amount does not reflect the actual economic value that may be realized by the director.
|
|
(3)
|
For each non-employee director who received restricted stock awards, the aggregate number of shares underlying such stock
award was 25,000.
|
|
(4)
|
All cash compensation received by Mr. Sherman has been paid to Tuatara Capital, L.P., where he serves as Managing Director -
Investments. All restricted stock awarded to Mr. Sherman as compensation for his service on the Board is held for the benefit of Tuatara Capital, L.P., and Mr. Sherman has no voting or investment power over such stock.
|
|
(5)
|
All cash compensation received by Mr. Trauben has been paid to Altitude Investment Management, where he serves as Partner.
|
85
The following is a summary of transactions since January 1, 2021,
to which SpringBig has been a party in which the amount involved exceeded $120,000 and in which any of SpringBig’s executive officers, directors, managers, promoters, beneficial holders of more than 5% of SpringBig’s membership interests, or
any associates or affiliates thereof had or will have a direct or indirect material interest, other than compensation arrangements which are described in the section captioned “Executive Compensation.”
Certain Employment Relationships
Certain immediate family members of Jeffrey Harris, SpringBig’s
chief executive officer and a member of SpringBig’s Board of Directors, provide services to SpringBig as full-time employees for compensation. Natalie Harris is employed as Vice President, Marketing of SpringBig. Ms. Harris, who is the
daughter-in-law of Mr. Harris, earned $160,781 in compensation in 2021 and $308,800 in compensation in 2022, consisting of a salary of $230,000 and restricted stock awards of $78,800. Sam Harris is employed as Vice President, Product
Development of SpringBig. Mr. Sam Harris, who is the son of Mr. Jeffrey Harris, earned $232,692 in compensation in 2021 and $343,800 in compensation in 2022, consisting of a salary of $265,000 and restricted stock awards of $78,800. For a
description of equity awards granted to SpringBig’s named executive officers, see “Executive and Director Compensation—Executive Compensation.”
The restricted stock award amounts reported in the prior paragraph
represent the aggregate grant date fair value of RSUs granted to such person during 2022 under the 2022 Plan, computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the RSUs reported in the
prior paragraph are set forth in Note 16—Stock Based Compensation to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 28, 2023. These amounts do not reflect the actual economic value that may be realized by Ms. Harris or Mr. Sam Harris.
Certain Other Enterprises
SpringBig has previously engaged InteQ to provide certain employee
support and sharing, software development work and information technology services. InteQ employed certain personnel who provided services solely to SpringBig. In exchange, SpringBig reimbursed InteQ at cost for such employees. SpringBig’s
Chief Executive Officer, Jeffrey Harris, founded InteQ and beneficially holds a controlling equity interest in such company. There is no ongoing formal, written agreement between SpringBig and InteQ. As part of Mr. Harris’s employment agreement
with SpringBig, Mr. Harris has agreed to customary provisions regarding the devotion of his business time and energy to SpringBig, confidentiality and non-compete obligations, and Board approval of related party transactions (including any new
arrangements or business with InteQ).
SpringBig paid InteQ a total of approximately $153,000 and
$408,000 for the years ended December 31, 2022 and 2021, respectively. These amounts are included in technology and software development expenses of the Company. At December 31, 2022 and 2021, the Company had recorded $3,000 and $4,000,
respectively, in accounts payable related to InteQ.
Other Transactions
SpringBig has entered into employment and other agreements with
certain of its executive officers. For a description of agreements with SpringBig’s named executive officers, see the section captioned “Executive and Director Compensation—Executive Employment Arrangements” and “—Outstanding Equity Awards at
December 31, 2022.”
SpringBig will enter into indemnification agreements with its
directors and executive officers.
Post-Business Combination Arrangements
In connection with the business combination, certain agreements
were executed. The agreements described in this section are filed as exhibits to the registration statement of which this prospectus forms a part, and the following descriptions are qualified by reference thereto. These agreements include:
|
•
|
Voting and Support Agreements. In connection with the signing of the merger
agreement, on November 8, 2021, Tuatara, Legacy SpringBig and certain stockholders and optionholders of Legacy SpringBig and
|
86
Tuatara entered into voting and support agreements, pursuant to which such Legacy
SpringBig stockholders agreed to vote all of their shares in Legacy SpringBig in favor of the merger agreement and related transactions and to take certain other actions in support of the merger agreement and related transactions. The Legacy
SpringBig voting and support members also each agreed, with certain exceptions, to a lock-up for a period of 180 days after the closing with respect to any securities of the Company that they receive as merger consideration under the merger
agreement.
|
•
|
Subscription Agreements. Certain investors entered in subscription agreements
pursuant to which Tuatara agreed to issue and sell to the subscription investors, in the aggregate, $13,100,000 of Common Stock of Tuatara at a purchase price of $10.00 per share. The closing of the PIPE Subscription Financing occurred
immediately prior to the closing of the merger. Certain of the subscription investors that were existing stockholders of Legacy SpringBig entered into convertible notes with Legacy SpringBig for an aggregate principal sum of $7,000,000
(the “convertible notes”), which was funded on or around February 25, 2022. Those notes matured at the closing of the business combination and the holders received the shares they subscribed for under the subscription agreement, as well
as interest payments in the form of 31,356 shares of the Company.
|
|
•
|
Amended and Restated Registration Rights Agreement. In connection with the
consummation of the merger agreement and the business combination, on June 14, 2022, SpringBig and certain holders entered in an amended and restated registration rights agreement, pursuant to which such holders are able to make a
written demand for registration under the Securities Act of all or a portion of their registrable securities, subject to a maximum of three (3) such demand registrations for our sponsor and four (4) such demand registrations for the
other investors thereto, in each case so long as such demand includes a number of registrable securities with a total offering price in excess of $10 million. Any such demand may be in the form of an underwritten offering, it being
understood that we will not be able to conduct more than two underwritten offerings where the expected aggregate proceeds are less than $25 million but in excess of $10 million in any 12-month period.
|
|
•
|
Sponsor Escrow Agreement. The Sponsor, Tuatara and certain independent members of
the pre-business combination board of directors entered into an escrow agreement (“Sponsor Escrow Agreement”) at the closing of the business combination pursuant to which the Sponsor and certain members of the pre-business combination
board of directors deposited an aggregate of 1,000,000 shares of the Company’s Common Stock (“Sponsor Earnout Shares”) into escrow. The Sponsor Escrow Agreement provides that such Sponsor Earnout Shares will either be released to the
Sponsor if the closing price of the Company’s Common Stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty
(30)-trading-day period at any time after the closing date and by the fifth anniversary of the closing date. The Sponsor Earnout Shares will be terminated and canceled by the Company if such condition is not met at any time after the
closing date and by the fifth anniversary of the closing date.
|
87
The following table sets forth information regarding the
beneficial ownership of the shares of Common Stock as of March 28, 2023 by:
|
•
|
each person known by the Company to be the beneficial owner of more than 5% of outstanding shares of Common Stock;
|
|
•
|
each of the Company’s named executive officers and directors; and
|
|
•
|
all executive officers and directors of the Company as a group.
|
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. The ownership percentages set forth in the table below are based on 26,940,841 shares of Common Stock issued and outstanding as of March 28, 2023 and unless otherwise noted below, do not take into account the
issuance of any shares of Common Stock issuable (i) upon exercise of warrants or (ii) underlying vested incentive equity awards, where the number of shares underlying such awards is not determinable until the actual payment date of such awards.
For information on the ownership of incentive equity awards by our named executive officers, please refer to “Executive and Director Compensation—Outstanding Equity Awards at Fiscal Year End.” However, shares that a person has the right to
acquire within 60 days of March 28, 2023 are deemed issued and outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed issued and outstanding for purposes of computing the percentage
ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise noted in the footnotes to the following table, and subject to applicable community property
laws, we believe the persons and entities named in the table have sole voting and investment power with respect to their beneficially owned shares of Common Stock.
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 Common Stock beneficially owned by such person. Except as otherwise noted below, the address for persons or entities listed in the table is c/o
SpringBig Holdings, Inc., 621 NW 53rd Street, Ste. 260, Boca Raton, FL 33487.
|
Name of Beneficial Owner
|
| |
Number of Shares
of Common Stock
Beneficially Owned
|
| |
Percentage of
Outstanding
Common Stock(1)
|
|
5% Stockholders
|
| |
|
| |
|
|
Medici Holdings V, Inc.
|
| |
4,743,120
|
| |
17.6
|
|
Tuatara Capital Fund II, L.P.(2)
|
| |
4,470,000
|
| |
16.6
|
|
TVC Capital IV, L.P.(3)
|
| |
2,495,499
|
| |
9.3
|
|
Altitude Investment Partners, LP(4)
|
| |
1,508,295
|
| |
5.6
|
|
Executive Officer and Directors of the Company
|
| |
|
| |
|
|
Jeffrey Harris(5)
|
| |
5,242,254
|
| |
19.1
|
|
Paul Sykes(6)
|
| |
115,635
|
| |
*
|
|
Navin Anand(7)
|
| |
95,110
|
| |
*
|
|
Steven Bernstein
|
| |
—
|
| |
*
|
|
Patricia Glassford
|
| |
—
|
| |
*
|
|
Amanda Lannert
|
| |
—
|
| |
*
|
|
Phil Schwarz
|
| |
474,312
|
| |
1.8
|
|
Sergey Sherman
|
| |
—
|
| |
*
|
|
Jon Trauben(4)
|
| |
—
|
| |
*
|
|
All directors and named executive officers of SpringBig as a group
post-business combination (9 individuals):
|
| |
5,927,311
|
| |
21.6
|
|
*
|
Represents beneficial ownership of less than 1% of the outstanding shares of our Common Stock.
|
|
(1)
|
The percentage of beneficial ownership of the Company is calculated based on 26,940,841 shares of Common Stock outstanding as
of March 28, 2023, which includes the shares of Common Stock issued to the stockholders of SpringBig in connection with the business combination. Unless otherwise indicated, the business address noted for each of the foregoing entities
or individuals is 621 NW 53rd Street, Ste. 260, Boca Raton, FL 33487.
|
88
|
(2)
|
Includes 3,870,000 shares of Common Stock held by TCAC Sponsor, LLC (the “Sponsor”) and 600,000 shares of Common Stock held by
Tuatara Capital Fund II, L.P. Tuatara Capital Fund II, L.P. (“Fund II”) is the sole member of TCAC Sponsor, LLC. Accordingly, shares of Common Stock held by TCAC Sponsor, LLC may be attributed to Fund II. Fund II is controlled by a
board of managers comprised of three individuals - Albert Foreman, Mark Zittman and Marc Riiska. Any action by our sponsor with respect to our company or the founders’ shares, including voting and dispositive decisions, requires a
majority vote of the managers of the board of managers of Fund II. Under the so-called “rule of three,” because voting and dispositive decisions are made by a majority of Fund II’s managers, none of the managers is deemed to be a
beneficial owner of our sponsor’s securities, even those in which he holds a pecuniary interest. Accordingly, none of the managers is deemed to have or share beneficial ownership of the founders’ shares held by the Sponsor.
|
|
(3)
|
TVC Capital IV, L.P. is an affiliate of TVC Capital Partners IV, L.P. Each of TVC Capital IV LP and TVC Capital Partners IV LP
is directly controlled by TVC Capital IV GP, LLC (“GP IV”). Each of Steven Hamerslag and Jeb S. Spencer is a managing member of GP IV and may be deemed to have shared voting and dispositive power over the shares held by the foregoing
entities. The foregoing is not an admission by any of Steven Hamerslag and Jeb S. Spencer that he is the beneficial owner of the shares held by the foregoing entities. The address for each of the foregoing persons is 11710 El Camino
Real, Suite 100, San Diego, CA 92130.
|
|
(4)
|
Held by Altitude Investment Partners, LP, in which Mr. Trauben has a less than 5% ownership interest. Altitude Investment
Partners, LP is managed by JRC Capital Partners, in which Mr. Trauben has an approximately 25% ownership interest. All decisions by JRC Capital Partners (including the voting and disposition and other decisions regarding the shares of
the Company) are made by unanimous written consent of the Board members of JRC Capital Partners, which such Board consists of greater than 3 persons. Accordingly, under the so-called “rule of three” pursuant to SEC guidance, because
voting and dispositive decisions are made by consent of the Board of JRC Capital Partners, Mr. Trauben is not deemed to be a beneficial owner of the shares of the Company and disclaims all beneficial ownership therein. The address for
Altitude Investment Partners, L.P. is 73 Bal Bay Drive, Bal Harbor, FL 33154.
|
|
(5)
|
Includes the shares of Common Stock held by Medici Holdings V, Inc., an estate planning vehicle through which Mr. Harris
shares ownership with family members of Mr. Harris and for which Mr. Harris may be deemed to have investment discretion and voting power. Includes 489,134 options exercisable for shares of Common Stock within 60 days.
|
|
(6)
|
Includes 9,264 options exercisable for shares of Common Stock within 60 days.
|
|
(7)
|
Includes 6,794 options exercisable for shares of Common Stock within 60 days.
|
89
Common Stock.
The material terms and provisions of our Common Stock are described under the caption “Description of Capital Stock—Common Stock.”
Pre-Funded Warrants.
The following summary of certain terms and provisions of the
pre-funded warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by the provisions of, the pre-funded warrant. Prospective investors should carefully review the terms and provisions of the form
of pre-funded warrant for a complete description of the terms and conditions of the pre-funded warrants.
Each pre-funded warrant will have an initial exercise price per
share equal to $0.0001. The pre-funded warrants will be immediately exercisable and may be exercised at any time until exercised in full. The exercise price and number of shares of Common Stock issuable upon exercise is subject to appropriate
adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our shares of Common Stock and the exercise price. The pre-funded warrants will be issued separately from the accompanying Common Stock
Warrants, and may be transferred separately immediately thereafter.
The pre-funded warrants will be exercisable, at the option of each
holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise (except in the case of a cashless exercise as discussed
below). Purchasers of the pre-funded warrants in this offering may elect to deliver their exercise notice following the pricing of the offering and prior to the issuance of the pre-funded warrants at closing to have their pre-funded warrants
exercised immediately upon issuance and receive shares of Common Stock underlying the pre-funded warrants upon closing of this offering. A holder (together with its affiliates) may not exercise any portion of the pre-funded warrant to the
extent that the holder would own more than 4.99% of the outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of
outstanding stock after exercising the holder’s pre-funded warrants up to 9.99% of the number shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the
terms of the pre-funded warrants. Purchasers of pre-funded warrants in this offering may also elect prior to the issuance of the pre-funded warrants to have the initial exercise limitation set at 9.99% of our outstanding shares of Common Stock.
No fractional shares of Common Stock will be issued in connection with the exercise of a pre-funded warrant. In lieu of fractional shares, we will round up to the next whole share.
If, at the time a holder exercises its pre-funded warrants, then
in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of
shares of Common Stock determined according to a formula set forth in the pre-funded warrants.
Subject to applicable laws, a pre-funded warrant may be
transferred at the option of the holder upon surrender of the pre-funded warrant to us together with the appropriate instruments of transfer.
There is no trading market available for the pre-funded warrants
on any securities exchange or nationally recognized trading system. We do not intend to list the pre-funded warrants on any securities exchange or nationally recognized trading system.
In the event of a fundamental transaction, as described in the
pre-funded warrants and generally including any reorganization, recapitalization or reclassification of our shares of Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our
consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding
shares of Common Stock, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they
exercised the pre-funded warrants immediately prior to such fundamental transaction.
Except by virtue of such holder’s ownership of shares of our
Common Stock, the holder of a pre-funded warrant does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until the holder exercises the pre-funded warrant.
90
Common Stock Warrants.
The following summary of certain terms and provisions of the
Common Stock Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by the provisions of, the applicable Common Stock Warrant. Prospective investors should carefully review the terms and
provisions of the forms of the Series A Warrant and the Series B Warrant for a complete description of the terms and conditions of the Common Stock Warrants. Pursuant to a warrant agency agreement between us and Continental Stock & Transfer
Company, as warrant agent, the Common Stock Warrants will be issued in book-entry form and shall initially be represented only by one or more global warrants deposited with the warrant agent, as custodian, on behalf of The Depository Trust
Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Each Common Stock Warrant will have an initial exercise price per
share equal to $ . The Series A Warrants will be immediately upon issuance and have a term of exercise equal to five years from the date of issuance. The Series B Warrants will be immediately upon issuance and have a term of exercise equal to
years from the date of issuance. The exercise price and number of shares of Common Stock issuable upon exercise of the Common Stock Warrants are subject to appropriate adjustment in the event of stock dividends, stock splits,
reorganizations or similar events affecting our shares of Common Stock and the exercise price. The Common Stock Warrants will be issued separately from the accompanying shares of Common Stock, and may be transferred separately immediately
thereafter.
The Common Stock Warrants will be exercisable, at the option of
each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of Common Stock purchased upon such exercise (except in the case of cashless exercises as discussed
below). A holder (together with its affiliates) may not exercise any portion of the Common Stock Warrants to the extent that the holder would own more than 4.99% of the outstanding shares of Common Stock immediately after exercise, except that
upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s Common Stock Warrants up to 9.99% of the number shares of Common Stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Common Stock Warrants. Purchasers of Common Stock Warrants in this offering may also elect prior to the issuance of
the Common Stock Warrants to have the initial exercise limitation set at 9.99% of our outstanding shares of Common Stock. No fractional shares of Common Stock will be issued in connection with the exercise of Common Stock Warrants. In lieu of
fractional shares, we will round up to the next whole share.
In the event that a registration statement covering shares of
Common Stock underlying the Common Stock Warrants, is not available for the issuance of such shares of Common Stock underlying the Common Stock Warrants, the holder may, in its sole discretion, exercise such warrants in whole or in part and, in
lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, elect instead to receive upon such exercise the net number of shares of Common Stock determined according to
the formula set forth in the Common Stock Warrants. In no event shall we be required to make any cash payments or net cash settlement to the registered holder in lieu of issuance of shares of Common Stock underlying the Common Stock Warrants.
Additionally, on or after the date of issuance, a holder of the Series B Warrants may also provide notice and elect an “alternative cashless exercise” pursuant to which they would receive an aggregate number of shares equal to the product of
(x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise and (y) .
Subject to applicable laws, the Common Stock Warrants may be
transferred at the option of the holder upon surrender of the Common Stock Warrants to us together with the appropriate instruments of transfer.
There is no trading market available for the Common Stock Warrants
on any securities exchange or nationally recognized trading system. We do not intend to list the Common Stock Warrants on any securities exchange or nationally recognized trading system.
In the event of a fundamental transaction, as described in the
pre-funded warrants and generally including any reorganization, recapitalization or reclassification of our shares of Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our
consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding
shares of Common Stock, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they
exercised the
91
pre-funded warrants immediately prior to such fundamental transaction.
Additionally, as more fully described in the Common Stock Warrants, in the event of certain fundamental transactions, the holders of the Common Stock Warrants will be entitled to receive consideration in an amount equal to the Black Scholes
value of the Common Stock Warrants on the date of consummation of such transaction.
Except by virtue of such holder’s ownership of shares of our
Common Stock, the holder of Common Stock Warrants do not have the rights or privileges of a holder of our Common Stock, including any voting rights, until the holder exercises such Common Stock Warrants.
Placement Agent Warrants.
The following summary of certain terms and provisions of the
Placement Agent Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by the provisions of, the Placement Agent Warrant. Prospective investors should carefully review the terms and provisions of
the form of Placement Agent Warrant for a complete description of the terms and conditions of the Placement Agent Warrants.
We have agreed to issue warrants to the placement agent, upon the
closing of this offering, up to 4.0% of the total number of shares of Common Stock and pre-funded warrants sold to investors pursuant to this prospectus, except that such percentage will be 2.0% of the total number of shares of Common Stock and
pre-funded warrants being sold in this offering to certain excluded investors specified in the placement agency agreement (the “Placement Agent Warrants”). The exercise price of these warrants is $ . The Placement Agent Warrants will be
exercisable immediately upon issuance, at any time and from time to time, in whole or in part, during the five-year period commencing from the commencement of sales of this offering. The terms of the Placement Agent Warrants are substantially
similar to the Series A Warrants being issued as part of this offering. The Placement Agent Warrants and the shares of Common Stock underlying the Placement Agent Warrants are being registered hereby.
92
Pursuant to a placement agency agreement, dated as of , 2023,
we have engaged Roth Capital Partners, LLC, or the Placement Agent, to act as our exclusive placement agent to solicit offers to purchase the securities offered by this prospectus on a reasonable best efforts basis. The Placement Agent is not
purchasing or selling any securities, nor is it required to arrange for the purchase and sale of any specific number or dollar amount of securities, other than to use its “reasonable best efforts” to arrange for the sale of the securities by
us. Therefore, we may not sell the entire amount of securities being offered, or any at all. This is a best efforts offering and there is no minimum offering amount required as a condition to the closing of this offering. The Placement Agent
may engage one or more subagents or selected dealers in connection with this offering. This offering will terminate on , 2023, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date. We
will have one closing for all the securities purchased in this offering. The combined public offering price per share (or pre-funded warrant) and accompanying Common Stock Warrants will be fixed for the duration of this offering.
We will enter into a securities purchase agreement directly with
the institutional investors, at the investor’s option, who purchase our securities in this offering. Investors who do not enter into a securities purchase agreement shall rely solely on this prospectus in connection with the purchase of our
securities in this offering.
The placement agency agreement provides that the Placement Agent’s
obligations are subject to conditions contained in the placement agency agreement.
We will deliver the securities being issued to the investors upon
receipt of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver the securities being offered pursuant to this prospectus on or about , 2023, subject to the satisfaction of customary
closing conditions. There is no minimum number of securities or amount of proceeds that is a condition to closing of this offering.
Placement Agent Fees, Commissions and Expenses
Upon the closing of this offering, we will pay the Placement Agent
a cash transaction fee of up to 6.0% of the aggregate gross proceeds to us from the sale of the securities in the offering, except that the cash fee will be 3.0% with respect to certain excluded investors specified in the placement agency
agreement. In addition, we will reimburse the Placement Agent for its out-of-pocket expenses incurred in connection with this offering, including the fees and expenses of the counsel for the Placement Agent, up to $125,000.
The following table shows the public offering price, Placement
Agent fees and proceeds, before expenses, to us, assuming the purchase of all the securities we are offering.
|
|
| |
Per Share
and related
Common Stock Warrants
|
| |
Per Pre-Funded
Warrant and related
Common Stock Warrants
|
|
Public offering price
|
| |
$
|
| |
$
|
|
Placement Agent fees
|
| |
$
|
| |
$
|
|
Proceeds to use before offering expenses
|
| |
$
|
| |
$
|
We estimate that the total expenses of the offering, including
registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding Placement Agent fees, will be approximately $ , all of which are payable by us. This figure includes the Placement Agent’s accountable
expenses, including, but not limited to, legal fees for Placement Agent’s legal counsel, that we have agreed to pay at the closing of the offering up to an aggregate expense reimbursement of $125,000.
Placement Agent’s Warrants
We have agreed to issue to the Placement Agent or its designees
warrants to purchase shares of our Common Stock, which represents up to 4.0% of the total number of shares of Common Stock and pre-funded warrants being sold in this offering, except that such percentage will be 2.0% of the total number of
shares of Common Stock and pre-funded warrants being sold in this offering to certain excluded investors specified in the placement agency agreement. The Placement Agent’s Warrants will have a term of five years from the commencement of sales
pursuant to this offering and an exercise price per share equal to $ per share, which represents 100% of the public offering price for the shares of Common Stock and accompanying Common Stock warrants sold in this offering and
93
shall be substantially in the form of the Series A Warrant issued to the investors
in this offering, except as required by FINRA. Pursuant to FINRA Rule 5110(e), the Placement Agent’s Warrants and any shares of Common Stock issued upon exercise of the Placement Agent’s Warrants shall not be sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following
the date of commencement of sales of this offering, except the transfer of any security: (i) by operation of law or by reason of reorganization of the issuer; (ii) to any FINRA member firm participating in the offering and the officers,
partners, registered persons or affiliates thereof, if all securities so transferred remain subject to the lock-up restriction set forth above for the remainder of the time period; (iii) if the aggregate amount of our securities held by the
Placement Agent or related persons does not exceed 1% of the securities being offered; (iv) that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise
directs investments by the fund and the participating members in the aggregate do not own more than 10% of the equity in the fund; (v) the exercise or conversion of any security, if all securities remain subject to the lock-up restriction set
forth above for the remainder of the time period; (vi) if we meet the registration requirements of Forms S-3, F-3 or F-10; or (vii) back to us in a transaction exempt from registration with the SEC. The Placement Agent’s Warrants and the shares
of Common Stock underlying the Placement Agent’s Warrants are registered on the registration statement of which this prospectus forms a part.
Lock-up Agreements
We and each of our officers and directors have agreed with the
Placement Agent to be subject to a lock-up period of days following the closing date of this offering. This means that, during the applicable lock-up period, we may not offer for sale, contract to sell, or sell any shares of our Common Stock
or any securities convertible into, or exercisable or exchangeable for, shares of our Common Stock subject to certain customary exceptions. The Placement Agent may, in its sole discretion and without notice, waive the terms of any of these
lock-up agreements.
Right of First Refusal
We have granted the Placement Agent the right of first refusal for
a period of six months following the closing of this offering to act as exclusive placement agent or lead underwriter and bookrunner in connection with any public or private offering of equity or equity-linked securities of the Company.
Tail
We have also agreed to pay the Placement Agent a tail fee equal to
the cash compensation in this offering, if any investor, who was introduced to the Company by the Placement Agent or who the Placement Agent conducted discussions with on behalf of the Company during the term of its engagement, provides us with
capital in any offering of the Company’s securities during the nine month period following expiration or termination of our engagement of the Placement Agent.
Other Relationships
From time to time, the Placement Agent and its affiliates may
provide in the future, various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which they will receive customary fees and commissions. The Placement Agent has received compensation in
connection with advisory services provided to the company and may receive additional compensation in connection with such advisory services.
Determination of Offering Price and Warrant Exercise Price
The actual public offering price of the securities we are
offering, and the exercise price of the Common Stock Warrants and pre-funded warrants that we are offering, were negotiated between us, the Placement Agent and the investors in the offering based on the trading of our Common Stock prior to the
offering, among other things. Other factors considered in determining the public offering price of the securities we are offering, as well as the exercise price of the Common Stock Warrants and pre-funded warrants that we are offering include
our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, the general conditions of the securities markets at the
time of the offering and such other factors as were deemed relevant.
94
Transfer Agent and Registrar and Warrant Agent
The transfer agent and warrant agent is and will be Continental
Stock Transfer & Trust Company.
Listing
Our Common Stock and Public Warrants are currently listed on the
Nasdaq Global Market under the symbols “SBIG” and “SBIGW,” respectively. The last reported sale price of our shares of Common Stock on , 2023 was $ per share. The final public offering price will be determined between us, the Placement
Agent and the investors in the offering, and may be at a discount to the current market price of our Common Stock. Therefore, the assumed public offering price used throughout this prospectus may not be indicative of the final public offering
price. There is no established public trading market for the Common Stock Warrants or pre-funded warrants, and we do not expect such markets to develop. In addition, we do not intend to apply for a listing of the Common Stock Warrants or
pre-funded warrants on any national securities exchange or other nationally recognized trading system.
Indemnification
We have agreed to indemnify the Placement Agent against certain
liabilities, including certain liabilities arising under the Securities Act, or to contribute to payments that the Placement Agent may be required to make for these liabilities.
Regulation M
The Placement Agent may be deemed to be an underwriter within the
meaning of Section 2(a)(11) of the Securities Act and any fees received by it and any profit realized on the sale of the securities by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities
Act. The Placement Agent will be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the
timing of purchases and sales of our securities by the Placement Agent. Under these rules and regulations, the Placement Agent may not (i) engage in any stabilization activity in connection with our securities; and (ii) bid for or purchase any
of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
Electronic Distribution
A prospectus in electronic format may be made available on a
website maintained by the Placement Agent. In connection with the offering, the Placement Agent or selected dealers may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as
Adobe® PDF will be used in connection with this offering.
Other than the prospectus in electronic format, the information on
the Placement Agent’s website and any information contained in any other website maintained by the Placement Agent is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or the Placement Agent in its capacity as placement agent and should not be relied upon by investors.
95
The following summary of the material terms of
our securities is not intended to be a complete summary of the rights and preferences of such securities, and is qualified by reference to our charter, our bylaws and the warrant-related documents described herein, which are exhibits to the
Registration Statement on Form S-1 of which this prospectus is a part. We urge to you read each of the charter and the bylaws (each as defined below), as well as the warrant-related documents, described herein in their entirety for a complete
description of the rights and preferences of our securities. Unless the context indicates otherwise, references in this section to the “Company,” “SpringBig,” “we,” “us,” “our” and similar terms refer to SpringBig Holdings, Inc., a Delaware
corporation, and its consolidated subsidiaries.
General
We are a corporation organized under the law of Delaware. On
June 13, 2022, in anticipation of the consummation of the merger of Merger Sub within and into Legacy SpringBig and the business combination of Tuatara and Legacy SpringBig, Tuatara changed its jurisdiction of incorporation by deregistering as
a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware (the “Domestication”). Subsequently, in connection with the Domestication, Tuatara changed its name to
“SpringBig Holdings, Inc.” and adopted the Certificate of Incorporation (the “charter”) and Bylaws (the “bylaws”) under Delaware law.
There have been no public takeover offers by third parties for our
shares nor any public takeover offers by us for the shares of another company that have occurred during the last or current financial years.
“Legacy SpringBig” means SpringBig, Inc., a Delaware corporation,
prior to the business combination, and a wholly-owned subsidiary of SpringBig following the business combination. “Tuatara” means Tuatara Capital Acquisition Corporation, an exempted company incorporated under the laws of the Cayman Islands,
the predecessor entity to SpringBig. “Merger Sub” means HighJump Merger Sub, Inc., a Delaware corporation and a wholly owned direct subsidiary of Tuatara.
Share Capital
The charter of SpringBig authorizes the issuance of an aggregate
of 350,000,000 shares of capital stock, consisting of 300,000,000 shares of Common Stock, and 50,000,000 shares of preferred stock, $0.0001 par value per share. Unless our Board of Directors determines otherwise, SpringBig will issue all shares
of capital stock in uncertificated form.
As of March 28, 2023, we had 26,940,841 shares of Common Stock
issued and outstanding. All of our issued shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable.
Common Shares
Voting Rights
Each holder of the shares of Common Stock is entitled to one vote
for each share of Common Stock held of record by such holder on all matters on which shareholders generally are entitled to vote. The holders of the shares of Common Stock do not have cumulative voting rights in the election of directors.
Generally, all matters to be voted on by shareholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all shareholders present in person or represented by proxy,
voting together as a single class.
Election of Directors
The charter provides for a classified board of directors that is
divided into three classes with staggered three-year terms. The election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote
thereon. The charter does not provide for cumulative voting for the election of directors.
Dividend Rights
Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of shares of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors of SpringBig out of funds legally available therefor.
96
Rights upon Liquidation, Dissolution and Winding-Up
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of SpringBig’s affairs, the holders of the shares of Common Stock are entitled to share ratably in all assets remaining after payment of SpringBig’s debts and other liabilities, subject to prior distribution rights of
preferred stock or any class or series of stock having a preference over the shares of Common Stock, then outstanding, if any.
Preemptive or Other Rights
The holders of shares of Common Stock have no preemptive or
conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares of Common Stock. The rights, preferences and privileges of holders of shares of Common Stock will be subject to those of
the holders of any shares of the preferred stock SpringBig may issue in the future.
Preferred Stock
No shares of preferred stock are currently issued or outstanding.
Our charter authorizes the Board of Directors of SpringBig to establish one or more series of preferred stock. Unless required by law or any stock exchange, the authorized shares of preferred stock will be available for issuance without further
action by the holders of the Common Stock. Shares of preferred stock may be issued from time to time in one or more series of any number of shares, provided that the aggregate number of shares issued and not retired of any and all such series
shall not exceed the total number of shares of preferred stock authorized, and with such powers, including voting powers, if any, and the designations, preferences and relative, participating, optional or other special rights, if any, and any
qualifications, limitations or restrictions thereof, all as shall be stated and expressed in the resolution or resolutions providing for the designation and issue of such shares of preferred stock from time to time adopted by the Board of
Directors pursuant to authority so to do which is expressly vested in the Board of Directors. The powers, including voting powers, if any, preferences and relative, participating, optional and other special rights of each series of preferred
stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding.
The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of SpringBig without further action by the shareholders. Additionally, the issuance of preferred stock may adversely affect the holders of the Common Stock of SpringBig by restricting dividends on the
shares of Common Stock, diluting the voting power of the shares of Common Stock or subordinating the liquidation rights of the shares of Common Stock. As a result of these or other factors, the issuance of preferred stock could have an adverse
impact on the market price of the shares of Common Stock. At present, we have no plans to issue any preferred stock.
Warrants
Public Shareholders’ Warrants
Each whole Public Warrant originally issued in the initial public
offering of Tuatara entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing thirty (30) days after June 14, 2022 (the “Closing Date”),
provided that we have an effective registration statement under the Securities Act, covering the issuance of the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and
such shares are registered, qualified or exempt from registration under the securities, or blue sky laws of the state of residence of the holder (or we permit holders to exercise their Public Warrants on a cashless basis under the circumstances
specified in the Warrant Agreement, dated February 11, 2021, between the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “warrant agent”)). A warrant holder may exercise its Public Warrants only for a whole
number of shares of Common Stock. This means only a whole Public Warrant may be exercised at a given time by a Public Warrant holder. The Public Warrants will expire five years after the Closing Date, at 5:00 p.m., New York City time, or
earlier upon redemption or liquidation.
SpringBig will not be obligated to deliver any shares of Common
Stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Common Stock issuable upon
exercise is then effective and a prospectus relating thereto is current, subject to SpringBig satisfying its obligations described below with respect to registration, or a valid exemption from registration is available, including in connection
with a cashless exercise permitted as a result of a notice
97
of redemption. No Public Warrant will be exercisable for cash or on a cashless
basis, and SpringBig will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the
exercising holder, or an exemption is available. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such Public Warrant will not be entitled to exercise
such Public Warrant and such Public Warrant may have no value and expire worthless. In the event that a registration statement is not effective for the exercised Public Warrants, the purchaser of a unit containing such Public Warrant will have
paid the full purchase price for the unit solely for the shares of Common Stock underlying such unit.
We filed with the SEC and have an effective registration statement
covering the issuance, under the Securities Act, of the shares of Common Stock issuable upon exercise of the Public Warrants, until the expiration of the Public Warrants. Notwithstanding the above, if the shares of Common Stock are, at the time
of any exercise of a Public Warrant, not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, SpringBig may, at our option, require holders of
Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event SpringBig so elects, SpringBig will not be required to file or maintain in effect a
registration statement, but will use our reasonable best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering each such
warrant for that number of shares of Common Stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the warrants, multiplied by the excess of the “fair market value”
less the exercise price of the warrants by (y) the fair market value and (B) 0.361 Class A shares per warrant. The “fair market value” as used in the preceding sentence shall mean the volume weighted average price of the shares of Common Stock
for the ten (10) trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
We may redeem the Public Warrants for redemption:
|
•
|
in whole and not in part;
|
|
•
|
at a price of $0.01 per Public Warrant;
|
|
•
|
upon not less than thirty (30) days’ prior written notice of redemption to each Public Warrant holder; and
|
|
•
|
if, and only if, the reported last sales price of the shares of Common Stock equals or exceeds $18.00 per share (as adjusted
for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date SpringBig sends
the notice of redemption to the Public Warrant holders (the “Reference Value”).
|
We will not redeem the warrants unless a registration statement
under the Securities Act covering the issuance of the shares of Common Stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Common Stock is available throughout the 30-day
redemption period. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the foregoing conditions are satisfied and SpringBig issues a
notice of redemption of the Public Warrants, each Public Warrant holder will be entitled to exercise his, her or its Public Warrant prior to the scheduled redemption date. However, the price of the shares of Common Stock may fall below the
$18.00 redemption trigger price as well as the $11.50 Public Warrant exercise price after the redemption notice is issued.
Once the warrants become exercisable, SpringBig may also redeem on
the following conditions:
|
•
|
in whole and not in part;
|
|
•
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to
exercise their warrants on a cashless basis prior to redemption based on the redemption date and the “fair market value” of our shares of Common Stock;
|
|
•
|
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for adjustments to the number of shares
issuable upon exercise or the exercise price of a warrant); and
|
|
•
|
if the Reference Value is less than $18.00 per share (as adjusted for adjustments to the number of shares issuable upon
exercise or the exercise price of a warrant), the private placement warrants must also concurrently be called for redemption on the same terms as the outstanding Public Warrants.
|
98
During the period beginning on the date the notice of
redemption is given, holders may elect to exercise their warrants on a cashless basis. The numbers in the table below represent the number of shares of Common Stock that a warrant holder will receive upon such cashless exercise in connection
with a redemption by us pursuant to this redemption feature, based on the “fair market value” of our shares of Common Stock on the corresponding redemption date (assuming holders elect to exercise their warrants and such warrants are not
redeemed for $0.10 per warrant), determined based on volume-weighted average price of our shares of Common Stock during the ten (10) trading days immediately following the date on which the notice of redemption is sent to the holders of
warrants, and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below. We will provide our warrant holders with the final fair market value no later than one
business day after the 10-trading day period described above ends.
The share prices set forth in the column headings of the table
below will be adjusted as of any date on which the number of shares issuable upon exercise of a warrant or the exercise price of the warrant is adjusted as set forth under the heading “-Anti-dilution Adjustments” below. If the number of shares
issuable upon exercise of a warrant is adjusted, the adjusted share prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the exercise price of the
warrant after such adjustment and the denominator of which is the price of the warrant immediately prior to such adjustment. In such an event, the number of shares in the table below shall be adjusted by multiplying such share amounts by a
fraction, the numerator of which is the number of shares deliverable upon exercise of a warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a warrant as so adjusted. If
the exercise price of the warrant is adjusted as a result of raising capital in connection with the merger, the adjusted share prices in the column headings will by multiplied by a fraction, the numerator of which is the higher of the market
value and the newly issued price as set forth under the heading “—Anti-dilution Adjustments” and the denominator of which is $10.00.
|
|
| |
Fair Market Value of Shares of Common Stock
|
||||||||||||||||||||||||
|
Redemption Date
(period to expiration of warrants)
|
| |
$10.00
|
| |
$11.00
|
| |
$12.00
|
| |
$13.00
|
| |
$14.00
|
| |
$15.00
|
| |
$16.00
|
| |
$17.00
|
| |
$18.00
|
|
60 months
|
| |
0.261
|
| |
0.281
|
| |
0.297
|
| |
0.311
|
| |
0.324
|
| |
0.337
|
| |
0.348
|
| |
0.358
|
| |
0.361
|
|
57 months
|
| |
0.257
|
| |
0.277
|
| |
0.294
|
| |
0.31
|
| |
0.324
|
| |
0.337
|
| |
0.348
|
| |
0.358
|
| |
0.361
|
|
54 months
|
| |
0.252
|
| |
0.272
|
| |
0.291
|
| |
0.307
|
| |
0.322
|
| |
0.335
|
| |
0.347
|
| |
0.357
|
| |
0.361
|
|
51 months
|
| |
0.246
|
| |
0.268
|
| |
0.287
|
| |
0.304
|
| |
0.32
|
| |
0.333
|
| |
0.346
|
| |
0.357
|
| |
0.361
|
|
48 months
|
| |
0.241
|
| |
0.263
|
| |
0.283
|
| |
0.301
|
| |
0.317
|
| |
0.332
|
| |
0.344
|
| |
0.356
|
| |
0.361
|
|
45 months
|
| |
0.235
|
| |
0.258
|
| |
0.279
|
| |
0.298
|
| |
0.315
|
| |
0.33
|
| |
0.343
|
| |
0.356
|
| |
0.361
|
|
42 months
|
| |
0.228
|
| |
0.252
|
| |
0.274
|
| |
0.294
|
| |
0.312
|
| |
0.328
|
| |
0.342
|
| |
0.355
|
| |
0.361
|
|
39 months
|
| |
0.221
|
| |
0.246
|
| |
0.269
|
| |
0.29
|
| |
0.309
|
| |
0.325
|
| |
0.34
|
| |
0.354
|
| |
0.361
|
|
36 months
|
| |
0.213
|
| |
0.239
|
| |
0.263
|
| |
0.285
|
| |
0.305
|
| |
0.323
|
| |
0.339
|
| |
0.353
|
| |
0.361
|
|
33 months
|
| |
0.205
|
| |
0.232
|
| |
0.257
|
| |
0.28
|
| |
0.301
|
| |
0.32
|
| |
0.337
|
| |
0.352
|
| |
0.361
|
|
30 months
|
| |
0.196
|
| |
0.224
|
| |
0.25
|
| |
0.274
|
| |
0.297
|
| |
0.316
|
| |
0.335
|
| |
0.351
|
| |
0.361
|
|
27 months
|
| |
0.185
|
| |
0.214
|
| |
0.242
|
| |
0.268
|
| |
0.291
|
| |
0.313
|
| |
0.332
|
| |
0.35
|
| |
0.361
|
|
24 months
|
| |
0.173
|
| |
0.204
|
| |
0.233
|
| |
0.26
|
| |
0.285
|
| |
0.308
|
| |
0.329
|
| |
0.348
|
| |
0.361
|
|
21 months
|
| |
0.161
|
| |
0.193
|
| |
0.223
|
| |
0.252
|
| |
0.279
|
| |
0.304
|
| |
0.326
|
| |
0.347
|
| |
0.361
|
|
18 months
|
| |
0.146
|
| |
0.179
|
| |
0.211
|
| |
0.242
|
| |
0.271
|
| |
0.298
|
| |
0.322
|
| |
0.345
|
| |
0.361
|
|
15 months
|
| |
0.13
|
| |
0.164
|
| |
0.197
|
| |
0.23
|
| |
0.262
|
| |
0.291
|
| |
0.317
|
| |
0.342
|
| |
0.361
|
|
12 months
|
| |
0.111
|
| |
0.146
|
| |
0.181
|
| |
0.216
|
| |
0.25
|
| |
0.282
|
| |
0.312
|
| |
0.339
|
| |
0.361
|
|
9 months
|
| |
0.09
|
| |
0.125
|
| |
0.162
|
| |
0.199
|
| |
0.237
|
| |
0.272
|
| |
0.305
|
| |
0.336
|
| |
0.361
|
|
6 months
|
| |
0.065
|
| |
0.099
|
| |
0.137
|
| |
0.178
|
| |
0.219
|
| |
0.259
|
| |
0.296
|
| |
0.331
|
| |
0.361
|
|
3 months
|
| |
0.034
|
| |
0.065
|
| |
0.104
|
| |
0.15
|
| |
0.197
|
| |
0.243
|
| |
0.286
|
| |
0.326
|
| |
0.361
|
|
0 months
|
| |
—
|
| |
—
|
| |
0.042
|
| |
0.115
|
| |
0.179
|
| |
0.233
|
| |
0.281
|
| |
0.323
|
| |
0.361
|
The exact fair market value and redemption date may not be set
forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of Common Stock to be issued for each warrant
exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year, as
applicable. For example, if the
99
volume-weighted average price of our shares of Common Stock during the ten (10)
trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $11.00 per share, and at such time there are 57 months until the expiration of the warrants, holders may choose to, in
connection with this redemption feature, exercise their warrants for 0.277 shares of Common Stock for each whole warrant.
For example, where the exact fair market value and redemption date
are not as set forth in the table above, if the volume-weighted average price of our shares of Common Stock during the ten (10) trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants
is $13.50 per share, and at such time there are 38 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.298 shares of Common Stock for each whole warrant.
In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Common Stock per warrant (subject to adjustment).
This redemption feature is structured to allow for all of the
outstanding warrants to be redeemed when the shares of Common Stock are trading at or above $10.00 per share, which may be at a time when the trading price of our shares of Common Stock is below the exercise price of the warrants. We have
established this redemption feature to provide us with the flexibility to redeem the warrants without the warrants having to reach the $18.00 per share threshold set forth above. Holders choosing to exercise their warrants in connection with a
redemption pursuant to this feature will, in effect, receive a number of shares for their warrants based on an option pricing model with a fixed volatility input as of the date of this prospectus. This redemption right provides us with an
additional mechanism by which to redeem all of the outstanding warrants, and therefore have certainty as to our capital structure as the warrants would no longer be outstanding and would have been exercised or redeemed. We will be required to
pay the applicable redemption price to warrant holders if we choose to exercise this redemption right and it will allow us to quickly proceed with a redemption of the warrants if we determine it is in our best interest to do so. As such, we
would redeem the warrants in this manner when we believe it is in our best interest to update our capital structure to remove the warrants and pay the redemption price to the warrant holders. As stated above, we can redeem the warrants when the
shares of Common Stock are trading at a price starting at $10.00, which is below the exercise price of $11.50, because it will provide certainty with respect to our capital structure and cash position while providing warrant holders with the
opportunity to exercise their warrants on a cashless basis for the applicable number of shares. If we choose to redeem the warrants when the shares of Common Stock are trading at a price below the exercise price of the warrants, this could
result in the warrant holders receiving fewer shares than they would have received if they had chosen to wait to exercise their warrants for shares of Common Stock if and when such shares were trading at a price higher than the exercise price
of $11.50.
No fractional shares of Common Stock will be issued upon exercise.
If, upon exercise, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole number of the number of shares of Common Stock to be issued to the holder.
A holder of a Public Warrant may notify SpringBig in writing in
the event it elects to be subject to a requirement that such holder will not have the right to exercise such Public Warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the
warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (or such other amount as a holder may specify) of Common Stock issued and outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments. If the number of issued and outstanding shares of Common Stock is increased by a capitalization or share dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock
or other similar event, then, on the effective date of such share dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be increased in proportion to such increase in the
issued and outstanding shares of Common Stock. A rights offering to holders of shares of Common Stock entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a share dividend of a number
of shares of Common Stock equal to the product of (1) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or
exercisable for Common Stock) multiplied by (2) one minus the quotient of (x) the price per shares of Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes, (1) if the rights offering is for
securities convertible into or exercisable for shares of Common Stock, in determining the price payable for shares of Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount
payable upon exercise or conversion and (2) fair market value means the volume weighted
100
average price of shares of Common Stock as reported during the ten (10) trading
day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
Contingent and Earnout Shares
As part of the merger consideration to be paid to the Legacy
SpringBig equity holders in connection with the business combination, holders of Legacy SpringBig’s Common Stock and preferred stock and Engaged Option Holders (as defined below) will also have the right to receive their pro rata portion of up
to an aggregate of 10,500,000 shares of Common Stock (“Contingent Shares”) if any of the following stock price conditions are met: (i) 7,000,000 Contingent Shares (“First Tranche Shares”) if the closing price of the Common Stock equals or
exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and on or before 60 months
after the closing date; (ii) 2,250,000 Contingent Shares (“Second Tranche Shares”) if the closing price of the Common Stock equals or exceeds $15.00 per share (as adjusted for share splits, share dividends, reorganizations, and
recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and on or before 60 months after the closing date; and (iii) 1,250,000 Contingent Shares (“Third Tranche Shares”) if the
closing price of the Common Stock on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing date and on or before 60 months after the closing date.
An “Engaged Option Holder” is an employee or engaged consultant of
Legacy SpringBig who held unexercised Legacy SpringBig options at the effective time of the merger and who remains employed or engaged by Legacy SpringBig at the time of such payment of Contingent Shares.
In addition, in the event of certain events during the 60 month
period after the Closing Date, then any Contingent Shares not previously issued shall be issued in accordance with the following, based on the price per share of Common Stock immediately prior to the consummation of such Earnout Trigger Event
or the price per share paid for each outstanding share of Common Stock in such Earnout Trigger Event (the “Earnout Trigger Price”):
|
i.
|
If the Earnout Trigger Event occurs prior to the one-year anniversary of the Effective Time and results in an Earnout Trigger
Price that is greater than $10.00, but less than $12.00, then only a portion of the First Tranche Shares shall be issued to the Legacy SpringBig shareholders and Engaged Option Holders equal to the First Tranche Shares multiplied by a
fraction calculated as: (A) the numerator of which shall be the Earnout Trigger Price minus $10 and (B) the denominator of which is 2.
|
|
ii.
|
If the Earnout Trigger Event occurs after the one-year anniversary of the Closing Date and results in an Earnout Trigger
Price that is less than $12.00, then none of the Contingent Shares shall be issued.
|
|
iii.
|
If the Earnout Trigger Event occurs at any time during the 60 months following the effective time and results in an Earnout
Trigger Price that is equal to or greater than $15.00, but less than $18.00, then only the First Tranche Shares and Second Tranche Shares shall be issued to the Legacy SpringBig shareholders and Engaged Option Holders.
|
|
iv.
|
If the Earnout Trigger Event occurs at any time during the 60 months following the effective time and results in an Earnout
Trigger Price equal to or greater than $18.00, then all of the Contingent Shares shall be issued to the Legacy SpringBig shareholders and Engaged Option Holders.
|
For purposes of the merger agreement, an “Earnout Trigger Event”
is defined to mean (a) SpringBig engages in a “going private” transaction pursuant to Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise ceases to be subject to reporting obligations under
Sections 13 or 15(d) of the Exchange Act; (b) SpringBig shall cease to be listed on a national securities exchange, other than for the failure to satisfy: (i) any applicable minimum listing requirements, including minimum round lot holder
requirements, of such national securities exchange; or (ii) a minimum price per share requirement of such national securities exchange; or (c) the occurrence in a single transaction or as a result of a series of related transactions, of one or
more of the following events: (a) any person or any group of persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act or any successor provisions thereto (excluding (i) sponsor and its
respective affiliates, successors and assigns, or (ii) a corporation or other entity owned, directly or indirectly, by the shareholders of SpringBig in substantially the same proportions as their ownership of stock of SpringBig ) (x) is or
becomes the beneficial owner, directly or indirectly, of securities of SpringBig representing more than fifty percent (50%) of the combined voting power of SpringBig’s then outstanding voting securities or (y) has or
101
acquires control of SpringBig’s Board of Directors, (b) a merger, consolidation,
reorganization or similar business combination transaction involving SpringBig and, immediately after the consummation of such transaction or series of transactions, either (x) the SpringBig Board of Directors immediately prior to the merger or
consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or, if the surviving company is a subsidiary, the ultimate parent thereof, or (y) the voting securities of SpringBig immediately
prior to such merger or consolidation do not continue to represent or are not converted into more than 50% of the combined voting power of the then outstanding voting securities of the person resulting from such transaction or series of
transactions or, if the surviving company is a subsidiary, the ultimate parent thereof, or (c) the sale, lease or other disposition, directly or indirectly, by SpringBig of all or substantially all of the assets of SpringBig and its
subsidiaries, taken as a whole, other than such sale or other disposition by SpringBig of all or substantially all of the assets of SpringBig and its Subsidiaries, taken as a whole, to an entity at least a majority of the combined voting power
of the voting securities of which are owned by shareholders of SpringBig.
Additionally, the sponsor, Tuatara and certain independent members
of the pre-business combination board of directors entered into an escrow agreement (“Sponsor Escrow Agreement”) at the closing of the business combination pursuant to which the sponsor and certain members of the pre-business combination board
of directors deposited an aggregate of 1,000,000 shares of Common Stock (“Sponsor Earnout Shares”) into escrow. The Sponsor Escrow Agreement provides that such Sponsor Earnout Shares will either be released to the sponsor if the closing price
of the Common Stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20) trading days in a thirty (30)-trading-day period at any time after the closing
date and by the fifth anniversary of the Closing Date. The Sponsor Earnout Shares will be terminated and canceled by the Company if such condition is not met at any time after the Closing Date and by the fifth anniversary of the Closing Date.
Dividends
We have not paid any cash dividends on the shares of Common Stock
to date and does not intend to pay cash dividends prior to the completion of the business combination. The payment of cash dividends in the future will be dependent upon Tuatara’s revenues and earnings, if any, capital requirements and general
financial condition subsequent to the completion of the business combination. The payment of any cash dividends is within the discretion of the Board of Directors.
Transfer Agent and Warrant Agent
The transfer agent for the shares of Common Stock and warrant
agent for warrants is Continental Stock Transfer & Trust Company.
Certain Anti-Takeover Provisions of Delaware Law, the Proposed Charter
and Proposed Bylaws
SpringBig, as a corporation incorporated under the laws of the
State of Delaware, subject to the provisions of Section 203 of the DGCL, which we refer to as “Section 203,” regulating corporate takeovers.
Section 203 prevents certain Delaware corporations, under certain
circumstances, from engaging in a “business combination” with:
|
•
|
A shareholder who owns fifteen percent or more of SpringBig’s outstanding voting stock (otherwise known as an “interested
shareholder”);
|
|
•
|
an affiliate of an interested shareholder; or
|
|
•
|
an associate of an interested shareholder, for three (3) years following the date that the shareholder became an interested
shareholder.
|
A “business combination” includes a merger or sale of more than ten
percent of SpringBig’s assets.
However, the above provisions of Section 203 do not apply if:
|
•
|
SpringBig’s Board of Directors approves the transaction that made the shareholder an “interested shareholder,” prior to the
date of the transaction;
|
|
•
|
after the completion of the transaction that resulted in the shareholder becoming an interested shareholder, that shareholder
owned at least 85% of SpringBig’s voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of Common Stock; or
|
102
|
•
|
on or subsequent to the date of the transaction, the business combination is approved by SpringBig’s Board of Directors and
authorized at a meeting of SpringBig’s shareholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested shareholder.
|
The Company’s organizational documents and the DGCL contain
provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by SpringBig’s Board of Directors. These provisions could also make it difficult for shareholders to take certain
actions, including electing directors who are not nominated by the members of SpringBig’s Board of Directors or taking other corporate actions, including effecting changes in our management. For instance, SpringBig’s charter does not provide
for cumulative voting in the election of directors and provides for a classified Board of Directors with three (3)-year staggered terms, which could delay the ability of shareholders to change the membership of a majority of the SpringBig Board
of Directors. SpringBig’s Board of Directors is empowered to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director in certain circumstances; and SpringBig’s
advance notice provisions in the proposed bylaws will require that shareholders must comply with certain procedures in order to nominate candidates to SpringBig’s Board of Directors or to propose matters to be acted upon at a shareholders’
meeting.
SpringBig’s authorized but unissued Common Stock and preferred
stock will be available for future issuances without shareholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence
of authorized but unissued and unreserved Common Stock and preferred stock could render more difficult or discourage an attempt to obtain control of SpringBig by means of a proxy contest, tender offer, merger or otherwise.
Stockholder Nominations and Proposals
Annual Meeting of Stockholders Notice Requirements
Nominations of persons for election to the Board of Directors or
the proposal of other business to be transacted by shareholders may only be made at a meeting properly called for such purpose and only (i) by or at the direction of the board of directors or any committee thereof or (ii) by a shareholder who
(A) was a shareholder of record of SpringBig when the notice is delivered to the secretary and at the time of the meeting and is entitled to vote for the election of directors or such business, as applicable, at the meeting and (B) complies
with the notice and other provisions of the proposed bylaws. Persons nominated for election to the Board of Directors by shareholders in accordance with the applicable sections of the proposed bylaws are referred to as “Shareholder Nominees.” A
shareholder nominating persons for election to the board of directors is referred to as the “Nominating Shareholder.”
SpringBig’s bylaws provide that, for nominations or business to be
properly brought before an annual meeting by a shareholder, the shareholder must give timely notice thereof in writing to the secretary of SpringBig and, in the case of proposed business, any such proposed business must constitute a proper for
shareholder action. To be timely, the notice must be delivered personally or mailed to, and received at, the principal executive offices of SpringBig, addressed to the secretary, by no earlier than one hundred and twenty (120) days and no later
than ninety (90) days before the first anniversary of the date of the prior year’s annual meeting of shareholders; provided, however, that if the annual meeting of shareholders is not within 45 days
before or after such anniversary date, the notice by the shareholder to be timely must be received (A) no earlier than one hundred and twenty (120) days before such annual meeting and (B) no later than the later of ninety (90) days before such
annual meeting and the tenth day after the day on which the notice of such annual meeting was made by mail or public disclosure. In no event will an adjournment, postponement or deferral of any annual meeting of shareholders, or announcement
thereof, commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above.
Special Meeting of Stockholders Notice Requirements
If the election of directors is included as business to be brought
before a special meeting in SpringBig’s notice of meeting, then nominations of persons for election to the board of directors at a special meeting of shareholders may be made by any shareholder who is a shareholder of record at the time of
giving notice of such nomination and at the time of the special meeting (who will be entitled to vote at the meeting). For nominations to be properly brought by a shareholder before a special meeting of shareholders, the shareholder must have
given timely notice not later than the close of business on the tenth day following the day on which public announcement of the date of the special meeting is first made by SpringBig.
103
Additional Stockholder Notice Requirements
Any shareholder’s notice to the secretary must set forth (i) as to
each person whom the shareholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and
number of shares of capital stock of SpringBig, if any, that are owned beneficially or of record by the person, and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, without regard to the application of the Exchange Act to
either the nomination or SpringBig; and (ii) as to the shareholder giving the notice (A) the name and record address of such shareholder as they appear on SpringBig’s books and the name and address of the beneficial owner, if any, on whose
behalf the nomination is made, (B) the class or series and number of shares of capital stock of SpringBig that are owned beneficially and of record by such shareholder and the beneficial owner, if any, on whose behalf the nomination is made,
(C) a description of all arrangements or understandings relating to the nomination to be made by such shareholder among such shareholder, the beneficial owner, if any, on whose behalf the nomination is made, each proposed nominee and any other
person or persons (including their names), (D) a representation that such shareholder (or a qualified representative of such shareholder) intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E)
any other information relating to such shareholder and the beneficial owner, if any, on whose behalf the nomination is made that would be required to be disclosed in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as
a nominee and to serve as a director if elected.
General
The person presiding over the meeting shall, if the facts warrant,
determine and declare to the meeting, that business was not properly brought or a nomination was not made, as the case may be, in accordance with the foregoing procedures prescribed by the proposed bylaws, and, if he or she should so determine,
he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted and the defective nomination shall be disregarded, as the case may be. If the shareholder (or a qualified
representative of the shareholder) does not appear at the applicable shareholder meeting to present a nomination or other proposed business, such nomination will be disregarded or such proposed business will not be transacted, as the case may
be, notwithstanding that proxies in respect of such vote may have been received by SpringBig. To be considered a qualified representative of the shareholder, a person must be a duly authorized officer, manager or partner of such shareholder or
must be authorized by a writing executed by such shareholder or an electronic transmission delivered by such shareholder to act for such shareholder as proxy at the meeting of shareholders and such person must produce such writing or electronic
transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of shareholders.
Listing of Common Stock
The shares of Common Stock are listed on The Nasdaq Global Market
under the symbol “SBIG.” The SpringBig Public Warrants are listed on the Nasdaq Global Market under the symbol “SBIGW.”
104
Rule 144
Pursuant to Rule 144 under the Securities Act (“Rule 144”), a
person who has beneficially owned restricted shares of Common Stock for at least six months would, subject to the restrictions noted in the section below, be entitled to sell their securities provided that (i) such person is not deemed to have
been an affiliate of us at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required
reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially owned restricted shares of Common
Stock for at least six months but who are affiliates of us at the time of, or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any
three-month period only a number of securities that does not exceed the greater of:
|
•
|
1% of the total number of shares of Common Stock then outstanding; or
|
|
•
|
the average weekly reported trading volume of such securities during the four calendar weeks preceding the filing of a notice
on Form 144 with respect to the sale.
|
Sales by our affiliates under Rule 144 are also limited by manner
of sale provisions and notice requirements and to the availability of current public information about us.
Lock-up Provisions
Concurrently with the execution of the original merger agreement,
certain shareholders of Legacy SpringBig entered into the voting and support agreements in favor of Tuatara and Legacy SpringBig and their respective successors. In the voting and support agreements, such shareholders agreed, with certain
exceptions, to a lock-up (e.g., agreed not to lend, 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, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for shares of Common Stock) for a period of 180 days after the closing with respect to
any securities of SpringBig that they receive as merger consideration under the merger agreement. Tuatara partially waived the lock-up in connection with the entry into the amended and restated merger agreement.
The foregoing lock-up restrictions do not apply to any shares of
Common Stock that may be issued to Cantor pursuant to the Common Stock Purchase Agreement previously registered under a separate registration statement on Form S-1.
105
The validity of any securities offered by this prospectus will be
passed upon for us by Benesch, Friedlander, Coplan & Aronoff LLP.
The consolidated financial statements of SpringBig Holdings, Inc.
as of December 31, 2022 and 2021 and for each of the years in periods ended December 31, 2022 and 2021 have been audited by Marcum LLP, an independent registered public accounting firm, as stated in their report thereon which report expresses
an unqualified opinion, have been included in this prospectus in reliance upon such report and upon the authority of such firm as experts in accounting and auditing. Marcum LLP’s report includes an explanatory paragraph relating to our ability
to continue as a going concern.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Delaware law allows a corporation to indemnify its directors,
officers, employees and agents against all reasonable expenses (including attorneys’ fees and amounts paid in settlement) and, provided that such individual, or indemnitee, acted in good faith and for a purpose which he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and, in the case of a criminal proceeding, had reasonable grounds to believe his or her conduct was lawful. Delaware law authorizes a corporation to indemnify its
directors, officers, employees and agents against all reasonable expenses including amounts paid in settlement and attorneys’ fees in connection with a lawsuit by or in the right of the corporation to procure a judgment in its favor if such
person acted in good faith and in a manner reasonably believed to be in or not opposed to the best interest of the corporation, except that no indemnification may be paid as to any claim, issue or matter as to which such person has been
adjudged liable to the corporation unless it is determined by the court making such adjudication of liability that, despite such finding, such person is fairly and reasonably entitled for such expenses deemed proper.
Delaware law also provides for discretionary indemnification made
by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made either:
|
•
|
by the stockholders;
|
|
•
|
by the board of directors by majority vote of a quorum consisting of directors who were not parties to the actions, suit or
proceeding;
|
|
•
|
if a majority vote of a quorum consisting of directors who were not parties to the actions, suit or proceeding so orders, by
independent legal counsel in a written opinion; or
|
|
•
|
if a quorum consisting of directors who were not parties to the actions, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
|
The articles of incorporation, the bylaws or an agreement made by
the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the
actions, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions do not affect any right to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to Delaware law does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the articles of incorporation or any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding office, except that indemnification, unless ordered by a court or for the advancement of
expenses, may not be made to or on behalf of any director or officer if his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. In addition, indemnification
continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person.
106
Insofar as indemnification for liabilities arising under the
Securities Act, as amended, may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
We have filed a registration statement on Form S-1, including
exhibits, under the Securities Act of 1933, as amended, with respect to the securities offered by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information
pertaining to us and our securities, you should refer to the registration statement and the exhibits to the registration statement.
In addition, we file annual, quarterly and current reports, proxy
statements and other information with the SEC. Our SEC filings are available to the public on a website maintained by the SEC located at www.sec.gov. We also maintain a website at www.springbig.com. Through our website, we make available, free
of charge, annual, quarterly and current reports, proxy statements and other information as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained on, or that may be accessed
through, our website is not part of, and is not incorporated into, this prospectus.
107
SPRINGBIG HOLDINGS, INC.
|
Audited Financial Statements
|
| |
|
| | | ||
| | | ||
| | | ||
| | | ||
| | | ||
| | |
F-1
To the Stockholders and Board of Directors of
SpringBig Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SpringBig Holdings,
Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2022, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain
its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Explanatory Paragraph - Adoption of New Accounting Standard
As discussed in Note 2 to the consolidated financial statements, the Company changed
its method of accounting for leases due to the adoption of ASU No. 2016-02, Leases (Topic 842), as amended, effective January 1, 2022, using the modified retrospective approach.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2021.
Fort Lauderdale, FL
March 28, 2023
F-2
CONSOLIDATED BALANCE SHEETS
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
|
| |
(In thousands except share data)
|
|||
|
ASSETS
|
| |
|
| |
|
|
Assets
|
| |
|
| |
|
|
Current assets:
|
| |
|
| |
|
|
Cash and cash equivalents
|
| |
$
|
| |
$
|
|
Accounts receivable, net
|
| |
|
| |
|
|
Contract assets
|
| |
|
| |
|
|
Prepaid expenses and other current assets
|
| |
|
| |
|
|
Total current assets
|
| |
|
| |
|
|
Operating lease asset
|
| |
|
| |
—
|
|
Property and equipment, net
|
| |
|
| |
|
|
Convertible note receivable
|
| |
|
| |
|
|
Total assets
|
| |
$
|
| |
$
|
|
|
| |
|
| |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
| |
|
| |
|
|
Liabilities
|
| |
|
| |
|
|
Current liabilities:
|
| |
|
| |
|
|
Accounts payable
|
| |
|
| |
|
|
Accrued expense and other current liabilities
|
| |
|
| |
|
|
Current maturities of long-term debt
|
| |
|
| |
|
|
Deferred revenue
|
| |
|
| |
|
|
Operating lease liability - current
|
| |
|
| |
—
|
|
Total current liabilities
|
| |
|
| |
|
|
Notes payable
|
| |
|
| |
|
|
Operating lease liability - non-current
|
| |
|
| |
—
|
|
Warrant liabilities
|
| |
|
| |
|
|
Total liabilities
|
| |
|
| |
|
|
|
| |
|
| |
|
|
Commitments and Contingencies
|
| |
|
| |
|
|
|
| |
|
| |
|
|
Stockholders’ Equity (Deficit)
|
| |
|
| |
|
|
Common stock par value $
|
| |
|
| |
|
|
Additional paid-in-capital
|
| |
|
| |
|
|
Accumulated deficit
|
| |
(
|
| |
(
|
|
Total stockholders’ equity (deficit)
|
| |
(
|
| |
|
|
Total liabilities and stockholders’ equity (deficit)
|
| |
$
|
| |
$
|
The accompanying notes are an integral part of these financial statements
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
|
| |
(In thousands except share data)
|
|||
|
|
| |
|
| |
|
|
Revenues
|
| |
$
|
| |
$
|
|
Cost of revenues
|
| |
|
| |
|
|
Gross profit
|
| |
|
| |
|
|
Operating expenses
|
| |
|
| |
|
|
Selling, servicing and marketing
|
| |
|
| |
|
|
Technology and software development
|
| |
|
| |
|
|
General and administrative
|
| |
|
| |
|
|
Total operating expenses
|
| |
|
| |
|
|
|
| |
|
| |
|
|
Loss from operations
|
| |
(
|
| |
(
|
|
Interest income
|
| |
|
| |
|
|
Interest expense
|
| |
(
|
| |
|
|
Change in fair value of warrants
|
| |
|
| |
|
|
Forgiveness of PPP loan
|
| |
|
| |
|
|
Loss before income tax
|
| |
(
|
| |
(
|
|
Income tax expense
|
| |
|
| |
|
|
Net loss
|
| |
$(
|
| |
$(
|
|
Net loss per common share:
|
| |
|
| |
|
|
Basic and diluted
|
| |
$(
|
| |
$(
|
|
Weighted-average common shares outstanding
|
| |
|
| |
|
|
Basic and diluted
|
| |
|
| |
|
The accompanying notes are an integral part of these financial statements
F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
| |
Common Stock
|
| |
Additional Paid-in-
Capital
|
| |
Accumulated
Deficit
|
| |
Total
|
|||
|
|
| |
Shares
|
| |
Amount
|
| |
Amount
|
| |
Amount
|
| |
Amount
|
|
|
| |
(In thousands except share data)
|
||||||||||||
|
Balance at December 31, 2020
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
Stock-based compensation
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
|
|
Exercise of stock options
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
|
|
Issue of common stock
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
|
|
Net loss
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
|
Balance at December 31, 2021
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
Stock-based compensation
|
| |
—
|
| |
—
|
| |
|
| |
—
|
| |
|
|
Exercise of stock options
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
|
|
Recapitalization
|
| |
|
| |
|
| |
|
| |
—
|
| |
|
|
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
|
Issue of common stock*
|
| |
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
Issue of common stock^
|
| |
|
| |
—
|
| |
|
| |
—
|
| |
|
|
Net loss
|
| |
—
|
| |
—
|
| |
—
|
| |
(
|
| |
(
|
|
Balance at December 31, 2022
|
| |
|
| |
$
|
| |
$
|
| |
$(
|
| |
$(
|
|
*
|
|
|
^
|
|
The accompanying notes are an integral part of these financial statements
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
|
| |
(In thousands)
|
|||
|
Cash flows from operating activities:
|
| |
|
| |
|
|
Net loss
|
| |
$(
|
| |
$(
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
| |
|
| |
|
|
Depreciation and amortization
|
| |
|
| |
|
|
Discount amortization on convertible notes
|
| |
|
| |
|
|
Stock-based compensation expense
|
| |
|
| |
|
|
Operating lease right of use assets amortization
|
| |
|
| |
—
|
|
Bad debt expense
|
| |
|
| |
|
|
Forgiveness of PPP Loan
|
| |
|
| |
(
|
|
Accrued interest on convertible notes
|
| |
|
| |
|
|
Change in fair value of warrants
|
| |
(
|
| |
|
|
Changes in operating assets and liabilities:
|
| |
|
| |
|
|
Accounts receivable
|
| |
(
|
| |
(
|
|
Prepaid expenses and other current assets
|
| |
(
|
| |
(
|
|
Contract assets
|
| |
|
| |
(
|
|
Accounts payable and other liabilities
|
| |
|
| |
|
|
Operating lease liabilities
|
| |
(
|
| |
—
|
|
Related party payable
|
| |
|
| |
(
|
|
Related party receivable
|
| |
|
| |
|
|
Deferred revenue
|
| |
(
|
| |
(
|
|
Net cash used in operating activities
|
| |
(
|
| |
(
|
|
Cash flows from investing activities:
|
| |
|
| |
|
|
Business combination, net of cash acquired
|
| |
|
| |
(
|
|
Purchase of convertible note
|
| |
(
|
| |
|
|
Purchases of property and equipment
|
| |
(
|
| |
(
|
|
Net cash used in investing activities
|
| |
(
|
| |
(
|
|
Cash flows from financing activities:
|
| |
|
| |
|
|
Business combination, net of transaction cost
|
| |
|
| |
|
|
Proceeds from convertible notes
|
| |
|
| |
|
|
Repayment of convertible notes
|
| |
(
|
| |
|
|
Proceeds from exercise of stock options
|
| |
|
| |
|
|
Net cash provided by financing activities
|
| |
|
| |
|
|
Net increase (decrease) in cash and cash equivalents
|
| |
$
|
| |
$(
|
|
Cash and cash equivalents at beginning of period
|
| |
|
| |
|
|
Cash and cash equivalents at end of period
|
| |
$
|
| |
$
|
|
Supplemental cash flows disclosures
|
| |
|
| ||
|
Income taxes paid
|
| |
$
|
| |
$
|
|
Interest paid
|
| |
$
|
| |
$
|
|
Supplemental disclosure of non-cash activities
|
| |
|
| |
|
|
Conversion of
|
| |
$
|
| |
$
|
|
Warrants assumed in business combination at estimated fair value
|
| |
$
|
| |
$
|
|
Conversion of L1 Notes into common stock
|
| |
$
|
| |
$
|
|
Issue of common stock for business combination
|
| |
$
|
| |
$
|
|
Indemnity holdback for business combination
|
| |
$
|
| |
$
|
The accompanying notes are an integral part of these financial statements
F-6
SPRINGBIG HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF BUSINESS
SpringBig Holdings, Inc. and its wholly-owned subsidiaries (the
“Company,” “we,” “us,” or “SpringBig”) developed a software platform that provides marketing and customer engagement services to cannabis dispensaries and brands throughout the United States and Canada. The Company allows merchants to provide
loyalty plans and rewards directly to consumers through an internet portal and mobile applications. Our operational headquarters are in Boca Raton, Florida, with additional offices located in the United States and Canada.
The Company has one direct wholly-owned subsidiary, SpringBig, Inc.
On June 14, 2022 (the “Closing Date”), SpringBig Holdings, Inc.
(formerly known as Tuatara Capital Acquisition Corporation (“Tuatara” or “ TCAC”)), consummated the business combination of SpringBig, Inc. (“Legacy SpringBig”) and HighJump Merger Sub, Inc., the wholly-owned subsidiary of Tuatara, pursuant to
the Amended and Restated Agreement of Plan Merger, dated as of April 14, 2022, as amended, by and among Tuatara, HighJump Merger Sub, Inc. and Legacy SpringBig. Prior to the closing of the business combination (the “Closing”), Tuatara changed its
jurisdiction of incorporation by deregistering as a Cayman Islands exempted company and continuing and domesticating as a corporation incorporated under the laws of the State of Delaware. In connection with the Closing, the registrant changed its
name from Tuatara Capital Acquisition Corporation to “SpringBig Holdings, Inc.” SpringBig will continue the existing business operations of Legacy SpringBig as a publicly traded company. See Note 9, Business Combination, to these consolidated
financial statements for further information.
While the legal acquirer in the business combination is SpringBig
for financial accounting and reporting purposes under U.S. GAAP, Legacy SpringBig is the accounting acquirer, with the merger accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting,
and the financial statements of the combined entity represent the continuation of the financial statements of Legacy SpringBig. Under this accounting method, SpringBig is treated as the “acquired” company and Legacy SpringBig is the accounting
acquirer, with the transaction treated as a recapitalization of Legacy SpringBig. SpringBig’s assets, liabilities and results of operations were consolidated with Legacy SpringBig’s beginning on the date of the business combination. Except for
certain warrant liabilities, the assets and liabilities of SpringBig were recognized at historical cost (which is consistent with carrying value) and were not material, with no goodwill or other intangible assets recorded. The warrant
liabilities, which are discussed in Note 13, Warrant Liabilities, were recorded at fair value. The consolidated assets, liabilities, and results of operations of Legacy SpringBig became the historical financial statements, and operations prior to
the closing of the business combination presented for comparative purposes are those of Legacy SpringBig. Pre-merger shares of common stock and preferred stock of Legacy SpringBig were converted to shares of common stock of the combined company
using the conversion ratio of 0.59289 and for comparative purposes, the shares and net loss per share of Legacy SpringBig prior to the
merger have been retroactively restated using the conversion ratio.
Beginning June 15, 2022, the ticker symbols for the Company’s common
stock and publicly-traded warrants were changed to “SBIG” and “SBIGW,” respectively, and commenced trading on The Nasdaq Global Market. The Company received net proceeds of $18.8 million, with gross proceeds of $25.1 million, which were
in addition to the $7.0 million in Convertible Notes proceeds, which were received in February 2022 in connection with Legacy
SpringBig’s issuance of such notes (and which Convertible Notes and the interest due thereon were converted into common stock in connection with the business combination. See Note 10, 15 % Convertible Promissory Notes, to these consolidated financial statements). Of the amount received at the Closing, approximately $8.8 million represented cash from the TCAC trust related to unredeemed shares; $6.1
million represented proceeds from the subscription for common stock from certain investors (the “PIPE Financing”), and $10.0 million
from the Secured Convertible Note (defined below). The Company incurred additional cash and non cash expenses totaling $8.7 million,
resulting in net business combination proceeds of $10.1 million.
Common Stock Purchase Agreement
On April 29, 2022, the Company entered into a Common Stock Purchase
Agreement (as amended, the “Stock Purchase Agreement”) with CF Principal Investments LLC (“Cantor”), an affiliate of Cantor Fitzgerald L.P. The Company, in its sole discretion, shall have the right, but not the obligation, to issue and sell to
Cantor, and Cantor shall purchase from the Company, up to $50.0 million of common shares, par value $0.0001 per share, subject to certain terms and conditions (the “Facility”).
F-7
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of
Presentation
Going Concern and Liquidity
Historically, the Company has incurred losses, which has resulted in
an accumulated deficit of approximately $26.3 million as of December 31, 2022. Cash flows used in operating activities were $14.5 million and $7.9 million, for the
twelve months ended December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company had a working capital deficit of approximately $1.5
million, inclusive of $3.5 million in cash and cash equivalents to cover overhead expenses.
The Company’s ability to continue as a going concern is dependent on
its ability to meet its liquidity needs through a combination of factors including, but not limited to, cash and cash equivalents, the ongoing increase in revenue through increased usage by customers and new customers, its Stock Purchase
Agreement and strategic capital raises. The ultimate success of these plans is not guaranteed.
Based on management projections for increases in revenue and cash on
hand, we concluded that there was substantial doubt about our ability to continue to operate as a going concern for the 12 months following the issuance of the accompanying consolidated financial statements.
The accompanying consolidated financial statements are prepared on a
going concern basis and do not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.
Foreign Currency
We translate the financial statements of our foreign subsidiaries,
which have a functional currency in the respective country’s local currency, to U.S. dollars using month-end exchange rates for assets and liabilities and actual exchange rates for revenue, costs and expenses on the date of the transaction.
Translation gains and losses are included within “general and administrative expense” on the consolidated statements of operations. These gains and losses are immaterial to the financial statements.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical
experience and various other assumptions that we believe to be reasonable. We believe that the assumptions and estimates associated with revenue recognition, software development costs, income taxes, and equity-based compensation have the
greatest potential impact on our consolidated financial statements. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the
preparation of these financial statements change as new events occur, as more experience is acquired, as additional information is obtained, and as the operating environment changes. Actual results may differ materially from these estimates.
Segments
The Company manages its business as a single operating segment. Our
chief operating decision maker reviews financial information presented for the purposes of allocating resources and evaluating financial performance at an entity level and we have no segment managers who are held accountable by the chief
operating decision maker for operations and operating results. The products and services across the company are similar in nature, distributed in a comparable manner and have customers with common characteristics. We determined that we have one
Fair Value of Financial Instruments
Our financial assets, which include cash equivalents, current
financial assets and our current financial liabilities have fair values that approximate their carrying value due to their short-term maturities.
F-8
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentration
of credit risk consist principally of cash and cash equivalents and accounts receivable. We place our cash and cash equivalents with high credit-quality financial institutions. Such deposits may be in excess of federally insured limits. We
perform periodic evaluations of the relative credit standing of the financial institutions.
We perform ongoing credit evaluations of our customers’ financial
condition and require no collateral from our customers. We maintain an allowance for doubtful accounts receivable based upon the expected collectability of accounts receivable balances.
We had one customer representing 11 % of total revenues for the twelve months ended December 31, 2022. By comparison, we had one customer that represented 11 % of total revenues for the same period ended December 31, 2021.
At December 31, 2022 and December 31, 2021, the same customer
represented 12 % and 28 %
of accounts receivable, respectively.
Transaction Costs
The Company incurred significant costs direct and incremental to the
business combination and therefore to the recapitalization of the Company. We deferred such costs incurred in 2021. In 2022, upon closing of the business combination, total direct transaction costs were allocated between equity and liability
instruments measured at fair value on a recurring basis that were newly issued in the recapitalization. Amounts allocated to equity were recorded to additional paid-in capital, while amounts allocated to the specified liabilities were recorded as
other expense. See Note 9, Business Combination, to these consolidated financial statements for further information.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less, when acquired, to be cash equivalents. The Company maintains its cash with three commercial banks.
As of December 31, 2022, the Company exceeded the federally insured
limits of $250,000 for interest and non-interest bearing deposits. The Company had cash balances with a single financial institution in excess of the FDIC insured limits by $3.2 million as of December 31, 2022. We monitor the financial condition of such institution and have not experienced any losses associated with these accounts.
Accounts Receivable and Allowance for Doubtful
Accounts
Accounts receivable are uncollateralized customer obligations due
under normal trade terms granted by the Company based on each customer’s own creditworthiness. The carrying amount of accounts receivable is reduced by an allowance for doubtful accounts that reflects management’s best estimate of amounts that
will not be collected. Management individually reviews past due accounts receivable balances and based on an assessment of each customer’s current creditworthiness, estimates the portion, if any, that will not be collected. Additionally,
management assesses the remaining balance of accounts receivable based on experience and an assessment of future economic conditions to determine its best estimate of the portion that will not be collected. Unbilled receivables are customer
obligations due under normal terms of trade which have not been invoiced at the balance sheet date and are invoiced shortly thereafter.
Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation. Major additions and improvements which extend the life of the assets are capitalized whereas maintenance and repairs, which do not improve or extend the life of the respective assets, are expensed as incurred. When property or
equipment is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of their estimated useful lives or the terms of the leases.
F-9
Contract Assets (Deferred Commission)
The Company recognized a contract asset for the incremental costs
(i.e., the sales commissions) of obtaining a contract because the Company expects to recover those costs through future fees for the services to be provided. The Company amortizes the asset over the course of three years , which is the estimated number of years a customer is retained.
Capitalized Software Development Costs
Internal and external costs associated with the development stage of
computer applications, as well as for upgrades and enhancements that result in additional functionality of the applications, are capitalized in accordance with Accounting Standards Codification (“ASC”) 350-40, Internal-Use
Software Accounting and Capitalization. Internal and external training and maintenance costs are charged to expense as incurred or over the related service period. When a software application is placed in service, the Company begins
amortizing the related capitalized software costs using the straight-line method based on its estimated useful life, which is generally three years .
Impairment of Long-Lived Assets
The Company reviews the carrying value of property and equipment for
impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected
future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include
current operating results, trends, and prospects, as well as the effects of obsolescence, demand, competition, and other economic factors. The Company did not recognize any impairment loss in 2022 or 2021.
Business Combinations
Acquisitions of subsidiaries are accounted for using the acquisition
method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of acquisition) of assets transferred and liabilities incurred or assumed, and equity instruments issued by the Company.
Acquisition-related costs are recognized in the statements of operations in the period which they are incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of
contingent consideration classified as an asset or liability are accounted for in accordance with relevant guidance consistent with ASC 805, Business Combinations. If the initial accounting for a business
combination is incomplete by the end of the reporting period in which the combination occurs, the Company will report provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the
measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of
that date. The measurement period is the period from the date of acquisition to the date the Company obtains complete information about facts and circumstances that existed as of the acquisition date and does not exceed twelve months.
The business combination was accounted for as a “reverse
recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Legacy SpringBig in many respects. Under
this method of accounting, Tuatara was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Legacy SpringBig was deemed to be the accounting acquirer in the transaction and, consequently, the transaction
was treated as a recapitalization of Legacy SpringBig (i.e., a capital transaction involving the issuance of stock by Tuatara for stock of Legacy SpringBig). Accordingly, the consolidated assets, liabilities and results of operations of Legacy
SpringBig became the historical financial statements of the combined company, and Tuatara’s assets, liabilities and results of operations were consolidated with Legacy SpringBig beginning on the acquisition date. Operations prior to the business
combination are presented as those of Legacy SpringBig. The net assets of Tuatara were recognized at historical cost (which are consistent with carrying value), with no goodwill or other intangible assets recorded.
Intangible Assets
We account for intangible assets under ASC 350, Goodwill and Other. Intangible assets represent software acquired in the acquisition of Beaches Development Group. The amount is recorded at fair value on the date of the
F-10
acquisition and amortized over its useful life of 3 years, using the straight-line method. The amount for intangible assets is included in property and equipment on the balance sheets.
Contract Liabilities (Deferred Revenue)
The Company records contract liabilities when cash payments are
received in advance of performance obligations being performed for initial start-up fees and payments received in advance of credits utilized. The Company expects to recognize these contract liabilities in the following period when it transfers
its services and, therefore, satisfies its performance obligation to the customers.
Revenue Recognition
On January 1, 2019, the Company adopted, using the full
retrospective method, the provisions of FASB Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, which provides guidance on the recognition, presentation, and disclosure
of revenue in financial statements. ASC 606 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. The Company recognizes revenue upon transfer of control of
promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those services. We report revenue net of sales and other taxes collected from customers to be remitted to government
authorities.
For a standard contract, the Company works with a customer to
provide access to an integrated platform that provides all the functions of its proprietary software, which utilizes proprietary technology to send text or email messages to the customer’s contacts based on a credit system. Through this software,
the Company allows merchants to provide loyalty plans and rewards directly to consumers through an internet portal and mobile applications. The functions of the software themselves do not have individual value to the customer. Each customer is
buying the license to the platform to receive all the benefits of the platform. Therefore, the Company’s single performance obligation is to provide customers the ability to use its proprietary software application that provides marketing and
customer engagement services to cannabis dispensaries throughout the United States.
Nature of Promises to Transfer - The services provided by the Company’s software are subscription based for its retail and brand customers as follows:
Retail customers - the Company provides its retail customer access to the software for an initial contract that is initially for a term of one year, with automatic annual renewals. Revenue is earned monthly, which consists of the contracted monthly
fixed fee for software access and a specified volume of messaging credits plus, if any, optional purchases for additional credits.
Brand customers
- a customer can purchase use of the Company’s software, which includes a certain amount of messaging credits to be utilized over a specified period of time. The Company recognizes revenue monthly based on the credits used each month which
depicts the best transfer of control.
Set up fees -
the Company recognizes revenue from a onetime set up fee which is charged to customers prior to going live. The amount is treated as deferred revenue and amortized over the life of the contract which is normally one year.
In no case does the Company act as an agent, i.e., the Company does
not provide a service of arranging for another party to transfer goods or services to the customer.
Timing of Satisfaction - Control of services is transferred during a subscription period. Services provided by the Company are performed over time on a monthly basis for retail customers or over a designated prepaid contract term generally from six to
twelve months from brand customers.
Allocating the Transaction Price - The transaction price of a subscription is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised services to a customer. Transaction prices do not include
amounts collected on behalf of third parties (e.g., sales taxes).
To determine the transaction price of a contract, the Company
considers its customary business practices as well as the terms of the contract. For the purpose of determining transaction prices, the Company assumes that the services will be transferred to the customer as promised in accordance with existing
contracts and that the contracts will not be cancelled, renewed, or modified.
The Company’s contracts with customers have fixed transaction prices
that are denominated in U.S. and CAD dollars. Consideration paid for services that customers purchase from the Company is nonrefundable. Therefore, at
F-11
the time revenue is recognized, the Company does not estimate expected refunds for
services. Customer discounts are netted against revenue and are recognized as incurred.
For both retail and brand contracts, there is only one performance
obligation for the standard contract. As such, the transaction price is allocated entirely to that obligation.
Practical Expedients - The Company has adopted certain practical expedients with significant items disclosed herein. The Company has elected to apply the portfolio approach practical expedient to evaluate contracts with customers that share the same
revenue recognition patterns as the result of evaluating them as a group will have substantially the same result as evaluating them individually.
Cost of Revenues
Cost of revenues principally consists of amounts payable to
distributors of messages on behalf of customers across cellular networks and the cost of third-party data and integrations.
Selling, Servicing and Marketing Expenses
Selling, servicing and marketing expenses consist primarily of
personnel and related costs, including salaries, benefits, bonuses, commissions and travel for our sales team, client success and marketing team. Other costs included in this expense are marketing and promotional events. Advertising costs are
charged to marketing expense as incurred. Advertising costs were $174 ,000 and $96 ,000 for the years ended December 31, 2022 and December 31, 2021, respectively.
Technology and Software Development
Technology and software development expense consist primarily of
personnel and related costs, including salaries, benefits, bonuses and cost of server usage by our developers.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel
and related costs for our executive, finance, legal, human resources, and administrative personnel, including salaries, benefits, bonuses, and stock-based compensation, legal, accounting, other professional service fees and other corporate
expenses.
Stock-Based Compensation
ASC 718, Compensation - Stock Compensation, addresses accounting for share-based awards, including stock options, restricted stock, performance shares and warrants. Stock-based compensation for stock options to employees and non-employees is based upon the
fair value of the award on the date of grant. We record forfeitures as they occur. The compensation cost is recognized over the requisite service period, which is generally the vesting period, and is included in general and administrative
expenses in the consolidated statements of operations.
The Company estimates the fair value of stock options using the
Black-Scholes valuation model. The expected life represents the term the options granted are expected to be outstanding. The expected volatility was determined using the historical volatility of similar publicly traded companies. The risk-free
interest rate is based on the U.S. Treasury rate in effect at the time of grant.
Earnings Per Share
The Company computes net income per share in accordance with ASC
260, Earnings Per Share. Under the provisions of ASC 260, basic net income per share is computed by dividing the net income available to common shareholders by the weighted average common shares
outstanding during the period. Diluted net income per share adjusts basic net income per share for the effects of stock options, warrants, convertible notes and restricted stock awards only in periods, or for such awards in which the effect is
dilutive. ASC 260 also requires the Company to present basic and diluted earnings per share information separately for each class of equity instruments that participate in any income distribution with primary equity instruments.
Income Taxes
We record current income taxes based on our estimates of current
taxable income and provide for deferred income taxes to reflect estimated future income tax payments and receipts. We are subject to federal income taxes as well as state taxes. In addition, we are subject to taxes in the foreign jurisdictions
where we operate.
F-12
The Company records a deferred tax asset or liability based on
the difference between financial statement and tax basis of assets and liabilities as measured by the anticipated tax rates which will be in effect when these differences reverse. The measurement of deferred tax assets is reduced, if necessary,
by the amount of any tax benefits that, based on available evidence, are not expected to be realized. The Company adopted ASU 2016-17, Balance Sheet Classification of Deferred Taxes. The guidance requires
that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will only have one net noncurrent deferred tax asset or liability.
The Company has evaluated its tax positions for any uncertainties
based on the technical merits of the positions taken. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be upheld on examination by taxing authorities. The Company
has analyzed the tax positions taken and has concluded that as of December 31, 2022 and 2021, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or disclosure in the financial
statements.
Effective Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. The amendments in this update modify the
concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. This update is effective
beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements for the period ended December 31, 2022.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. The ASU enhances and simplifies various aspects of the income tax accounting guidance in ASC 740, including requirements related to the
following: (1) hybrid tax regimes; (2) tax basis step-up in goodwill obtained in a transaction that is not a business combination; (3) separate financial statements of entities not subject to tax; (4) intra-period tax allocation exception to the
incremental approach; (5) ownership changes in investments; (6) interim-period accounting for enacted changes in tax law; and (7) year-to-date loss limitation in interim-period tax accounting. The amendments in ASU 2019-12 are effective for
public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard
did not have a material impact on our consolidated financial statements for the period ended December 31, 2022.
In January 2020, the FASB issued ASU 2020-01, Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The amendments in this update clarify certain interactions between the guidance to account for certain equity securities. This update is
effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial statements for the period ended December 31, 2022.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. Under ASU 2020-06, embedded conversion features are no longer separated from the host contract for convertible instruments with
conversion features that are not required to be accounted for as derivatives, or that do not result in substantial premiums accounted for as paid-in capital. The convertible debt instruments will now be accounted for as a single liability
measured at amortized cost. This results in the interest expense recognized for convertible debt instruments to be closer to the coupon interest rate. The new guidance also requires the if-converted method to be applied for all convertible
instruments when calculating earnings per share. This update is effective beginning after December 15, 2021. We adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on our consolidated financial
statements for the period ended December 31, 2022.
In February 2016, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). FASB issued ASU 2016-02 to increase transparency and comparability among organizations by recognizing lease assets and lease
liabilities on the balance sheet and disclosing key information about leasing arrangements. Certain qualitative and quantitative disclosures are required, as well as a retrospective recognition and measurement of impacted leases. In June 2020,
FASB issued ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Deferral of the Effective Dates for Certain Entities, which deferred the effective date of ASU 2016-02 to
annual reporting periods beginning after December 15,
F-13
2021, with early adoption permitted. In July 2021, the FASB released Update No.
2021-05 Lessors-Certain Leases with Variable Lease Payments. The amendments in this update affect lessors with lease contracts that (1) have variable lease payments that do not depend on a reference index
or a rate and (2) would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing. The amendments in this update amend Topic 842. The amendments are effective for fiscal years
beginning after December 15, 2021, for all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities.
The Company adopted this standard on January 1, 2022. As such, we
determine if an arrangement is a lease at inception. The Company recognizes a right-of-use (ROU) asset and a lease liability for operating and finance leases by recognizing and measuring leases at the commencement date based on the present value
of lease payments over the lease term. The Company does not have any sales-type leases, for which the book value of the leased asset would be removed from the balance sheet and a net investment in sales-type lease would be recognized based on
fixed payments under the contract and the residual value of the asset being leased. The Company has elected not to apply the recognition requirements to short-term leases and not to separate nonlease components from associated lease components
for all classes of underlying assets. ROU assets are included in non-current assets and lease liabilities are included in current and non-current liabilities on the Company’s consolidated balance sheets. Operating lease expense is included in
general and administrative expense on SpringBig’s consolidated statements of operations.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to revise the criteria for the measurement, recognition, and reporting of credit losses on financial instruments to be
recognized when expected. In November 2019, FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the
effective date of ASU 2016-13 to annual reporting periods beginning after December 15, 2022, with early adoption permitted. Management is currently evaluating the impact of adopting this standard on our financial condition and results of
operations.
In October 2021, the FASB issued ASU 2021-08 - Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require that an entity (acquirer) recognize and measure
contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated
the contracts. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this update should be applied
prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption of the amendments is permitted, including adoption in an interim period. An entity that early adopts in an interim period should
apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business
combinations that occur on or after the date of initial application. Management is currently evaluating the impact of adopting this standard on our financial condition and results of operations.
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable, net consisted of the following (in thousands):
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Accounts receivable
|
| |
$
|
| |
$
|
|
Unbilled receivables
|
| |
|
| |
|
|
Total receivables
|
| |
|
| |
|
|
Less allowance for doubtful accounts
|
| |
(
|
| |
(
|
|
Accounts receivable, net
|
| |
$
|
| |
$
|
Bad debt expense was $1.5 million and $216 ,000 for the years ending December 31, 2022
and 2021, respectively.
F-14
NOTE 4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following
(in thousands):
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Prepaid insurance
|
| |
$
|
| |
$
|
|
Other prepaid expenses
|
| |
|
| |
|
|
Deposits
|
| |
|
| |
|
|
|
| |
$
|
| |
$
|
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Computer equipment
|
| |
$
|
| |
$
|
|
Furniture & Fixtures
|
| |
|
| |
|
|
Data warehouse
|
| |
|
| |
|
|
Software
|
| |
|
| |
|
|
Total Cost
|
| |
|
| |
|
|
Less accumulated depreciation and amortization
|
| |
(
|
| |
(
|
|
Property and Equipment
|
| |
$
|
| |
$
|
The useful life of computer equipment, furniture and fixtures, software
and the data warehouse is 3 years.
Depreciation and amortization expenses for the years ended
December 31, 2022 and 2021 were $259 ,000 and $173 ,000, respectively. The amounts are included in general and administrative expenses in the consolidated statements of operations.
NOTE 6 – CONVERTIBLE NOTE RECEIVABLE
In April 2022, the Company purchased $250 ,000 in aggregate principal amount of convertible promissory note due April 1, 2026 (the “Convertible Note Receivable”).
The Convertible Note Receivable accrues interest at the rate of 5 % per annum on the principal amount of the Convertible Note Receivable. The issuer may not prepay the note prior to its maturity date without the
consent of the Company. The Convertible Note Receivable is convertible into common stock of the issuer, and the conversion price is based on the occurrence of certain actions by the issuer.
The Company earned $9 ,000 in interest income on the Convertible Note Receivable for the year ended December 31, 2022.
NOTE 7 – ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other current liabilities consisted of the
following (in thousands):
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Accrued wages, commission and bonus
|
| |
$
|
| |
$
|
|
Accrued professional fees
|
| |
|
| |
|
|
Other liabilities
|
| |
|
| |
|
|
Financial advisory fees payable
|
| |
|
| |
|
|
|
| |
$
|
| |
$
|
NOTE 8 – RELATED PARTY TRANSACTIONS
The Company incurred software development and information technology
related costs to a vendor related through common ownership to a major stockholder of approximately $153 ,000 and $408 ,000 for the years ended
F-15
NOTE 9 – BUSINESS COMBINATIONS
Reverse Merger
The business combination between Tuatara and Legacy SpringBig was
consummated on June 14, 2022. Holders of an aggregate of 19,123,806 Class A ordinary shares of Tuatara sold in its initial public
offering properly exercised their right to have such shares redeemed for a full pro rata portion of the trust account holding the proceeds from Tuatara’s IPO, which was approximately $10.01 per share, or $191,437,817 in the aggregate. The holders that did not
elect to have their shares redeemed, received, following the domestication, additional shares of common stock which amounted to 876,194
shares of common stock, resulting in total shares of 1,752,388 .
Beginning June 15, 2022, the ticker symbols for TCAC’s common stock
and warrants were changed to “SBIG” and “SBIGW,” respectively, and commenced trading on The Nasdaq Global Market. The Company received net proceeds of $18.8
million, with gross proceeds of $25.1 million, in addition to the $7.0 million Convertible Notes which were issued in February 2022 and were converted into common stock at the Closing, see Note 10, 15 % Convertible Promissory Notes, to these consolidated financial statements for further information. Of the amounts received, approximately $8.8 million represents remaining funds for unredeemed shares from the TCAC trust; $6.1 million from PIPE Financing proceeds and $10.0 million from the Secured
Convertible Note. On consummation of the Business Combination, Legacy SpringBig options were converted into options of SpringBig as disclosed in Note 16.
On April 29, 2022, the Company entered into the Stock Purchase
Agreement with Cantor, which was subsequently amended on July 20, 2022. The Company, in its sole discretion, shall have the right, but not the obligation, to issue and sell to Cantor, and Cantor shall purchase from the Company, up to $50.0 million of common shares, par value $0.0001
per share, subject to certain terms and conditions. During the three months ended September 30, 2022, the Company issued 877,193
shares to satisfy a $1.5 million commitment fee for the Cantor Equity Facility.
The following table provides a summary of the significant sources
and uses of cash related to the closing of the business combination on June 14, 2022, (in thousands):
|
Amount available after paying TCAC redeeming stockholders
|
| |
$
|
|
Proceeds from convertible notes
|
| |
|
|
Proceeds from PIPE Financing
|
| |
|
|
TCAC operating account
|
| |
|
|
Gross proceeds available at closing
|
| |
|
|
Expenses paid at closing
|
| |
(
|
|
Net cash to Legacy SpringBig at closing
|
| |
$
|
|
Post closing expense (cash paid or accrued for expenses by Legacy SpringBig)
|
| |
(
|
|
Net cash after closing
|
| |
$
|
The following table provides a reconciliation of the common shares
related to the business combination transaction:
|
TCAC non-redeeming shareholders
|
| |
|
|
PIPE Investors
|
| |
|
|
TCAC sponsor shareholders
|
| |
|
|
Legacy SpringBig shareholders
|
| |
|
|
Issued and outstanding
|
| |
|
Of the 1,341,356 shares of common stock shown above, 730,493 shares
were issued to holders of the Convertible Note (which was converted at Closing), representing repayment of principal of $7.0 million
and outstanding interest of $305 ,000, in accordance with the terms of the Convertible Notes. See Note 10, 15 % Convertible Promissory Note, to these consolidated financial statements for further information.
F-16
Acquisition of Beaches Development Group Ltd
In January 2021, Legacy SpringBig formed Medici Canada LLC, an
indirect wholly owned subsidiary of the Company, to acquire all the issued and outstanding capital stock of Beaches Development Group LTD, an Ontario corporation, pursuant to a stock purchase agreement.
The fair value of the consideration paid in connection with this
transaction was satisfied through the issuance of 107,296 shares of the Company’s common stock, par value $0.0001 per share (180,972 converted at
a conversion rate of 0.59289 into SpringBig Holdings, Inc. shares), valued at $135 ,000 plus cash consideration of $155 ,000.
The purchase price allocation is as follows (in thousands):
|
Fair value of shares
|
| |
$
|
|
Less: Post combination cost - restricted shares
|
| |
(
|
|
Fair value of net shares
|
| |
|
|
Cash consideration
|
| |
|
|
Indemnity holdback
|
| |
|
|
Fair value of purchase consideration
|
| |
$
|
|
Assets assumed
|
| |
$
|
|
Goodwill
|
| |
|
|
Intangibles (Software)
|
| |
|
|
Fair value of assets
|
| |
$
|
Of the 107,296 shares, 39,762 shares with a value of approximately $50 ,000 were issued to the sellers at the closing of the transaction. Two of the sellers signed employment contracts with Beaches Development Group LTD; 67,535 shares
were allocated to them as purchase consideration with a value of $85 ,000 and were unvested as of the closing date of the acquisition
(the “acquisition date”). Such unvested shares were scheduled to vest, over a two-year period, with 50 % in the first year and the remaining 50 %
in the second year following the acquisition date. As a result, the shares were treated as post-combination expense and were restricted at the time of issuance. All unvested shares were subsequently vested with the consummation of the business
combination on June 14, 2022.
Approximately $23 ,000 of the cash price was initially withheld as an indemnity holdback to offset any losses payable by the Company for a period of 12 months, any remaining indemnity to be
released to the seller’s representative. The indemnity holdback was paid to the seller during the year ended December 31, 2022.
Medici Canada LLC assumed cash totaling $9 ,000; this was the only tangible asset assumed at purchase, no liabilities assumed. The purchase price was allocated to the cash assumed with the
excess of $196 ,000 allocated to software intangible assets and is included under property and equipment in the Company’s balance sheet
as of December 31, 2022 and December 31, 2021. The Company adopted a cost to replace valuation approach in ascertaining the value of the software.
Software intangible assets are being amortized over a three-year period. The Company incurred amortization expense of approximately $65 ,000 and $60 ,000, respectively, for the years ended
December 31, 2022 and 2021, which is included in general and administrative expenses in the consolidated statement of operation. The aggregate remaining amortization expense is approximately $71 ,000.
NOTE 10 – 15% CONVERTIBLE PROMISSORY NOTES
In February 2022, the Company issued $7.0 million in aggregate principal amount of convertible promissory notes due September 30, 2022 (the “Convertible Notes”).
The Convertible Notes accrued interest at the rate of 15 % per annum on the principal amount of the Convertible Notes, due and payable at the maturity date of September 30, 2022 (the “Maturity Date”), if
not converted prior to the maturity date. Under the terms of such notes, the conversion of the Convertible Notes could be triggered by the closing of the business combination between Tuatara and Legacy SpringBig, the occurrence of the stated
maturity date, or in connection with certain equity issuances. The Convertible Notes contained customary events of default such as failures to observe or perform any covenants, obligation, condition or agreement contained in the Convertible Notes
and commencement of bankruptcy.
F-17
In connection with the consummation of the business combination,
the Convertible Notes and outstanding accrued interest converted in full into 730,493 shares of common stock at a price of $10.00 per share, representing repayment of principal of $7.0
million and outstanding interest of $305,000 , in accordance with the terms of the Convertible Notes.
NOTE 11 – SENIOR SECURED CONVERTIBLE NOTES
In connection with the business combination, on June 14, 2022, the
Company issued $11.0 million in aggregate principal amount of Senior Secured Original Issue Discount Convertible Note, due June 14,
2024 (the “Secured Convertible Notes”), issued at a discount of $1.0 million, with proceeds of $10.0 million received on the Closing Date. The Secured Convertible Notes accrue interest at the rate of 6.0 % per annum which is payable in cash quarterly in arrears through June 2024. The principal is payable in equal amounts monthly through June 2024 beginning six months after the issuance of the Secured Convertible Notes. The Company may, at its option, satisfy each principal payment either in cash or, if
certain conditions set forth in the Secured Convertible Notes are met, by issuing a number of shares of common stock equal to the amount due on such date divided by the lower of (i) the number of shares determined based on at a rate of $12.00 per share or (ii) 93 % of the
volume-weighted average price prior to such monthly payment date.
A warrant representing 586,890 shares of common stock of the Company (the “Convertible Warrant”) with a fair value of $839 ,000 was also issued in a private placement with the purchaser party thereto. The Convertible Warrant is exercisable for shares of the Company’s common stock at an exercise price of $12.00 per share, subject to certain anti-dilution adjustments. Warrants are classified as equity on SpringBig’s consolidated balance sheet as of
December 31, 2022.
The Company performed a Black-Scholes calculation as of June 14,
2022 to determine the fair value of the Convertible Warrant on such date using a stock price of $4.28 , a strike price of $12.00, a risk
free rate of 3.61 %, annualized volatility of 65 %, and a time to maturity of five years . It was determined that the fair value of the Convertible
Warrant on June 14, 2022 was approximately $839 ,000 as compared to the previously reported fair value of $147 ,000. Accordingly, SpringBig recorded an adjustment of approximately $692 ,000 to reduce the carrying value of the L1 Note and increase additional paid-in capital as of June 14, 2022.
Below is a summary of the impact of the revision for the two
quarters ended June 30 and September 30, 2022, respectively.
|
|
| |
QUARTER ENDING
|
||||||
|
|
| |
June 30,
2022
As reported
|
| |
Adjustment
|
| |
June 30,
2022
Revised
|
|
Current maturities of long-term debt
|
| |
$
|
| |
$
|
| |
$
|
|
Notes payable
|
| |
|
| |
(
|
| |
|
|
Carrying amount
|
| |
$
|
| |
$(
|
| |
$
|
|
Additional paid-in capital
|
| |
$
|
| |
$
|
| |
$
|
|
|
| |
QUARTER ENDING
|
||||||
|
|
| |
September 30,
2022
As reported
|
| |
Adjustment
|
| |
September 30,
2022
Revised
|
|
Current maturities of long-term debt
|
| |
$
|
| |
$
|
| |
$
|
|
Notes payable
|
| |
|
| |
(
|
| |
|
|
Carrying amount
|
| |
$
|
| |
$(
|
| |
$
|
|
Additional paid-in capital
|
| |
$
|
| |
$
|
| |
$
|
The Secured Convertible Notes are convertible at the option of the
holder beginning at the earlier of (i) the date of effectiveness of a registration statement as contemplated in that certain Registration Rights Agreement entered into between the Company and the purchaser party thereto or (ii) June 14, 2023 at
an initial conversion share price of $12.00 per share.
The Secured Convertible Notes are secured against substantially all
the assets of the Company and each material subsidiary, including Legacy SpringBig.
F-18
The Secured Convertible Notes include restrictive covenants that,
among other things, limit the ability of the Company to incur additional indebtedness and guarantee indebtedness; incur liens or allow mortgages or other encumbrances; prepay, redeem, or repurchase certain other debt; pay dividends or make other
distributions or repurchase or redeem our capital stock; sell assets or enter into or effect certain other transactions (including a reorganization, consolidation, dissolution or similar transaction or selling, leasing, licensing, transferring or
otherwise disposing of assets of the Company or its subsidiaries); issue additional equity (outside of the equity facility with Cantor, issuances under our equity compensation plan and other limited exceptions); enter into variable rate
transactions (exclusive of the equity facility with Cantor); and adopt certain amendments to our governing documents, among other restrictions. The Secured Convertible Notes also contain customary events of default.
At December 31, 2022, the outstanding principal of the Secured
Convertible Notes was $9.8 million with a carrying value of $8.3 million, net of discount of $1.5 million.
The Company recorded $356 ,000 and $0 of interest expense for the years ended
December 31, 2022 and 2021, respectively.
NOTE 12 – PAYCHECK PROTECTION PROGRAM
The Company received $781 ,000 from a Paycheck Protection Program (“PPP”) loan on May 1, 2020, through the Small Business Administration (“SBA”) that was made available under the CARES Act in
response to the COVID-19 pandemic. On August 11, 2021, the Company received full forgiveness for the PPP loan. The income from forgiveness is included on the consolidated statements of operations for the year ended December 31, 2021.
NOTE 13 – WARRANT LIABILITIES
Prior to the business combination, at the time of their initial
public offering, TCAC issued warrants to purchase 10,000,000 Class A ordinary shares at a price of $11.50 per share, for aggregate consideration of $10.0
million as part of the units offered by the prospectus and, simultaneously with the closing of their initial public offering, issued in a private placement an aggregate of 6,000,000 private placement warrants for aggregate consideration of $6.0
million, each exercisable to purchase one Class A ordinary share at a price of $11.50 per share.
The Company accounts for the warrants in accordance with the
guidance contained in ASC 815 Derivatives and Hedging, under which the warrants do not meet the criteria for equity treatment and hence are recorded as liabilities. Accordingly, we classify the warrants
as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement
of operations.
At December 31, 2022, the estimated fair value of the warrants is $0.3 million.
The Company recorded a change in fair value gain of approximately $4.2 million for the year ended December 31, 2022. This amount is included in the statements of operations for the year ended December 31, 2022.
The fair value is determined in accordance with ASC 820, Fair Value Measurement. See Note 19, Fair Value Measurements, to the accompanying consolidated financial statements for further information.
NOTE 14 – REVENUE RECOGNITION
Effective January 1, 2022 the Company corrected the classification
of credits given to customers to report the credits as a reduction of revenue.
Below is a summary of the impact of the revision for the previous year.
|
|
| |
December 31,
2021
As reported
|
| |
Adjustment
|
| |
December 31,
2021
Revised
|
|
Revenues
|
| |
$
|
| |
$(
|
| |
$
|
|
Cost of revenues
|
| |
(
|
| |
|
| |
(
|
|
Gross profit
|
| |
$
|
| |
$
|
| |
$
|
F-19
Below is a summary of the impact of the revision for the three
quarters ended March 31, June 30, and September 30, 2022, respectively.
|
|
| |
QUARTER ENDING
|
||||||
|
|
| |
March 31,
2022
As reported
|
| |
Adjustment
|
| |
March 31,
2022
Revised
|
|
Revenues
|
| |
$
|
| |
$(
|
| |
$
|
|
Cost of revenues
|
| |
(
|
| |
|
| |
(
|
|
Gross profit
|
| |
$
|
| |
$
|
| |
$
|
|
|
| |
QUARTER ENDING
|
| |
YEAR TO DATE
|
||||||||||||
|
|
| |
June 30,
2022
As reported
|
| |
Adjustment
|
| |
June 30,
2022
Revised
|
| |
June 30,
2022
As reported
|
| |
Adjustment
|
| |
June 30,
2022
Revised
|
|
Revenues
|
| |
$
|
| |
$(
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
Cost of revenues
|
| |
(
|
| |
|
| |
(
|
| |
(
|
| |
|
| |
(
|
|
Gross profit
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
|
|
| |
QUARTER ENDING
|
| |
YEAR TO DATE
|
||||||||||||
|
|
| |
September 30,
2022
As reported
|
| |
Adjustment
|
| |
September 30,
2022
Revised
|
| |
September 30,
2022
As reported
|
| |
Adjustment
|
| |
September 30,
2022
Revised
|
|
Revenues
|
| |
$
|
| |
$(
|
| |
$
|
| |
$
|
| |
$(
|
| |
$
|
|
Cost of revenues
|
| |
(
|
| |
|
| |
(
|
| |
(
|
| |
|
| |
(
|
|
Gross profit
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
The following table represents our revenues disaggregated by type (in
thousands):
|
|
| |
Year ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Revenue
|
| |
|
| |
|
|
Brand revenue
|
| |
$
|
| |
$
|
|
Retail revenue
|
| |
|
| |
|
|
Total Revenue
|
| |
$
|
| |
$
|
Geographic Information
Revenue by geographical region consist of the following (in
thousands):
|
|
| |
Year ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Brand revenue
|
| |
|
| |
|
|
United States
|
| |
$
|
| |
$
|
|
Canada
|
| |
|
| |
|
|
Retail revenue
|
| |
|
| |
|
|
United States
|
| |
|
| |
|
|
Canada
|
| |
|
| |
|
|
|
| |
$
|
| |
$
|
Revenues by geography are generally based on the country of the
Company’s contracting entity. Total United States revenue was approximately 98 % of total revenue for the year ended December 31, 2022
and 99 % of total revenue for the year ended December 31, 2021.
F-20
NOTE 15 – CONTRACT ASSETS AND LIABILITIES
Contract Assets (Deferred Cost)
Contract assets consisted of the following as of (in thousands):
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Deferred sales commissions
|
| |
$
|
| |
$
|
Contract liabilities consisted of the following as of (in thousands):
|
|
| |
December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Deferred retail revenues
|
| |
$
|
| |
$
|
|
Deferred brands revenues
|
| |
|
| |
|
|
Contract liabilities
|
| |
$
|
| |
$
|
The movement in the contract liabilities during the years ended
December 31, 2022 and 2021 comprised the following (in thousands):
|
|
| |
Year ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
The movement in the contract liabilities during each period comprised the
following:
|
| |
|
| |
|
|
Contract liabilities at start of the period
|
| |
$
|
| |
$
|
|
Amounts invoiced during the period
|
| |
|
| |
|
|
Less revenue recognized during the period
|
| |
(
|
| |
(
|
|
Contract liabilities at end of the period
|
| |
$
|
| |
$
|
NOTE 16 – STOCK BASED COMPENSATION
At the Special Meeting, in connection with the business combination,
the Tuatara shareholders approved the SpringBig Holdings, Inc. 2022 Long-Term Incentive Plan (the “2022 Incentive Plan”), which became effective upon the Closing.
The number of shares of our common stock initially reserved for
issuance under the 2022 Incentive Plan was 1,525,175 , which equaled the amount of shares of our common stock equal to 5 % of the sum of (i) the number of shares of our common stock outstanding as of the Closing and (ii) the number of shares of our common stock
underlying stock options issued under the SpringBig, Inc. 2017 Equity Incentive Plan (as amended and restated) (the “Legacy Incentive Plan”) that were outstanding as of the Closing. Shares subject to stock awards granted under the 2022 Incentive
Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the 2022 Incentive Plan.
Prior to the closing of the business combination, Legacy SpringBig
maintained an equity incentive plan (the “Legacy Incentive Plan”), which was originally established effective December 1, 2017. The Legacy Incentive Plan permitted the grant of incentive stock options, non-qualified stock options, restricted
stock awards, and restricted stock unit awards to Legacy SpringBig and its affiliates’ employees, consultants and directors. SpringBig will not grant any additional awards under the Legacy Incentive Plan following the business combination.
During the years ended December 31, 2022 and 2021, compensation
expense recorded in connection with the Company’s incentive plans was $1.2 million and $0.6 million, respectively. These are included in general and administrative expense on the statements of operations.
F-21
The following table summarizes information on stock options
outstanding as of December 31, 2022 under the Legacy Incentive Plan:
|
|
| |
Options Outstanding
|
| |
Options Vested and Exercisable
|
|||||||||
|
Fixed Options
|
| |
Number of
Options
|
| |
Weighted
Average
Exercise Price
(Per Share)
|
| |
Number of
Options
|
| |
Weighted
Average
Remaining
Contractual
Life (Years)
|
| |
Weighted
Average
Exercise
Price (Per
Share)
|
|
Outstanding Balance, January 1, 2022
|
| |
|
| |
$
|
| |
|
| |
|
| |
$
|
|
Options granted
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Options exercised
|
| |
(
|
| |
$
|
| |
|
| |
|
| |
|
|
Options forfeited
|
| |
(
|
| |
$
|
| |
|
| |
|
| |
|
|
Options cancelled
|
| |
(
|
| |
$
|
| |
|
| |
|
| |
|
|
Outstanding Balance, June 14, 2022
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Conversion ratio
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
SpringBig Holdings options
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Options exercised
|
| |
(
|
|
$
|
| |
|
| |
|
| |
|
|
|
Options forfeited
|
| |
(
|
| |
$
|
| |
|
| |
|
| |
|
|
Outstanding Balance, Dec. 31, 2022
|
| |
|
| |
$
|
| |
|
| |
|
| |
$
|
The intrinsic value of the options exercised during the years ended
December 31, 2022 and 2021 was $3.4 million and $81 ,000, respectively.
With the consummation of the business combination, all outstanding
options were vested with the exception of 192,689 options granted to certain executives of the Company. The cost associated with the
early vesting was $0.9 million and is included in administrative expense on the statement of operations.
During the year ended December 31, 2021, the Company used the
Black-Scholes option-pricing model to value option grants and to determine the related compensation expense. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimations. The Company
based its expected volatility based on the volatilities of certain publicly traded peer companies.
The risk-free interest rate used for each grant is equal to the U.S.
Treasury yield curve in effect at the time of grant for instruments with a similar expected life. The expected term of options granted was determined based on the expected holding period at the time of the grant. GAAP also requires that the
Company recognize compensation expense for only the portion of options that are expected to vest.
On July 7, 2022, the Company issued 761,500 Restricted Stock Units to its employees, which were awarded when the price per share was $1.97 . By December 31, 2022, 36,500 of the Restricted Stock
Units had been forfeited by terminated employees. After forfeitures, the outstanding number of Restricted Stock Units at December 31, 2022 was 725,000 .
The Restricted Stock Units vest over a 3 year period and have a weighted average remaining vesting term of years. The compensation expense recognized for the year ended December 31, 2022 related to the Restricted Stock Units was $246 ,000 and the remaining expense of approximately $1.2
million will be recognized in future periods.
NOTE 17 – COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company has entered into employment agreements with certain of
its officers, Jeffrey Harris, CEO, and Paul Sykes, CFO, which became effective as of the Closing. Pursuant to his employment agreement, Mr. Harris will receive an annual salary of $450,000 , will be eligible for a target cash incentive opportunity of up to 137.5 %
of his annual base salary, and will be eligible to receive equity incentive awards under SpringBig’s long-term incentive plan as in effect from time to time.
Pursuant to his employment agreement, Mr. Sykes will receive an
annual salary of $350,000 , will be eligible for a target cash incentive opportunity of up to 100 % of his annual base salary, and will be eligible to receive equity incentive awards under SpringBig’s long-term incentive plan as in effect from time to time.
F-22
In addition, the SpringBig board of directors awarded each of
Mr. Harris and Mr. Sykes a one-time cash bonus in the amount of $300,000 and $250,000 , respectively, which was awarded as of the Closing, the amount is included in administrative expenses on the statement of operations.
Litigation
The Company is from time to time involved in litigation incidental
to the conduct of its business. In accordance with applicable accounting guidance, the Company records a provision for a liability when it is both probable that a liability has been incurred and the amount can be reasonably estimated. Management
believes that the outcome of such legal proceedings, legal actions and claims will not have a significant adverse effect on the Company’s financial position, results of operations or cash flows.
NOTE 18 – LEASES
As discussed in Note 2, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) in February 2016 (“Lease Standard”). The amendments are effective for fiscal years beginning after December 15, 2021, for
all entities, and interim periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities. The Company adopted this standard on January 1, 2022.
SpringBig elected to take the cumulative transition approach to
accounting for the adoption of the Lease Standard. This approach requires entities to apply the ASC 842 requirements in the period of adoption (i.e., assuming an adoption date of January 1, 2022, SpringBig’s comparative financial statements for
the years ended December 31, 2022 and 2021 would need to apply ASC 842 only for the year ended December 31, 2022). As of the adoption date of January 1, 2022, the Company recorded ROU assets of $1.1 million and lease liabilities of $1.1 million. A cumulative
effect adjustment to equity of $31 ,000 was recorded as of the adoption date.
The Company leases office facilities in Boca Raton, Florida,
Seattle, Washington and Ontario, Canada under non-cancelable operating lease agreements. The leases require monthly payments ranging from $3 ,000
to $42 ,000 and expire on various dates through November 2024. In addition to minimum rent, the Company is required to pay a
proportionate share of operating expenses under these leases.
In June of 2022, the Company entered into a lease with the current
landlord for the Company’s corporate headquarters under which the current leases will be replaced by the new lease on a single floor in the same building as the Company currently occupies. The new lease will commence on the sooner of the day the
Company takes occupancy or day of substantial completion of leasehold improvements. Neither of these events had taken place as of December 31, 2022. The new lease term is for 98 months. Rental payments range from $38 ,000 to $48 ,000 over the life of the lease.
Rent expense was approximately $846 ,000 and $644 ,000 for the years
ended December 31, 2022 and 2021, respectively, which is recorded in general and administrative expenses on the consolidated statement of operations. Of the $846 ,000 for the year ended December 31, 2022, $515 ,000 related to operating
leases under ASC 842 with the remainder attributable to common area maintenance, taxes, and other charges.
As of December 31, 2022, the following amounts were presented on
SpringBig’s consolidated balance sheets in accordance with the Leasing Standard.
|
|
| |
Year ended
December 31,
2022
|
|
Balance Sheet
|
| |
|
|
Assets:
|
| |
|
|
Right of Use Asset - Operating Lease
|
| |
$
|
|
Liabilities
|
| |
|
|
Current
|
| |
|
|
Non-current
|
| |
|
|
Total Operating Lease Liability
|
| |
$
|
F-23
For the year ending December 31, 2022, the Company’s operating
lease cost was $0.5 million. Other information pertaining to capitalized assets and liabilities under the leasing standard is as follows.
|
Other information
|
| |
|
|
Operating lease cost
|
| |
$
|
|
Operating cash flows from operating leases
|
| |
$
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
| |
$
|
|
Weighted-average remaining lease term - operating leases (months)
|
| |
|
|
Weighted-average discount rate - operating leases
|
| |
|
As of December 31, 2022, the Company’s lease liabilities mature as
follows:
|
|
| |
Operating Leases
|
|
Fiscal Year:
|
| |
|
|
2023
|
| |
$
|
|
2024
|
| |
|
|
Total lease payments
|
| |
|
|
Less Imputed Interest
|
| |
(
|
|
Present value of lease liabilities
|
| |
$
|
NOTE 19 – FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities
reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the
measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs
(internal assumptions about how market participants would price assets and liabilities).
The following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
Level 1:
|
Valuation is based on unadjusted quoted prices in active markets for
identical assets and liabilities that are accessible at the reporting date. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a
significant degree of judgment.
|
|
Level 2:
|
Valuation is determined from pricing inputs that are other than quoted
prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.
|
|
Level 3:
|
Valuation is based on inputs that are both significant to the fair value
measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management
judgment or estimation. .
|
Liabilities measured at fair value on a recurring
basis
The balances of the Company’s liabilities measured at fair value on
a recurring basis as of December 31, 2022, are as follows (in thousands):
|
|
| |
Level 1
|
| |
Level 2
|
| |
Level 3
|
| |
Total Fair
Value
|
|
Liabilities:
|
| |
|
| |
|
| |
|
| |
|
|
Public warrants
|
| |
|
| |
|
| |
|
| |
|
|
|
| |
$
|
| |
$
|
| |
$
|
| |
$
|
F-24
The following is a description of the methodologies used to
estimate the fair values of liabilities measured at fair value on a recurring basis and within the fair value hierarchy.
Warrant liabilities
Prior to the business combination, TCAC issued warrants to purchase
10,000,000 Class A ordinary shares at a price of $11.50 per whole share, as part of the units offered by the prospectus for their initial public offering and, simultaneously with the closing of their initial public offering, issued in a
private placement an aggregate of 6,000,000 private placement warrants, each exercisable to purchase one Class A ordinary share at a price of $11.50
per share.
The Company utilizes a fair value approach to account for its
warrants based on the quoted price at December 31, 2022, and the calculation is consistent with ASC 820, Fair Value Measurement, with changes in fair value recorded in current earnings.
At December 31, 2022, the value of the public and private warrants
was approximately $0.3 million using a closing price of $0.0211 .
Changes in Fair Value
The following tables provides a roll-forward in the changes in fair
value for the year ended December 31, 2022, for all liabilities for which the Company determines fair value on a recurring basis (in thousands):
|
Warrants
|
| |
|
|
Balance, January 1, 2022
|
| |
$
|
|
Assumed in business combination at fair value
|
| |
|
|
Change in fair value
|
| |
(
|
|
Balance, December 31, 2022
|
| |
$
|
|
Changes in fair value included in earnings for the period
relating to liabilities held at December 31, 2022
|
$(
|
During the year ended December 31, 2022, an aggregate of 6,000,000 private placement warrants issued for aggregate consideration of $6.0 million in connection with the business combination were transferred from Level 2 to Level 1 of the fair value hierarchy. These private placement warrants were not transferable,
assignable or salable until 30 days after the completion of the business combination (i.e., until July 14, 2022). As of September 30, 2022, the Company was more than 30 days beyond the business combination and hence, the private placement
warrants became marketable and Level 1.
Other Fair Value Considerations - Carrying value of accounts receivables, contract assets, prepaid expenses and other assets, accounts payable and accrued expenses approximate fair value
due to their short-term maturities and/or low credit risk.
NOTE 20 – STOCKHOLDERS’ EQUITY
The Consolidated Statements of Changes in Stockholders' Equity
reflect the reverse recapitalization on June 14, 2022, as discussed in Note 9, Business Combination, to these consolidated financial statements. Because the Company was determined to be the accounting acquirer in the transaction, all periods
presented prior to consummation of the transaction reflect the historical activity and balances of Legacy SpringBig, Inc. (other than common stock and potentially issuable shares underlying stock options which have been retroactively restated).
Immediately after giving effect to the business combination, the
following equity securities of the SpringBig, were issued and outstanding: (i) 5,752,388 1,752,388 Class A ordinary
shares after giving effect to the redemptions and the issuance of shares to public shareholders who did not elect to redeem their public shares and 4,000,000
Class B ordinary shares that converted into common stock), (ii) 18,196,526 shares of SpringBig common stock issued to the stockholders
of SpringBig as
F-25
consideration in the business combination, (iii) 10,000,000 warrants to purchase shares of SpringBig common stock issued to holders of the Public Shares upon conversion of warrants to purchase
Tuatara Class A ordinary shares in connection with the business combination (each, a “New SpringBig Public Warrant”), (iv) 6,000,000
warrants to purchase shares of SpringBig common stock issued to Sponsor upon conversion of warrants to purchase Tuatara Class A Common Stock, and (v) 1,310,000
shares of SpringBig common stock issued to private investors (the “PIPE Investors”) in the PIPE Financing, plus 31,356 shares paid to
certain PIPE Investors pursuant to the Convertible Notes.
Prior to the consummation of the business combination, the capital
stock of Legacy SpringBig consisted of Series A, B and Seed preferred stock which was automatically convertible into common stock at the earlier of a $50.0
million initial public offering or vote of 63 % of majority of preferred stockholders. The conversation rate of all preferred stock was
at a one to one ratio to common stock. The preferred shares of stock were converted to SpringBig common stock at the Closing Date.
With the consummation of the business combination, Legacy SpringBig.
issued and outstanding shares were converted into shares of SpringBig common stock as follows:
|
|
| |
Legacy SpringBig
|
| |
Conversion Rate
|
| |
SpringBig
|
|
Series B Preferred
|
| |
|
| |
|
| |
|
|
Series A Preferred
|
| |
|
| |
|
| |
|
|
Series Seed Preferred
|
| |
|
| |
|
| |
|
|
Common Stock
|
| |
|
| |
|
| |
|
|
|
| |
|
| |
|
| |
|
Sponsor Escrow Agreement
At the time of the Closing, TCAC Sponsor, LLC, a Delaware limited
liability company (“Sponsor”), Tuatara and certain independent members of Tuatara’s board of directors entered into an escrow agreement (“Sponsor Escrow Agreement”), providing that (i) immediately following the Closing, Sponsor and certain of
Tuatara’s board of directors’ independent directors shall deposit an aggregate of 1,000,000 shares of our Common Stock (such deposited
shares, the “Sponsor Earnout Shares”) into escrow, (ii) the Sponsor Earnout Shares shall be released to the Sponsor if the closing price of our Common Stock equals or exceeds $12.00 per share (as adjusted for share splits, share dividends, reorganizations, and recapitalizations) on any twenty (20 ) trading days in a thirty (30 ) trading-day period ending at any time after
the Closing Date and before the fifth anniversary of the Closing Date, and (iii) the Sponsor Earnout Shares will be terminated and canceled by us if such condition is not met by the fifth anniversary of the Closing Date.
Contingent and Earnout Shares
The holders of Legacy SpringBig’s common stock and the “engaged
option holders” (employees or engaged consultants of Legacy SpringBig who held Legacy SpringBig options at the effective time of the business combination and who remains employed or engaged by Legacy SpringBig at the time of such payment of
contingent shares) shall be entitled to receive their pro rata portion of such number of shares, fully paid and free and clear of all liens other than applicable federal and state securities law restrictions, as set forth below upon satisfaction
of any of the following conditions:
|
a.
|
|
|
b.
|
|
|
c.
|
|
F-26
NOTE 21 – NET LOSS PER SHARE
Given the consummation of the business combination, ASC 805, Business Combination states that the equity structure for the prior period of Legacy SpringBig (the accounting acquirer) is restated using the exchange ratio
established in the acquisition agreement to reflect the number of shares of the accounting acquiree issued in the business combination.
As of December 31, 2022 and 2021, there were 26,659,711 17,862,108
Basic net loss per share is computed by dividing the net loss by the
weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by giving effect to all potential shares of common stock. Basic and diluted net loss per share was the same for each period
presented, given that there are losses during the period, the inclusion of all potential common shares outstanding would have been anti-dilutive.
The following table reconciles actual basic and diluted earnings per
share for the years ended December 31, 2022 and 2021, respectively (in thousands, except share and per share data).
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Loss per share:
|
| |
|
| |
|
|
Numerator:
|
| |
|
| |
|
|
Net loss
|
| |
$(
|
| |
$(
|
|
Denominator
|
| |
|
| |
|
|
Weighted-average common shares outstanding
|
| |
|
| |
|
|
Basic and diluted
|
| |
|
| |
|
|
Net loss per common share
|
| |
|
| |
|
|
Basic and diluted
|
| |
$(
|
| |
$(
|
The anti-dilutive securities excluded from the weighted-average
shares used to calculate the diluted net loss per common share for the years ended December 31, 2022 and 2021 were as follows:
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Shares unvested and subject to exercise of stock options
|
| |
|
| |
|
|
Shares subject to outstanding common stock options
|
| |
|
| |
|
|
Shares subject to convertible notes stock conversion
|
| |
|
| |
|
|
Shares subject to warrants stock conversion
|
| |
|
| |
|
|
Shares subject to contingent earn out
|
| |
|
| |
|
|
Restricted stock units
|
| |
|
| |
|
NOTE 22 – BENEFIT PLAN
The Company maintains a safe harbor 401(k) retirement plan for the
benefit of its employees. The plan allows participants to make contributions subject to certain limitations. Company matching contributions were $502 ,000
and $239 ,000 for the years ended December 31, 2022 and 2021, respectively.
F-27
NOTE 23 – INCOME TAXES
The provision (benefit) for income taxes consist of the following,
(in thousands):
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Provision (benefit) for income taxes
|
| |
|
| |
|
|
Current
|
| |
|
| |
|
|
Federal
|
| |
$
|
| |
$
|
|
State
|
| |
|
| |
|
|
International
|
| |
|
| |
|
|
|
| |
$
|
| |
$
|
U.S. and foreign components of loss from operations before income
taxes were as follows (in thousands):
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Loss from operations
|
| |
|
| |
|
|
U.S.
|
| |
$(
|
| |
$(
|
|
Foreign
|
| |
(
|
| |
(
|
|
|
| |
$(
|
| |
$(
|
The Company’s actual provision (benefit) for income taxes from
operations differ from the federal expected income tax provision as follows (in thousands):
|
|
| |
December 31, 2022
|
| |
December 31, 2021
|
||||||
|
|
| |
Amount
|
| |
Rate
|
| |
Amount
|
| |
Rate
|
|
U.S. federal income tax provision (benefit) at statutory rate
|
| |
$(
|
| |
|
| |
$(
|
| |
|
|
Increase (decrease) in taxes resulting from:
|
| |
|
| |
|
| |
|
| |
|
|
State income tax expense
|
| |
|
| |
|
| |
|
| |
|
|
Foreign income and losses taxed at different rates
|
| |
(
|
| |
|
| |
(
|
| |
|
|
Change in valuation allowance
|
| |
|
| |
(
|
| |
|
| |
(
|
|
Paycheck protection program forgiveness
|
| |
|
| |
|
| |
(
|
| |
|
|
Non-deductible or non-taxable items
|
| |
(
|
| |
|
| |
(
|
| |
|
|
Foreign income taxes
|
| |
|
| |
|
| |
|
| |
|
|
Effect of income tax rate changes on deferred items
|
| |
|
| |
|
| |
(
|
| |
|
|
Provision (benefit) for income taxes
|
| |
$
|
| |
|
| |
$
|
| |
|
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management evaluates whether it is more
likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Management’s evaluation, the net deferred tax
asset was offset by a full valuation allowance as of December 31, 2022 and 2021, respectively. The deferred tax asset valuation allowance will be reversed if and when the Company generates sufficient taxable income in the future to utilize the
tax benefits of the related deferred tax assets.
F-28
The tax effects of temporary difference that give rise to a
significant portion of deferred tax assets and tax liabilities for the years ended December 31, 2022 and 2021 are as follows (in thousands):
|
|
| |
Years Ended December 31,
|
|||
|
|
| |
2022
|
| |
2021
|
|
Deferred tax assets:
|
| |
|
| |
|
|
Accrued expenses and other liabilities
|
| |
$
|
| |
$
|
|
Net operating loss - US Federal
|
| |
|
| |
|
|
Net operating loss - US State
|
| |
|
| |
|
|
Net operating loss - Foreign
|
| |
|
| |
|
|
Property and equipment, net
|
| |
|
| |
|
|
Operating lease liability
|
| |
|
| |
|
|
Stock based compensation
|
| |
|
| |
|
|
Total gross deferred tax assets
|
| |
$
|
| |
$
|
|
Less: valuation allowance
|
| |
(
|
| |
(
|
|
Total deferred tax assets
|
| |
|
| |
|
|
Deferred tax liabilities:
|
| |
|
| |
|
|
Prepaid expenses and other assets
|
| |
$(
|
| |
$(
|
|
Operating lease right of use asset
|
| |
(
|
| |
|
|
Property and equipment, net
|
| |
|
| |
(
|
|
Total deferred tax liabilities
|
| |
(
|
| |
(
|
|
Net deferred income tax asset (liability)
|
| |
$
|
| |
$
|
The Company has incurred significant losses in recent periods. As a
result, we maintained valuation allowances against our domestic and foreign deferred tax assets as of December 31, 2022 and 2021, to reduce their carrying values to amounts that are realizable either through future reversals of existing taxable
temporary differences or through taxable income in carryback years for the applicable jurisdictions.
At December 31, 2022, the Company has federal net operating loss
available to carryforward of approximately $26.4 million which will be carried forward indefinitely. Pursuant to IRC §382 of the
Internal Revenue Code, the utilization of net operating loss carryforwards may be limited as a result of a cumulative change in stock ownership of more than 50% over a three-year period. The Company has not determined whether such a change has
occurred and accordingly, the utilization of the net operating loss carryforwards may be subject to certain limitations.
The Company has state net and foreign operating loss available to
carryforward of approximately $27.2 million and $2.2 million, respectively, which begin expiring in 2030 and 2037, respectively, as of December 31, 2022.
The Company has evaluated its tax positions for any uncertainties
based on the technical merits of the positions taken. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be upheld on examination by taxing authorities. The Company
has analyzed the tax positions taken and has concluded that as of December 31, 2022 and 2021, there are no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or disclosure in the financial
statements.
The Company accrues interest and penalties arising on the
underpayment of taxes if the full benefit of a tax position is not recognized in the financial statements. In accordance with ASC 740, Accounting for Income Taxes, interest and penalties are recorded as income tax expense. There have been no
penalties or interest paid or incurred during the twelve months ended December 31, 2022 and 2021, respectively.
Management is required to analyze all open tax years, as defined by
the statute of limitations, for all major jurisdictions, including federal and certain state taxing authorities. As of and for the twelve months ended December 31, 2022 and 2021, the Company did not have a liability for any unrecognized taxes.
The Company has no examinations in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax liabilities will significantly change in the next twelve months. The Company’s 2019
through 2021 tax years are open for examination for federal and state taxing authorities.
NOTE 24 – SUBSEQUENT EVENTS
Management has considered subsequent events through March 28, 2023,
the date this report was issued, and there were no events that required additional disclosure.
F-29
Shares of Common Stock
Series A Warrants to Purchase up to Shares of Common Stock
and up to Shares of Common Stock Underlying the Series A Warrants
Series B Warrants to Purchase up to Shares of Common Stock
and up to Shares of Common Stock Underlying the Series B Warrants
Pre-Funded Warrants to Purchase up to Shares of Common Stock
and up to Shares of Common Stock Underlying the Pre-Funded Warrants
PRELIMINARY PROSPECTUS
Roth Capital Partners
, 2023
PART II
Information Not Required in Prospectus
|
Item 13.
|
Other Expenses of Issuance and Distribution.
|
The following is an estimate of the expenses (all of which are to
be paid by the registrant) that we may incur in connection with the securities being registered hereby.
|
|
| |
Amount
|
|
SEC registration fee
|
| |
$551.00
|
|
FINRA fee
|
| |
$*
|
|
Legal fees and expenses
|
| |
$*
|
|
Accounting fees and expenses
|
| |
$*
|
|
Financial printing and miscellaneous expenses
|
| |
$*
|
|
Total
|
| |
$*
|
|
*
|
To be completed by amendment.
|
|
Item 14.
|
Indemnification of Directors and Officers.
|
Subsection (a) of Section 145 of the DGCL empowers a corporation
to indemnify any person who was or is a party or who is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action,
suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe the person’s conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person acted in
any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Section 145 further provides that to the extent a director or
officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith; that indemnification provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and the indemnification provided for by Section 145 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of such person’s heirs, executors and administrators. Section 145 also empowers the corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person
and incurred by such person in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify such person against such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a corporation’s
certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders or monetary damages
II-1
for breach of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.
Additionally, our charter limits the liability of our directors to
the fullest extent permitted by the DGCL, and our bylaws provide that we will indemnify them to the fullest extent permitted by such law. We expect to enter into agreements to indemnify our directors, executive officers and other employees as
determined by our board of directors. Our charter requires us to indemnify and advance expenses to each of our directors and officers, to the fullest extent permitted by the laws of the state of Delaware, if the basis of the indemnitee’s
involvement was by reason of the fact that the indemnitee is or was our director or officer or was serving at our request in an official capacity for another entity. Such obligations would require indemnification of our officers and directors
against all reasonable fees, expenses, charges and other costs of any type or nature whatsoever, including any and all expenses and obligations paid or incurred in connection with investigating, defending, being a witness in, participating in
(including on appeal), or preparing to defend, be a witness or participate in any completed, actual, pending or threatened action, suit, claim or proceeding, whether civil, criminal, administrative or investigative, or establishing or enforcing
a right to indemnification under the indemnification agreement. Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money
available to us.
|
Item 15.
|
Recent Sales of Unregistered Securities.
|
The following list sets forth information regarding all
unregistered securities sold by us since inception on January 24, 2020. None of the following transactions involved any underwriters, underwriting discounts or commissions, or any public offering.
|
•
|
Tuatara’s sponsor purchased an aggregate of 6,000,000 private placement warrants for a purchase price of $1.00 per warrant in
a private placement that occurred simultaneously with the closing of the initial public offering. Each private placement warrant may be exercised for one share of Common Stock at a price of $11.50 per share, subject to adjustment. The
private placement warrants (including the shares issuable upon exercise of the private placement warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by it until 30 days after the completion of the
initial business combination.
|
|
•
|
On June 14, 2022, at the first closing under the Notes and Warrants Purchase Agreement, we issued and sold to the Investor
(i) a Note in the principal amount of $11,000,000 and (ii) a five-year warrant to purchase 586,980 shares of our Common Stock at an exercise price of $12.00 per share, for total cash consideration to the Company of $10,000,000
|
|
•
|
On June 14, 2022, we issued 1,310,000 shares of Common Stock pursuant to the Subscription Agreements entered into in
connection with the PIPE Subscription Financing for aggregate consideration of $13.1 million, plus 31,356 shares paid to certain investors pursuant to the convertible notes with such investors.
|
|
•
|
On September 9, 2022, we issued 877,193 shares of our Common Stock (such shares, the “Commitment Fee Shares”) to Cantor. We
issued the Commitment Fee Shares as consideration for Cantor’s irrevocable commitment to purchase additional shares of Common Stock at our election in our sole discretion, from time to time upon the terms and subject to the satisfaction
of the conditions set forth in the Common Stock Purchase Agreement. The Common Stock Purchase Agreement established a committed equity facility pursuant to which we may in the future, from time to time, at our election in our sole
discretion, upon the terms and subject to the satisfaction of the conditions set forth in the Common Stock Purchase Agreement issue and sell to the Cantor additional shares of our Common Stock.
|
|
•
|
On December 2, 6, 9, and 13, 2022, we issued 80,770, 80,770, 91,481, and 98,224, respectively, for a total of 351,245 shares
of our Common Stock (such shares, the “L1 Shares”) to the Investor. We issued the L1 Shares as consideration for repayment of a portion of the amounts payable under the L1 Notes.
|
We issued the foregoing securities in transactions not involving
an underwriter and not requiring registration under Section 5 of the Securities Act of 1933, as amended, in reliance on the exemption afforded by Section 4(a)(2) thereof.
II-2
|
Item 16.
|
Exhibits.
|
|
Exhibit
Number
|
| |
Exhibit Description
|
| |
Form
|
| |
Exhibit
|
| |
Filing Date
|
| |
SEC
File #
|
| | |
Amended and Restated Merger Agreement with Amendment No. 1.
|
| |
Proxy Statement /
Prospectus
|
| |
Annex A
|
| |
May 17, 2022
|
| |
333-262628
|
|
| | |
Certificate of Incorporation of SpringBig Holdings, Inc.
|
| |
10-K
|
| |
3.1
|
| |
March 28, 2023
|
| |
001-40049
|
|
| | |
By-Laws of SpringBig Holdings, Inc.
|
| |
10-K
|
| |
3.2
|
| |
March 28, 2023
|
| |
001-40049
|
|
| | |
Senior Secured Original Issue Discount Convertible Promissory Note dated
June 14, 2022 between SpringBig Holdings, Inc. and the holder party thereto.
|
| |
8-K
|
| |
4.1
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
Common Stock Purchase Warrant SpringBig Holdings Inc.
|
| |
8-K
|
| |
4.2
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
Amendment to Secured Original Issue Discount Convertible Promissory Note dated
December 1, 2022 between SpringBig Holdings, Inc. and the holder party thereto.
|
| |
8-K/A
|
| |
10.1
|
| |
December 1, 2022
|
| |
001-40049
|
|
| | |
Warrant Agreement, dated as of February 11, 2021, by and between Tuatara
Capital Acquisition Corporation and Continental Stock Transfer & Trust Company, as warrant agent.
|
| |
8-K
|
| |
4.1
|
| |
February 17, 2021
|
| |
001-40049
|
|
|
4.5**
|
| |
Form of Series A Warrant
|
| |
|
| |
|
| |
|
| |
|
|
4.6**
|
| |
Form of Series B Warrant
|
| |
|
| |
|
| |
|
| |
|
|
4.7**
|
| |
Form of Pre-Funded Warrant
|
| |
|
| |
|
| |
|
| |
|
|
4.8**
|
| |
Form of Warrant Agency Agreement
|
| |
|
| |
|
| |
|
| |
|
|
5.1**
|
| |
Opinion of Benesch, Friedlander, Coplan & Aronoff LLP.
|
| |
|
| |
|
| |
|
| |
|
| | |
Form of Sponsor Escrow Agreement.
|
| |
8-K
|
| |
10.1
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
Amended and Restated Registration Rights Agreement, dated June 14, 2022, by and
among New SpringBig, the Sponsor and other holders party thereto.
|
| |
8-K
|
| |
10.2
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
Form of Subscription Agreement.
|
| |
8-K
|
| |
10.2
|
| |
November 9, 2021
|
| |
001-40049
|
|
| | |
Securities Purchase Agreement, dated April 29, 2022, among Tuatara Capital
Acquisition Corporation, and L1 Capital Global Opportunities Master Fund.
|
| |
8-K
|
| |
10.3
|
| |
May 2, 2022
|
| |
001-40049
|
|
| | |
Registration Rights Agreement, dated June 14, 2022, among SpringBig Holdings,
Inc. and the investors party thereto.
|
| |
8-K
|
| |
10.5
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
SpringBig Holdings, Inc. 2022 Long-Term Incentive Plan.
|
| |
8-K
|
| |
10.6
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
Executive Employment Agreement, dated November 8, 2021 by and between SpringBig
and Jeffrey Harris.
|
| |
8-K
|
| |
10.7
|
| |
June 21, 2022
|
| |
001-40049
|
II-3
|
Exhibit
Number
|
| |
Exhibit Description
|
| |
Form
|
| |
Exhibit
|
| |
Filing Date
|
| |
SEC
File #
|
| | |
Executive Employment Agreement, dated November 8, 2021 by and between SpringBig
and Paul Sykes.
|
| |
8-K
|
| |
10.8
|
| |
June 21, 2022
|
| |
001-40049
|
|
| | |
Purchase Agreement, dated April 29, 2022, between Tuatara Capital Acquisition
Corporation and CF Principal Investments LLC.
|
| |
8-K
|
| |
10.2
|
| |
May 2, 2022
|
| |
001-40049
|
|
| | |
Registration Rights Agreement, dated April 29, 2022, between Tuatara Capital
Acquisition Corporation and CF Principal Investments LLC.
|
| |
8-K
|
| |
10.3
|
| |
May 2, 2022
|
| |
001-40049
|
|
| | |
Amendment No. 1 to Purchase Agreement, dated July 20, 2022, by and between
SpringBig Holdings, Inc. and CF Principal Investments LLC.
|
| |
S-1
|
| |
10.11
|
| |
July 22, 2022
|
| |
333-266293
|
|
| | |
Amendment to Purchase Agreement, dated December 1, 2022, by and between
SpringBig Holdings, Inc. and L1 Capital Global Opportunities Master Fund.
|
| |
8-K/A
|
| |
10.1
|
| |
December 1, 2022
|
| |
001-40049
|
|
| | |
Amendment No. 2 to Purchase Agreement, dated December 28, 2022, by and between
SpringBig Holdings, Inc. and L1 Capital Global Opportunities Master Fund.
|
| |
8-K
|
| |
10.1
|
| |
December 29, 2022
|
| |
001-40049
|
|
|
10.14**
|
| |
Form of Securities Purchase Agreement
|
| |
|
| |
|
| |
|
| |
|
|
10.15**
|
| |
Form of Placement Agency Agreement
|
| |
|
| |
|
| |
|
| |
|
| | |
Subsidiaries of SpringBig Holdings, Inc.
|
| |
10-K
|
| |
21.1
|
| |
March 28, 2023
|
| |
001-40049
|
|
| | |
Consent of Marcum LLP, Independent Registered Public Accounting Firm of
SpringBig Holdings, Inc.
|
| |
|
| |
|
| |
|
| |
|
|
|
23.2**
|
| |
Consent of Benesch, Friedlander, Coplan & Aronoff LLP (included in Exhibit
5.1)
|
| |
|
| |
|
| |
|
| |
|
| | |
Power of Attorney (incorporated by reference to the signature page of this
Registration Statement on Form S-1).
|
| |
|
| |
|
| |
|
| |
|
|
|
101.INS*
|
| |
Inline XBRL Instance Document
|
| |
|
| |
|
| |
|
| |
|
|
101.SCH*
|
| |
Inline XBRL Taxonomy Extension Schema Document
|
| |
|
| |
|
| |
|
| |
|
|
101.CAL*
|
| |
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
| |
|
| |
|
| |
|
| |
|
|
101.DEF*
|
| |
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
| |
|
| |
|
| |
|
| |
|
|
101.LAB*
|
| |
Inline XBRL Taxonomy Extension Label Linkbase Document
|
| |
|
| |
|
| |
|
| |
|
|
101.PRE*
|
| |
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
| |
|
| |
|
| |
|
| |
|
II-4
|
Exhibit
Number
|
| |
Exhibit Description
|
| |
Form
|
| |
Exhibit
|
| |
Filing Date
|
| |
SEC
File #
|
|
104*
|
| |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in
Exhibit 101)
|
| |
|
| |
|
| |
|
| |
|
| | |
Filing Fee Table
|
| |
|
| |
|
| |
|
| |
|
|
*
|
Filed herewith.
|
|
**
|
To be filed by amendment.
|
|
#
|
Indicates management contract or compensatory plan or arrangement.
|
|
†
|
Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies
of any of the omitted schedules upon request by the Securities and Exchange Commission
|
|
Item 17.
|
Undertakings.
|
The undersigned registrant hereby undertakes:
|
A.
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration
statement:
|
|
(i)
|
To include any prospectus required by section 10(a)(3) of the Securities Act;
|
|
(ii)
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective registration statement.
|
|
(iii)
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration statement;
|
|
B.
|
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
|
C.
|
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
|
|
D.
|
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in
the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
|
E.
|
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial
distribution of the securities, that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the following
|
II-5
communications, the undersigned registrant will be a seller to the purchaser and
will be considered to offer or sell such securities to such purchaser:
|
(i)
|
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424;
|
|
(ii)
|
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or
referred to by the undersigned registrant;
|
|
(iii)
|
The portion of any other free writing prospectus relating to the offering containing material information about the
undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
|
(iv)
|
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
F.
|
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
|
II-6
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, on April 20, 2023.
|
|
| |
SPRINGBIG HOLDINGS, INC.
|
||||||
|
|
| |
|
| |
|
| |
|
|
|
| |
By:
|
| |
/s/ Jeffrey Harris
|
|||
|
|
| |
|
| |
Name:
|
| |
Jeffrey Harris
|
|
|
| |
|
| |
Title:
|
| |
Chief Executive Officer
|
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENT, that each of the undersigned
constitutes and appoints Jeffrey Harris and Paul Sykes his or her true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him or her and in his or her name, place and stead, in any and all capacities, to
execute any or all amendments including any post-effective amendments and supplements to this Registration Statement, and any additional Registration Statement filed pursuant to Rule 462(b), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-1 has been signed below by the following persons in the capacities and on the dates indicated.
|
Name
|
| |
Title
|
| |
Date
|
|
|
| |
|
| |
|
|
/s/ Jeffrey Harris
|
| |
Chief Executive Officer and Director
(principal executive officer)
|
| |
April 20, 2023
|
|
Jeffrey Harris
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Paul Sykes
|
| |
Chief Financial Officer
(principal financial officer and
principal accounting officer)
|
| |
April 20, 2023
|
|
Paul Sykes
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Steven Bernstein
|
| |
Director
|
| |
April 20, 2023
|
|
Steven Bernstein
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Patricia Glassford
|
| |
Director
|
| |
April 20, 2023
|
|
Patricia Glassford
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Amanda Lannert
|
| |
Director
|
| |
April 20, 2023
|
|
Amanda Lannert
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Phil Schwarz
|
| |
Director
|
| |
April 20, 2023
|
|
Phil Schwarz
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Sergey Sherman
|
| |
Director
|
| |
April 20, 2023
|
|
Sergey Sherman
|
| |
|
|||
|
|
| |
|
| |
|
|
/s/ Jon Trauben
|
| |
Director
|
| |
April 20, 2023
|
|
Jon Trauben
|
| |
|
II-7
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the inclusion in this Registration Statement of SpringBig Holdings, Inc. on Form S-1 of our report dated March 28, 2023, which includes an
explanatory paragraph as to the Company’s ability to continue as a going concern, with respect to our audits of the consolidated financial statements of SpringBig Holdings, Inc. as of December 31, 2022 and 2021 and for the years ended December 31, 2022 and 2021, which report appears 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.
Our report on the consolidated financial statements
refers to a change in the method of accounting for leases due to the adoption of ASU No. 2016-02, Leases (Topic 842), as amended, effective January 1, 2022, using the modified retrospective approach.
/s/ Marcum llp
Marcum llp
Fort Lauderdale, Florida
April 20, 2023