United States securities and exchange commission logo
January 31, 2023
Kit Gray
President
Courtside Group, Inc.
335 N. Maple Drive, Suite 127
Beverly Hills, California 90210
Re: Courtside Group,
Inc.
Registration
Statement on Form S-1
Filed December 27,
2022
File No. 333-269028
Dear Kit Gray:
We have reviewed your registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by amending your registration
statement and providing the
requested information. If you do not believe our comments apply to your
facts and
circumstances or do not believe an amendment is appropriate, please tell
us why in your
response.
After reviewing any amendment to your registration statement and
the information you
provide in response to these comments, we may have additional comments.
Registration Statement on Form S-1 filed December 27, 2022
Cover Page
1. We note that you will
be a majority owned subsidiary of LiveOne. As such, please
prominently disclose
that you will be a "controlled company" under Nasdaq rules. Please
include appropriate
disclosure on the prospectus cover page and in the prospectus
summary, provide risk
factor disclosure of this status, and disclose the corporate
governance exemptions
available to a controlled company and whether you intend to
utilize them.
2. Clarify why LiveOne
will be distributing only 6.2% of outstanding shares of common
stock held by LiveOne
on a pro rata basis to holders of record of LiveOne's common
stock.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 2 31, 2023 Page 2
FirstName LastName
Questions and Answers about the Spin-Out, page 15
3. Please include a question and answer addressing the rationale for the
Bridge Notes
financing and explaining the mechanics of the financing, including the
planned conversion
of the Bridge Notes.
Why is the separation of our Company structured as a Spin-Out?, page 16
4. We note your assertion that LiveOne believes that the Distribution of
a portion of your
common stock and the Direct Listing is the best way to separate your
business from
LiveOne. Please explain why the Distribution and Direct Listing is the
best way to
achieve the separation. Disclose the potential detriments associated
with this structure and
whether any alternative structures were considered.
If I sell my shares of LiveOne common stock on or before the Distribution
Date..., page 18
5. We note your disclosure that if an investor holds shares of LiveOne
common stock on the
Record Date and decides to sell those shares on or before the
Distribution Date, such
investor "may lose" their entitlement to receive a pro rate portion of
your common stock
in the Distribution. Prominently disclose, if true, that if a holder
of LiveOne common
stock as of the Record Date sells their common stock before the
Distribution Date, such
holder will not receive the special dividend, or explain the reason
for the uncertainty.
What are the U.S. federal income tax consequences to me of the Distribution?,
page 18
6. We note your disclosure that no gain or loss should be recognized by,
or be includible in
the income of, U.S. Holders as a result of the Distribution.
Therefore, please provide
a tax opinion covering the material federal tax consequences of the
Distribution to the
holders of LiveOne's common stock and revise your disclosure
accordingly. Refer to
Item 601(b)(8) of Regulation S-K and, for guidance, Section III.A.2 of
Staff Legal
Bulletin No. 19.
How will our common stock trade?, page 19
7. Your disclosure here indicates that trading in your common stock may
begin on a "when-
issued" basis as early as two trading days prior to the Distribution
Date. However, the
disclosure on the cover page suggests that the distribution will occur
concurrently with the
direct listing. Please revise here and on the cover page to clearly
explain the precise order
and mechanics of the events that will occur to effect the contemplated
transactions.
Summary Consolidated Financial and Operating Information
Consolidated Statements of Operations Information, page 20
8. Revise to present pro forma net income (loss) per share information
only for the year
ended March 31, 2022 and for the six months ended September 30, 2022.
Refer to Article
11-02(c)(2) of Regulation S-X.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 3 31, 2023 Page 3
FirstName LastName
Consolidated Balance Sheet Information, page 22
9. In the pro forma balance sheet data you give effect to the Bridge
Notes conversion into
common stock. However, we note the Optional Redemption feature
described on page F-
38, where certain note holders may require the company to redeem a
portion of such
holder s notes. Revise to discuss the terms of this feature and
quantify the potential
impact this may have on the various pro forma financial statement line
items if the holders
do redeem.
10. You also give effect to the cancellation of the derivatives associated
with the Bridge
Notes. Please revise to describe the nature of the derivatives ,
which appear to be both
the warrant liability and the embedded derivative related to the
redemption option, and
explain why they are cancelled . As it appears the related
warrants will remain
outstanding, clarify how the warrants are reflected in the pro forma
information.
11. Please revise to clarify the adjustment to cancel the 127,984,230
shares of common stock
and how the amount was derived.
Non-GAAP Financial Measures, page 22
12. You disclose that contribution margin is reconciled to revenue, the
most comparable
GAAP financial measure. Please revise to indicate that gross profit is
the most
comparable GAAP measure to contribution margin.
Risk Factors, page 23
13. We note the Ninth Circuit Court of Appeals decision in Pirani v. Slack
Technologies, Inc.,
No. 20-16419 (9th Cir. 2021) addressing whether a plaintiff is
required to trace their
purchase of shares to the shares registered pursuant to the
registration statement in a direct
listing. Please tell us what consideration you have given to including
a risk factor
discussing the differences a tracing requirement could pose to
securities liability
challenges brought under Section 11 for a direct listing versus a
traditional IPO and the
impact that it would have on the company and potential investors.
For the years ended March 31, 2022 and 2021, our management concluded that our
disclosure
controls and procedures..., page 44
14. We note these disclosures appear to be consistent with those in the
LiveOne, Inc. Form
10-K filed June 29, 2022. We also note that you refer to Item 9A;
however, there is no
such item in the Form S-1. Please clarify whether the material
weaknesses disclosed
are specific to the company. In this regard, in one material weakness
listed, reference is
made to controls relating to revenue and inventory of [y]our
recently acquired
subsidiary , but it does not appear that the company has a recently
acquired subsidiary.
Revise to clarify whether and how the material weaknesses listed
relate to the company
and include any other material weaknesses noted in the preparation of
the company s
financial statements.
Kit Gray
Courtside Group, Inc.
January 31, 2023
Page 4
15. Please revise to disclose the remediation plan with respect to the
material weaknesses,
how long you estimate it will take to complete your plan and any
associated material costs
that you have incurred or expect to incur.
Risks Related to the Spin-Out
The Distribution could result in significant tax liability to LiveOne and its
stockholders, page 57
16. We note the Distribution will not be determined to qualify for
non-recognition of gain and
loss, and therefore, U.S. Holders will be subject to tax. We also note
your disclosure on
page 18 that no gain or loss should be recognized by U.S. Holders as a
result of the
Distribution. Please revise to address this inconsistency.
Risks Related to the Ownership of Our Common Stock
Our listing differs significantly from an underwritten initial public offering,
page 59
17. You state here your intentions to host an investor day on September
14, 2021, and that
you are engaging in certain other investor education meetings. This
disclosure appears to
have been inadvertently added. With a view toward revised disclosure,
please tell us
whether Courtside Group will host an investor day or will engage in
any similar meetings
with potential investors. Please also revise to ensure the disclosure
in the registration
statement is specific to the facts and circumstances of Courtside
Group.
18. If you do not intend to host an investor day, please address the
potential impact on the
demand of your common stock through appropriate risk factor
disclosure.
The trading price of our common stock...may have little or no relationship to
the historical sales
prices of our capital stock in private..., page 62
19. You disclose here that there has been limited trading of your capital
stock historically in
private transactions. Elsewhere in the registration statement, you
disclose that there have
not been any private transactions of your common stock in the recent
past and that your
common stock does not have a history of trading. Please revise to
reconcile this
conflicting information.
As a smaller
FirstName reporting company,
LastNameKit Gray we are subject to scaled disclosure
requirements..., page 67
Comapany
20. NameCourtside
We note that this riskGroup,
factor Inc.
appears to be the same as the one in the
LiveOne Form 10-K.
JanuaryPlease revise
31, 2023 to provide
Page 4 disclosures specific to the company.
FirstName LastName
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 5 31, 2023 Page 5
FirstName LastName
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Business Metric, page 80
21. We note your disclosure that you review a number of operating and
financial metrics to
evaluate your business, measure your performance, identify trends
affecting your
business, formulate business plans, and make strategic decisions. Tell
us your
consideration for disclosing the number of impressions sold in each
period, monthly
unique listeners, monthly average listeners and/or any other measures
used to evaluate
your business and measure performance, in addition to Number of
Podcast Downloads
disclosed, that would provide a better understanding of the company
s results. Refer to
SEC Release No. 33-10751.
Liquidity and Capital Resources, page 87
22. Please revise to state whether as of the most recent balance sheet
date, your existing cash
will be sufficient to fund your operations for the next 12 months. To
the extent it will not,
disclose how long you will be able to continue to fund your operations
using current
available cash resources. Refer to FRC 501.03(a) and Section IV of SEC
Release 33-
8350.
23. Revise to disclose the Bridge Note, the pertinent terms, including the
conversion feature
and the Optional Redemption, as disclosed on page F-38. Further,
discuss the Early
Redemption terms as noted on page 121, clearly indicating each of the
dates when you
will be required to redeem $1,000,000 of the Bridge Notes if you have
not consummated
the Direct Listing or an initial public offering.
24. Revise to disclose the parent company debt, the amount currently
outstanding, the related
covenant regarding judgments entered against LiveOne, Inc. and the
lender s related
option to immediately accelerate the debt and require repayment,
similar to the disclosures
on page F-17.
Legal proceedings, page 102
25. Regarding the SoundExchange, Inc. ( SX ) complaint, you disclose
that LiveOne believes
it has reserved for the amounts due to SX in LiveOnes s financial
statements included in
this Quarterly Report . Please revise as LiveOne s financial
statements are not included
in this prospectus.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 6 31, 2023 Page 6
FirstName LastName
Certain Relationships And Related Party Transactions
Various Agreements Entered into with LiveOne
Issuance of Bridge Notes and Bridge Warrants, page 119
26. We note that LiveOne agreed not to effect the Direct Listing or an
initial public offering
unless your post-money valuation at the time of such event is at least
$150 million. Please
describe the valuation method or model that will be used to calculate
the valuation.
Additionally, please include risk factor disclosure addressing the
risks if such valuation is
not achieved.
27. We note that if you have not effectuated the Direct Listing or an
initial public offering by
the seven-, eight-, or nine-month anniversary of July 15, 2022, that
you will be required to
redeem $1,000,000 of the then outstanding Bridge Notes up to an
aggregate of redemption
of $3,000,000 over the course of such three months. Given the
significance of such
financial covenants, please provide prominent disclosure regarding the
conditions of your
Bridge Notes at the forefront of your filing. Additionally, please
include risk factor
disclosure addressing the risks if you are unable to consummate the
Direct Listing by the
seven-, eight-, or nine-month anniversary.
28. We note that in connection with the closing of the Bridge Financing,
you and the Bridge
Investors and your officers and directors entered into lock-up
agreements. Please disclose
the exceptions to your lock-up agreements. Additionally, please file
as exhibits the lock-
up agreements mentioned in this section.
Principal and Registered Stockholders, page 124
29. With a view toward revised disclosure, please tell us the basis for
your assertion that
Courtside Group is "not party to any arrangement with any Registered
Stockholder or
any broker-dealer with respect to sales of shares of our common stock
by the Registered
Stockholders." In this regard, we note the various agreements entered
into with LiveOne
and the planned distribution of the special dividend.
Sale Price History of Our Capital Stock, page 137
30. We note your assertion that recent sale price history of your common
stock "has little or
no relation to broader market demand" for your common stock or to the
opening public
price. You also caution potential investors not to place undue
reliance on any of your
historical private sales prices. Please revise this information to
reflect that there is no sale
price history for your common stock and accordingly sale price history
or historical
private sales will not be a factor affecting the Current Reference
Price to be determined by
the Nasdaq. Please also address how the lack of any history of trading
in private
purchases differs from other recent direct listings and explain how
this may impact price
discovery.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 7 31, 2023 Page 7
FirstName LastName
Plan of Distribution, page 141
31. Revise to disclose how Joseph Gunnar will determine whether to approve
proceeding at
the "Current Reference Price." Similarly, disclose the methodology and
process Joseph
Gunnar will use to select price bands for purposes of applying the
price validation test.
32. Given that the distribution of the special dividend and the direct
listing will occur
concurrently or in close proximity, please explain the interplay
between the distribution of
the special dividend and the Nasdaq price discovery process discussed
in this section.
Your disclosure should explain the precise order and mechanics of the
events that will
occur to effect the contemplated transactions.
Consolidated Financial Statements
Note 1 - Organization and Basis of Presentation
Basis of Presentation, page F-7
33. Please revise to disclose that the results of operations and financial
position of the
company are consolidated with LiveOne s financial statements and
that these financial
statements have been derived as if the company had operated on a
standalone basis during
the periods presented. Further, explain that amounts recorded for
related party
transactions with LiveOne may not be considered arm s length with an
unrelated third
party and therefore, the financial statements may not necessarily
reflect the results of
operations, financial position and cash flows had the company engaged
in such
transactions with an unrelated third party during all periods
presented. Lastly, state that
accordingly, the company s historical financial information is not
necessarily indicative of
what the results of operations, financial position and cash flows will
be in the future, if
and when the company contracts at arm s length with unrelated third
parties for services
they receive from LiveOne.
Note 2 - Summary of Significant Accounting Policies
Revenue Recognition Policy, page F-8
34. You refer to recognizing variable consideration over the related time
period membership
services are rendered. You also refer to paid premium membership
services on page 79.
Please tell us and revise your disclosures to describe the nature of
these services, the terms
of a membership and/or a paid premium membership , further
explain how the related
revenue is recognized, and the amount of revenue recognized for such
services for each
period presented.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 8 31, 2023 Page 8
FirstName LastName
35. We note your disclosures regarding gross versus net revenue
recognition. Please revise to
clarify specifically which arrangements you report revenue on a gross
basis and those you
report revenue on a net basis, the pertinent terms considered in the
determination, and how
much revenue is generated from each type of reporting. Also, clarify
what is meant by
gross and net as it relates to the amounts generated from
services provided to your
customers. For example, if true, indicate that revenue is equal to the
amounts received
from your customers, gross of the revenue sharing expenses owed to the
content creators.
Stock-Based Compensation, page F-10
36. You disclose stock-based compensation is allocated to the company from
LiveOne based
on the amount of stock-based compensation granted to employees of the
company in the
form of stock-based compensation of LiveOne. Please revise to include
the disclosure
requirements in ASC 718-10-50 as they relate to the LiveOne
stock-based compensation
granted to your employees.
Note 3 - Business Combinations, page F-14
37. We note the consideration paid for the equity interests of the company
included contingent
consideration, which is reflected or pushed down to the company's
financial statements.
Please tell us and revise to disclose whether the contingent
consideration was the legal
obligation of the company. To the extent it was not, please tell us
how you considered the
guidance in ASC 805-50-30-12.
Note 8 - Related Party Transactions, page F-16
38. You disclose the company was allocated expenses by LiveOne attributed
to the overhead
expenses incurred on behalf of the company. Please revise further to
describe the nature
of these costs, such as officer salaries, rent, and selling and
general administrative
expenses, etc. Also, include an explanation of the allocation method
used and your
assertion, if true, that the method was reasonable. Further, disclose,
if practicable, your
estimate of what the expenses would have been on a stand-alone basis,
for each year
presented, when such basis produced a materially different result.
Refer to Staff
Accounting Bulletin Topic 1.B.1.
Condensed Consolidated Financial Statements
Note 8 - PodcastOne Bridge Loan, page F-38
39. Please revise to define Qualified Financing or Qualified Event .
40. Revise to disclose the Early Redemption terms as noted on page 121,
clearly indicating
each of the dates when you will be required to redeem $1,000,000 of
the Bridge Notes if
you have not consummated the Direct Listing or an initial public
offering.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 9 31, 2023 Page 9
FirstName LastName
Note 14 - Subsequent Events, page F-43
41. Revise to disclose the date through which subsequent events have been
evaluated and
whether that date was the date of issuance or the date on which the
financial statements
were available to be used. Refer to ASC 855-10-50-1.
Part II
Item 13. Other Expenses of Issuance and Distribution, page II-1
42. Please tell us the methodology used to compute the registration fee
for this registration
statement.
General
43. Please tell us how you considered the guidance in Rule 11-01(a)(7) of
Regulation S-X in
determining whether to provide pro forma financial information to
reflect the operations
and financial position of Courtside Group, Inc. as an autonomous
entity, or revise to
include such information.
44. We note that you intend to enter into a Separation Agreement with
LiveOne before the
Spin-Out, and that the Separation Agreement will contain the principal
actions to be taken
in connection with the Spin-Out and will set forth the terms that will
govern aspects of
your relationship with LiveOne following the Spin-Out. Please confirm
that you intend to
file the Separation Agreement as an exhibit to this registration
statement and update the
disclosure in this registration statement to reflect the material
terms of the agreement prior
to effectiveness.
Kit Gray
FirstName LastNameKit
Courtside Group, Inc. Gray
Comapany
January 31,NameCourtside
2023 Group, Inc.
January
Page 10 31, 2023 Page 10
FirstName LastName
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Refer to Rules 460 and 461 regarding requests for acceleration. Please
allow adequate
time for us to review any amendment prior to the requested effective date of
the registration
statement.
You may contact Melissa Kindelan, Senior Staff Accountant, at (202)
551-3564 or
Christine Dietz, Senior Staff Accountant, at (202) 551-3408 if you have
questions regarding
comments on the financial statements and related matters. Please contact Kyle
Wiley, Staff
Attorney, at (202) 344-5791 or Josh Shainess, Legal Branch Chief, at (202)
551-7951 with any
other questions.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Sasha Ablovatskiy