View:
United States securities and exchange commission logo
December 2, 2021
Heidy Chow
Chief Financial Officer
Snail, Inc.
12049 Jefferson Blvd
Culver City, CA 90230
Re: Snail, Inc.
Draft Registration
Statement on Form S-1
Submitted November
4, 2021
CIK No. 0001886894
Dear Ms. Chow:
We have reviewed your draft 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 providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. 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 the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary
Overview, page 1
1. Please disclose that
you generate the substantial majority of your revenues from your
ARK franchise and
disclose the percentage of your revenues generated from this franchise
for the periods
presented.
2. Please disclose the
basis for your statements that you are a leading developer and
publisher of
interactive digital entertainment and that you are a category leader in sandbox
survival games. Clarify
the criteria on which you based these statements, such as revenue
or number of customers
or market share.
Heidy Chow
Snail, Inc.
December 2, 2021
Page 2
3. Please define your reference to daily active users.
4. Please disclose the source of your statements regarding the global
gaming industry in this
section.
We rely on license agreements to publish certain games..., page 14
5. Please disclose that the terms or other aspects of your license
agreement with Studio
Wildcard may differ from those which would be negotiated with
independent parties.
Key Performance Metrics and Non-GAAP Measures
Units Sold, page 51
6. Please revise to address any known underlying material trends related
to the substantial
increase in units sold in Q4 2020.
Adjusted EBITDA, page 53
7. We note that you added back the license costs in 2020 to Adjusted
EBITDA in order to
be consistent with the previous year presentation. However, it appears
this adjustment
may result in a non-GAAP performance measure that excludes normal,
recurring, cash
operating expenses. Please revise or advise us. We refer you to the
guidance in the
answer to Question 100.01 of the Division's non-GAAP C&DIs.
Components of our Results of Operation, page 54
8. Please identify the top platform providers presented in the table
disclosing the proportion
of total net revenue associated with each platform provider.
Liquidity and Capital Resources, page 58
9. Please file the loan agreements described in this section as exhibits
to your registration
statement. Refer to Item 601(b)(10) of Regulation S-K.
Loans to related parties, page 59
10. Please disclose the Company's business purpose in being a party to a
line of credit note
with Mr. Shi. Also disclose if Mr. Shi intends to repay the loans. If
so, specify when and
clarify if the loans will be repaid in cash.
Compensation Discussion and Analysis
Employment Arrangements,Chow
FirstName LastNameHeidy page 81
Comapany
11. NameSnail,
Please Inc.letter with Ms. Chow as an exhibit to your
registration statement.
file the offer
Refer
December 2, to Item
2021 601(b)(iii)(A)
Page 2 of Regulation S-K.
FirstName LastName
Heidy Chow
FirstName
Snail, Inc. LastNameHeidy Chow
Comapany2,
December NameSnail,
2021 Inc.
December
Page 3 2, 2021 Page 3
FirstName LastName
Certain Relationships and Related Party Transactions
License Agreements, page 84
12. Please file the license agreements with SDE Inc. and Suzhou Snail
Digital Technology
Co. as exhibits to your registration statement. Refer to Item
601(b)(10)(ii)(A) of
Regulation S-K.
Description of Capital Stock
Common Stock, page 86
13. Please disclose the instances in which the holders of the Class A and
Class B common
stock will vote as a separate class.
Underwriting
No Sales of Similar Securities, page 96
14. Please disclose the exceptions to the lock-up agreements with your
officers, directors and
other existing security holders.
Financial Statements
Consolidated Statements of Operations and Comprehensive Income (Loss), page F-4
15. Reclassify the amounts reported within the line-item "Salaries and
Wages" to the
appropriate functional expense line items, e.g. Cost of revenues,
General and
administrative, etc., pursuant to Rule 5-03 of Regulation S-X.
Notes to Consolidated Financial Statements
Note 1. Presentation and Nature of Operations, page F-7
16. We note the Company is a wholly owned subsidiary of Suzhou Snail
Digital Technology
Co., Ltd. Please revise the Company's historical income statements to
reflect all of its
costs of doing business. In this regard, any expenses incurred by the
parent that are
clearly applicable to the Company should be reflected in its income
statements. Also,
a reasonable method of allocating common expenses, such as rent,
taxes, data center, and
marketing costs should be utilized. Fully comply with the accounting
and disclosure
guidance in SAB Topic 1:B and advise us.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition, page F-8
17. We note that you rely on third-party advertising partners to display
advertisements within
your mobile phone games. Tell us whether your advertising revenues are
material; and, if
so, disclose how you account for such revenues. Disclose whether
material advertising
revenues are reported on gross or net basis and explain why.
Separately disclose revenue
from contracts with customers separately from other sources of
revenues in accordance
with ASC 606-10-50-4a.
Heidy Chow
Snail, Inc.
December 2, 2021
Page 4
18. Tell us whether your subscription service revenues are material and,
if so, disclose how
you account for them.
Research and Development, page F-11
19. We note that Studio Wildcard, a subsidiary of SDE Inc., is currently
developing ARK 2
games. With a view toward enhanced disclosure, describe for us your
research and
development contracts, arrangements and understandings with related
parties and with
unrelated third parties, as applicable. Explain how ARK 2 and other
game research and
development projects will be funded. Tell us the extent to which Snail
directly or
indirectly provides such funding.
Note 5. Accounts Receivable - Related Party, page F-18
20. We note from your disclosure that you license gaming rights from a
related party, yet this
related party owes you unremitted gaming royalties in the ordinary
course of business.
Please explain why the Company is owed royalties. Describe the
transactions from which
these receivables arose. Also, disclose the receivables' repayment
terms.
Note 10. Intangible Assets, page F-19
21. We note that substantially all of your licensing rights were obtained
from related
parties. Tell us and disclose how you determined the carrying values
and the related fair
values of these licensing rights intangible assets.
General
22. We note that you have business operations in China and your related
risk factor disclosure
on pages 29, 33 and 34. Please describe your China-based business
operations in greater
detail and expand your discussion of the risks relating to your
China-based operations.
Also, tell us the percentage of your revenue you generate from
China-based customers.
23. Please supplementally provide us with copies of all written
communications, as defined in
FirstName LastNameHeidy Chow
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
Comapany NameSnail,
present Inc.investors in reliance on Section 5(d) of the
Securities Act, whether or
to potential
not they
December retain
2, 2021 copies
Page 4 of the communications.
FirstName LastName
Heidy Chow
FirstName
Snail, Inc. LastNameHeidy Chow
Comapany2,
December NameSnail,
2021 Inc.
December
Page 5 2, 2021 Page 5
FirstName LastName
You may contact Joseph Kempf, Senior Staff Accountant, at (202)
551-3352 or Robert
Littlepage, Accounting Branch Chief, at (202) 551-3361 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Patrick Faller, Staff
Attorney, at (202) 551-4438 or Jeff Kauten, Staff Attorney, at (202) 551-3447
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Byron Rooney