Skybound

Key Information

1. Valuation

The Company’s pre-money valuation of $497,511,500 USD is on an undiluted basis in line with the valuation presented in the Republic co-raise. Please note that on a fully-diluted basis, the pre-money valuation is $545,379,000. The Company currently has:

•995,023 units issued and outstanding on an undiluted basis (excluding the 35,687 units issued in connection with the Republic co-raise); and
•1,090,758 units issued and outstanding on a fully-diluted basis (excluding the 35,687 units issued in connection with the Republic co-raise).

The Company also has granted 187,316 Common Interest Appreciation Rights (“CIARs”) to certain executives which are not reflected in either valuation figure. CIARs are a type of employee compensation that tracks the unit price of the Common Interests (with a starting price of $261.19 per unit) and any appreciation in value is payable on both a liquidation and exit event. Unlike equity, however, the CIARs holders never receive membership interests in the Company.

On a liquidation event or exit transaction, the CIARs will be paid out ahead of Preferred Interests and Common Interests (who will then be paid out in accordance with the liquidation and exit preference set out in the Membership Interests section below).

2. Membership Interests

The Company is a limited liability company formed under the laws of the State of Delaware. As such, its capital is divided into membership interests.

There are three classes of membership interests: Series A Preferred Interests, Series B Preferred Interests and Common Interests. All investors in this round, including Seedrs investors, will receive Common Interests.

On a liquidation, the remaining assets of the Company (after payment of all liquidation costs (including the sale of any property), payment of debts and liabilities and the setting up of any reserves necessary for contingent or unforeseen liabilities or obligations) shall be distributed in the following order:
• First, the holders of Series A Preferred Interests and Series B Preferred Interests shall be entitled to receive their preferred liquidation preference as follows:
- $289.86 per unit of Series A Preferred Interests; and
- $290.31 per unit of Series B Preferred Interests,
• Second, all Members will receive their pro rata share of the remaining proceeds, provided that no Preferred Member will receive, in the aggregate under this pro rata distribution to all Members an amount in excess of such Preferred Member’s preferred liquidation preference (excluding the preferred liquidation preference that was distributed to such Preferred Member under the first bullet point above).

In connection with an exit transaction, the same order of priority shall apply however, if a Preferred Member would receive a higher amount if their Preferred Interests were converted to Common Interests on a one-to-one basis (subject to certain anti-dilution adjustments), then they shall be deemed to have converted prior to the exit event and participate as a holder of Common Interests.

3. Master License Agreement

Pursuant to an Amended and Restated Master License Agreement (the “Master License Agreement”), Skybound, LLC (a wholly-owned subsidiary of the Company) has the exclusive license to commercialize all comic books created by Robert Kirkman, the Co-Chairman, Chief Creative Officer and Manager of the Company, as merchandise, comic books and video games, and the exclusive administration rights in connection with any motion picture or television projects based on any of the comic books, which includes, among others, the IP for The Walking Dead and Invincible. The initial term of the Master License Agreement runs until August 2026; however, so long as the IP is commercialised or licensed to Third Parties (as defined in the Master License Agreement), the Master License Agreement will automatically extend to run concurrently with the term of any agreement with any such Third Party(ies).

Robert Kirkman, via his entity Robert Kirkman, LLC, receives royalties in respect of the commercialisation of the licensed IP, as follows:
(i) 15% of Net Sales (as defined in the Master License Agreement) with respect to Articles (as defined in the Master License Agreement) (other than video games and applications) manufactured and sold by Skybound, LLC;
(ii) 30% of Gross Revenues (as defined in the Master License Agreement) with respect to Articles (other than video games and applications) manufactured and sold by a Third Party; and
(iii) 30% of Gross Revenues with respect to Articles that are video games and applications.

4. Founder Interests

As part of this fundraise and in connection with any future equity fundraises the Company undertakes, the Company’s Board and Preferred Members have prospectively authorised the redemption of Common Interests held by the Company’s founders in an aggregate amount up to 12.5% of the total investment amount received by the Company in connection with the relevant equity raise, at the applicable unit price of the round. In connection with the Republic co-raise, 2,310 units of Common Interests have been redeemed to date.

5. Corporate Structure

Within the Company’s corporate structure, there are three joint venture entities that are not wholly owned by the Company:

1. IBO, LLC: a music publishing company
- Joint venture majority owned by the Company, owning 51%

2. Skybound Galactic, LLC: a production company that engages in production for television.
- Joint venture majority owned by Bumbio LLC (a direct subsidiary of the Company), owning 66.375%

3. Skybound Stories, Inc.: a co-financier of video games.
- Joint venture majority owned by Skybound Interactive, LLC (an indirect subsidiary of the Company), owning 88.03%

4. In addition, Skybound Game Studios, Inc. (an indirect subsidiary of the Company), holds an investment in 5th Planet Games A/S, a mobile games publisher and developer. 5th Planet Games A/S is a publicly traded company in which Skybound Game Studios, Inc. owns approx. 48%.

6. Post investment page administration

Due to administrative constraints, the Company will only be providing a post-investment page update every 6 months which will link to the updated biannual SEC filing rather than a general business update. The Company may also not be in a position to respond to the discussion forum questions on the post- investment page.

7. Republic co-raise

This Seedrs raise is an extension of Skybound’s recent successful raise on Republic’s US based platform in which the company raised $17.8 million USD from approx. 5,760 investors. This amount has been reflected on this campaign’s progress bar at an FX rate of 0.77216 (£13,778,370).

SEC filing

Further information on the above can be found on Skybounds SEC filing from December 2022: https://www.sec.gov/Archives/edgar/data/1867925...