Photo illustration by Lorenzo Gordon
Four years ago, Dennis Gile, a former pro football player who started a successful quarterback coaching service in Arizona, decided to expand into the crowded college sports recruiting industry.
Signing Day Sports (SDS), a paid app to match high school prospects with college coaches, was Gile’s big effort. “The new era of recruiting has now dawned,” the company announced when it was founded.
That era could soon extend to Wall Street, as SDS filed with the Securities and Exchange Commission last week for an IPO that would value the company around $100 million.
But while IPOs typically represent a corporate milestone on the road to strong, assured growth, the SDS filing — which SDS’ SEC prospectus says is expected to raise $22.5 million — seems like the equivalent of a late-breaking rush on the company to be end zone.
According to the filing, SDS’ current and former auditors “have expressed serious doubts about the company’s ability to continue as a going concern.”
The subscription service, which costs customers $25 per month or $250 per year, allows players to upload their film, transcripts, verified vitals, and connect with NCAA football, baseball, and softball coaches. The core tenet of SDS is that it saves children from having to travel to camps, a traditional way of attracting the attention of universities. While its service is hardly a novel concept — a competitor, Next College Student Athlete (NCSA), has been doing something similar for decades, albeit at a higher price — SDS has boldly touted itself as the breakthrough technology that will would provide athletes with a cost-effective way to connect with schools.
And in some respects it seems to have caused a sensation.
Its current shareholders include Yankees third baseman Josh Donaldson; sprint car driver Spencer Bayston; and former pro basketball player and executive director of the NBA Players Association, Roger Mason Jr. (Mason also serves on the SDS board of directors). Over the past year, the company has grown from eight to 15 employees, with the recent addition of two new Division I offensive veterans as coordinators: Jeff Hecklinski, formerly of San Diego State, and Luke Meadows, who most recently coached at Troy.
Earlier this month, SDS announced a data sharing partnership with Chicago-based Zcruit, a recruiting database service that serves over 100 Division I schools. “I was really impressed with what they were able to do,” Cory Nichol, Zcruit’s director of business development, told Sportico. “They did a great job and put together a team of people who really understand the space.”
Regardless of the signs of success, amid a spate of leadership unrest, SDS has also seen Gile sued and recently fired from his company – although he remains the largest shareholder in SDS. Most members of the board and management team have resigned or changed positions in the past seven months.
At least recently, the company has been short of a lot of cash. As of this writing, SDS does not have cash to pay its bills for next year. Over the past two years, the company’s annual revenue has fallen from $341,000 in 2021 to just $78,336 in 2022. SDS has $7.2 million in long-term debt and would be worth less than nothing if liquidated.
Then why try to enter the market? Because failing to go public is likely to be a death sentence. To fund its operations and commitments, including $1.26 million in salaries for Gile and five other former executives in 2021, the company has borrowed millions of dollars it wouldn’t have in an IPO must pay back.
Promissory note loans, which SDS currently has to settle in cash, may instead be settled in shares if the company goes public. SDS has a $1.32 million bill due in August, another $6.3 million in 2024, and just $254,000 in cash.
Underwriter Boustead Securities expects interested investors to pay between $4 and $6 a share at the IPO. Because a portion of Boustead’s fees is paid in warrants for shares in the public company, the underwriter has an incentive to sell the IPO.
Signing Day Sports is one of several online recruitment companies trying to break into the $29 billion youth sports industry. Some of its competitors — like Hudl, which counts 6 million active athlete users — provide athletes with a free platform while targeting high school teams or college athletic departments as paying customers. SDS takes the opposite approach, requiring athletes to pay a membership fee to promote themselves and provide verified statistics. It competes with industry giant NCSA, which was founded in 2000, currently employs over 1,000 people and was acquired by IMG Academy last year.
Given the availability of free services like Hudl and the litany of scouting lists and recruiting tools that college athletic departments use, it’s debatable how much value there is to certain high school prospects (or their families) for doing so out of pocket to paid recruiting equivalents to dating apps.
However, SDS claims in its SEC filings that the sports recruitment industry continues to witness “the best athletes in the world being overlooked” and that its technology can help create “a level playing field” for college students at all levels.
In an interview with Sports Business Journal in March, Gile likened his service to “LinkedIn on steroids” and cited the success story of his own son Jordan, a top-notch high school quarterback who accepted a scholarship to play in Florida. Earlier in the month, however, Dennis Gile tweeted that Jordan would not be going to UF after an “unfortunate phone call” and would resume his engagement. (Currently, Jordan Gile’s Twitter profile has a link to his highlights on Hudl pinned to the top.)
Dennis Gile declined to comment on the story, citing the SEC-mandated dormancy period for IPOs.
Gile, an All-Star first-team quarterback from Phoenix, played as a starter for Central Missouri for two years, had a cup of coffee with the New England Patriots, and later played in both the Canadian Football League and the Arena Football League. Eventually, he made a name for himself in his home state as a professional and high school quarterback coach. In 2016, a reality TV series centered around Gile and his training school, QB Academy, began filming through a now-defunct marketing agency, although the show never aired.
After founding Signing Day Sports, Gile secured a $700,000 loan from Arizona businessman John Dorsey in April 2021. The parties entered into a security agreement whereby Gile pledged its 3% interest in SDS plus all related proceeds as security. The loan was to be repaid in full last spring. Later that year, Gile resigned and Dorsey became CEO.
In September, after Gile failed to repay all but $100,000, Dorsey and his family holding company filed a lawsuit in Maricopa County Superior Court, charging Gile with breach of contract. Gile responded with a counterclaim alleging that Dorsey failed to deliver on his promise to provide $6 million in seed capital and tricked him into giving up the CEO seat. The parties finally came to an agreement.
Dorsey, who received a base salary of $240,000, left the company last June, after which Gile resumed the role of CEO. He remained in office until November, when he resigned and became chairman of the board.
As part of their settlement agreement, Dorsey agreed to waive his claims against Gile in exchange for an initial payment of $10,000 and a $40,000 promissory note, contingent on Signing Day Sports’ initial bid being successful before July brings in at least $1 million in revenue.
In a text message to Sportico, Dorsey called the recruiting app “phenomenal” and said his lawsuit against Gile had “nothing to do with SDS.” Dorsey remains the second largest shareholder of SDS individually.
The SEC prospectus filed last week inadvertently listed his cell phone number as Signing Day Sports’ main corporate number, a mistake Dorsey said would be fixed in an amended filing. He declined further comment, citing the confidentiality terms of the settlement.
In late March, SDS paid Gile $800,000 under an agreement to repurchase 600,000 common shares, resulting in Gile stepping down from his position as the company’s chief executive officer. Dorsey then received $695,000 of that money to pay off the balance and interest payments on the loan. Gile and Dorsey have since separately signed agreements not to sue SDS.
In addition to the 88% drop in sales from 2021 to 2022, there are other indications of problems in the first draft of the prospectus. That preliminary form, submitted in November, included a detailed explanation from users — more than 75,000 seniors at 600 schools and 436 college athletic departments — while the current version simply says “many.”
That’s not the only source of uncertainty ahead of the IPO. While the IPO has been filed, Signing Day Sports has not yet set a date for the initial offering.
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