Form S-1
We note your use of "nutraceutical." The term "nutraceutical" has no meaning in FDA rules and regulations. To the extent you use the term, you should clearly define the term the first time it is used and briefly explain why it is an accurate descriptor.
No reply letter found.
We note your statements that hemp-based products have "various health benefits," that the growth of the market is due to "increased incidences of diseases such as epilepsy and other sleep disorders," that your primary products "combat pain, depression, and anxiety" and also "provide better calm and sleep to the end user." Products that are intended for use in the diagnosis, cure, mitigation, treatment, or preventionRest of the question
of disease and/or intended to affect the structure or any function of the body are considered drugs under the Federal Food, Drug and Cosmetic Act and subject to FDA approval. Please revise to describe the regulatory status of these products, or revise to avoid unsubstantiated therapeutic claims.
No reply letter found.
Please revise to provide the basis for your statements that the "market for hemp-derived products is expected to increase exponentially over the next five years," that "Grove is well positioned to be a dominant player in the hemp industry", that "you offer the industry’s most comprehensive portfolio of CBD products," that you have a "leading market position in the CBD industry trade show," and that you are theRest of the question
"Leader in CBD
No reply letter found.
Please file the acquisition agreements referenced as exhibits to the registration statement. Refer to Item 601(b)(2) of Regulation S-K. Alternatively, please explain to us why such disclosure is not required. Risk Factors If we are unable to protect our intellectual property rights, our competitive position could be harmed, page 14
No reply letter found.
Please expand your disclosure to state that you do not currently have any patents, trademarks or copyrights.
No reply letter found.
Please remove statements regarding your belief that all of your products are safe when taken as directed. Determinations of safety are solely within the authority of the FDA. Laws and regulations affecting the CBD industry are evolving under the Farm Bill, page 21
No reply letter found.
We note your disclosure that the 2018 Farm Bill. Please revise your disclosure to clarify the scope of the 2018 Farm Bill, including restrictions applicable to hemp and requirements for any hemp-derived cannabinoid product to be excluded from Schedule 1 of the Controlled Substances Act. Additionally, please discuss restrictions applicable to the use of cannabis-derived products in clinical research and development.
No reply letter found.
Please expand your risk factor disclosure to discuss at length the current concerns of the FDA regarding products that contain cannabis or cannabis-derived compounds, including CBD. We note in particular that the FDA has deemed marketing food containing CBD or labeling it as a dietary supplement to be illegal. Also disclose any material risks relating to state or foreign regulations on your business.Rest of the question
Please include similar disclosure in the Summary and Business sections where you discuss the 2018 Farm Bill.
No reply letter found.
With reference to Item 504 of Regulation S-K, please revise to identify the principal purposes and the approximate amount intended to be used for each such purpose. For instance, we note that your disclosure on page 24 indicates that you intend to use the net proceeds from this offering to fund, among other purposes, new and ongoing research and development expenses and hiring of additional personnel.
No reply letter found.
Please address the following in your capitalization table: • Revise to incorporate indebtness, including long-term debt and notes payable, as part of your capitalization. • Include a mathematically accurate total for capitalization at the bottom of the table. • Ensure the pro forma amount are consistent with the offering, we note that you assumed $5.00 per share which is not finalized in the prospectus.
No reply letter found.
We note your disclosure on page F-34 that the Company and Infusionz each entered into a Paycheck Protection Program loan in connection with the COVID-19 pandemic. Please describe the material terms of each PPP loan. Alternatively, please explain to us why such
No reply letter found.
We note your disclosure that certain factors raise substantial doubt about your ability to continue as a going concern and that there is no assurance that the Company will be able to finance operating costs over the next twelve months with existing cash on hand and/or the private placement of Common Stock.Rest of the question
Please expand your disclosure to describe the potential consequences to your business if you are unable to raise additional financing.
No reply letter found.
Once you have an estimated offering price or range, please explain to us how you determined the fair value of the common stock underlying your equity issuances and the reasons for any differences between the recent valuations of your common stock leading up to the IPO and the estimated offering price.Rest of the question
This information will help facilitate our review of your accounting for equity issuances, including stock compensation and beneficial conversion features. Please discuss with the staff how to submit your response. Description of Business, page 43
No reply letter found.
We note your disclosure on page 21 that a significant amount of your net sales, in certain markets, is dependent on a few key distributors and their extensive sales networks and that the loss or inactivity of one or more of these key distributors who generate a significant amount of your net sales could have a material adverse effect on your business, results of operations and financial condition.Rest of the question
To the extent your business is substantially dependent on such distributors, please identify the distributors, describe the material terms of your agreements with such distributors and file the agreements as exhibits to your registration statement. Alternatively, please explain to us why such disclosure is not required. Our Products, page 44
No reply letter found.
Please revise to clarify whether your primary products are all commercial products or whether any are currently still in development, including the current status of development. In this regard, we note your statements that you cannot assure investors that you will successfully market and sell your "planned" products.
No reply letter found.
We note your disclosure that you currently export to several European countries and have begun searching for a quality distribution partner familiar with European regulations and distribution processes. Please expand your disclosure to discuss any foreign regulations applicable to your business.
No reply letter found.
Please file your employment agreements with each of your executive officers as exhibits to the registration statement. See Item 601(b)(10) of Regulation S-K.
No reply letter found.
Please disclose the name of the related person as required by Item 404(a)(1) of Regulation S-K.
No reply letter found.
Based on the change in your auditor, please provide the disclosures required by Item 304 of Regulation S-K, including a letter from your former auditor agreeing or disagreeing with your disclosures, filed as an exhibit to the registration statement. Refer to Item 11(i) of Form S-1.
No reply letter found.
We note from page 16 and throughout the filing that you provide services to your customers and that COVID has limited your ability to visit customer sites to perform services related to your products. Please tell us and revise your filing to disclose the nature of the services that you provide to your customers that accompany your products.Rest of the question
Within your discussion, please explain how you are accounting for these services under ASC 606.
No reply letter found.
We note that you recognized $1.3 million in trade show revenue during fiscal 2020 but that you cancelled your 2020 trade show. Please revise throughout the filing to state, if true, that you cancelled your November 2020 trade show and clarify that you held the November 2019 show.
No reply letter found.
Please tell us and revise the filing to disclose why you do not allocate any general and administrative expenses to your product segment category. Additionally, describe and disclose the specific types of material amounts included in the "other" category and not allocated to the reportable segments' profit or loss and assets for each period presented. Refer to ASC 280-10-50-29 through 50-31.
No reply letter found.
We note your disclosure on pages 44-53 related to your different type of products. Please revise the filing to disclose your revenue by product pursuant to ASC 280-10-50-40 for each reporting period presented.
No reply letter found.
We note the line item Sales and marketing in the June 30, 2020 reconciliation is not mathematically accurate. Please revise.
No reply letter found.
We note that your board of directors approved a reverse stock split of your outstanding common stock with a record date of February 5, 2021. Please revise the filing to comply with ASC 260-10-55-12 and SAB Topic 4C.
No reply letter found.
We note that you acquired Infusionz LLC for $3.4 million, which will consist of an estimated $3 million in shares of common stock and $350,000 in cash. Please address the following with reference to ASC 805 and revise the filing as appropriate: • Clarify if the agreement guarantees a specified number of common shares, the fair value of common shares to be issued or a combination of both.Rest of the question
• Provide calculations describing how the number of common shares to be issued will be determined. • Describe the time frame for the delivery of common shares. We note for example that additional shares were issued on November 1, 2020. • Describe how you accounted for and valued the common shares issued on November 1, 2020. • Clarify what the balance sheet account Acquisition payable represents and how the value was determined.
No reply letter found.
Please revise to disclose the information required by ASC 805-10-50-2(h), including the supplemental pro forma information.
No reply letter found.
Considering the significance of the Infusionz acquisition consummated on July 1, 2020, please tell us, and revise if necessary, how you considered the requirements for pro forma financial statements under Rule 8-05 of Regulation S-X.
No reply letter found.
Please provide us with copies of all written communications, as defined in Rule 405 under the Securities Act, that you, or anyone authorized to do so on your behalf, present to potential investors in reliance on Section 5(d) of the Securities Act, whether or not they retain copies of the communications.
No reply letter found.
We note your response to prior comment 3. Please clarify whether such growth estimates over the next five years depends on favorable U.S. Food and Drug Administration guidance or legislation from Congress.
In response to the Staff’s comment, the disclosure has been updated to clarify that the growth estimates are dependent on favorable guidance from the U.S. Food and Drug Administration or legislation from Congress.
ALBANY
AMSTERDAM
ATLANTA
AUSTIN
BERLIN¬
BOCA RATON
BOSTON
CHICAGO
DALLAS
DELAWARE
DENVER
FORT
LAUDERDALE
HOUSTON
LAS VEGAS
LONDON*
LOS ANGELES
MEXICO CITY+
MIAMI
MILAN**
NEW JERSEY
NEW YORK
NORTHERN
VIRGINIA
ORANGE COUNTY ORLANDO
PHILADELPHIA
PHOENIX
ROME**
SACRAMENTO
SAN FRANCISCO
SEOUL∞
SHANGHAI
SILICON VALLEY
TALLAHASSEE
TAMPA
TELRead in the reply ↗Rest of the answer
AVIV^
TOKYO¤
WARSAW~
WASHINGTON, D.C. WESTCHESTER
COUNTY
WEST PALM
BEACH
¬ OPERATES AS GREENBERG
TRAURIG
GERMANY, LLP * OPERATES AS A
SEPARATE UK
REGISTERED
LEGAL ENTITY +
OPERATES AS
GREENBERG
TRAURIG, S.C.
* * STRATEGIC
ALLIANCE ∞
TRAURIG LLP
FOREIGN LEGAL
CONSULTANT
OFFICE
^ A BRANCH OF
TRAURIG, P.A.,
FLORIDA, USA ¤
GT TOKYO
HORITSU
JIMUSHO
~ OPERATES AS
GRZESIAK SP.K.
We note your response to prior comment 9. Please explain to us why you have presented your use of proceeds based on percentage of the offering sold. In this regard, we note that you contemplate a firm commitment underwritten offering. Additionally, we note that you intend to use a portion of the proceeds for acquisition investments.Rest of the question
To the extent you plan to use the proceeds to finance acquisitions of other businesses, please revise your disclosure to include the nature of the businesses to be sought. Refer to Instruction 6 to Item 504 of Regulation S-K.
In response to the Staff’s comment, the Company has removed the presentation of use of proceeds based on percentage of the offering sold and included information regarding the nature of the businesses to be acquired. Read in the reply ↗
We note your response to comment 10. Please revise your capitalization table to include a mathematically accurate total for pro forma stockholders' equity and total capitalization. Also, revise the first sentence of this section to be labelled as of December 31, 2020 rather than as of September 30, 2020.
In response to the Staff’s comment, the capitalization table has been updated and the first sentence of the section has been revised to reference December 31, 2020. Read in the reply ↗
We note that you disclose that your net tangible book value and pro forma net tangible book value per share is $5,143,000 and $15,143,000 as of December 31, 2020. Please tell us how you calculated these amounts considering that you have total assets of $10,019,396, which is comprised of $2,208,261 of intangible assets and $2,413,815 of goodwill, and $7,696,625 of total liabilities as of December 31, 2020.Rest of the question
Revise as necessary.
In response to the Staff’s comment, this disclosure has been revised.
Management's Discussion and Analysis of Financial Condition and Results of Operations Consolidated pro-forma unaudited financial statements for the three months and six months 2019, page 35 Read in the reply ↗
We note your responses to comment 27 and 28 and that you present summary consolidated pro forma unaudited results of operations for the three months and six months ended December 31, 2019. You similarly provide a presentation on page 38 of summary unaudited consolidated pro forma results of operations for the year ended June 30, 2020 and 2019.Rest of the question
In consideration of Rule 8-05 of Regulation S-X, revise your filing to provide a condensed pro forma statement of income for the fiscal year ended June 30, 2020 related to the Infusionz acquisition consummated on July 1, 2020 that complies with the presentation, and disclosure of pro forma financial information requirements of Rule 11-01 through Rule 11-03 of Regulation S-X. This includes both sets of historical income statements, a column of pro forma adjustments recorded and supporting footnote information.
In response to the Staff’s comment, the filing has been revised to include the referenced pro forma statements and related information. Read in the reply ↗
We note your response to prior comment 14. We also note your disclosure on page F-39 relating to your significant customers for the three and six months ended December 31, 2020. To the extent you are dependent on one or a few major customers, please identify the customers, describe the material terms of your agreements with such customers and file the agreements as exhibits to your registration statement.Rest of the question
Please also include risk factor disclosure, if appropriate.
In response to the Staff’s comment, additional disclosure regarding significant customers has been added. An additional risk factor disclosure has also been included on page [__]. Read in the reply ↗
We note your response to prior comment 16. Please revise to clarify whether your flavoring products are subject to EU regulations. To the extent applicable, please expand your disclosure to discuss any foreign regulations applicable to your business.
In response to the Staff’s comment, the Company has revised the disclosure to address any applicable foreign regulations. Read in the reply ↗
We note your response to prior comment 22. As previously requested, please explain to us and revise the filing to disclose why you do not allocate any general and administrative expenses to your product segment category as part of the measurement of segment profit. Refer to the introductory paragraph of ASC 280-10-50-29 and 50-29(b).
In response to the Staff’s comment, general and administrative expense has been fully allocated between the two segments, Products and Trade Show, with most of the general and administrative expenses being allocated to the product segment category. There are no unallocated general and administrative expenses and the footnotes have been updated to reflect the full allocation of general and administrative expense. Read in the reply ↗
We note your response to comment 25 that you have adjusted the shares related to the reverse stock split throughout the filing. However, we do not see where you have adjusted the shares throughout your audited financial statements retroactively for the reverse stock split.Rest of the question
As previously requested, please revise the entire filing to present all share information on a post reverse stock split basis to comply with ASC 260-10-55-12 and SAB Topic 4C.
In response to the Staff’s comment, the financial statements have been updated to reflect the reverse stock split. Read in the reply ↗
We note on pages F-23 through F-23 that you present an "other" category in your segment presentation and do not include this category in your segment presentation here. Please explain to us if you have had a change in your segment reporting structure. If so, please provide the disclosures required by ASC 280-10-50-34 through 50-36 related to this change in segment presentation.
In response to the Staff’s comment, this presentation has been revised to remove the “other” category. Read in the reply ↗
We note that your segment disclosures here do not reconcile to your unaudited condensed financial statements included on pages F-26 and F-27. For instance, we note on page F-27 that your total revenue for the six months ended is $7,102,336 rather than $9,308,422. Please revise.
In response to the Staff’s comment, the total revenue has been corrected.
We hope the foregoing answers are responsive to your comments. Please do not hesitate to contact me by telephone at (916) 868-0630 or by fax at (916) 448-1709 with any questions or comments regarding this correspondence. Read in the reply ↗
Please file the HAVZ Consolidated acquisition agreement as an exhibit to the registration statement or tell us why you are not required to do so. Refer to Item 601(b)(2) of Regulation S-K.
In response to the Staff’s comment, the Company has filed the acquisition agreement as Exhibit 2.2.
ALBANY
AMSTERDAM
ATLANTA
AUSTIN
BERLIN¬
BOCA RATON
BOSTON
CHICAGO
DALLAS
DELAWARE
DENVER
FORT LAUDERDALE
HOUSTON
LAS VEGAS
LONDON*
LOS ANGELES
MEXICO CITY+
MIAMI
MILAN**
NEW JERSEY
NEW YORK
NORTHERN VIRGINIA
ORANGE COUNTY
ORLANDO
PHILADELPHIA
PHOENIX
ROME**
SACRAMENTO
SAN FRANCISCO
SEOUL∞
SHANGHAI
SILICON VALLEY
TALLAHASSEE
TAMPA
TEL AVIV^
TOKYO¤
WARSAW~
WASHINGTON, D.C.
WESTCHESTER COUNTY
WEST PALM BEACH
¬ OPERATES AS
GREENBERG TRAURIG GERMANY, LLP
*Read in the reply ↗Rest of the answer
OPERATES AS A
SEPARATE UK REGISTERED LEGAL ENTITY
+ OPERATES AS
GREENBERG TRAURIG, S.C.
* * STRATEGIC ALLIANCE
∞ OPERATES AS
GREENBERG TRAURIG LLP
FOREIGN LEGAL CONSULTANT OFFICE
^ A BRANCH OF
GREENBERG TRAURIG, P.A.,
FLORIDA, USA
¤ OPERATES AS
GT TOKYO HORITSU JIMUSHO
~ OPERATES AS
GREENBERG TRAURIG GRZESIAK SP.K.
We note your response to prior comment 2. With respect to the proceeds you expect to receive from the offering, please revise to identify the principal purposes for which you plan to use the proceeds and the approximate amount intended to be used for each such purpose.Rest of the question
For instance, we note that your disclosure on page 25 indicates that you intend to use the net proceeds from this offering to fund, among other purposes, new and ongoing research and development expenses and hiring of additional personnel. Dilution, page 28
In response to the Staff’s comment, the disclosure has been revised accordingly. Read in the reply ↗
We note your response to comment 4 and that you disclose that your net tangible book value is $(1,947,363) and $(.16) per share of common stock as of December 31, 2020. As previously requested, please tell us how you calculated these amounts considering that you have total assets of $10,019,396, which is comprised of $2,208,261 of intangible assets and $2,413,815 of goodwill, and $7,696,625 of total liabilities asRest of the question
of December 31, 2020. Revise as necessary.
In response to the Staff’s comment, the disclosure of net tangible book value as of December 31, 2020 has been revised accordingly. Read in the reply ↗
We note your response to prior comment 5. Please revise to remove the consolidated pro forma unaudited financial statements for the three months and six months ended December 31, 2019 presented here and for the year ended June 30, 2019 presented on page 37. Refer to the guidance in Rule 11-02(c)(2)(i) and Rule 8-05 of Regulation S-X. Consolidated pro-forma unaudited financial statements, page 37
In response to the Staff’s comment, the consolidated pro forma unaudited financial statements for the three and six months ended December 31, 2019 and for the year ended June 30, 2019 have been removed accordingly. Read in the reply ↗
We note your response to prior comment 5. Please revise the disclosure to explain how you determined the adjustment for amortization expense associated with the fair value of definite lived intangible assets of approximately $333,068 per year as well as providing supporting calculations in the disclosure for your pro forma basic loss per common share for the year ended June 30, 2020.Rest of the question
Refer to Rule 11-02(a) of Regulation S-X. Government Regulation, page 55
In response to the Staff’s comment, the disclosure has been revised to include detail regarding amortization and the calculation of pro forma basic loss per common share. Read in the reply ↗
We note your response to prior comment 7. We also note your disclosure that you continue to search for a quality distribution partner familiar with European regulations and distribution processes. To the extent that you plan to expand the distribution of your products into Europe, please expand your disclosure to include a discussion of the regulations that may apply to your products.Rest of the question
Refer to Item 101(h)(4)(ix) of Regulation S- K. Alternatively, please explain to us why such disclosure is not required. MANAGEMENT
In response to the Staff’s comment, the Company does not have immediate plans to expand to Europe and therefore the disclosure has been deleted. Read in the reply ↗
Please expand your disclosure to describe the material terms of your employment agreement with Mr. Hackett and file the agreement as an exhibit to the registration statement or tell us why you are not required to do so. See Item 402(o) and Item 601(b)(10)(iii)(A) of Regulation S-K.
In response to the Staff’s comment, the disclosure has been revised to include a description of the material terms of Mr. Hackett’s employment agreement and the employment agreement has been filed as Exhibit 10.7. Read in the reply ↗
We note your response to comment 19 in our letter dated March 10, 2021. As outlined in your response to that comment, please amend your filing prior to effectivenss to include a letter from your former auditor as Exhibit 16.1.
In response to the Staff’s comment, the Company has filed a letter from its former auditor as Exhibit 16.1. Read in the reply ↗
Please revise your reportable segments’ measures of profit or loss to reconcile to your consolidated income before income taxes. Please note that this also applies to your disclosures on page F-39. Refer to the guidance in ASC 280-10-50-30(b).
In response to the Staff’s comment, Note 15 has been revised to correct the typographical error. Read in the reply ↗
We note you refer to $1 million of convertible promissory notes issued in February and March 2020. As referenced on page F-40, it appears these notes were issued in February and March 2021. Please revise or advise to clarify.
In response to the Staff’s comment, Note 16 has been revised to correct the typographical error. Read in the reply ↗
We note your response to prior comment 11. As previously noted, your segment disclosures do not agree to your unaudited condensed financial statements included on pages F-27. For instance, we note that your total loss from operations for the three and six months ended December 31, 2020 included here is incorrect. Please revise. Exhibits
In response to the Staff’s comment, Note 14 has been revised accordingly. Read in the reply ↗
Prior to requesting effectiveness, please obtain and amend your filing to include a currently dated consent from your auditors for Infusionz LLC's audit report located on page F-42.
In response to the Staff’s comment, the Company will file updated consents from its auditors prior to effectiveness in a pre-effective amendment.
We hope the foregoing answers are responsive to your comments. Please do not hesitate to contact me by telephone at (916) 868-0630 or by fax at (916) 448-1709 with any questions or comments regarding this correspondence. Read in the reply ↗
We note your response to prior comment 1. It appears that Mr. Hackett was a Managing Member and/or President of Steam Distribution, LLC, One Hit Wonder Holdings, LLC, One Hit Wonder, Inc., and HAVC, LLC when the companies filed petition under Chapter 11 of the U.S. Bankruptcy Code. Please provide the disclosure required by Items 401(f) and 404 of Regulation S-K and revise the disclosure on pages 57 and 60.Rest of the question
Please also provide balancing disclosure in the Summary section, which clarifies Messrs. Hackett's and Voudouris' experience with the above referenced companies and involvement with their recent bankruptcy.
In response to the Staff’s comment, the Company has revised the disclosures accordingly.
FORT LAUDERDALE
HOUSTON
LAS VEGAS
LONDON*
LOS ANGELES
MEXICO CITY+
MIAMI
MILAN**
NEW JERSEY
NEW YORK
NORTHERN VIRGINIA
ORANGE COUNTY
ORLANDO
PHILADELPHIA
PHOENIX
ROME**
SACRAMENTO
SAN FRANCISCO
SEOUL∞
SHANGHAI
SILICON VALLEY
TALLAHASSEE
TAMPA
TEL AVIV^
TOKYO¤
WARSAW~
WASHINGTON, D.C.
WESTCHESTER COUNTY
WEST PALM BEACH
¬ OPERATES AS
GREENBERG TRAURIG GERMANY, LLP
* OPERATES AS A
SEPARATE UK REGISTERED LEGAL ENTITY
+ OPERATES AS
GREENBERG TRAURIG, S.C.
* * STRATEGICRead in the reply ↗Rest of the answer
ALLIANCE
∞ OPERATES AS
GREENBERG TRAURIG LLP
FOREIGN LEGAL CONSULTANT OFFICE
^ A BRANCH OF
GREENBERG TRAURIG, P.A.,
FLORIDA, USA
¤ OPERATES AS
GT TOKYO HORITSU JIMUSHO
~ OPERATES AS
GREENBERG TRAURIG GRZESIAK SP.K.
We note your revised disclosure in response to prior comment 2, including that you intend to use certain of the proceeds for working capital and miscellaneous corporate purposes and that you intend to use a portion of the proceeds for acquisitions, but you do not have any current agreements, commitments or understandings for any specific acquisition.Rest of the question
To the extent that you do not have a current specific plan for a significant portion of the proceeds, please include a statement to this effect, discuss the principal reasons for the offering and add risk factor disclosure. Refer to Item 504 of Regulation S-K. Government Regulation, page 55
In response to the Staff’s comment, the Company has revised the disclosure and added risk factor disclosure accordingly. Read in the reply ↗
We note your response to prior comment 6 and your revised disclosure on page 42 that you “have no immediate plans to export any products to Europe.” Please tell us why your distribution activities are not subject to European regulations or expand your disclosure to include a discussion of the regulations that may apply to your products. Refer to Item 101(h)(4)(ix) of Regulation S-K.Rest of the question
Please also clarify whether your reference to “customer” on page 42 means a channel partner such as reseller, distributor, or enduser customer.
In response to the Staff’s comment, the Company does not believe its distribution activities are subject to European regulations because it sold flavoring products to only one end user customer in the U.S., who in turn distributed those products to Europe on its own accord. The onus on any regulatory compliance was on that customer. The Company is not aware of, and has no knowledge of, any potential liability in the event that claims are brought regarding those flavoring products in Europe.Read in the reply ↗Rest of the answer
The Company believes that the risk of liability resulting from those flavoring products is minor, because (a) the sales of such flavoring products represented 0.5% (approximately $40,000) of the Company’s total sales during the relevant fiscal year, which is an immaterial amount, (b) such flavoring products have since been discontinued, (c) the Company no longer sells any of its products to that end user customer, and (d) since that last sale, the Company has not sold any products to any customer that in turn exported or distributed such products to Europe. Furthermore, because the Company has no plans in the next two (2) or more years to distribute any products to Europe, the Company does not believe it is currently subject to any European regulations.
We hope the foregoing answers are responsive to your comments. Please do not hesitate to contact me by telephone at (916) 868-0630 or by fax at (916) 448-1709 with any questions or comments regarding this correspondence.
We note the statement on page F-36 that the convertible promissory notes issued during the three months ended March 31, 2021 will automatically convert in any initial public offering by the company. Please revise the pro forma column and related notes to reflect and discuss the conversion of any notes or preferred stock that is directly attributable to the initial public offering.
In response to the Staff’s comment, the Company has revised the pro forma column and related notes accordingly. Read in the reply ↗
Please revise to highlight the auditor's explanatory paragraph regarding your ability to continue as a going concern. Your disclosures should describe the potential consequences to your business if you are unable to raise additional financing.
In response to the Staff’s comment, the Company has revised the disclosure accordingly. Read in the reply ↗
We note your disclosure that each of Robert Hackett, your President, and Nikolaos Voudouris, a greater than 5% shareholder of the Company, was an equity holder, managing member and/or officer of the HAVZ Consolidated companies that you acquired in May 2019. Please provide the disclosure required by Item 404 of Regulation S-K. Alternatively, please explain to us why such disclosure is not required.
In response to the Staff’s comment, the Company has revised the disclosure accordingly. Read in the reply ↗
We note the revised disclosure on page 6 that Robert Hackett and Nikolaos Voudouris were both either an equity holder, managing member and/or officer of the four companies in the HAVZ Consolidation. Please identify and quantify their ownership or membership control percentages of each of the four entities along with Grove, Inc. at the time of the transaction on May 31, 2019.Rest of the question
Describe to us in detail how you concluded that this transaction did not represent a reorganization of entities under common control under ASC 805-50-15-6 and 30-5 which would recognize the assets and liabilities transferred at their carrying amounts and not at fair value.
In response to the Staff’s comment, the reporting entity did not have common control at the measurement date of the acquisition and thus must apply fresh start reporting upon emergence from bankruptcy as it met both of the following criteria:
·
The reorganization value of the emerging entity immediately before the date of confirmation is less than the total of all post petition liabilities and allowed claims, which is sometimes referred to as being “balance sheet insolvent,” and
The holders of existing voting shares immediately before confirmation receive less than 50% of the voting sharesRead in the reply ↗Rest of the answer
of the emerging entity.
Greenberg Traurig, LLP ■ ATTORNEYS AT LAW ■ WWW.GTLAW.COM
Mr. Hackett and Mr. Voudouris each owned 50% of each of the four entities of HAVZ Consolidated at the time of the transaction on May 31, 2019. Mr. Hackett owned 20.69% and Mr. Voudouris owned 8.05% of the Company at the time of the acquisition of HAVZ Consolidated. Following the transaction, Mr. Hackett owned 20.69% and Mr. Voudouris owned 8.05% of the emerging entity, which requires application of fresh start reporting upon emergence from bankruptcy under ASC 852-10-45-20 and 45-21. Therefore, adjustments were made in the predecessor accounts upon emergence from bankruptcy and adoption of fresh start reporting, and goodwill and intangible assets were recognized.
As such, this transaction did not represent a reorganization of entities under common control under ASC 805-50-15-6 and 30-5 which would recognize the assets and liabilities transferred at their carrying amounts and not at fair value.
In this regard, please revise the filing clearly describe the nature of the related party relationship of the HAVZ Consolidation entities and provide all of the disclosures required by ASC 805-10-50-1.
In response to the Staff’s comment, the transaction was negotiated and conducted through bankruptcy court and with the vendors and debtors of HAVZ Consolidated, not negotiated directly with Mr. Hackett and Mr. Voudouris and they did not have control of the final transaction. As such this was not a related party transaction requiring disclosure under ASC 805-10-50-1.
We hope the foregoing answers are responsive to your comments. Please do not hesitate to contact me by telephone at (916) 868-0630 or by fax at (916) 448-1709 with any questions or comments regarding this correspondence. Read in the reply ↗
Also in this review: company letter, 2021-04-26