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United States securities and exchange commission logo
August 26, 2021
Gerard G. Law
Chief Executive Officer
Project Clean, Inc.
3 Executive Campus, Suite 155
Cherry Hill, NJ 08002
Re: Project Clean, Inc.
Draft Registration
Statement on Form S-1
Submitted July 30,
2021
File No. 377-05272
Dear Mr. Law:
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
General
1. Please provide us
supplemental 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 have
presented or expect to
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether
or not you retained or intend to retain copies of these
communications. Please
contact legal staff associated with the review of this filing to
discuss how to submit
the materials, if any, to us for review.
2. The discussion of the
Tax Receivable Agreement and the redirection of cash flows to the
pre-IPO owners should
be enhanced and given more prominence in your prospectus.
Please include the
discussion of the TRA as a principal topic in the prospectus summary
Gerard G. Law
FirstName LastNameGerard G. Law
Project Clean, Inc.
Comapany
August 26, NameProject
2021 Clean, Inc.
August
Page 2 26, 2021 Page 2
FirstName LastName
so that readers do not have to search for key information about
significant financial
arrangements that will materially impact the company's liquidity.
Please ensure that your
revised disclosure states clearly that you expect the payments to be
substantial and that the
arrangement will reduce the cash provided by the tax savings that
would otherwise have
been available to you for other uses. Because the arrangement could be
considered a
windfall for the pre-IPO owners, your disclosure at the top of the
prospectus should
adequately address the fact that the agreement confers significant
economic benefits to the
TRA Participants and redirects cash flows to them at the expense of
the rest of your
shareholders. We would expect to see a detailed discussion of the TRA
well before the
Risk Factor Summary currently found on page 6.
Prospectus Summary, page 1
3. We note your disclosure that you commissioned a report by SPINS.
Please file the written
consent of the third-party as an exhibit to the registration statement
or explain to us why
you do not believe you are required to do so. Please refer to Rule 436
of the Securities
Act.
Summary of the Reorganization, page 7
4. We note your disclosure in the last paragraph on page 9 that RGF, Inc.
will consolidate
RGF, LLC under the variable interest entity consolidation model.
Please tell us in
sufficient detail how RGF, LLC qualifies as a variable interest entity
under ASC 810-10-
15-14. In addition, since you have determined that RGF, Inc. is the
primary beneficiary,
please disclose and tell us how you will consolidate and recognize the
assets and liabilities
of RGF, LLC and the non-controlling interests in your audited
financial statements. In
this regard, describe whether you will account for this as a
transaction between entities
under common control or under the purchase method of accounting. We
refer you to ASC
810-10-30-1 through 30-4. Additionally, discuss your method of
consolidation in the
unaudited pro forma combined financial data section of your
prospectus.
Capitalization, page 58
5. Given the number of transactions involved with your Reorganization and
Offering,
including the automatic conversion of all outstanding convertible
promissory notes held
by certain lenders into shares of Class A common stock, please include
separate footnotes
to the table indicating how you arrived at the pro forma and pro forma
as adjusted
amounts for the Class A and Class B common stock. Also describe in a
footnote how the
pro forma and pro forma as adjusted amounts were determined for the
line items, non-
controlling interest and redeemable convertible non-controlling
interest were determined.
6. Further, please revise or tell us why the components in your Members'
equity (deficit)
section on an actual basis does not reflect the equity components of
your December 31,
2020 audited historical balance sheet included in the filing. In this
regard, we note the
Gerard G. Law
Project Clean, Inc.
August 26, 2021
Page 3
historical balance sheet has a Members' deficit section comprising
Common units, Series
A preferred units and Series Seed preferred units. To the extent your
June 30, 2021
unaudited interim balance sheet, to be included in an amended filing,
continues to include
these historical components, please expand the Capitalization table
accordingly to also
include these components on an actual basis. Provide footnote
disclosure of the necessary
pro forma adjustments, and clarify accordingly that these individual
historical components
will be reclassified into Class A Units and Class B Units of RGF, LLC
pursuant to the
Reorganization.
Unaudited Pro Forma Combined Financial Data, page 61
7. Refer to your paragraph disclosures regarding the Tax Receivable
Agreement ("TRA") in
the introductory section on page 62. Please prominently disclose,
consistent with your
disclosures of the Tax Receivable Agreement under Certain
Relationships and Related-
Party Transactions beginning on page 128, that you expect that the
payments that you may
be required to make to the Members could be substantial. Please also
expand to briefly
describe for investors how you will account for the TRA upon initial
recognition of the
obligation, as noted in pro forma adjustment 2(f), and for subsequent
changes in the
measurement of the obligation based on the factors denoted in the
bullet points on page
129 under Basis Adjustments.
8. Please expand your pro forma balance sheet on page 63 to include the
full historical
section of members' equity (deficit) as of June 30, 2021, along with a
section heading for
stockholders' equity (deficit) reflecting your post-offering capital
structure. Also, we note
from the Capitalization table that you have a line item for Redeemable
convertible non-
controlling interest. Please include this line item in the pro forma
balance sheet and
provide a discussion as to the nature of the line item, how it was
determined and valued,
along with a detailed footnote of the pro forma adjustment, or tell us
why you believe such
disclosure is not required.
9. Please clarify pro forma adjustment 2(c) regarding the repayment of
outstanding
indebtedness to PPZ and PMC, specifically addressing what outstanding
indebtedness
owed to PMC this relates, given the February 2021 term loan entered into
with PMC to
partially fund the acquisition of a co-manufacturing business of your
former supplier or
the PMC and your apparent use of proceeds from the issuance of the 2021
Notes in May
2021 to repay the outstanding balance on the PMC Credit Facility.
Additionally, reconcile
FirstName LastNameGerard G. Law
this disclosure with that under Use of Proceeds that you intend to use a
portion of the net
Comapany NameProject
proceeds to repay Clean,
the PPZInc.
loans without regard to any potentially
outstanding debt with
AugustPMC.
26, 2021 Page 3
FirstName LastName
Gerard G. Law
FirstName LastNameGerard G. Law
Project Clean, Inc.
Comapany
August 26, NameProject
2021 Clean, Inc.
August
Page 4 26, 2021 Page 4
FirstName LastName
10. For pro forma adjustment 2(d) regarding the conversion of outstanding
convertible
promissory notes issued in May 2021, please expand to describe how you
will account for
the 20% discount to the offering price on the conversion.
11. Refer to pro forma adjustment 2(e). Please expand to disclose herein
or in a more
prominent location, that profits interest represent units granted to
certain of RGF, LLC's
executive officers and to other parties, and that prior to the
Reorganization the units were
not deemed to be equity ownership interests, but rather provided the
holder with the right
to receive a cash payment representing a certain percentage of your
profit or enterprise
value for a particular period. Also, disclose that the profits
interest units were classified as
liability awards and accounted for as performance bonuses. Please
disclose the liability
amount, if any, as of the most recent balance sheet date, and advise
how the converted
amount has been reflected in the pro forma adjustments. Reference is
made to disclosure
on page 118 under the heading Profits Interest Units, and also to page
F-15. Also, it
appears the ending to the first sentence in footnote 2(e) needs
clarification, beginning with
'and all holders of profits interest units and Members.' Please revise
or advise.
12. Refer to pro forma adjustments 2(m) and 2(o) on the pro forma combined
statements of
operations on pages 64 and 65. Please expand the adjustment
explanation footnotes to
further distinguish why the adjustment is reflected in both the
Transaction Accounting
Adjustments - Offering, as well as the Transaction Accounting
Adjustments -
Reorganization, columns.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Non-GAAP Financial Measure, page 81
13. We note your discussion of the Non-GAAP Financial Measure of Adjusted
EBITDA
within MD&A precedes the disclosure of your Results of Operations.
Please amend to
more prominently disclose your GAAP results so that such results
precede those of your
non-GAAP financial measure. Refer to Question 102.10 of the Division's
Non-GAAP
Financial Measures Compliance & Disclosure Interpretations.
Our Market Opportunity, page 98
14. We note your use of Compound Annual Growth Rate (CAGR) estimates here
and
elsewhere, please revise your disclosure to include balancing language
stating that there is
no guarantee that you will achieve comparable metrics in the future.
Gerard G. Law
FirstName LastNameGerard G. Law
Project Clean, Inc.
Comapany
August 26, NameProject
2021 Clean, Inc.
August
Page 5 26, 2021 Page 5
FirstName LastName
You may contact Beverly Singleton Staff Accountant, at (202) 551-3328
or Mark Rakip,
Accounting Branch Chief, at (202) 551-3573 if you have questions regarding
comments on the
financial statements and related matters. Please contact Sergio Chinos, Staff
Attorney, at (202)
551-7844 or Perry Hindin, Special Counsel, at (202) 551-3444 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Manufacturing
cc: Ryan C. Wilkins