September 27, 2019
Andrew Van Noy
Chief Executive Officer and President
CloudCommerce, Inc.
321 Sixth Street
San Antonio, Texas 78215
Re: CloudCommerce, Inc.
Offering Statement on Form 1-A
Filed August 30, 2019
File No. 024-11067
Dear Mr. Van Noy:
We have reviewed your offering 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 amending your offering statement and
providing the
requested information. 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 any amendment to your offering statement and the
information you
provide in response to these comments, we may have additional comments.
Offering Statement on Form 1-A Filed August 30, 2019
Part I
1-A: Item 1. Issuer Information
Financial Statements , page 1
1. Please tell us what consideration you gave to providing the financial
statement
information for the most recent period contained in the offering
statement. In this regard,
we note the most recent period presented within the filing is June 30,
2019.
Outstanding Securities
Common Equity, page 1
2. The reported number of common equity units outstanding does not agree to
the financial
statements included in the filing. Please ensure all reported information
agrees to the
financial information for the latest period included in the offering
statement.
Andrew Van Noy
FirstName LastNameAndrew Van Noy
CloudCommerce, Inc.
Comapany 27, 2019
September NameCloudCommerce, Inc.
September 27, 2019 Page 2
Page 2
FirstName LastName
Part II and III
Plan of Distribution, page 15
3. We note your disclosure that you plan to market the shares in this
offering both through
online and offline means, and that online marketing may take the form
of contacting
potential investors through electronic media and posting your offering
circular or "testing
the waters" materials on an online investment platform. Please confirm
your
understanding that "testing the waters" materials may be used before
qualification of the
offering statement, provided that all solicitation materials are
preceded or accompanied by
a preliminary offering circular or contain a notice informing
potential investors where and
how the most current preliminary offering circular can be obtained.
See Securities Act
Rule 255(b)(4). Further, unless otherwise filed and as applicable,
please
file your testing the waters materials as exhibits, and confirm that
you will do so with
future testing the waters materials. Refer to Item 17.13 of Form 1-A.
Use of Proceeds, page 18
4. We note your disclosure that you intend to use the net proceeds form
this offering "for
general corporate purposes, including working capital," that you
intend to reserve 15% of
the proceeds for the payment of dividends, and that "pending the use
of net proceeds from
the offering as described above, [you] intend to invest the net
proceeds in investment-
grade, interest-bearing instruments." To the extent known, please
describe the allocation
of the total net proceeds to working capital, other general corporate
purposes, and
investment-grade, interest-bearing instruments. In this regard, it is
clear that 15% of the
proceeds will be allocated to the payment of dividends, but it is
unclear how the rest of
your proceeds will be allocated among those uses disclosed. Further,
describe any
anticipated material changes in the use of proceeds if all of the
securities being qualified
on the offering statement are not sold. For example, provide a
description of the uses of
proceeds for the sale of 25%, 50%, and 75% of the maximum aggregate
offering. See
Item 6. and Instruction 3 to Item 6. of Form 1-A.
5. As a related matter, please revise your disclosure to state whether or
not the proceeds will
be used to compensate or otherwise make payments to officers or
directors or any of
your subsidiaries. Please refer to Instruction 2 to Item 6 of Part II
of Form 1-A.
Our Business
Revenue Model, page 21
6. We note your disclosure that you "will charge monthly recurring
platform fees for
SWARM depending on various usage metrics." Please disclose when you
plan to
implement the monthly recurring platform fee for SWARM, considering
your disclosure
that you "will" charge this fee.
7. As a related matter, you disclose that you have a variety of
revenue-generating models,
including "fixed or variable implementation fees to design, build, and
execute on digital
Andrew Van Noy
FirstName LastNameAndrew Van Noy
CloudCommerce, Inc.
Comapany 27, 2019
September NameCloudCommerce, Inc.
September 27, 2019 Page 3
Page 3
FirstName LastName
marketing campaigns," and "retainer arrangements for other services
that vary in term
length." Please disclose from which model you derive the majority of
your revenue, and
provide a brief description of the percentage of your revenues
attributable to each fee
model for fiscal 2018, and the period ended June 30, 2019.
Management's Discussion and Analysis of Financial Position and Results of
Operations, page 24
8. Please revise to clarify the effect that changes in price and volume
had on the revenues for
each period presented. Further, we note that on page F-10, you
disaggregated your
revenue into five categories. Tell us what consideration you gave to
discussing changes in
revenue related to these categories for each period presented, or
advise us why this
information would not be useful to an investor. Please refer to Item 9
of Part II of Form
1-A.
9. Please update your results of operations discussion to include each
year or period for
which financial statements are required. In this regard, you should
provide a results of
operations discussion which compares the historical periods presented
in your condensed
consolidated statements of operations (i.e. year ended December 31,
2018 compared to the
six months ended December 31, 2017, and the six months ended December
31, 2017
compared to the year ended June 30, 2017). Please refer to Item 9 of
Part II of Form 1-A.
For clarity, in an appropriate place in this section, please discuss
the basis for the
presentation of your results of operations, specifically that, in
2018, you changed your
fiscal year-end from June 30 to December 30.
10. We note your disclosure that the decrease in revenue for the three
months ended June 30,
2019 and the six months ended June 30, 2019 was primarily due to a
reduction in revenue
from a related party, partially offset by revenue increases from third
parties. Please
disclose whether you expect to continue to see a reduction in revenue
from this related
party.
Critical Accounting Policies
Indefinite Lived Intangibles and Goodwill Assets, page 25
11. Your discussion of critical accounting policies should focus on
policies involving the most
significant assumptions, estimates and judgments that may result in
fluctuations in your
reported results from period to period. For example, you cite goodwill
as a critical
accounting policy and indicate that you performed a qualitative
assessment; however, it is
unclear what qualitative factors you considered to determine that it
is more likely than not
that the fair value of each of your reporting unit(s) was more than
their carrying amount.
Accordingly, please revise your disclosure. Additionally, expand your
disclosure to
identify those reporting units and indicate, if true, that the fair
values of those reporting
units are substantially in excess of their carrying values. Identify
for us any reporting
units with a fair value not substantially in excess of their carrying
value and quantify the
related goodwill associated with those reporting units. For any
reporting unit with a fair
Andrew Van Noy
FirstName LastNameAndrew Van Noy
CloudCommerce, Inc.
Comapany 27, 2019
September NameCloudCommerce, Inc.
September 27, 2019 Page 4
Page 4
FirstName LastName
value not substantially in excess of their carrying value, please
provide investors with
additional information regarding the risk associated with the
reporting unit, including the
following information necessary to assess the probability of a future
material impairment
charge:
The percentage by which fair value exceeded carrying value as of
the date of the most
recent test;
The amount of goodwill allocated to the reporting unit;
A description of the key assumptions used and how the key
assumptions were
determined;
A discussion of the degree of uncertainty associated with the key
assumptions. The
discussion regarding uncertainty should provide specifics to the
extent possible; and
A description of potential events and/or changes in circumstances
that could
reasonably be expected to negatively affect the key assumptions.
Liquidity and Capital Resources, page 32
12. We note your auditors have issued a going concern opinion. Please
disclose your rate of
negative cash flow per month and management's belief as to the period
of time that
available cash can sustain your current operations.
13. Your discussion of liquidity should provide information on any short
and long-term
sources of liquidity. You should also discuss any material unused
sources of liquidity. If
none, so state. Please refer to paragraph (b)(1) of Item 9 of Part II
of Form 1-A. Lastly,
please disclose your material commitments for capital expenditures.
Refer to paragraph
(b)(2) of Item 9 of Part II of Form 1-A.
Security Ownership of Management and Certain Shareholders, page 37
14. Please revise the beneficial ownership table to provide separate
columns for the "Amount
and nature of beneficial ownership" and the "Amount and nature of
beneficial ownership
acquirable." Refer to Item 12 of Part II of Form 1-A..
15. We note the percentages of ownership disclosed in the table on page 37
and that the
percentages in this column total more than 100%. We also note your
explanatory disclosure before the table. Please revise your
explanation to clarify for
investors in more detail why the column totals more than 100%. For
example, consider
revising your disclosure to state that your 142,021,401 shares
outstanding are "as
of August 13, 2019."
Andrew Van Noy
CloudCommerce, Inc.
September 27, 2019
Page 5
Interest of Management and Others in Certain Transactions, page 38
16. We note your disclosure that your subsidiary Parscale Digital entered
into a consulting
agreement with Bradley Parscale, and that under the agreement,
Parscale Digital agreed to
pay Mr. Parscale a consultancy fee equal to 95% of all fees collected
directly by Parscale
Digital for Mr. Parscale's performance of such services. Please
disclose the total amount
of Mr. Parscale's interest in the contract, i.e. the total fees he
received pursuant to the
agreement.
Financial Statements, page F-1
17. Please tell us whether you have made the one time irrevocable election
to delay
complying with any new or revised accounting standards pursuant to
paragraph (a)(3) to
Part F/S of Form 1-A. If so, please disclose such election.
Report of Independent Registered Public Accounting Firm, page F-3
18. We note that the auditor's report is addressed to the board of
directors but not the
stockholders of the Company. Please tell us how your auditor's report
complies with
PCAOB AS 3101.07.
2. Summary of Significant Accounting Policies
Revenue Recognition, page F-10
19. Please provide us with your analysis regarding how you determined
gross reporting for
your reimbursable costs was appropriate pursuant to ASC 606-10-55-39.
Specifically
address how you considered the definition of control and how you are
directing any third
party providers to provide the goods or services. Additionally, please
revise your
disclosure to provide your assessment of the indicators of control
under ASC 606-10-55-
39 (i.e. primarily responsible for fulfilling the promise to provide
the specified good or
service, inventory risk, and price discretion). In this regard, some
of the factors you
reference relate to the legacy gross versus net guidance under ASC
605.
20. Please revise your disaggregated revenue disclosure on pages F-10 and
F-17 to remove the
unaudited period for the year ended December 31, 2017. Additionally,
please revise to
present this information for the periods that correspond to your
audited financial
statements.
6. Intangible Assets
Brand name, page F-22
FirstName LastNameAndrew Van Noy
Comapany NameCloudCommerce, the guidance of ASC 350-30-35-3 in your
determination that
21. Tell us how you considered Inc.
September 27, 2019 Pagehave an indefinite life.
your brand names 5
FirstName LastName
Andrew Van Noy
FirstName LastNameAndrew Van Noy
CloudCommerce, Inc.
Comapany 27, 2019
September NameCloudCommerce, Inc.
Page 6
September 27, 2019 Page 6
FirstName LastName
General
22. Please provide the dilution disclosures pursuant to Item 4 of Part II
of Form 1-A, or tell us
why this disclosure is unnecessary.
23. The consent of Liggett & Webb, P.A. should not refer to the financial
statements as of
June 30, 2017 and year ended June 30, 2016. According, please have
Liggett & Webb,
P.A. revise their consent.
We will consider qualifying your offering statement at your request. If
a participant in
your offering is required to clear its compensation arrangements with FINRA,
please have
FINRA advise us that it has no objections to the compensation arrangements
prior to
qualification.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff. We also remind you that, following qualification of your
Form 1-A, Rule 257
of Regulation A requires you to file periodic and current reports, including a
Form 1-K which
will be due within 120 calendar days after the end of the fiscal year covered
by the report.
You may contact Robert Babula, Staff Accountant, at (202) 551-3339 or
William
Thompson, Accounting Branch Chief, at (202) 551-3344 if you have questions
regarding
comments on the financial statements and related matters. Please contact
Katherine Bagley,
Staff Attorney, at (202) 551-2545 or Jacqueline Kaufman, Staff Attorney, at
(202) 551-3797 with
any other questions.
Sincerely,
Division of
Corporation Finance
Office of
Consumer Products
cc: Gregory Sichenzia