United States securities and exchange commission logo
September 7, 2021
Byron Roth
Co-Chief Executive Officer
Roth CH Acquisition III Co
888 San Clemente Drive, Suite 400
Newport Beach, CA 92660
Re: Roth CH Acquisition
III Co
Preliminary Proxy
Statement on Schedule 14A
Filed August 11,
2021
File No. 001-40147
Dear Mr. Roth:
We have reviewed your filing 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 these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14A
General
1. Please provide your
analysis why the proposed issuance of ROCR common stock as
consideration for the
business combination does not require registration under the
Securities Act 1933.
Letter to Stockholders, page i
2. When discussing the
business combination, please quantify the "portion of the merger
consideration"
allocated to each step of the business combination and the capital
contribution from ROCR.
3. The first letter to
stockholders states that the sponsor owns 20% of ROCR's issued and
outstanding common
stock. The second letter to stockholders reflects ownership of such
shares of 18.94%. The
beneficial ownership table reflects the sponsor shares in the
Byron Roth
Roth CH Acquisition III Co
September 7, 2021
Page 2
ownership of Byron and Gordon Roth, which own 7% and 4.6% respectively
in the
beneficial ownership table on page 204. Please reconcile and revise
throughout.
Questions and Answers About the Proposals, page 4
4. You state in the second question on page 14 that "Broker non-votes
will count as a vote
AGAINST all of the Proposals, except for the Directors Proposal
(Proposal 5)."
However, in the next question you state that "Broker non-votes will
not be counted as
present for the purposes of establishing a quorum and will have no
effect on any of the
Proposals." Please reconcile.
5. When discussing the vote required for approval of each proposal,
please disclose the
percent of shares outstanding held by the individuals that have agreed
to vote in favor of
each proposal.
Summary of the Proxy Statement, page 17
6. Please include in the discussion of the business combination proposal
the total
consideration to be paid and how the consideration will be allocated
to the holders of
QualTek. Similarly revise the discussion of the Business Combination
Agreement
discussion beginning on page 94. Clearly disclose the consideration to
be received, rather
than referring to equity interests being converted into the right to
receive a portion of the
merger consideration. Please also disclose the amount of the capital
contribution from
ROCR.
7. Please revise the diagrams on page 20 to include the percentages of
ownership. In
addition, please consider adding diagrams to show the steps to
complete the business
combination, as discussed in the letter to stockholders and elsewhere.
8. We note in the Buyer Voting and Support Agreement certain ROCR common
stockholders agreed to approve the business combination agreement.
Please quantify the
amount and percent of the vote held by these stockholders.
9. Please revise the disclosure regarding the Interests of ROCR's
Directors and Officers and
Others in the Business Combination beginning on page 28 to clearly
disclose the amount
of such interests. For example, clearly state the estimated amount to
be reimbursed for out
of pocket expenses. In addition, clearly disclose all interests, such
as any loans from the
officers, directors and/or sponsor, and any officers or directors that
will continue with the
company in any capacity post-business combination.
10. Please quantify the aggregate dollar amount and describe the nature of
what the sponsor
and its affiliates have at risk that depends on completion of a business
combination.
FirstName LastNameByron Roth
Include the current value of securities held, loans extended, fees due,
and out-of-pocket
Comapany NameRoth
expenses CH the
for which Acquisition III Co
sponsor and its affiliates are awaiting
reimbursement. Provide
similar
September disclosure
7, 2021 Page 2for the company s officers and directors, if
material.
FirstName LastName
Byron Roth
FirstName LastNameByron
Roth CH Acquisition III Co Roth
Comapany 7,
September NameRoth
2021 CH Acquisition III Co
September
Page 3 7, 2021 Page 3
FirstName LastName
11. Please highlight the risk that the sponsor will benefit from the
completion of a business
combination and may be incentivized to complete an acquisition of a
less favorable target
company or on terms less favorable to shareholders rather than
liquidate.
12. Please clarify if the sponsor and its affiliates can earn a positive
rate of return on their
investment, even if other SPAC shareholders experience a negative rate
of return in the
post-business combination company.
13. Please highlight the material risks to public warrant holders,
including those arising from
differences between private and public warrants. Clarify whether
recent common stock
trading prices exceed the threshold that would allow the company to
redeem public
warrants. Clearly explain the steps, if any, the company will take to
notify all
shareholders, including beneficial owners, regarding when the warrants
become eligible
for redemption.
14. Please explain how the merger consideration is calculated including
the equity value.
Provide an example of such calculation.
15. Please highlight material differences in the terms and price of
securities issued at the time
of the IPO as compared to conversion price of the pre-PIPE convertible
note
offering contemplated at the time of the business combination.
Disclose if the your
sponsor, directors, officers or their affiliates will participate in
the private placement. In
addition, please revise to disclose the potential impact of these
securities and the PIPE
securities, on non-redeeming shareholders.
Risks Related to ROCR and the Business Combination, page 46
16. Disclose the material risks to unaffiliated investors presented by
taking the company
public through a merger rather than an underwritten offering. These
risks could include
the absence of due diligence conducted by an underwriter that would be
subject to liability
for any material misstatements or omissions in a registration
statement.
17. Please revise to disclose all possible sources and extent of dilution
that shareholders who
elect not to redeem their shares may experience in connection with the
business
combination. Provide disclosure of the impact of each significant
source of dilution,
including the amount of equity held by founders, convertible
securities, including warrants
retained by redeeming shareholders, at each of the redemption levels
detailed in your
sensitivity analysis for redemption scenarios, including any needed
assumptions.
18. It appears that 3.5% marketing fee payable to Roth and Craig-Hallum
remains constant
and is not adjusted based on redemptions. Revise your disclosure to
disclose the
effective fee on a percentage basis for shares at each redemption
level presented in your
sensitivity analysis related to dilution.
Byron Roth
FirstName LastNameByron
Roth CH Acquisition III Co Roth
Comapany 7,
September NameRoth
2021 CH Acquisition III Co
September
Page 4 7, 2021 Page 4
FirstName LastName
Cautionary Note Regarding Forward Looking Statements, page 63
19. We note your reliance upon the safe harbor for forward-looking
statement contained in the
Private Securities Litigation Reform Act of 1995. Because the
application of the safe
harbor to your merger is unsettled (due in part to no definitive case
law regarding its
application), please condition your reliance with qualifying language
that the protections
of the safe harbor of the Private Securities Litigation Reform Act of
1995 may not be
available.
Special Meeting of ROCR Stockholders, page 65
20. Please reconcile the following two sentences from page 66.
"Abstentions will be counted
in connection with the determination of whether a valid quorum is
established and will
have the same effect as a vote AGAINST the Proposals. A failure
to vote by proxy or to
vote in person or an abstention [emphasis added]from voting with
regard to the Proposals
will have the same effect as a vote AGAINST the Charter
Amendment Proposal and if a
valid quorum is otherwise established, it will have no effect on the
outcome of the vote on
the Business Combination Proposal, the Charter Amendment Proposal, the
Governance
Proposal, the Nasdaq Proposal, the Directors Proposal, the Management
Equity Incentive
Plan Proposal, the ESPP Proposal and the Adjournment Proposal."
Background of the Business Combination, page 82
21. Please revise the disclosure in this section to provide a description
of how Qualtek was
identified and by whom, and how the negotiations were started and by
whom.
22. We note the risk factor disclosure on page 35 that you derive a
significant portion of your
revenues from a few customers, that many of your contracts do not
obligate your
customers to undertake any infrastructure projects or other work with
you, and that most
of your contracts can be cancelled on short or no advance notice. In
light of this, please
disclose any discussions with Qualtek about the potential loss of
clients in the near future
or other events that may materially affect the target s prospects or
its financial projections
for future performance of the business.
23. Please disclose any discussions about the need to obtain additional
financing for the
combined company through a PIPE transaction(including the pre PIPE),
and the
negotiation/marketing processes, such as who selected the potential
PIPE investors, what
relationships did the PIPE investors have to ROCR, the sponsor,
Qualtek and its affiliates,
and the placement agent, and how were the terms of the PIPE
transactions determined. In
addition, please disclose whether there were any valuations or other
material information
about the ROCR, Qualtek, or the de-SPAC transaction provided to
potential PIPE
investors that have not been disclosed publicly.
24. We note management's prior involvement with two prior SPACS, Roth CH I
and Roth CH
II. Please provide balanced disclosure about this prior involvement
and the outcomes of
the prior transactions.
Byron Roth
FirstName LastNameByron
Roth CH Acquisition III Co Roth
Comapany 7,
September NameRoth
2021 CH Acquisition III Co
September
Page 5 7, 2021 Page 5
FirstName LastName
25. Please disclose the negotiation of any contingent payments to be
received by Qualtek
shareholders.
26. We note ROCR hired a company that provided financial advisory
services. Please clearly
describe the role of the financial advisor in the business
combination, the level of
diligence the financial advisor performed in connection with the
transaction, and the basis
for the board determining it was not necessary to obtain a fairness
opinion for the business
combination.
The Board of Directors' Reasons for the Approval of the Business Combination,
page 87
27. Please clarify whether and how the Board took into account the
consideration being paid
in this transaction in recommending the transaction, and if not, why
not.
The Business Combination Agreement, page 95
28. Please clearly calculate and disclose the consideration to be received
in the business
combination. For instance, clarify the reference in calculating the
blocker owner
consideration to "the number of shares of Class A Common Stock equal
to the merger
consideration."
Interests of ROCR's Directors and Officers and Others in the Business
Combination, page 107
29. We note that Roth and Craig-Hallum performed additional services after
the IPO and the
marketing fee was deferred and conditioned on completion of a business
combination.
Please quantify the aggregate fees payable to Roth and Craig-Hallum
that are contingent
on completion of the business combination.
Certain U.S. Federal Income Tax Considerations to Holders of ROCR Common Stock
Exercising Redemption Rights, page 108
30. We note that you have limited the discussion of federal income tax
considerations to
holders of ROCR common stock exercising redemption rights. Please
revise to also
discuss the tax considerations for non-redeeming holders of ROCR.
Conflicts of Interest , page 146
31. Please address whether the conflicts of interest with your officers
and directors impacted
your search for an acquisition target.
Information about Qualtek, page 153
32. We note your disclosure that you have an estimated $1.7 billion in
backlog over two
years. Please clarify and expand your disclosures to include the
following:
Clarify whether you view backlog as a significant metric. If
so, please provide the
following:
o a clear definition of the metric and how it is calculated;
Byron Roth
FirstName LastNameByron
Roth CH Acquisition III Co Roth
Comapany 7,
September NameRoth
2021 CH Acquisition III Co
September
Page 6 7, 2021 Page 6
FirstName LastName
o a statement indicating the reasons why the metric provides
useful information to
investors, and;
o a statement indicating how management uses the metric in
managing or
monitoring the performance of the business
Disclose how much of the backlog is based on committed versus
uncommitted work
given your disclosure that the majority of your backlog is based
on estimated work
from master service agreements which do not require your
customers to purchase a
minimum amount of services and are cancelable on short notice as
disclosed on page
36; and
Disclose how much of your backlog relates to contracts from
your
Telecommunications reportable segment versus your Renewables &
Recovery
Logistics reportable segment
Compensation of Executive Officers and Directors of Qualtek, page 167
33. Please revise the disclosure of the compensation of the officers and
directors post-business
combination to clearly disclose the material terms, once known. Please
disclose the
expected material terms of the employment agreements to be entered
into with the named
executive officers.
Management's Discussion and Analysis of Financial Condition and Results of
Operations of
Qualtek
Results of Operations, page 178
34. Please quantify the impact of each factor you identify as materially
contributing to the
changes in your revenue and cost of revenues for the three months
ended April 3, 2021
and April 4, 2020. Please refer to Items 303(b)(2) of Regulation S-K.
Liquidity and Capital Resources, page 183
35. Please revise to address the Tax Receivable Agreement, including
estimated annual
payments and how you intend to fund the required payments under the
agreement. Please
also disclose the likely impact on your liquidity from any known
trends, events or
uncertainties related to the Tax Receivable Agreement payments.
Critical Accounting Policies and Estimates
Impairment of Goodwill and Long-lived Assets, page 184
36. We note that as of December 31, 2020 and 2019, you recorded goodwill
impairment
charges of $28.8 million and $13.3 million in 2020 and 2019,
respectively for two of your
reporting units in your Telecom segment. In order for investors to be
able to assess the
probability of future goodwill impairment, please disclose, if
accurate, that the estimated
fair values of the reporting units you quantitatively tested for
impairment substantially
exceeded their carrying values. For any reporting unit whose estimated
fair value did not
substantially exceed its carrying value, please provide the following
additional
Byron Roth
FirstName LastNameByron
Roth CH Acquisition III Co Roth
Comapany 7,
September NameRoth
2021 CH Acquisition III Co
September
Page 7 7, 2021 Page 7
FirstName LastName
disclosures:
the percentage by which fair value exceeded carrying value at the
date of the most recent
test;
a more detailed description of the methods and key assumptions
used and how the key
assumptions were determined;
a discussion of the degree of uncertainty associated with the
assumptions; and
a description of potential events and/or changes in circumstances
that could reasonably
be expected to negatively affect the key assumptions. If your
reporting unit is not at risk of
failing the quantitative impairment test, please disclose that the
fair value of your
reporting unit is substantially in excess of carrying value and not at
risk of failing.
Please refer to Item 303(b)(3) of Regulation S-K and Section V of SEC
Release No. 34-
48960.
Management of the Combined Company After the Initial Business Combination, page
189
37. We note that Mr. Doran is included in the executive compensation
disclosures beginning
on page 167 and is described as a named executive officer. Please
revise this section to
include the information required by Item 401 of Regulation S-K for Mr.
Doran.
Security Ownership of Certain Beneficial Owners and Management of ROCR and the
Combined
Company, page 203
38. Please disclose the control person(s) for each entity listed in the
table.
Certain Relationships and Related Party Transactions, page 206
39. Please disclose whether and related party loans have been made to
ROCR.
40. Please identify the majority member with whom Qualtek entered into an
advisory services
agreement.
Note 1. Nature of Business and Summary of Significant Accounting Policies
Revenue Recognition, page F-41
41. While we note your disclosure that portions of the contracts include
one or multiple
performance obligations, it is not ultimately clear how the Company
views the multiple
types of services in its standard type contracts. For example we note
that you have various
types of services including, engineering, construction, project
management, site
management, aerial and underground construction. In order to better
understand the
nature of the services transferred in your arrangements and the
resulting number of
performance obligations in your typical arrangements please further
clarify whether your
typical arrangements result in one performance obligation or multiple
performance
obligations. To the extent you have arrangements that result in
multiple performance
obligations, please further describe the basis for which the Company
allocates the
Byron Roth
Roth CH Acquisition III Co
September 7, 2021
Page 8
transaction price among the various performance obligations. Refer to ASC
606-10-50-
12 and 606-10-50-17.
Note 5. Accounts Receivable, Net of Allowance, Contract Assets and Liabilities,
and Customer
Credit Concentration, page F-49
42. Please disclose the amount of revenue recognized during the reporting
period that was
included in contract liabilities at the beginning of the period pursuant
to ASC 606-10-50-
8b. This comment also applies to your interim financials presented as of
April 3, 2021.
Segments and Related Information, page F-55
43. We note your references throughout the filing to your Telecom Wireless,
Telecom
Wireline, Renewable and Recovery Logistics subs-segments. Also, we note
you include
certain revenue expectations for such sub-segments on pages 159 - 161 .
As such, please
tell us your consideration of providing a similar breakdown in your
segment disclosures.
Refer to ASC 280-10-50-40.
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.
You may contact Ameen Hamady at 202-551-3891 or Isaac Esquivel at
202-551-3395 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Ruairi Regan at 202-551-3269 or Pam Howell at 202-551-3357 with any
other questions.
Sincerely,
FirstName LastNameByron Roth
Division of
Corporation Finance
Comapany NameRoth CH Acquisition III Co
Office of Real
Estate & Construction
September 7, 2021 Page 8
cc: Janeane R. Ferrari, Esq.
FirstName LastName