United States securities and exchange commission logo
September 20, 2021
Ross Sklar
Chief Executive Officer
Starco Brands, Inc.
250 26th Street, Suite 200
Santa Monica, CA
Re: Starco Brands, Inc.
Offering Statement
on Form 1-A
Filed August 31,
2021
File No. 024-11622
Dear Mr. Sklar:
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 31, 2021
Risk Factors
Risks Related to Our Company and its Business
"The novel coronavirus (COVID-19) pandemic may have an impact on . . .",
page 13
1. In light of the time
that has passed since the initial outbreak of the novel coronavirus
(COVID-19) pandemic in
December 2019, please revise this risk factor to specifically
discuss the impact that
the COVID-19 pandemic has had on your business to date, rather
than presenting such
risks as hypothetical. In this regard, please revise to clarify that
COVID-19 has impacted
you in 2020 and 2021, if true, and disclose any material effects
of COVID-19 on your
business, financial condition and results of operations. For
instance, we note your
disclosure elsewhere in the filing indicating that the pandemic
contributed positively
to the 468.2% increase in your royalty revenues during your fiscal
year ended 2020, as
well as to the significant increase from the net loss you recorded in
fiscal 2019 to the net
income you recognized in fiscal 2020. Also, discuss what
Ross Sklar
FirstName LastNameRoss Sklar
Starco Brands, Inc.
Comapany 20,
September NameStarco
2021 Brands, Inc.
September
Page 2 20, 2021 Page 2
FirstName LastName
management expects the pandemic's future impact will be (considering,
for example, the
prevalence of COVID-19 vaccines), how management is responding to
evolving events,
and how it is planning for COVID-19-related uncertainties. Please make
conforming
changes to your Management s Discussion and Analysis of Financial
Condition and
Results of Operations section. For guidance, consider the Division of
Corporation
Finance's Disclosure Guidance: Topic Nos. 9 and 9A, available on our
public website.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 35
2. To provide additional context for investors, please revise to
separately quantify the
portions of your royalty revenues attributable to sales of your
Breathe hand sanitizer and
cleaning sprays, Kleen-out, and Winona Popcorn Spray for all periods
presented in this
section.
Three months ended June 30, 2021 compared to the three months ended June 30,
2020, page 35
3. Please revise your results of operations discussion to quantify the
COVID-19 pandemic's
impact on your revenues and any COVID-related costs incurred during
the three and six
months ended June 30, 2021. In doing so, please quantify, to the
extent practicable, the
impact that COVID-19 had on the decreases in your royalty revenue,
sales of your Breathe
hand sanitizer and cleaning sprays, and net loss during the three
months ended June 30,
2021. Refer to CF Disclosure Guidance: Topic Nos. 9 and 9A.
Trend Information, page 37
4. Please amend your disclosure to provide a brief explanation for the
sharp decrease in sales
of your Breathe products for the three months ended June 30, 2021,
including an
explanation of whether you expect this trend to continue as public
health concerns related
to the pandemic and government-imposed quarantines and other COVID
restrictions are
eased and the COVID-19 vaccine roll-outs continue to gain traction.
Refer to CF
Disclosure Guidance: Topic Nos. 9 and 9A.
Interest of Management and Others in Certain Transactions, page 42
5. Please revise your disclosure in this section to ensure that you
briefly describe any
transactions or any currently proposed transactions during
your last two completed fiscal years and the current fiscal year. For
instance, you do not
describe your royalty revenue generated from related parties during
your 2019 fiscal year,
some of which you previously disclosed but have recently deleted. As a
related matter,
we note your disclosure on page 43 that "there are $133,599 of
accounts receivable from
related companies as of June 30, 2021" and "[a]ll revenue received is
from related
parties." Please revise to indicate the name of the parties in the
noted related party
transactions, their relationship to the company, the nature of their
interest in the
transactions, and the amount of their interest in the transactions.
Refer to Item 13(a) of
Ross Sklar
FirstName LastNameRoss Sklar
Starco Brands, Inc.
Comapany 20,
September NameStarco
2021 Brands, Inc.
September
Page 3 20, 2021 Page 3
FirstName LastName
Part II of Form 1-A.
6. We note your disclosure on page 42 that on June 28, 2021 Ross Sklar
advanced an
additional $100,000 to you on the same terms as the promissory note
that you executed
with Mr. Sklar on January 24, 2020. Please clarify whether the
additional $100,000 was
advanced to you under a new promissory note, or if the promissory note
that you entered
into with Mr. Sklar in January 2020 has been amended to reflect the
additional $100,000
that was advanced to you on June 28, 2021. Additionally, please either
file the new
promissory note or amended promissory note as an exhibit, or tell us
why you believe you
are not required to do so. See Item 17(6) of Part III of Form 1-A.
Exhibits
7. Please revise the legal opinion to include an opinion regarding the
shares being offered by
selling stockholders.
General
8. You disclose that the maximum offering amount is $50 million, however,
it appears that
you are using the midpoint of the price range in making this
calculation. Please revise the
disclosure in your offering circular, legal opinion and Part I, Item 4
of your Form 1-A to
use the maximum offering amount, calculated using the upper limit of
the price range. As
a related matter, please revise to indicate the upper limit of your
price range as the "price
per security" in Item 4 of Part I of your Form 1-A. For additional
guidance, refer to Item
1(j) and Instruction to Item 1(j) to Part II of Form 1-A, as well as
to Rule 253(b)(2)(ii) of
Regulation A.
9. We note that the company may undertake one or more closings on a
rolling basis and that
"[a]fter the initial closing of this Offering, [you] expect to hold
closings on at least a
monthly basis." We also note that an investor s subscription is
irrevocable according to
the subscription agreement, although this feature is not disclosed in
the Offering Circular.
Please disclose when you expect to hold your initial closing and what
factors you will
consider in determining whether and when to hold additional closings
and explain to us in
more detail how the rolling closings will work in conjunction with
this offering. For
example, please provide additional detail about the timing and
mechanics of the rolling
closings, such as how long a rolling closing will take, and whether
the decision to effect a
rolling closing is in the company s sole discretion.
Additionally, please revise to clarify the following:
If true, that a subscription is irrevocable and that a subscriber
has no rights after
submitting a subscription agreement to request the return of their
funds before the
next closing;
What rights a subscriber will have in the event of liquidation or
dissolution of the
company after subscribing, but prior to a closing;
How and when you plan to notify investors regarding the date of
the next closing;
Ross Sklar
Starco Brands, Inc.
September 20, 2021
Page 4
Whether you intend to accept subscriptions from investors on the
date of a closing
and if so, if subscriptions that are received on the date of closing
will be closed upon
on that date or the next monthly closing; and
Whether each closing is only expected to last for a single day.
10. We note that the auditor's consent in Exhibit 11 indicates that Haynie &
Company has
prepared an audit report for your audited financials for the years ended
December 31,
2020 and 2019. However, we do not see an auditor report for these
audited financials in
the filing. Please amend to provide an independent auditor's report for
your audited
financials for the years ended December 31, 2020 and 2019.
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.
Please contact Nicholas Lamparski at (202) 551-4695 or Lilyanna Peyser at
(202) 551-
3222 with any other questions.
Sincerely,
FirstName LastNameRoss Sklar
Division of
Corporation Finance
Comapany NameStarco Brands, Inc.
Office of Trade &
Services
September 20, 2021 Page 4
cc: Jeanne Campanelli
FirstName LastName