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November 29, 2018
Yaniv Sarig
President and Chief Executive Officer
Mohawk Group Holdings, Inc.
37 East 18th Street, 7th Floor
New York, NY 10003
Re: Mohawk Group Holdings, Inc.
Draft Registration Statement on Form S-1
Submitted November 2, 2018
CIK No. 0001757715
Dear Mr. Sarig:
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 Submitted November 2, 2018
Cover Page
1. We note that you are registering for resale all of the company's
outstanding common stock
as well as common stock underlying warrants. In light of the number of
shares being
registered, the nature of the selling shareholders and the lack of
market for your shares, it
appears that this may be an indirect primary offering by the company and
that the selling
stockholders may actually be underwriters selling on behalf of the
company. If so, and
because the company would not be eligible to conduct a primary
at-the-market offering
under Securities Act Rule 415(a)(4), you must identify the selling
shareholders as
underwriters and provide a fixed offering price for the duration of the
offering. Please
provide us with a detailed legal analysis as to why the offering by the
selling stockholders
Yaniv Sarig
FirstName LastNameYaniv Sarig
Mohawk Group Holdings, Inc.
Comapany 29, 2018
November NameMohawk Group Holdings, Inc.
November 29, 2018 Page 2
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FirstName LastName
should properly be regarded as a secondary offering. Refer to
Securities Act Rules
Compliance and Disclosure Interpretation 612.09, available on our
website at
https://www.sec.gov/divisions/corpfin/cfguidance.shtml.
2. Please remove your reference to "a total offering amount of
$182,998,084," as the
company is not offering shares or raising funds in the offering.
Prospectus Summary, page 1
3. Please explain and provide more detail as to how your AIMEE system
allows for "rapid
opportunity identification and online sales and marketing of consumer
products."
4. Please explain how your consumer products are "digital native."
5. We note your discussion of "contract manufacturers" and "Amazon
warehouses, other
third-party warehouses and logistics partners." Please disclose
whether you have any
agreements or arrangements with manufacturers, warehouse and logistics
partners, or
online marketplaces.
6. Where you discuss your revenue growth and amount of revenues for 2016
and 2017,
please balance your disclosure by also providing your net losses for
the periods discussed.
7. We note your statement that "the consumer journey is data-driven and
no longer relies
primarily on brand value to drive buying decisions." We also note your
later statement
that your "business depends on [y]our ability to build and maintain
strong brands." Please
reconcile these statements.
Our History and Corporate Information, page 5
8. Please explain the business reasons for the reverse merger and its
connection to the Series
C preferred stock financing of Mohawk Opco.
Risk Factors, page 11
9. We note your discussion regarding your reliance upon "data provided by
third parties."
Given the centrality of data to AIMEE's operations, please provide
more detail as to how
you acquire relevant data and how it is actually used in your
manufacturing and sales
processes. Please also discuss any monetary costs associated with data
acquisition.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 46
10. So that investors may better understand your business model, please
clarify what you
mean by "digital native consumer products." Further explain how such
products, which
are "created" through your AIMEE platform, are distinguished from
branded products
sold by a typical consumer product company. We note your four owned
and operated
consumer brands: hOme, Vremi, Xtava and RIF6 and their descriptions on
page 60.
Yaniv Sarig
FirstName LastNameYaniv Sarig
Mohawk Group Holdings, Inc.
Comapany 29, 2018
November NameMohawk Group Holdings, Inc.
November 29, 2018 Page 3
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Financial Operations Overview - Revenue, page 47
11. We note that in 2018, you entered into SaaS agreements with
third-party brands and have
launched pilot programs for your managed SaaS business leveraging your
AIMEE
technology platform. If material to your 2018 revenues or results from
operations, please
disclose your revenue recognition policy for these arrangements.
Results of Operations - Comparison of Years Ended December 31, 2016 and 2017,
page 48
12. We note that your significant revenue growth (101% year over year) was
driven by new
products launched in 2017 and the full year 2017 impact of products
released in the
second half of 2016. On page F-11, it appears that a significant
portion of your growth
was derived from the sale of environmental appliances. Please revise
to describe the new
types of products launched and to provide examples of what is meant by
environmental appliances.
13. Please revise your discussion of cost of sales and gross margin on
page 49 to more clearly
describe how changes in product mix affect your results. For example,
explain which
types of products contribute to a higher (or lower) gross margin.
Business
Managed SaaS, page 61
14. Please clarify the operational functionality of your Managed SaaS
service. For example,
disclose whether you have begun offering this service to
third-parties, whether you have
generated revenues from this service, etc.
Security Ownership of Certain Beneficial Owners and Management, page 79
15. We note your statement that Asher Delug has entered into voting
agreements with Larisa
Storozhenko and MV II, LLC. In light of these agreements, please
disclose Mr. Delug's
combined, total voting power. Please also expand your risk factor
discussion on page 34
to discuss this.
Selling Stockholders, page 81
16. We note that several selling stockholders are broker-dealers and
affiliates of broker-
dealers. For each broker-dealer, tell us whether the shares being
registered were received
as compensation for underwriting activities or if some or all of the
shares were received
for other purposes. For each affiliate of a broker-dealer, disclose
the following (where not
done so already):
whether the seller purchased in the ordinary course of business, and
at the time of the purchase of the securities to be resold, whether
the seller had any
agreements or understandings, directly or indirectly, with any
person to distribute the
securities.
Yaniv Sarig
FirstName LastNameYaniv Sarig
Mohawk Group Holdings, Inc.
Comapany 29, 2018
November NameMohawk Group Holdings, Inc.
November 29, 2018 Page 4
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FirstName LastName
Where You Can Find Additional Information, page 102
17. We note your statement that you will become subject to the information
and reporting
requirements of the Exchange Act. Please clarify if you intend to
register your common
stock under Section 12 of the Exchange Act.
2. Summary of Significant Accounting Policies - Revenue Recognition, page F-10
18. Please disclose when you adopted ASC 606 and, if true, that you
adopted using the full
retrospective method.
19. You disclose on page F-10 that Amazon provides you with your sales
platform, logistics
and fulfillment operations, including certain warehousing for your
goods. In light of the
scope of services provided by this third party, please revise to more
clearly disclose the
significant judgments made in evaluating that you have control over
the product prior to
its transfer to the customer. If true, please also revise to clarify
that although Amazon
may facilitate product returns on your behalf, you retain back-end
inventory risk over
products returned by customers. Refer to ASC 606-10-55-37A,
606-10-55-79 though 55-
80 and 606-10-50-19.
3. Inventory, page F-13
20. Please revise to disclose the extent to which your inventory is held
in Amazon or other
third-party warehouses. Please also clarify if your agreements with
contract
manufacturers provide you with any rights of return.
Notes to Consolidated Financial Statements for the Years Ended December 31,
2016 and 2017
9. Credit Facility and Term Loan, page F-14
21. Please revise to disclose the material financial covenants that you
will be required to
maintain, starting October 2018, under the Midcap Financial Trust
Credit Facility.
Item 15. Recent Sales of Unregistered Securities, page II-2
22. You disclose that you relied on the exemptions from registration
provided by
Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D
for the securities
issued in the merger with Mohawk Opco. Please state briefly the facts
relied upon to
make the exemptions available, including the number and nature of
persons offered and
sold securities in connection with the merger.
Yaniv Sarig
Mohawk Group Holdings, Inc.
November 29, 2018
Page 5
You may contact Kathryn Jacobson, Senior Staff Accountant, at (202)
551-3365 or
Lisa Etheredge, Staff Accountant, at (202) 551-3424 if you have questions
regarding comments
on the financial statements and related matters. Please contact William
Mastrianna, Attorney-
Adviser, at (202) 551-3778 or Kathleen Krebs, Special Counsel, at (202)
551-3350 with any
other questions.
FirstName LastNameYaniv Sarig Sincerely,
Comapany NameMohawk Group Holdings, Inc.
Division of
Corporation Finance
November 29, 2018 Page 5 Office of
Telecommunications
FirstName LastName