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Lightspace Corp
|
S-1/A
Jun 21, 6:58 PM ET
Lightspace Corp S-1/A
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Contents
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1. It appears that you are registering the issuance of securities to the underwriter (Fee Table lines 9 through 17). Please advise as to your purpose for doing so given that the underwriter will not be able to rely on Section 4(2) of the Securities Act for resales by it to third parties. If your intent is to register such securities for resale, please revise the fee table and your disclosure throughout the prospectus as applicable.
2. The securities issuable pursuant to the February 9, 2006 “Exchange Agreement” (Fee Table lines 18 through 27) may not be registered for a primary offering since the offers commenced prior to filing the registration statement, as is evident from the terms of the Exchange Agreement. Further, it appears these securities may not be registered for resale at this time because the issuance transactions have not been completed. Please remove these securities from this registration statement and delete the “Alternate Prospectus” pages A-1 to A-5. After you have completed the “Exchange Agreement” transactions privately, you may register the securities for resale on any Form available to you for resales at that time. Please revise throughout the prospectus as applicable. Please also note that it is inconsistent with Section 5 of the Securities Act to renegotiate a private offering while the related securities are still subject to a pending registration statement.
3. The securities issuable upon surrender of the “Bridge Notes” cannot be registered as a primary offering since the offer commenced prior to filing the registration statement, as is evident by the terms of the Bridge Notes. Further, it appears these securities may not be registered at this time for resale because the issuance transactions have not been completed. After you have completed the Bridge Note surrender transactions privately, you may register the securities for resale on any Form available to you for resales at that time. Please revise throughout the prospectus as applicable. Please also note that it is inconsistent with Section 5 of the Securities Act to renegotiate a private offering while the related securities are still subject to a pending registration statement.
4. Since the Bridge Note surrender Units are ineligible for the registered primary offering, it is unclear whether the surrender would qualify for meeting the minimum Unit offering requirement. Please revise or advise.
5. Once the Underwriter's securities, “Exchange Agreement” and Bridge Note surrender transactions are all removed from registration, it appears that Form SB-2 would be available for the offering. See General Instruction I to Form S-1 and General Instruction A.1 to Form SB-2. Please re-file on Form SB-2 or te11 why you believe you are eligible to use Form S-1.
6. Please revise the first paragraph to highlight that $x (y%) of the stated aggregate offering proceeds will be applied to reducing outstanding indebtedness, resulting in only $z of net cash proceeds to the company from the minimum offering amount. Further, revise the risk factor “We may need additional capital to fund our growth” at page 7 to explain the effect of this intended application of offering proceeds.
We have added the following paragraph to the cover page of the Prospectus:
“We intend to use approximately $825,000, representing 29% of the Minimum Offering and 21% of the Maximum Offering, to pay the principal and accrued interest on our outstanding 8% senior secured notes due June 15, 2006 (the “Senior Notes”). After repayment of the Senior Notes, the aggregate proceeds to us of the Offering will be $2,055,000 in the case of the Minimum Offering and $3,015,000 in the case of the Maximum Offering.”
We have also revised the risk factor beginning “We may need additional capital” to clarify that we anticipate that the net proceeds of the Offering, after payment of the Senior Notes, will be adequate to satisfy our capital requirements for the next six to 12 months.
7. In the first paragraph you disclose the aggregate proceeds to be received in the minimum and maximum scenarios. Please revise such disclosure to show expected offering proceeds amounts net of the underwriting commission payable.
8. In the fourth paragraph you refer to $2.4 million of 8% senior secured notes to be surrendered for approximately 387,000 Units. In the table at page 4 you indicate $1.7 million of senior secured notes will be eliminated. Please reconcile the discrepancy in amounts.
9. We note that your pro forma statements assume a one for 2.5 reverse stock split of your common stock. Please clarify for us when the stock split is effective. Note that changes in capital structure due to reverse stock splits must be given retroactive effect in the balance sheet. An appropriately cross-referenced note should disclose the retroactive treatment, explain the change made and state the date the change became effective. Revise as necessary. Refer to SAB 4C and SFAS 128, paragraph 54 for guidance.
10. Please expand the note to the table on page 4 to explain the basis for the pro forma cash amounts shown.
11. We note that you are using the minimum value method to estimate the value of the Exchange Warrants. This method is appropriate for a non-public entity. However, as indicated under Appendix E of SFAS 123, a company that makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market is considered to be a public entity. Please discuss the consideration that you have given to this guidance.
12. Please include appropriate risk factor headings for each risk factor included in this section. In doing so, please evaluate each of your headings to ensure that your risk factors clearly and specifically state the material risk to investors that is a consequence of the condition or uncertainty that you identify. Avoid risk factor headings that are too vague and generic to adequately describe the risk that follows or merely allude to the risk. You should describe the risk and its result clearly and concretely and include the nature of the specific risk or harm in your headings. Readers should be able to read the risk factor headings and come away with a strong understanding of what the risk is and the result of the risk as it specifically applies to you. For example, but without limitation, please revise the following risk factor headings in response to this comment:
13. Please identify the foreign countries where you have previously made sales.
14. Briefly indicate whether the underwriter of this offering expects to make a market in your securities.
15. Since data for each of the last five fiscal years of the registrant is required, revise to explain that you were incorporated in August 2001,but did not begin operations unti1 2003. Discuss the effect on the comparability of the financial data presented. Refer to Item 301 of Regulation S-K.
16. Please discuss the significant quarterly variability of revenues in fiscal 2005, including reasons for the significant decline in the fourth quarter.
17. We note that from March 2005 to September 2005 you did not produce any interactive tiles and during 2004 you encountered significant manufacturing problems. Please revise to provide a
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discussion of the significant manufacturing problems and quantify the impact that these matters have had on your business and what effect is expected in future periods. Please also describe the remedial steps taken. We note the current manufacturer is unable to produce components that meet your requirements, and you anticipate you will cancel the contract. Please revise MD&A to discuss if this cancellation is expected to have a material impact you're your revenues or operating results.
18. We note that you have limited supply sources for materials and services. Please discuss. Also, we note you are seeking to develop lower cost manufacturing methods and suppliers. Please discuss.
19. We note that you outsource manufacturing. Please revise to c1arify what you mean by "production requirements" at your facility.
20. Note 12 to the financial statements indicates the options granted in September 2005 Stock Incentive Plan are exercisable at $0.33. Note 2 to the table here indicates options granted under that program are exercisable at $0.83. Please reconcile.
The disclosure related to the option grants has been revised to reflect that the options were granted with an exercise price of $0.83 per share, the price of the options after giving effect to the 1 for 2.5 reverse stock split.
21. We see in Note7 to the financial statements that you engaged in transactions with an officer and principal stockholder during 2005. Please discuss those transactions in this section, or tell us why you believe they need not be disclosed.
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22. We note several transactions with affiliates described in Note 9 to the financia1 statements. Please tell us where each of these transactions is described in this section, revise to include them, or tell us why you believe they may be omitted.
23. With respect to the second paragraph hereunder, material contracts and agreements should be filed as exhibits to the registration statement, not furnished upon request. In addition, since you are not currently a reporting company, you may not incorporate by reference any required disclosure. See Form S-l, General Instruction VII. Please revise appropriately.
24. As previously noted, you may not register a primary issuance of shares issuable upon exercise of outstanding conversion rights. Please revise this section accordingly.
25. Provide the information, including the table, required by Item 508(e) of Regulation S~K.
The disclosure has been revised to reflect that the underwriter is not receiving any compensation in the form of commissions, as discussed above. We have added a table setting forth the number of Units to be subject to the underwriter’s warrant in the case of the Minimum Offering and the Maximum Offering.
26. Revise to clearly state that there is "substantial doubt" about your ability to continue as a going concern. Going concern disclosures must use the words "substantial doubt."
27. We note that your products have hardware and software features. Please tell us how you allocate revenue to these elements. Explain if the customer is provided with a right to receive additional
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software products free or at a reduced price. Please explain how you comply with SOP 97-2 and EITF 00-21 with regard to your multiple element arrangements.
28. Please tell us more about what is included in the line item "deferred revenue." Also, revise your liquidity section of your MD&A to describe the significant decrease from fiscal year 2004 to fiscal year 2005.
29. We noted that your products are "generally" warranted against defects for twelve months following the sale. We also note on page 29, that pursuant to your warranty, products may be returned for repair, replacement or refund. Please tell us how Warranty costs are estimated at the time of revenue recognition.
30. For each convertible note and warrant purchase agreement, please tell us and disclose the following:
31. For your Series A convertible preferred stock, please tell us and disclose the significant terms of the preferred stock. Significant terms include settlement alternatives and the party that controls settlement and conversion rates, as wel1 as caps and floors on those rates. Please also tell us and disclose how you accounted for the issuance of the convertible preferred stock, warrants, and any subsequent modifications. Cite the accounting literature upon which you relied and explain in detail how you applied that literature to the terms of your agreements.
32. Please revise to include all of the disclosures required by paragraphs 45-47 of SFAS 123, including the pro forma information required. We also refer you to the disclosure requirements of SF AS 148.
33. Provide us with an itemized chronological schedule detailing each issuance of your common shares, preferred stock, stock options and warrants since March 2005 through the date of your response. Include the following information for each issuance or grant date:
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34. Revise your disclosure to identify the total amount of revenues from each of your customers that exceed 10% of your total revenues. We refer you to paragraph 39 of SFAS 131.
35. We note on February 9, 2006 that you entered into an Exchange Agreement with holders of Existing Notes, Series A Preferred Stock and Existing Warrants. Please respond to the following:
36. Consideration should be given on an ongoing basis to the updating requirements of Rule 3-12 of Regulation S-X. Also, all amendments should contain a currently dated accountant's consent.
37. It appears you have limited disclosure in the section to equity securities. Please revise to include the issuance of all securities issued over the last 3 years in accordance with Reg. S-K Item 70l.
38. We note several references to sales of securities, such as notes, warrants and preferred stock. For example, you indicate on pages F-12 and F-13 of your financial statements issuances of notes to investors in April, November and December of 2004 and January, June and September of 2005. If material, please file copies of the securities sales contracts.
39. You refer on page 24 to a purchase contract with a Chinese manufacturer. To the extent required by Item 601(b)(10) of Regulation S-K, please file such contract as an exhibit. In addition, to the extent you entered into purchase contracts with any of your customers that comprised at least 10% of your revenues, please also file such contracts as exhibits.
40. Please file the escrow agreement described on page 42 as an exhibit.
29. Please include the undertakings required by Item 512(a)(5)(ii) of Regulation S-K. See Rule 430C(d) and Rule 424(b)(3).
30. Consideration should be given on an ongoing basis to the updating requirements of Rule 3-12 of Regulation S-X. Also, all amendments should contain a currently dated accountant's consent.