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August 8, 2011
Securities and Exchange Commission
Division of Corporate Finance
100 F Street, NE
Washington, D.C. 20549
Attn: | Loan Lauren P. Nguyen |
Sonia Bednarowski
Re: | The PAWS Pet Company, Inc. f/k/a Pet Airways, Inc. |
Registration Statement on Form S-1
Filed June 20, 2011
File No. 333-175026
Amendment No. 2 to Form 8-K
Filed June 20, 2011
Amendment No. 3 to Form 8-K
Filed June 23, 2011
File No. 333-130446
Dear Ms. Nguyen and Ms. Bedbarowski:
We are counsel to The PAWS Pet Company, Inc. f/k/a Pet Airways, Inc. (the “Company”). We hereby submit, on behalf of the Company, a response to certain questions raised by the staff of the Securities and Exchange Commission (the “Staff”) in its letter of comments dated July 14, 2011 (the “Comment Letter”) relating to the Company’s Registration Statement on Form S-1 filed on June 20, 2011 (the “Registration Statement on Form S-1”), Amendment No. 2 to the Company’s Current Report on Form 8-K filed on June 20, 2011 (“8-K Amendment No. 2”), and Amendment No. 3 to the Company’s Current Report on Form 8-K filed on June 23, 2011 (“8-K Amendment No. 3”). Set forth below is the Company’s responses to the Staff’s comments.
The Company’s responses are numbered to correspond to the Staff’s comments and are filed in conjunction with Amendment No. 1 to the Company’s Registration Statement on Form S-1 (“Amendment No. 1”) and Amendment No. 4 to the Company’s Current Report on Form 8-K (“Amendment No. 4”). For your convenience, each of the Staff’s comments contained in the Comment Letter has been restated below in its entirety, with the Company’s response set forth immediately under such comment.
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Form S-1
Registration Statement Cover Page
1. | Please revise to indicate the Primary Standard Industrial Classification Code as 4512 or advise. |
Response:
In response to the Staff’s comment, the Company has revised the cover page of Amendment No. 1 to indicate the Primary Standard Industrial Classification Code of 4512.
Prospectus Cover
2. | Please revise the first sentence in the paragraph to say “sale” rather than “resale” and revise throughout the document accordingly. |
Response:
In response to the Staff’s comment, the Company has revised the first sentence in the referenced paragraph and throughout Amendment No. 1 to say “sale” rather than “resale”.
Prospectus Summary, page 4
3. | Please revise to disclose how many shares of Common A Stock in this offering are underlying warrants. In addition, please revise your fee table to distinguish the issued and outstanding shares of Common A Stock and the shares of Common A Stock that are underlying warrants that you are registering. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Prospectus Summary section on page 4 of Amendment No. 1 to disclose the number of shares of Common A Stock included in the offering that are underlying warrants. In addition, the Company has disclosed in a footnote to the fee table the maximum number of shares of Common A Stock issuable upon exercise of warrants that are being registered.
Business Overview, page 4
4. | Please revise to disclose that your independent auditor’s report expresses substantial doubt about your ability to continue as a going concern. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Business Overview Section on page 4 of Amendment No. 1 to disclose that its auditor’s report expresses substantial doubt about its ability to continue as a going concern.
5. | Please revise to add the disclosure from the last risk factor on page 7 that you do not presently have adequate cash from operations or financing activities to meet your financing needs, that you may seek additional funding through one or more credit facilities, if available, or through the sale of debt or additional equity securities and that you cannot consummate any such additional financing without the consent of your investor in the June 3, 2011 private placement here. In addition, please disclose the amount of additional funding you require. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Business Overview Section on page 4 of Amendment No. 1 to add the disclosure from the last risk factor on page 7. In addition, the Company disclosed the amount of additional funding it requires for the next 12 months.
6. | Please revise to disclose here that you will not receive any proceeds in this offering from the sales of common stock by your selling stockholder but that you may receive proceeds if the warrants are exercised. In addition, please provide a brief summary of the ways the warrants may be exercised and the amount of proceeds you will receive depending upon how the warrants are exercised. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Business Overview Section on page 4 of Amendment No. 1 to disclose that it will not receive any proceeds in this offering from the sales of common stock by its selling security holder but that it may receive the exercise price of the warrant if the cashless exercise feature is not used or if the warrant is not exchanged for shares of common stock. In addition, the Company has provided a brief summary of the ways the warrants may be exercised and the amount of proceeds that that it will receive depending upon how the warrant is exercised.
7. | Please revise to provide a brief description of the terms of the transaction in which the selling shareholder obtained the warrants and shares of common stock that are being offered in this offering. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Business Overview Section on page 4 of Amendment No. 1 to provide a brief description of the terms of the transaction in which the selling security holder obtained the warrants and shares of common stock that are being offered in this offering.
8. | Please revise to include a brief history of your operating company. In addition, please revise to disclose that in March 2010 you suspended flight operations to upgrade your reservation system and to raise additional capital and that in June 2010 you resumed flight operations after raising additional capital by issuing a series of convertible debentures, shares of common stock and warrants. |
Response:
In response to the Staff’s comment, the Company revised its disclosure on page 4 of Amendment No. 1 to include a brief history of its operating subsidiary including disclosure regarding the suspension of its flight operations in March 2010, its June 2010 capital raise and its return to flight operations.
9. | Please revise to remove marketing language such as “Pet Lounge,” “Pawsengers” and “Pet Parents.” |
Response:
In response to the Staff’s comment, the Company has removed marketing language such as “Pet Lounge,” “Pawsengers” and “Pet Parents” throughout Amendment No. 1.
10. | We note your disclosure on page 47 that as of March 31, 2011 you served 10 markets. However, here you state that as of June 16, 2011 you serve nine markets. Please advise or revise. Also briefly describe the current markets that you serve. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Business Overview section on page 4 of Amendment No. 1 to indicate that the Company currently serves nine markets. In addition, the Company briefly described the nine markets currently served by the Company.
11. | Please revise to disclose the approximate number of passengers per flight that you can transport. Also disclose the types of animals your airline will transport and discuss any limitations due to the types of animals that you currently serve due to size and weight restrictions. Lastly, revise the Business section accordingly. |
Response:
In response to the Staff’s comment, the Company has revised the Business Overview section on page 4 of Amendment No. 1 to disclose the approximate number of passengers per flight that it can transport. In addition, the Company added additional disclosure regarding the types of animals that it transports and size and weight limitations of its passengers. The Company added similar disclosure in the Business section on page 23 of Amendment No. 1.
12. | Disclose the number of aircraft that you currently operate and whether you own any of the aircrafts. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in the Business Overview Section on page 4 of Amendment No. 1 as well as the Business section on page 23 of Amendment No. 1 to disclose the number of aircraft that it currently operates and that it does not own any of its own aircraft.
13. | Please revise to clarify what you mean by “specially trained” on page 4. |
Response:
In response to the Staff’s comment, the Company has removed the referenced language from page 4 of Amendment No. 1.
14. | Please remove the word “easily” from the second to the last sentence in the second paragraph of this section. |
Response:
In response to the Staff’s comment, the Company has removed the word “easily” from the second to the last sentence in the second paragraph of this section.
The Offering, page 5
15. | Considering that this registration statement relates to the sale of common stock by the selling share holder, it may not be apparent to a reader why the amount common stock to be outstanding after the offering is not the same as the amount of common stock outstanding before the offering. Therefore, please include a footnote to your disclosure that explains to readers why the amount of common stock to be outstanding after the offering is not the same as the amount of common stock outstanding before the offering. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 5 of Amendment No. 4 to include a footnote that explains to readers why the amount of common stock to be outstanding after the offering is not the same as the amount of common stock outstanding before the offering.
16. | Please revise to disclose the amount you could receive from the exercise of the warrants. |
Response:
In response to the Staff’s comment, the Company has disclosed the maximum amount that it may receive from the exercise of the warrant on page 5 of Amendment No. 1.
Risk Factors, page 6
17. | Please revise to remove the third sentence in the introductory paragraph in this section. If risks are not deemed material then they should not be mentioned here. |
Response:
In response to the Staff’s comment, the Company has removed the third sentence in the introductory paragraph in the Risk Factors section on page 6 of Amendment No. 1.
18. | Please revise to add risk factors that discuss the effect that the issuance of your Series A Preferred Stock could have on the holders of your common stock, the effect on your business if this registration statement is not declared effective within 60 days of the closing of your June 3, 2011 private offering, and the effect that your registration rights agreement, dated as of June 3, 2011, could have on your ability to raise money through future equity offerings. Alternatively, explain why such risk factors are not necessary. |
Response:
In response to the Staff’s comment, the Company has added risk factors that the disclose the effect that the issuance of its Series A Preferred Stock could have on the holders of its common stock on page 11 of Amendment No. 1. In addition, the Company added a risk factor addressing the effect on its business if this registration statement is not declared effective within 60 days of its June 3, 2011 private offering on page 10 of Amendment No. 1. The Company also added a risk factor which explains the impact of the registration rights agreement on its ability to raise money through future equity offerings on page 10 of Amendment No. 1.
We may have difficulty managing our growth, page 6
19. | We note your disclosure that you “[a]nticipate that [you] will continue to grow in the near future.” Please revise to clarify that there is no guarantee that you will continue to grow in the near future. |
Response:
In response to the Staff’s comment, the Company has revised the referenced risk factor on page 6 of Amendment No. 1 to clarify that there is no guarantee that it will continue to grow in the near future.
We may not be able to maintain our cost structure, thus leading to higher operating, page 6
20. | We note your disclosure in the first sentence of this risk factor that your “ability to do business and be profitable is based on maintaining the lower average cost per Pawsengers as possible.” Please revise to clarify that you have experienced net losses since inception and have not generated positive cash flows from operations. |
Response:
In response to the Staff’s comment, the Company has revised the referenced risk factor on page 6 of Amendment No. 1 to clarify that it has experienced net losses since inception and has not generated positive cash flows from operations.
The traditional commercial airline industry is subject to extensive government regulation, page 9
21. | Refer to the last sentence of the first paragraph. Please expand on the traditional airline regulations that you are subject to and discuss how they impose risks to your business operations. |
Response:
In response to the Staff’s comment, the Company revised the referenced risk factor on page 9 of Amendment No. 1 to expand on the traditional airline regulations that it is subject to and discuss how they impose risks on its business operations.
The issuance of shares upon conversion of convertible debentures, page 10
22. | Please revise to disclose the number of shares of your common stock that would be outstanding after the exercise of the referenced warrants and debentures. |
Response:
In response to the Staff’s comment, the Company has revised the referenced risk factor on page 10 of Amendment No. 1 to disclose the number of shares of common stock that would be outstanding after the conversion and/or exercise of the referenced debentures and warrants.
Our controlling stockholders hold a significant percentage, page 11
23. | We note that three individuals are the beneficial owners of 41% of your outstanding voting securities. However, you state that two stockholders may not have interests similar to those of your stockholders. Please revise or advise. |
Response:
In response to the Staff’s Comment, the Company has revised the referenced risk factor on page 11 of Amendment No. 1 to remove the reference to Mr. Andrew C. Warner.
Use of Proceeds, page 12
24. | Please disclose the amount of proceeds you could receive from the exercise of the warrants and quantify the anticipated uses of such proceeds, if possible. Also clarify that you will not receive any proceeds from this offering from the sales of common stock by your selling stockholder but that you may receive proceeds if the warrants are exercised. |
Response:
In response to the Staff’s comment, the Company has revised the referenced risk factor on page 12 of Amendment No. 1 to disclose the amount of proceeds that it could receive from the exercise of warrants. The Company is not able to quantify the use fo such proceeds as the amount of proceeds to be received, if any, is not determinable. The Company also clarified that it will not receive any proceeds from this offering from the sales of common stock by its selling security holder but that it may receive proceeds if the cashless exercise feature, the full-recourse note exercise feature or the exchange feature is not used, upon exercise of the warrants by the selling security holder.
Selected Financial Data, page 14
25. | Refer to page 15, Operational Metrics. We note your disclosure that key operational metrics that you regularly monitor include approved credit card transactions, bookings of pawsengers on your flights, and flight utilization. In addition, we note your disclosure that you track the average revenue per mile flown and compare that to the average cost per mile. We believe you should add similar disclosure of key operating statistics to your disclosure of selected financial data so that investors can observe and analyze such data for your most recent years of operations. In addition, we believe you should provide a discussion and analysis of these key operational metrics in MD&A and any other operating statistics that you believe would be useful to investors to better understand your business. Please revise accordingly. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 15 of Amendment No. 1 to remove disclosure regarding its tracking of average revenue per mile flown and average cost per mile flown as it only began tracking such data in its last completed fiscal year. Accordingly, the Company cannot provide meaningful information on a comparable basis for inclusion in its selected financial data or its MD&A. The Company will consider including such suggested disclosure in the future once the applicable data is available.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 15
Overview, page 15
26. | Provide a discussion of your relationship with Suburban Air Freight, Inc. Such discussion should include the number of aircraft available for your use and the nature of your relationship with Suburban Air Freight, Inc., including the terms of any contractual relationship. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 15 of Amendment No. 1 to include a discussion of its relationship with Suburban Air Freight, Inc. In addition, the Company has added a risk factor on page 6 of Amendment No. 1 regarding its relationship with Suburban Air Freight, Inc.
Critical Accounting Policies, page 16
27. | We believe that disclosure about critical accounting estimates should supplement, not repeat, the description of accounting policies included in the notes to the financial statements. While notes to the financial statements generally describe the method used to apply an accounting policy, we believe the discussion in this section should focus on the estimates, assumptions or uncertainties involved in applying a principle and how these items may have different effects on financial results, including why these items are subject to change and their sensitivity to change. For example, your discussion on accruals for contingent liabilities could discuss the analysis of the factors used in arriving at your estimates, how likely the factors may change, and the impact on financial results if the factors that you used in these assumptions would change by a specified level. This type of disclosure is not limited to the example above, but rather should be considered in each of your critical accounting policy based on each of their specific assumptions and uncertainties. Please refer to Section V of FR-72 (Release no. 33-8350) for further guidance in this area. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure regarding its critical accounting policies on page 16 of Amendment No. 1.
Results of Operations, page 19
28. | You cite a number of factors affecting the comparison of revenues and expenses but do not quantify their effects. Please quantify all factors cited so that investors may have an understanding of the magnitude and relative effect of each on your results. Refer to section 501.04 of the Codification of Financial Reporting Releases for guidance. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in Amendment No. 4 to indicate that the fluctuations in results were caused by its suspension of flights from March 2010 to June 2010.
29. | In addition, we believe your disclosure would provide investors with greater insight into your results, particularly for trending purposes and discerning future prospects, if your discussion of the factors cited as causes of variances included the underlying reasons associated with the factors. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in Amendment No. 4 to indicate that the fluctuations in results were caused by its suspension of flights from March 2010 to June 2010.
Liquidity and Capital Resources, page 20
30. | We note your disclosure on page 20 that the debenture holders of unsecured 8% convertible debentures in the aggregate principal amount of $525,000 elected to convert their debentures into 1,300,000 shares of common stock in January 2011. Please revise to clarify here the amount of 8% convertible debentures that have not been converted. |
Response:
In response to the Staff’s comment, the Company revised its disclosure on page 20 of Amendment No. 1 to clarify the amount of 8% convertible debentures that have not yet been converted.
31. | Please revise to provide a discussion of your plan for raising additional capital including each step required as well as any contingencies in the raising of additional capital. In addition, provide a discussion of how long you can satisfy your cash requirements, given your current amount of working capital. As part of your discussion, disclose your monthly burn rate. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 20 of Amendment No. 1 to include a discussion of its plan for raising additional capital. In addition, the Company has included a discussion of how long it can satisfy its cash requirements given its current amount of working capital.
Off-Balance Sheet Arrangements, page 24
32. | We note that you have two sections entitled “Off-Balance Sheet Arrangements.” Please revise or advise. |
Response:
In response to the Staff’s comment, the Company removed one of the Off-Balance Sheet Arrangements sections from page 24 of Amendment No. 1.
Business, page 25
33. | Please revise to discuss the costs and effects of existing or probable governmental regulations on your business, including the costs and effects of compliance with environmental laws. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 26 of Amendment No. 1 to indicate that the costs of complying with governmental regulations is incurred by Suburban Air, which is built into the fees that it charges the Company.
Description of Market, page 25
34. | Please revise to clarify what you mean in the last sentence in the first paragraph of this section that you have “easily accessible Pet Lounges located away from main terminals.” For example, please disclose as to whether your customers must pass through security to drop off the animals that you will be transporting. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 23 of Amendment No. 1 to simply disclose that its lounges are located away from the main terminals.
35. | Please revise to clarify what you mean by “launching operations from Orlando, Florida” by disclosing whether you have entered into any arrangements to operate at the new location. In addition, please revise to clarify what you mean by “within a two hour driving radius of the majority of the U.S. pet population.” |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 24 of Amendment No. 1 to clarify that it is currently evaluating suitable space for its planned Orlando facility. In addition, the Company has added additional disclosure regarding its belief that most pet owners will be willing to drive up to 2 hours to use its services.
36. | We note your disclosure on page 26 that you ultimately “intend to offer direct national service, at which point, [you] will look to partner with traditional commercial airlines and offer Pet Airways as a safe alternative to commercial airline pet transport options.” Please revise to disclose when you intend to offer direct national service by providing a timeline and budget that describes each step of your business plan, if possible. In addition, please revise to describe the type of partnership you hope to form with traditional commercial airlines. Finally, please revise to clarify what you mean by “direct national service.” In this regard, we note your disclosure on page 26 that you may use a hub and spoke system where you would fly to a centralized hub and then to the final destination city. |
Response:
In response to the Staff’s comment, the Company has removed the disclosure regarding its intent to offer direct national service from Amendment No. 1.
Our Aircraft, page 26
37. | Please disclose, if true, that you do not own any of your aircraft. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 24 of Amendment No. 1 to indicate that it does not own any of its own aircraft.
Our Pet Lounges, page 26
38. | Please revise to clarify what you mean by your disclosure that your pet lounges “are comfortably furnished with pet friendly furniture” and please revise to clarify how this creates a “welcoming atmosphere” for the animals that you transport. In this regard, we note your disclosure on page 25 that you place the pets into a carrier and then board the carrier into the main cabin of the aircraft. |
Response:
In response to the Staff’s comment, the Company has removed the referenced language from Amendment No. 1.
39. | Please revise to disclose the fees for overnight stay and short term stay. In addition, please revise to disclose what you mean by “short term stay.” Finally, please describe your current capacity for short term stays and disclose your plans for increasing the space allocated for such stays. |
Response:
In response to the Staff’s comment, the Company has removed the disclosure regarding short term stays from Amendment No. 1 as it is not material to the business of the Company.
40. | We note disclosure in the risk factor on page 9 that you may incur additional costs due to inclement weather. In such instances, please disclose whether you will board the pets at the Pet Lounges and incur the additional costs. Please also tell us whether these additional costs have been material to your business. |
Response:
In response to the Staff’s comment, the Company has added additional disclosure on page 24 of Amendment No. 1 regarding the need to utilize third party boarding facilities in the event that flights are cancelled due to inclement weather.
Flight Routes, page 26
41. | Please disclose any current plans you have to enter new markets, including the specific markets you intend to enter, such as the Orlando, Florida market, a timeline and budget. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 25 of Amendment No. 1 to disclose its current plans to enter into new markets, including a timeline and budget.
Our Competition, page 26
Traditional Commercial Airlines, page 26
42. | Please revise the first sentence in the second paragraph to state as a belief. |
Response:
In response to the Staff’s comment, the Company revised the referenced sentence to state as a belief.
43. | Please revise to clarify what you mean by “generally unregulated” in the second sentence in the second paragraph of this section. |
Response:
In response to the Staff’s comment, the Company has removed its statement that cargo hold temperature is generally unregulated from Amendment No. 1.
44. | Please provide support to us that, in traditional commercial airlines’ aircraft, “pets are generally strapped in under a cargo net close to the cargo door.” |
Response:
In response to the Staff’s comment, the Company has removed the referenced disclosure from Amendment No. 1.
45. | Please revise to clarify what you mean by “routinely” by providing quantitative information and please provide support to us that that “[p]ets have routinely escaped from cargo holding areas or have been lost in transit when accidently transferred to a different aircraft.” |
Response:
In response to the Staff’s comment, the Company has removed the referenced disclosure from Amendment No. 1.
46. | We note your disclosure regarding a 1998 study by the San Francisco SPCA regarding the number of pets that travel in cargo and the number of pets that were injured while traveling in cargo. Please revise to disclose updated information. |
Response:
In response to the Staff’s comment, the Company has removed the referenced disclosure from Amendment No. 1.
Pet Concierge Services, page 27
47. | Please provide support to us that all pet concierge services use traditional commercial airlines and that the pet is relegated to the cargo hold for the duration of the flight. Alternatively, please revise to clarify that this is a belief. |
Response:
In response to the Staff’s comment, the Company revised its disclosure to indicate that it is a belief.
Pet Boarding and Sitters, page 27
48. | We note your disclosure that “boarding is not a good option for” cats. Please revise to clarify that this is a belief. In addition, please revise the last sentence in this section to state as a belief. |
Response:
In response to the Staff’s comment, the Company revised its disclosure to indicate that it is a belief.
Pricing, page 27
49. | Please provide support to us of the cost for air cargo and carry-on baggage for pets on traditional airlines, ground transport of animals and boarding cost for animals. Alternatively, please revise to state that this is a belief. |
Response:
In response to the Staff’s comment, the Company revised its disclosure to indicate that that the estimated costs are a belief.
50. | Please revise to disclose the cost per animal that you incur for your service. |
Response:
The cost to the Company of each flight depends on the route flown and the price of fuel at the time of flight. Generally, it is in the range of $36,000 to $40,000 per week on the Los Angeles to New York to Los Angeles route and $53,000 to $63,000 per week for the Los Angeles to Fort Lauderdale to Los Angeles route. The cost per animal depends upon the amount of pets carried on each leg of each flight. The Company does not track information with respect to its flights that would enable it to calculate the average cost per animal incurred for its service.
Corporate Strategy, page 27
51. | Please provide support to us that “Pet Parents, the Department of Transportation, the USDA and others in the airline industry, all agree that transporting pets and animals as cargo presents a clear danger to these pets and animals.” In addition, please revise to clarify what you mean by “others in the airline industry.” |
Response:
In response to the Staff’s comment, the Company has revised the referenced statement to indicate that it is a belief of the Company.
52. | We note the services that you intend to offer at the bottom of page 27 and on page 28. Please revise to disclose when you intend to offer such services, including a timeline and budget of the steps necessary to implement such services. In addition, please revise to remove the words “for rest and relaxation” from the second bullet point on page 27 as this is marketing language. Finally, please revise to clarify whether you already offer boarding services. In this regard, we note your disclosure on page 26 that, “[a]s a convenience to [your] Pet Parents, [you] offer limited overnight or short term stay kennel facilities at some of [your] Pet Lounges.” |
Response:
In response to the Staff’s comment, the Company has removed the referenced disclosure regarding its planned services from Amendment No. 1.
Management, page 30
Business Experience, page 30
53. | Please revise to clarify the business experience of Mr. Wiesel for the last five years. |
Response:
In response to the Staff’s comment, the Company has clarified its disclosure to indicate that Mr. Wiesel co-founded Pet Airways in 2005 and has served the Company in varying capacities since its formation.
54. | Please revise to briefly discuss the specific experience, qualifications, attributes or skills that led to the conclusion that the Mr. Warner should serve as a director for you at the time that the disclosure is made, in light of your business and structure. Refer to Item 401(e)(1) of Regulation S-K. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 28 of Amendment No. 1 to briefly discuss the specific experience, qualifications, attributes and skills that led to the conclusion that the Mr. Warner should serve as a director
Executive Compensation, page 32
55. | Please revise to include the compensation paid to the individuals that served as your named executive officers and directors prior to the reverse acquisition. |
Response:
In response to the Staff’s comment, the Company revised its Executive Compensation table on page 30 of Amendment No. 1 to include the compensation paid to the individuals that served as its named executive officers and directors prior to the reverse acquisition.
Security Ownership of Certain Beneficial Owners and Management, page 33
56. | Please revise to disclose the individual or individuals who have voting and dispositive power with respect to the shares held by the Daniel T. Zagorin Trust. |
In response to the Staff’s comment, the Company revised the Security Ownership of Certain Beneficial Owners and Management section on page 31 of Amendment No. 1 to disclose the name of the individual who has voting and dispositive control over the shares held by the Daniel T. Zagorin Trust.
Equity Compensation Plan Information, page 33
57. | Please reconcile your disclosure at the bottom of page 13 that no securities are authorized for issuance under equity compensation plans with your disclosure in the table on page 33 that 4,000,000 shares are available for future issuance under equity compensation plans. |
Response:
In response to the Staff’s comment, the Company has moved the disclosure formerly contained on page 33 of its Registration Statement on Form S-1 to page 13 of Amendment No. 1.
Transactions with Related Persons, page 34
58. | We note your disclosure regarding the aggregate fees received by Mr. Wiesel and Ms. Binder for the three months ended March 31, 2011 and for the fiscal years ended December 31, 2009 and December 31, 2010. Please revise to disclose the amount of fees paid to each and revise to clarify whether these fees were also paid for consulting, development and strategic advisory services. In addition, to the extent that you have written agreements regarding the fees disclosed in this section, please file such agreements as exhibits to your registration statement with your next amendment. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 32 of Amendment No. 1 to disclose the amount of fees pad to Mr. Wielsel and Ms. Binder for the six months ended June 30, 2011 and clarified that these fees were paid for consulting, development and strategic advisory services.
59. | Please revise to disclose the basis on which the Daniel T. Zagorin Trust is a related person. Refer to Item 404(a)(1) of Regulation S-K. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 32 of Amendment No. 1 to indicate that the Daniel T. Zagorin Trust is a 5% stockholder of the Company.
Description of Securities, page 35
Common Stock, page 35
60. | Please revise to remove your statement that the outstanding shares of common stock are “validly issued, fully paid and non-assessable” as these are legal conclusion that the company is not qualified to make. Alternatively, please attribute these statements to counsel and file counsel’s consent to be named in this section. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 33 of Amendment No, 1 to remove its statement that the outstanding shares of common stock are “validly issued, fully paid and non-assessable.”
Preferred Stock, page 35
61. | We note disclosure on page 7 which disclosed your newly created perpetual and nonconvertible Series A Preferred Stock. Please revise to disclose the terms of such issuance here. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 33 of Amendment No. 1 to disclose the terms of issuance of the Series A Preferred Stock.
Warrants, page 35
62. | Please revise to clarify what you mean by a “full ratchet basis” on page 36. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 36 of Amendment No. 1 to explain the meaning of “full ratchet basis.”
Notes to the Consolidated Financial statements, page 58
Note 7: Debt Obligations, page 65
63. | Please provide all of the disclosures required by ASC 470-20-50. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 65 to Amendment No. 1 to include the disclosure required by ASC 470-20-50.
Exhibits, page 75
64. | Please revise to include your agreement with Suburban Airways as an exhibit to your registration statement or explain why this is not necessary. |
Response:
As disclosed in Amendment No. 1, the Company does not currently have a formal written agreement with Suburban Air Freight, Inc.
65. | We note your disclosure on page 36 that you have entered into indemnification agreements with your officers and directors. Please file these agreements as exhibits to your registration statement or advise. |
Response:
The disclosure regarding indemnification agreements was inadvertently included in the Registration Statement on Form S-1. The Company ahs removed such statement from Amendment No. 1.
Undertakings, page 76
66. | Please revise to include the undertaking exactly as it appears in Item 512(a) of Regulation S-K. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 74 of Amendment No. 1 to include the undertaking exactly as it appears in Item 512(a) of Regulation S-K.
Other
67. | The financial statements should be updated, as necessary, to comply with Rule 8-08 of Regulation S-X. |
Response:
The Company has included its audited financial statements for the year ended December 31, 2010 together with its unaudited financial statements for the period ended March 31, 2011 in accordance with Rule 8-08 of Regulation S-X.
68. | Provide a currently dated consent from the independent registered public accountant in the amendment. |
Response:
The Company has included a currently dated consent from its independent registered public accountant as Exhibit 23.1 to Amendment No. 1.
Amendment No. 2 to Form 8-K filed on June 20, 2011
Form 10 Disclosure, page 3
General
69. | As you respond to our comments related to your registration statement on Form S-1, please revise your Form 8-K accordingly. Please also note that all comments on your Form 8-K will need to be fully resolved before we act on a request for acceleration of the effectiveness of the Form S-1. |
Response:
In response to the Staff’s comment, the Company has revised its Form 8-K accordingly in Amendment No. 4.
70. | Please revise to discuss whether you required board and shareholder approval to enter into the merger agreement and how you obtained such approval. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure in Amendment No. 4 to indicate that it required and obtained board approval to enter into the share exchange agreement.
71. | We note that you have not included Item 5.06 of Form 8-K. Please provide us an analysis as to why you have not included Item 5.06 to your Form 8-K or advise. |
Response:
In response to the Staff’s comment, the Company has included Item 5.06 of Form 8-K in Amendment No. 4.
Description of Business, page 3
Business Overview, page 3
72. | Please revise to disclose in one of your introductory paragraphs that your independent auditor’s report expresses substantial doubt about your ability to continue as a going concern. |
Response:
In response to the Staff’s comment, the Company has disclosed on page 3 of Amendment No. 4 that its independent auditor’s report expresses substantial dount about its ability to continue as a going concern.
73. | Please revise to add the disclosure from the last risk factor on page 7 that you do not presently have adequate cash from operations or financing activities to meet your financing needs, that you may seek additional funding through one or more credit facilities, if available, or through the sale of debt or additional equity securities and that you cannot consummate any such additional financing without the consent of your investor in the June 3, 2011 private placement here. |
Response:
In response to the Staff’s comment, the Company has included the referenced language in on page 3 of Amendment No. 4.
74. | Please revise to include a brief history of your operating company. In addition, please revise to disclose that in March 2010 you suspended flight operations to upgrade your reservation system and to raise additional capital and that in June 2010 you resumed flight operations after raising additional capital by issuing a series of convertible debentures, shares of common stock and warrants. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 4 of Amendment No, 4 to include a brief history of its operating company.
Risk Factors, page 8
In order to grow at the pace expected by management, we will require additional capital, page 9
75. | Please revise the second sentence in this risk factor to change “June 3, 2011” to “June 2, 2011” to reconcile this date with the date disclosed on page 7 in your registration statement on Form S-1 or advise. |
Response:
The Company has updated its disclosure to a current date in Amendment No. 4.
Executive Compensation, page 30
76. | Please revise to disclose the compensation of your directors pursuant to Item 402(r) of Regulation S-K. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page 30 of Amendment No. 4 to disclose the compensation of its directors pursuant to Item 402® of Regulation S-K.
Related Party Transactions, page 30
77. | Please reconcile your disclosure on page 30 regarding the amount of fees paid to Mr. Wiesel and Ms. Binder with your disclosure on page 34 of your registration statement on Form S-1 or advise. |
Response:
In response to the Staff’s comment, the Company has reconciled its disclosure on page 30 of Amendment No. 4 with its disclosure on page __ of Amendment No. 1.
78. | Please revise to disclose your independent directors pursuant to Item 407(a) of Regulation S-K. |
Response:
In response to the Staff’s comment, the Company has revised its disclosure on page __ of Amendment No. 4 to disclose its independent directors pursuant to Item 407(a) of Regulation
Should you have any questions regarding the foregoing, please do not hesitate to contact the undersigned at (609) 895-6719.
Very truly yours, | |
/s/ Sean F. Reid | |
Sean F. Reid |
cc: Daniel Wiesel