March 30, 2011
VIA EDGAR
United States Securities
and Exchange Commission
100 F Street, NE
Mail Stop 4720
Washington, D.C. 20549
Attention: Amanda Ravitz
Assistant Director
Re: Internal Fixation Systems, Inc.
Registration Statement on Form S-1
Filed December 22, 2010
File No. 333-17008
Dear Ms. Ravitz:
Thank you for your February 10, 2011 letter regarding Internal Fixation Systems, Inc. (“IFS” or the “Company”). Enclosed is a copy of IFS’s Form S-1/A, which has been marked to show changes from our prior submission. The changes in the revised registration statement reflect the staff’s comments to the previously submitted material. Also, in order to assist you in your review of the Form S-1/A, we hereby submit a letter responding to the comments. For your convenience, we have set forth below the staff’s numbered comments in their entirety followed by our responses thereto.
If we are unable to successfully…. Page 3
| 1. | We note your response to prior comment 1. It is unclear how we are able to conclude that the risks of the two separate procedures (screw only and plate/screw) are identical. Specifically, given the limited tolerance for incongruity between the plate and screws, it would appear that the production of plate/screw sets may expose you to increased risks related to design or manufacturing defects. Please advise. |
Response: Complied with. We have added disclosure regarding the fact that given the potential for incongruity between the plates and screws, and our limited experience and knowledge in manufacturing plate/screw sets, we may be exposed to increased risks related to both the design and manufacturing of the plate/screw sets.
Future sales of our common stock…. Page 13
1
| 2. | Please expand this risk factor to discuss the specific risks presented to you by the significant number of restricted shares that will become eligible for future sale. Your current discussion appears to describe only a generic risk. |
Response: Complied with. We have added disclosure regarding the potential risk of the price of our common stock decreasing due to the significant amount of restricted securities that that will be eligible for sale in the public market at the same time.
Industry Overview…page 16
| 3. | We note your response to prior comment 4 which indicates industry data more recent than 2008 is very costly to obtain. However, this response appears to confirm that the data contained in the prospectus is not the most recent available data. Please tell us how the use of this data is consistent with your obligations to present information that is current as of the date of the prospectus. In this regard, note that it remains unclear how your review of the public filings of two of our competitors substantiates the data in the prospectus as you suggest in your response. |
Response: Complied with. We have included a report from 2009 that confirms the anticipated growth in the orthopedic implant projections. However, we have been unable to access, without significant expense, any additional reports from any sources that confirm the specific cannulated screw data. We have added current additional data derived from the financial statements of our competitors that we believe substantiates the 2008 and 2009 data.
Competition…Page 18
| 4. | While we note your response top prior comment 5, your disclosure continues to reference reduced production times. Specifically, we note that you disclose here and on page 16 that your proprietary modifications to the CNC Swiss-Turn machine reduces manufacturing steps and eliminates post production processing steps. We also note that the prospectus continues to reference time savings on page 12. Please clarify and substantiate this disclose or remove it. |
Response: Complied with. We have added additional disclosure and have removed the reference to time savings on pages 12, 16, and 18.
Holders…Page 20
2
| 5. | We note that the information in this section is provided as of September 30, 2010. Please update your disclosure. Make similar revisions elsewhere in the registration where disclosure is not current, including, under “Security Ownership of Certain Beneficial Owners and Management. “ |
Response: Complied with. We have updated the disclosure on pages 20 and 33and elsewhere throughout the document.
Current and Future Financing Needs….page 26
| 6. | Please consider revising your disclosure in this section for clarity. In this regard you may wish to consider organizing your disclosure into a bulleted list of your obligations setting forth the amounts, due dates and relevant call features, if any. Ensure that similar disclosure appearing else where in the prospectus, including the risk factors on pages 7 and 8 and in the third paragraph on page 38, is also clear and understandable to investors. |
Response: Complied with. We have revised the verbiage and added a chart to provide clarity on pages 7, 8 and 38.
Selling Security Holders…page 34
| 7. | We note in your response to prior comment 12 and reissue in part. Please tell us each selling shareholder’s relationship to the company and file the September 2010 private placement agreements, including the service agreement(s) with Larry and Neal Moskowitz and any registration rights agreements. In addition, please tell us whether the services provided by Larry and Neal Moskowitz in exchange for their shares have been completed |
Response: NealMoskowitz (“Moskowitz”) was retained by the Company as a consultant to introduce the Company to potential transactions. Moskowitz fulfilled his obligations and introduced the Company to bona fide candidates; however the Company chose not to engage in any transactions so introduced by Moskowitz. The Consulting Agreement was terminated on September 23, 2010. In accordance with Section 3 of the Consulting Agreement, the Company was obligated to pay Moskowitz $2,000 per month for 10 months of services., The Consulting Agreement allowed Moskowitz to exchange monies owed for stock at $0.50/share. Moskowitz elected to exchange $20,000 for 40,000 shares. In addition, Moskowitz elected to exercise his warrants at $0.10/share as provided in the agreement. Moskowitz assigned a portion of his shares to his two sons and brother. We have filed theConsulting Agreement and the warrant that wasissued to Moskowitz as an exhibit to the registration statement.
| 8. | Please tell us why shares were sold to Evan and Ian Moskowitz on September 15, 2010 for $.10 per share and to Larry and Neal Moskowitz for $.20 per share, when shares were sold to other investors on that same date for $.50 per share. To the extent that the shares were underlining certain convertible securities described under the sales of unregistered securities on Page 20, please revise to clarify. |
3
Response: The sale price of $.20 was an error. Moskowitz was to be paid $20,000 for his services and received 40,000 shares of common stock in lieu of the cash payment in accordance with the terms of the Consulting Agreement. In addition, in February 2010, the Company issued to Moskowitz warrants exercisable for 50,000 shares of common stock at an exercise price of $.10 per share pursuant to Section 2 of the Consulting Agreement for payment of expenses incurred by him in the performance of his services. The warrants were exercised and stock was issued in September 2010 to Moskowitz and his assignees.
Certain relationships…..page 36 Selling Security Holders…page 34
| 9. | You have disclosed in your response to prior comment 17 that your manufacturing and equipment sub-leases with Mr. Hernandez were entered into by you as a part of your separation agreement with Mr. Hernandez. Please disclose whether the terms of these leases are similar to those you would have received in non-related party transactions. |
Response: Complied with. We have disclosed that the lease terms are similar to those we would have received in non- related party transactions. Please note that the terms of the equipment lease between the Company and Mr. Hernandez are the same terms of the master lease that Mr. Hernandez negotiated with a non-related party.
| 10. | We note your revised disclosure refers to office space in Medley, Florida. However, your discussion of properties on page 19 does not appear to mention this property. Please advise |
Response: Please note that Medley, Florida is a suburb of Miami. Therefore, either Miami or Medley is correct from the post office perspective; however for the sake of clarity we have changed the address on page 19 to Medley, Florida.
| 11. | We note that the $185,000 promissory note is payable to Star Medical Equipment Rental, Inc. Please revise the prospectus to disclose, if true, that Mr. Hernandez is not the payee of this note and to clarify the relationship between Mr. Hernandez and Star Medical Equipment Rental, Inc. |
Response: Complied with. We have revised the disclosure to state that the payee of the note is Star Medical Equipment Rental, Inc., a company wholly owned by Mr. Hernandez.
4
| 12. | We note your response to prior comment 18; however, it appears that you have deleted the reference contained in your prior amendment to the revenue milestones set forth in the $185,000 promissory note, rather than disclosed them as requested. Please revise your disclosure in your next amendment to add the milestones and call features related to your loan and promissory notes |
Response: Please note that the $185,000 promissory note does not contain revenue milestones; however the Separation Agreement between the Company and Mr. Hernandez does contain the following language, which has been added to the Prospectus (page 36): “in the event that, for three consecutive calendar months, IFS has gross revenues in excess of $30,000, then Christopher Endara, Matthew Endara and Kenneth West and Jamie Carbonell, shall each personally guarantee IFS’s performance under the promissory notes and the Premises and Machines subleases.”
| 13. | In the third paragraph of this section, you state that your chief executive officer has personally guaranteed two of your equipment leases. While we note the personal guarantee as exhibit 4.6, please tell us where you have filed the second personal guarantee. |
Response: Please note that our chief executive officer has only guaranteed one equipment lease. Under the terminated shareholders agreement, he had a right to guarantee the leases instead of contributing additional funds to the company but he only provided one guarantee. The Prospectus has been amended accordingly .
| 14. | We note your response to prior comment 20 and reissue the comment in part. Please disclose the identity of the surgical facilities referenced in the eighth paragraph of this section. |
Response: Complied with. We have disclosed the name of the surgical facility.
| 15. | Please review the same paragraph to clarify whether Dr. Carbonell is a director of the surgical facility or Internal Fixation Systems. If the latter, please make appropriate revisions elsewhere in the prospectus, including page 27 under “Directors, Executive Officers, promoters, and Control Persons,” to disclose that Dr. Carbonell is a director of the Company |
Response: Complied with. Dr. Carbonell is no longer a director of IFS and has not been a director of IFS since 2009 but he is a shareholder. He has never been a director at the South Florida Surgery Center but does have an equity interest in such facility of less than 5% of the equity of such facility. We have revised the disclosure accordingly.
| 16. | Please disclose when note held by Ms. Cattabriga does not appear on the list of promissory note holders in Exhibit 4.1 or debenture holders in Exhibit 4.2. Please advise |
5
Response: The note is issued to in the name of Laura Cattabriga and her husband, Alberto Cattabriga. We have filed an amended exhibit chart adding Laura Cattabriga’s name to the chart.
| 17. | Refer to the penultimate paragraph of this section. Please describe for us the non-cash transaction through which Mr. Chris Endara, Mr. Matt Endara and Ken West repaid the cash advances they received from the Company. Please also disclose the terms of the advances and the amount of any excess. |
Response: Complied with. We have revised the prospectus to clarify the cash advances and monies owed.
We acknowledge that the adequacy and accuracy of the disclosure in our filings is our responsibility. We acknowledge that the staff comments or changes to disclosure do not foreclose the Commission from taking any action with respect to the filings. We acknowledge that the company may not assert staff comments as a defense in any proceedings initiated by the Commission or any person under the federal securities laws of the United States.
If you have any questions or need additional information, please contact the undersigned at (212) 907-6457.
| Sincerely, | ||
| /s/ Leslie Marlow | ||
| Leslie Marlow | ||
Enclosures
cc: Internal Fixation Systems, Inc.
6
A-1
C-1
C-2
C-3
D-1
D-2
D-3