Upholstery International, Inc
8005 W. 183rd Street, Ste E,
Tinley Park, IL, 60423
Tel # 708-372-2726
ken@kenscustomupholstery.com
www.upholsteryinternational.com
June 18, 2014
United States
Security & Exchange Commission
Division of Corporate Finance
Attn: Emily Drazen, Staff Attorney
100 F Street, N.E.
Washington, DC 20549
Re: Upholstery International Inc.
Registration statement on Form S-1A
File No: 333-195209
Enclosed is our response to your comments of May 8, 2014. As per your request attached you will find a copy of the “redlined” amendment for comparison purposes. Please note, a number of your comments were based upon your review of the company’s web site which was and is under development. The website is down for at this time for further update.
We look forward to hearing back from you and we hope we responded appropriately to all your comments. Please feel free to contact us directly atTelephone: 708-372-2726 or ken@kenscustomupholstery.com
Sincerely;
s/s__________
Ken Kovie
President
May 8, 2014
Via E-mail
Mr. Ken Kovie
President
Upholstery International, Inc.8005 W. 183rd Street, Ste ETinley Park, IL 60423
Re: Upholstery International, Inc.
Registration Statement on Form S-1
Filed April 11, 2014
File No. 333-195209
Dear Mr. Kovie:
We have reviewed your registration statement and have the following comments. In some of our comments, we may ask you to provide us with information so we may betterunderstand your disclosure.
Please respond to this letter by amending your registration statement and providing therequested 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 yourresponse.
After reviewing any amendment to your registration statement and the information youprovide in response to these comments, we may have additional comments.
General
| 1. | It appears from your websitewww.upholsteryinternational.com that your business plan is to expand your upholstery business nationally through acquisitions and that you have “avery aggressive roll-up plan in place for 2014.” Please substantially revise the disclosurethroughout the prospectus to describe your business plan, addressing the time frame forimplementation, steps involved, estimated costs and any material obstacles involvedbefore you can implement your business plan. |
Response: Revised
Our goal is to strategically acquire companies that fit within an aggressive model that will allow us to compete with our top competition. We are currently looking at many companies to acquire, however, we have not entered into any agreements with any yet as we are in the early stages of negotiations. Our business plan is based off of growing our existing company internally within the Upholstery related sector, while placing a focus on acquiring furniture
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manufacturing outlets as well. We are reaching out to a target list of potential companies that we feel will best suit our grow plans. We are and always will be in acquisition mode as this is our how we plan to grow.
Our timeframe for implementation is immediate. We intend on utilizing the following steps pre and post IPO.
| · | Send out mailers to a targeted group of qualified companies that meet our initial minimum financial requirements. We will be targeting furniture manufacturing facilities, fabric Manufacturing facilities as well as other upholstery specific businesses. |
| · | Our Plan is to Initiate negotiations and on-board the newly acquired organization. |
Some issues that we may encounter might be the inability to close these acquisitions in a timely manner thus making it difficult to accomplish our business plan. We will face an acquisition cost that will be associated with finding these deals and bring them to the closing table. We intend to raise additional capital through utilizing our private equity partners if needed.
| 2. | You state the following on your websitewww.upholsteryinternational.com: “In thecoming months, Ken expects that Upholstery International will complete numerousacquisition agreements. The company’s chief acquisition officer in Las Vegas already hasseveral contracts in the works.” Please disclose whether you having any currentagreements, arrangements or plans to acquire any companies. |
Response:
We are currently in the process of securing Mr. Chris Short as Chief Acquisitions Officer for Upholstery International, Inc. Mr. Short does not have any signed agreements with the company and he is located in Las Vegas. Currently Mr. Short is acting on good faith and assisting Upholstery International, Inc. with having some early conversations with some potential strategic companies that fit within our growth plan. So far, we have not entered into any agreements with any company.
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| 3. | You state on your websitewww.upholsteryinternational.com that, “UpholsteryInternational Inc. has joined with Lambert Private Equity LLC to begin its acquisition‘roll-up’ growth strategy by enabling the company to now aggressively lock in newacquisition targets such as other upholstery related companies, fabric manufacturers,furniture outlets as well as auto-fabric repair.” Please discuss your arrangements with Lambert Private Equity and file any agreements as exhibits to the registration statement. |
Response:
Upholstery International, Inc. has entered into now two agreements with Lambert Private Equity, LLC. Lambert Private Equity has issued Upholstery International, Inc. a total of $10 Million Dollars as a subscription Agreement. $10 Million is within a signed subscription agreement, (Please see Exhibit), while we have a LOI for another $100 Million to be utilized within 5 years or sooner.
| 4. | You refer on your websitewww.upholsteryinternational.com to having a $110 millioninvestment. With respect to the $110 million investment, your website states that, “InJanuary 2014, Pathways Financial helped Ken secure a $10 million equity subscriptionfacility from Lambert Private Equity, followed by an additional $100 million afterresearch into the upholstery and furniture market revealed that a more substantialinvestment would be required to make Upholstery International’s nationwide rollup asuccess.” Please disclose the terms of the $10 million equity subscription facility fromLambert Private Equity as well as the terms of the additional $100 million investment.File the agreements with Lambert Private Equity and Pathways Financial LLC as exhibitsto the registration statement. |
Response: exhibits filed
Please see the Lambert Subscription Agreements.
We do not have any agreements with Pathways Financial, LLC.
| 5. | You state on your websitewww.upholsteryinternational.com that Pathways Financialsecured Pre-IPO funding for the company from Georgia Peaches, LLC. Please discussthis funding and file the agreement with Georgia Peaches as an exhibit to the registrationstatement. |
Response:
Georgia Peaches, LLC is a Private Equity Company based out of Mokena, IL and provides initial funding for businesses who would like to take their company public. Please see Exhibit.
Prospectus Cover Page
| 6. | We note your disclosure that there is no minimum amount that must be raised in thisoffering. Please expand your disclosure to state that investors may be in a position wherethey have invested in a company without sufficient capital to execute on its business plan. |
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Also provide a table showing the price per share and net proceeds you may receive if yousell 10%, 50% and 100% of the shares being offered. Refer to Item 501(b)(3) ofRegulation S-K.
Response: Revised
7. Please disclose the duration of the offering, including any extension period.
Response: Disclosed
8. Item 3. Summary Information
Disclose the minimum amount of proceeds you need to fund your business plan and tomeet your reporting requirements. Discuss what will happen in the event that you do notraise that amount. Discuss with specificity what each level of funding will accomplish inadvancing your operations and business plan. Throughout the prospectus, focus thediscussion of your planned business on the objectives you can reasonably attain with yourlimited resources and various levels of net proceeds you may receive from the offering.Provide a detailed discussion of these matters in your Management’s Discussion and Analysis section based upon the sale of 25%, 50% and 75% of the shares being offered.
Response: see use of proceeds
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| 9. | Disclose whether the company, the company’s officers and directors, any companypromoters, or any of their affiliates intend for the company, once it is reporting, to beused as a vehicle for a private company to become a reporting company. |
Response: the company itself and its officers and directors have no plans to be used as a vehicle for a private company to become a reporting company.
Summary Information about Upholstery International, Inc., page 5
| 10. | Please clarify whether officers and directors of the company will own 75% of the issuedand outstanding shares of the company after this offering. We note your disclosure onpage 13 that the company’s officers and directors will own over 66% after the offering iscompleted and your disclosure in the table on page 30 that the officers as a group willown 52% after the offering. |
Response: 52% for O/D, corrected
Summary of the Offering, page 6
| 11. | You disclose at the top of page 7 that you may terminate the offering sooner than 90 daysin your sole discretion. Please disclose under what circumstances you would terminatethe offering early. |
Response: Revised
| 12. | You refer to selling security holders on pages 7 and 17. This appears to be in error.Please advise whether there will be a selling security holder component of the offering. |
Response: an error and corrected, there will NOT be a selling shareholder component.
Summary of Financial Information, pages 8 and 9
| 13. | Please provide the selected financial information including revenues, operating expenses,operating income (loss), and net income (loss) per Item 301 of Regulation S-K for allperiods presented in your statements of operations. Also, please revise headings toreflect ‘December 31st’ and the amount of total liabilities at each year end in your table. |
Response: Revised
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Risk Factors, page 11
| 14. | Please revise your risk factors so that they are specific to your company, your industryand your planned expansion. In this regard, there are no risk factors addressing risks ofoperating in the upholstery business or risks associated with your expansion andacquisition plans. In addition, several risk factors do not appear to apply to yourcompany because they suggest that you have limited or no operations (e.g., the first andlast risk factors on page 11). |
Response: Revised
| 15. | Please avoid repetition in your risk factors. For example, you have two risk factorsregarding the lack of an established market for your shares (pages 12 and 15); you havetwo risk factors regarding potential dilution of shareholders due to the ability ofmanagement to issue additional shares (pages 12 and 15); and you have two risk factorsregarding the fact that shareholders may not be able to sell their shares for more than thepurchase price in the offering (pages 11 and 15) |
Response: Revised
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Because the company is likely to have less than three hundred shareholders..., page 11
| 16. | Please explain why termination or suspension of reporting obligations may result in atotal loss of investment. |
Response:Because it is likely that the Company will have less than three hundred shareholders of record following our offering, the Company may be eligible to terminate our registration under Section 12(g) of the Exchange Act and suspend our reporting obligations under Section 15(d) of the Exchange Act.If the Company pursues this course of action, the Company would not be required to provide shareholders periodic or current reports which may result in no market for the securities offered herein. As a result, your entire investment may be lost.
Item 4. Use of Proceeds, page 16
| 17. | Please provide narrative disclosure of what your proposed use of proceeds at eachoffering level will accomplish and whether you will need additional funding toaccomplish any purpose. |
Response: Revised
Item 7. Plan of Distribution, page 19
| 18. | We note you plan to rely on Rule 3a4-1 in connection with this offering. On yourwebsitewww.upholsteryintenational.com, it states Pathways Financial LLC has managedyour IPO process and you have partnered with Lambert Private Equity LLC. Pleasedisclose if these entities will be participating or assisting with this offering. |
Response:
Pathways Financial, LLC, is a company designed to assist companies with going public. Pathways Financial will be participating only as consultants on an as needed basis. Currently, we do not have an agreement in place with Pathways Financial, LLC. Lambert Private Equity is simply acting as a private equity funding company and both Pathways Financial, LLC and Lambert Private do not intend to participate in the IPO offering.
Description of Securities to be Registered, page 20
| 19. | Please disclose whether the terms of the preferred stock have been designated andwhether any shares of preferred stock are issued and outstanding. |
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Response:
To date, Upholstery International, Inc. has not issued any preferred shares of its stock to any investor.
Item 11. Information with Respect to the RegistrantBusiness Description
| 20. | Substantially revise this section to provide all of the material information required byItem 101(h)(4) of Regulation S-K. Additional disclosure topics which appear materialinclude, but are not limited to, distribution methods of your products and services, sources and availability of equipment and the names of principal suppliers, yourdependence on one or a few major customers and the number of total employees andnumber of full-time employees. |
Response: Revised
Report of Independent Registered Public Accounting Firm, page F-1
| 21. | Please have your auditors revise the first paragraph of their opinion to identify the“statements of changes in stockholders’ equity” consistent with the title on page F-4 ofyour financial statements. |
Response:We have changed the wording and heading in Consolidated Balance Sheet and Consolidated Statement of Stockholders Deficit and our auditors have revised their opinion so the wording is consistent throughout the financial statements.
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| 22. | Referencing the fourth paragraph of your auditor’s report, the working capital deficit of$308,690 does not agree with the deficit of $374,469 on your Consolidated Balance Sheetat December 31, 2013 on page F-2. Please explain this difference or have your auditorsrevise their auditor’s report accordingly. |
Response:Our auditors have revised the fourth paragraph of their opinion to reflect the proper working capital deficit as shown on the Consolidated Balance Sheet.
Consolidated Statement of Operations, page F-3
| 23. | Please revise to reflect an income (loss) before income taxes and income taxes asrequired per Rule 3-03 of Regulation S-X. |
Response:We have revised our Consolidated Statement of Operations to conform to the proper presentation as required by Rle 3-03 of Regulation S-X.
Statements of Changes in Stockholders’ Equity, page F-4
| 24. | Please tell us and disclose the nature of the services provided and how you determinedthe fair value of the 550,000 shares of common stock issued for services during 2013. |
Response:The Company issued 550,000 shares of common stock for consulting services with regards to the share exchange agreement and financial consulting for its intended growth and operations. These shares were valued at the same price as the 6,000,000 shares issued on subscription to third parties around the same time as the shares issued for the services.
Statements of Cash Flows, page F-5
| 25. | Please revise to reflect Net cash ‘(used in), provided by’ operating activities, Net cash‘used in investing activities’, and Net cash provided by ‘(used in)’ financing activities, topresent the correct subtotal captions in your statements of cash flows. |
Response:We have revised our Consolidated Statement of Cash Flows to present the correct subtotal captions
Notes to Consolidated Financial Statements, page F-6
Note 2 – Significant Accounting Policies, Barter Transactions, page F-7
| 26. | Disclose the specific details of the transactions that resulted in the recognition of the barter credits receivable and advise us. Specifically address in your disclosure andresponse: |
· the nature of the nonmonetary assets exchanged;
· how you determined fair value of the assets exchanged; and
· how and when you expect to realize the receivable.
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Response:Transactions on Barter Accounts are exchanged in the same way as if being cash transactions. They are valued at the same values given cash sales. They are used as cash with other barter members. We utilize them for various items. We will be needing many of the services available on trade when we expand our locations .
| 27. | Please explain to us your basis for classifying the barter credit receivable as a currentasset in your balance sheet. We refer you to the guidance in ASC 210-10-45. Also, tellus how much of the credit you have collected in goods and services since December 31,2013 and when you anticipate colleting the remaining balance. |
Response:Barter credit is considered as a asset because they can and have been used for goods and services. Examples invoice forms, advertising (both radio ads and direct mailings),office furniture, electrical work, carpentry services, building main., storage unit rentals, truck lettering , and other business needs. As of Dec. 2013 we had a credit balance of $18,480.00 .We anticipate using them in our expansion plans within the next year. We will be needing many of the services to set up a new workshop and show room.
Note 3 – Going Concern, page F-8
| 28. | Please revise the disclosed amount of working capital deficit of $308,690 to equal totalcurrent liabilities less total current assets as reported within your consolidated balancesheet as of December 31, 2013 or advise us. |
Response:We have revised our disclosed amount or working capital deficit to $374,649 in Note 3 to the consolidated financial statements to equal the total current liabilities less total current assets as reflected on the consolidated balance sheet at December 31, 2013.
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Note 5– Notes Payable, page F-9
| 29. | In light of disclosure elsewhere within your filing, it appears the promissory note wasissued in 2013, not 2014. If so, please revise to correct the date or advise us. |
Response:We have revised the disclosure in Note 5 to reflect the proper date of the issuance of the promissory note on November 15, 2013.
Note 8– Credit Cards Payable, page F-10
| 30. | Please provide the interest rates on your credit cards at December 31, 2013. Further,please tell us and disclose if you are in default or have entered into any paymentarrangements on the Company’s major credit cards at December 31, 2013 or subsequent to year end. |
Response:The following is the current interest rates on the credit cards utilized by the company:
Home Depot 21.99%
Menards 11%
Capital One 17.99%
Capital One 17.00%
Credit One 23.9%
Carter One 16.49%
Discover 18.24%
Shell 12%
Sams 29.9%
The Company is not in default, nor has entered into any payment arrangements .
We will revise Note 8 to disclose the range of interest rates at December 31, 2013.
| 31. | With a view towards more complete disclosure, please tell us the maximum amount thatyou may borrow under your credit card arrangements, the extent to which they are usedto finance ongoing operations, and who is the guarantor. |
Response:The maximum amount of borrowings under current credit card arrangements are as follows:
Home Depot 9,200
Menards 6,000
Capital One 5,000
Capital One 11,000
Shell 1,500
Credit One 600
Charter One 5,000
Discover 7,500
Sams 4,300
The guarantor of the credit cards is Kenneth Kovie. The Company uses the credit cards in the operation of the business to finance its working capital requirements, including but not limited to the purchase of supplies, fabrics, staples, filling for cushions. As well as general supplies for its operations, office supplies, and gasoline for making deliveries to customers.
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Management Discussion and Analysis, page 26
| 32. | Substantially revise this section to provide all of the material information required byItem 303 of Regulation S-K for your last two fiscal years and most recent interim period. |
Response: Revised
Capital Resources and Liquidity, page 26
| 33. | We note your disclosure on page 26 that you “are a development stage company with noor limited operations to date...” However, on page 23, you disclose that you have nearly$600,000 in revenues, over 100 years combined staff experience, and have a variety ofclientele. Please reconcile this disclosure. Additionally, please remove any otherreferences to your status as a development stage company as appropriate. |
Response: Revised
| 34. | We note your disclosure that Mr. Kovie “may be willing” to provide a loan of up to$20,000 to cover expenses related to this offering and subsequent reporting obligations.Further, on page 5 you estimate the costs associated with the offering will totalapproximately $50,000, and on page 32 you estimate that the costs associated with thisoffering will total $35,064. Please disclose how these costs will be paid if Mr. Kovie does not provide the loan and explain how the difference will be met. |
Response:
Mr. Kovie has secured a loan with Georgia Peaches, LLC in order to fund the entire process of going public and all associated expenses that pertain to this process. Currently, Mr. Kovie has enough capital to fund the final stages of reaching the OTCBB, which is the exchange we are hoping to reach.
Directors, Executive Officers and Corporate Governance, page 27
| 35. | In providing us with e-mail contacts for comment letters on the registration statement,you identified Mr. Daniel Gallagher as a Director and Officer of Upholstery International.Please explain why he is not included as a named executive officer and director in your registration statement. You may wish to refer to Regulation S-K Item 401, Item 402, Item403, and Item 404. |
Response: Mr. Gallagher is not directly affiliated with the company; he is part of Pathway Financial LLC assisting in the Registration process.
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| 36. | In addition, your websitewww.upholsteryinternational.com states that “the company’schief acquisition officer in Las Vegas already has several contracts in the works.” Pleaseexplain why your chief acquisition officer is not included as a named executive officer inyour registration statement. |
Response:
Currently, Our Chief Acquisitions Officer is acting in good faith on behalf of Upholstery International until his final employment agreement is signed.
| 37. | Further, please remove references to “our sole director” throughout the filing asappropriate. |
Response: we only have one officer
Security Ownership of Certain Beneficial Owners, page 30
38. Please revise the table to show beneficial ownership both before and after the offering.
Response: Revised
39. Certain Relationships and Related Transactions, page 31
| 40. | Please provide disclosure of the loan(s) from your officer and director disclosed in Note 7to the financial statements. File the loan agreement(s) as exhibits to the registrationstatement. |
Response: Mr. Kovie does not have any actual loan. It’s simply money they personally injected to keep the company alive during the recession.
Recent Sales of Unregistered Securities, page 32
| 41. | As noted in comments, above, it appears that you have received funding from GeorgiaPeaches LLC and Lambert Private Equity LLC. Please provide disclosure, as appropriate, of any sales of unregistered securities to these entities. |
Georgia Peaches received 350,000 shares as part of a Pre-IPO funding agreement.
Lambert Private Equity received 200,000 shares as part of a post IPO private equity funding agreement. Both Lambert Private Equity and Georgia Peaches have received stock certificates as part of their funding agreements
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Exhibit 10.4– Subscription Agreement
| 42. | It appears that you have filed a subscription agreement for a private offering rather thanfor the current registered offering. Please advise. |
Response: Revised
We urge all persons who are responsible for the accuracy and adequacy of the disclosurein the filing to be certain that the filing includes the information the Securities Act of 1933 andall applicable Securities Act rules require. Since the company and its management are inpossession of all facts relating to a company’s disclosure, they are responsible for the accuracyand adequacy of the disclosures they have made.
Notwithstanding our comments, in the event you request acceleration of the effective dateof the pending registration statement please provide a written statement from the companyacknowledging that:
•should the Commission or the staff, acting pursuant to delegated authority, declare thefiling effective, it does not foreclose the Commission from taking any action with respectto the filing;
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| · | the action of the Commission or the staff, acting pursuant to delegated authority, indeclaring the filing effective, does not relieve the company from its full responsibility forthe adequacy and accuracy of the disclosure in the filing; and |
| · | the company may not assert staff comments and the declaration of effectiveness as adefense in any proceeding initiated by the Commission or any person under the federalsecurities laws of the United States. |
Please refer to Rules 460 and 461 regarding requests for acceleration. We will consider awritten request for acceleration of the effective date of the registration statement as confirmationof the fact that those requesting acceleration are aware of their respective responsibilities underthe Securities Act of 1933 and the Securities Exchange Act of 1934 as they relate to the proposedpublic offering of the securities specified in the above registration statement. Please allowadequate time for us to review any amendment prior to the requested effective date of theregistration statement.
You may contact Robert Shapiro, Staff Accountant, at (202) 551-3273 or RobertLittlepage, Accountant Branch Chief, at (202) 551-3361 if you have questions regardingcomments on the financial statements and related matters. Please contact Emily Drazan, StaffAttorney at (202) 551-3208, Kathleen Krebs, Special Counsel at (202) 551-3350 or me at (202)551-3810 with any other questions.
Sincerely,
/s/ Kathleen Krebs, for
Larry SpirgelAssistant Director