Upholstery International, Inc
8005 W. 183rd Street, Ste E,
Tinley Park, IL, 60423
Tel # 708-372-2726
ken@kenscustomupholstery.com
www.upholsteryinternational.com
July 24, 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 June 30, 2014. As per your request attached you will find a copy of the “redlined” amendment for comparison purposes.
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
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General
| 1. | We note that your disclosure does not reference your Subscription Agreement with Lambert Private Equity LLC or your Private Equity Loan Agreement with GeorgiaPeaches LLC anywhere in the body of your prospectus. Please revise your “MD&A”section to include a discussion of these agreements and the material terms. Additionally,please revise your risk factors to provide potential investors with disclosure regarding anyrestrictions these agreements have on your operations or future offerings. |
Response: revised
| 2. | We note your responses to comments 1 - 5 and the revised disclosure you included inyour Business Section on page 24. Based upon your current financial situation, including your lack of cash or capital financing, please balance your statements concerning your“immediate” acquisition strategy and “pre IPO” steps to be taken to implement this strategy with a detailed discussion of your sources of capital, your initial minimumfinancial requirements and how you are selecting which companies to approach for potential acquisition. |
Response: revised
| 3. | We note your response to comments 3 -5; however neither financing agreement is signedby the respective parties. Please file executed copies of both agreements. Please refer toItem 601(a)(10) of Regulation S-K. |
Response: filed
Summary of Financial Information, pages 8 and 9
| 4. | We note your response to comment 13. Please provide the selected financial informationincluding revenues, operating expenses, operating income (loss), and net income (loss)per Item 301 of Regulation S-K for all periods presented in your statements of operations.Also, please provide the equity section at each balance sheet date. |
Response: revised
Risk Factors, page 10
| 5. | We note your response to comment 14 but there still appears to be risk factors that do notrelate to your business. For example, you state on page 12 that you have a limitedoperating history and no earnings. Please revise your risk factors to include only relevantinformation for your business. |
Response: revised
Item 4. Use of Proceeds, age 17
| 6. | We note your amended disclosure on page 17 in response to comment 17 of our previousletter. |
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Supplement your tabular breakdown of your use of proceeds by providing anaccompanying narrative detailing the material uses.
Response:We use many materials in our business. Among them lumber, springs, foam rubbers cotton, fabric,twine, webbing, burlap, thread, buttons, welt cord, zippers, staples, nails, tacks, stains, glue, cane,rushing, and other items as needed.
| 7. | We note your response to comment 17. Please expand on your discussion of theminimum amounts needed to accomplish specified purposes of your business plan forwhich the proceeds are to be obtained per Item 504 of Regulation S-K. Please referenceinstruction 3 of Item 504 of Regulation S-K. |
Response: revised
Item 5. Determination of Offering Price, page 17
| 8. | We note your response to comment 12 that there is no selling shareholder component tothis offering. However, there are still erroneous references to selling shareholders on page 18. Please revise. |
Response: revised
Description of Securities to be Registered, page 21
| 9. | We note your amended disclosure on page 21 that no preferred shares have been issued atthis time. Please expand this disclose to include whether the terms of the preferred stockhave been designated. |
Response: revised
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Item 11. Information with Respect to the RegistrantBusiness Description, page 24
| 10. | We note your expanded disclosure in response to comment 20. Please revise this sectionto more clearly describe your operations and business plan following the offering. |
Response:We will be making new furniture as well as giving our customers the opportunity to have their existingfurniture reupholstered. Having new furniture and offering reupholstery of existing furniture combinedin one location will give customers more choices. Customers will have a knowledgeable sales staff whohelp them in designing custom made new furniture and help them in choosing fabrics for reupholsteryof their current furniture. We will able to educate people on the benefits of recycling their furniture tomake it new again, Having a staff that knows how furniture is made canbevaluable for our customer'sneeds.
Consolidated Statements of Operations (omitted)
| 11. | We note your response to comment 23. Please provide your Consolidated Statements ofOperations for the years ended December 31, 2013 and 2012, which has been omitted.Also, please revise to reflect an income (loss) before income taxes and income taxes asrequired per Rule 3-03 of Regulation S-X. |
Response: revised
Notes to Consolidated Financial Statements, page F-5
Note 2 – Significant Accounting Policies, Barter Transactions, page F-6
| 12. | We note your responses to comments 26 and 27. However, please revise your disclosureto include the specific details of the transactions or services that resulted in therecognition of the barter credits receivable. Specifically address in your disclosure: |
| · | the nature of the nonmonetary assets exchanged (i.e. specific services or goodsprovided, etc.); |
| · | how you determined fair value of the assets exchanged; and |
| · | how and when you expect to realize the receivable. |
Please also disclose your rationale for classifying the barter credit receivable as a currentasset in your balance sheet and when you anticipate collecting the remaining balance. Werefer you to the guidance in ASC 210-10-45.
Response:The Company uses barter transactions regularly in the normal course of its business. The types of transactions that the company exchanges its upholstering services are merchandise materials, supplies, advertising, and other normal operating expenses incurred during the course of business. The fair market value is determined by a third party record keeper of the barter
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transactions as the regular prevailing prices on a one hundred percent trade basis, as stipulated by the seller of the goods and services. During the year ended December 31, 2013 the company bartered $22,831 in transactions. The Company expects to use at least the same and probably more in the year 2014, and has accordingly recognized the barter credits receivable as a current asset in the balance sheet at December 31, 2013
Note 8 – Credit Cards Payable, page F-9
| 13. | We note your responses to comments 30 and 31, and understand the Company has totalavailable credit card financing of approximately $50,000 used to finance a wide range ofyour operating expenses. However, we note the Company has approximately $230,000 ofcredit cards payable at Dec. 31, 2013. Please advise or revise. |
Response:In our response to prior comments 30 and 31, we informed you that the Company has total available credit card financing of approximately $50,000. This is the current amount of available credit on the credit cards currently available to the Company. The difference between this amount and the amount reflected on the balance sheet at December 31, 2013 is that the Company has credit cards in which there has been no more credit extended to the Company and they are making payments against the current balances with no more credit available on those cards.
| 14. | We note your response to comment 30. Please disclose whether you are in default orunder a payment arrangement on any of your credit cards. |
Response: We will disclose in the notes to the financial statement that the company is not in default under payment arrangements on any of the credit cards.
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Financial Statements for the period ending March 31, 2014
Note 2 – Significant Accounting Policies, Barter Transactions, page F-15
| 15. | We note your responses to comments 26 and 27. However, please revise your disclosure to include the specific details of the transactions or services that resulted in the recognition of the barter credits receivable. Specifically address in your disclosure: |
| · | the nature of the nonmonetary assets exchanged (i.e. specific services or goodsprovided, etc.); |
| · | how you determined fair value of the assets exchanged; and |
| · | how and when you expect to realize the receivable. |
Please also disclose your rationale for classifying the barter credit receivable as a currentasset in your balance sheet and when you anticipate collecting the remaining balance. Werefer you to the guidance in ASC 210-10-45.
Response:The Company uses barter transactions regularly in the normal course of its business. The types of transactions that the company exchanges its upholstering services are merchandise materials, supplies, advertising, and other normal operating expenses incurred during the course of business. The fair market value is determined by a third party record keeper of the barter transactions as the regular prevailing prices on a one hundred percent trade basis, as stipulated by the seller of the goods and services. During the year ended December 31, 2013 the company bartered $22,831 in transactions. The Company expects to use at least the same and probably more in the year 2014, and has accordingly recognized the barter credits receivable as a current asset in the balance sheet at December 31, 2013.
Note 7 – Credit Cards Payable, page F-17
| 16. | Please disclose the maximum aggregate amount that you may borrow and amountsoutstanding, in total, under your credit card arrangements at March 31, 2014, the extent towhich they are used to finance ongoing operations, and the guarantor. |
Response:We will add to the disclosure in Note 7 to the financial statements for the period ending March 31, 2014 the maximum aggregate amounts that we may borrow, the extent used to finance ongoing operations, and the guarantor.
| 17. | We note your response to comment 30. Please disclose whether you are in default orunder a payment arrangement on any of your credit cards. |
Response: see comment 14
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Management’s Discussion and AnalysisCapital Resources and Liquidity, page 26
| 18. | Please disclose the nature of your credit card arrangements, the maximum aggregateamount you may borrow and amounts outstanding under these arrangements, and theextent to which they are used to finance ongoing operations. |
Response:Businesscreditcardsare used to purchase materials needed to complete the reupholstery of furniture,tooperate and maintain the business vehicles, as well as general office supplies, and businessmaintenance.
Current credit card are as follows:
Capital Onebalance $ 5108.23credit limit $5000.00
Capital Onebalance $10,537.95 credit limit $10,900.00
Capital One /Menard's balance$2263.10credit limit $ 5000.00
Credit Onebalance $507.75credit limit $ $600.00
Discoverbalance $7336.33credit limit $7,500.00
Home Depotbalance 3529.94credit limit$9,200.00
Sam'sbalance $4157.26credit limit $ 4,300.00
Shell balance $1,361.29 credit limit $1,500
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| 19. | Please expand your disclosure on the nature of your secured loan from Georgia Peaches,LLC including the date of the loan, proceeds, amount outstanding, and maturity date. |
Response: revised
Results of Operations, page 27
| 20. | Please provide more robust, detailed disclosure of the information necessary for anunderstanding of your financial condition, changes in financial condition, and results ofoperations for the year ended December 31, 2013 and three months ended March 31, 2014 as required by Item 303 of Regulation S-K |
Response: revised
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Directors, Executive Officers and Corporate Governance, page 28
| 21. | We note your response to comments 2 and 36 that Mr. Short has not yet signed anemployment agreement with the company and he is not an executive officer at this time.Please revise your disclosure to clarify his current employment status. |
Response: Mr. Short is no longer with the company
Security Ownership and Certain Beneficial Owners and Management, page 31
| 22. | We note your response to comment 10. However, based on the number of sharescurrently issued and outstanding it appears that Officers and Directors currently own 52%of the shares and that they will own 42% of shares if all the shares included in thisoffering are sold. Please clarify this discrepancy between your disclosure on page 5 and your beneficial ownership table on page 31. |
Response: revised
Certain Relationships and Related Transactions, page 32
| 23. | We note your response to comment 39. Please provide the information required underItem 404 of Regulation S-K. |
Response: revised
Recent Sales of Unregistered Securities, page 32
| 24. | We note your response to 40 and the amended disclosure on page 33. Please revise yourdisclosure to include all the information required by Item 701 of Regulation S-K. |
Response: revised
Exhibit 10.4 – Subscription Agreement
| 25. | We note your response to comment 41 but it appears that you have not amended thisexhibit with your most recent filing so we reissue our prior comment. It appears that youhave filed a subscription agreement for a private offering rather than for the currentregistered offering. Please advise. |
Response: revised
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