Upholstery International, Inc.
8005 W. 183rd Street, Ste E,
Tinley Park, IL, 60423
Tel # 708-372-2726
ken@kenscustomupholstery.com
www.upholsteryinternational.com
August 15, 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-1A2
File No: 333-195209
Enclosed is our response to your comments of August 8, 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
| 1 |
Prospectus Cover Page, page 3
| 1. | Please reconcile your disclosure on the prospectus cover page that the offering periodwill be 120 days with the disclosure on pages 6, 7 and 19 that the offering period will be90 days. |
Response: reconciled
Item 3. Summary Information, page 5
| 2. | Please clarify throughout the prospectus, including in the first paragraph on page 5, thatthe company owns one upholstery store. |
Response: revised
Summary of Financial Information, pages 8 and 9
| 3. | We note your response to comment 4. However, it does not appear the revisions havebeen made. Please provide the selected financial information including revenues,operating expenses, operating income (loss), and net income (loss) per Item 301 ofRegulation S-K for all periods presented in your statements of operations. Also, pleaseprovide the equity section at each balance sheet date. |
Response: revised
Item 4. Use of Proceeds, page 16
| 4. | We note your response to prior comment 6. Please provide a narrative discussion thatexplains how the amounts allocated for each purpose will or will not advance yourbusiness plan at each level of proceeds. For example, specifically explain how the particular allocation of minimum proceeds of $7,500,000 will allow you to “moveforward with our business plan slowly but surely.” |
Response: revised
| 5. | We note your response to comment 7 and don’t believe it addresses the minimumamounts needed to address specified purposes. 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
| -2- |
Item 6. Dilution, page 17
| 6. | Update your dilution disclosure to be as of the most recent balance sheet date. Also,clarify on page 17 that there is a net tangible deficit per share, not book value. |
Response: revised
| 7. | Please expand your dilution information to address the impact on investors if less than100% of the offered shares are sold, similar to the disclosure provided under Use ofProceeds. |
Response: revised
Item 10. Information with Respect to the Registrant, page 23
| 8. | We note the new disclosure you added as the second paragraph on page 23. Pleaseclarify whether you currently make new furniture. If not, please discuss your currentbusiness first – your sole upholstery store in Illinois. You may then discuss theaspirational aspects of your business plan under a separate heading, detailing the steps,time, costs and hurdles before you begin such proposed operations. |
Response: revised
| 9. | With respect to your acquisition plan, please discuss what “initial minimum financialrequirements” you are looking for in target companies and in what geographic areas youintend to limit your search. |
Response: revised
Consolidated Financial Statements for the Years Ended December 31, 2013 and 2012Note 8. Credit Cards Payable, page F-9
| 10. | We note your response to comment 13. Please disclose the business purpose, the total credit availability, and the guarantor under your credit card arrangements at December31, 2013. |
Response: We have added the requested disclosures to Note 8 of the consolidated financial statements for the years ended December 31, 2013 and 2012.
| -3- |
Management’s Discussion and Analysis, page 26Capital Resources and Liquidity, page 26
| 11. | We note your response to comment 18. Please revise to disclose the maximum amountyou may borrow and the amounts understanding under your credit arrangements. Pleasedelete the individual credit arrangements and balances outstanding. |
Response: We have a maximum credit line of $50,000; we currently owe $34,798 leaving a balance of $15,202 we can draw on.
| 12. | You disclose on pages 11 and 26 that you entered into an agreement with LambertPrivate Equity, LLC on April 4, 2014, for Lambert Private Equity to invest up to $45million to purchase your common stock. The agreement you filed as Exhibit 99.2(Lambert Agreement) is a subscription agreement dated December 17, 2013 between youand Lambert Private Equity for Lambert Private Equity to invest up to $10 million to purchase your common stock. Please explain this discrepancy. We may have furthercomments once the correct agreement and/or disclosure is provided. |
Response: revised
| 13. | Please revise your disclosure regarding your agreement with Lambert Private Equity towrite it in plain English. Avoid copying legalistic language directly from, andreferencing sections of, the legal document. Instead, summarize in plain language the material terms of the agreement and explain how it will operate. Explain how likely it isthat the company will receive the full investment, highlighting any limitations and howthey will operate. Disclose the purchase price for the shares. Specify any conditions toLambert Private Equity’s obligation to purchase the shares pursuant to the agreement. Also disclose each party’s termination rights under the agreement and any ongoingcovenants. |
Response:On December 17th, 2014 Upholstery International, Inc signed an agreement with Lambert Private Equity, LLC., which is a voluntary agreement on the part of Upholstery International, Inc. That is, according to the Agreement, in the event that Upholstery International, Inc is actually trading on an agreed upon exchange, after a 30 day trading period, in which price and volume are established, Upholstery International, Inc, may seek a draw down wherein Lambert, using the 30 day price trading average, would purchase up to $1,000,000.00 of Upholstery Internationals Stock per draw down at a 10% discount from the established price.
This would cause a dilution to existing shareholders. Consequently, Upholstery International, Inc will utilize the Lambert Agreement only when and if absolutely necessary to meet financial demands. As an inducement to Lambert to enter into this Agreement, Upholstery International, Inc has issued 80,000 Shares, representing a fee of 2% the total Commitment of $10,000,000.00
Upholstery International’s agreement with Lambert Private Equity LLC has specific registration rights that could affect potential shareholder rights. Lambert Private Equity holds shares within Upholstery International, Inc per a commitment fee and will not be able to add additional funding if the company holds more than 4.9% ownership. Further, there is no assurance that Lambert will provide funding if needed nor that Upholstery International, Inc will need to activate the agreement.
| -4- |
| 14. | We note your response to prior comment 1 and the revised disclosure on pages 11 and 26.On page 11 your disclosure indicates that 80,000 shares have been issued to LambertPrivate Equity as a commitment fee for the subscription agreement. However, on page 26you state that 200,000 shares have been issued. Please reconcile your disclosure |
Response: revised
| 15. | Please tell us and disclose the timing for when Lambert Private Equity, LLC (Lambert) will make its investments, if any, and your proposed accounting to issue 200,000 sharesfor Lambert’s Commitment Fee for the Agreement. |
Response:On December 17th, 2014 Upholstery International, Inc signed an agreement with Lambert Private Equity, LLC., which is a voluntary agreement on the part of Upholstery International, Inc. That is, according to the Agreement, in the event that Upholstery International, Inc is actually trading on an agreed upon exchange, after a 30 day trading period, in which price and volume are established, Upholstery International, Inc, may seek a draw down wherein Lambert, using the 30 day price trading average, would purchase up to $1,000,000.00 of Upholstery Internationals Stock per draw down at a 10% discount from the established price.
This would cause a dilution to existing shareholders. Consequently, Upholstery International, Inc will utilize the Lambert Agreement only when and if absolutely necessary to meet financial demands. As an inducement to Lambert to enter into this Agreement, Upholstery International, Inc has issued 80,000 Shares, representing a fee of 2% the total Commitment of $10,000,000.00
Upholstery International’s agreement with Lambert Private Equity LLC has specific registration rights that could affect potential shareholder rights. Lambert Private Equity holds shares within Upholstery International, Inc per a commitment fee and will not be able to add additional funding if the company holds more than 4.9% ownership.
Further, there is no assurance that Lambert will provide funding if needed nor that Upholstery International, Inc will need to activate the agreement.
| 16. | Based upon the agreement with Georgia Peaches, LLC filed as Exhibit 99.3, please reviseyour disclosure to clarify the following: |
| · | The $70,000 loan is between Ken’s Custom Upholstery, Inc. and Georgia Peaches,LLC; |
| · | Ken’s Custom Upholstery received net proceeds of $60,000 pursuant to the loanagreement with Georgia Peaches due to the requirement to immediately pay GeorgiaPeaches’ legal counsel $10,000 from the loan proceeds; |
| · | The loan is due the earlier of November 15, 2014 or seven calendar days after“Borrower has been first listed on a stock exchange in connection with Borrower’sinitial public offering.” Clarify whether this would include quotation of UpholsteryInternational’s common stock on an over-the-counter quotation system rather than anexchange; |
| · | The loan is guaranteed by Ken Kovie; |
| · | The loan is secured, if true, by all the assets of Ken’s Custom Upholstery; and |
| · | Georgia Peaches received a warrant to purchase 350,000 shares of common stock.Disclose the material terms of the warrant. |
Response: see page 40
Security Ownership of Certain Beneficial Owners and Management, page 31
| 17. | We note your disclosure on page 33 that Pathways Financial LLC received 6,000,000shares on December 26, 2013. Based off the current shares issued and outstanding itwould appear that Pathways Financial LLC owns more than 5% of your outstandingshares. Please revise your beneficial ownership table to include Pathways Financial LLC. |
Response: revised
| -5- |
Certain Relationships and Related Transactions, page 32
| 18. | We note your response to prior comment 23. You still disclose loans made by Mr. Kovie in Note 7 to the financials page F-9. Please revise your disclosure on page 32 to includethe information required by Item 404 of Regulation S-K. |
Response: revised
Item 15. Recent Sales of Unregistered Securities, page 33
| 19. | We note your response to prior comment 24 and amended disclosure on page 33regarding recent sales of unregistered securities. However, all the information required byItem 701 of Regulation S-K is still not included. Please revise your disclosure to includeall information required by Item 701. |
Response: revised
| -6- |
