Mail Stop 4-6
December 15, 2004
Mr. Jerome R. Mahoney
Chairman of the Board
iVoice Technology, Inc.
750 Highway 34
Matawan, New Jersey 07747
Re: iVoice Technology, Inc.
Registration Statement on Form SB-2 filed November 15, 2004
File No. 333-120490
Dear Mr. Mahoney:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. On August 2004, you entered into a standby equity distribution
agreement with Cornell Capital Partners for the sale of up to $10
million of your common stock, relying upon Rule 506 of Regulation
D
and/or Section 4(2) of the Securities Act. Thereafter, you filed
a
registration statement concerning Cornell Capital`s resale of the
shares underlying the equity line. After considering the factual
context of the proposed equity line financing, we do not believe
that
a binding contractual commitment for the sale of shares under the
equity line was entered into with Cornell Capital, because at the
time the equity line was entered, iVoice Technology was (and is) a
non-reporting company with no trading market. As such, the
arrangement by Cornell Capital to pay for shares at a purchase
price
that is effectively 87.5% of a "market price," does not represent
an
irrevocable commitment to purchase the equity line shares.
Further,
the conditions to Cornell Capital`s purchase obligation include
admission of the shares to the OTC Bulletin Board, which is also
inconsistent with a conclusion that there is a pre-existing,
irrevocable purchase commitment. Please revise the disclosure
throughout the filing to remove any implication that there is an
existing equity line arrangement with Cornell Capital that
provides
you with a viable mechanism to obtain needed financing.
2. We note iVoice, Inc.`s press release dated September 9, 2004
regarding its intent to sell its speech engine and related
intellectual property to Biometric Company for $6.25 million.
Please
supplementally inform us concerning the relationship between this
speech engine technology and the technology that will be
contributed
to you and the business you will conduct.
Prospectus Cover Page
3. We note that Mr. Mahoney will not be receiving shares of your
Class A common stock. Please advise us of any other affiliates
who
will not be receiving shares of your Class A common stock.
4. Please provide the legend specified by Item 502(b) of
Regulation
S-B.
Prospectus Summary
Overview, pp. 1-2
5. Tell us whether any of the remaining patents and patent rights
held by iVoice includes technology that is used in the IVR
software
business or whether all necessary technology assets will be
transferred to you. It does not appear that an assignment or
contribution agreement specifying the terms and assets being
transferred as well as the liabilities being incurred has been, or
is
planned to be, filed as a material exhibit. Please file this
agreement. Please see Items 601(b)(2) and (10) of Regulation S-B.
6. You indicate that you may expand through acquisitions. Please
disclose whether there are any plans, proposals or arrangements,
whether in writing or oral, concerning proposed acquisitions.
Tell
us the status of any potential acquisitions being considered which
have not resulted in plans, proposals or arrangements.
7. You indicate that iVoice will be receiving 5% Series A
convertible
preferred stock with an aggregate stated value of $750,000 in
exchange for the transfer of the IVR software business. Disclose
and
also inform us in detail how the value of such assets was
determined.
We note that the balance sheet in iVoice`s recent Form 10-QSB for
the
quarter ended September 30, 2004 shows intangible assets with a
recorded value of $199,000. It also appears that your pro forma
balance sheet does not reflect assets that will be contributed to
iVoice Technology that have a carrying value of $750,000.
Nevertheless, on page 24 you state that the assets to be
transferred
have "an aggregate book value of $750,000." Please advise and
revise
as appropriate.
8. In a prominent place in the summary, please inform stockholders
about the existence and potential adverse effects of securities
that
have conversion (or exercise) prices that are dependent upon a
fluctuating market price. There appear to be at least three
categories of these "toxic" securities, including the $750,000 of
convertible debt to be held by iVoice, the $190,000 of convertible
debt to be held by Mr. Mahoney and the $560,000 of convertible
debt
held by Cornell Capital. In addition to an overview in the
summary,
ensure that a prominently positioned risk factor concisely and
comprehensively addresses the potential adverse effects of a
substantial portion of your capitalization being convertible at
substantial discounts to fluctuating market prices. Throughout
your
filing you sometimes indicate that shares issuable under these
arrangements are "indeterminable." Please revise these references
to
more precisely describe the below market conversion feature and if
true, state that there is no limitation on the number of shares
you
may be obligated to issue under the arrangements. Ensure that you
provide numerical examples to show investors the potential effects
of
fluctuations in the market price on the number of shares you are
obligated to issue. In view of the absence of a market price for
your securities, we suggest that you use book value and declines
to
75%, 50% and 25% of book value to provide investors with
meaningful,
concrete examples of the sensitivity of your share issuance
obligations to changes in market prices for your securities.
9. We note your disclosure on page 25 regarding Mr. Mahoney`s
agreement to forego receiving any of your Class A common stock as
a
result of his ownership of capital stock in iVoice. Is there a
written agreement which may need to be filed as an exhibit?
Please
see Items 601(b)(4) and (10) of Regulation S-B. We also note that
pursuant to iVoice`s filings, it appears that Mr. Mahoney owns
approximately 90 percent of iVoice. Mr. Mahoney will be
receiving,
however, a note convertible into Class B common stock with
extraordinary voting rights. Please summarily discuss the
foregoing
issues in this section, particularly the control over the company
that Mr. Mahoney may acquire upon conversion of his note to Class
B
common stock as well as through his control of iVoice and its
Series
A preferred stock holdings.
10. We note that iVoice disclosed in its recent Form 10-QSB for
the
quarter ended September 30, 2004 a cash balance of approximately
$7.5
million. Please advise us whether you will be receiving any
portion
of this cash balance. In light of iVoice`s capital resources,
please
discuss summarily in this section and more fully elsewhere in your
prospectus the issues that were considered by iVoice`s management
and
board of directors in creating your initial financial condition
and
capitalization with respect to your business plans and objectives.
About Us, p. 2
11. iVoice, Inc. maintains a Web site that continues to reflect
the
business to be transferred to you. Please supplementally advise
us
whether you will be maintaining a separate Web site upon the
transfer
of the IVR software business to you. If available, please
consider
disclosing your prospective new Internet address. Please see Item
101(c)(3) of Regulation S-B.
12. We note your disclosure regarding iVoice Technology, Inc., a
Nevada corporation. Please elaborate further on the relationship
of
iVoice Technology Nevada to you and iVoice as well as the purpose
of
the assignments. Please briefly identify the material agreements
that have been transferred to you. Please revise your disclosure
in
Management`s Discussion and Analysis as appropriate. Such
agreements
as well as the conveyance instruments may need to be filed as
exhibits. Please see Item 601(b)(10) of Regulation S-B.
Summary of the Distribution, pp. 2-7
13. If the record date has been selected, please disclose it in
your
next filing. If you plan to select a record date at a later
time,
please modify the presentation so that it will accommodate the
entry
of the applicable date.
14. With respect to your "Distribution Ratio" discussion, please
disclose the number of shares of iVoice outstanding on the record
date as well as the actual portion of such outstanding shares that
will be participating in the Distribution. We note that Mr.
Mahoney
and other affiliates, if any, will not receive a distribution of
shares of your Class A common stock with respect to their holdings
of
iVoice shares.
15. We note your disclosure under "Our Relationship With iVoice
After
the Distribution" and elsewhere in your prospectus regarding the
administrative services agreement. Please supplementally inform
us
the purpose of such an agreement when the business has yet to
transferred to and operated by you. Please clarify your
disclosure.
Summary of Consolidated Financial Information, p. 7
16. At the outset of the section, please add a discussion
regarding
how you derived your financial information from the financial
information of iVoice. Address the fact that such financial
information does not represent actual historical results and
depicts
your performance as if you operated as an independent entity.
Please
note that such financial information is based on significant
assumptions and allocations, among other things, that may not
represent actual results. In addition to this discussion, ensure
that a prominently positioned risk factor concisely and
comprehensively addresses the risk reflected in your financial
information having been prepared on a fictional basis as opposed
to
reflecting actual historical results.
Risk Factors
iVoice Technology will face many of the difficulties that
companies
in the early stage may face, p. 8
17. Please limit each risk factor to a clearly defined risk with a
discussion of its applicability to you. This particular risk
factor
is general and broad. Please consider preparing separate risk
factors with fuller discussions for each of the points that you
enumerate in this risk factor. You should review your other risk
factors in light of this comment.
iVoice Technology has no operating history as an independent
public
company and may be unable to operate profitably as a stand-alone
company, pp. 8-9
18. Discuss how long iVoice has operated the IVR software business
that is being spun off to you.
iVoice`s operations demonstrate a history of net losses and cash
flow
shortfalls and iVoice Technology`s likely will as well, p. 9
19. More specifically discuss your net loss and negative cash
flows
from operations for your last fiscal year and your nine-months
ended
September 30, 2004 with respect to the IVR software business that
is
being transferred to you.
iVoice Technology has received a going concern opinion from its
independent auditors that describes the uncertainty regarding its
ability to continue as a going concern, p. 9
20. Please revise this risk factor to briefly discuss the
consequence
to investors of the fact that the financial statements do not
include
any adjustments that might result from the outcome of the
uncertainty
regarding the your ability to operate as a going concern.
iVoice`s earnings and stock price will be subject to significant
fluctuations, p. 10
21. Why are fluctuations in iVoice`s stock price a material risk
to
holders of iVoice Technology stock? Clarify why this paragraph is
provided, and among other matters, expand the risk factor caption
to
state the material risk to holders of iVoice Technology stock that
results from the uncertainty you describe. Given that you
comprise
only a component of iVoice, your disclosure regarding the earnings
and stock price of iVoice appears to be of limited applicability
in
assessing any risks that affect your business and stock price.
If either iVoice or iVoice Technology lose the services of any key
personnel, including our chief executive officer or our directors,
our business may suffer, p. 10
22. We note that you plan to have a very limited business
relationship with iVoice upon the Distribution. As such, please
inform us why the loss of iVoice personnel presents a risk to your
business. Otherwise, please revise this risk factor accordingly.
Members of iVoice Technology`s Board of Directors and management
may
have conflicts of interest after the Distribution; iVoice
Technology
does not have any formal procedure for resolving conflicts in the
future, p. 11
23. Please provide additional disclosure as to how a conflict of
interest between you and iVoice may result in a risk. In
addition,
we note your disclosure regarding conflicts that may arise as a
result of potential business acquisitions. Please elaborate
further
on how a prospective acquisition by you may conflict with the
interests of iVoice.
iVoice Technology stockholders may experience significant dilution
if
future equity offerings are used to fund operations or acquire
businesses, pp. 11-12
24. Specifically discuss your expectations and plans to obtain
working capital from future equity offerings and the likelihood of
dilution as a result of such offerings. Please quantify your need
for additional capital resources over the 12-month period
following
the distribution.
iVoice Technology faces intense price-based competition for
licensing
of its products which could reduce profit margins, p. 12
25. Please disclose whether such price competition has previously
resulted in any pressure on the pricing of your products in the
IVR
software business. If such pressure did exist, please provide
details of such pricing pressure and the effect on your business.
iVoice Technology may be unsuccessful in developing new
distribution
channels, p. 12
26. We note your disclosure regarding existing relationships
between
dealers and resellers with iVoice. Please revise to discuss
whether
you will be assuming any of these relationships and the extent to
which you will need to develop a new network as opposed to
utilizing
the assumed iVoice network. Also address any risks presented by
iVoice`s dealers and resellers in not agreeing to the transfer of
the
relationship to you. Also elaborate on the risks presented by
"rapidly evolving distribution and marketing technologies."
Product returns may exceed established reserves and affect iVoice
Technology`s revenues, p. 13
27. We note your disclosure in the first paragraph on page 27
where
you state that your policy is to not provide customers the right
to
refund any portion of its license fees. We also note your
disclosure
in the third paragraph on page 27 of your filing in which you
state
that "[c]urrent reseller agreements do not provide for a
contractual
right of return." The foregoing statements differ from your
disclosure in this risk factor. Please reconcile the disclosures.
Further, please disclose whether any returns for a period
materially
exceeded the reserves you had established for such period.
iVoice Technology may depend on distribution by resellers and
distributors for a significant portion of revenues, p. 13
28. You mentioned the existence of reseller relationships in your
filing. The prior comment noted one such instance and on page 30
you mention the existence of more than 100 resellers. Please
reconcile such disclosure with the text in this risk factor
stating
that "[n]o such relationships currently exist" and your disclosure
on
page 32 stating that you have "traditionally sold [y]our product
primarily on a direct basis." Please revise your risk factor and
other disclosure as appropriate.
29. Please consider discussing in this risk factor or in a
separate
risk factor your dependence on any customer which represents a
material portion of your revenues. We note that iVoice identifies
specific customers such as ADP and the American Red Cross in its
press releases.
The results of iVoice Technology`s research and development
efforts
are uncertain, p. 13
30. In the caption, disclose the risk to investors that result
from
this uncertainty. Do you expect your business will be dependant
on
the results of a specific ongoing research and development
project?
Please revise to provide more specific information concerning
research and development efforts that are in process that subject
investors to material risks.
The greater than expected length of the product development cycle
may
adversely affect our future revenues, p. 13
31. Please revise to include details of specific examples of when
your product development cycle exceeded your expectations. Please
provide specific information that provides a context to the
investors
about the scope of this risk and how it has affected you in the
past
by detailing how such delays have previously affected your
operations
and financial results.
iVoice Technology must attract and retain personnel while
competition
for personnel in this industry is intense, p. 14
32. We note that you currently have only five full-time employees
and
that you plan to terminate the administrative services agreement
with
iVoice and fulfill such services in-house. Please discuss
specifically your needs and plans for hiring additional personnel
to
operate as an independent company. Elaborate on the specific
risks
of not being able to fulfill personnel requirements to meet such
needs. We would expect to see quantitative disclosure in the
Management`s Discussion and Analysis regarding these plans and the
extent to which they will cause expenditures and cash rate usage
in
future periods to vary from the expenditure levels and cash
requirements that were recorded in the carve-out financial
statements.
iVoice Technology relies on third party technologies which may not
support iVoice Technology products, p. 14
33. If applicable, please consider adding disclosure regarding any
reliance upon licensed software or hardware that is material to
the
operations of your business. Any substantial dependency upon
technology licenses should also be described under Business or
another appropriate portion of the body of the prospectus,
including
a description of license terms and conditions. As applicable,
please
identify each material license on which you are substantially
dependent and disclose the term of each such agreement, the scope
of
the license, its termination provisions and other significant
terms.
Such agreements may need to be filed as exhibits. Please see Item
601(b)(10) of Regulation S-B.
We may not be able to access sufficient funds when needed, p. 15
34. As previously noted, please provide a specific discussion
quantifying your capital requirements to fund planned operations
over
the next 12 months and your current deficiency with respect to the
same. Please discuss your plans to meet such deficiency and the
risk
to investors if you are unable to address the deficiency. Will
you
seek to obtain a new equity line agreement after the Distribution,
and if you are unable to negotiate one, what steps would you take
to
address capital deficiencies?
Quarterly financial results are subject to significant
fluctuations
which could cause iVoice Technology`s stock price to decline, p.
15
35. This risk factor appears to be similar to the risk factor
presented at the bottom of page 9 of your filing. Please
consolidate.
Government regulation of telemarketing activities may diminish
iVoice
Technology`s earning potential, p. 17
36. Please discuss the extent to which you have been marketing
your
products to telemarketers and the portion of your revenue, if any,
that is derived from sales to telemarketers.
The Distribution of iVoice Technology Class A Common Stock will
result in substantial tax liability, pp. 17-18
37. In this paragraph you indicate that the distribution will only
be
taxable "to the extent of [your] current or accumulated earnings
and
profits." Since it does not appear that there are any earnings or
profits, why do you believe that a tax liability will be
generated?
Furthermore, including this information concerning the limited
extent
to which tax liability is likely to be incurred suggests that
there
will be no tax liability. We note the disclosure in the Federal
Income Tax Consequence section at page 48 as well. Given the
nature
of the transaction you are registering, expand to provide a
materially complete tax matters discussion and provide an opinion
that is referenced in and supports the material tax consequences
you
describe. See Item 601(b)(8) of Regulation S-B.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
38. Please consider preparing a separate "Overview" section in
order
to provide a general analysis and discussion of the condition of
your
business. Please note that Management`s Discussion and Analysis
should include disclosure based on currently known trends, events
and
uncertainties that are reasonably expected to have material
effects
upon you. For example, your separation from iVoice may likely
entail
significant expenditures to hire necessary personnel and develop
administrative systems, among other things. Please also disclose
whether any customer provides a material portion of your revenue.
In
preparing your response, refer to Item 303 of Regulation S-B and
Release Nos. 33-6835 and 33-8350 for additional guidance.
Further,
include in the first paragraph of such "Overview" a discussion
regarding your carve-out financial statements and how such
financial
statements do not reflect actual results.
Separation from iVoice, pp. 20-21
39. We refer you to the first paragraph in this section. Please
revise your disclosure to indicate that the IVR software business
will be transferred to you by iVoice in exchange for Series A
preferred stock with an aggregate stated value of $750,000. As a
result, iVoice also will have a significant continuing ownership
interest in you.
40. We refer you to the second paragraph on page 21 of your
filing.
Please consider revising your disclosure to detail the specific
material assets being transferred to you and to discuss whether
any
agreements or other obligations are being transferred. In this
regard, we note that any existing customer, reseller, distributor,
co-marketing, alliance or vendor agreements that are material to
the
IVR software business may likely be transferred to you as well.
41. We refer you to the third paragraph on page 21 of your filing.
We also note your disclosure in Note 1 to your financial
statements
on page F-7 stating that the temporary administrative services
agreement may be continued on a month-to-month basis. Please
consider elaborating on such continuation option and your
expectations of employing such option. We note your disclosure
elsewhere in your filing in which you state that the
administrative
services agreement will be terminated upon the Distribution
without
qualification. Please revise such disclosure in order to reflect
this option.
Results of Operations for the Nine Months Ended September 30, 2004
as
Compared with the Nine Months Ended September 30, 2003, pp. 21-22
42. Please discuss the causes for any material changes, and
quantify
the impact of each identified source for significant changes, from
period to period in line items of your financial statements. For
example, you state that your low sales volume is attributable to
the
minimal resources provided by iVoice. The limitations of minimal
resources in both periods, however, does not explain the change in
revenue between the two periods. Following are further
nonexclusive
examples of other disclosure requiring a more robust discussion of
material changes:
* With reference to the first paragraph of page 22, how much of
the
change in operating expenses is attributable to executive
compensation and how much is due to professional fees;
* With reference to the fourth paragraph of page 22, it appears
that
only $28,000 of the $450,000 change in other expenses is
explained;
and
* With reference to the second paragraph of page 23, there appears
to
be no discussion regarding the specific changes in your
operations,
business conditions or transactions that led to the $230,000
decline.
What other events or business conditions contributed materially to
the changes in results and what was the dollar impact of each of
the
contributing factors? Please refer to Item 303 of Regulation S-B
and
Section III.D of Release No. 33-6835 for guidance.
43. The fourth paragraph on page 22 indicates that you will incur
charges for the effects of the beneficial conversion feature of
your
convertible debentures. Please expand the discussion to describe
how
such amounts will be calculated and how they will be reflected in
the
financial statements of future periods.
44. With respect to the last paragraph on page 22, please quantify
the amount of the change in price and discuss in quantitative
terms
the effect the change in price had on your revenues as compared to
the portion of the change that was due to a change in the volume
sold.
Results of Operations for Year Ended December 31, 2003 as Compared
with Year Ended December 31, 2002, pp. 22-23
45. The numbers disclosed for your loss of operations in this
section
do not reconcile with the numbers presented in your financial
statements. The numbers appear to be for net loss. Please
correct
and reconcile.
Liquidity and Capital Resources, pp. 23-25
46. You state that "Mr. Mahoney has agreed to accept shares of
[your]
Class B Common Stock in satisfaction of [your] obligations" in the
second paragraph of this section. Does this statement refer to
the
$190,000 note to Mr. Mahoney that is by its terms convertible into
either Class A or B common stock or has Mr. Mahoney also agreed to
accept the note for payments owed to him under his employment
agreement with Class B common stock? Please inform us whether
there
are any other obligations owed by you to Mr. Mahoney. Please
clarify
your disclosure and note that any agreement would need to be filed
as
an exhibit. Please see Item 601(b)(10)(i)(A) of Regulation S-B.
47. Please supplementally inform us of the terms of your sale of
convertible debentures. Are the terms embodied in a purchase
agreement? Does Cornell Capital Partners have discretion as to
whether it shall purchase the $140,000 of convertible debentures?
We
note that the purchase is related to the effectiveness of this
filing. However, your subsequent registration statement, File No.
333-120608, filed in connection with your equity line of credit
appears to state that the subsequent purchase of convertible
debentures is related to the effectiveness of that registration
statement.
48. Your amended disclosure in this section will not include a
discussion of the equity line of credit and as a result, your
current
financing arrangements will not be sufficient for the next 12
months.
Please expand to address your capital requirements in quantitative
terms and how you plan to meet such requirements. Based on your
"as-
if" assumptions in your carve-out financial statements, at what
rate
do you use cash in operations and for what period of time will you
be
able to fund your anticipated business operations with existing
capital resources? Please discuss any expenditure for staffing,
equipment and services, among other things, that you plan to
undertake in order to become a functioning independent company.
49. Please consider revising your disclosure regarding the
$190,000
note to discuss the reason for your assumption of a liability that
is
unrelated to your business. Also, provide a reasonably detailed
explanation of the transactions that generated the $190,000
liability
of iVoice to Mr. Mahoney. Is this liability attributable to cash
advances only or does it include an interest component? If so,
how
much of the $190,000 obligation represents funds advanced to
iVoice?
Our Business
50. Please elaborate on your plans to expand by acquisition. In
this
regard, what strategies do you expect to pursue regarding the
acquisition of businesses. For example, is your objective to
obtain
complementary products, to diversify your current business or to
expand your geographic reach?
Competition, pp. 30-31
51. You identify two specific markets in which you compete-the IVR
enterprise market and the IVR enhanced network services market.
Please elaborate on the distinction between these two markets and
discuss how your products address the needs of customers in these
two
markets.
Product Development, pp. 31-32
52. Please discuss whether any development efforts are currently
being undertaken in the IVR software business and, if applicable,
provide a brief summary of the status of such efforts. Are you
developing any new versions of your products?
Business Development, p. 32
53. With respect to your strategic alliances and OEM and reseller
accounts, consider disclosing the status of any current
negotiations.
Expand to describe the nature and significance of any material
strategic alliances and OEM and reseller accounts.
Employees, p. 34
54. Please expand to discuss your specific requirements and plans
to
increase the number of employees in order to operate your
business.
Properties, p. 35
55. Discuss your specific plans with respect to your office space
after the Distribution.
iVoice Technology`s Management
56. We refer to your statement concerning Mr. Mahoney in which you
state that "we merged [with International Voice Technologies] on
May
21, 1999." Please clarify.
57. On page 45 of the filing under "Reasons for the Distribution"
you
discuss the ability to create equity incentive plans as a reason
for
the Distribution. Please disclose the material features of such
equity incentive plans, if any. Are there any current plans,
proposals or arrangements to provide awards under an equity
incentive
plan following the Distribution? If so, please provide a
materially
complete description of those planned awards.
Certain Relationships and Related Transactions
58. Please indicate the relationship you have with Cornell Capital
that requires you to disclose your transactions with them in this
section. In particular, is Cornell Capital a significant
shareholder
or will it become one in connection with the Distribution? What
is
the specific nature of its intent? Please refer to Item 404 of
Regulation S-B.
Principal Stockholders
59. Please include iVoice and Cornell Capital in your table with
respect to their Series A preferred stock and convertible notes,
respectively. It appears iVoice and Cornell Capital each have a
contractual right to acquire the underlying shares of common stock
within 60 days and would be the beneficial owners of the
underlying
shares. Please see Rule 13d-3. In addition, please disclose with
clarity in a footnote or otherwise that control of the company
will
remain with Mr. Mahoney through (1) his promissory that is
convertible to Class B common stock with extraordinary voting
rights
as well as (2) his ownership of iVoice and their holdings of your
Series A preferred stock. If you don`t believe Mr. Mahoney will
be
the controlling person following the Distribution, tell us why in
your response letter.
Further, please note that once a market price is determined and
you
are able to determine the number of shares issuable upon
conversion
of iVoice, Cornell Capital and Mr. Mahoney`s respective
obligations,
you will need to assess the adequacy of your disclosure concerning
the principal beneficial owners, particularly during the
prospectus
distribution period.
Description of Securities
Class A Common Stock, p. 39
60. You state that 100 shares of your Class A common stock was
issued
and outstanding as of September 30, 2004. However, you were not
incorporated as a legal entity until November 10, 2004. Please
modify your disclosure to convey that the financial statements
show
that 100 shares were outstanding but that these shares were not
actually outstanding at September 30, and are presented as such as
part of the preparation of those statements on a carve-out basis.
Series A 5% Convertible Preferred Stock, pp. 41-42
61. Disclose the prospective stated value of your to-be-issued
preferred shares. Provide a materially complete explanation of
how
the aggregate stated value of the 30 shares was determined. Did
you
obtain an opinion of a third party as to the value of the assets
being transferred? What steps were taken by the board of
directors
in establishing this dollar amount?
The Distribution
Results of the Distribution, p. 46
62. Please also explain to us your statement that "regardless of
the
number of stockholders of record and outstanding iVoice shares as
of
the Record Date" you expect to have 10 million shares outstanding
and
approximately 20,000 holders. Do you intend to adjust the
distribution ratio so that the 10 million shares will be allocated
among the holders? You plan to distribute one share of your Class
A
common stock for every 874 shares of iVoice stock or fraction
thereof. Please also explain your statement in the Prospectus
Summary that the ratio is subject to change depending on the
number
of shares outstanding.
Please also confirm whether your apparent uncertainty as to the
Distribution ratio is derived from the existence of nominee
holders
holding for the accounts of beneficial stockholders. Please
explain
how and when you will compute Distribution ratio to achieve the
issuance of the desired 10 million shares. Will the shares held
in
aggregate by nominee holders or will each beneficial owner`s
shareholdings be used to determine the shares issuable as well as
serve as the basis for any rounding determinations.
Further, please supplementally provide us with an analysis of what
you would do in terms of updating your disclosure, if you were to
change the Distribution ratio after the effective date. Would you
be
able to make this change by prospectus supplement and, if so, what
is
the basis for such belief?
63. We refer you to Rule 10b-17 of the Exchange Act in connection
with your proposed dividend.
64. Please provide the disclosure required by Item 201(a)(2) of
Regulation S-B.
Financial Statements
65. Your attention is directed to Item 310(g) of Regulation S-B
and
the need for updated financial statements and related disclosures.
66. You are reminded that a currently dated consent of the
independent accountants with typed signature should be included in
any amendment to the registration statement.
Note 6 - Related Party Transactions, p. F-13 to F-14
67. Please provide consistent disclosures regarding administrative
services following the completion of the Distribution. The risk
factor on page 14 of the text indicates that the agreement with
iVoice will terminate following the distribution and you will be
required to obtain such services from another party which could be
more expensive. Note 6 to your December 31, 2003 and 2002
financial
statements indicates that the amounts allocated by iVoice on a
historical basis are a reasonable approximation of what would have
been incurred by you on a stand alone basis and Note 1 indicates
that
the administrative services agreement may be continued after the
distribution if you are unable to replace it. We note similar
disclosures in Management`s Discussion and Analysis and throughout
the prospectus. Please also note our prior comment.
Note 6 - Convertible Debenture and Equity Line of Credit, p. F-27
68. Please expand Note 6 to your September 30, 2004 financial
statements to quantify the amount capitalized for the beneficial
conversion feature and how such amount was calculated.
Selected Historical and Pro Forma Financial Information, pp. F-32
to
F-37
69. Pro forma adjustments should only include those adjustments
that
are directly attributable to the specific transaction requiring
pro
forma presentation, are factually supportable and expected to have
a
continuing impact. It appears to us that the impairment of
intangible assets is not directly attributable to the spin-off and
the adjustment should therefore be eliminated from the pro forma
presentation. Revise the historical financial statements to
reflect
the impairment in the appropriate period and provide an
explanation
of the reasons for the impairment in the notes to the financial
statements and in Management`s Discussion and Analysis.
Item 27. Exhibits.
70. Please file all required exhibits. The exhibits form an
integral
part of your registration statement, provide material disclosure
to
investors and facilitate our review of your filing. Please refer
to
Item 601(b) of Regulation S-B for additional guidance. We will
review the exhibits when they are filed and may have further
comments
at that time.
Signatures
71. Per your disclosure, Mr. Seidler also serves as a director.
Please revise as appropriate.
* * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts related to your disclosure, they are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert the staff comments and the
declaration
of effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of your registration statement as a confirmation of
the fact that those requesting acceleration are aware of their
respective responsibilities under the Securities Act and the
Exchange
Act as they relate to the proposed public offering of the
securities
specified in the above registration statement. We will act on the
request and, pursuant to delegated authority, grant acceleration
of
the effective date.
We direct your attention to Rule 461 regarding requesting
acceleration of a registration statement. Please allow adequate
time
after the filing of any amendment for further review before
submitting a request for acceleration. Please provide this
request
at least two business days in advance of the requested effective
date.
You may contact Maureen Bauer at (202) 942-1824, or Tia
Jenkins
at (202) 942-1902, if you have questions or comments on the
financial
statements and related matters. Please contact Daniel Lee at
(202)
942-1871 with any other questions. If you need further
assistance,
you may contact me at (202) 942-1818 or Barbara Jacobs, Assistant
Director, at or (202) 942-1800.
Sincerely,
Mark P. Shuman
Branch Chief - Legal
cc: Via Facsimile
Scott Rosenblum, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Telephone: (212) 715-9100
Facsimile: (212) 715-8000