Mail Stop 03-05
December 28, 2004
Via U.S. Mail
Corinne Fallacaro
President, CEO and Director
Global Music International, Inc.
20 Old Stagecoach Road
Redding, CT 06896
Re: Global Music International, Inc.
Registration Statement on Form SB-2, filed on December 1,
2004
File No. 333-120908
Dear Ms. Fallacaro,
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.
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 and welcome any questions you may have
about our comments or on any other aspect of our review. Feel
free
to call us at the telephone numbers listed at the end of this
letter.
General
1. Please remember that the prospectus needs to present investors
with a snapshot of your company containing all material
information
as of the time of effectiveness. It is not supposed to present a
description of your future plans or aspirations. You need to
revise
the entire document so that it accurately presents your current
situation. You may talk about what you plan to do but you should
present that discussion in the context of a timeline which sets
forth
the obstacles and benchmarks that you must achieve along the way.
Include your estimate of the financial wherewithal needed to reach
your plan and discuss your plans for raising the money so that
investors can make an informed decision about the quality of your
plan. The other comments below are intended primarily to offer
some
guidance as you begin the difficult but necessary task of revising
this prospectus so that it serves its purpose to investors.
2. In an appropriately captioned section, give the factors that
were
considered in determining the offering price of the stock that
will
be sold under this prospectus. Please refer to Item 505 of
Regulation S-B.
3. Consideration should be given to the updating requirements of
Item
310(g) of Regulation S-B.
Registration Statement Cover Page
4. If you are offering your securities on a delayed or continuous
basis, please add the following to the front of your registration
statement, "if any of the securities being registered on this Form
are to be offered on a delayed or continuous basis pursuant to
Rule
415 under the Securities Act of 1933, check the following box,"
and
check the box.
Cover Page
5. Since this is an initial public offering and there is no market
for your shares, you need to revise to disclose prominently the
fixed
price at which the shares will be offered. You may say that after
a
market is established the price will be at the market.
Prospectus Summary, page 1
The Company, page 1
6. Please tell us whether your website has been updated to reflect
the current operations of Global Music International. If so, it
seems that you acquired Ecity Records Incorporated, from its
previous
owner, Falcon Entertainment Incorporated. As such, tell us and
revise your filing to include how you acquired Ecity Records, the
details of the acquisition as well as the related accounting.
Additionally, tell us if you have signed any artists to the Ecity
Records label or if there are any commitments related to the
record
label activities. We may have further comments based on your
response.
7. Please revise your first paragraph. Your business plan is
unclear. From the rest of the filing it appears that you intend
to
serve as the music video equivalent of a vanity press and then
intend
to get programmers to pay you for the privilege of showing your
videos. If this is correct, please revise to clarify here. If it
is
not, please revise here and elsewhere so that investors can
determine
what your plan is.
8. Please disclose that you have no revenue from operations and
your
net loss for the most recent audited period. Please also disclose
that your auditors have issued a going concern opinion.
9. Also disclose that your control person has a debt secured by
all
the assets of the corporation which she may call at any moment
with
the result that any monies paid into the company might become
forfeit
to her.
10. Revise to disclose your monthly "burn rate" and the month you
will run out of money assuming no change in present trends.
Risk Factors, page 2
We have no public trading market for our securities, page 2
11. Please revise this risk factor to clarify that in the past you
have not been subject to the periodic filing and reporting
requirements of the Securities Exchange Act of 1934.
12. We note that you intend to distribute financial statements to
your shareholders on an annual basis; however, please revise or
delete the second part of the last sentence "...but cannot provide
assurances that such financial statements will be available, or,
if
available, will be audited." If you are declared effective as a
small business issuer, you must provide audited financial
statements
as required by Item 310(a) of Regulation S-B in your annual 10-
KSB.
If we are unable to obtain additional capital, page 3
13. Please revise to tell when you will need to obtain additional
capital before you have to curtail or cease operations.
Funds are not and may not be available to pay demand note, page 4
14. Since it appears these are the same assets you discuss in the
next risk factor, please explain why they increased in value to
$1.5
million from $700,000. Since Ms. Fallacaro is both the holder of
the
note and the control person of the company and the assets were
earlier valued at the lower amount, please disclose here how the
board arrived at the $1.5 million amount.
There may be claims made against our assets..., page 4
15. Please revise to discuss the risk that creditors of Falcon may
challenge the validity of the transfer of assets.
We may be unable to attract and retain independent contractors...,
page 4
16. Please expand your disclosure to explain why you need to hire
independent contractors and how the inability to attract
independent
contractors may harm your ability to develop and manage your
business. Additionally, please explain why the market for
independent contractors is extremely competitive.
We may be unable to adequately protect our proprietary rights...,
page 5
17. Please expand your disclosure to identify and to discuss the
nature of your proprietary rights.
Our inability to attract wireless operators, page 6
18. Disclose here the total number of wireless operators and cable
providers you have formed agreements with.
If the selling shareholders all elect to sell their shares at the
same time..., page 6
19. Please consider including a risk factor to address any risks
associated with stock that trades in relatively small volume.
Business of the Company, page 7
Industry Background, page 7
20. Please describe the competitive business conditions and your
position in the industry and methods of competition. Refer to
Item
101(a)(4) of Regulation S-B.
21. You might consider revising this section to discuss the costs
and
difficulties of becoming listed on a cable station. We believe
there
are limited spaces.
22. If you have done any studies about the receptivity to
unfiltered
musical offerings (that is, with no prescreening for talent
levels,
etc.), please disclose.
Plan of Operation, page 8
23. Please refer to the third paragraph. Please explain how
webcast
programming content gives consumers access to a wide range of
independent music video programming.
24. Refer to the last paragraph of this section. Please discuss
in
more detail how you will distribute your programming on a
subscription basis to telecom companies. For instance, what type
of
telecom companies are you targeting and in what form will your
content be delivered?
Historical Information About Our Product, page 8
25. We note that you have purchased various assets for your
business.
Please provide more information about the assets you purchased.
For
example, identify how each asset or group of assets contributed to
the operations of its previous owner in both qualitative and
quantitative terms. Also, please discuss how you plan to use each
asset or group of assets in meeting your business objectives.
Employees, page 8
26. It appears that your "full time" employees received no
compensation as directors or executive officers. If they received
no
compensation at all, please disclose. Supplementally confirm that
they have no other jobs or revise the label of "full time."
Property, page 8
27. Please provide more information regarding the ownership of the
Redding, CT office space and any limitations related to your use
of
the property. Do you rent or own? If the former, what are the
terms?
Please refer to Item 102 of Regulation S-B.
Management`s Discussion and Analysis or Plan of Operation, page 9
Overview, page 9
28. Either remove the reference to the Private Securities
Litigation
Reform Act or revise the disclosure to state that by its terms it
does not apply to penny stock companies like yours.
29. Please expand your discussion to more fully comply with the
disclosure requirements of Item 303(a) and (c) of Regulation S-B.
Your present discussion lacks the specific informational
components
required by this Item. Discuss the circumstances and events that
caused the auditor to conclude that substantial doubt exists about
your ability to continue as a going concern for a reasonable
period
of time, as well as management`s plans for dealing with this
situation.
30. Please provide a discussion of how long you can satisfy your
cash
requirements and whether you will have to raise additional funds
in
the next twelve months. Refer to Item 303(a) of Regulation S-B.
31. Please explain how you intend to operate as a "diversified
entertainment company."
32. Please clarify here and throughout the document whether you
have
started to webcast your programming on the IMNTV website. If so,
please discuss your operating results attributable to that aspect
of
your business in both quantitative and qualitative terms.
Additionally, if known, please discuss any future trends related
to
the operation of the website.
Management, page 11
33. Please tell us why the list of officer and director names and
positions on your website, www.imntv.com, differ from your
disclosure
on page 11.
34. Please confirm supplementally whether Ms. Fallacaro and Mr.
Mauritz still hold their positions at Independent Music Network
Inc.
and Falcon Entertainment Corp.
Certain Relationships and Related Transactions, page 13
35. Please expand your disclosure to describe your relationship
with
Falcon Entertainment Corp. and disclose that Falcon is a public
company. Disclose any common officers, directors and principal
shareholders.
Principal Shareholders, page 13
36. Your largest shareholder, Corinne Fallacaro, beneficially
owns,
in the aggregate, approximately 79.2% of the Company`s outstanding
common shares and may have the effective power to elect all
members
of the board of directors and to control the vote on substantially
all other matters, without the approval of other stockholders. In
view of this fact, it appears that these matters should be
discussed
in a footnote to the financial statements. Please revise or
supplementally explain why no additional disclosures are
considered
necessary. Refer to the requirements of paragraph 2 of SFAS 57.
Selling Shareholders, page 14
37. Please revise your disclosure to state any position, office,
or
other material relationship which the selling security holders
have
had within the past three years with you or any of its
predecessors
or affiliates. Please refer to Item 507 of Regulation S-B.
38. We note that Mark Beloyan owns 1,000,000 shares. Please
revise
your table or footnote to accurately reflect the percentage of
shares
owned by Mr. Beloyan.
39. Revise to disclose the amount and (if more than 1%) the
percentage of shares to be held by each selling shareholder after
the
offering.
Description of Securities, page 15
40. Please disclose the approximate number of holders of record of
your common stock. Refer to Item 201(b) of Regulation S-B.
Where You Can Find Additional Information, page 17
41. Please revise this section to comply with Item 101(c)(1) and
(2)
of Regulation S-B.
Plan of Distribution, page 17
42. Revise to clarify that the shares will be sold at the fixed
price
given on the front cover until a market develops.
43. You correctly state that the selling shareholders are "deemed"
underwriters. However, it appears that Ms. Fallacaro and Mr.
Mauritz
should be listed simply as underwriters because of the amount of
shares they are registering and their position with the company.
If
you disagree, please provide your analysis. You should also
include
a brief description of the liability of underwriters.
Financial Statements, page F-1
44. We note that you were organized on July 1, 2004 and that you
currently do business through Independent Music Network, and its
program "IMNTV." Independent Music Network was formerly a
subsidiary
of Falcon Entertainment Corp. Corinne Fallacaro, your principal
shareholder, took possession of these assets in January 2001. You
acquired the assets from Ms. Fallacaro in July 2004. Your
executive
officers and directors, Ms. Fallacaro and Mr. Mauritz, also served
as
officers of Independent Music Network through 2004. Given this
fact
pattern, it appears that Independent Music Network should be
considered your predecessor. If true, historical financial
statements for you and your predecessor must be provided for each
of
the periods specified in Item 310(b) of Regulation S-B. Please
revise the filing accordingly, or supplementally provide support
for
your apparent conclusion that no additional financial statements
are
required. In determining whether you acquired assets or a
business,
consideration should be given to the guidance in Article 11-01 (d)
of
Regulation S-X.
Footnote 1 - Significant Accounting Policies, page F-6
Property and Equipment
45. We note that you acquired various assets from Corinne
Fallacaro,
your principal shareholder, in exchange for consideration of $1.5
million dollars. Please tell us and revise your disclosure to
explain how you valued and accounted for the transaction. Provide
your basis in GAAP for the accounting applied. We may have
further
comments.
Footnote 5 - Going Concern, page F-8
46. In relation to the substantial doubt about your ability to
continue to operate as a going concern, there are no disclosures
in
your footnotes regarding: (1) the possible effects of such
conditions and events; (2) management`s evaluation of the
significance of those conditions and events and any mitigating
factors; (3) possible discontinuance of operations; (4)
management`s
plans; and (5) information about the recoverability or
classification
of recorded asset amounts or the amounts or classification of
liabilities. As such, please revise your filing to include the
aforementioned disclosures. For example, please expand
disclosures
to include your plan on attaining profitable operations and
sufficient additional equity as well as the effects of not
fulfilling
your plans. For further guidance refer to paragraph 10 of SAS 59.
Item 27 Exhibits, page II-2
47. Please include an exhibit of your common stock instrument.
Refer
to Item 601(b)(4) of Regulation S-B.
Exhibit 5.1
48. In the next amendment please include a legality opinion for
the
shares being offered by the selling shareholders.
Exhibit 23.2 Consent of Carlin, Charron & Rosen, LLP
49. An updated consent should be included in any amendment to the
filing.
Item 28 Undertakings, page II-2
50. Please include the Item 512(a) undertaking if you plan to
offer
your securities on a delayed or continuous basis.
* * * * *
As appropriate, please amend the 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 relating to a company`s 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 this action 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 the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 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 Rules 460 and 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 Juan Migone at (202) 942-1771 or Margery
Reich
at (202) 942-1839 if you have questions regarding comments on the
financial statements and related matters. Please contact Rolaine
Bancroft at (202) 824-5537 or me at (202) 942-1850 with any other
questions.
Regards,
Max A. Webb
Assistant Director
cc: Mark C. Perry, Esq.
via facsimile: 954-561-0997
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Corinne Fallacaro
Global Music International, Inc.
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