Mail Stop 0407
December 29, 2004
Patrick Deparini
President
Nascent Wine Company, Inc.
5440 West Sahara Avenue, Suite 202
Las Vegas, Nevada 89146
RE: Nascent Wine Company, Inc.
Registration Statement on Form SB-2
Filed December 2, 2004
333-120949
Dear Mr. Deparini:
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 with any of our comments, 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 on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form SB-2
General
1. We note that Mr. Deparini, your sole officer and director, will
be
the only person conducting the offering. Supplementally describe
how
he intends on marketing the offering. Provide us with sales
materials and scripts that he will use to sell the offering. Tell
us
also how he will locate and contact investors. Does he intend to
utilize the Internet to advertise this offering?
2. You refer to your officers and directors throughout your
prospectus. You also refer to actions that might be taken by a
unanimous vote of your board of directors. Please revise your
prospectus to clarify that your company consists of one
individual,
Mr. Deparini, who acts as your sole officer, director and employee
and to remove all inferences that your company has officers,
directors or a board of directors consisting of more than one
person.
Prospectus Cover Page
3. Please note that you have repeated your disclosure that "[t]his
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted." Please delete accordingly.
Also,
please delete your name and address and all other information not
required by Item 501 of Regulation S-B or otherwise key to an
investment decision.
Summary Information and Risk Factors, page 4
The Company, page 4
4. We note your disclosure that your "goal is to act as a broker
in
the distribution of limited-production wines" and that you "intend
to
focus your efforts on "boutique" wineries, which each typically
produce less than an aggregate of 10,000 12-bottle cases per
annum."
Please expand your disclosure regarding your company and proposed
business operations. The risks you present in Risk Factors are
difficult to understand without a basic idea of what you do. You
must carefully consider and identify those aspects of your
business
and the offering that are the most significant and highlight these
points in clear, plain language. See Item 503 of Regulation S-B.
5. Please disclose the following in this section:
* Your net losses since inception and the fact that you have no
significant assets;
* You have had no revenues since inception and you have not yet
commenced business operations;
* When you expect to begin generating revenues;
* Your auditors have expressed substantial doubt about your
ability
to continue as a going concern;
* You currently have one individual working part-time for the
company; and
* Whether you need to raise a set amount of money in the next 12
months to continue in business. If so, please quantify that
amount.
The Offering, page 4
6. We note your disclosure regarding your escrow account. Clarify
whether Wendy Miller will deposit the offering proceeds in a bank
account. Also, disclose that Wendy E. Miller also acts as your
legal
counsel and, therefore, is not an independent third party.
7. We note your disclosure regarding termination on your
prospectus
cover. Please enhance your disclosure regarding the terms of your
offering in this section. In this regard, please address the
following:
* Please disclose what factors may prompt early termination of the
offering on this basis and how this would impact your proposed
operations;
* In the event you decide to terminate the offering after the
minimum
amount of proceeds is raised but before the maximum amount of
proceeds has been raised, please clarify, if true, that you will
retain all proceeds received prior to termination and that you
will
promptly return to investors any subscription funds received after
the date of termination. Also, in the event of early termination,
disclose whether you will notify the potential investors you
previously solicited that you have terminated the offering;
* We note your disclosure that the proceeds will be released from
escrow once the minimum proceeds are raised. Please clarify
whether
the offering proceeds received after the minimum amount is raised
will be deposited in escrow;
* Disclose that subscriptions are irrevocable; and
* Disclose that the offering price of the common stock has been
arbitrarily determined and bears no relationship to any objective
criterion of value.
Risk Factors, page 6
8. Add as your first risk factor that your company consists of
only
one individual working on a part-time basis. In this regard,
discuss
how Mr. Deparini will have to offer and sell the shares in the
offering, develop the company`s fledgling business and manage the
reporting requirements of a public company while only working
part-
time. Highlight Mr. Deparini`s lack of public company experience,
including no experience as a principal accounting officer of a
public
(or private) company. Highlight Mr. Deparini`s lack of past
experience in the wine brokering business. We note your later
risk
factors highlighting potential conflicts of interest (e.g. a board
of
directors consisting of one person) and lack of experience
relating
to Mr. Deparini. In light of our comment, these risk factors
should
be combined up front with this risk factor.
Our independent auditors have qualified their report . . .,
page
6
9. Because you mainly repeat information contained in your first
risk
factor, please combine this risk factor with your first risk
factor.
Competitors with more resources may force us out of business, page
6
10. This risk factor is generic. Please discuss in more specific
terms your competitors, particularly in the geographic market
where
you intend to operate.
Current and proposed government regulation could inhibit our
operations . . ., page 6
11. This risk factor is vague. In this regard, you state that you
believe that you will operate in compliance with all applicable
laws,
however, you also state that you do not believe that the laws
governing the sale of wine apply to you. Please clarify, which
applicable laws, if any, apply to you. In addition, what is your
basis for your belief that the laws governing the sale of wine do
not
apply to your company? Is it based on the opinion of your legal
counsel or Mr. Deparini`s belief? If the latter, please advise
how
Mr. Deparini is qualified to interpret the laws governing the sale
of
wines.
Taxation on alcohol-based beverages could have a negative impact .
..
.., page 7
12. We note your disclosure that the federal government and
individual states impose excise taxes on beverage alcohol products
in
varying amounts. Disclose the current federal excise tax for
table
wine and any applicable state taxes, particularly in Nevada where
you
intend to focus your efforts, that may directly impact your
business.
Also, disclose whether the federal excise tax has increased
frequently and consider disclosing the last date it increased and
by
how much. Also, your disclosure in the second paragraph appears
to
address a separate risk. Please consider combining this
disclosure
with your risk factor immediately prior to this risk factor.
The increase in direct shipment programs . . ., page 7
13. We note your disclosure that the "direct sales programs
threaten
the three-tier regulatory structure currently in place . . ."
Please
add context by briefly describing the three-tier regulatory
structure.
We may not be able to generate revenues as a wine broker, page 8
14. Move this risk factor to the beginning of the risk factors
section and indicate the earliest that Mr. Deparini reasonably
believes the company may begin generating revenues. In addition,
supplementally advise as to the basis for Mr. Deparini`s
expectation
that revenues will amount to between 5-25% of a wholesaler`s gross
profit. We may have further comment.
Changes in consumer preferences could reduce demand for our
products,
page 8
15. We note your disclosure that "[d]ecisions about our supplier
relationships often are made in advance of sales to retailers."
Please revise to reflect the fact that you have no supplier
relationships.
Purchasers in this offering will have limited control . . ., page
9
16. Please revise the caption and the text of this risk factor to
disclose that Mr. Deparini, your sole officer, director and
employee,
owns 100% of your outstanding common stock. Also, disclose what
percent of your outstanding common stock would own in the event
that
you sell the minimum amount of your offering and the percent he
will
own in the event you sell the maximum amount of your offering.
You may not be able to sell your shares in our company . . ., page
9
You may not be able to sell your shares in our company . . ., page
10
The stock of Nascent Wine Company is a speculative investment . .
..,
page 10
17. Please combine these three risk factors. Also, we note that
you
plan to take steps to list your stock on an exchange.
Supplementally
advise how you plan on satisfying the quantitative and qualitative
listing criteria of a national stock exchange, such as the NYSE,
or
stock association, such as NASDAQ. In the alternative, delete
this
reference and clarify what markets your stock is likely to trade
on,
such as the Pink Sheets or the OTC Bulletin Board.
Investors may have difficulty liquidating their investment because
Nascent`s stock is likely to be..., page 10
18. Revise the caption of this risk factor to replace the words
"is
likely to" with the word "will." Also, the detail you go into in
this risk factor regarding the specific provisions of the penny
stock
rules is more appropriate in the "Description of Securities"
section
of your prospectus. It is too much detail for the risk factors
section. In your risk factor, you should discuss the risk only.
In
this regard, the risk you convey is unclear. It appears that the
risk is that the penny stock rules may result in fewer brokers
willing to make a market in your shares. Please revise. Also,
please delete your disclosure that the risk disclosure document is
"prepared by the SEC."
Investors in this offering will bear a substantial risk of
loss
.. . ., page 10
19. We note your disclosure that "[t]he present owners of our
issued
and outstanding common stock acquired their holdings at a cost
substantially less than investors in this offering will pay."
Revise
your disclosure to state that Mr. Deparini holds all of your
outstanding shares of common stock. Disclose the number of shares
he
holds and the price per share of the common stock that he
received.
We are selling the shares offered in this prospectus without an
underwriter . . ., page 11
20. We note your disclosure that your shares are being offered
through "licensed agents of the issuer." Revise this disclosure
to
state that the shares are being offered solely by Mr. Deparini.
Supplementally advise what licenses, if any, Mr. Deparini holds.
Special note regarding forward-looking statements, page 11
21. The disclosure in the second paragraph implies that you have
existing products, services and customers. Please revise this
disclosure to reflect the current status of your business.
22. Since the safe harbor created by the Private Securities
Litigation Reform Act of 1995 is not available to the company, the
last sentence of this subsection reaffirming this fact is somewhat
confusing and should be deleted.
Use of Proceeds, page 12
23. Supplementally advise why your legal and professional fees and
accounting fees are not considered to be part of your offering
expenses.
Selling Security Holders, page 14
24. Because this section is not applicable, please delete the
heading
and disclosure.
Plan of Distribution, page 14
25. We note your references to Exhibits 99(a) and 99(b), however,
we
cannot locate these exhibits. Please advise. Also, describe the
material terms of your escrow and subscription agreements in
greater
detail. Disclose, if true, that the offering proceeds will not be
placed in escrow at a bank. Describe the specific
responsibilities
of your escrow agent regarding maintenance of the escrow and
disclose
how the offering proceeds will be sufficiently safeguarded.
Directors, Executive Officers, Promoters and Control Persons, page
15
Background of Directors, Officers, Promoters and Control
Persons, page 16
26. Disclose the authorized number of directors on your board of
directors and whether you have any plans of adding additional
directors to your board.
27. Disclose the time periods for each of Mr. Deparini`s positions
so
that your disclosure regarding Mr. Deparini`s business experience
for
the past five years is clear. Also, disclose the name of the
private
company Mr. Deparini provided services to from 1997-2001. See
Item
410(a)(4) of Regulation S-B.
Business of the Issuer, page 20
28. We note your disclosure that your goal is to act as a broker
in
the distribution of wines in the State of Nevada. Please disclose
whether you intend to limit your solicitation efforts of suppliers
to
a specific geographic area.
29. We note your disclosure that your "role in these transactions
will be to pair retailers with suppliers." We also note your
disclosure in your Plan of Operation section that you are
attempting
to "foster relationships with suppliers and retailers." It
appears,
however, that your primary role is to broker transactions between
suppliers and wholesalers. Please clarify the nature of your
proposed efforts in respect of wholesalers and retailers. In this
regard, clarify whether wholesalers would purchase inventory from
the
suppliers you intend to represent.
Industry Background and Competitive Business Conditions..., page
21
30. Indicate whether there are any other companies that you will
compete against that follow a similar business model as your
company
(i.e. wine broker).
Effect of Existing or Probable Government Regulations . . ., page
22
31. Because you intend to focus your distribution efforts in the
State of Nevada, describe any applicable Nevada laws that may
impact
your business.
Reports to Security Holders, page 22
32. We note your disclosure regarding the Internet site maintained
by
the SEC for "issuers that file electronically." Revise this
disclosure to state that your SEC filings will be available on the
SEC`s Internet site.
Management`s Discussion and Plan of Operation, page 23
Plan of Operation, page 23
33. Revise the second paragraph of this subsection to identify the
fixed assets that were purchased from Mr. Deparini.
34. Address how the company anticipates funding the costs of
operating as a public company.
Description of Property, page 25
35. We note your disclosure regarding the shareholder that
provides
office space to you. Since you have only one shareholder,
identify
Mr. Deparini as the individual who provides office space and
services
to the company free of charge.
Certain Relationships and Related Transactions, page 26
36. Explain how you valued the shares provided to Mr. Deparini in
the
various transactions.
Holders, page 27
37. We note your disclosure that your outstanding stock is "held
by
approximately 1 shareholder of record." Delete the word
"approximately" and disclose, if true, that Mr. Deparini is your
sole
shareholder of record.
Financial Statements, page F1
Note 3 - Fixed Assets, page 39
38. We note your disclosure that you are depreciating equipment
over
a 5 year life using straight line depreciation. However, the
amount
of depreciation you recorded for the years ended December 31, 2003
and 2002, and the interim period ended September 30, 2004 seem
inconsistent with your accounting policy. Please revise or advise
Note 2 - Going Concern, page 47
39. We refer to your disclosure that "Management believes that it
has
raised enough funds to sustain operations for a period of twelve
months". Clarify in MD&A the source, timing and amount of the
funds
required for the next twelve months. Your discussion should also
address your ability to sustain operations if you are unable to
raise
any funds from the offering.
Consent of Accountants
40. Include a consent from Beckstead and Watts, LLP to include
their
review report on your interim financial statements.
* * * *
Please furnish a cover letter with your response 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 Alonso Rodriguez, Staff Accountant, at (202)
824-5497 or Terry French, Accountant Branch Chief, at (202) 942-
1998
if you have questions regarding comments on the financial
statements
and related matters. Please contact Albert Pappas, Staff
Attorney,
at (202) 942-7914, or me at (202) 942-1990 with any other
questions.
Sincerely,
Larry Spirgel
Assistant Director
cc: Wendy E. Miller, Esq.
(702) 242-6617 (fax)
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Mr. Patrick Deparini
Nascent Wine Company, Inc.
December 29, 2004
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