Mail Stop 4-6
February 10, 2005
VIA FACSIMILE (303) 347-8763 AND U.S. MAIL
James H. Watson, Jr.
Chief Executive Officer
1st Net Technologies, Inc.
1869 W. Littleton Boulevard
Littleton, Colorado 80120
RE: 1st Net Technologies, Inc.
Preliminary Schedule 14A
Filed August 27, 2004, January 7, 2005 and January 14,
2005
Definitive Schedule 14A
Filed January 19, 2005
File No. 0-27145
Dear Mr. Watson:
This is to advise you that we have limited our review of the
above proxy statements to compliance with certain area of Schedule
14A. Based on this limited review, we 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 on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Schedule 14A
General
1. As you are aware, in our verbal comments to you on August 31,
2004
and September 7, 2004, we informed you that as a result of our
initial review of your proxy statement, certain issues and Item
requirements of Schedule 14A must be resolved and provided in
order
for us to complete our review of your filing. For example, since
this proposal falls within Item 14 of Schedule 14A, we requested
that
you amend your proxy statement to provide the appropriate
financial
information. Additionally, we requested that you address the
reasons
for each proposal and its impact to shareholders, as well as to
discuss whether there were any plans, proposals or arrangements
for
the increase in authorized shares.
As detailed in each of the comments below, we do not believe your
amended proxy statements filed January 7, 2005 and January 14,
2005
have adequately addressed the deficiencies in your original proxy
statement. Based on these deficiencies, it appears that your
soliciting materials do not provide your shareholders with
information needed to make an informed voting decision and that
accumulating and counting the proxy cards associated with these
soliciting materials would be inappropriate. Therefore, please
provide us with a detailed analysis of how you intend to address
our
comments and provide your shareholders the information required by
Schedule 14A.
2. Additionally, based on our Friday, January 21, 2005
conversation
with you, it is our understanding that the only reason you amended
your January 7, 2005 proxy statement on January 14, 2005 was to
change the meeting date from February 17, 2005 to February 24,
2005.
Please confirm, if true, that this was the sole change made in
this
amendment. Future amendments should be marked to show changes.
Please see Rule14a-6(h) and Rule 310 of Regulation S-T.
3. Finally, based on our conversation with you today, it is now
our
understanding that your proxy statement was mailed to your
shareholders on Friday, January 21, 2005. Please confirm, if
true,
that this was the mailing date of your proxy statement.
4. Please advise us of the exemption relied upon and supporting
facts
for the securities to be issued to VOS Systems, Inc in the
proposed
merger transaction. In this regard, we find that no Regulation D
filing has been filed on Edgar.
Related Material, page 3
5. This paragraph indicates that you will not mail an annual
report
to your shareholders either immediately before or concurrently
with
your proxy statement. And you confirmed to us today that your
annual
report has not been mailed to your shareholders. Under Rule 14a-
3,
however, a solicitation with respect to an annual meeting shall
not
be made unless each person solicited is concurrently furnished or
has
previously been furnished an annual report to security holders.
In
this regard, it appears you have not complied with the proxy rules
in
soliciting your shareholders. Please advise us of how you intend
to
comply with Rule 14a-3.
6. Additionally, regarding the last sentence of this section which
states that "[t]he Annual Report is not to be treated as part of
the
proxy solicitation material, or as having been incorporated by
reference," please note that you are required to either 1) provide
all the Schedule 14A Item requirements explicitly within your
proxy
statement, or 2) incorporate by reference certain Schedule 14A
Item
requirements in a specifically permitted manner. If you intend to
incorporate by reference certain permitted information, however
you
must delete this statement.
Proposal Three, page 6
7. As the proposed merger transaction falls under Item 14 of
Schedule
14A, Item 14(c)(1) of Schedule 14A requires Form S-4 level
disclosure
for both the acquiring and acquired company. Therefore, in
addition
to the financial statements provided for VOS Systems, all the
information required by Parts B and C of Form S-4 must be
provided.
Please note that Item 14(e)(2) of Schedule 14A would allow you to
comply with certain Item 14(c) information requirements for 1st
Net
Technologies by incorporating this information by reference to
your
annual report, but only to the extent that annual report is sent
to
security holders in compliance with Rule 14a-3. Please revise as
necessary and note that mailing your annual report at this time
after
your proxy material has been mailed would not be consistent with
the
Rule 14a-3 requirement.
8. Please explain to shareholders how they will be impacted if the
proposed merger transaction is approved. For example, explain the
ownership structure of 1st Net Technologies both before the
proposed
merger transaction as well as how the proposed merger transaction
will change the ownership of your company. This information
should
be consistent with the information included under Item 403 of
Regulation S-K.
9. In the forth paragraph of the "VOS Systems, Inc." disclosure,
please explain how the proposed merger transaction "brings value
to
the shareholders."
Proposal Five, page 8
10. Please disclose whether there are any current plans, proposals
or
arrangements for the use of the increase in authorized common
shares
other than the 36,050,000 to be issued in to VOS Systems in the
proposed merger transaction.
11. Please revise to explain the impact of dilution to your
current
shareholders from the issuance of additional common shares.
Proposal Seven, page 9
12. Please revise to explain to your shareholders why management
agreed to the distribution of this asset and how this distribution
will impact the company.
Voting Securities, Principal Holders, page 11
13. Please provide the information required by Item 403(b) of
Regulation S-B, or advise us why specific information is not
required. In this regard, please note that this information is
required director nominees. Similarly, it appears that Mr. Watson
is
the beneficial owner of the shares held by JW Holding Corp. and
possibly Entrepreneur Group as well.
14. Additionally, please note that in order for this information
to
be meaningful to your shareholders, all Item 403 information must
be
presented to reflect your ownership both from a current
standpoint,
as well as to explain how the proposed merger transaction will
change
the ownership of your company. Among other information, this
post-
transaction will indicate the beneficial owners of more than five
percent of any class of your voting securities. See Item 403(c)
of
Regulation S-B. Please revise or advise.
* * * *
As noted in comment 1, based on these deficiencies in the
proxy
materials you mailed to your shareholders, it appears that
accumulating and counting the proxy cards associated with these
soliciting materials would be inappropriate. Therefore, please
provide us with a detailed analysis of how you intend to address
our
comments and provide your shareholders the information required by
Schedule 14A prior to their voting decisions.
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.
No further review of these proxy statements has been or will
be
made. 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.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments 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 our review of your filing or in
response to our comments on your filing.
Please contact Robert Bell, Staff Attorney, at (202) 942-
1953
with any questions. If you need further assistance, you may
contact
me at (202) 942-1818. For additional assistance, you may also
contact Barbara C. Jacobs, Assistant Director, at (202) 942-1800.
Sincerely,
Mark P. Shuman
Branch Chief - Legal
Office of Computers and Online
Services
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Mr. James H. Watson, Jr.
1st Net Technologies, Inc.
Schedule 14A; File No. 0-27145
February 10, 2005
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