Mail Stop 03-05
May 16, 2005
Via U.S. Mail
Mr. L. Kelly Jones
Chief Executive Officer
VirTra Systems, Inc.
440 North Center
Arlington, TX 76011
Re: VirTra Systems, Inc.
Amendment No. 1 on Form SB-2 filed April 25, 2005
File No. 333-123890
Dear Mr. Jones,
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.
Registration Statement Cover Page
1. 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.
2. Please complete the calculation of registration fee table.
Refer
to Form SB-2.
Prospectus Cover Page
3. We note that you may receive additional proceeds from the sale
to
the Dutchess funds of shares issuable upon the exercise of any
warrants that they may exercise. Please revise to clarify the
terms
of the additional proceeds that you may receive. Also, please
revise
in the Use of Proceeds section on page 11.
4. Please revise to disclose here that your auditors have issued a
going concern opinion.
5. This prospectus registers sales, not resales. Please revise
cover
page and elsewhere to clarify that.
Prospectus Summary, page 2
6. Please revise the first paragraph to disclose your revenues and
loss for the most recent audited period and interim stub.
7. Also disclose here the information in the first paragraph under
Liquidity on page 20.
The Offering, page 3
8. It appears that the selling shareholders will sell 750,000
shares
issuable upon the exercise of warrants. Please revise your
disclosure
to briefly discuss the terms of the warrants.
Risk Factors, page 4
General
9. Revise your subheadings throughout this section to ensure that
it
reflects the risk that you discuss in your text. Several of your
subheadings merely state facts about your company, such as "We
expect
our stock price to be volatile" on page 6; "We depend heavily on
the
continued service of our chief executive officer" on page 7; "We
are
in default on certain equipment leases" on page 7; and "A majority
of
our shareholders can elect all of our directors" on page 7.
Succinctly state in your subheadings the risk that may result from
the
facts or uncertainties.
10. Please add a risk factor that your history of not paying your
debts may make it difficult or impossible to obtain a bank loan or
advise why one is not necessary. See Convertible Promissory Notes
on
page 36.
Other companies with more resources and greater name recognition,
page
5
11. Please revise this subheading to reflect the risk that your
patent, licenses on patents and patents pending will provide only
limited protection that you discuss in the text.
Our operating results may fluctuate significantly, page 5
12. We do not understand the reference to securities analysts in
the
last sentence and elsewhere in the filing as we are not able to
locate
any analysts who follow your stock. Please revise or advise.
The success of our new line of virtual reality simulators will be
affected, page 5
13. Please include quantified information so that investors can
gauge
how serious this risk is. What is the aggregate dollar amount of
firm
orders you have from each of the three entities you name?
We cannot predict our future capital needs, page 6
14. Disclose here and in the Summary the amount of funds necessary
to
sustain operations for the next twelve months.
15. Please revise to clarify what you mean by "non-dilutive
discounted
purchase order financing."
We are in default on certain equipment leases, page 7
16. Please revise to quantify the dollar amount of the default.
We may not have enough funding to complete our business plan, page
8
17. Delete the next-to-last sentence which appears to say you are
being harmed by having to follow securities laws.
Selling Shareholders, page 10
18. Please refer to footnote (2). Please revise to disclose your
basis for assuming that the conversion price will be $0.33.
19. Please confirm supplementally whether any of the selling
shareholders are broker-dealers or affiliates of a broker-dealer.
Management`s Discussion and Analysis, page 18
Results of Operations
20. Refer to the second paragraph on page 19. Please revise to
quantify each of the causes for the increase in G&A.
21. Please refer to the next-to-last paragraph of this section.
We
note your disclosure on page 7, that you remain in default for the
remaining notes that were not converted to equity. Please revise
in
this section to disclose that you are in default and quantify the
amount.
Liquidity and Plan of Operations, page 20
22. We note your disclosure on page 7, that you remain in default
for
equipment lease payments. Please revise to disclose in this
section
that you are in default to leaseholders and quantify the amount.
23. Please revise to disclose your monthly "burn rate." Also,
please
discuss the amount of funds necessary to sustain operations for
the
next twelve months.
24. Please remove the references to the equity line from the
second
paragraph of this section and the last paragraph of this section.
Business, page 21
25. We could not locate your description of property as required
by
Item 102 of Regulation S-B. Please revise or advise.
26. We note that you have capitalized development costs. Please
disclose in this section the information required by Item
101(a)(10),
if material.
Entertainment/Amusement, page 21
27. Please supplementally tell us why you have included a
discussion
of VR Zones if you left the market in 2003. Also, please clarify
whether the entertainment/amusement market is still part of your
business.
Advertising/Promotion, page 22
28. We note your bulleted list of projects. Please revise to
state
the time frame when you were involved in these projects.
Training/Simulation Products, page 23
29. Please revise the last sentence of this section to disclose
the
aggregate dollar amount of enforceable contracts for these
products.
If the amount of any contract is so material to your results that
it
should be filed, please file it with the next amendment. If none
is,
please disclose that fact and supplementally support it.
30. Revise the Business section to provide the price or price
range
for each of your products. If you have not had sales for a
product,
disclose that fact.
Marketing, page 26
31. Do you depend on one or a few major customers? If so, please
revise to disclose for each of your markets. Refer to Item
101(b)(6)
of Regulation S-B.
Significant Employees, page 29
32. Please revise to briefly describe each person`s business
experience during the past five years. Refer to Item 401(a) and
(b).
Executive Compensation, page 30
33. We note your disclosure of restricted stock awards for Mr.
Jones
and Mr. Wells. Please revise to disclose information required by
Instruction 2 to Item 402(b)(2)(iv) of Regulation S-B or advise.
34. We note your disclosure of "Securities Underlying
Options/SARs"
for Mr. Jones, Mr. Ferris, Ms. Biggs and Mr. Kitchen. Please
revise
the table to disclose the sum of the number of underlying stock
options granted as required by Item 402(b)(2)(iv) of Regulation S-
B.
35. We note that you have named Michael Kitchen an executive
officer
pursuant to Item 402(a)(2) of Regulation S-B. Accordingly, please
include Mr. Kitchen in your options granted table on page 31.
Principal Shareholders, page 32
36. According to your disclosures on page 11, it seems that you
consider Dutchess a beneficial owner of your stock. Please revise
your principal shareholder table to disclose beneficial ownership
information for both Dutchess funds.
Convertible Promissory Notes/Promissory Notes, page 36
37. Refer to the first paragraph. Please revise to clarify if you
are
in default with respect to this note.
Warrants, page 37
38. We note that you are contesting the warrants issued to Swartz
Private Equity L.P. Please expand your disclosure to briefly
describe
why you are contesting the warrants or advise.
Signature Page
39. Please revise to reflect that the controller or accounting
officer
has signed the Registration Statement. Please see Instructions
for
Signatures on Form SB-2.
* * * * *
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 Rolaine Bancroft at (202) 551-3313 or me at
(202) 551-3755 with any questions.
Regards,
Max A. Webb
cc: David C. Thomas, Esq.
Rayce, Paikin, Greenblatt, Lesser & Krieg LLP
via facsimile: (212) 684-9022
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Mr. L. Kelly Jones
VirTra Systems, Inc.
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