Mail Stop 0306
June 1, 2005
Spencer L. Sterling
President and Chief Executive Officer
DDS Technologies USA, Inc.
150 East Palmetto Park Road
Suite 510
Boca Raton, Florida 33432
Re: DDS Technologies USA, Inc.
Registration Statement on Form S-3
Filed on May 12, 2005
File No. 333-124852
Form 10-KSB for Fiscal Year Ended
December 31, 2004
Filed April 15, 2005
Dear Mr. Sterling:
We have limited our review of your filing to those issues we
have addressed in our comments. Where indicated, we think you
should
revise your filings 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 information so we may better understand
your
disclosure. After reviewing this information, we may 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.
Registration Statement on Form S-3
General
1. It appears that the registrant does not meet the requirements
for
registration of securities for resale under Instruction I.B.3 of
Form
S-3. Please note that the Over-the-Counter Bulletin Board does
not
qualify as a national securities exchange or automated quotation
system within the meaning of that instruction. Refer to Item H54
of
our July 1997 Manual of Publicly Available Telephone
Interpretations.
Please revise your filing accordingly.
Registration Statement Cover Page
2. We note from footnote (1) to your fee table that you are
purporting to register an indeterminable number of additional
shares
of common stock that may be issued pursuant to the anti-dilution
provisions of the warrants and preferred stock. Please note that
you
may only register an indeterminate number of additional securities
that may become issuable pursuant to stock splits, stock dividends
or
similar transactions contemplated by Rule 416 of the Securities
Act
of 1933; Rule 416 does not permit you to register an indeterminate
number of additional shares that may be issued upon conversion or
exercise in the event that the company subsequently issues
securities
at a price lower than the applicable conversion or exercise price
of
the warrants and the preferred stock. You must instead register
the
maximum number of shares that you believe may need to be issued in
connection with any such future exercise price or conversion price
adjustments, based on your good faith estimate. If you are
ultimately required to issue more shares than estimated in
connection
with those future adjustments, you will need to file a new
registration statement to register those additional shares.
Please
revise your fee table accordingly.
Annual Report on Form 10-KSB for the fiscal year ended December
31,
2004
Item 6. Management`s Discussion and Analysis of Financial
Condition
or Plan of Operations, page 11
Critical Accounting Policies, page 12
3. In future filings please provide a discussion of your critical
accounting policies. For example, include your policies related
to
patents and the valuation and recording of options and warrants.
Refer to FR-60 and FR-72 for guidance. Please note that critical
accounting policy disclosure should provide insight about complex
judgments and estimates that underlie the accounting policies you
identify as critical.
Plan of Operations, page 17
4. We note the discussion on page 4 of the significant additional
capital necessary to fund operations. Please tell us and disclose
in
future filings more details of your specific plans and time frame
to
fully develop your products and services, the amount of capital or
financing necessary and the expected sources of this capital.
Financial Statements, page F-1
Consolidated Balance Sheets, page F-4
5. Please tell us why the note and interest receivable from
related
party are classified as equity in the consolidated balance sheets
citing applicable GAAP.
Note 2 (D). Inventory, page F-11
6. We note from page three that the machine located in Marietta,
Georgia is being utilized for research and development as well as
a
demonstration machine. Please tell us why the costs related to
this
machine have been capitalized. Refer to SFAS 2.
Note 2(F). Patent, page F-12
7. Please tell us details of the acquisition of the patent,
including
whether it was acquired from a related party and the basis for the
valuation of the stock issued to acquire the asset. In addition,
tell us the results of the most recent impairment test of this
asset.
Please tell us details of the accounting for the refund of the
$741,000 of payments.
Note 14. Machinery and Equipment, page F-27
8. In addition, tell us more details of the nature of the
significant
impairment recorded in fiscal 2004 and the specific circumstances
that the resulted in this impairment. Tell us whether these
assets
were acquired from related parties. Additional disclosure should
be
provided in MD&A and the footnotes of future filings.
Note 15. Subsequent Events, page F-28
9. We note your sale of Series A convertible preferred stock on
April
12, 2005. Please tell us how you will account for the issuance of
the convertible preferred stock and associated warrants, including
whether or not you will record a beneficial conversion feature.
Refer to EITF Issues 00-27, EITF Issue 98-5 and SFAS 150.
Exhibits 31.1, 31.2 and 32.1
10. Please include with your response letter filed on EDGAR a
signed
and dated copy of your certifications.
* * *
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 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 filing to be certain that the
filing includes all information investors require for an informed
investment 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 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 the registration statement as 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 Lynn Dicker at (202) 551-3616 or Brian Cascio
at
(202) 551-3676 if you have questions regarding comments on the
financial statements and related matters. Please contact Tim
Buchmiller at (202) 551-3635 or me at (202) 551-3607 with any
other
questions.
Sincerely,
David Ritenour
Special Counsel
cc: Gary Epstein, Esq.
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Spencer L. Sterling
DDS Technologies USA, Inc.
June 1, 2005
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