Mail Stop 0407
August 8, 2005
Stephen W. Carnes
President
Signature Leisure, Inc.
100 Candace Drive
Suite 100
Maitland, FL 32751
Re: Signature Leisure, Inc.
Registration Statement on Form SB-2
Filed July 13, 2005, as amended
File No. 333-126509
Form 10-KSB for the year ended December 31, 2004
Filed April 18, 2005
Form 10-QSB for the quarter ended March 31, 2005
Filed May 23, 2005
File No. 0-49600
Dear Mr. Carnes:
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
Prospectus Summary, page 1
1. Please revise to discuss very briefly, but in more definite and
concrete terms the key aspects of your business. Your current
disclosure is too vague. In this regard, please address the
following:
* Clearly disclose how you generate revenue and the extent to
which
you are currently generating revenues from your products and
services. For example, clarify what you mean by "reestablishing"
your auto dealer operations. Do you have an operational
dealership
with inventory? To the extent that these products and services
are
not generating revenue, briefly disclose the steps you must take
to
make them operational.
* We note a press release dated July 6, 2005, prior to your filing
of
this registration statement, that you "entered into the
information
technology services industry and has begun servicing clients in
Central Florida." Briefly describe this business and provide
sufficient information so that investors can assess how material
it
is to your business. File this agreement as an exhibit.
* Disclose your revenues and net losses for the quarter ended
March
31, 2005 and for the year ended December 31, 2004. Please also
disclose your accumulated deficit and total assets.
* We note your discussion of your auditor`s "going concern"
opinion.
Please revise to quantify very briefly how much funding you will
need
to raise to operate in the next twelve months.
The Offering, page 2
2. Explain how you calculate the "lowest volume weighted average
price." Further, revise to clarify, if true, that the 1% fee is a
cash fee or discount that is retained by Katalyst Capital and that
it
does not represent additional shares issued to Katalyst Capital.
3. We note your disclosure in footnote 2 regarding the convertible
debentures and the compensation debenture. We also note your
disclosure in the liquidity and capital resources section
regarding
the "second promissory note" issued to Katalyst Capital in
February
2005 and the promissory note issued to Katalyst Capital in
December
2004. In your response letter, please identify all securities of
Signature Leisure currently held by Katalyst Capital. File the
relevant agreements relating to these securities (including the
instruments defining the rights of the securities). Indicate in
your
response letter whether these securities are convertible or
exercisable into other Signature Leisure securities and whether
the
conversion prices, exercise prices, or formulas are based on the
market price of other Signature Leisure securities.
4. Please clarify that the sales of shares by Katalyst Capital
will
likely cause the market price of your common stock to decline,
which
will require you to issue increasing numbers of shares to Katalyst
Capital. Please similarly clarify your risk factors entitled
"Management Recognizes That We Must Raise Additional Financing . .
.."
on page 6 and your risk factor entitled "Future Sales by Our
Stockholders . . .", on page 9.
5. Tell us in your response letter how Spencer-Clarke, LLC
facilitated the equity line agreement. Detail the role that
Spencer-
Clarke, LLC played in bringing the parties together. Confirm that
there are no affiliations among Spencer-Clarke, LLC, Katalyst
Capital
Group, the company or any of its executives.
6. Please disclose that under Section 7.2(h) of your equity line
agreement that the number of shares issuable to Katalyst Capital
may
not cause Katalyst Capital to own more than 9.9% of your
outstanding
shares. Revise your table on page 2 to reflect this limitation.
For
example, revise the net cash to Signature column to make clear
that
these amounts could be considerably less if Katalyst Capital
retains
a portion of the stock that it purchases from the company.
7. We note footnote (1) on page 3. Please revise the footnote to
indicate that up to 163,398,693 shares your common stock may be
issued (as opposed to will be issued) due the uncertainty
surrounding
the success of the offering. Carefully review the rest of your
prospectus and make conforming changes elsewhere.
Risk Factors, page 6
8. Add a risk factor highlighting the terms of Mr. Carnes`
employment
agreement. Address the uncertainty on how the company`s
obligations
will be funded given the company`s precarious financial condition.
In addition, we note that Mr. Carnes` Employment Agreement dated
September 3, 2003 was executed on behalf of Signature Leisure by
Mr.
Carnes. Discuss any potential conflict of interest concerns
relating
to the execution of his employment agreement.
9. Do not present risks that could apply to any issuer in your
industry, do not reflect your current operations, are not
material,
or are generic, boilerplate disclosure. Rather, tailor each risk
factor to your specific facts and circumstances. To the extent
that
a risk is not material to you or your investors, consider whether
you
need to include it. We note as illustrative examples the
following:
* Future Acquisitions May Disrupt Our Business . . ., page 7
* We Are Subject to Price Volatility . . ., page 8
* We May Not be Able to Compete Effectively . . ., page 8
* We May Not be Able to Manage Growth . . ., page 8
* The Price You Pay in This Offering Will Fluctuate . . ., page 10
Signature Has Historically Lost Money . . ., page 6
10. Disclose how much funding you will need to raise in the next
twelve months and disclose when you anticipate reaching
profitability.
Management Recognizes That we Must Raise Additional Financing . .
..,
page 6
11. Please disclose that if Signature Leisure uses funds from the
equity distribution agreement for acquisitions, Mr. Carnes will be
entitled to receive $150,000 for each acquisition. Disclose, if
true, that these bonus amounts would be funded from the equity
line.
Our Common Stock May be Affected . . ., page 7
12. Please revise your heading to clarify how the low trading
volume
may affect your shareholders` ability to sell shares. Also,
disclose
in the text the average daily trading volume of your stock.
Please
combine your disclosure regarding price fluctuation with your risk
factor regarding price volatility on page 8.
We Could Fail to Attract or Retain Key Personnel . . ., page 7
13. Move the risk factor to the beginning of this section. Revise
your caption to disclose that you have and depend on one officer,
Mr.
Carnes, and that Mr. Carnes is also the CEO of another publicly
traded company and, therefore, does not devote all of his time to
Signature Leisure. In the text, highlight the risks associated
with
your officer trying to develop the company`s various fledgling
businesses and manage the reporting requirements of a public
company
while only working part-time. Also, disclose, if true, Mr.
Carnes`
lack of direct prior experience in operating the various
businesses
you intend to develop.
Existing Shareholders Will Experience Significant Dilution...,
page 9
14. Delete the reference to "our net income per share could
decrease
in future periods" since the company has never had net income.
The Selling Stockholders Intend to Sell Their Shares . . ., page 9
15. We note that, under the terms of your equity distribution
agreement, Katalyst Capital is permitted to sell shares
corresponding
to a particular advance before those shares have been delivered.
Please disclose that Katalyst Capital can engage in short sales
and
cover the position with shares issued under your equity line of
credit. In addition, please discuss what affect this will have on
the market price of your common stock.
Our Common Stock May be Affected . . ., page 10
16. This risk factor merely repeats your risk factor regarding
your
limited trading volume on page 7. Please delete.
Our Common Stock is Deemed to be "Penny Stock" . . ., page 10
17. 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.
We May Not be Able to Obtain . . ., page
18. Please disclose that even though Katalyst Capital may not hold
more than 9.9% of your common stock at any one time, this
restriction
does not prevent Katalyst Capital from selling some of its
holdings
and then receiving additional shares.
Selling Stockholders . . ., page 13
19. Disclose the "Consultants and Others" and the shares that are
being registered on their behalf. Disclose how those shares were
acquired.
Use of Proceeds, page 15
20. Disclose any proceeds that Mr. Carnes will be receiving from
the
equity line from his accrued salary and bonuses.
21. Disclose more particularly how the proceeds will be used for
business development, infrastructure and improvements and
operating
capital.
22. Please disclose the amount of proceeds that will be used to
repay
amounts owed under the convertible notes that you previously
disclosed.
23. Please also list the placement agent fee as a use of proceeds
in
your table. In addition, please include the expenses you disclose
on
page 19. In this regard, do these amounts include the escrow
agent
fees disclosed under Section 12.4(a) of the standby equity
distribution agreement? Please disclose all fees relating to the
offering in the table.
Standby Equity Distribution Agreement, page 17
24. We note your statement that "[t]here are no other significant
closing conditions to cash advances under the Equity Distribution
Agreement." Confirm to us in your response letter that there are
no
other conditions to cash advances under the agreement or tell us
in
your response letter all other conditions to cash advances under
the
agreement.
25. We note the escrow agreement. Please explain to us the
purpose
of this agreement. Clarify what are the conditions for release of
any funds to the company from escrow.
Plan of Distribution, page 19
26. Please disclose Katalyst Capital`s intentions regarding short
selling and other hedging activity.
Management`s Discussion and Analysis . . ., page 20
Overview, page 20
27. Briefly describe how you generate revenue from Parker
Productions. Also, please briefly describe the specific steps you
intend to take and the anticipated timing "to begin working
towards
starting to rebuild the auto sales business . . ." Please also
disclose when you anticipate you will generate revenue from your
auto
sales business and what "other business opportunities" you plan to
pursue.
Results of Operations for the Three Months Ended March 31, 2005 .
.. .
, page 20
Revenues, page 20
28. Please clarify whether you generated any revenue from auto
sales.
Cost of Sales, page 21
29. Explain why your cost of sales increased "primarily because
of
our lack of sales."
Expenses, page 21
30. Disclose how many employees you hired, their titles and for
which
of your businesses.
Results of Operations for the Year Ended December 31, 2004 . . .,
page 21
31. Disclose what the $1,183,019 in general and administrative
costs
were in 2004. Disclosed who received the $714,100 in stock-based
compensation.
Liquidity and Capital Resources, page 22
32. Please revise to begin with a brief overview describing your
current financial situation, including the main categories of your
present indebtedness. In the overview, state clearly whether or
not
your current assets are sufficient to meet your current
liabilities
and explain the significance to investors.
33. Clarify whether the note currently in default is secured. If
so,
indicate whether the lender has indicated any intention to
foreclose
on the note.
34. We note your disclosure regarding your equity distribution
agreement, however, it is unclear whether this source of funding
will
be sufficient to meet your funding needs in the next twelve
months.
Please generally revise to explain in greater concrete detail your
specific plans to achieve profitability and to address your
auditor`s
going concern opinion. Also clarify for how long into the future
you
expect to incur significant operating losses. Disclose how much
funding you will need to continue operations for the next twelve
months and please disclose the sources of this funding. Provide
greater detail about your definite plans for "equity or debt
financing or credit facilities" or clearly state that you have
none.
These are only examples, generally revise your Liquidity and
Capital
Resources discussion and consider the guidance in Section IV of
Securities Act Release No. 33-8350 (December 19, 2003).
Description of Business, page 25
35. Significantly revise this section to focus on providing a
clear
and concise description of your company. In this regard, please
address the following:
* Clearly disclose the nature and extent of operations for your
car
dealership and modeling and event staffing operations. Disclose,
if
true, that the car dealership business currently does not generate
any revenue and disclose the revenue you have generated from the
model and event staffing business.
* Describe your arrangements with your independent contractors and
how many you currently employ.
* Clearly discuss how you intend to develop each business. In
this
regard, discuss the steps needed to reach each point and the time
frame and anticipated amount of funding needed to implement each
stage.
* We note your disclosure that "[m]anagement intends to pursue and
review other business opportunities . . ." Please clarify what
these
opportunities may be and provide the basis for having the ability
to
pursue other opportunities given your number of employees.
Management, page 29
Employment Agreements, page 30
36. Please clarify how "each merger and/or acquisition and/or
business unit start-up brought to Signature" is defined under the
employment agreement so that investors understand the magnitude of
the transaction that qualifies for this bonus amount. For
example,
is there a minimum value of a business to be acquired that is
required to trigger this bonus payment? Please disclose the
transactions that have qualified for the payment of this bonus and
the value of those transactions.
Certain Relationships and Related Transactions, page 32
37. Please file all of your related party transaction agreements
as
exhibits.
38. Disclose the shareholder who loaned Signature $28,210 and the
nature of the shareholder`s affiliation to Signature Leisure.
Disclose whether this transaction is comparable to terms you could
have received from an unaffiliated party.
How To Get More Information, page 35
39. Please note that the address of the Commission`s public
reference
room has changed to 100 F Street, NE, Washington, DC 20549.
Please
revise. Please also disclose that investors may obtain
information
on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at (800) SEC-0330.
Part II, page II-1
Recent Sales of Unregistered Securities, page II-1
2004, page II-2
40. Disclose the exemption from registration you relied upon for
each
issuance.
41. We note your disclosure regarding the 1,700,000 shares of your
common stock issued "to consultants in exchange for business
consulting services." Please disclose the names of these
consultants
and the services they provided.
Exhibits
42. Please review your Standby Equity Distribution Agreement and
your
Escrow Agreement for drafting errors and refile (please attach
blacklined copies with your response letter). For example, the
placement agent is incorrectly identified as Newbridge Securities
in
the forefront of the Standby Equity Distribution Agreement. The
references to the "Investor" and to the "Company" in Part 2.c of
the
Escrow Agreement appear to be confused.
43. Explain to us the reference to "free trading shares" in
Section
1.2 of the Standby Equity Distribution Agreement.
Form 10-KSB for the Year Ended December 31, 2004
Form 10-QSB for the Quarter Ended March 31, 2005
44. Please revise your future periodic reports to comply with our
comments on your Form SB-2.
Controls and Procedures, page 28
45. We note your disclosure that your officer`s evaluation "was
conducted within 90 days prior to the filing of this report."
Please
note that filings after August 14, 2003 must comply with the
disclosure requirements of revised Item 307. That is, you must
disclose the conclusion of your certifying officers regarding the
effectiveness of your disclosure controls and procedures as of the
end of the period covered by the report, based upon the evaluation
of
these controls and procedures. Please confirm in your response
letter that your disclosure controls and procedures were effective
as
of the end of the period covered by your Form 10-K and your Form
10-Q
for the quarter ended March 31, 2005. Please also revise your
future
filings accordingly.
46. We note your disclosure that your officer concluded that your
disclosure controls and procedures were "effective in ensuring
that
all material information required to be filed in this annual
report
has been made known to them in a timely fashion." Please confirm
to
us in your response letter, if true, that your disclosure controls
and procedures are effective to ensure that information required
to
be disclosed in the reports that you file under the Exchange Act
is
recorded, processed, summarized and reported, within the time
periods
specified in the Commission`s rules and forms and are also
effective
to ensure that information required to be disclosed in the reports
that you file or submit under the Exchange Act is accumulated and
communicated to your management, including your principal
executive
and principal financial officers, to allow timely decisions
regarding
required disclosure. See Rule 13a-15(e) of the Exchange Act.
Alternatively, in your future filings, you may simply state that
your
disclosure controls and procedures are effective.
47. We note your disclosure that "[t]here have been no significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date the
Principal Executive Officer and Principal Financial Officer
completed
their evaluation." Item 308(c) of Regulation S-B requires the
disclosure of any change in your internal control over financial
reporting identified in connection with an evaluation thereof that
occurred during your last fiscal quarter (or your fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, your
internal
control over financial reporting. Please confirm in your response
letter, if true, that there was no change in your internal control
over financial reporting that occurred during your fourth quarter
of
2004 and your first quarter ending March 31, 2005 that has
materially
affected, or is reasonably likely to materially affect, your
internal
control over financial reporting. Please also revise your future
filings accordingly.
* * * *
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.
Please contact Albert Pappas, Staff Attorney, at (202) 551-
3378, or me at (202) 551-3810 with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
cc: Clayton Parker, Esq.
Kirkpatrick & Lockhart Nicholson Graham LLP
(305) 358-7095 (fax)
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Mr. Stephen Carnes
Signature Leisure, Inc.
August 8, 2005
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