May 19, 2005
Mail Stop 4561
Scott Kincer
Datascension, Inc.
145 S. State College Blvd., Suite 350
Brea, California 92821
Re: Datascension, Inc.
Amendment No. 1 to Registration Statement on Form SB-2
Filed April 27, 2005
Registration No. 333-121851
Dear Mr. Kincer:
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.
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.
Form SB-2
General
1. We note that on page 38, you have identified the selling
stockholders as underwriters, which implies that this is a primary
offering by or on behalf of the issuer. Please supplementally
explain why you believe the selling stockholders are underwriters
under Section 2(a)(11) of the Securities Act. Please be advised
that
if this offering is a primary offering, then the shares must be
offered by the selling stockholders at a fixed price.
2. We note your response to prior comment 39; however, we reissue
our
previous comment asking for your analysis regarding why your
subsidiaries, Nutek Oil and Century Innovations, did not have to
register the spin-off of shares to the shareholders of
Datascension.
Refer to Section 4.A. of Staff Legal Bulletin No. 4 (September 16,
1977). In particular, it does not appear that each subsidiary
registered the spun-off securities under the Exchange Act by the
date
it spun-off the securities. Refer to Section 4.B.3.a. of SLB 4.
We
note that Nutek filed its Form 10 one year after the spin-off and
that Century has not filed its Form 10, even though the Century
spin-
off occurred in December 2004. In addition, please tell us how
Datascension, as parent, provided information to its shareholders
about each subsidiary that substantially complies with Regulation
14A
or Regulation 14C. It does not appear that any Schedules 14A or
14C
were filed in connection with these spin-offs. Further, please
tell
us whether any consideration was paid by Datascension`s
stockholders,
whether each spin-off was pro rata, the business purpose of each
spin-off and whether the parent held the shares for two years.
Refer
to Section 4.A. and B. of SLB 4. In the alternative, if you are
relying on another exemption, please supplementally provide us
with
your analysis of the exemption and the facts relied upon to make
it
available.
3. In future filings, please revise the front page of the
registration statement to refer to the amendment number. Refer to
Form SB-2.
4. We note your response to comment 1 and your March 1, 2005 press
release. We also note that the prospectus does not contain
disclosure about these "strategic alliances." Please confirm that
these alliances, which were described in the March 1, 2005 press
release, are not material to your business.
Prospectus Summary, page 1
5. We note your response to comment 10. However, it still may not
be
clear to an investor how the allocation mechanism works. Please
revise the disclosure to clarify. We note that it appears that
the
noteholder would convert the debt and quickly sell or convert and
cover short sales to maintain the 4.99% threshold.
Risk Factors, page 3
6. We note your response to comment 20. However, we believe the
risk
factor as redrafted in your comment letter is helpful to
investors.
Please include the risk factor as redrafted.
Risks Relating to Our Current Financing Arrangement, page 9
7. Please revise to discuss the risks to you in the event that you
are required to repay the outstanding convertible debt.
8. Please revise to discuss the risk of dilution when the
Preferred
Stock Series B are converted into 1,307,353 shares of common stock
in
the second quarter of 2005.
The market price of our common stock may be volatile, page 11
9. Please include actual historical pricing data to support your
disclosure.
Management`s Discussion And Analysis of Financial Condition Or
Plan
Of Operation, page 14
10. We note your response to prior comment 23. Please revise to
include the substance of your response. Further, please revise to
describe how your contracts with management companies address
government regulations in Costa Rica and the Dominican Republic.
Plan of Operations, page 15
11. Please provide brief disclosure on the inbound call center
initiative.
12. Please disclose when you intend to begin offering the services
of
your in-house programming department to clients and the
anticipated
impact on your operations.
Results of Operations, page 16
13. Please clarify in the disclosure the reference in your
discussion
of interest expense to "the interest associated with the
beneficial
conversion feature."
Liquidity and Capital Resources, page 17
14. We note your statement that DSEN is "expecting monthly cash
flow
in 2005 of $213,303." Please disclose the basis for this
projection.
Refer to Item 10(d)(1)-(3) of Regulation S-B.
Estimated future cash requirements, page 19
15. We note your response to prior comment 37. We note that you
state: "DSEN does not currently have any contractual restrictions
on
its ability to incur debt;" however, on page 9, you state that
your
ability to issue equity, convertible debt or other securities may
be
restricted for the next year. Please revise to discuss your
accumulated deficit, describe the financing restriction and
discuss
the impact that this restriction will have on your ability to
raise
capital. Further, please discuss the impact on working capital
and
liquidity if you are required to repay the outstanding debt and
the
effect on your business if you are unable to repay the debt.
16. We note that in the second quarter of 2005, the holders of
Preferred Stock Series B will receive 1,307,353 shares of common
stock and dividends in the amount of $381,000. Please discuss
this
conversion and disclose the source of funds for the dividend
payout.
Our Business, page 20
17. We note your response to prior comment 43 and your statement
that
the telemarketing rules apply to "individuals or companies [that]
provide substantial assistance to sellers or telemarketers."
Please
tell us why this does not apply to your business when you are
conducting interviews and gathering information for potential
sellers?
Major Clients, page 22
18. We note your response to prior comment 40. Please revise to
file
any agreements that you have with these major clients and describe
the material terms of each agreement.
19. Please disclose the relative contribution to revenues of your
"in-bound customer service" business line.
Management, page 25
20. Please remove the recently resigned executive officers from
your
table of officers and directors and please also remove their
biographies. Please briefly disclose the recent resignations.
Executive Compensation, page 28
21. We note your disclosure of the December 31, 2004 common stock
grant to four of your officers. Please clarify your reference to
"the federal small issue exemption for bonus shares of reporting
companies."
Security Ownership of Certain Beneficial Owners and Management,
page
31
22. We note your response to comment 50. Please also disclose in
a
footnote the amount of securities reflected that are subject to
the
exercise of options.
Standstill Agreement, page 39
23. Please clarify your disclosure of the percentages referenced
for
the directors and officers. Do the percentages refer to the
percentage of shares outstanding or the percentage of shares they
own?
Experts, page 40
24. Update your disclosure to reflect Larry O`Donnell, CPA, P.C.,
your current independent auditor, as an expert.
Financial Statements
Independent Auditors` Report, page F-4
25. Please have your former independent accountant revise their
audit
report in accordance with Auditing Standard No. 1 of the PCAOB,
References in Audit Reports to the Standards of the Public Company
Accounting Oversight Board.
26. Please have your former independent accountant revise their
audit
report so that the audit report reflects only those periods for
which
financial statements are presented.
Statements of Cash Flows, page F-8
27. Please supplementally reconcile the discontinued
operations/impairment of assets in the amount of $3,525,663 to the
discontinued operations in the amount of $1,794,639 in the
Statements
of Operations.
Summary of Significant Accounting Policies
Intangible Assets, page F-10
28. We have reviewed your response to comment 71. Please
supplementally advise us of the amount of amortization expense
that
would have been recognized in 2003 had you appropriately amortized
your finite-lived intangibles in accordance with SFAS 142. To the
extent these amounts are material to net income in 2003, please
advise us why you have not modified your financial statements to
correct this error?
Note 4 - Receivable from Nutek Oil - Asset Held for Sale, page F-
13
29. We note your response to comment 77. Please disclose in the
notes to your financial statements the major terms of and the
pertinent agreements entered into related to the conversion of the
Nutek Oil receivable into Nutek Oil common stock. Additionally,
help
us to understand how you determined that an impairment for the
receivable was not needed and if you have given any consideration
to
APB 29 in making such a determination. Further, please support
your
basis in GAAP for classifying the receivable as an asset held for
sale on the balance sheet given the guidance in paragraph 27 of
SFAS
144.
Note 7 - Convertible Notes Payable and Debentures, pages F-16 to
F-17
30. We note your references to both APB 14 and EITF 00-19 relating
to
the accounting treatment for the beneficial conversion feature on
convertible debt and the related warrants issued with the debt.
Please help us to understand, in detail, how you have accounted
for
the convertible debt and the warrants, each as a separate
discussion.
Additionally, please advise why it appears that you have not
accounted for that portion of the proceeds of debt allocable to
the
warrants, as additional paid-in capital (reference is made to
paragraph 16 of APB 14)? Also, please advise us of your
consideration of applying EITF 98-5 and 00-27 to account for the
convertible debt and why taking a one-time charge is appropriate.
Note 13 - Discontinued Operations, page F-20
31. For impairment losses recognized, disclose the required
information in paragraph 47(a) through (c) of SFAS 144.
Part II
Item 26. Recent Sales of Unregistered Securities
32. Please revise to include, for each private placement in which
Section 4(2) of the Securities Act was relied upon, the number of
non-accredited investors. To the extent the number of non-
accredited
investors over any 6 month period exceeded 35, please provide a
supplemental analysis as to why these offerings should not be
integrated in accordance with Rule 502 of Regulation D.
Exhibits
33. We note your response to comment 80. Since you may not
incorporate your Form 10KSB by reference, please revise to file a
list of your subsidiaries. Refer to Item 601(b)(21) of Regulation
S-
B.
34. Please revise the date of the Form 8-K referenced in footnote
6.
The filing was made on November 23, 2004.
Undertakings
35. Please revise undertaking (a)(1)(ii) to comply with Item 512
of
Regulation S-B. In particular, the second part of the first
sentence, beginning with "and arising after," should be deleted.
In
addition, please advise us why you have added the Rule 430A
undertakings.
* * * *
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 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.
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 Howard Efron, Staff Accountant, at (202) 551-
3439 or Cicely Luckey, Accounting Branch Chief, at (202) 551-3413
if
you have questions regarding comments on the financial statements
and
related matters. Please contact Michael McTiernan, Special
Counsel,
at (202) 551-3852, or me at (202) 551-3411 with any other
questions.
Sincerely,
Peggy Kim
Senior Counsel
cc: Owen Naccarato, Esq. (via facsimile)
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Datascension, Inc.
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