May 25, 2006
By facsimile to (303) 223-1111 and U.S. Mail
Mr. Howard Brill
President and Chief Executive Officer
Global Employment Holdings, Inc.
9090 Ridgeline Boulevard, Suite 205
Littleton, CO 80129
Re: Global Employment Holdings, Inc.
Registration Statement on Form S-1
Filed May 1, 2006
File No. 333-133239
R&R Acquisition I, Inc.
Annual Report on Form 10-KSB for the fiscal year ended December
31,
2005
and Subsequent Exchange Act Reports filed by Global Employment
Holdings, Inc.
File No. 0-51737
Dear Mr. Brill:
We reviewed the filings and have the comments below.
Where indicated, we think that you should revise the
documents
in response to the comments. If you disagree, we will consider
your
explanation why a comment is inapplicable or a revision is
unnecessary. Be as detailed as necessary in your explanation. To
understand better your disclosure, we may ask you in some comments
to
provide us supplemental information. We may raise additional
comments after reviewing this information.
Our review`s purpose is to assist you in your compliance
with
applicable disclosure requirements and to enhance the overall
disclosure in your documents. We look forward to working with you
to
achieve these objectives. We welcome any questions that you may
have
about comments or any other aspect of our review. You may call us
at
the telephone numbers listed at the end of this letter.
S-1
General
1. If applicable, comments on the S-1 are comments on reports
filed
under the Exchange Act by Global Employment Services Holdings,
Inc.
or Global and vice versa.
2. Disclosure indicates that Global was a reporting shell company
with no operations before its March 31, 2006 merger with Global
Employment Services, Inc. or GES, a private company. Our view is
that both before and after the transaction Global`s promoters or
affiliates and their transferees "are" underwriters of the
securities
issued. Our view also is that Rule 144 would be unavailable for
resale transactions in this situation, regardless of technical
compliance with the rule. See our Worm no-action letter, publicly
available January 21, 2000. As appropriate, revise the disclosure
throughout the registration statement, including the prospectus`
outside front cover page and the selling stockholders and plan of
distribution sections, to make clear that:
* Global`s promoters or affiliates and their transferees "are"
underwriters of the securities issued. Language such as "may be
deemed to be" an underwriter is unacceptable.
* Rule 144 is unavailable for resale transactions in this
situation.
We note the disclosure under "Securities issued by Global
Employment Holdings" on page II-2 and elsewhere.
3. We note your citation of studies and reports by The American
Staffing Association, Booz Allen Hamilton, Deloitte & Touche LLP,
and
other third parties. Provide us marked copies of any materials
that
support third party statements in the prospectus, cross
referencing
clearly a statement with the underlying support. Tell us whether
you
believe that these materials are the most recent materials on the
subject by the authors. Tell us whether the materials have been
made
available to the public without payment of subscription or similar
fees. If any of these materials have been published in widely
circulated media of general interest or among industry
participants,
tell us when and where. Unless these materials have been used in
widely circulated media of general interest or among industry
participants, you must adopt the statements that you attribute to
them as your own or file signed and dated consents from each as
exhibits to the registration statement.
4. We note that you refer to "an independent actuary" in note A to
the financial statements under "Workers Compensation Insurance" on
page F-8. If you refer to a third party, you must identify the
third
party and obtain its consent. Otherwise, you should delete all
references to a third party. See Rule 436 of Regulation C under
the
Securities Act.
5. We note that you are registering fractional shares that are
currently outstanding in this registration statement; however, we
note disclosure in your Form 10-Q that as of April 2, 2006 there
were
no fractional shares outstanding. Please advise.
Registration Statement`s Facing Page
6. Since Global is relying on Rule 415 under the Securities Act,
check the applicable box.
Prospectus` Outside Front Cover page
7. Since there is no existing market for Global`s common stock,
delete the sentence "We expect that sales of the common stock
offered
hereby will be made at the market price if a market develops."
Rather, state that:
The selling stockholders will sell at a price of $x.xx
or a
range per share until Global`s common stock is quoted
on
The OTC Bulletin Board and after that at prevailing
market prices or privately negotiated prices.
As appropriate, revise the disclosure throughout the
registration statement, including the summary section and
"Determination of offering price" on page 14.
Prospectus Summary, page 1
8. Disclosure here and elsewhere states that Global`s wholly owned
subsidiary is a "leading" provider of human capital solutions.
Indicate the basis for the statement. For example, revenues,
gross
profit, net income, market share, or some other quantifiable
indicator. Otherwise, delete the statement. If you are using or
relying upon a study or report as support for this and other
statements, provide us a copy of the study or report.
9. Disclose that you are registering an amount of common stock in
excess of the amount that is currently required under the terms of
the notes, the preferred stock, and the warrants. Also disclose
why
this is necessary and how the conversion ratios could be adjusted.
Forward-Looking Statements, page 3
10. Move this section so that it follows the summary and risk
factors
sections. See Item 503(c) of Regulation S-K.
Risk Factors, page 3
11. The first paragraph states that "the risks and uncertainties
described below are not the only ones we face" and makes reference
to
"unknown" risks. Since Global must disclose all risks that it
believes are material, delete this language.
12. Include in each risk factor`s discussion information necessary
to
assess the risk, including its magnitude. For example:
* The first risk factor states that Global may lose market share
if
it is unable to compete effectively. Quantify Global`s market
share.
* The fourth risk factor states that some of Global`s offices are
dependent on a few relatively large customers. Quantify the
number
of Global`s offices that are dependent on a few relatively large
customers. Further, clarify the experience of these offices with
customers` terminations, non-renewals, and reductions in services
during the periods presented in the financial statements.
* The sixth risk factor states that increasing the growth and
profitability of Global`s business is particularly dependent upon
retaining existing customers and capturing additional customers.
Quantify Global`s retention rate of existing customers and
accretion
rate of new customers during the periods presented in the
financial
statements.
* The seventh risk factor states that Global intends to continue
to
open new offices and to develop new practice areas or lines of
business complementary to its core services. Indicate Global`s
schedule for opening new offices and developing new practice areas
or
lines of business complementary to its core services.
* The ninth risk factor states that commissions and overrides
represent a significant proportion of Global`s professionals`
total
compensation. Quantify the portion of professionals` total
compensation attributable to commissions and to overrides.
* The twenty-ninth risk factor states that a significant amount of
common stock will be eligible for sale six months after the
registration statement`s effectiveness and on the one year
anniversary of the recapitalization. Quantify the amount of
common
stock that will be eligible for sale upon the occurrence of each
event.
* The thirtieth risk factor states that Global would be subject to
a
SEC rule if it failed to meet the specified criteria. Identify
the
rule.
13. Avoid generic conclusions in the risk factors` headings and
discussions such as Global`s business, results of operations, and
financial condition could be materially and adversely affected or
harmed. For example, refer to the second, third, seventh, ninth,
eleventh, fifteenth, seventeenth, eighteenth, twenty-second, and
twenty-fifth risk factors. Rather, explain specifically what the
risk`s consequences or effects are for Global and its
stockholders.
14. Disclose in an appropriate risk factor the large net loss that
you have recently incurred, that you recently have been in default
of
financial covenants in your credit agreements, and that you
currently
have a negative net worth. Disclose what this means to your
company
and to investors.
Market Information, page 14
15. Revise to remove the implication that quotation or listing is
assured.
16. Disclose whether you currently meet the listing standards for
Nasdaq or the American Stock Exchange.
Dividends, page 14
17. Identify the former shareholders of GES who received the
dividend
and quantify the amount that each received.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 17
Liquidity and capital resources, page 24
18. Given the materiality of accounts receivable to financial
position and liquidity, please disclose the receivable turnover
ratios for each period and explain any material variances.
Specifically explain why receivables increased 30% whereas 2005
sales
increased 14%. See Item 303(a) of Regulation S-K.
19. If a credit facility or other financial instrument requires
Global or its wholly owned subsidiary, GES, to satisfy specified
financial ratios and tests, state what the limits of all material
financial ratios and tests are. Also indicate whether Global or
its
wholly owned subsidiary, GES, is in compliance with them.
20. Discuss liquidity on a short term and a long term basis. See
Item 303(a) of Regulation S-K and instruction 5 to Item 303(a) of
Regulation S-K.
PEO growth strategy, page 30
21. Provide support for the statements that:
* Global`s operating expenses are approximately 40% less than the
average of all audited PEO members and Global`s operating income
per
worksite employee is approximately 35% greater than the average of
all audited PEO members.
* Global`s attention to risk management and underwriting results
in a
lower level of workers` compensation losses, thereby lowering
Global`s workers` compensation costs compared to its competitors.
Our technology, page 32
22. Provide support for the statement that management believes the
software PayPlus packages are the "leading" technology in the
industry today. Further, disclose here that Global is a part-
owner
of PayPlus Software, Inc. or PayPlus.
Intellectual property and other proprietary rights, page 32
23. Disclosure states that Global holds a number of licenses for
PayPlus software through its arrangement with PayPlus. Tell us
what
consideration you have given to filing the licenses as exhibits to
the registration statement. See Item 601(b)(10) of Regulation S-
K.
24. Disclosure states that Global is entitled to a number of
licenses
for its use or transfer under its agreement with AP Technologies,
also known as AcuPrint, Inc. Clarify whether Global has exercised
its entitlement to the licenses. If so, tell us what
consideration
you have given to filing the licenses as exhibits to the
registration
statement. See Item 601(b)(10) of Regulation S-K.
25. Disclosure states that Global with two other companies own the
software and source code for a web portal. Identify the two other
companies and the web portal.
Employees, page 33
26. Disclosure states that each of Global`s managerial, sales, and
administrative employees has entered into a standard form of
employment agreement. File the form as an exhibit to the
registration statement.
27. Disclose whether the 17,920 employees work solely for you. We
note disclosure that you co-employ employees. Disclose whether
any
of the employees listed in this section are co-employed, and
clarify
what this means.
Properties, page 34
28. Disclosure states that Global signed a new lease for its
headquarters in April 2006. File the lease as an exhibit to the
registration statement.
Employment contracts and termination of employment and change in
control, page 38
29. Disclosure states that Global intends to enter into new
employment agreements with the named executive officers in the
near
future. Confirm that you will file the new employment agreements
as
exhibits to the registration statement if you enter into them
before
the registration statement`s effectiveness.
Certain Relationships and Related Transactions, page 41
30. Disclose whether the transactions described in this section
are
on terms as favorable as could have been obtained from
unaffiliated
parties.
Description of Capital Stock, page 42
31. Delete in the first paragraph the qualification of the
description to documents outside the prospectus. The
qualification
is permitted under Rule 411(a) of Regulation C under the
Securities
Act only where a summary of a particular document is required or
contemplated by the form.
Description of preferred stock, page 43
32. Disclose whether the series A preferred stock has voting
rights.
If applicable, include these shares in the beneficial ownership
table.
Selling Stockholders, page 44
33. Expand the disclosures in footnotes (3), (4), (5), (8), (9),
(10), (12), (14), (16), (17), (18), (22), and (23) to identify the
natural person or persons having sole or shared voting and
investment
control over the securities held by the beneficial owners. Refer
to
telephone interpretation 4S in the Regulation S-K section of the
March 1999 supplement to our "Manual of Publicly Available
Telephone
Interpretations" that is available on the Commission`s website at
http://www.sec.gov, and revise appropriately. We note the
disclosures in footnotes (6), (7), (13), and (19).
34. Expand the disclosure to include all compensation fees payable
under financing agreements with selling stockholders, including
future transactions. We note the disclosure in exhibit 10.27.
35. Describe briefly any continuing relationship of Global with
selling stockholders.
36. Other than Rodman & Renshaw, LLC and R&R Investments I, LLC,
confirm that none of the selling stockholders is a broker-dealer
or a
broker-dealer`s affiliate.
37. For a selling stockholder that is a broker-dealer`s affiliate,
include disclosure that this broker-dealer`s affiliate:
* Purchased the securities to be resold in the ordinary course of
business.
* Had no agreements or understandings, directly or indirectly,
with
any person to distribute the securities at the time of their
purchase.
If Global is unable to make the representations noted above
in
the prospectus, Global must state in the prospectus that the
selling stockholder is an underwriter. Language such as "may be
deemed to be" an underwriter is unacceptable if the selling
stockholder is an affiliate of an underwriter that cannot make
these representations.
38. For other than Global`s promoters or affiliates and their
transferees, consider adding disclosure that the term selling
stockholders includes the selling stockholders and their
transferees,
pledgees, donees, or their successors.
39. State that Global will file a prospectus supplement to name
successors to any named selling stockholders who are able to use
the
prospectus to resell the securities.
Plan of Distribution, page 48
40. Revise the third paragraph on page 49 to remove the phrase "if
required" from the second sentence because in the situation
described
you will be required to file a prospectus supplement.
Available Information, page 51
41. If a contract or other document filed as an exhibit is
discussed
in the prospectus, you must include all material terms of the
contract or other document in the discussion. Thus, clarify what
you
mean by the "not necessarily complete" language.
Financial Statements
42. Please update the financial statements as required by Article
3-
12 of Regulation S-X. Given the March 31, 2006 recapitalization
date,
the updated financial statements should be those of Global. A
footnote to the financial statements should disclose that the
historical financial statements are those of GES and that the
operations of Global are included commencing March 31, 2006.
43. We note the disclosure in note J on page F-16 regarding the
preferred stock. Please clarify for us why these accounts were
classified outside of equity at January 2, 2005. It appears that
the
guidance in EITF D-98 may be relevant. Also, please clarify for us
the specific accounting literature that supports: (1) recognition
of
the estimated fair value adjustment on January 1, 2006 instead of
in
the first quarter of 2006; and (2) classification of the $36
million
item as an expense. It appears that the redemption amount was
indeterminable until after closing of the March 31, 2006 private
placement. Given the guidance in paragraph 23 of SFAS 150, please
provide an analysis of whether the preferred stock was a
"mandatorily
redeemable financial instrument" or a "conditionally redeemable
financial instrument" on January 1, 2006.
44. Please clarify for us the specific accounting literature used
to
support the recognition of $11.5 million of compensation expense
(page F-18) on January 1, 2006 instead of in the first quarter of
2006.
45. Please revise note O on page F-19 to disclose the amounts of
depreciation expense and capital expenditures charged to each
segment, if applicable. See paragraphs 27 and 28 of SFAS 131.
Exhibits and financial statement schedules, page II-3
46. For an exhibit incorporated by reference, expand the
disclosure
in the "Reference" column to include the exhibit number in the
document from which the exhibit is incorporated. Similarly,
revise
the exhibit index.
Undertakings, page II-8
47. Provide the undertakings specified by subparagraphs (a)(5) and
(a)(6) of Item 512 of Regulation S-B.
Signatures, page II-8
48. Global`s principal accounting officer or controller also must
sign the registration statement. Further, any person who occupies
more than one of the specified positions, for example, principal
financial officer and principal accounting officer or controller,
must specify each capacity in which he signs the Form S-1. See
instructions 1 and 2 to signatures on Form S-1, and revise.
Exhibit 5.1
49. Provide written confirmation as correspondence on the EDGAR
system that counsel concurs with our understanding that the
reference
and limitation to Delaware General Corporation Law includes the
statutory provisions and all applicable provisions of the Delaware
constitution, including reported judicial decisions interpreting
these laws.
50. Revise the opinion to state whether the outstanding shares of
common stock that are being registered for resale are validly
issued,
fully paid, and non-assessable.
Exhibit 16.2
51. The letter from Grant Thornton does not comply with Item
304(a)(3) of Regulation S-K. Please revise.
10-KSB
Signatures
52. The principal accounting officer or controller also must sign
the
Form 10-KSB. Further, any person who occupies more than one of
the
specified positions, for example, principal financial officer and
principal accounting officer or controller, must specify each
capacity in which he signs the Form 10-KSB. Please revise in
future
filings.
8-K dated March 31, 2006 and filed April 4, 2006
Exhibits 10.1, 10.2, 10.7, 10.9, 10.11, 10.16, 10.17, 10.19,
10.22,
10.23, and 10.24
53. Absent an order granting confidential treatment, Item
601(b)(10)
of Regulation S-B requires the filing of material contracts,
including attachments, in their entirety. Attachments include,
for
example, annexes, appendices, exhibits, and schedules. Since you
did
not file all of the attachments to the exhibits, please refile the
exhibits in their entirety.
Closing
File amendments to the S-1 and the 8-K in response to the
comments. To expedite our review, Global may wish to provide us
three marked courtesy copies of the amendments. Include with the
filings any supplemental information requested and a cover letter
tagged as correspondence that keys the responses to the comments.
If
Global thinks that compliance with any of the comments is
inappropriate, provide the basis in the letter. We may have
additional comments after review of the amendments, the responses
to
the comments, and any supplemental information.
We urge all persons responsible for the accuracy and adequacy
of
the disclosure in the registration statement reviewed by us to
ensure
that they have provided all information investors require for an
informed decision. Since Global and its management are in
possession
of all facts relating to the disclosure in the registration
statement, they are responsible for the adequacy and accuracy of
the
disclosures that they have made.
If Global requests acceleration of the registration
statement`s
effectiveness, Global should furnish a letter at the time of the
request, acknowledging that:
* Should the Commission or the staff acting by delegated authority
declare the registration statement effective, it does not
foreclose
the Commission from taking any action on the filing.
* The action of the Commission or the staff acting by delegated
authority in declaring the registration statement effective does
not
relieve Global from its full responsibility for the adequacy and
accuracy of the disclosure in the filing.
* Global may not assert our comments and the declaration of the
registration statement`s effectiveness as a defense in any
proceeding
initiated by the Commission or any person under the United States`
federal securities laws.
The Commission`s Division of Enforcement has access to all
information that Global provides us in our review of the
registration
statement or in response to our comments on the registration
statement.
We will consider a written request for acceleration of the
registration statement`s effectiveness under Rule 461 of
Regulation C
under the Securities Act as confirmation that those requesting
acceleration are aware of their responsibilities under the
Securities
Act and the Exchange Act as they relate to the proposed public
offering of the securities specified in the registration
statement.
We will act on the request and by delegated authority grant
acceleration of the registration statement`s effectiveness.
You may direct questions on accounting comments to Alfred P.
Pavot, Jr., Staff Accountant, at (202) 551-3738. You may direct
questions on other comments and disclosure issues to Edward M.
Kelly,
Senior Counsel, at (202) 551-3728 or Christopher B. Edwards,
Special
Counsel, at (202) 551-3742.
Very truly yours,
Pamela A. Long
Assistant Director
cc: Adam J. Agron, Esq.
Brownstein Hyatt & Farber, P.C.
410 17th Street, 22nd Floor
Denver, CO 80202
Mr. Howard Brill
May 25, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE