Mail Stop 4561
June 22, 2006
James C. Ackerly
President
Splinternet Holdings, Inc.
535 Connecticut Avenue
Norwalk, Connecticut 06854
Re: Splinternet Holdings, Inc.
Registration Statement on Form SB-2
Filed on June 1, 2006
File No. 333-134658
Dear Mr. Ackerly:
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.
Prospectus Cover Page
1. We note that your securities will be sold on a continuous
basis.
As a result, please add a Rule 415 box to the facing page of your
registration statement noting that the securities being registered
on
your Form SB-2 are being offered on a delayed or continuous basis.
Refer to the Division of Corporation Finance Manual of Publicly
Available Telephone Interpretations, Section D, paragraph 36.
Calculation of Registration Fee
2. We note the reference in footnote 2, and in other places in
your
document, to the share exchange between Splinternet Holdings,
Inc.,
and Splinternet Communication which occurred on April 3, 2006.
Please
advise us as to the exemption or exemptions upon which you relied
for
the exchange, and provide us with the analysis whereby you
determined
the exemption(s) appropriate.
General
3. Please provide us with copies of any graphics, maps,
photographs,
and related captions or other artwork including logos that you
intend
to use in the prospectus.
4. Please provide us with highlighted copies of any study or
report
that you cite or on which you rely. For example, we note on page
31
that you refer to statistics obtained International Data Corp.
Confirm with us that the industry reports or studies that you rely
on
were not prepared for you and that you did not compensate the
party
that prepared these reports or studies. Alternatively, if the
reports were prepared for you, please file the experts` consents
as
Exhibits.
Prospectus Cover Page
5. Please revise to remove defined terms from your prospectus
cover
page. Refer to Item 421(d) of Regulation C.
6. Please revise the cover page to include a price at which the
selling stockholders may resell their shares of common stock until
a
market develops on the OTC Bulletin Board.
7. Please identify any selling shareholders who are registered
broker-dealers or affiliates of broker dealers. Additionally,
tell
us if the broker-dealer received the securities as underwriting
compensation.
8. If any of the selling shareholders are affiliates of broker-
dealers, please provide an analysis supporting your position that
the
resale of securities by any affiliates of broker-dealers is not an
indirect primary offering. Your analysis should address the
following points:
* how long the selling shareholders have held the securities,
* the circumstances under which the selling shareholders received
the
securities,
* the selling shareholders` relationship to the issuer,
* the amount of securities involved,
* whether the sellers are in the business of underwriting
securities,
and
* whether under all the circumstances it appears that the seller
is
acting as a conduit for the issuer.
Assuming the resale of securities by affiliates of broker-dealers
is
not an indirect primary offering, you must clearly state in your
prospectus:
* the seller purchased in the ordinary course of business and
* at the time of the purchase of the securities to be resold the
seller had no agreements or understandings, directly or
indirectly,
with any person to distribute the securities.
9. Please revise paragraph four to highlight the reference to the
risk factors section by the use of prominent type or in some other
manner. Refer to Item 501(a)(5) of Regulation S-B.
Prospectus Summary
10. Please advise us whether or not you have a web address. If you
do, please include the address in your summary section. See Item
101(c)(3) of Regulation S-B.
11. The summary should provide investors with a clear, concise and
coherent "snapshot" description of the most significant aspects of
the offering. We note that much of the information in the summary
is
repeated in, and more appropriate for, the body of the prospectus.
For example, disclosure relating to the features Splinternet
offers
are repeated on pages 29 and 32. Please revise to delete
repetitious
disclosure. If you wish to retain information about the features
you
offer, and your wholesale and retail strategies, please limit the
disclosure to a brief summary rather than the detailed disclosure
you
currently provide. In addition, please supplement references to
your
strategies with information regarding your current operations,
including the percentage of your revenues that relate to your
retail
business versus your wholesale business and reference any material
"strategic relationships" you already have.
12. Please revise paragraph two on page 5 to explain what it means
to
function as a "white label."
13. If you retain disclosure relating to your wholesale business
strategy on page 5, please revise to explain why it might not be
possible for an international long distance carrier to purchase
minutes directly from a local carrier.
Risk Factors - page 8
14. Please revise the introductory paragraph to reference a
prospectus, as opposed to a memorandum.
15. Please add risk factors to discuss the following:
* The limited usefulness of your historical financial statements
as
you have changed you business focus from wholesale to resale and
have
lost your largest wholesale customer; and
* The impact on your results from the loss of your largest
customer.
We have had limited revenues thus far - page 8
16. Please revise to include a discussion of the significant drop
in
your first quarter 2006 revenues.
17. Please revise paragraph two to reference purchasers, as
opposed
to "prospective subscribers."
We are dependent on strategic relationships. - page 13
18. As currently drafted, this risk factor is sufficiently generic
as
to apply to virtually any company. Please revise to express the
risk
specific to Splinternet Holdings, Inc. If you are unable to
identify
a specific risk, consider omitting the generic risk factor.
The existence of outstanding warrants may harm our ability to
obtain
additional financing and their exercise will result in dilution to
your interests. - page 16
19. Please advise us of the transaction details of the warrant
issuance. We note that 1,607,250 of the warrant shares we issued
to
Atheneum Capital and the Mountain View Trust, as disclosed in Item
28.
20. Please revise to explain more fully why your ability to obtain
future financing would be subject to harm while the warrants are
outstanding. In addition, please disclose the exercise price of
the
warrants and the relationship of the price to the offering price
that
you will disclose on the prospectus cover page.
Penny stock regulations may impose certain restrictions on
marketability of the company`s securities. - page 17
21. Please revise the introductory sentence to clarify that there
is
currently no plan to have your common stock quoted on the OTC-BB.
Determination of Offering Price - page 18
22. Please revise paragraph two to clarify that the application of
a
market maker is necessary to have your common stock quoted on the
OTC-BB, as opposed to the company making such application on its
own
behalf.
23. Please disclose the offering price in this section of your
document, as well as the per share sales price (on a post-exchange
basis) from your private placement.
Plan of Distribution - page 22
24. Please revise the first paragraph of this section to clarify
that
the shares will be offered at a fixed price until they are quoted
on
the OTC-BB.
Principal Stockholders and Holdings of Management - page 25
25. Please clarify whether the number of shares owned includes
shares
underlying the warrants.
Experts - page 28
26. Please revise here or elsewhere in the prospectus that Feldman
Weinstein LLP has or will issue an opinion regarding the legality
of
the shares.
Business - page 28
27. Please revise to include the basis for the following
statement:
"The volume of data traffic has already eclipsed voice traffic and
is
growing much faster than voice." (page 30).
28. We note disclosure on page 38 regarding a sales increase of
614%
due to increased wholesale opportunities in Central America, as
well
as to the cessation of operations of your primary customer,
Contelca.
Please revise your business section, as applicable, to disclose
your
dependence on one or a few major customers. Refer to Item
101(a)(6)
of Regulation S-B.
Customer and Technical Support - page 33
29. Please revise to explain what a "technical point of presence"
consists of.
Intellectual Property - page 36
30. Your disclosure indicates that you have developed proprietary
software. However, there is no mention of this software in your
financial statements. Please clarify how you have accounted for
your
costs of developing such software. In your response cite the
applicable accounting literature that you are relying upon.
Where you can find more Information - page 36
31. Please revise to note that the Public Reference Section has
relocated to Room 1580, 100 F Street N.E., Washington, D.C. 20549.
Likewise, please delete the references to public reference rooms
in
the regional offices, since they are no longer operational.
Management`s Discussion and Analysis - page 37
32. Please consider relocating Management`s Discussion and
Analysis
to follow immediately upon the summary financial data on page 6,
given your recent change in the focus of your business from
wholesale
to retail and the impact this will have upon your financial
results
going forward.
33. This section should present an analysis of the company`s
business
as seen through the eyes of management, including known trends,
demands and commitments that may impact future financial condition
or
operating performance. Please expand your introductory disclosure
to
provide an analysis of these issues and other items which
management
believes may have a material impact on your future financial
condition or operating performance. In addition, please quantify
the
percentage of your revenues generated by your wholesale and retail
lines of business. For additional guidance, refer to Commission
Release No. 33-8350 (Dec. 19, 2003).
Overview - page 37
34. Please explain the meaning of being at the "critical
inflection
point" in your business development.
Results of Operations - page 38
35. We note that you have had significant decreases in product
sales
and services revenue during the first quarter of 2006. Please
revise
to discuss what the expectations are for the immediate future and
how
you will replace the loss of your primary customer. The fact that
you have lost your primary customer should be highlighted
throughout
the filing.
36. Tell us and revise to disclose why your services sold had no
direct incremental costs for the first quarter of 2006. Please
tell
us and disclose whether you have any existing customers.
Cost of Sales - page 38
Sales, General, and Administrative Costs - page 38
37. Please revise to provide more detail as to the reason for the
832% increased cost of sales, beyond the brief reference to the
"sale
of increased hardware," and for the significant decrease in gross
profits. We note, further, that you do not appear to have included
a
comparison of gross profits for the year ended December 31, 2005
and
the year ended December 31, 2004. Please revise to include
complete
disclosure regarding your financial condition and results of
operations pursuant to Item 303(b)(1) of Regulation S-B.
Liquidity and Capital Resources - page 39
38. If material, disclose any known trends, events or
uncertainties
that have, or are reasonably likely to have, a material impact on
your short-term or long-term liquidity. Refer to Item 303 of
Regulation S-B.
39. Please advise us why you feel you will have increased access
to
both private and public capital markets following registration of
common shares pursuant to the instant registration statement. We
note
your statement on the bottom of page 40, to the effect that you
have
not entered into any discussion with any market maker concerning
the
participation of a market maker in the future trading market, if
any,
for your common stock.
Changes in Income Elements, page 39
40. We note that the majority of your income to date comes from
wholesale opportunities. Please clarify whether this trend is
expected to continue or whether you anticipate that your retail
operations will represent the majority of your business in the
future.
Financial Statements, page F-1
41. Please tell us how you determined that you are not a
development
stage enterprise. See paragraph 8 of SFAS 7 for reference.
Part II
Item 26. Recent Sales of Unregistered Securities
42. In each instance, please revise to identify the exemption you
relied upon, and note the facts you relied upon in deeming the
exemption from registration available. Refer to Item 701(d) of
Regulation S-B.
43. Please revise to identify the person or class of person to
whom
the company issued shares from November 15, 2005 through March 15,
2006. Please refer to Item 701(b) of Regulation S-B.
Item 27-Exhibits
Exhibit 5.1-Opinion of Feldman Weinstein LLP
44. Please revise paragraph two to clarify whether in counsel`s
opinion the shares being registered were legally issued. In
addition,
please delete the "when sold" reference as it appears that all the
registered shares have already been issued.
45. Please file an executed copy of the legal opinion.
Item 28-Undertakings
46. Please update your undertakings to include the undertaking
provided in Item 512(g)(2) of Regulation S-B.
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 filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided 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, when 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 William Demarest, Accountant, at (202) 551-
3432
or Daniel Gordon, Branch Chief, at (202) 551-3486 if you have
questions regarding comments on the financial statements and
related
matters. Please contact Paul Fischer, Staff Attorney, at (202)
551-
3415 or the undersigned at (202) 551-3852 with any other
questions.
Sincerely,
Michael McTiernan
Special Counsel
cc: Jamie Bogart, Esq. (via facsimile)
Feldman Weinstein LLP
Mr. James C. Ackerly
Splinternet Holdings, Inc.
June 22, 2006
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