July 7, 2005
Leonard Armato
Chief Executive Officer
AVP, Inc.
6100 Center Drive, Suite 900
Los Angeles, CA 90045
Re: AVP, Inc.
Amendment No. 1 to Registration Statement on Form SB-2
File No. 333-124084
Filed June 9, 2005
Dear Mr. Armato:
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 on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. We note your response to prior comment 3. Please note that you
cannot register the stock options that were offered prior to the
filing of a registration statement. It appears to the staff that
the
terms under Section 7.b of the player agreement relating to
options
represents an offer of the options. Please tell us what exemption
from registration the company relied upon for the offer of the
stock
options to your players. Also, please advise whether the players
received any other information on the options other than the terms
of
the player agreement. In the alternative, please provide a legal
analysis why the terms of the player agreement should not be
viewed
as an offer of the options, including the grant date of the
options.
2. In this regard, please disclose the terms of the options
granted
to the players in an appropriate section in the prospectus. If
the
term of the options allow a player to exercise the option within
one
year, it is deemed to be immediately exercisable. Therefore, a
registration statement must be on file to register the underlying
securities before the option is exercisable. See Section A.9. of
the
Division of Corporation Finance`s Manual of Publicly Available
Telephone Interpretations dated July 1999 available on our website
at
http://www.sec.gov/divisions/corpfin.shtml.
3. We note your response to prior comment 4. Please tell us the
dates of the meetings with analysts. Also, please explain whether
and by what means you made the information you provided to
analysts
public in compliance with Regulation FD.
Prospectus Cover Page
4. We reissue prior comment 7. It is not clear whether the
selling
stockholders will be offering their shares of your common stock to
the public based on the prices quoted on the OTC Bulletin Board.
Please revise to clarify on the cover page.
Prospectus Summary, page 1
Business Overview, page 1
5. Quantify your statement that you have a "sizable base of
spectators and television viewers...."
Summary of the Offering, page 2
Capital stock outstanding, page 3
6. Please explain why the exercise of 30,952 shares of Series B
Preferred Stock yielded an additional 7,520,873 shares of common
stock outstanding rather than 7,521,336 shares. Refer to the
change
in outstanding common shares and Series B Preferred shares from
your
prior disclosure.
Risk Factors, page 3
7. Revise your subheadings to ensure that it reflects the risk
that
you discuss in your text. Most of your subheadings merely state
facts about your company, such as "We have a history of losses and
anticipated future losses," "We may require additional financing,"
"We rely on short-term sponsorship agreements for most of our
revenues," and "AVP`s management began operating AVP only
recently."
Succinctly state in your subheadings the risk that may result from
the facts or uncertainties.
Business, page 9
Our Business, page 10
8. We note your response to prior comment 19. To the extent these
statements cannot be objectively verified, characterize them as
beliefs. Alternatively, disclose in the prospectus the bases
provided in your response.
9. We note your response but reissue prior comment 20 in part.
You
must identify here and in your risk factor the sponsor that
attributed to 10% or more of your total revenue in 2004. Refer to
Item 101(a)(6) of Regulation S-B. Also, you cannot request
confidential treatment for information that is material to
investors.
See Section B.2 of the Staff Legal Bulletin No. 1 available on our
website. Please revise accordingly.
10. In this regard, we note that you disclose the name of most of
your sponsors on page 11. If true, please revise to clarify that
none of these sponsors currently account for 10% or more of your
revenues.
11. We note your response to prior comment 22. Please disclose
the
fact that your production and distribution agreements with NBC,
Fox
and OLN have not been reduced to writing. In this regard, you
should
disclose in the risk factors that lack of enforceability of your
agreements with these parties.
MD&A, page 17
12. You indicate that the majority of your revenues are derived
from
sponsorship and advertising contracts. As a result, your
distribution agreements with FOX and NBC appear to be critical to
the
success of your operations. If you have no written contractual
agreements with these networks as you represent in your response
to
prior comment 22, this fact appears to constitute a known
uncertainty
that should be prominently disclosed in MD&A. Please revise or
advise.
Executive Compensation, Page 28
13. We note your response to prior comment 28. Please disclose on
page 30 the specific efforts provided to you by Mr. Painter as
discussed in your response.
Certain Relationships and Related Transactions, page 30
14. We reissue prior comment 29. Clarify the dates of the
"private
placement" and "offering" as they relate to the acquisition of MPE
LLC by the Association. In addition, please disclose this
transaction in the list of recent sales of unregistered securities
and include the required information pursuant to Item 701 of
Regulation S-B.
Selling Stockholders, page 37
15. Please revise footnote 58 to clarify what "other such
outstanding
securities" have not been converted or exercised.
16. Refer to the last sentence of the second paragraph. Please
revise your disclosure to clarify that selling shareholders "may
be
deemed" underwriters.
17. We note your response to prior comment 38. Where the selling
securityholder is a broker-dealer, disclose that that seller is an
underwriter. Where the selling securityholder is an affiliate of
a
broker-dealer, disclose whether to the best of your knowledge
these
entities purchased the securities in the ordinary course of
business
and, if at the time of the purchase of the securities to be
resold,
the selling securityholder had any agreements or understandings,
directly or indirectly, with any person to distribute the
securities.
If you are unable to make these assertions for any selling
securityholder identified as an affiliate of broker-dealers, then
you
must identify the seller as an underwriter.
18. We note your response to prior comment 39. Confirm that you
will
update the selling securityholder table, through pre-effective
amendment, to identify the natural person or persons who have
voting
and/or investment control over any selling stockholders.
Available Information, page 48
19. We reissue prior comment 40. Refer to the second paragraph in
this section. You may refer readers to related documents for a
more
complete reading or understanding, but should not infer that the
prospectus does not contain all material information from those
documents, even if summarized, or that the statements made in the
prospectus are in any way inaccurate. Please revise accordingly.
Balance Sheet, page F-3
20. Your accounts receivable balance has increased by
approximately
$454,000. However, you have not recognized any revenues. As
such,
it is not clear how you increased your accounts receivable
balance.
Therefore, please tell us and provide us with support regarding
this
increase in accounts receivable.
21. Additionally, your deferred revenues balance has increase by
approximately $3,000,000. However, there is no disclosure in your
filing describing the change in this account. As such, please
revise
both your footnote and MD&A disclosures to address the
aforementioned
issue.
Statements of Changes in Stockholders Equity (Deficiency), page F-
5
22. When updating your financials, the consolidated statement of
equity should be retroactively restated (a recapitalization) for
the
equivalent number of shares received in the merger after giving
effect to any differences in par value of the issuer`s and
acquirer`s
stock with an offset to paid in capital. As such, your statement
of
changes in stockholders deficiency should reflect the equity
securities received by the accounting acquirer (AVP), from the
accounting acquire (Othnet), as if they had been outstanding since
the inception of AVP and rolled forward to the beginning balance
based on the ratio of shares issued to shares acquired. Further,
the
outstanding shares of Othnet at the date of acquisition should be
reflected as an issuance on the date the reverse merger
transaction
occurred. Accordingly, please ensure that any changes made to the
consolidated statement of equity are reflected in your earnings
per
share calculation, as necessary (i.e. changes to the number of
shares
outstanding).
Subsequent Event, page F-7
23. We see that you have identified and discussed your method of
accounting for the fiscal 2003 merger with DMC in footnote 13.
Please address your method of accounting for the February 2005
merger
in your footnotes, as well.
24. The loss per share information presented in this document is
inconsistent with the loss per share information provided in your
Form 10-QSB for the Quarter Ended March 31, 2005. Please revise
as
appropriate.
Pro-forma Net Loss per Common Share, page F-14
25. We note your response to prior comment 43. However, we
reissue
our prior comment. Please disclose your calculation of weighted
average shares. Your calculation should individually disclose the
number of outstanding options, warrants and shares issuable upon
conversion of outstanding convertible debt or preferred stock,
that
could potentially dilute basic earnings per share in the future,
but
that were not included in the computation of diluted earnings per
share for the periods presented in your financial statements
because
their impact was anti-dilutive for the periods presented in your
financial statements. Refer to the requirements of paragraph 40 of
SFAS No.128.
Part II.
Item 26. Recent Sales
26. We note that the investors were solicited by Maxim Group.
Please
explain how Maxim solicited investors and how such solicitation
falls
within the exemption of Section 4(2) of the Securities Act.
27. We note that you raised $2,360,000 during the months of June
through August 2004. However, we also note the dates of the lock-
up
agreements with Maxim for these securities offerings range from
December 2004 through February 2005. Please revise to clarify the
dates of the offering or advise why no revision is necessary.
Closing
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.
You may contact Juan Migone at (202) 551-3312 or Margery
Reich
at (202) 551-3347 if you have questions regarding comments on the
financial statements and related matters. Please contact Mathew
C.
Bazley at (202) 551-3382, or me, at (202) 551-3348 with questions.
Sincerely,
Jennifer G. Williams
Special Counsel
cc: Via Facsimile: (212) 214-0686
David C. Fischer
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
AVP, Inc.
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
Mail Stop - 3561