December 20, 2019
James Byrd, Jr.
Chairman, Chief Executive Officer
Legion Capital Corp.
301 E. Pine St, Suite 850
Orlando, FL 32801
Re: Legion Capital Corp.
Offering Statement on Form 1-A
Filed November 27, 2019
File No. 024-11123
Dear Mr. Byrd:
We have reviewed your offering statement and have the following
comments. In some of
our comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to this letter by amending your offering statement and
providing the
requested information. If you do not believe our comments apply to your facts
and
circumstances or do not believe an amendment is appropriate, please tell us why
in your
response. After reviewing any amendment to your offering statement and the
information you
provide in response to these comments, we may have additional comments.
Form 1-A Filed November 27, 2019
Part II
General, page 1
1. Please revise to disclose whether you have elected to delay complying
with any new or
revised financial accounting standard until the date that a company that
is not an issuer (as
defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
7201(a)) is
required to comply with such new or revised accounting standard, if such
standard also
applies to companies that are not issuers. Please refer to General Rule
(a)(3) of Part F/S
of Form 1-A.
2. Please revise to clearly disclose the date you plan to adopt each
recently issued or revised
accounting standard.
3. We note the disclosure on the cover page under "Restrictions on
Redemption and
Repurchase" that you will have no obligation "to redeem preferred shares
upon a
James Byrd, Jr.
FirstName LastNameJames Byrd, Jr.
Legion Capital Corp.
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redemption request made by the holder if the Company, in its sole
discretion, determines
that redemption is not in the best interest of the Company." Please
make these disclosures
clearly under the subheading "Redemption Requests at the Option of the
Holder" where
you discuss how stock holders can request redemption. Please also
clarify, if true, that no
redemption fees will be charged under the heading "Optional Repurchase
Upon Death, Disability or Bankruptcy of a Holder."
4. We note the statement on page 1: "During the next 12 months we plan to
use our current
cash, as well as additional capital procured through this offering and
other capital sources,
to build and acquire new businesses and opportunities within our core
operating areas and
potential new areas, to grow our current lending, real estate services
and development
businesses both organically and through acquisition and to expand our
business services
such as marketing and management." Please expand to clarify whether
there are any
current plans, understandings or arrangements regarding acquisitions
or business
combinations. Please also expand on this disclosure in your Use of
Proceeds section.
Part II, page 1
5. Please revise the offering amounts on the offering circular cover page
to be consistent and
to clarify, if true, that you are offering $20 million each of Bonds
and Preferred Stock.
Plan of Distribution and Selling Securityholders
Plan of Distribution, page 11
6. You disclose that you may engage placement agents in the future and
pay commissions.
Please disclose that, if you do, you will file a supplement to the
offering statement naming
the placement agents and their commissions before any sales are made
under those
arrangements.
Use of Proceeds to Issuer, page 13
7. Revise to disclose the material terms of the debt you may retire or
repay, including
interest rate and maturity date. If the indebtedness to be discharged
was incurred within
one year, describe the use of the proceeds arising from such
indebtedness. Refer to Item 6
and the Instructions to thereto Disclose whether or not the proceeds
will be used to
compensate or otherwise make payments to officers or directors of the
issuer or any of its
subsidiaries. See Instruction 2 to Item 6 of For 1-A.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 15
8. Please revise to provide an analysis of the results of operations
including discussion of
relevant trends for each period presented in your financial
statements. Please ensure you
provide appropriate discussion related to the gain on sale of equity
interests, bad debt
expense and any other material item impacting financial results.
Please refer to Item 9 of
Part II of Form 1-A. To the extent that you provide information
related to periods
James Byrd, Jr.
FirstName LastNameJames Byrd, Jr.
Legion Capital Corp.
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subsequent to your financial statements included in this filing,
please label this
information as Recent Developments or something similar.
9. We note your disclosure on page 1 that you are a holding company with
operating
subsidiaries in the areas of commercial lending, real estate and real
estate services,
management and marketing. Please revise to quantify financial
information, including
revenues and gross profit or other profitability metrics, by business
unit or segment for
each period presented. Refer to Item 9 of Form 1-A.
10. Please revise to provide the weighted average yield on your loans
receivable and the
weighted average cost of your notes payable for each period presented
in MD&A and
explain any material trends.
Operations Our Lending Business
Tier I A Direct Secured Loan, page 19
11. Please revise to explain your strategy for offering interest rates on
secured loans which
approximates your actual capital cost.
Tier III Participation Fees, page 19
12. Please revise to disclose the amount of participation fees recognized
in each period
presented and what line item they are presented in the income
statement.
13. Please revise to disclose your revenue recognition policies related to
participation fees in
your financial statement notes.
Interest of Management and Others in Certain Transactions, page 21
14. We note the cross reference to footnotes 13 and 14 to the financial
statements. Please
revise to disclose here the information required by Item 13 of Form
1-A.
Securities Being Offered
The Bonds, page 22
15. You disclose that the bonds will be secured by a first lien on a pool
of mortgage loans or
other asset backed business loans. Please revise to disclose the
contractual rights
bondholders have related to the pool. For example, clarify whether a
bondholder has the
right to sell or repledge the assets in the pool.
16. Item 5 states that an 84 month maturity Bond will be due in full at
the end of 72 months.
Please explain or revise here and elsewhere, as appropriate.
17. Revise to clarify, if true, that there are no rollover features, or
revise to describe.
Financial Statements, page F-1
18. Please revise to include updated financial statements in accordance
with paragraphs
James Byrd, Jr.
FirstName LastNameJames Byrd, Jr.
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(b)(3)-(4) of Part F/S and update related disclosures in the filing.
19. We note your disclosure on page 1 that you are a holding company with
operating
subsidiaries in the areas of commercial lending, real estate and real
estate services,
management and marketing. Please tell us in detail how you identified
your operating
segments and your reportable segments and ensure that you disclose the
information
required by ASC 280-10-50-20.
Report of Independent Registered Public Accounting Firm, page F-2
20. Please tell us how your auditor determined that an emphasis of a
matter paragraph, due to
the financial statement restatement disclosed in Note 3, was not
required considering the
guidance in AU-C Section 708.13.
21. Please tell us how your auditor determined that there was not
substantial doubt about your
ability to continue as a going concern for a reasonable period of time
and that an emphasis
of a matter paragraph was not warranted. Refer to AU-C Section 570 for
guidance.
Consolidated Balance Sheets, page F-3
22. We note your common stock has no par value and that you have credited
common stock
for amounts received in exchange for common stock. Please tell us why
amounts were
not recorded as additional paid in capital upon issuance of stock with
no par value or
revise to recognize amounts received in exchange for no par value
common stock as
additional paid in capital.
23. We note you presented $1,157,630 of goodwill in your June 30, 2018
Balance Sheet
included in your Form 1-A POS filed on October 2, 2018. We also note
that you do not
present any goodwill in your December 31, 2018 Balance Sheet. Please
tell us the facts
and circumstance related to recognizing the goodwill at June 30, 2018
but no longer
presenting the amounts or any impairment of goodwill in your December
31, 2018
financial statements.
Consolidated Statements of Operations, page F-4
24. Please tell us why you present the $1.8 million gain on sale of equity
interest in revenue.
Alternatively, please revise to present this amount in other income.
Refer to Rule 5-03 of
Regulation S-X for guidance.
25. Please tell us why you present interest income in revenue.
Alternatively, please revise to
present these amounts in other income. Refer to Rule 5-03 of
Regulation S-X for
guidance.
26. Given the materiality of amounts, please revise to present bad debt
expense in a separate
line item. Refer to Rule 5-03 of Regulation S-X for guidance.
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FirstName LastNameJames Byrd, Jr.
Legion Capital Corp.
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Statements of Consolidated Cash Flows, page F-6
27. Please tell us why you present cash flows related to issuing and
collecting business loans
in the operating section, and the supporting accounting guidance
considered.
Alternatively, please present these items in the investing section.
Refer to ASC 230-10-
45-12 for guidance.
28. Please tell us where you present the preferred membership unit
distribution of $112,724 in
2017 in the statement of cash flows and provide supporting details for
your presentation.
Note 2: Summary of Significant Accounting Policies
Business Loans Receivable, page F-8
29. Please revise to describe your policy for charging off loans
receivable. Specifically
discuss the triggering events or other facts and circumstances that
will cause you to
charge-off a note. Refer to ASC 310-10-50-11B(b) for guidance.
30. Please revise to disclose your policy for recording payments received
on nonaccrual loans
and for resuming the accrual of interest on nonaccrual loans. Refer to
ASC 310-10-50-
6(c) and ASC 310-10-50-6(b) for guidance.
31. Your disclosure of the amount of the allowance for loan losses on page
F-8 does not agree
to the amount disclosed on page F-12. Please revise as necessary.
32. We note your disclosure that each distressed or non-performing asset
is evaluated on an
individual case by case basis for restructuring. Please revise to
disclose how you consider
whether a modification is a troubled debt restructuring. Specifically,
explain the key
factors you consider to determine if a modification represents a
concession and whether
the borrower is experiencing financial difficulties. Refer to ASC
310-40 for guidance.
Note 3: Adjustments to Prior Year Financial Statements, page F-12
33. We note your disclosure of the multiple correction of errors. In order
to more clearly
show the effect of your corrections, please revise to present the
impacted financial
statement line items as originally reported, as adjusted, and the
impact of the corrections.
Refer to ASC 250-10-50-7 and the example disclosure in ASC 250-10-55
for guidance.
Note 5 Business Loans Receivable, page F-12
34. We note your disclosure that your portfolio segments are real estate
and transportation.
Please revise to provide a roll forward of your allowance for loans
losses by portfolio
segment for each period presented. Refer to ASC 310-10-50-11B(c) for
guidance.
35. Your disclosure on the bottom of page F-12 appears to indicate that
every notes receivable
was impaired at December 31, 2018. As noted in the guidance in ASC
310-10-35-2, a
note is impaired if it is probable that you will be unable to collect
all the contractual
interest and principal payments as scheduled in the loan agreement.
Please revise your
James Byrd, Jr.
FirstName LastNameJames Byrd, Jr.
Legion Capital Corp.
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disclosure to disclose both the balance of your allowance for loan
losses and your
recorded investment in loans by impairment method (e.g. collectively
evaluated or
individually evaluated) for each loan portfolio segment at each period
end. Please note
that a loan individually reviewed for impairment but determined not to
be impaired should
be measured for impairment under ASC 450-20 and is presented as
collectively evaluated
in your disclosure. Refer to ASC 310-10-50-11B(g) and (h) and the
example disclosure in
ASC 310-10-55-7 for guidance.
36. Please revise to present the recorded investment in loans receivable
on nonaccrual status
by class of loan receivable or portfolio segment at each period end.
Refer to ASC 310-10-
50-7(a) for guidance.
37. Please revise to provide an age analysis of past due loans receivable
by class or portfolio
segment at each period end. Refer to ASC 310-10-55-9 for guidance.
Note 8: Notes Payable, page F-13
38. Please revise to disclose the weighted average interest rate of each
type of obligation.
Separately present the rate for the current portion and the long term
portion. Refer to ASC
210-10-S99-1 for guidance.
39. Please revise to disclose the carrying amount and classification of
any assets pledged as
collateral for your notes payable. Refer to ASC 860-30-50-1A.b.1 for
guidance.
40. Please revise to disclose qualitative information about the
relationship between any assets
pledged and the associated liabilities. For example, if assets are
restricted solely to satisfy
a specific obligation, a description of the nature of restrictions
placed on those assets, etc.
Refer to ASC 860-30-50-1A.b.2 for guidance.
Note 11: Stock Options, page F-14
41. Please revise to clarify why management determined that an adjustment
was not required
due to the modifications of the stock options.
Note 12: Income Taxes, page F-15
42. Please revise to disclose the components of your gross deferred tax
asset and liability at
each period end presented. Refer to ASC 740-10-50-2 for guidance.
Note 14: Related Party Transactions, page F-16
43. Please revise to disclose why the sale of your equity interest in a
sand and stone mining
operation represents a related party transaction.
44. We note your disclosure that you hold a $4 million secured note and
mortgage on the sand
and stone mining operation and real estate. Please revise to disclose
all material related
party amounts on the face of your balance sheet, income statement and
statement of cash
flows for all periods presented. Refer to ASC 235-10-S99-1(k).
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FirstName LastNameJames Byrd, Jr.
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Note 15: Acquisitions, page F-17
45. Please provide us an analysis of how you accounted for the acquisition
of the assets of
Legion Select Venture Fund, LLC. In your analysis:
Tell us the method of accounting (e.g. acquisition of assets,
acquisition method,
transaction between entities under common control) and provide
any guidance
supporting your accounting determinations.
Clarify how you initially measured the assets acquired and
liabilities assumed. If you
used fair value, please tell us how you determined fair value. If
not, please tell us the
guidance supporting the initial measurement and how you
considered the guidance in
ASC 805-50-30-2.
Quantify each major class of assets acquired and liabilities
assumed.
Provide a summary journal entry of the transaction with
supporting commentary
explaining the basis for any material amounts or judgments made.
46. We note the preferred membership units earn a dividend of 12% plus 25%
of the net
income from the assets acquired. Please provide us the calculation of
the amount of net
income attributed to the non-controlling interest and the amount
distributed for 2017 and
2018. Please provide supporting commentary to allow us to fully
understand the
calculation.
47. Your disclosure of the amount of the allowance for loan losses related
to the $1.7 million
secured loan on the assets of the maritime renovation and sales
company is greater than
the allowance for loan losses for the entire company as disclosed in
Note 5 on page F-12.
Please revise as necessary.
48. Please revise to disclose the gain or loss related to the maritime
renovation and sales
company acquisition and sale.
49. Please revise to disclose the purchase price allocation and other
information required by
ASC 805-10-50, ASC 805-20-50 and ASC 805-30-50 related to the
acquisition of Dorman
Willis Motors, Inc.
50. We note disclosure in your Form 1-A POS filed on October 2, 2018
related to the
acquisitions of SDC of Florida, LLC and A.R. Bailey Homes, LLC on July
2, 2018.
Please tell us how these acquisitions are accounted for in your
financial statements and
ensure you disclose all required information.
Notes to Consolided Financial Statements
Note 17: Subsequent Events, page F-17
51. Please supplementally provide details on the $4,700,000 of new Notes
issued after
December 31, 2018, including the number of purchasers, any commissions
paid, and
exemptions relied on to make these sales.
We will consider qualifying your offering statement at your request.
If a participant in
James Byrd, Jr.
Legion Capital Corp.
December 20, 2019
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your offering is required to clear its compensation arrangements with FINRA,
please have
FINRA advise us that it has no objections to the compensation arrangements
prior to
qualification.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff. We also remind you that, following qualification of your
Form 1-A, Rule 257
of Regulation A requires you to file periodic and current reports, including a
Form 1-K which
will be due within 120 calendar days after the end of the fiscal year covered
by the report.
You may contact Michael Volley at 202-551-3437 or Amit Pande at
202-551-3423 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Jessica Livingston at 202-551-3448 or Michael Clampitt at 202-551-3434
with any other
questions.
FirstName LastNameJames Byrd, Jr. Sincerely,
Comapany NameLegion Capital Corp.
Division of
Corporation Finance
December 20, 2019 Page 8 Office of Finance
FirstName LastName