Letterhead of Andrews Kurth LLP
Andrews Kurth LLP
1717 Main Street
Suite 3700
Dallas, Texas 75201
214.659.4400 Phone
214.659.4401 Fax
andrewskurth.com
Ronald L. Brown
214.659.4469 Direct
June 23, 2005
VIA EDGAR
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Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0405
Attention: Jeffrey B. Werbitt Mail Stop 4-6
Re: Assure Data, Inc.
Amendment No. 4 to Registration Statement on Form SB-2 File No.
333-121347
Gentlemen:
We are filing today Amendment No. Four to the above-captioned registration
statement and are responding to each of your comments in your letter dated May
10, 2005 in the amendment and as discussed below.
We are also sending a courtesy copy of the amended Registration Statement
to Jeffrey Werbitt and Melissa Walsh, blacklined to show changes from Amendment
No. 3. Page references described in this letter pertain to the clean courtesy
copy and not necessarily to either the courtesy blackline or the Edgar version.
Prospectus
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General
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1. We refer you comment 2 of our letter of February 3, 2005. It appears that
portions of your prospectus continue to refer to this transaction as a
"best-efforts" offering, such as in your "Plan of Distribution" section.
Please ensure that you refer to this transaction as a direct public
offering or self-underwritten offering.
We found one reference to a best efforts offering in the Plan of
Distribution on Page 23 which has been changed to a direct basis.
Securities and Exchange Commission
June 23, 2005
Page 2
Use of Proceeds, Page 9
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2. Although you advise that disclosure has been added that the officers will
pay the shortfall of the offering expenses, it does not appear that the
prospectus contains this disclosure. If true, please disclose that your
officers will pay the shortfall of your offering expenses or otherwise
disclose how you plan to pay the offering expenses if the proceeds are
inadequate to pay the expenses. If the officers will pay the shortfall of
the offering proceeds, please describe the arrangements that Assure Data
has with its officers. Is there an agreement with the officers? Are the
officers otherwise bound to pay the offering expenses?
Language has been added on Page 9.
Description of Business, Page 10
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The Primary Manner In Which We Expect to Conduct Business, Page 11
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3. We reissue comment 26 of our comment letter of February 3, 2005. Explain
your statement that you have obtained rights to select email listing of
information technology employees and consultants.
A more detailed statement of the arrangement appears on Page 11.
Competition, Page 12
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4. Please disclose the basis for your belief that there are 2.2 million
potential customers in North America and that there is no single large
company with a significant share of the market.
The basis for the Company's beliefs have been added on Page 14.
Management's Discussion and Analysis or Plan of Operation, Page 14
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5. We reissue comment 33 of our comment letter of February 3, 2005. We note
that you have had revenues in your last fiscal year ended December 31, 2003
and in the nine months ended September 30, 2004. Please revise your
disclosure to include the information required by Item 303(b) of Regulation
S-B.
Comparative period to period discussions have been added on Pages 16 and
17.
6. We note that you estimate that the annual cost to be a small business
reporting company to be approximately $25,000. We also note that you
disclose that Assure Data will have adequate financial resources to meet
your financial obligations as you currently conduct business for at least
twelve months. Please clarify whether you will be able to meet your
financial obligations, including the annual cost to be a reporting company,
Securities and Exchange Commission
June 23, 2005
Page 3
for the next twelve months if you only receive nominal proceeds in this
offering. Also, consider additional risk factor disclosure that addresses
the additional cash needs of the company resulting from your reporting
obligation.
Additional language has been added and the discussion moved to the
Statement of Operations. The risk factor "We may not remain a reporting
company" addresses this issue.
Executive Compensation, Page 17
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7. You disclose in your "Certain Relationships and Related Transactions"
section that Mr. Lisle was compensated $63,785 for services provided to
Assure Data in 2003 and 2004. However, your executive compensation
discloses "Other Annual Compensation" of $63,785 for 2003 and $16,355 for
2004. Please reconcile your disclosure. Also, to the extent that any of the
"Other Annual Compensation" was received as a result of consulting services
paid through Information Technology Systems, please revise to disclose this
amount as "Salary" in your compensation table. Similarly, disclose the
compensation Mr. Kipness received for his consulting services for services
provided to Assure Data as "Salary" in the executive compensation table.
These disclosures have been corrected on Pages 20 and 21.
8. We note that you disclose 16,355 under "Securities Underlying Options or
Warrants." You also disclose that no stock has been issued to any officer,
employee or director. Please reconcile. Please also advise why you have not
provided an option grant table or any disclosure regarding these securities
in an option grant table.
The table has been corrected.
Notes to the Financial Statements
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Organization and Summary of Significant Accounting Policies
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Revenue Recognition, Page F-7
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9. We refer you to comment 53 of our letter of February 3, 2005. We note your
revision to the revenue recognition policy description in response to our
prior comment. Based on your disclosure, it appears that the monthly
service fee and the initial set-up fee are recognized in accordance with
SAB 104. If true, it may be helpful to include the related revenue
recognition criteria considered in determining when to recognize revenue
and how you determine that each of your arrangements meet those criteria.
Also, supplementally explain when you begin to recognize revenue generated
from refundable set-up fees and how this adheres to the guidance in SAB
104. In addition, please tell us how you considered the fact that all
Securities and Exchange Commission
June 23, 2005
Page 4
contracts are terminable upon 30 days notice by either party (as disclosed
in your "Description of Business" section on Page 10) in your revenue
recognition policy.
We have expanded our disclosure under revenue recognition to state that
monthly fees are charged "based on the provisions of each customer's contract".
We have changed the reference to the Staff Accounting Bulletin from SAB 101 to
SAB 104.
Revenue from set up fees is recognized over a 36 month period coinciding
with the beginning of the contract period. Although the set-up fee is
refundable, none of our customers has requested a refund during or after this
initial 30 day period. In addition, the average start-up fee for the existing 7
customers has been approximately $465. Therefore, the difference between revenue
recorded at the outset of the contract period versus after the 30 day refund
period has expired would be clearly immaterial for the existing service
contracts.
Contracts are for a one year period with provisions for automatic one year
renewals unless cancelled by either party with 30 days written notice. Due to
the lack of history for the Company, the expected length of these contracts had
to be estimated by management. To date, no contracts have been cancelled. The
Company's policy on any contracts cancelled in the future is to record any
remaining unrecognized revenues from set-up fees in the period in which the
contract is cancelled. Accordingly, management is of the opinion that
recognizing revenue in the manner prescribed herein represents the most
conservative treatment available given the nature of the Company's operations.
Please contact the undersigned with your further questions and comments.
Sincerely,
/s/ Ronald L. Brown
Ronald L. Brown
cc: Robert Lisle
Palmer Miles